DEF14A 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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 Pursuant to Sec.240.14a-11(c) or Sec.240.14a-12
SpaceDev,
Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee
required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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13855
Stowe Drive
Poway,
California 92064
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD AUGUST 10, 2007
TO
THE
STOCKHOLDERS OF SPACEDEV, INC.:
The
annual meeting of the stockholders of SpaceDev, Inc., a Colorado corporation,
(the "Company") will be held at 13855 Stowe Drive, Poway, California 92064,
on
August 10, 2007, at 8:00 A.M.
PDT for
the following purposes:
1. |
To
elect a board of directors for the
Company;
|
2. |
To
ratify the appointment of PKF, Certified Public Accountants, A
Professional Corporation, as the Company's registered independent
public
accounting firm for the fiscal year ending December 31,
2007;
|
3. |
To
approve a change in the state of incorporation from Colorado to Delaware
by approving and adopting an Agreement and Plan of Merger providing
for
the merger of our Company into its wholly-owned subsidiary, SpaceDev,
Inc., a Delaware corporation;
|
and,
to
transact such other business as may properly come before the meeting or any
postponement or adjournment thereof.
THE
BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES
TO
THE BOARD OF DIRECTORS AND RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF EACH
OTHER
ITEM LISTED ON THIS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS.
Stockholders
of record at the close of business on June 4, 2007, are the only persons
entitled to notice of and to vote at the meeting.
Your
attention is directed to the attached Proxy Statement and Proxy Card. WHETHER
OR
NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN THE PROXY
CARD INFORMATION COMPLETELY. THEN PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE (AND INCLUDE YOUR E-MAIL ADDRESS) IN ORDER TO
SAVE
THE COMPANY FURTHER SOLICITATION EXPENSE. If you are present at the meeting,
you
may then revoke your proxy and vote in person, as explained in the Proxy
Statement in the section entitled "ANNUAL MEETING OF STOCKHOLDERS - AUGUST
10,
2007." A return envelope is enclosed for your convenience.
Richard
B. Slansky
Corporate
Secretary
Dated:
June 25, 2007
________________________________________
PROXY
STATEMENT
________________________________________
SPACEDEV,
INC.
13855
Stowe Drive
Poway,
California 92064
ANNUAL
MEETING OF STOCKHOLDERS - AUGUST 10, 2007
Our
board
of directors is soliciting your proxy, on the enclosed form of proxy card,
in
connection with the annual meeting of stockholders of SpaceDev, Inc., a Colorado
corporation, (the "Company") to be held on August 10, 2007 at 8:00 A.M. PDT
at
13855 Stowe Drive, Poway, California 92064, and any postponements or
adjournments thereof. We will pay the cost of solicitation, including the cost
of preparing and mailing the Notice of Stockholders' Meeting and this Proxy
Statement. Such mailing is being made on approximately June 29, 2007. Our
employees may, without cost to us, solicit proxies for our management by means
of mail, telephone or personal calls.
A
proxy
may be revoked before the meeting by giving written notice of revocation to
our
corporate secretary, or may be revoked at the meeting before voting (or by
actually voting in person, which will automatically revoke the proxy). Unless
revoked, properly executed proxy cards will be voted as indicated on the proxy
cards. Should any other matters come before the meeting, it is the intention
of
the persons named as proxy holders in the enclosed form of proxy card to act
upon them according to their best judgment. In instances where choices are
specified by the stockholders in a signed proxy card, those proxies will be
voted, or the vote will be withheld in accordance with each stockholder's
choice. An "abstention" on any proposal will be counted as present for purposes
of determining whether a quorum of shares is present at the meeting with respect
to the proposal on which the abstention is noted, but will have the same
practical effect as a vote "against" such proposal.
Only
stockholders of record at the close of business on June 4, 2007 may vote at
the
meeting or any postponements or adjournments thereof. As of that date there
were
issued and outstanding approximately 26,639,353 common shares, 248,460 shares
of
our Series C preferred stock and 4,026 shares of our Series D-1 preferred stock.
Each stockholder is entitled to one vote for each common share held. Voting
for
the election of directors is not cumulative, which means that the holders of
a
majority of the Company's outstanding shares have the power to elect the entire
board of directors. None of the matters to be presented at the meeting, except
Proposal 3, will entitle any stockholder to appraisal rights. In the event
that
proxies, which are sufficient in number to constitute a quorum, are not received
by August 10, 2007, or for other good reason, we may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Such
adjournments will require the affirmative vote of the holders of a majority
of
the shares present in person or by proxy at the meeting. The persons named
as
proxy holders will vote in favor of such adjournment. At the annual meeting,
the
stockholders will be asked to elect the proposed slate put forth by the
nominating and corporate governance committee of our board of directors, to
ratify the selection of the registered independent public accounting firm for
us
and to
approve
a merger effecting a change in the state of incorporation from Colorado to
Delaware.
PROPOSAL
1
ELECTION
OF DIRECTORS
Proxy
cards, in the enclosed form, which are duly signed and returned will be voted
for the election of the nine (9) persons named below as directors for SpaceDev
unless such authority has been withheld in the respective proxy. The term of
office of each person elected to our board of directors will be until the next
annual meeting of the stockholders and until his successor is duly elected.
Each
of our current directors is a nominee for director. Pertinent information
regarding each nominee for the past five years is set forth beside his name
below.
Name
and
Age |
Position
with the Company and Pricipal Occupations |
Mark
N. Sirangelo (46)
|
Mark
N. Sirangelo, until he was appointed our vice-chairman and chief
executive
officer in December 2005, was the managing member and chief executive
officer of The Quanstar Group, LLC from December 2003 until November
2005
and the managing member of QS Advisors, LLC from February 1998 to
December
2005. Mr. Sirangelo became our chairman in September 2006 upon the
resignation of James W. Benson. QS Advisors and Quanstar are strategic
and
business advisors and we were a client of them. Mr. Sirangelo actively
participated in the development of a number of early-stage companies
in
aerospace, technical, scientific, and other industries. His work
at
Quanstar also included hands-on involvement with technology
commercialization transfer for university and government laboratories.
From 2001 until 2003, Mr. Sirangelo also served as a senior officer
of
Natexis Bleichroeder, Inc., an international investment banking firm.
Mr.
Sirangelo has a bachelor's degree in science, a master's degree in
business, and juris doctorate, all from Seton Hall University. Mr.
Sirangelo is a director for the National Center for Missing and Exploited
Children in addition to serving as a director and treasurer of the
International Center for Missing and Exploited Children, and is a
director
of Adam Aircraft Industries.
|
Richard
B. Slansky (50)
|
Richard
B. Slansky is currently our president, chief financial officer, director,
and corporate secretary. He joined us in February 2003 as chief financial
officer and corporate secretary. In November 2004, Mr. Slansky was
appointed as president and a director. Mr. Slansky served as interim
chief
executive officer, interim chief financial officer, and director
for Quick
Strike Resources, Inc., an IT training, services, and consulting
firm,
from July 2002 to February 2003. From May 2000 to July 2002, Mr.
Slansky
served as chief financial officer, vice president of finance,
administration and operations, and corporate secretary for Path 1
Network
Technologies Inc., a public company focused on merging broadcast
and cable
quality video transport with IP networks. Mr. Slansky earned a bachelor's
degree in economics and science from the University of Pennsylvania's
Wharton School of Business and a master's degree in business
administration in finance and accounting from the University of
Arizona.
|
Scott
Tibbitts (49)
|
Scott
Tibbitts was appointed our managing director and a director at the
closing
of the Starsys merger on January 31, 2006. Mr. Tibbitts co-founded
Starsys
Research Corporation in 1988 and served as president, chief executive
officer, and a member of the board of directors from 1988 until May
2005;
and from May 2005 to January 2006 served as chief executive officer
and a
member of the board of directors. Mr. Tibbitts has a bachelor's degree
in
chemical engineering from the University of
Wisconsin.
|
James
W. Benson (62)
|
James
W. Benson is our founder and served as our chairman of the board
from
October 1997 until September 2006. Mr. Benson also served as our
chief
executive officer from October 1997 until December 2005, at which
time he
was succeeded by Mark N. Sirangelo in such position, and became
our chief
technology officer. In September 2006, Mr. Benson resigned from
employment
at SpaceDev to found Benson Space Company, a space tourism company
of
which he is chief executive officer, but remains a member of our
board of
directors. In 1984, Mr. Benson founded Compusearch Corporation
(later
renamed Compusearch Software Systems), which was engaged in the
development of software algorithms and applications for personal
computers
and networked servers to create full text indexes of government
procurement regulations and to provide instant full text searches
for any
word or phrase. In 1989, Mr. Benson started the award-winning ImageFast
Software Systems, which later merged with Compusearch. In 1995,
Mr. Benson
sold Compusearch and ImageFast, and retired at age fifty. Mr. Benson
started SpaceDev, Inc., a Nevada corporation, which was acquired
by
Pegasus Development Corp., a Colorado corporation, in October of
1997. Mr.
Benson acquired a controlling ownership in Pegasus and later changed
its
name to SpaceDev, Inc. Mr. Benson holds a bachelor's degree in
geology
from the University of Missouri. He founded the non-profit Space
Development Institute, and introduced the $5,000 Benson Prize for
Amateur
Discovery of Near Earth Objects. He is also vice chairman and private
sector representative on NASA's national Space Grant Review Panel,
and is
a member of the American Society of Civil Engineers subcommittee
on Near
Earth Object Impact Prevention and Mitigation.
|
Curt
Dean Blake (49)
|
Curt
Dean Blake was appointed to our board of directors as an independent
director in September 2000. He serves as chairman of our audit
committee
and is a member of our compensation committee. In 2003 Mr. Blake
formed,
and currently remains the chief executive officer of GotVoice,
Inc., a
startup company in the voicemail consolidation and messaging business.
From 1999 to 2002, Mr. Blake provided consulting services to various
technology companies, including Apex Digital, Inc. and SceneIt.com.
Mr.
Blake has a master's degree and juris doctorate from the University
of
Washington.
|
Howell
M. Estes, III (65)
|
General
Howell M. Estes, III (USAF Retired) was appointed to our board
of
directors as an independent director in April 2001, is chairman
of our
nominating and corporate governance committee and is a member of
our
compensation committee. General Estes retired from the United States
Air
Force in 1998 after serving for 33 years. At that time, he was
the
Commander-in-Chief of the North American Aerospace Defense Command
and the
United States Space Command, and the Commander of the Air Force
Space
Command headquartered at Peterson Air Force Base, Colorado. In
addition to
a bachelor of science degree from the Air Force Academy, he holds
a master
of arts degree in public administration from Auburn University
and is a
graduate of the Program for Senior Managers in Government at Harvard's
J.F.K. School of Government. Since 1998, General Estes has been
the
president of Howell Estes & Associates, Inc., a consulting firm to
chief executive officers, presidents, and general managers of aerospace
and telecommunications companies worldwide. He serves as vice chairman
of
the board of trustees at The Aerospace Corporation. He served as
a
consultant to the Defense Science Board Task Force on Space Superiority
and more recently as a commissioner on the U.S. Congressional Commission
to Assess United States National Security Space Management and
Organization, also known as the Rumsfeld
Commission.
|
Wesley
T. Huntress (65)
|
Wesley
T. Huntress was appointed to our board of directors as an independent
director in June 1999, and is a member of our audit committee and
nominating and corporate governance committee. Since 1998, Dr.
Huntress
has been the director of the Geophysical Laboratory at the Carnegie
Institution of Washington in Washington, D.C., where he leads an
interdisciplinary group of scientists in the fields of high-pressure
science, astrobiology, petrology and biogeochemistry. From October
1993 to
September 1998, Dr. Huntress served as the associate administrator
for
Space Science at NASA where he was responsible for NASA's programs
in
astrophysics, planetary exploration, and space physics. Dr. Huntress
received his bachelor's degree in chemistry from Brown University,
and his
doctorate in chemical physics from Stanford. He became a permanent
research scientist at Jet Propulsion Laboratory, or JPL, in 1969.
At JPL,
Dr. Huntress served as co-investigator for the ion mass spectrometer
experiment in the Giotto Halley's Comet mission, and as an
interdisciplinary scientist for the Upper Atmosphere Research Satellite
and Cassini missions. He also assumed a number of line and research
program management assignments while at JPL, and spent a year as
a
visiting professor in the Department of Planetary Science and Geophysics
at Caltech.
|
Scott
McClendon (68)
|
Scott
McClendon was appointed to our board of directors as an independent
director in July 2002. He is currently chairman of our compensation
committee and a member of our audit committee. Mr. McClendon is
currently
acting president as well as a member of the board of directors
for
Overland Storage, Inc., a public data storage company, where he
is also
the chairman of the board. He became the chairman of the board
after
serving as president and chief executive officer from October 1991
to
March 2001. In addition to SpaceDev and Overland Storage, Mr. McClendon
is
currently serving on the board of directors of Procera Networks,
Inc., a
global provider of intelligent network traffic identification,
control,
and service management infrastructure equipment. Mr. McClendon
received a
bachelor's degree in electrical engineering, and a master's degree
in
electrical engineering from Stanford University School of
Engineering.
|
Robert
S. Walker (64)
|
Robert
S. Walker was appointed to our board of directors as an independent
director in April 2001. He is currently a member of our nominating
and
corporate governance committee. Mr. Walker has acted as chairman
of Wexler
& Walker Public Policy Associates in Washington, D.C. since January
1997. Mr. Walker was a member of the U.S. House of Representatives
from
1977 to 1997, during which time he served as chairman of the House
Science
Committee, and vice-chairman of the Budget Committee, and participated
in
House Republican leadership activities. Mr. Walker was the first
sitting
member of the U.S. House of Representatives to be awarded NASA's
highest
honor, the Distinguished Service Medal. Mr. Walker was on the board
of
directors of The Aerospace Corporation, from March 1997 to November
2005.
Mr. Walker became chairman of the board of The Space Foundation
in January
2006.
|
Stock
Ownership
The
following table provides information as of June 4, 2007 concerning the
beneficial ownership of our common stock by (i) each director, (ii) each named
executive officer, (iii) each shareholder known by us to be the beneficial
owner
of more than 5% of our outstanding common stock, and (iv) the directors and
officers as a group. Except as otherwise indicated, the persons named in the
table have sole voting and investing power with respect to all shares of common
stock owned by them.
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership(1)
|
|
Percent
of Ownership
|
Mark
N. Sirangelo
|
2,142,500
|
(2)
|
6.79%
|
Richard
B. Slansky
|
2,237,886
|
(3)
|
7.05%
|
Susan
C. Benson
|
6,474,907
|
(4)
|
21.48%
|
James
W. Benson
|
6,171,407
|
(5)
|
20.48%
|
Laurus
Master Fund, LLC
|
3,033,768
|
(6)
|
9.99%
|
Scott
F. Tibbitts
|
712,668
|
|
2.40%
|
Curt
Dean Blake
|
248,633
|
(7)
|
0.83%
|
Wesley
T. Huntress, Jr.
|
232,209
|
(8)
|
0.78%
|
Scott
McClendon
|
219,460
|
(9)
|
0.73%
|
General
Howell M. Estes III
|
201,667
|
(10)
|
0.68%
|
Robert
S. Walker
|
150,994
|
(11)
|
0.51%
|
Officers
and Directors as a group (9 Persons)
|
12,317,424
|
(12)
|
42.93%
|
The
business address for each of these persons is 13855 Stowe Drive, Poway, CA
92064
with the exception of Susan C. Benson whose address is 13592 Ranch Creek Lane,
Poway, CA 92064, and Laurus Master Fund, LLC located at 335
Madison Avenue, New York, NY 10017.
(1) |
Where
persons listed on this table have the right to obtain additional
shares of
common stock through the exercise of outstanding options or warrants
or
the conversion of convertible securities within 60 days from June
4, 2007,
these additional shares are deemed to be outstanding for the purpose
of
computing the percentage of common stock owned by such persons, but
are
not deemed outstanding for the purpose of computing the percentage
owned
by any other person. Percentages are based on total outstanding shares
of
29,639,353 on June 4, 2007.
|
(2) |
Includes
vested options to purchase up to an aggregate of 1,900,000 shares.
|
(3) |
Includes
vested options to purchase up to an aggregate of 2,125,000 shares.
|
(4) |
Represents
2,948,200 shares held directly by Ms. Benson as her separate property,
plus beneficial ownership in 2,565,294 shares held jointly with James
W.
Benson, as to which she shares voting and investing power with Mr.
Benson,
indirect beneficial ownership interest in 471,413 shares held in
Space
Development Institute (where Ms. Benson is a member of the board
of
directors along with James W. Benson), as to which she shares voting
and
investing power with Mr. Benson, and beneficial ownership in options
vested
today issued
in the name of James W. Benson on 500,000 shares (which may constitute
community property of Ms. Benson and James W. Benson). Excludes
approximately 1.2 million shares held by children of Ms. Benson,
for which
Ms. Benson disclaims beneficial
ownership.
|
(5) |
Represents
2,644,700 shares held directly by Mr. Benson as his separate property,
plus beneficial ownership in 2,565,294 shares held jointly with Susan
C.
Benson, as to which he shares voting and investing power with Ms.
Benson,
indirect beneficial ownership interest in 471,413 shares held in
Space
Development Institute (where Mr. Benson is a member of the board
of
directors along with Susan C. Benson), as to which he shares voting
and
investing power with Ms. Benson, and beneficial ownership in options
vested today to purchase up to an aggregate of 500,000 shares (which
may
constitute as community property of Mr. Benson Susan C. Benson).
Excludes
approximately 1.2 million shares held by children of Mr. Benson,
for which
Mr. Benson disclaims beneficial ownership.
|
(6) |
Represents
2,305,878 shares held directly by Laurus Master Fund, Ltd. and beneficial
ownership in warrants for 1,826,203 shares of common stock and
approximately 250,769.26 shares of Series C and Series D-1 Preferred
Stock
which has the ability to convert into 3,173,687 shares of Common
Stock.
The total amount the Fund could potentially beneficially own is 7,305,768;
however some of the warrants and the preferred stock contain an issuance
limitation prohibiting the Fund from exercising those securities
to the
extent that such exercise would result in beneficial ownership by
the Fund
of more than 4.99% of the Shares then issued and outstanding. The
remaining warrants contain an issuance limitation currently prohibiting
the Fund from exercising that security to the extent that such exercise
would result in beneficial ownership by the Fund of more than 9.99%
of the
shares then issued and outstanding. The Issuance Limitations may
be waived
by the Fund upon at least 61 days prior notice to the Company and
shall
automatically become null and void upon the occurrence and/or continuance
of an event of default.
|
(7) |
Includes
vested options to purchase up to an aggregate of 179,000 common shares.
|
(8) |
Includes
vested options to purchase up to an aggregate of 181,647 common
shares.
|
(9) |
Includes
vested options to purchase up to an aggregate of 219,460 common shares.
|
(10) |
Includes
vested options to purchase up to an aggregate of 160,000 common
shares.
|
(11) |
Includes
vested options to purchase up to an aggregate of 129,000 common
shares.
|
(12) |
Executive
officers and directors as a group include our nine board members,
three of
whom are also executive officers.
|
Board
of Directors and Committees
Meetings
of the Board and Committees. Our
board
of directors took action ten (10) times during the last fiscal year, with eight
(8) being at regular or special meetings attended by the members of the board
either personally or telephonically. There were two (2) unanimous written
consents in 2006. Each current director attended, in 2006, at least 75% of
the
board of directors meetings, and the committee meetings of the committees of
which he was a member.
Audit
Committee. We
have a
standing audit committee comprised of Messrs. Blake (chairman), McClendon and
Dr. Huntress, all of whom are independent within the meaning of the listing
standards of The Nasdaq Stock Market and Securities Exchange Act Rule 10A-3.
Mr.
Blake is an audit committee financial expert, as defined by SEC regulations.
On
April 19, 2002, the board of directors adopted and approved a charter for the
audit committee, which is attached as Appendix B to our Definitive Proxy
Statement filed July 7, 2004 and is also available via our website at
www.spacedev.com. The primary function of the audit committee is to assist
the
board of directors in fulfilling its oversight responsibilities by reviewing
the
financial information that will be provided to the stockholders and others,
the
preparation of our internal financial statements, and our audit and financial
reporting process, including internal control over financial reporting. In
addition, our audit committee is responsible for maintaining free and open
lines
of communication among the committee, the independent auditors and management.
Our audit committee consults with our management and independent auditors before
the presentation of financial statements to stockholders and, as appropriate,
initiates inquiries into various aspects of our financial affairs. The committee
is also responsible for considering, appointing, and establishing fee
arrangements with our independent auditors and, if necessary, dismissing them.
It is not responsible for preparing our financial statements or for planning
or
conducting the audits. Our audit committee took action four (4) times during
the
last fiscal year, each time at a regular meeting attended by a quorum of the
members of the committee either personally or telephonically.
Compensation
Committee.
Our
compensation committee is comprised of Messrs. McClendon (chairman), Blake
and
General Estes. Each member of the compensation committee is independent within
the meaning of the listing standards of The Nasdaq Stock Market and SEC rules.
The committee is required to maintain a minimum of three (3) members. The
compensation committee is responsible for: (a) determining, or recommending
to
our board of directors for determination, the compensation and benefits of
all
of our executive officers; (b) reviewing our compensation and benefit plans
to
ensure that they meet corporate objectives; (c) administering our equity
compensation plans; and (d) such other matters as are specifically delegated
to
the compensation committee by our board of directors from time to time or which
are otherwise included in the committee's charter, which is available via our
website at www.spacedev.com. Our compensation committee took action one time
during the last fiscal year, at a regular meeting attended by a quorum of the
members of the committee either personally or telephonically.
Nominating
and Corporate Governance Committee.
Our
nominating and corporate governance committee is comprised of General Estes
(chairman), Dr. Huntress and Mr. Walker. Each member of the nominating and
corporate governance committee is independent within the meaning of the listing
standards of The Nasdaq Stock Market and SEC rules. The committee is required
to
maintain a minimum of three (3) members. Our nominating and corporate governance
committee took action one time during the last fiscal year, at a regular meeting
attended by a quorum of the members of the committee either personally or
telephonically.
The
nominating and corporate governance committee has the responsibility to
identify, evaluate, recruit, and recommend qualified candidates to our board
of
directors for nomination or election. Each of the director nominees included
in
our proxy statements is recommended by the nominating and corporate governance
committee. In addition, it is the responsibility of the committee to make
recommendations to the board of directors regarding the size and composition
of
the board of directors, committee structures and makeup, monitor our performance
in meeting our obligations of fairness in internal and external matters and
our
principles of corporate governance, and such other matters that are specifically
delegated to the committee by our board of directors from time to time or which
are otherwise included in the committee's charter, which is available via our
website at www.spacedev.com.
The
board
of directors has an objective that its membership be composed of experienced
and
dedicated individuals with diversity of backgrounds, perspectives, and skills
relevant to our business. The nominating and corporate governance committee
selects candidates for director based on their character, judgment, diversity
of
experience relevant to our business, business acumen, and ability to act on
behalf of all stockholders. Each director nominee is selected by the nominating
and corporate governance committee based on his/her experience in management
or
accounting and finance, or industry and technology knowledge, personal and
professional ethics, and the willingness and ability to devote sufficient time
to effectively carry out his/her duties as a director.
Any
shareholder who desires to recommend a nominee for director must submit a
letter, addressed to the Corporate Secretary, SpaceDev, Inc., 13855 Stowe Drive,
Poway, California 92064, which is clearly identified as a "Director Nominee
Recommendation." All recommendation letters must identify the author as a
shareholder and provide a brief summary of the candidate's qualifications,
as
well as contact information for both the candidate and the shareholder, to
enable the committee to contact the nominee for additional information to
evaluate the person's qualifications. Any shareholder nominee will be required
to meet the criteria established by the committee and will be interviewed by
at
least one member of the committee. If the nominee is found to be eligible during
the initial interview, the nominee will then be invited to meet with the full
committee or the board of directors for further evaluation. The committee will
consider all proposed nominees whose names are submitted in accordance with
the
above-stated requirements. We have never received a shareholder nominee for
director, but if we do, we would evaluate him or her based on the same standards
used for other candidates.
Shareholder
Communication With The Board of Directors.
Shareholders may communicate with the board of directors, including the
non-management directors, by sending a letter to our board of directors, c/o
Corporate Secretary, SpaceDev, Inc., 13855 Stowe Drive, Poway, California 92064
for submission to the board or committee or to any specific director to whom
the
correspondence is directed. Stockholders communicating through this means should
include with the correspondence evidence, such as documentation from a brokerage
firm, that the sender is a current record or beneficial stockholder of the
Company. Our Corporate Secretary will direct the correspondence to the chairman
of the board, the appropriate committee or the specific director, as
applicable.
Company
Code of Conduct And Ethics.
The
board has adopted a Code of Conduct and Ethics that applies to the Company's
directors, officers and employees; a copy of this policy is available via our
website at www.spacedev.com. We have also filed a copy of the Code of Conduct
and Ethics with the SEC as an exhibit to our Annual Report on Form 10-KSB for
fiscal year 2002, filed on March 28, 2003.
Director
Compensation
Our
independent directors received options for attending 2005/2006 meetings of
the
board as follows: each director received an option to purchase 6,000 shares
for
each telephonic meeting attended and an option to purchase 12,000 shares for
each meeting attended in person, with a cap of options on 36,000 shares per
year. Our independent directors also received compensation for attending
2005/2006 committee meetings as follows: each director received an option to
purchase 5,000 shares for each audit committee meeting attended, each director
received an option to purchase 2,500 shares for each compensation committee
meeting attended and each director received an option to purchase 2,500 shares
for each nominating and corporate governance committee meeting attended, which
options were not subject to a cap.
The
following table sets forth the remuneration paid to our directors during the
fiscal year ended December 31, 2006. The table is essentially empty because,
in
response to the adoption of SFAS 123(R) in January 2006, we paid no compensation
to our directors in 2006 with the exception of a fee paid to Mr. Benson for
his
services as chairman of the board. We issued options for director compensation
at the end of 2005 for anticipated services in 2006 in anticipation of the
impact of SFAS 123(R), and until a new director compensation arrangement could
be discussed and implemented. Our board addressed independent director
compensation for 2007 and beyond during their March 29, 2007 meeting. We do
not
pay directors, who are also our officers, additional compensation for their
service as directors.
Name
|
|
|
Fees
Earned or Paid in Cash ($
|
)
|
|
Stock
Awards ($
|
)
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan Compensation ($
|
)
|
|
Nonqualified
Deferred Compensation Earnings ($
|
)
|
|
All
Other Compensation ($
|
)
|
|
Total
($
|
)
|
Mark
N. Sirangelo
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Richard
B. Slansky
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
James
W. Benson (1)
|
|
|
19,385
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
19,385
|
|
Scott
Tibbitts
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Curt
Dean Blake
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
General
Howell M. Estes, III
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Wesley
T. Huntress
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Scott
McClendon
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Robert
S. Walker
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Susan
Benson (2)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Stuart
Schaffer (2)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1) |
Mr.
Benson resigned as chairman of the board on September 26, 2006 to
found
Benson Space Company; however, he remains a member of the board of
directors of SpaceDev, Inc.
|
(2) |
On
August 10, 2006, Ms. Benson and Mr. Schaffer, in connection with
the
reduction of our board of directors' size from 11 to 9, did not seek
re-election.
|
On
December 20, 2005, the vesting on all outstanding options, including those
held
by independent directors, was accelerated such that all outstanding options
became fully-vested. No options were granted to members of the board of
directors in 2006.
On
March
29, 2007, the compensation committee of the board of directors met and proposed
a change in the compensation arrangement for the Company’s board of
directors. Each external (i.e., non-officer, non-management) director
will, effective January 1, 2007, receive $1,500 in cash compensation for each
board of directors meeting attended in person and $750 cash for each board
of
directors meeting attended by telephone conference call. In addition, each
external director will receive $750 for each audit committee, compensation
committee, or nominating and corporate governance committee meeting attended
in
person or by telephone conference call. Each external director will
receive reasonable and customary reimbursement of travel-related expenses for
attendance at board of director meetings. Finally, each external director will
receive an annual stock option grant for 10,000 shares of the Company’s common
stock at the end of each calendar year, so long as the external director served
on the board for at least six months during the year. The price of the
option would be based on the fair market value of the Company’s stock at grant,
would vest over three years in six-month increments, and would expire four
years
from date of grant. The compensation committee left open the possibility
for an initial grant of the Company’s common stock for new Board members under
the same general terms and conditions. The board of directors ratified the
compensation proposal.
Executive
Officers
Certain
information about the current executive officers of the Company is set forth
below.
Mark
N. Sirangelo,
until he
was appointed our vice chairman and chief executive officer in December 2005,
was the managing member and chief executive officer of The Quanstar Group,
LLC
from December 2003 until November 2005 and the managing member of QS Advisors,
LLC from February 1998 to December 2005. Mr. Sirangelo became our chairman
in
September 2006 upon the resignation of James W. Benson. QS Advisors and Quanstar
are strategic and business advisors and we were a client of them. Mr. Sirangelo
actively participated in the development of a number of early-stage companies
in
aerospace, technical, scientific, and other industries. His work at Quanstar
also included hands-on involvement with technology commercialization transfer
for university and government laboratories. From 2001 until 2003, Mr. Sirangelo
also served as a senior officer of Natexis Bleichroeder, Inc., an international
investment banking firm. Mr. Sirangelo has a bachelor's degree in science,
a
master's degree in business, and juris doctorate, all from Seton Hall
University. Mr. Sirangelo is a director for the National Center for Missing
and
Exploited Children in addition to serving as a director and treasurer of the
International Center for Missing and Exploited Children, and is a director
of
Adam Aircraft Industries.
Richard
B. Slansky is
currently our president, chief financial officer, director, and corporate
secretary. He joined us in February 2003 as chief financial officer and
corporate secretary. In November 2004, Mr. Slansky was appointed as president
and a director. Mr. Slansky served as interim chief executive officer, interim
chief financial officer, and director for Quick Strike Resources, Inc., an
IT
training, services, and consulting firm, from July 2002 to February 2003. From
May 2000 to July 2002, Mr. Slansky served as chief financial officer, vice
president of finance, administration and operations, and corporate secretary
for
Path 1 Network Technologies Inc., a public company focused on merging broadcast
and cable quality video transport with IP networks. Mr. Slansky earned a
bachelor's degree in economics and science from the University of Pennsylvania's
Wharton School of Business and a master's degree in business administration
in
finance and accounting from the University of Arizona.
Scott
Tibbitts was
appointed our managing director and a director at the closing of the Starsys
merger on January 31, 2006. Mr. Tibbitts co-founded Starsys Research Corporation
in 1988 and served as president, chief executive officer, and a member of the
board of directors from 1988 until May 2005; and from May 2005 to January 2006
served as chief executive officer and a member of the board of directors. Mr.
Tibbitts has a bachelor's degree in chemical engineering from the University
of
Wisconsin.
Executive
Officer Compensation
Total
compensation paid to our "named executive officers" for 2006 is set forth below.
The named executive officers consist of each person who was our principal
executive officer at any time in 2006, our two most highly compensated executive
officers other than the CEO(s) who were serving as executive officers on
December 31, 2006, and up to two additional individuals who would have been
within the two-other-most-highly compensated but were not serving as executive
officers on December 31, 2006.
Summary
Compensation Table
Name
and principal position
|
|
|
Year
|
|
|
Salary
($
|
)
|
|
Bonus
($
|
)
|
|
Stock
awards ($
|
)
|
|
Option
awards ($
|
)
|
|
Non-equity
incentive plan compensation ($
|
)
|
|
Change
in pension value and non-qualified deferred compensation earnings
($
|
)
|
|
All
other compensation ($
|
)
|
|
Total
|
|
Mark
N. Sirangelo
|
|
|
2006
|
|
|
292,730
|
|
|
25,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
317,730
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Benson (1)
|
|
|
2006
|
|
|
144,623
|
|
|
22,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
32,308
|
|
|
199,431
|
|
Former
Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
B. Slansky
|
|
|
2006
|
|
|
195,877
|
|
|
25,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
101,458
|
|
|
322,335
|
|
President
and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Tibbitts
|
|
|
2006
|
|
|
140,871
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,374
|
|
|
243,245
|
|
Managing
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
Vacek (1)
|
|
|
2006
|
|
|
224,319
|
|
|
-
|
|
|
-
|
|
|
104,795
|
|
|
-
|
|
|
-
|
|
|
3,400
|
|
|
332,514
|
|
Former
President, Starsys, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Mr.
Benson resigned as an officer on September 26, 2006 to found Benson
Space
Company. Mr. Vacek resigned on November 20, 2006, with an effective
departure date of December 15,
2006.
|
On
December 20, 2005, we eliminated all vesting requirements on all stock options
then outstanding. Options granted in 2006 are subject to a three-year vesting
requirement.
Outstanding
Equity Awards at Fiscal Year-End
The
following table reflects information for our executive officers named in the
Summary Compensation Table, effective December 31, 2006:
Name
|
|
|
Number
of securities underlying unexercised options exercisable
(#
|
)
|
|
Number
of securities underlying unexercised options unexercisable
(#
|
)
|
|
Equity
incentive plan award: number of securities underlying unexercised
unearned
options (#
|
)
|
|
Option
exercise price($
|
)
|
|
Option
expiration date
|
|
Mark
N. Sirangelo
|
|
|
1,900,000
|
|
|
-
|
|
|
-
|
|
$
|
1.40
|
|
|
12/20/2010
|
|
James
W. Benson (1)
|
|
|
1,100,000
|
|
|
-
|
|
|
-
|
|
|
1.40
|
|
|
12/20/2010
|
|
|
|
|
500,000
|
|
|
-
|
|
|
-
|
|
|
1.00
|
|
|
1/18/2010
|
|
Richard
B. Slansky
|
|
|
1,400,000
|
|
|
-
|
|
|
-
|
|
|
1.40
|
|
|
12/20/2010
|
|
|
|
|
330,000
|
|
|
-
|
|
|
-
|
|
|
0.51
|
|
|
2/10/2009
|
|
|
|
|
395,000
|
|
|
-
|
|
|
-
|
|
|
0.92
|
|
|
3/25/2010
|
|
Scott
Tibbitts
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Robert
Vacek (2)
|
|
|
125,000
|
|
|
-
|
|
|
700,000
|
|
|
1.46
|
|
|
3/15/2007
|
|
(1) |
Options
on 1,100,000
shares expired unexercised on April 2,
2007.
|
(2) |
All
of Mr. Vacek’s options expired unexercised on March 15,
2007.
|
Long-Term
Incentive Awards
We
did
not have any long-term incentive plan awards during fiscal year
2006.
Employment
Agreements, Termination of Employment Arrangements and Change of Control
Agreements
On
January 31, 2006, we entered into a three year executive employment agreement
with Scott Tibbitts, pursuant to which Mr. Tibbitts is employed as our managing
director. Under the agreement, Mr. Tibbitts earns an annual base salary of
$150,000 and will be eligible for quarterly performance bonuses, as determined
by our board of directors or compensation committee, up to an annual aggregate
amount of 50% of his base salary. Bonus milestones will be mutually agreed
upon
in good faith by Mr. Tibbitts and by our board of directors or compensation
committee. We will pay severance to Mr. Tibbitts if his employment is terminated
by us without cause or by Mr. Tibbitts for good reason. The severance payment
is
equal to: (1) if Mr. Tibbitts' employment is terminated by us without cause,
his
then-current base salary per month multiplied by the number of months remaining
in the term of the agreement (prorated with respect to any partial month);
or
(2) if Mr. Tibbitts' employment is terminated by Mr. Tibbitts for good reason,
his then-current base salary per month multiplied by the lesser of twelve months
and the number of months remaining in the term of the agreement. Under the
agreement, we will indemnify Mr. Tibbitts to the extent provided in our articles
of incorporation, as may be amended from time to time, and pursuant to our
standard indemnification agreement with our officers and directors, provided
that we will have no obligation to indemnify or defend Mr. Tibbitts for any
action, suit or other proceeding to the extent based on acts, omissions, events,
or circumstances occurring before the Starsys merger.
On
January 31, 2006, we entered into an executive employment agreement with Robert
Vacek pursuant to which Mr. Vacek was employed as the president of Starsys,
Inc., our subsidiary. The agreement had an initial term of two years, and
provided for automatic renewal for a third year unless either we or
Mr. Vacek provided written notice of an intent not to renew. Under the
agreement, Mr. Vacek was entitled to receive: (1) a base salary of $17,000
per
month, subject to adjustment up to $19,000 per month upon the happening of
certain events or by the sixteenth month of service; (2) performance-based
cash
bonuses based on the achievement of specific goals set forth in the agreement;
and (3) an option to purchase up to 825,000 shares of our common stock under
the
terms and conditions of our 2004 Equity Incentive Plan, as amended. The option
had an exercise price equal to $1.46 per share, which was the closing sale
price
reported on the OTCBB on the date of grant, and was to expire 90 days after
the
termination of Mr. Vacek's continuous employment. We agreed to pay severance
to
Mr. Vacek if his employment was terminated by us without cause or by Mr. Vacek
for good reason. The severance payment was equal to: (1) if Mr. Vacek's
employment was terminated by us without cause, his then-current base salary
per
month multiplied by the greater of (A) 12 months or (B) the number of months
remaining in the term of the agreement (prorated with respect to any partial
month); or, (2) if Mr. Vacek's employment was terminated by Mr. Vacek for good
reason, his then-current base salary per month multiplied by the lesser of
(A)
12 months or (B) the number of months remaining in the term of the agreement
provided that such number of months was not deemed to be less than six months.
Under the agreement, we agreed to indemnify Mr. Vacek to the extent provided
in
our articles of incorporation, as amended from time to time, to the maximum
extent permitted by law and pursuant to our standard indemnification agreement,
if any, with our officers and directors. Mr. Vacek resigned on November 20,
2006
with an effective departure date of December 15, 2006 and received no severance
payment as a result of his resignation.
On
December 20, 2005, we entered into an executive employment agreement with Mark
N. Sirangelo pursuant to which Mr. Sirangelo was employed as our chief executive
officer and vice chairman. The agreement has an initial term of two years,
and
will be automatically renewed for a third year unless either we or
Mr. Sirangelo provides written notice of an intent not to renew. Under the
agreement, Mr. Sirangelo is entitled to receive: (1) a base salary of $22,500
per month, subject to adjustment up to $27,500 per month upon the happening
of
certain events or by the sixteenth month of service; (2) performance-based
cash
bonuses based on the achievement of specific goals set forth in the agreement
(including a bonus of $25,000 upon the completion of the merger with Starsys);
and (3) a fully-vested option to purchase up to 1,900,000 shares of our common
stock under the terms and conditions of a non-plan stock option agreement
between us and Mr. Sirangelo. The option has an exercise price equal to $1.40
per share, which was the closing sale price reported on the OTCBB on the date
of
grant, and will expire five years after the date of grant. Some of the shares
subject to the option are subject to sale restrictions that expire upon the
achievement of certain specific milestones or four years from the date of grant,
whichever comes first. Subject to certain limitations, the option may be
exercised by means of a net exercise provision by surrendering shares with
a
fair market value equal to the exercise price upon exercise. We will pay
severance to Mr. Sirangelo if his employment is terminated by us without cause
or by Mr. Sirangelo for good reason. The severance payment is equal to: (1)
if
Mr. Sirangelo's employment is terminated by us without cause, his then-current
base salary per month multiplied by the greater of (A) 12 months or (B) the
number of months remaining in the term of the agreement (prorated with respect
to any partial month); or (2) if Mr. Sirangelo's employment is terminated by
Mr.
Sirangelo for good reason, his then-current base salary per month multiplied
by
the lesser of (A) 12 months or (B) the number of months remaining in the term
of
the agreement provided that such number of months will not be deemed to be
less
than six months.
On
December 20, 2005, we entered into an amended and restated executive employment
agreement with Richard B. Slansky pursuant to which Mr. Slansky is employed
as
our president and chief financial officer. The agreement has an initial term
of
two years, and will be automatically renewed for a third year unless either
we
or Mr. Slansky provides written notice of an intent not to renew. Under the
agreement, Mr. Slansky is entitled to receive: (1) a base salary of $14,500
per
month, subject to adjustment up to $20,000 per month upon the happening of
certain events or by the sixteenth month of service; (2) performance-based
cash
bonuses based on the achievement of specific goals set forth in the agreement
(including a bonus of $25,000 upon the completion of the merger with Starsys);
and (3) a fully-vested option to purchase up to 1,400,000 shares of our common
stock under the terms and conditions of a non-plan stock option agreement
between us and Mr. Slansky. The option has an exercise price equal to $1.40
per
share, which was the closing sale price reported on the OTCBB on the date of
grant, and will expire five years after the date of grant. Some of the shares
subject to the options are subject to sale restrictions that expire upon the
achievement of certain specific milestones or four years from the date of grant,
whichever comes first. Subject to certain limitations, the option may be
exercised by means of a net exercise provision by surrendering shares with
a
fair market value equal to the exercise price upon exercise. We will pay
severance to Mr. Slansky if his employment is terminated by us without cause
or
by Mr. Slansky for good reason. The severance payment is equal to: (1) if Mr.
Slansky's employment is terminated by us without cause, his then-current base
salary per month multiplied by the greater of (A) 12 months or (B) the number
of
months remaining in the term of the agreement (prorated with respect to any
partial month); or (2) if Mr. Slansky's employment is terminated by Mr. Slansky
for good reason, his then-current base salary per month multiplied by the lesser
of (A) 12 months or (B) the number of months remaining in the term of the
agreement provided that such number of months will not be deemed to be less
than
six months.
On
December 20, 2005, we entered into an executive employment agreement with James
W. Benson pursuant to which Mr. Benson was employed as our chairman and chief
technology officer. The agreement superseded all prior employment agreements
between us and Mr. Benson. The agreement had an initial term of two years,
and
provided for automatic renewal for a third year unless either we or
Mr. Benson provided written notice of an intent not to renew. Under the
agreement, Mr. Benson was entitled to receive: (1) a base salary of $14,000
per
month, subject to adjustment up to $17,000 per month upon the happening of
certain events or by the sixteenth month of service; (2) performance-based
cash
bonuses based on the achievement of specific goals set forth in the agreement
(including a bonus of $22,500 upon the completion of the merger with Starsys);
and (3) a fully-vested option to purchase up to 950,000 shares of our common
stock under the terms and conditions of a non-plan stock option agreement
between us and Mr. Benson. The option had an exercise price equal to $1.40
per
share, which was the closing sale price reported on the OTCBB on the date of
grant, and was
originally set to expire five years after the date of grant; however, due to
Mr.
Benson’s resignation and change in status to our consultant, the options’
expiration date became: a) ninety (90) days after the termination of his
consulting agreement; or b) December 20, 2010, whichever is earlier.
We had
agreed to pay severance to Mr. Benson if his employment was terminated by us
without cause or by Mr. Benson for good reason. The severance payment is equal
to: (1) if Mr. Benson's employment was terminated by us without cause, his
then-current base salary per month multiplied by the greater of (A) 12 months
or
(B) the number of months remaining in the term of the agreement (prorated with
respect to any partial month); or (2) if Mr. Benson's employment was terminated
by Mr. Benson for good reason, his then-current base salary per month multiplied
by the lesser of (A) 12 months or (B) the number of months remaining in the
term
of the agreement provided that such number of months will not be deemed to
be
less than six months. Mr. Benson resigned as an employee on September 26, 2006,
and received no severance payment as a result of his resignation. However,
he
did remain a consultant through January 2, 2007 and still serves on our board
of
directors. Mr. Benson received approximately $56,000 for his consulting services
from the date of his resignation through January 2, 2007. The option to purchase
950,000 shares expired on April 2, 2007. Mr. Benson remains one of our major
shareholders.
On
December 20, 2005, Mr. Benson also received an option to purchase up to 150,000
shares of our common stock in connection with his services as our chairman
pursuant to the terms of a separate non-plan stock option agreement between
us
and Mr. Benson. The option has an exercise price equal to $1.40 per share,
which
was the closing sale price reported on the OTCBB on the date of grant, and
was
originally set to expire five years after the date of grant; however, due to
Mr.
Benson’s resignation and change in status to our consultant, the options’
expiration date became: a) ninety (90) days after the termination of his
consulting agreement; or b) December 20, 2010, whichever is earlier. Mr. Benson
resigned as an employee on September 26, 2006 but remained a member of our
board
of directors and one of our major shareholders. He served as a consultant
through January 2, 2007. The option to purchase 150,000 shares expired on April
2, 2007.
Employee
Benefits
Under
our
1999 Incentive Employee Stock Option Plan, the board of directors had the
ability to grant our employees, directors and affiliates Incentive Stock
Options, non-statutory stock options and other forms of stock-based
compensation, including bonuses or stock purchase rights. Incentive Stock
Options, which provide for preferential tax treatment, are only available to
employees, including officers and affiliates, and may not be issued to
non-employee directors. The exercise price of the Incentive Stock Options must
be 100% of the fair market value of the stock (110% for stockholders holding
10%
or more of our outstanding voting stock) on the date the option is granted.
Pursuant to our plan, the exercise price for the non-statutory stock options
may
not be less than 85% of the fair market value of the stock on the date the
option is granted. We are required to reserve an amount of common shares equal
to the number of shares which may be purchased as a result of awards made under
the Plan at any time.
In
2000,
we amended this Plan, increasing the number of shares eligible for issuance
under the Plan to 30% of the then outstanding common stock and allowing the
board of directors to make annual adjustments to the Plan to maintain a 30%
ratio to outstanding common stock at each annual meeting of the board of
directors. The board, at its annual meetings in 2001 and 2002, made no
adjustment, as a determination was made that the number of shares then available
under the Plan was sufficient to meet the Company's then current needs.
In
2004,
we created a new incentive plan. We have reserved 7,000,000 shares for issuance
under our 2004 Equity Incentive Plan. The plan is an important part of our
total
compensation program because competitive benefit programs are a critical
component of our efforts to attract and retain qualified employees, directors,
and consultants. Options granted under the plan may be Incentive Stock Options
or non-statutory stock options, as determined by the board of directors or
a
committee appointed by the board of directors at the time of grant. Limited
rights and stock awards may also be granted under the Plan.
As
of
December 31, 2006, 11,184,698 shares were authorized for issuance under the
1999
Stock Option Plan and the 2004 Equity Incentive Plan, 7,495,098 of which are
currently subject to outstanding options and awards, and options on 1,509,316
shares were exercised through 2006.
In
addition to the 1999 Stock Option Plan and the 2004 Equity Incentive Plan,
our
1999 Employee Stock Purchase Plan authorizes our board of directors to make
offerings of our common stock to our employees. The 1999 Employee Stock Purchase
Plan has been instituted and the first employees enrolled in the plan in August
2003. The first shares of common stock were issued under the Plan in February
2004 and every six-month anniversary thereafter. The 1999 Employee Stock
Purchase Plan was scheduled to expire in June 2005; however, the board
authorized a one-year extension of the plan at their meeting in November 2004,
while the compensation committee reviewed the value of the plan to employees
and
the desire for its continuance. In March 2005, the board authorized an
additional extension of the plan to June 30, 2010.
We
also
offer a variety of health, dental, vision, 401(k) and life insurance benefits
to
our employees.
Equity
Compensation Plan Information
The
following table reflects information as of December 31, 2006.
|
|
|
|
|
(a)
|
(b)
|
(c)
|
|
|
|
|
Plan
category
|
Number
of securities
|
Weighted-average
|
Number
of securities
|
|
to
be issued upon
|
exercise
price of
|
remaining
available for
|
|
exercise
of outstanding
|
outstanding
|
future
issuance under
|
|
options,
warrants, and
|
options,
warrants
|
equity
compensation plans
|
|
rights
|
and
rights
|
(excluding
securities
|
|
|
|
reflected
in column (a))
|
|
|
|
|
Equity
|
|
|
|
compensation
plans
|
7,495,098
|
$1.17
|
2,180,284
|
approved
by
|
|
|
|
security
holders
|
|
|
|
|
|
|
|
Equity
|
4,900,000
|
1.36
|
-
|
compensation
plans
|
|
|
|
not
approved by
|
|
|
|
security
holders
|
|
|
|
|
|
|
|
Total
|
12,395,098
|
$1.24
|
2,180,284
|
The
options granted to our executives, under the equity compensation plans not
approved by security holders, are fully vested and exercisable on the date
of
grant, have an exercise price of $1.00 to $1.40 per share, which was the closing
sale price, reported on the OTCBB on the date of grant, and will expire five
to
ten years after the date of grant. Some of the shares subject to the
options are subject to sale restrictions that expire upon the achievement of
certain milestones or four years from the date of grant, whichever comes
first. Subject to certain limitations, these options may be exercised by
means of a net exercise provision by surrendering shares with a fair market
value equal to the exercise price upon exercise.
Certain
Relationships And Related Transactions
James
W.
Benson, our former chief technology officer and former chairman of the board
of
directors, and Susan C. Benson, our former corporate secretary and director,
are
married. Mr. Benson has personally guaranteed the building lease on our Poway,
California headquarters facility and has placed his home in Poway as collateral.
Mr. Benson remains a member of our board of directors and one of our major
shareholders.
In
October 2006, we were
awarded
a $330,000 study contract from the Benson Space Company to further the SpaceDev
Dream Chaser™
spaceship program. Mr. Benson founded the Benson Space Company in
September 2006 and remains a member of our Board and principal stockholder.
Therefore, this contract could be considered a related party transaction. The
study contributed to the on-going development of the spaceship and resulted
in a
space vehicle and rocket motor design. The SpaceDev Dream Chaser™ spaceship is
based on NASA’s design of the ten-passenger orbital HL-20 personnel launch
system, and will launch vertically and land horizontally. We completed the
study in March 2007 and have recognized all revenue under this
program.
Until
joining us, Mark N. Sirangelo, chief executive officer, and chairman of our
board of directors, was a member of QS Advisors, LLC, and also a member of
The
QuanStar Group LLC, business advisors to us. We entered into an agreement with
QS Advisors for which QS Advisors was paid a monthly fee of $5,000. In addition,
under the agreement, upon the consummation of the merger with Starsys, and
for
services performed in relation to the merger and considered part of the purchase
price, QS Advisors received $200,000 cash and 250,000 shares of our common
stock. QS Advisors subsequently distributed 7,500 shares of our common stock
to
Mr. Daniel Avrutsky for services performed and retained 242,500 shares. This
agreement terminated upon consummation of Mr. Sirangelo's employment with us;
however, Mr. Sirangelo claims beneficial ownership of the 242,500 shares
distributed to QS Advisors.
On
January 31, 2006, we entered into a non-competition agreement with Scott
Tibbitts, pursuant to which Mr. Tibbitts has agreed not to be employed by or
have any interest in an entity that engages in a similar business to Starsys
related to the aerospace industry for three years, shall not solicit any
business from any of our past or present customers, not solicit or encourage
any
of our employees to leave or reduce his or her employment, not to encourage
a
consultant under contract with us to cease or diminish his or her work with
us,
not to use our intellectual property other than for the benefit of us and not
to
make any negative or disparaging statements regarding us to any third party.
Mr.
Tibbitts has received $100,000 for 2006 and will continue to receive $100,000
annually each year he abides by the covenant not to compete.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
upon a review of the Forms 3 and 4 furnished to us during 2006, each of the
directors and/or executive officers timely filed any required initial Form
3 and
Form 4 under Section 16(a) of the Securities Exchange Act of 1934 during 2006
with the following exceptions: James W. Benson on September 11, 2006 and
November 6, 2006; Susan C. Benson on January 11, 2006 and January 12, 2006;
Robert Walker on June 2, 2006 and December 18, 2006; Richard B. Slansky on
June
2, 2006; Randall K. Simpson on June 2, 2006 and December 6, 2006; Wesley
Huntress on June 2, 2006 and September 11, 2006; Howell Estes on June 20, 2006
and August 29, 2006; Robert Vacek on August 29, 2006; Frank Macklin on August
29, 2006 and December 6, 2006; and Curt Blake on August 29, 2006 and December
12, 2006.
Required
Vote
At
the
Annual Meeting, nine directors are to be elected, by plurality vote. We ask
that
you sign and return the enclosed proxy card to give the named proxy holders
the
right to vote for the nine nominees identified in this Proxy Statement. If
you
elect to withhold authority for any individual nominee or nominees, you may
do
so by making an "X" in the box marked "For All Except," and by writing the
number(s) of the nominee(s) on the line provided on the proxy card that you
do
not wish to vote for.
Each
of
the nominees for director has agreed to serve as a director of the Company
until
his replacement is elected. If any unforeseen event prevents one or more of
the
nominees from serving as a director, your votes will be cast for the election
of
a substitute or substitutes selected by the board. In no event, however, can
the
proxies be voted for a greater number of persons than the number of nominees
named. Unless otherwise instructed, the proxy holders will vote for the election
of each nominee to serve as a director of the Company.
OUR
BOARD
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES TO
THE
BOARD OF DIRECTORS OF THE COMPANY.
PROPOSAL
2
RATIFICATION
OF SELECTION OF REGISTERED
INDEPENDENT
PUBLIC ACCOUNTING FIRM
Our
audit
committee has selected PKF, Certified Public Accountants, A Professional
Corporation, ("PKF"), who was our auditing firm for the fiscal years ended
December 31, 2003, 2004, 2005, and 2006 as our registered independent public
accounting firm for the fiscal year ending December 31, 2007. This selection
is
being submitted to the stockholders for ratification at the Annual Meeting.
A
representative of PKF is expected to be present at the Annual Meeting, will
have
the opportunity to make a statement if he wishes to do so, and will be available
to respond to appropriate questions.
Stockholders
are not required to ratify the selection of PKF, as our registered independent
public accounting firm. However, we are submitting the selection of PKF to
the
stockholders for ratification as a matter of good corporate governance. If
the
stockholders fail to ratify the selection, our audit committee will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
audit
committee, in its discretion, may direct the appointment of a different
registered independent public accounting firm at any time if it determines
that
such a change would be in our and our stockholders' best interests.
Audit
Fees
The
following are the fees billed us by our auditors, PKF, Certified Public
Accountants, A Professional Corporation, respectively, for services rendered
thereby during 2006 and 2005:
|
2006
|
2005
|
Audit
Fees
|
$
101,690
|
$
46,380
|
Audit
Related Fees
|
82,445
|
-
|
Tax
Fees
|
24,088
|
7,500
|
All
Other Fees
|
285
|
42,275
|
Total
|
$
208,507
|
$
96,155
|
The
increase in fees was due to the acquisition of Starsys in January 2006 as well
as the required filing and additional work performed for the cut-off financial
information at the time of the merger. The acquisition of Starsys added
additional complexities and consolidation issues to the Company's reporting
requirements.
Audit
Fees
consist
of the aggregate fees billed for professional services rendered for the audit
of
our annual financial statements and the reviews of the financial statements
included in our Forms 10-QSB and for any other services that were normally
provided by PKF in connection with our statutory and regulatory filings or
engagements.
Audit
Related Fees
consist
of the aggregate fees billed for professional services rendered for assurance
and related services that were reasonably related to the performance of the
audit or review of our financial statements and were not otherwise included
in
Audit Fees. The 2006 fees in this category related to specific research of
accounting treatment under new FASB rules.
Tax
Fees
consist
of the aggregate fees billed for professional services rendered for tax
compliance, tax advice and tax planning. Included in such Tax Fees were fees
for
preparation of our tax returns and consultancy and advice on other tax planning
matters.
All
Other Fees
consist
of the aggregate fees billed for products and services provided by PKF and
not
otherwise included in Audit Fees, Audit Related Fees or Tax Fees. Included
in
such Other Fees were fees for services rendered by PKF in connection with our
private and public offerings conducted during such periods.
Our
audit
committee has considered whether the provision of the non-audit services
described above is compatible with maintaining PKF's independence and determined
that such services are appropriate.
Before
the auditors are engaged to provide us audit or non-audit services, such
engagement is (without exception, required to be) approved by the audit
committee of our board of directors.
The
affirmative vote of the holders of a majority of the stock represented and
voting at the meeting will be required to ratify the selection of
PKF.
OUR
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY
SELECTION OF THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2007.
PROPOSAL
3
APPROVAL
OF A CHANGE OF THE COMPANY'S STATE OF INCORPORATION FROM COLORADO TO DELAWARE
BY
APPROVAL AND ADOPTION OF AN AGREEMENT AND PLAN OF MERGER PROVIDING FOR THE
MERGER OF OUR COMPANY INTO A WHOLLY-OWNED DELAWARE
SUBSIDIARY
General
For
the
reasons set forth below, our board unanimously approved the Merger Agreement
and
believes that it is in the best interests of our Company and our Shareholders
to
change the state of incorporation from Colorado to Delaware. While we have
been
advised by counsel that there are only limited substantive differences in your
rights as Shareholders between Colorado and Delaware corporate law, our board
has determined that reincorporation in Delaware is in the Company's best
interests in pursuing future business opportunities in our line of business.
Throughout this section of the Proxy Statement, our Company as currently
incorporated in Colorado will be referred to as "SPDV" and the Company as
reincorporated in Delaware (which reincorporation is subject to approval of
the
Merger Agreement by the Shareholders at the Annual Meeting) will be referred
to
as "SpaceDev, Inc." The
Merger Agreement will be effected by merging SPDV into a newly formed Delaware
corporation that will be a wholly-owned subsidiary of SPDV, also named SpaceDev,
Inc., (the "Merger") pursuant to an Agreement and Plan of Merger, in the form
attached hereto as Appendix A (the "Merger Agreement"). You
are
urged to carefully read this section of this Proxy Statement, including the
related appendices referenced below and attached to this Proxy Statement, before
voting on the Merger Agreement.
No
Change in Name, Business, Jobs, Physical Location, Etc.
The
reincorporation merger 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 the Charters and the Bylaws of SPDV
and
SpaceDev, Inc. and Significant Differences Between the Corporation Laws of
Colorado and Delaware." However, the reincorporation merger will not result
in
any change in name, headquarters, business, jobs, management, location of any
of
our offices or facilities, number of employees, taxes payable to the State
of
Colorado, assets, liabilities or net worth (other than as a result of the costs
incident to the reincorporation merger, which are immaterial). Our management,
including all directors and officers, will remain the same in connection with
the reincorporation merger and will assume identical positions with SpaceDev,
Inc. None of our subsidiaries will be changing their respective states or
jurisdictions of incorporation in connection with the reincorporation merger.
There will be no new employment agreements for executive officers or other
direct or indirect interest of the current directors or executive officers
of
the Company in the reincorporation merger as a result of the reincorporation.
Upon the effective time of the reincorporation merger, your shares of SPDV
Common Stock will be converted into an equivalent number of shares of Common
Stock of SpaceDev, Inc. of Delaware and such shares will trade on the OTCBB
under the symbol "SPDV.OB."
SpaceDev,
Inc., a Delaware Corporation
SpaceDev,
Inc., our wholly owned subsidiary, was incorporated under the Delaware General
Corporation Law (DGCL) on June 19, 2007 under the name "SpaceDev, Inc., a
Delaware Corporation," exclusively for the purpose of merging with SPDV. The
address and phone number of SpaceDev, Inc. Delaware's principal office are
the
same as those of the Company. Prior to the reincorporation merger, SpaceDev,
Inc. will have no material assets or liabilities and will not have carried
on
any business.
Upon
completion of the reincorporation merger, the rights of the stockholders of
SpaceDev, Inc. will be governed by the DGCL and the certificate of incorporation
and the bylaws of SpaceDev, Inc. (the "Delaware Certificate of Incorporation"
and the "Delaware Bylaws," respectively). The Delaware Certificate of
Incorporation of SpaceDev, Inc. and the Delaware Bylaws are attached to this
proxy statement as Appendices B and C, respectively.
The
Merger Agreement and Effective Time
The
Merger Agreement will be effected by merging SPDV into a newly formed Delaware
corporation that will be a wholly-owned subsidiary of SPDV, also named SpaceDev,
Inc., (the "Merger") pursuant to an Agreement and Plan of Merger, in the form
attached hereto as Appendix A (the "Merger Agreement"). Upon completion of
the
Merger, SPDV, as a corporate entity, will cease to exist and SpaceDev, Inc.
will
succeed to the assets and liabilities of SDPV and will continue to operate
the
business of our Company under the name "SpaceDev, Inc." As provided by the
Merger Agreement, each outstanding share of SPDV common stock, $0.0001 par
value
per share, will be automatically converted into one share of SpaceDev, Inc.
common stock, $0.0001 par value per share, at the effective time of the Merger.
In addition, each share of Series C and Series D-1 preferred stock of SPDV
will
be automatically converted into one share of SpaceDev, Inc. Series C and Series
D-1 preferred stock, $0.001 par value per share, at the effective time of the
Merger. Each stock certificate representing issued and outstanding shares of
SPDV common stock will continue to represent the same number of shares of
SpaceDev, Inc. common stock.
PLEASE
DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES REPRESENTING SHARES OF THE
COMPANY'S COMMON STOCK, AS IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE
THEIR EXISTING SPDV STOCK CERTIFICATES FOR SPACEDEV, INC. STOCK CERTIFICATES.
HOWEVER, SHAREHOLDERS MAY REQUEST THAT THEIR CERTIFICATES BE EXCHANGED IF THEY
SO CHOOSE. DELIVERY OF THE SPDV COMMON STOCK CERTIFICATES WILL CONSTITUTE
DELIVERY FOR TRANSACTIONS IN SHARES OF SPACEDEV, INC. COMMON STOCK AFTER THE
EFFECTIVE DATE OF THE MERGER.
The
current directors of SPDV will become the directors of SpaceDev, Inc. All
employee benefit and stock option plans of SPDV will become SpaceDev, Inc.
plans, and each option or right issued by such plans will automatically be
converted into an option or right to purchase the same number of shares of
SpaceDev, Inc. common stock, at the same price per share, upon the same terms
and subject to the same conditions. Shareholders should note that approval
of
the Merger Agreement will also constitute approval of these plans continuing
as
SpaceDev, Inc. plans. Other employee benefit arrangements of SPDV will also
be
continued by SpaceDev, Inc. upon the terms and subject to the conditions
currently in effect. Our Series C Convertible Redeemable Preferred Stock and
Series D-1 Amortizing
Convertible Perpetual Preferred Stock
will be
converted into shares of preferred stock of SpaceDev, Inc. with essentially
identical charter-level rights, powers and privileges as the shares so
converted. We believe that the Merger Agreement will not affect any of our
material contracts with any third parties and that SPDV's rights and obligations
under such material contractual arrangements will continue as rights and
obligations of SpaceDev, Inc. The Merger Agreement has been approved by the
members of the board, who unanimously voted "FOR"
the
Merger Agreement. If approved by the Shareholders, it is anticipated that the
Merger will become effective under the Merger Agreement (the "Effective Time")
on August 10, 2007, or as soon as practicable thereafter. However, as described
in the Merger Agreement, if before the Effective Time the board determines
that
circumstances have arisen that make it inadvisable to proceed with the Merger
Agreement under the original terms of the Merger Agreement, the Merger (and
thus
the Merger Agreement) may be abandoned or the Merger Agreement may be amended
by
the board either before or after Shareholder approval has been obtained (except
that the principal terms may not be amended without obtaining further
Shareholder approval). The discussion below is qualified in its entirety by
reference to the Merger Agreement, the Delaware Certificate of Incorporation
and
the Delaware Bylaws, copies of which are attached to this Proxy Statement as
Appendices A, B and C, respectively, and by the applicable provisions of
Colorado corporate law and Delaware corporate law.
Approval
of the Merger and the Merger Agreement, which will also constitute approval
of
the SpaceDev Inc.’s Delaware Charter and the SpaceDev, Inc.’s Delaware Bylaws,
will require the affirmative vote of a majority of outstanding shares as of
the
Record Date entitled to vote thereon.
Effect
of Not Obtaining the Required Vote for Approval
If
the
reincorporation proposal fails to obtain the requisite vote for approval, the
reincorporation merger will not be consummated and the Company will continue
to
be incorporated in Colorado.
Dissenters'
Rights
Shareholders
of SPDV stock that follow the appropriate procedures are entitled to dissent
from the consummation of the Merger and receive payment of the fair market
value
of their shares under Article 113 of the Colorado Business Corporations Act
("CBCA").
The
following discussion summarizes the material applicable provisions of the
Colorado dissenters' rights statute. You are urged to read the full text of
the
Colorado dissenters' rights statute, which is reprinted in its entirety and
attached as Appendix D to this document. A person having a beneficial interest
in shares of SPDV stock that are held of record in the name of another person,
such as a bank, broker or other nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner
if
such person wishes to perfect any dissenters' rights such person may
have.
This
discussion and Appendix D should be reviewed carefully by you if you wish to
exercise statutory dissenters' rights or wish to preserve the right to do so,
because failure to strictly comply with any of the procedural requirements
of
the Colorado dissenters' rights statute may result in a termination or waiver
of
dissenters' rights under the Colorado dissenters' rights statute.
A
record
holder of any of SPDV stock may assert dissenters' rights as to fewer than
all
of the shares of SPDV stock registered in such record holder's name only if
the
record holder dissents and does not vote in favor of the Merger Agreement with
respect to all shares of such stock beneficially owned by any one person and
causes SPDV to receive timely written notice which states such dissent and
the
name, address and federal taxpayer identification number, if any, of each
beneficial holder on whose behalf the record holder asserts dissenters'
rights.
A
beneficial holder of shares SPDV stock may assert dissenters' rights as to
the
shares held on such beneficial Shareholder's behalf only if the beneficial
holder causes SPDV to receive the record holder's timely written consent to
the
dissent not later than the time the beneficial holder asserts dissenters' rights
and the beneficial holder dissents and causes the record holder to refrain
from
voting in favor of the Merger Agreement with respect to all shares of common
stock owned by the beneficial holder.
If
a
holder of SPDV stock wishes to dissent, such holder must send SPDV, before
the
vote on the reincorporation merger is taken, written notice of such holder's
intention to demand payment for such holder's shares of stock if the
reincorporation merger is effectuated and such holder must refrain from voting
in favor of the reincorporation merger. Neither a vote against the Merger
Agreement, nor any proxy directing such vote, nor abstention from voting on
the
Merger Agreement will satisfy the requirement for a written notice to SPDV
of
the holder's intention to demand payment. All such notices should be mailed
to
13855 Stowe Drive, Poway, California 92064, Attention: Richard B. Slansky,
Corporate Secretary.
If
the
reincorporation merger is authorized at the Annual Meeting, then, within ten
days thereafter, we will provide to any holder of SPDV stock still entitled
to
demand payment, a written notice containing all information and instructions
required by Colorado law for any such holder to complete the demand, including
certain deadlines by which SPDV must receive from a dissenting holder a formal
notice demanding payment from SPDV and such holder’s share certificates
representing such dissenting holder's shares of SPDV stock.
We
will
pay to a holder of SPDV stock, if eligible, and if such holder has validly
exercised his, her or its dissenters' rights under Article 113 of the CBCA,
the
amount we estimate is the fair market value of the dissenting holder's shares
plus interest at the rate provided in Article 113 of the CBCA from the effective
date of the reincorporation until the payment date. We also will provide the
information required by Article 113 of the CBCA to the dissenting owner of
SPDV
stock entitled to receive payment.
If
the
holder of shares of SPDV stock has validly exercised dissenters' rights under
Article 113 of the CBCA and believes that; (i) the amount offered or paid is
less than the fair market value of such holder's shares or that the interest
was
incorrectly calculated, (ii) we have failed to make the payment within sixty
days of the deadline for receiving payment demand, or (iii) we do not return
deposited certificates when required to do so, the dissenting holder may give
notice to us of such holder's estimate of the fair market value of such holder's
shares and the amount of interest due and demand payment of such estimate,
less
any payment previously made by us, or the dissenting holder may reject our
offer
and demand payment of the fair market value of the shares and interest due.
If a
dissenting holder's demand for payment remains unresolved, then we may, within
sixty days of receipt thereof, commence a proceeding and petition the court
to
determine the fair market value of such dissenting holder's shares and interest
due thereon. If we do not timely make such a request, we must pay the dissenting
holder the amount set forth in such holder's demand for payment.
SPDV
has
retained the right to elect not to proceed with the Merger Agreement if greater
than 1% of the Shareholders entitled to vote properly exercise their dissenters
rights, or if the board of directors deems the reincorporation to be
non-beneficial to the Company.
If
you
wish to seek dissenters' rights, you are urged to review the applicable Colorado
statutes attached to this document as Appendix D.
Reasons
for the Reincorporation
For
many
years, Delaware has followed a policy of encouraging incorporation in that
state
and, in furtherance of that policy, has been a leader in adopting, construing,
and implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Many corporations
have initially chosen Delaware, or have chosen to reincorporate in Delaware,
in
a manner similar to that proposed by the Company. Our board believes that the
principal reasons for considering such a reincorporation are:
· |
the
development in Delaware over the last century of a well-established
body
of case law construing the DGCL, which in many contexts, provides
businesses with a greater measure of predictability than exists in
any
other jurisdiction;
|
· |
the
certainty afforded by the well-established principles of corporate
governance under Delaware corporate law are of benefit to our Company
and
Shareholders and should increase our ability to attract and retain
quality
directors and officers;
|
· |
Delaware
corporate law itself, which is generally acknowledged to be the most
advanced and flexible corporate statute in the
country;
|
· |
the
Delaware Court of Chancery, which brings to its handling of complex
corporate issues a high level of experience, speed of decision and
sophistication, and the Delaware Supreme Court, the only appeals
court;
|
· |
the
Delaware corporate law benefits as viewed by investors if and when
our
Company moves to a national exchange listing;
and,
|
· |
the
Delaware General Assembly, which each year considers and adopts statutory
amendments that have been proposed by the Corporation Law Section
of the
Delaware bar to meet changing business
needs.
|
Significant
Changes Caused By Reincorporation
In
general, our corporate affairs are presently governed by the corporate law
of
Colorado, our state of incorporation, the SpaceDev, Inc.’s Colorado Charter and
by the SpaceDev, Inc.’s Colorado Bylaws, which have been adopted pursuant to
Colorado law. The Colorado Charter and Colorado Bylaws are available for
inspection during business hours at the principal executive offices of the
Company. In addition, copies may be obtained by writing to us at 13855 Stowe
Drive, Poway, California 92064, Attn: Richard B. Slansky, Corporate
Secretary.
Following
the Merger, issues of corporate governance and control would be controlled
by
Delaware, rather than Colorado, corporate law. The Colorado Charter and Colorado
Bylaws, will, in effect, be replaced by the Delaware Certificate of
Incorporation and the Delaware Bylaws, copies of which are attached as
Appendices B and C, respectively, to this Proxy Statement. The following
comparison of the charters and the bylaws of SPDV and SpaceDev, Inc. and
significant differences between the corporation laws of Colorado and Delaware
is
not intended to be an exhaustive list of all such differences or a complete
description of the differences, and is qualified in its entirety by the CBCA,
the Delaware General Corporation Law and the relevant charter and
by-laws.
Comparison
of the Charters and the Bylaws of SPDV and SpaceDev, Inc. and Significant
Differences Between the Corporation Laws of Colorado and
Delaware
Fiduciary
Duties of Directors
Both
Delaware and Colorado law provide that the board of directors has the ultimate
responsibility for managing the business and affairs of a corporation. In
discharging this function, directors of Colorado and Delaware corporations
owe
fiduciary duties of care and loyalty to the corporations they serve, as well
as
their shareholders. The fiduciary duty provisions included in Colorado corporate
law may provide significantly broader discretion, and increased protection
from
liability, to directors in exercising their fiduciary duties, particularly
in
the context of a change in control.
The
following summarizes certain aspects of Delaware and Colorado law as they relate
to fiduciary duties of directors:
Standard
of Care
Delaware
courts have held that the directors of a Delaware corporation are required
to
exercise an informed business judgment in performing their duties. Delaware
courts have also imposed a heightened standard of conduct on directors in
matters involving a contest for control of the corporation.
A
director of a Colorado business corporation must perform his or her duties
as a
director in good faith, with the care an ordinary person in a like position
would exercise under similar circumstances and with a view to the best interests
of the corporation.
Anti-Takeover
Laws
Section
203 of the Delaware General Corporation Law contains certain "anti-takeover"
provisions that apply to a Delaware corporation, unless the corporation elects
not to be governed by such provisions in its certificate of incorporation or
bylaws. Section 203 precludes a corporation from engaging in any "business
combination" with any person that owns 15% or more of its outstanding voting
stock for a period of three years following the time that such stockholder
obtained ownership of more than 15% of the outstanding voting stock of the
corporation. A business combination includes any merger, consolidation, or
sale
of substantially all of a corporation's assets.
The
three-year waiting period does not apply, however, if any of the following
conditions are met:
· |
the
board of directors of the corporation approved either the business
combination or the transaction which resulted in such stockholder
owning
more than 15% of such stock before the stockholder obtained ownership
of
more than 15% of the corporation's
stock;
|
· |
once
the transaction which resulted in the stockholder owning more than
15% of
the outstanding voting stock of the corporation is completed, such
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time that the transaction commenced;
or
|
· |
at
or after the time the stockholder obtains more than 15% of the outstanding
voting stock of the corporation, the business combination is approved
by
the board of directors and authorized at a meeting of stockholders
(and
not by written consent) by the affirmative vote of at least 66 2/3%
of the
outstanding voting stock that is not owned by the acquiring
stockholder.
|
The
CBCA
does not contain any similar business combination provisions.
Par
Value of Capital Stock, Surplus, Capital
Delaware
law recognizes the concepts of par value, surplus, and capital.
The
concepts of par value, surplus, and capital do not exist under the CBCA, though
par value stock is permitted.
Preferred
Stock
The
Delaware Certificate of Incorporation contains a similar authorization for
the
board of directors with respect to preferred stock; however, the rights and
limitations of the preferred stock are to the fullest extent permitted by
Delaware law. Accordingly, the Board is permitted to fix whether or not the
holders of shares of a series of preferred stock will have voting rights and
the
terms of those voting rights, in addition to the voting rights provided by
Delaware law.
The
Colorado Articles of Incorporation authorize the board of directors of the
Company to issue shares of preferred stock in one or more series, and to fix
for
each series the number, dividend rights, conditions of redemption, rights on
dissolution, voting rights (but only to the limited extent the preferred stock
is granted the right to vote by the CBCA), conversion privileges and other
rights and limitations to the extent permitted by the CBCA. SPDV currently
has
two series of preferred stock outstanding, Series C and Series D-1. All of
the
SPDV Series C and Series D-1 will convert into the same equal value Series
C and
Series D-1 of SpaceDev, Inc.
The
authorized shares of preferred stock for both SPDV, and for SpaceDev, Inc.
after
the reincorporation, may be used for any proper corporate purpose approved
by
the board of directors. Their availability enables the board of directors to
act
with flexibility and dispatch when favorable capital raising or acquisition
opportunities arise which permit the use of equity securities other than common
stock. Under certain circumstances, the preferred stock could have anti-takeover
effects. The terms of the preferred stock, and in the case of SpaceDev, Inc.,
the ability of the board of directors to give the preferred stock a wider array
of voting rights, could discourage or thwart persons seeking to effect a
takeover or otherwise gain control of SPDV or SpaceDev, Inc. The use of the
preferred stock for such a purpose, however, is unlikely.
Dividend
Rights and Repurchase of Shares
Under
Delaware corporate law, a corporation may declare and pay dividends out of
surplus or, if no surplus exists, out of net profits, for the fiscal year in
which the dividends are declared and/or for its preceding fiscal year, provided
that dividends may not be paid out of net profits if the capital of the
corporation is less than the aggregate amount of capital represented by the
outstanding stock of all classes having a preference upon the distribution
of
assets. Surplus is defined as net assets minus stated capital. Delaware
corporate law applies different tests to the payment of dividends and the
repurchase of shares.
The
CBCA
provides that the payment of distributions is generally permissible unless
after
giving effect to the dividend or distribution, the corporation would be unable
to pay its debts as they become due in the usual course of business, or if
the
total assets of the corporation would be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise) the
amount that would be needed, if the corporation were dissolved at the time
the
dividend was paid, to satisfy the preferential rights of shareholders whose
preferential rights upon dissolution of the corporation are greater than those
of the shareholders receiving the dividend. Because Colorado law dispenses
with
the concepts of par value of shares as well as statutory definitions of capital
and surplus, the above limitation is the only limitation with respect to the
declaration of dividends by the board of directors of the Company, so long
as
the distributions are reasonable under the circumstances.
Reacquisition
of Stock by the Corporation
Delaware
corporate law provides that a corporation may repurchase or redeem its shares
if, among other things, such repurchase or redemption will not impair the
capital of the corporation and if the shares are redeemable at the option of
the
corporation and the corporation does not pay more than the redemption price.
Under the CBCA, a company may acquire its own shares, subject to certain
limitations, and except in certain circumstances (which may include a
prohibition on reissuance in the articles of incorporation), such shares will
constitute authorized but unissued shares.
Liability
of Directors and Officers
Delaware
corporate law permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the personal liability of
its
directors to the corporation or its stockholders for monetary damages arising
from a breach of fiduciary duty, except for:
· |
a
breach of the duty of loyalty to the corporation or its
stockholders;
|
· |
acts
or omissions not in good faith or which involve intentional misconduct
or
a knowing violation of law;
|
· |
a
declaration of a dividend or the authorization of the repurchase
or
redemption of stock in violation of Delaware corporate law;
or
|
· |
any
transaction from which the director derived an improper personal
benefit.
|
The
Delaware Bylaws and the Delaware Charter include provisions which limit the
liability of directors of SpaceDev, Inc. to the maximum extent permitted by
law.
While
these provisions provide directors with protection from awards for monetary
damages for breaches of their duty of care, they do not eliminate such duty.
Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on an officer's
or
director's breach of such duties.
Under
Colorado corporate law, if provided in the articles of incorporation, a
corporation may limit a director's personal liability to the corporation or
its
shareholders for monetary damages for breach of his or her fiduciary duty,
except that no such provision in the articles of incorporation may eliminate
or
limit the liability of a director for any of the following:
· |
breach
of the director's duty of loyalty to the corporation or
shareholders;
|
· |
acts
or omissions not in good faith or which involve intentional misconduct
or
a knowing violation of law;
|
· |
a
distribution made in violation of Colorado corporate law or the articles
of incorporation; or
|
· |
any
transaction from which the director directly or indirectly derived
an
improper personal benefit.
|
The
Colorado Charter does not limit SPDV's directors’ and officers’ personal
liablility for monetary damages for any breach of fiduciary duty.
Indemnification
of Directors and Officers
Both
Delaware and Colorado permit a corporation to indemnify officers, directors,
employees and agents for actions taken in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, which they had no
reasonable cause to believe that their conduct was unlawful, except that no
indemnification may be made in respect of any claim, issue or matter as to
which
the person seeking indemnification shall have been adjudged to be liable to
the
corporation. Notwithstanding the foregoing, however, under Delaware law, even
a
person who has been found liable may still obtain indemnification to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. Both Delaware and Colorado corporate
law
also provide that a corporation may advance to a director or officer expenses
incurred by him in defending any action, upon receipt of an undertaking by
the
present or former director or officer to repay the amount advanced if it is
ultimately determined that he or she is not entitled to
indemnification.
Under
the
Delaware Charter, the Company is obligated to indemnify, to the fullest extent
permitted under Delaware law, all its directors and officers. The Delaware
Bylaws also require advancement of defense expense to SpaceDev, Inc.’s directors
and officers.
Under
the
Colorado Charter the Company was authorized to indemnify its directors and
officers to the fullest extent permitted by Colorado law.
Under
Colorado corporate law, unless limited by its articles of incorporation, a
Colorado corporation must indemnify its directors and officers who are wholly
successful in the defense of any proceeding to which they were a party because
of their position as a director or officer against reasonable expenses incurred
in connection therewith. In addition, Colorado corporate law requires Colorado
corporations to give shareholders, with or before the notice for the next
shareholders' meeting, a notice of all indemnification of, or advancement of
expenses to, directors of the Company in connection with a proceeding by or
in
the right of the corporation.
Annual
Meetings of Stockholders and Director Elections
Under
Delaware law an annual meeting of stockholders shall be held for the election
of
directors on a date and at a time designated by or in the manner provided in
the
bylaws. If there is a failure to hold the annual meeting or to take action
by
written consent to elect directors in lieu of an annual meeting for a period
of
30 days after the date designated for the annual meeting, or if no date has
been
designated, for a period of 13 months after the latest to occur of the
organization of the corporation, its last annual meeting or the last action
by
written consent to elect directors in lieu of an annual meeting, the Court
of
Chancery may summarily order a meeting to be held upon the application of any
stockholder or director.
Under
the
CBCA, a corporation shall hold an annual meeting of shareholders at a time,
date
and place stated in or fixed in accordance with the bylaws, or, if not so stated
or fixed, at a time, date and place stated in or fixed in accordance with a
resolution of the board of directors. If no place is stated or fixed, annual
meetings shall be held at the corporation's principal office. The failure to
hold an annual meeting at the time and date fixed in the bylaws or by resolution
will not affect the validity of any corporate action and does not create a
forfeiture or dissolution of the corporation. If an annual meeting was not
held
within the earlier of six months after the close of the corporation's most
recently ended fiscal year or 15 months after its last annual meeting, a meeting
may be summarily ordered by the appropriate district court upon the application
of any shareholder entitled to participate in an annual meeting.
Special
Meetings of Stockholders
Under
Delaware corporate law, a special meeting of the stockholders may be called
by
the board of directors or any other person as may be authorized by the bylaws.
The Delaware Bylaws provide that special meetings may be called by the chairman
of the board of directors or a majority of the entire board of
directors.
Under
Colorado corporate law, special meetings of shareholders may be called by the
board of directors or any other person as may be authorized by the bylaws or
a
resolution of the board of directors, or at the request in writing (which must
include the purpose of the meeting) of shareholders of record owning at least
10% of all the shares entitled to vote at the meeting. Only business within
the
purpose or purposes described in the notice of the meeting required by the
CBCA
may be conducted at a special shareholders' meeting. If not otherwise fixed,
the
record date for determining shareholders entitled to demand a special meeting
pursuant to written shareholder demand is the date of the earliest of any of
the
demands pursuant to which the meeting is called, or the date that is 60 days
before the date the first of such demands is received by the corporation,
whichever is later. If a notice of the special meeting was not given (i) within
30 days after the date of the call or (ii) the date the last of the demands
necessary to require the calling of the special meeting was received by the
corporation; or the special meeting was not held in accordance with the notice,
a meeting may be summarily ordered by the appropriate district court upon the
application of any person who participated in a call of or demand for a special
meeting.
Notice
of Adjournment and Other Actions
Under
Delaware corporate law, if a meeting of stockholders is adjourned and the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting must
be
given to each stockholder of record entitled to vote at the meeting. In
addition, at the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting.
Colorado
corporate law provides that if an annual or special shareholders' meeting is
adjourned to a different date, time, or place, notice need not be given of
the
new date, time, or place if the new date, time, or place is announced at the
meeting before adjournment, unless otherwise required by the bylaws. If,
however, a new record date for the adjourned meeting is or must be fixed because
the meeting is adjourned for more than 120 days after the date fixed for the
original meeting, notice of the adjourned meeting shall be given under this
section of no fewer than ten nor more than sixty days before the date of the
meeting; except that, if the number of authorized shares is to be increased,
at
least thirty days' notice shall be given to persons who are shareholders as
of
the new record date.
Record
Date
Under
Delaware law (i) the record date is not to precede the date upon which the
resolution fixing the record date is adopted by the board of directors, (ii)
when applicable, the record date is not to be more than 60 days before the
meeting or action requiring determination of stockholders, except in the case
of
an action by written consent, the record date for which must be not be more
than
10 days after the date upon which the resolution fixing the record date is
adopted by the board of directors, and (iii) in the case of a stockholder
meeting, in addition to the maximum limit of the record date being not more
than
60 days before the meeting, a minimum limit applies to the record date of not
less than 10 days before the meeting.
Under
the
CBCA, with respect to all actions requiring the fixing of a record date
(including distributions) other than a shareholder action by written consent,
the record date is not to be more than 70 days before the meeting or action
requiring a determination of shareholders. With respect to a shareholder action
by written consent, the record date is the date on which a writing upon which
the action is taken is first received by the Company.
Action
by Shareholders Without a Meeting
Delaware
corporate law, permits stockholder action to be taken by less than unanimous
written consent, if written consents are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled
to
vote thereon were present and voted and prompt notice of the action so taken
by
written consent of the requisite majority of the stockholders is given to the
non-consenting stockholders.
The
CBCA
provides that any action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if; (i) all of the shareholders entitled
to vote thereon consent to such action in writing, or (ii) if expressly provided
for in the articles of incorporation, the shareholders holding shares 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 of the shares entitled to vote
thereon were present and voted consent to such action in writing. Such action
by
written consent will be effective as of the date the last writing necessary
to
effect the action is received by the Corporate Secretary of the Company, unless
all of the written consents necessary to effect the action specify a later
date
as the effective date of the action. If action is taken with less than unanimous
consent, prompt notice of the action so taken by written consent must be given
to the non-consenting shareholders.
Advance
Notice of Director Nominations and Shareholder Proposals
Delaware
corporate law does not specify the manner in which nominations for directors
may
be made by stockholders or the manner in which business may be brought before
a
meeting. The Delaware Bylaws provide that notice of a director nomination or
other stockholder proposal must be received by us not less than 90 days nor
more
than 120 days before the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is changed by more than 30 days from the prefious year’s annual meeting
date, the proposing stockholder must deliver such notice not later than the
close of business on the later of the 90th day before such annual meeting or
the
10th day following the day on which public announcement of the date of such
meeting is first made. In the case of a special meeting of stockholders called
for the purpose of electing directors, such notice must be received not later
than the later of the close of business 90 days before such meeting or the
10th
day following the day on which public announcement of the date of such special
meeting is first made.
Colorado
corporate law, like Delaware corporate law, does not specify the manner in
which
nominations for directors may be made by shareholders or the manner in which
business may be brought before a meeting. The Colorado Bylaws have no notice
provisions for nominations and shareholder proposals similar to those in the
Delaware Bylaws.
Amendments
To The Articles (Certificate) of Incorporation
Under
Delaware corporate law, an amendment or change to the Certificate of
Incorporation generally requires the approval of the board of directors,
followed by the approval of such amendment by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote thereon. When
an amendment of the certificate would specially adversely affect the rights
of a
class of stock or the rights of a series of a class, Delaware corporate law
provides that the enactment of the amendment also requires the affirmative
vote
of the holders of a majority of the outstanding shares of such class or
series.
Under
the
CBCA, amendments to the Articles of Incorporation, other than ministerial
amendments authorized by the directors without shareholder action, may be
proposed by the board of directors of the Company or by the holders of shares
representing at least 10% of all of the votes entitled to be cast on the
amendment. The board of directors of the Company must recommend the amendment
to
the shareholders, unless the amendment is being proposed by the shareholders,
or
unless the board of directors determines that because of a conflict of interest
or other special circumstances it should make no recommendation and communicates
the basis for its determination to the shareholders with the
amendment.
Amendments
to Bylaws
Under
Delaware corporate law, bylaws may be adopted, amended or repealed by the
stockholders entitled to vote thereon provided that any corporation may, in
its
certificate of incorporation, confer this power upon the directors. However,
the
power vested in the stockholders shall not be divested or limited where the
board of directors also has such power. The Delaware Charter provides that
the
directors have the power to adopt, amend or repeal the Delaware Bylaws. The
Delaware Bylaws provide that the vote of a majority of all directors or the
affirmative vote of a majority of the votes cast by all stockholders entitled
to
vote thereon is required to alter, amend or repeal the bylaws other than to
amend the indemnification provisions of the bylaws which requires a resolution
adopted by two-thirds of the entire board of directors or a 75% supermajority
vote of stockholders.
Under
the
Colorado corporate law, the board of directors or the shareholders may amend
the
bylaws at any time to add, change, or delete a provision, unless the articles
of
incorporation, the CBCA or a particular bylaw prevents the directors from doing
so. If authorized by the articles of incorporation, the shareholders may amend
the bylaws to fix a greater quorum or voting requirement for shareholders,
or
voting groups of shareholders, than is required by the CBCA. An amendment to
the
bylaws to add, change, or delete a greater quorum or voting requirement for
shareholders shall meet the same quorum requirement and be adopted by the same
vote and voting groups required to take action under the quorum and voting
requirements then in effect or proposed to be adopted, whichever are greater.
A
bylaw that fixes a greater quorum or voting requirement for shareholders may
not
be amended by the board of directors. An amendment to the bylaws to add a
greater quorum or voting requirement for the board of directors may be amended
only by the shareholders, if adopted by the shareholders, or, if adopted by
the
board of directors, either by the shareholders or by the board of
directors.
Interested
Director Transactions
Under
Delaware corporate law, some contracts or transactions in which one or more
of a
corporation's directors has an interest are not void or voidable because of
such
interest, provided that certain conditions, such as obtaining the required
approval and fulfilling the requirements of good faith and full disclosure
are
met.
Under
Delaware corporate law, the conditions are that either (1) the shareholders
or
the disinterested directors must approve any such contract or transaction after
the full disclosure of material facts, or (2) the contract or transaction must
have been fair as to the corporation at the time it was approved. Under Delaware
corporate law, if board approval is sought, the contract or transactions must
be
approved by a majority of the disinterested directors (even though less than
a
quorum).
Colorado
corporate law specifically prohibits certain loans or credit facilities to
interested directors. The CBCA does not, however, automatically void contracts
or transactions between a corporation and one of the corporation's directors.
Under Colorado corporate law, a contract or transaction is not voidable solely
because:
· |
the
contract is between the corporation and a director of the corporation
or
an entity in which a director of the corporation has a financial
interest;
|
· |
an
interested director is present at the meeting of the board of directors
that authorizes or approves the contract or transaction;
or
|
· |
the
vote or votes of the interested director are counted for purposes
of
authorizing or approving the contract or transaction involving the
interested transaction.
|
Rather,
under Colorado corporate law, contracts or transactions such as those described
above are permissible if:
· |
the
facts surrounding the contract or transaction are known to the board
of
directors (or a committee of the board of directors) and the board
of
directors authorizes (or an authorized committee), approves, or ratifies
the contract or transaction in good faith by a vote without counting
the
vote of the interested director, even though they are less than a
quorum;
or
|
· |
the
facts or circumstances surrounding the contract or transaction are
made
known to the shareholders and they authorize, approve or ratify the
contract or transaction in good faith by a majority vote of the
shareholders entitled to vote thereon;
or
|
· |
the
contract or transaction is fair to the
corporation.
|
Removal
of Directors
Under
Delaware corporate law, any director or the entire board of directors may be
removed, with or without cause, by the majority vote of the stockholders then
entitled to vote at an election of directors. Under the CBCA, the shareholders
may remove one or more directors with or without cause, unless the articles
of
incorporation provide that directors may be removed only for cause, if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal at a meeting called for that purpose. If a director is elected
by a shareholder voting group, only that voting group may vote to remove that
director. In addition, Colorado corporate law provides that in a proceeding
commenced either by the corporation or by shareholders holding at least ten
percent of the outstanding shares of any class, the appropriate district court
may remove a director and bar the director from reelection, if the court finds
that the director engaged in fraudulent or dishonest conduct or gross abuse
of
authority or discretion with respect to the corporation and that removal is
in
the best interests of the corporation.
Business
Combination Statute
The
CBCA
does not contain any business combination provisions.
Section
203 of the DGCL provides for a three-year moratorium on certain business
combinations with "interested stockholders" (generally, persons who own,
individually or with or through other persons, 15% or more of the corporation's
outstanding voting stock). However, the DGCL permits a corporation to opt out
of
the restrictions imposed by Section 203. SpaceDev, Inc. has not opted out of
Section 203 of the DGCL in its Delaware Certificate of
Incorporation
Shareholder
Derivative Suits
The
Delaware corporate law requirements for bringing derivative actions are
substantially similar to those contained in the CBCA, except that the Delaware
corporate law does not impose (i) the reasonable cause requirement and (ii)
the
security requirement imposed by the CBCA.
Colorado
corporate law requires that a plaintiff was a shareholder at the time of the
transaction of which plaintiff complains or that plaintiff's shares or voting
trust certificates devolved by operation of law from a person who was a
shareholder at such time. Under the CBCA, if a court finds that a derivative
action was brought without reasonable cause, the court may require the plaintiff
to pay the defendants' reasonable expenses attributable to the defense of such
action, exclusive of attorney's fees. In addition, a company may, at any time
before final judgment, require the plaintiff to give a security for the costs
and reasonable expenses which may be incurred by the company or other parties
named as defendants in the defense of such action, but not including attorney's
fees, if the shareholder instituting the action holds less than 5% of the
outstanding shares of any class of the company, unless the shares so held have
a
market value in excess of $25,000. If the court then finds that the action
was
instituted without cause, the corporation may have recourse to such security
in
the amount determined by the court.
Mergers
and Major Transactions
Under
Delaware corporate law, whenever the approval of the stockholders of a
corporation is required for an agreement of merger or consolidation or for
a
sale, lease or exchange of all or substantially all of its assets, such
agreement, sale, lease or exchange requires the affirmative vote of the owners
of a majority of the outstanding shares entitled to vote thereon.
Notwithstanding the foregoing, under Delaware law, unless required by its
certificate of incorporation, no vote of the stockholders of a constituent
corporation surviving a merger is necessary to authorize a merger
if:
· |
the
agreement of merger does not amend in any respect the certificate
of
incorporation of such constituent corporation;
and
|
· |
each
share of stock of the constituent corporation outstanding immediately
before the merger is to be an identical outstanding or treasury share
of
the surviving corporation after the merger;
and
|
· |
either
no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into the common stock are to
be
issued under such agreement of merger, or the number of shares of
common
stock issued or so issuable does not exceed 20% of the number thereof
outstanding immediately before the
merger.
|
Under
Colorado corporate law, the sale, lease, exchange or disposal of all of the
assets of a corporation as well as any merger, consolidation or share exchange
generally must be recommended by the board of directors and requires the
approval of a majority of the shares of each class of the stock of the
corporation entitled to vote on such matters. Under Colorado corporate law,
the
vote of the shareholders of a Colorado corporation surviving a merger is not
required if:
· |
the
articles of incorporation of the surviving corporation will not
substantially differ from its articles of incorporation before the
merger;
and
|
· |
each
shareholder of the surviving corporation before the effective date
will
hold the same number of shares, with identical designations, preferences,
limitations and relative rights immediately after the merger;
and
|
· |
the
number of voting shares outstanding immediately after the merger,
plus the
number of voting shares issued as a result of the merger, will not
exceed
by more than 20% the total number of voting shares of the surviving
entity
outstanding immediately before the merger;
and
|
· |
the
number of participating shares outstanding immediately before the
merger,
plus the number of participating shares issuable as a result of the
merger, will not exceed by more than 20% the total number of participating
shares outstanding immediately before the
merger.
|
Dissenters'
Rights of Appraisal
Under
both Delaware and Colorado corporate law, a dissenting stockholder of a
corporation engaged in certain major corporate transactions may, under certain
limited circumstances, be entitled to appraisal rights. Appraisal rights permit
a stockholder to receive cash in the amount of the fair market value of his
or
her shares (as determined by agreement of the parties or a court), in lieu
of
the consideration that he or she would otherwise receive in any such
transaction.
Under
Delaware corporate law, unless the certificate of incorporation of a corporation
provides otherwise, appraisal rights are only available with respect to a merger
or consolidation of a corporation under certain limited circumstances. No
appraisal rights are provided in the case of a sale or transfer of all or
substantially all of the corporation's assets or an amendment to the
corporation's certificate of incorporation. Moreover, Delaware corporate law
does not provide appraisal rights in connection with a merger or consolidation,
unless the certificate of incorporation provides otherwise, to the owners of
shares of a corporation that, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the merger or consolidation, is either:
· |
listed
on a national securities exchange or designated as a national market
system security by the National Association of Securities Dealers,
Inc.;
or
|
· |
held
of record by more than 2,000
stockholders;
|
unless
the applicable agreement of merger or consolidation requires the owners of
these
shares to receive, in exchange for these shares, anything other than shares
of
stock of the resulting or surviving corporation or shares of stock of any other
corporation listed on a national securities exchange, designated as described
above, or held of record by more than 2,000 holders.
In
addition, Delaware corporate law denies appraisal rights to the stockholders
of
the surviving corporation in a merger if that merger did not require for its
approval the vote of the stockholders of the surviving corporation. Under
Delaware corporate law, no vote of the stockholders of a surviving corporation
is required if the number of shares to be issued in the merger does not exceed
20% of the shares of the surviving corporation outstanding immediately before
the merger and certain other conditions are met.
The
Delaware Charter does not provide for any appraisal rights in addition to the
rights required under Delaware corporate law.
Colorado
corporate law provides that shareholders, whether or not entitled to vote,
of a
corporation are entitled to dissent from and obtain payment of the fair market
value of his or her shares in the event of the following corporate
actions:
· |
consummation
of a plan of merger to which the Colorado corporation is a party
if (i)
approval by the shareholders is required for the merger or (ii) the
Colorado corporation is a subsidiary and is merged with its parent
where
approval of the shareholders is not
required;
|
· |
consummation
of a plan of share exchange to which the Colorado corporation is
a party
as the corporation whose shares will be
acquired;
|
· |
consummation
of a sale, lease, exchange or other disposition of all, or substantially
all, of the property of the Colorado corporation for which shareholder
approval is required;
|
· |
consummation
of a sale, lease, exchange or other disposition of all, or substantially
all, of the property of an entity controlled by the Colorado corporation
if the shareholders of the Colorado corporation were entitled to
vote on
the Colorado corporation's consent to such sale, lease, exchange
or other
disposition;
|
· |
in
the event of a reverse stock split that reduces the number of shares
owned
by the shareholder to a fraction of a share or scrip if the fractional
shares or scrip so created is to be acquired for cash or the scrip
is to
be voided; or
|
· |
for
any other corporate action as may be provided by the corporation's
bylaws
or a resolution of the board of
directors.
|
While
appraisal rights are generally available for a wider number of corporate actions
in Colorado than in Delaware, Colorado corporate law with respect to the denial
of appraisal rights is similar to Delaware corporate law. That is, Colorado
corporate law does not provide appraisal rights to the owners of shares of
a
corporation that are either:
· |
listed
on a national securities exchange or on national market system of
NASDAQ;
or
|
· |
held
of record by more than 2,000
shareholders;
|
on
(i)
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting of shareholders to act upon the relevant corporate
action, (ii) the record date to determine shareholders entitled to consent
in
writing to such action or (iii) on the effective date of such action if
authorized by other than shareholder action, unless the owners of these shares
will receive, in exchange for their shares, anything other than shares of stock
of the corporation surviving the merger or share exchange, shares of stock
of
any other corporation listed on a national securities exchange or national
market system of NASDAQ, held of record by more than 2,000 holders, cash in
lieu
of fractional shares or any combination of the foregoing.
Derivative
Actions
Under
the
CBCA, if a court finds that a derivative action was brought without reasonable
cause, the court may require the plaintiff to pay the defendants' reasonable
expenses attributable to the defense of such action, exclusive of attorney's
fees. In addition, the Company may, at any time before final judgment, require
the plaintiff to give a security for the costs and reasonable expenses which
may
be incurred by the Company or other parties named as defendants in the defense
of such action, but not including attorney's fees, if the shareholder
instituting the action holds less than 5% of the outstanding shares of any
class
of the Company, unless the shares so held have a market value in excess of
$25,000. If the court then finds that the action was instituted without cause,
the corporation may have recourse to such security in the amount determined
by
the court.
The
DGCL's requirements for bringing derivative actions are substantially similar
to
those contained in the CBCA, except that the DGCL does not impose (i) the
reasonable cause requirement and (ii) the security requirement imposed by the
CBCA.
Dissolution
Under
Delaware corporate law, if the board of directors of the corporation deems
it
advisable that the corporation should be dissolved and the holders of a majority
of the outstanding shares of stock of the corporation entitled to vote thereon
vote in favor of the proposed dissolution, the corporation shall be dissolved
upon the filing of a certificate of dissolution with the Secretary of State
of
the State of Delaware. The corporation shall continue after dissolution for
the
purposes of defending suits and settling its affairs for a three-year period.
Delaware corporate law sets forth payment and distribution procedures a
dissolving corporation must follow in connection with winding up its affairs.
Such procedures include notification requirements and, under specified
circumstances, obtaining the approval of the Delaware Court of
Chancery.
Dissolution
under Colorado corporate law is substantially the same as under Delaware
corporate law. Similar to Delaware corporate law, if the board of directors
of
the corporation deems it advisable that the corporation should be dissolved
and
the holders of a majority of the outstanding shares of stock of the corporation
entitled to vote thereon vote in favor of the proposed dissolution, the
corporation shall be dissolved upon the filing of articles of dissolution with
the Secretary of State of the State of Colorado. The corporation continues
its
corporate existence but may not carry on any business except as is appropriate
to wind up and liquidate its business and affairs.
Corporate
Records (Form of Records)
Delaware
law provides that any records maintained in the regular course of its business,
including its stock ledger, books of account and minute books, may be kept
on,
or by means of, or be in the form of, any information storage device or method,
provided that the records so kept can be converted into clearly legible paper
form within a reasonable time. Delaware law does not require that any specific
records be kept at any particular place or for a specific period of
time.
Colorado
law is substantially similar to Delaware law as to the maintenance of corporate
records except that a Colorado corporation is required to keep specific records
at its principal office, including the corporation's articles of incorporation,
the bylaws, minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past three years, all written
communications within the past three years to the shareholders, or any specific
class thereof, as a group, a list of names and business addresses for all
current officers and directors, a copy of the corporation's most recent annual
report and any financial statements prepared for periods ending during the
last
three years that a shareholder could have requested.
Examination
of Books and Records
Under
the
CBCA and the Colorado Bylaws, any record or beneficial shareholder of the
Company may, upon five days written demand, inspect certain records, including
shareholder actions, minutes of shareholder meetings, communications with
shareholders and recent financial statements. In addition, upon five days
written demand, any such shareholder may inspect the list of shareholders and
certain other corporate records, including minutes of the meetings of board
of
directors of the Company, if the shareholder either (i) has been a shareholder
for at least 3 months or (ii) is a shareholder of at least 5% of all outstanding
shares of any class of shares when the demand is made, provided that the demand
is made in good faith for a proper purpose reasonably related to such person's
interests as a shareholder.
Under
the
DGCL, the inspection rights of the stockholders of SpaceDev, Inc. are the same
as under Colorado law, except: (i) there is no requirement that a stockholder
has been a stockholder for at least three months or is a stockholder of at
least
5% of all outstanding shares of any class of shares when the demand is made,
and
(ii) if SpaceDev, Inc. refuses to permit inspection or does not reply to the
demand within five business days after the demand has been made, the stockholder
may apply to the Court of Chancery for an order to compel such
inspection.
Inspection
of Shareholders List and Other Corporate Matters
Delaware
corporate law permits any stockholder to inspect a corporation's stockholders'
list for a purpose reasonably related to such person's interest as a stockholder
and, during the ten days preceding a stockholders' meeting, for any purpose
germane to that meeting.
Under
Colorado corporate law, any record or beneficial shareholder of the Company
may,
upon five business days' written demand, inspect certain records, including
shareholder actions, minutes of shareholder meetings, communications with
shareholders and recent financial statements. In addition, upon five business
days' written demand, any such shareholder may inspect the list of shareholders
and certain other corporate records, including minutes of the meetings of board
of directors of the Company, if the shareholder either (i) has been a
shareholder for at least three months, or (ii) is a shareholder of at least
5%
of all outstanding shares of any class of shares when the demand is made,
provided that the demand is made in good faith for a proper purpose reasonably
related to such person's interests as a shareholder.
Duration
of Proxies
Under
Delaware corporate law, a proxy executed by a stockholder can remain valid
for
no longer than a period of three years, unless the proxy provides for a longer
period. In contrast, under Colorado corporate law, a proxy will remain valid
for
a period of eleven months, unless a different period is provided for in the
proxy.
Committees
of the Board of Directors
Delaware
and Colorado corporate law both provide that the board of directors may delegate
certain of their duties to one or more committees elected by a majority of
the
board. Under Delaware corporate law a committee of the board of directors may
exercise any powers and authority of the board of directors in the management
of
the business and affairs of the corporation, provided that no committee may
approve, adopt, or recommend to stockholders any action on any matter expressly
required by Delaware corporate law to be submitted to stockholders for approval,
or adopt, amend or repeal any by-law of the corporation.
Under
Colorado corporate law, unless it is otherwise provided in the articles of
incorporation, a committee of the board of directors has and may exercise the
powers of the board of directors in the management of the business and affairs
of the corporation except that a committee can not authorize distributions,
approve or propose actions requiring shareholder approval, fill vacancies on
the
board of directors or any committees thereof, amend the corporation's articles
of incorporation, adopt, amend or repeal the corporation's bylaws, approve
a
plan of merger not requiring shareholder approval, authorize or approve the
reacquisition of shares except according to a formula or method prescribed
by
the board of directors, or authorize or approve the issuance or sale of shares,
or a contract for the sale of shares, or determine the designation and relative
rights, preferences, and limitations of a class or series of shares except
within limits specifically prescribed by the board of directors.
Franchise
Tax
In
Delaware, a corporation has to pay a franchise tax, which is not based upon
income, but rather on formulae involving the number of authorized shares (the
Authorized Shares method), or alternatively, the value of the corporation (the
Assumed Par Value method), whichever would impose a lesser tax. SpaceDev, Inc.
would most likely pay under the Assumed Par Value method, which is based on
the
amount of total gross assets of the corporation. Under this method, SpaceDev,
Inc. would have owed approximately $7,500 in franchise taxes for 2006, had
it
been incorporated in Delaware.
There
is
no franchise tax in Colorado.
Federal
Income Tax Consequences of the Merger
Subject
to the limitations, qualifications and exceptions described in this section,
it
is expected that, for federal income tax purposes, no gain or loss will be
recognized by the holders of shares of SPDV common stock as a result of the
consummation of the Merger Agreement, and no gain or loss will be recognized
by
SPDV or SpaceDev, Inc. In addition, it is expected that each former holder
of
shares of SPDV common stock will have the same aggregate tax basis in the shares
of SpaceDev, Inc. common stock received by such person in the Merger Agreement
as such holder had in the shares of SPDV common stock held by such person at
the
time of consummation of the Merger Agreement, and such person's holding period
with respect to such shares of SpaceDev, Inc. common stock will include the
period during which such holder held the corresponding shares of SPDV common
stock, provided the latter were held by such person as capital assets at the
time of the consummation of the Merger Agreement.
We
have
not requested a ruling from the Internal Revenue Service (the "IRS") or an
opinion of counsel with respect to the federal income tax consequences of the
Merger Agreement under the Internal Revenue Code. A successful IRS challenge
to
the reorganization status of the Merger Agreement would result in a Shareholder
recognizing gain or loss with respect to each share of SPDV stock exchanged
in
the Merger Agreement equal to the difference between the Shareholder's basis
in
such share and the fair market value, as of the time of the Merger Agreement,
of
the shares of SpaceDev, Inc. stock received in exchange therefor. In such event,
a Shareholder's aggregate basis in the shares of SpaceDev, Inc. stock received
in the exchange would equal their fair market value on such date, and the
Shareholder's holding period for such shares would not include the period during
which the Shareholder held shares of SPDV stock. State, local, or foreign income
tax consequences to Shareholders may vary from the federal tax consequences
described above.
SHAREHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF THE MERGER AGREEMENT
UNDER APPLICABLE FEDERAL, STATE, LOCAL, OR FOREIGN INCOME TAX
LAWS.
Accounting
Treatment of the Merger Agreement
The
reincorporation merger will be accounted for as a reverse merger whereby, for
accounting purposes, SPDV will be considered the accounting acquiror and
SpaceDev, Inc. will be treated as the successor to the historical operations
of
SPDV. Accordingly, the historical financial statements of SPDV, which previously
have been reported to the Commission on forms 10-KSB and 10-QSB, among others,
as of and for all periods through the date of this proxy statement, will be
treated as the financial statements of SpaceDev, Inc. a Delaware Corporation.
Regulatory
Approval
To
the Company's knowledge, the only required regulatory or governmental approval
or filing necessary in connection with the consummation of the reincorporation
merger will be the filing of the Articles of Merger (including the Merger
Agreement) with the Secretary of State of Colorado and the filing of the
Certificate of Merger with the Secretary of State of Delaware.
OUR
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE AGREEMENT AND PLAN OF
MERGER.
OTHER
MATTERS
We
do not
intend to present any business at the meeting not mentioned in this Proxy
Statement, and currently know of no other business to be presented. If any
other
matters are brought before the meeting, the appointed proxy holders will vote
on
all such matters in accordance with their judgment of the best interests of
the
Company.
AUDIT
COMMITTEE REPORT
Following
is the report of the audit committee with respect to the Company's audited
consolidated financial statements for the fiscal year ended December 31, 2006,
which include the consolidated balance sheets of the Company as of December
31,
2006 and 2005 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the fiscal years ended December
31, 2006 and 2005, and the notes thereto.
“The
primary responsibility of the audit committee is to assist
the board of directors in fulfilling its oversight responsibilities related
to
corporate accounting, financial reporting practices, and the quality and
integrity of the Company's financial reports.
In that
respect, the audit committee has reviewed and discussed the audited financial
statements and the footnotes thereto with management and the independent
auditors. The audit committee has not been apprised of any misstatements or
omissions in the financial statements. In addition, the audit committee
discussed with the independent auditors the matters required to be discussed
by
Statement of Auditing Standard No. 61, Communication with Audit Committees,
including, among other items, matters related to the conduct of the audit of
the
Company's financial statements. Management has the primary responsibility for
the Company's financial statements and internal control over financial
reporting, as well as disclosure controls and procedures.
The
audit
committee has received from the independent accountants, as required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit
Committee, (i) a written disclosure, indicating all relationships, if any,
between the independent auditor and its related entities and the Company and
its
related entities which, in the auditor's professional judgment, reasonably
may
be thought to bear on the auditor's independence, and (ii) a letter from the
independent auditor confirming that, in its professional judgment, it is
independent of the Company; and the audit committee has discussed with the
auditor the auditor's independence from the Company.
Based
on
the reviews and discussions referred to above, we recommended to the board
of
directors that the audited consolidated financial statements be included in
the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2006.
Submitted
by the Audit Committee of the Company's Board of Directors:
Curt
Dean
Blake
Scott
McClendon
Wesley
T.
Huntress”
STOCKHOLDER
PROPOSALS AND NOMINATIONS
Proposals
which are intended to be presented by any stockholder at our next Annual Meeting
of Stockholders must be received by us no later than the
date
specified in our Delaware Bylaws, if adopted, or Colorado Bylaws, if not
adopted,
in
order to be considered for inclusion in our proxy statement and form of proxy
card relating to that meeting. Stockholders who wish to make a recommendation
for a nominee to be elected as a director at our 2008 Annual Meeting of
Stockholders must submit their recommendation by the date specified in our
Delaware Bylaws, if adopted, or Colorado Bylaws, if not adopted to allow for
meaningful consideration and evaluation of the nominees by the nominating and
corporate governance committee. Such proposals, or nominee recommendations,
should be mailed to Richard B. Slansky, Corporate Secretary, SpaceDev, Inc.,
13855 Stowe Drive, Poway, CA 92064.
Richard
B. Slansky,
Corporate
Secretary
Dated:
June 25, 2007
APPENDIX
A
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of [August 10, 2007],
is entered into between SpaceDev, Inc., a public company incorporated in the
State of Colorado ("SPDV" or the "Company"), and SpaceDev, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("SpaceDev,
Inc.").
RECITALS
WHEREAS,
the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado;
WHEREAS,
SpaceDev, Inc. is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and on the date of this
Agreement has authority to issue one hundred million (100,000,000) shares of
common stock, par value $0.0001 per share (the "SpaceDev, Inc. common stock"),
and ten million (10,000,000) shares of preferred stock, par value $0.001 per
share (the "SpaceDev, Inc. preferred stock"), of which [29,639,353] shares
of
SpaceDev, Inc. common stock are issued and outstanding;
WHEREAS,
the respective Boards of Directors of the Company and SpaceDev, Inc. and the
stockholder of SpaceDev, Inc. have determined that, for purposes of effecting
the reincorporation of the Company in the State of Delaware, it is advisable,
to
the advantage of and in the best interests of SpaceDev, Inc. and its stockholder
and the Company and its shareholders that the Company merge with and into
SpaceDev, Inc. upon the terms and subject to the conditions herein provided
(the
"Reincorporation Merger");
WHEREAS,
the parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of
1986, as amended (the "Code"), and to cause the Reincorporation Merger to
qualify as a reorganization under the provisions of Section 368 of the Code;
and
WHEREAS,
the respective Boards of Directors of the Company and SpaceDev, Inc. and the
stockholder of SpaceDev, Inc. have unanimously adopted and approved this
Agreement, and the Board of Directors of the Company has directed that this
Agreement be submitted for approval by vote of the holders (the "Shareholders")
of shares of; SPDV common stock, par value $0.0001 per share (“SPDV common
stock”).
NOW,
THEREFORE, in consideration of the premises and of the agreements of the parties
hereto contained herein, the parties hereto agree as follows:
ARTICLE
I
THE
REINCORPORATION MERGER; EFFECTIVE TIME
1.1.
The
Reincorporation Merger. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined
below), the Company shall be merged with and into SpaceDev, Inc. whereupon
the
separate existence of the Company shall cease. SpaceDev, Inc. shall be the
surviving corporation (sometimes hereinafter referred to as the "Surviving
Corporation") in the Reincorporation Merger and shall continue to be governed
by
the laws of the State of Delaware. The Surviving Corporation shall continue
to
operate the business of the Company under the name, "SpaceDev, Inc." The
Reincorporation Merger shall have the effects specified in the General
Corporation Law of the State of Delaware, as amended (the "DGCL") and in the
Colorado Business Corporation Act, as amended (the "CBCA"), and the Surviving
Corporation shall succeed, without other transfer, to all of the assets and
property (whether real, personal or mixed), rights, privileges, franchises,
immunities and powers of the Company, and shall assume and be subject to all
of
the duties, liabilities, obligations and restrictions of every kind and
description of the Company, including, without limitation, all employee benefit
plans and arrangements, stock options plans, stock purchase plans, and all
indebtedness, of the Company.
1.2.
Effective Time. Provided that the condition set forth in
Section 5.1 has been fulfilled or waived in accordance with this Agreement
and
that this Agreement has not been terminated or abandoned pursuant to Section
6.1, on the date of the closing of the Reincorporation Merger, the Company
and
SpaceDev, Inc. shall cause Articles of Merger to be executed and filed with
the
Secretary of State of Colorado (the "Colorado Articles of Merger") and a
Certificate of Merger to be executed and filed with the Secretary of State
of
Delaware (the "Delaware Certificate of Merger"). The Reincorporation Merger
shall become effective upon the date and time specified in the Colorado Articles
of Merger and the Delaware Certificate of Merger (the "Effective
Time").
ARTICLE
II
CHARTER
AND BYLAWS OF THE SURVIVING CORPORATION
2.1.
The
Certificate of Incorporation. The certificate of
incorporation of SpaceDev, Inc. in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation, until amended in
accordance with the provisions provided therein or applicable law.
2.2.
The
Bylaws. The bylaws of SpaceDev, Inc. in effect at the
Effective Time shall be the bylaws of the Surviving Corporation, until amended
in accordance with the provisions provided therein or applicable
law.
ARTICLE
III
OFFICERS
AND DIRECTORS OF THE SURVIVING CORPORATION
3.1.
Officers. The officers of the Company at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation, until their successors have been duly elected or appointed or
until
their earlier death, resignation or removal.
3.2.
Directors. The directors and the members of the various
committees of the board of directors of the Company at the Effective Time shall,
from and after the Effective Time, be the directors and members of such
committees of the Surviving Corporation, until their successors have been duly
elected or appointed or until their earlier death, resignation or
removal.
ARTICLE
IV
EFFECT
OF MERGER ON CAPITAL STOCK
4.1.
Effect of Merger on Capital Stock. At the Effective Time,
as a result of the Reincorporation Merger and without any action on the part
of
the Company, SpaceDev, Inc. or the Shareholders:
(a)
Each
share of SPDV common stock (other than shares ("Dissenting Shares") that are
owned by shareholders ("Dissenting Shareholders") exercising dissenters' rights
pursuant to Article 113 of the CBCA), issued and outstanding immediately before
the Effective Time shall be converted (without the surrender of stock
certificates or any other action) into one fully paid and non-assessable share
of SpaceDev, Inc. common stock, and all shares of SPDV common stock shall be
cancelled and retired and shall cease to exist. It is intended that at the
Effective Time, the shares of SpaceDev, Inc. common stock shall be listed for
quotation on the NASDAQ OTC Bulletin Board Market, under the ticker symbol,
"SPDV.OB."
(b)
Each
share of SPDV Series C preferred stock (other than Dissenting Shares), issued
and outstanding immediately before the Effective Time, shall be converted
(without the surrender of stock certificates or any other action) into one
fully
paid and non-assessable share of Series C Cumulative Convertible preferred
stock, par value $0.001 per share, of SpaceDev, Inc. ("SpaceDev, Inc. Series
C
preferred stock"), and all shares of SPDV Series C preferred stock shall be
cancelled and retired and shall cease to exist.
(c)
Each
share of SPDV Series D-1 preferred stock (other than Dissenting Shares), issued
and outstanding immediately before the Effective Time, shall be converted
(without the surrender of stock certificates or any other action) into one
fully
paid and non-assessable share of Series
D-1 Amortizing Convertible Perpetual preferred stock, par value $0.001 per
share,
of
SpaceDev, Inc. ("SpaceDev, Inc. Series D-1 preferred stock"), and all shares
of
SPDV Series D-1 preferred stock shall be cancelled and retired and shall cease
to exist.
(d)
Each
option, warrant, purchase right, unit, convertible note or other such security
of the Company issued and outstanding immediately before the Effective Time,
by
virtue of the Merger Reincorporation and without any action on part of the
holder thereof, shall be (i) converted into and shall be an identical security
of SpaceDev, Inc., and (ii) in the case of securities to purchase shares of
SPDV
common stock, converted into the right to purchase the same number of shares
of
SpaceDev, Inc. common stock as the number of shares of SPDV common stock that
were acquirable pursuant to such security, at a price per share equal to the
exercise price of such security, and upon the same terms and subject to the
same
conditions as set forth in the agreements entered into by the Company pertaining
to such security. A number of shares of SpaceDev, Inc. common stock shall be
reserved for the purposes of the exercise of such options, warrants, purchase
rights, units or other such securities, or conversion of such convertible notes
and of SpaceDev, Inc. Series C preferred stock and SpaceDev, Inc. Series D-1
preferred stock, equal to the number of shares of SPDV common stock so reserved
immediately before the Effective Time.
(e)
Each
share of treasury stock owned by the Company shall no longer be outstanding
and
shall be cancelled and retired and shall cease to exist.
(f)
At
the Effective Time, the [29,639,353] shares of SpaceDev, Inc. common stock
presently issued and outstanding in the name of the Company shall be cancelled
and retired and resume the status of authorized and unissued shares of SpaceDev,
Inc. common stock, and no shares of SpaceDev, Inc. common stock or other
securities of SpaceDev, Inc. common stock shall be issued in respect
thereof.
4.2.
Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior thereto represented shares
of
SDPV common stock or SPDV preferred stock (other than Dissenting Shares), or
options, warrants, purchase rights, units or other securities of the Company,
if
any, shall be deemed for all purposes to evidence ownership of and to represent
the shares of the respective SpaceDev, Inc. common stock or series of SpaceDev,
Inc. preferred stock, or options, warrants, purchase rights, units or other
securities of SpaceDev, Inc., if any, as the case may be, into which the shares
of SPDV common stock or SPDV preferred stock, or options, warrants, purchase
rights, units or other securities of the Company represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agent.
The
registered owner of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted
for
to the Surviving Corporation or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of SpaceDev, Inc. common
stock or series of SpaceDev, Inc, preferred stock, or options, warrants,
purchase rights, units or other securities of SpaceDev, Inc., if any, as the
case may be, evidenced by such outstanding certificate, as above
provided.
4.3.
Rights of Former Holders. From and after the Effective
Time, no holder of certificates which evidenced SPDV common stock or SPDV
preferred stock immediately before the Effective Time shall have any rights
with
respect to the shares formerly evidenced by those certificates, other than
to
receive the shares of SpaceDev, Inc. common stock or SpaceDev preferred stock
into which such SPDV common stock or SPDV preferred stock shall have been
converted pursuant to the Reincorporation Merger.
4.4.
Dissenters' Rights. No Dissenting Shareholder shall be
entitled to shares of SpaceDev common stock or SpaceDev preferred stock under
this Article IV unless and until the holder thereof shall have failed to perfect
or shall have effectively withdrawn or lost such holder's right to dissent
from
the Reincorporation Merger under the CBCA, and any Dissenting Shareholder shall
be entitled to receive only the payment provided by Article 113 of the CBCA
with
respect to Dissenting Shares owned by such Dissenting Shareholder. If any person
or entity who otherwise would be deemed a Dissenting Shareholder shall have
failed to properly perfect or shall have effectively withdrawn or lost the
right
to dissent with respect to any shares which would be Dissenting Shares but
for
that failure to perfect or withdrawal or loss of the right to dissent, such
Dissenting Shares shall thereupon be treated as though such Dissenting Shares
had been converted into shares of SpaceDev, Inc. common stock or SpaceDev
preferred stock pursuant to Section 4.1 hereof.
ARTICLE
V
CONDITION
5.1.
Condition to Each Party's Obligation to Effect the Reincorporation
Merger. The respective obligation of each party hereto to
effect the Reincorporation Merger is subject to receipt before the Effective
Time of the requisite approval of this Agreement and the transactions
contemplated hereby by the Shareholders pursuant to the CBCA and the Articles
of
Incorporation and bylaws of the Company.
ARTICLE
VI
TERMINATION
6.1.
Termination. This Agreement may be terminated, and the
Reincorporation Merger may be abandoned, at any time before the Effective Time,
whether before or after approval of this Agreement by the Shareholders, if
the
board of directors of the Company determines for any reason, in its sole
judgment and discretion, that the consummation of the Reincorporation Merger
would be inadvisable or not in the best interests of the Company and its
shareholders. Notwithstanding the foregoing, the Company retains the right
to
elect not to proceed with the Reincorporation Merger if Shareholders holding
more than 1% of the SPDV common stock or more than 1% of the SPDV preferred
stock entitled to vote properly exercise their dissenters' rights. In the event
of the termination and abandonment of this Agreement, this Agreement shall
become null and void and have no effect, without any liability on the part
of
either the Company or SpaceDev, Inc., or any of their respective shareholders,
directors or officers.
ARTICLE
VII
MISCELLANEOUS
AND GENERAL
7.1.
Further Assistance. From and after the Effective Time, as
and when required by SpaceDev, Inc. or by its successor and assigns, there
shall
be executed and delivered on behalf of the Company such deeds and
other
instruments, and there shall be taken or caused to be taken by it such further
and other action, as shall be appropriate or necessary in order to vest, perfect
or confirm, of record or otherwise, in SpaceDev, Inc. the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, power, franchises and authority of the Company, and otherwise to
carry out the purposes of this Agreement, and the officers and directors of
SpaceDev, Inc. are fully authorized in the name and on behalf of the Company
or
otherwise to take any and all such action and to execute and deliver any and
all
such deeds and other instruments.
7.2.
Modification or Amendment. Subject to the provisions of
applicable law, at any time before the Effective Time, the parties hereto may
modify or amend this Agreement; provided, however, that an amendment made after
the approval of this Agreement by the holders of SPDV common stock and other
shareholders shall not (i) alter or change the amount or kind of shares and/or
rights to be received in exchange for or on conversion of all or any of the
shares or any class or series thereof of such corporation, (ii) alter or change
any provision of the certificate of incorporation of the Surviving Corporation
to be effected by the Reincorporation Merger, or (iii) alter or change any
of
the terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any
of
the parties hereto.
7.3.
Counterparts. This Agreement may be executed in any
number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
7.4.
Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
7.5.
No
Third Party Beneficiaries. This Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
7.6.
Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any
provision of this Agreement, or the application thereof to any person or any
circumstance, is determined by any court or other authority of competent
jurisdiction to be invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may
be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
7.7.
Headings. The headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
7.8.
Approval of the Company as the Sole Stockholder of SpaceDev,
Inc. By its execution and delivery of this Agreement, the
Company, as the sole stockholder of SpaceDev, Inc., consents to, approves and
adopts this Agreement and approves the Reincorporation Merger, subject to the
approval and adoption of this Agreement by the affirmative vote of respective
majorities of the outstanding shares of each class and series of capital stock
of the Company entitled to vote. The Company agrees to execute such instruments
as may be necessary or desirable to evidence its approval and adoption of this
Agreement and Reincorporation Merger as the sole stockholder of the Delaware
Corporation.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly
authorized officers of the parties hereto as of the date first written
above.
SpaceDev,
Inc.,
A
Colorado Corporation
By:_____________________________
Name:
Mark N. Sirangelo
Title:
Chief Executive Officer and Chairman of the Board of Directors, SpaceDev, Inc.
a
Colorado Corporation
SpaceDev,
Inc.,
A
Delaware Corporation
By:_____________________________
Name:
Richard B. Slansky
Title:
Chief Financial Officer, Corporate Secretary and Treasurer, SpaceDev, Inc.
a
Delaware Corporation
APPENDIX
B
CERTIFICATE
OF
INCORPORATION OF
SPACEDEV,
INC.
ARTICLE
I
The
name
of the corporation is SpaceDev, Inc. (the “Corporation”).
ARTICLE
II
The
address of the Corporation’s registered office in the State of Delaware is 615
South DuPont Highway, Dover, Delaware 19901. The name of its registered agent
at
such address shall be National Corporate Research, Ltd.
The
name
and mailing address of the incorporator are as follows:
Richard
B. Slansky
13855
Stowe Drive
Poway,
CA
92064
ARTICLE
III
The
purpose of the Corporation is to engage in any lawful act or activity for
which
corporations may be organized under the Delaware General Corporation Law
(“DGCL”).
ARTICLE
IV
(A) Classes
of Stock.
The
Corporation is authorized to issue two classes of stock to be designated,
respectively, “Common
Stock”
and
“Preferred
Stock.”
The
total number of shares which the Corporation is authorized to issue is
110,000,000 shares, of which 100,000,000 shares shall be Common Stock, $0.0001
par value per share and 10,000,000 shares shall be Preferred Stock, $0.001
par
value per share.
(B) Preferred
Stock.
The
Preferred Stock authorized by this Certificate of Incorporation (the
“Certificate”)
may be
issued from time to time in one or more series. 250,000 shares of the Preferred
Stock of the Corporation shall be designated as Series C Cumulative Convertible
Preferred Stock (the “Series
C Preferred Stock”).
5,500
shares of the Preferred Stock of the Corporation shall be designated as Series
D-1 Amortizing Convertible Perpetual Preferred Stock (the “Series
D-1 Preferred Stock”).
The
Board of Directors is authorized, subject to any limitations prescribed by
law,
to provide for the issuance of Preferred Stock by filing a certificate pursuant
to the applicable law of the state of Delaware (a “Certificate
of Designation”),
to
establish from time to time the number of shares to be included in each such
series, and fix the designation, powers, preferences and rights of each such
series, and any qualifications, limitations or restrictions thereof. The
number
of authorized shares of Preferred Stock may be increased or decreased (but
not
below the number of shares thereof then outstanding) by the affirmative vote
of
the holders of a majority of the Common Stock, without a vote of the holders
of
the Preferred Stock, or of any series thereof, unless a vote of such holders
is
required pursuant to the terms of Article IV(C), Article IV(D), or any
Certificate of Designation. The powers, preferences, rights and restrictions
granted to and imposed on the Series C Preferred Stock and the Series D-1
Preferred Stock, respectively (collectively, the “Preferred
Stock”),
are
as set forth below in Article IV(C) and Article IV(D),
and
in
all regards such powers, preferences, rights and restrictions are subject
to the
powers, preferences, rights and restrictions of any one or more series of
Preferred Stock that may from time to time in the future come into
existence.
(C) Series
C Preferred Stock.
For all
purposes of Article IV(C), except as otherwise expressly provided or unless
the
context otherwise requires all references in this Article IV(C) to designated
“Sections” and other subdivisions are to the designated Sections and other
subdivisions of this Article IV(C). Defined terms used in this Article IV(C)
shall have the meanings assigned to them in this Article IV(C).
1.
Stated
Value.
Each
share of Series C Preferred Stock shall have a stated value equal to $10
(as
adjusted for any stock dividends, combinations or splits with respect to
such
shares) (the “Stated
Value”).
The
Series C Preferred Stock shall have no stated maturity and shall not be subject
to any sinking fund or mandatory cash redemption by the holders of Series
C
Preferred Stock.
2. Ranking.
The
Series C Preferred Stock shall rank (i) before the Corporation’s Common Stock;
and (ii) on a parity with the Corporation’s Series D-1 Preferred Stock. All
equity securities of the Corporation to which the Series C Preferred Stock
ranks prior (whether with respect to liquidation, dissolution, winding up
or
otherwise), including the Common Stock, are collectively referred to in this
Article IV(C) as the “Junior
Securities.”
All
equity securities of the Corporation with which the Series C Preferred
Stock ranks on a parity (whether with respect to liquidation, dissolution,
winding up or otherwise), including the Series D-1 Preferred Stock, are
collectively referred to in this Article IV(C) as the “Pari
Passu Securities.”
For
the avoidance of doubt, a series of shares of Preferred Stock of the Corporation
that are of equal rank with the Series D-1 Preferred Stock as to payments
of
Liquidation Funds (as defined in Article IV(D)) designated and issued in
accordance with Section 4.24 of the Purchase Agreement (as defined in Article
IV(D)), shall, if so designated and issued, to the extent provided in the
Certificate of Designation with respect to such series, constitute Pari Passu
Securities with respect to the Series C Preferred Stock. All equity securities
of the Corporation to which the Series C Preferred Stock ranks junior
(whether with respect to liquidation, dissolution, winding up or otherwise),
are
collectively referred to in this Article IV(C) as the “Senior
Securities”.
The
respective definitions of Junior Securities, Pari Passu Securities and Senior
Securities shall also include any rights, options or warrants exercisable
for
any of the Junior Securities, Pari Passu Securities and Senior Securities,
as
the case may be. The Series C Preferred Stock shall be subject to the
creation of Junior Securities, Pari Passu Securities and Senior Securities.
Notwithstanding the immediately foregoing, in no event shall the Corporation
issue or authorize for issuance any Senior Securities or Pari Passu Securities
without the prior express written consent of each holder of Series C Preferred
Stock.
3. Dividends.
(a) Subject
to Section 11(h) of Article IV(D), the holders of outstanding shares of Series
C
Preferred Stock shall be entitled to receive quarterly preferential dividends
at
a rate equal to six and eighty-five one hundredths percent (6.85%) per annum
(the “Dividend
Rate”)
(each,
a “Dividend”)
in
cash, out of any funds of the Corporation legally available at the time for
declaration of dividends before any dividend or other distribution will be
paid
or declared and set apart for payment on any shares of any Common Stock or
other
class of Junior Securities presently authorized or to be authorized. From
and
after August 25, 2004, dividends shall accrue on the Stated Value of each
share
of Series C Preferred Stock (which shall include for all dividend accrual
and
accumulation purposes, on a tacked basis, shares of Series C Cumulative
Convertible Preferred Stock of the Corporation’s Colorado predecessor) then
outstanding and be distributed quarterly commencing January 1, 2005 and on
the
first business day of each consecutive calendar quarter thereafter (each
a
“Dividend
Payment Date”).
If
subject to the provisions hereof, Dividend distributions are made in fully
paid
and non-assessable registered shares of the Corporation’s Common Stock at the
Fixed Conversion Price (as defined herein) then in effect, issuance of such
shares of the Corporation’s Common Stock shall constitute full payment of such
Dividend.
(b) Dividends
on the Series C Preferred Stock shall be cumulative from and after the date
of
issuance thereof (or of, on a tacked basis, shares of Series C Cumulative
Convertible Preferred Stock of the Corporation’s Colorado predecessor), whether
or not earned, so that, if any time cumulative dividends on all outstanding
shares of the Series C Preferred Stock then outstanding shall not have been
paid
or declared and set apart for payment as set forth herein, or if the full
dividend on all such outstanding Series C Preferred Stock for the then current
dividend period shall not have been paid or declared and set apart for payment,
the amount of the deficiency shall be paid or declared and set apart for
payment
(but without interest thereon) before any sum shall be set apart for or applied
by the Corporation or a subsidiary of the Corporation to the purchase,
redemption or other acquisition of the Series C Preferred Stock or Pari Passu
Securities and before any dividend or other distribution shall be paid or
declared and set apart for payment on any Junior Securities and before any
sum
shall be set aside for or applied to the purchase, redemption or other
acquisition of Junior Securities.
3.1 Payment
of Dividends in Cash or Common Stock.
(a)
By
the
fifth (5th)
business day before the last day of each calendar quarter (the “Notice
Date”),
each
holder of Series C Preferred Stock shall deliver to Corporation a written
notice
in the form provided by the Corporation converting the Dividend distributable
to
the holder of Series C Preferred Stock on the next Dividend Payment Date
in
either cash or Common Stock (each, a “Distribution
Notice”).
If a
Distribution Notice is not delivered by the holder of Series C Preferred
Stock
on or before the applicable Notice Date for such Dividend payment, then the
Corporation shall make the distribution of the Dividend due on such Dividend
Payment Date in cash. Any Dividend paid in cash on a Dividend Payment Date
shall
be paid to the holder of Series C Preferred Stock an amount equal to 100%
of
such Dividend due the holder of Series C Preferred Stock on such Dividend
Payment Date. If, subject to the terms hereof, the holder of Series C Preferred
Stock converts the quarterly Dividend into shares of Common Stock, the number
of
such shares to be issued by the Corporation to the holder on such Dividend
Payment Date shall be the number determined by dividing (x) the portion of
the
Dividend amount to be paid in shares of Common Stock, by (y) the then applicable
Fixed Conversion Price. For purposes hereof, the initial “Fixed
Conversion Price”
means
$1.54.
(b)
Dividend
Conversion Guidelines.
Subject
to Sections 3.1(a), 3.1(b), and 3.2 hereof, the Dividend due on each Dividend
Payment Date shall be paid in shares of Common Stock if the average closing
price of the Common Stock as reported by Bloomberg, L.P. on the Principal
Market
for the 20 trading days immediately preceding such Dividend Payment Date
was
greater than or equal to 120% of the Fixed Conversion Price, provided, however,
that such stock Dividend shall not exceed 25% of the aggregate dollar trading
volume of the Common Stock for the 20 trading day period immediately preceding
delivery of a Distribution Notice to the Corporation. Any part of the Dividend
due on a Dividend Payment Date that is not payable in shares of Common Stock
pursuant to this Section 3.1(b) shall be paid by the Corporation in cash
on such
Dividend Payment Date. Any part of the Dividend due on such Repayment Date
which
must be paid in cash (as a result of the average closing price of the Common
Stock for the 20 trading days preceding the applicable Dividend Payment Date
being less than 120% of the Fixed Conversion Price) shall be paid in cash
at the
rate of 100% of the Dividend otherwise due on such Dividend Payment Date,
within
3 business days of the applicable Dividend Payment Date.
3.2 No
Effective Registration.
Notwithstanding anything to the contrary herein, Section 3.1(b) hereof shall
not
apply unless (i) either (x) an effective current Registration Statement (as
defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in connection with satisfaction of such obligations exists
or
(y) an exemption from registration of such Common Stock is available pursuant
to
Rule 144 of the Securities Act.
3.3 Optional
Redemption.
(a)
If
(i)
the Corporation shall not have registered the shares of the Corporation’s Common
Stock underlying the outstanding Series C Preferred Stock and those certain
warrants issued to the holders of the Corporation’s Colorado predecessor’s
Series C Cumulative Convertible Preferred Stock simultaneously with the issuance
of the Corporation’s Colorado predecessor’s Series C Cumulative Convertible
Preferred Stock, on a registration statement declared effective by the
Securities and Exchange Commission (the “SEC”)
or if
such registration statement shall have been declared effective but then fails
to
be effective for any reason, or (ii) the
closing market price (the “Market
Price”)
of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined
below) for any of the 22 trading days immediately preceding a Redemption
Payment
Date does not exceed the then applicable Fixed Conversion Price by at least
15.00%,
then
the Corporation will have the option of repurchasing the Series C Preferred
Stock in whole or in part (“Optional
Redemption”)
by
paying to the holder of Series C Preferred Stock a sum of money equal to
115% of
the Stated Value of each share of Series C Preferred Stock to be redeemed
together with accrued but unpaid dividends thereon and any and all other
sums
due, accrued or payable to the holder of Series C Preferred Stock arising
under
the Series C Preferred Stock to be redeemed (the “Below
Market Redemption Amount”)
on the
day written notice of redemption (the “Below
Market Notice of Redemption”)
is
given to the holder of Series C Preferred Stock. The Notice of Redemption
shall
specify the date for such Optional Redemption (the “Below
Market Redemption Payment Date”)
which
date shall be 10 days after the date of the Notice of Redemption (the
“Below
Market Redemption Period”).
(b)
If
(i)
the Corporation shall have registered the shares of the Corporation’s Common
Stock underlying the outstanding Series C Preferred Stock and those certain
warrants issued to the holders of the Corporation’s Colorado predecessor’s
Series C Cumulative Convertible Preferred Stock simultaneously with the issuance
of the Corporation’s Colorado predecessor’s Series C Cumulative Convertible
Preferred Stock, on a registration statement declared effective by the SEC
and
such registration statement remains effective on the Redemption Payment Date
and
(ii) the
Market Price for each of the 22 trading days immediately preceding a Redemption
Payment Date exceeds the then applicable Fixed Conversion Price by at least
15.00%,
then
the Corporation will have the option of repurchasing the Series C Preferred
Stock in whole or in part (“Optional
Redemption”)
by
paying to the holder of Series C Preferred Stock a sum of money equal to
100% of
the Stated Value of each share of Series C Preferred Stock to be redeemed
together with accrued but unpaid dividends thereon and any and all other
sums
due, accrued or payable to the holder of Series C Preferred Stock arising
under
the Series C Preferred Stock to be redeemed on the day written notice of
redemption (the “Above
Market Notice of Redemption”)
is
given to the holder of Series C Preferred Stock (the “Above
Market Redemption Amount”)
provided, however, that the Above Market Redemption Amount shall not exceed
50%
of the aggregate dollar trading volume of the Corporation’s Common Stock on the
Principal Market during the 22 trading days preceding the delivery of any
Above
Market Notice of Redemption. The Above Market Notice of Redemption shall
specify
the date for such Optional Redemption (the “Above
Market Redemption Payment Date”)
which
date shall be 10 days after the date of the Above Market Notice of Redemption
(the “Above
Market Redemption Period”).
(c) Neither
a
Below Market Notice of Redemption nor an Above Market Notice of Redemption
shall
be effective with respect to any portion of the Series C Preferred Stock
for
which the holder of Series C Preferred Stock has a pending election to convert
pursuant to Section 3.1, or for conversions elected to be made by the holder
of
Series C Preferred Stock pursuant to Section 3.1 during either of the Below
Market Redemption Period or the Above Market Redemption Period. Each of the
Below Market Redemption Amount and/or the Above Market Redemption Amount
shall
be determined as if such holder’s conversion elections had been completed
immediately before the date of the respective Notice of Redemption. On each
respective Below Market Redemption Date or the Above Market Redemption Date,
as
applicable, the appropriate redemption amount must be paid in good funds
to the
holder of Series C Preferred Stock. In the event the Corporation fails to
pay
such appropriate redemption amount on the respective Below Market Redemption
Payment Date or Above Market Redemption Payment Date, then the redemption
notice
delivered in respect of such redemption will be null and void. All shares
of the
Series C Preferred Stock redeemed or repurchased pursuant to this Section
3.3
shall be retired and restored to the status of authorized and unissued shares
of
preferred stock, without designation as to series and may thereafter be reissued
as any series of preferred stock.
4. Liquidation
Rights.
(a) Upon
the
dissolution, liquidation or winding-up of the Corporation, whether voluntary
or
involuntary, the holders of Series C Preferred Stock shall be entitled to
receive before any payment or distribution shall be made on the Junior
Securities, out of the assets of the Corporation available for distribution
to
stockholders, the Stated Value per share of Series C Preferred Stock then
outstanding and all accrued and unpaid Dividends to and including the date
of
payment thereof. Upon the payment in full of all amounts due to the holders
of
Series C Preferred Stock and any Pari Passu Securities, the holders of the
Common Stock of the Corporation and any other class of Junior Securities
shall
receive all remaining assets of the Corporation legally available for
distribution. If the assets of the Corporation available for distribution
to the
holders of Series C Preferred Stock and any Pari Passu Securities shall be
insufficient to permit payment in full of the amounts payable as aforesaid
to
the holders of Series C Preferred Stock and any Pari Passu Securities upon
such
liquidation, dissolution or winding-up, whether voluntary or involuntary,
then
all such assets of the Corporation shall be distributed ratably among the
holders of Series C Preferred Stock and any Pari Passu Securities in accordance
with the amount that would have been payable on such distribution if the
amounts
to which the holders of outstanding shares of Series C Preferred Stock and
the
holders of outstanding shares of such Pari Passu Securities are entitled
were
paid in full.
(b) Neither
the purchase nor the redemption by the Corporation of shares of any class
of
stock nor the merger or consolidation of the Corporation with or into any
other
corporation or corporations nor the sale or transfer by the Corporation of
all
or any part of its assets shall be deemed to be a liquidation, dissolution
or
winding-up of the Corporation for the purposes of this Section 4.
5. Conversion
of Series C Preferred Stock into Common Stock.
Shares
of Series C Preferred Stock shall have the following conversion rights and
obligations:
(a) Subject
to the further provisions of this Section 5, each holder of shares of Series
C
Preferred Stock shall have the right at any time commencing after the issuance
of the Series C Preferred Stock to such holder to convert such shares into
fully
paid and non-assessable shares of Common Stock of the Corporation (as further
subject to the limitation set forth in Section 5(a) below) at the Conversion
Price provided in Section 3.1(a). All issued or accrued but unpaid Dividends
may
be converted at the election of the holder of Series C Preferred Stock
simultaneously with the conversion of the Series C Preferred Stock being
converted. Notwithstanding anything contained herein to the contrary, no
holder
of Series C Preferred Stock shall be entitled to convert into Common Stock
pursuant to the terms of this Section 5(a) that amount of the Series C Preferred
Stock which would result in such holder’s beneficial ownership (as defined
below) of the Corporation’s Common Stock being in excess of 4.99% of the
outstanding shares of Common Stock of the Corporation. For the purposes of
the
immediately preceding sentence, beneficial ownership shall be determined
in
accordance with Section 13(d) of the Securities Exchange Act of 1934 and
Regulation 13d-3 thereunder. Subject to the foregoing, a holder of Series
C
Preferred Stock shall not be limited to aggregate conversions of only 4.99%.
A
holder of Series C Preferred Stock may void, as to such holder, the conversion
limitation described in this Section 5(a) upon 75 days prior notice to the
Corporation.
(b) The
number of shares of Common Stock issuable upon conversion of each share of
Series C Preferred Stock shall equal (i) the sum of (A) the Stated Value
per
share, as amended pursuant to Section 5 hereof, and (B) at the election of
the
holder of Series C Preferred Stock, accrued and unpaid Dividends on such
shares
of Series C Preferred Stock, divided by (ii) the then applicable Fixed
Conversion Price.
(c) The
holder of any certificate for shares of Series C Preferred Stock desiring
to
convert any of such shares may give notice of its decision to convert the
shares
into common stock by delivering, along with the certificate(s) representing
the
shares of Series C Preferred Stock to be converted if requested by the
Corporation, an executed and completed notice of conversion (“Notice
of Conversion”)
to the
Corporation (the “Conversion
Date”).
Each
date on which a notice of conversion is delivered or telecopied to the
Corporation in accordance with the provisions hereof shall be deemed a
Conversion Date. The Corporation will cause the transfer agent to transmit
the
certificates representing the shares of the Corporation’s Common Stock issuable
upon conversion of the Series C Preferred Stock (and a certificate representing
the balance of the Series C Preferred Stock not so converted, if requested
by
Purchaser) to the holder by (i) to the extent permitted by the transfer agent
for the Common Stock, crediting the account of the holder’s prime broker with
the Depository Trust Company (“DTC”)
through its Deposit/Withdrawal At Custodian (“DWAC”)
system, or (ii) otherwise, by delivery to the holder of a stock certificate
representing such shares of Common Stock, within 3 business days after receipt
by the Corporation of the Notice of Conversion and the certificate(s)
representing the shares of Series C Preferred Stock to be converted (the
“Delivery
Date”).
The
Corporation shall deliver to the holder simultaneously with the aforedescribed
Common Stock, at the election of the holder, any additional shares of Common
Stock representing the conversion (at the applicable Fixed Conversion Price),
of
any accrued and undistributed Dividends on the outstanding Series C Preferred
Stock. The Corporation shall not be required, in connection with any conversion
of Series C Preferred Stock and payment of Dividends on Series C Preferred
Stock
to issue a fraction of a share of its Series C Preferred Stock and shall
instead
deliver a stock certificate representing the next whole number. The Corporation
shall pay the amount of any and all issue taxes (but not income taxes) which
may
be imposed in respect of any issue or delivery of stock upon the conversion
of
any shares of Series C Preferred Stock, but all transfer taxes and income
taxes
that may be payable in respect of any change of ownership of Series C Preferred
Stock or any rights represented thereby or of stock receivable upon conversion
thereof shall be paid by the person or persons surrendering such stock for
conversion.
(d) The
Corporation understands that a delay in the delivery of the Common Stock
in the
form required pursuant to this Section 5 beyond the Delivery Date could result
in economic loss to the holder. In the event that the Corporation fails to
direct its transfer agent to deliver the Common Stock to the holder within
the
time frame set forth in Section 5 and the Common Stock is not delivered to
the
holder by the Delivery Date, as compensation to the holder for such loss,
the
Corporation agrees to pay late payments to the holder for late issuance of
the
Common Stock in the form required pursuant to this Section 5 in the amount
equal
to $500 per business day after the Delivery Date. The Corporation shall pay
any
payments incurred under this Section 5 in immediately available funds upon
demand. Notwithstanding the foregoing, the Corporation shall not owe the
holder
any late fees set forth in this Section 5(d) if (i) the delay in the delivery
of
the Series C Preferred Shares beyond the Delivery Date is solely out of the
control of the Corporation (as determined in good faith by the holder and
the
Corporation), (ii) the Corporation is utilizing its best efforts to actively
attempt to cure the cause of the delay or (iii) the delay is the result of
the
exhaustion of all registered shares of Common Stock issuable upon conversion
of
the Preferred Stock or payment of dividends on the Preferred Stock if the
Corporation is in the process of registering additional shares of Common
Stock
for such purpose.
(e) Upon
the
conversion of any shares of Series C Preferred Stock no adjustment or payment
shall be made with respect to such converted shares on account of any Dividend
on the Common Stock, except that the holder of such converted shares shall
be
entitled to be paid any dividends declared on shares of Common Stock after
conversion thereof.
6. Adjustments
to the Fixed Conversion Price.
The
Fixed Conversion Price determined pursuant to Section 3.1(a) shall be subject
to
adjustment from time to time as follows:
(a)
Dividends. If
the
Corporation shall at any time (A) declare any dividend or distribution on
its
Common Stock or other securities of the Corporation other than (i) the Series
C
Preferred Stock or (ii) any Pari Passu Securities, (B) split or subdivide
the
outstanding Common Stock, (C) combine the outstanding Common Stock into a
smaller or greater number of shares, or (D) issue by reclassification of
its
Common Stock any shares or other securities of the Corporation, then in each
such event the Fixed Conversion Price shall be adjusted proportionately so
that
the holders of Series C Preferred Stock shall be entitled to receive the
kind
and number of shares or other securities of the Corporation which such holders
would have owned or have been entitled to receive after the happening of
any of
the events described above had such shares of Series C Preferred Stock been
converted immediately before the happening of such event (or any record date
with respect thereto). Such adjustment shall be made when any of the events
listed above shall occur. For the purposes hereof, any adjustment made to
the
Fixed Conversion Price pursuant to this Section 6(a) shall take effect on
the
date of occurrence of the events set forth herein.
(b) Share
Issuances.
Subject
to the provisions of this Section 6, if the Corporation shall at any time
issue
any shares of the Corporation’s Common Stock or securities convertible into the
Corporation’s Common Stock except (i) to the holders of Series C Preferred
Stock; (ii) pursuant to options, warrants, or other obligations of the
Corporation’s Colorado predecessor to issue shares outstanding on August 25,
2004 as disclosed to Holder in writing; (iii) pursuant to options that may
be
issued under any stock option plan or stock option arrangement adopted by
the
Corporation; or (iv) pursuant to stock granted under the revolving credit
facility on September 29, 2006, for a consideration per share (the “Offer
Price”)
less
than the Fixed Conversion Price in effect at the time of such issuance, then
the
Fixed Conversion Price applicable hereunder shall be immediately reset to
such
lower Offer Price at the time of issuance of such securities. For purposes
hereof, the issuance of any security of the Corporation convertible into
or
exercisable or exchangeable for the Common Stock shall result in an adjustment
to the Fixed Conversion Price at the time of issuance of such
securities.
(c)
Mergers.
In
case
of any merger of the Corporation with or into any other corporation (other
than
a merger in which the Corporation is the surviving or continuing corporation
and
which does not result in any reclassification, conversion, or change of the
outstanding shares of Common Stock) then as part of such merger, lawful
provision shall be made so that holders of Series C Preferred Stock shall
thereafter have the right to convert each share of Series C Preferred Stock
into
the kind and amount of shares of stock and/or other securities or property
receivable upon such merger by a holder of the number of shares of Common
Stock
into which such shares of Series C Preferred Stock might have been convertible
by the holder immediately before such consolidation or merger. Such provision
shall also provide for adjustments that shall be as nearly equivalent as
may be
practicable to the adjustments provided for in this Section 6. The foregoing
provisions of this Section 6(c) shall similarly apply to successive
mergers.
(d) Sale
of Assets, etc.
In
case
of any sale or conveyance to another person or entity of the property of
the
Corporation as an entirety, or substantially as an entirety, in connection
with
which shares or other securities or cash or other property shall be issuable,
distributable, payable, or deliverable for outstanding shares of Common Stock,
then, unless the right to convert such shares shall have terminated, lawful
provision shall be made so that the holders of Series C Preferred Stock shall
thereafter have the right to convert each share of the Series C Preferred
Stock
into the kind and amount of shares of stock or other securities or property
that
shall be issuable, distributable, payable, or deliverable upon such sale
or
conveyance with respect to each share of Common Stock immediately before
such
conveyance.
(e) Adjustment
of Fixed Conversion Price.
Whenever
the number of shares to be issued upon conversion of the Series C Preferred
Stock is required to be adjusted as provided in this Section 6, the Corporation
shall forthwith compute the adjusted number of shares to be so issued and
prepare a certificate setting forth such adjusted conversion amount and the
facts upon which such adjustment is based; and the Corporation shall mail
to
each holder of record of Series C Preferred Stock notice of such adjusted
conversion price.
(f)
Record
Date.
If, at
any time, the Corporation shall propose to take any action set forth in Sections
6(a), 6(b), 6(c), 6(d) or begin the voluntary dissolution, liquidation or
winding-up of the Corporation; then, and in any one or more of said cases,
the
Corporation shall cause at least 15 days prior notice of the date on which
(A)
the books of the Corporation shall close or a record be taken for such stock
dividend, distribution, or subscription rights, or (B) such capital
reorganization, reclassification, merger, dissolution, liquidation or winding-up
shall take place, as the case may be, to be mailed to the Transfer Agent
for the
Series C Preferred Stock and to the holders of record of the Series C Preferred
Stock.
7. Authorized
Shares.
So long
as any shares of Series C Preferred Stock shall remain outstanding and the
holders thereof shall have the right to convert the same in accordance with
provisions hereof, the Corporation shall at all times reserve from the
authorized and unissued shares of its Common Stock a sufficient number of
shares
to provide for such conversions.
8. Overall
Limit on Common Stock Issuable.
The
number of shares of Common Stock issuable by the Corporation and acquirable
by a
holder of Series C Preferred Stock under all securities issued by the
Corporation to the holder, shall not exceed 19.99% of the then outstanding
shares of the Corporation’s Common Stock, subject to appropriate adjustment for
stock splits, stock dividends, or other similar recapitalizations affecting
the
Common Stock (the “Maximum
Common Stock Issuance”),
at a
price below $1.50 (closing price on day of closing or the average of the
closing
prices for the five days before closing) unless the issuance of shares hereunder
in excess of the Maximum Common Stock Issuance shall first be approved by
the
Corporation’s stockholders provided, however, that any shares of Common Stock
issued to a holder of Series C Preferred Stock upon conversion of convertible
securities or upon exercise of warrants and subsequently sold by the holder
shall be excluded from the calculation of the aggregate Maximum Common Stock
Issuance. If at any point in time and from time to time the number of shares
of
Common Stock issued pursuant to conversion of the Preferred Stock, together
with
the number of shares of Common Stock that would then be issuable by the
Corporation in the event of the conversion or exercise of all other securities
issued by the Corporation, would exceed the Maximum Common Stock Issuance
but
for this Section, the Corporation shall promptly call a stockholder meeting
to
obtain stockholder approval for the issuance of the shares of Common Stock
hereunder in excess of the Maximum Common Stock Issuance if required by the
American Stock Exchange or other applicable trading market’s listing
requirements.
9. Voting
Rights.
The
shares of Series C Preferred Stock shall not have voting rights.
10. Deemed
Ownership.
In the
case of the exercise of the conversion rights or in the case of payment of
the
Dividend in Common Stock as set forth herein, the conversion privilege shall
be
deemed to have been exercised and the shares of Common Stock issuable upon
such
conversion shall be deemed to have been issued upon the date of receipt by
the
Corporation of the Notice of Conversion or on the Dividend Payment Date if
the
Dividend is paid in shares of Common Stock, as the case may be. The person
or
entity entitled to receive Common Stock issuable upon such conversion shall,
on
the date such conversion privilege is deemed to have been exercised and
thereafter, be treated for all purposes as the record holder of such Common
Stock.
11. Status
of Converted or Redeemed Stock.
In
case
any shares of Series C Preferred Stock shall be redeemed or otherwise
repurchased or reacquired, the shares so redeemed, converted, or reacquired
shall resume the status of authorized but unissued shares of Preferred Stock
and
shall no longer be designated as Series C Preferred Stock.
(D) Series
D-1 Preferred Stock.
For
all
purposes of Article IV(D), except as otherwise expressly provided or unless
the
context otherwise requires all references in this Article IV(D) to designated
“Sections” and other subdivisions are to the designated Sections and other
subdivisions of this Article IV(D). Defined terms used in this Article IV(D)
shall have the meanings assigned to them in this Article IV(D).
1.
Definitions.
For the
purposes of Article IV(D), the following terms shall have the following
meanings:
“Additional
Series D Preferred Stock”
means
shares of Series D Preferred Stock issued on a Subsequent Issue
Date.
“Alternate
Consideration”
shall
have the meaning set forth in Section 8(c).
“Amortization
Price”
means
the average of the VWAPs for the 10 Trading Days immediately before the Monthly
Optional Redemption Date.
“Bankruptcy
Event”
means
any of the following events: (a) the Corporation or any “Significant
Subsidiary”
(as
such term is defined in Rule 1-02(w) of Regulation S-X promulgated under
the
Securities Act) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Corporation or any Significant Subsidiary thereof; (b) there
is
commenced against the Corporation or any Significant Subsidiary thereof any
such
case or proceeding that is not dismissed within 60 days after commencement;
(c)
the Corporation or any Significant Subsidiary thereof is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case
or
proceeding is entered; (d) the Corporation or any Significant Subsidiary
thereof
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 days; (e)
the
Corporation or any Significant Subsidiary thereof makes a general assignment
for
the benefit of creditors; (f) the Corporation or any Significant Subsidiary
thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Corporation or any
Significant Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing
or
takes any corporate or other action for the purpose of effecting any of the
foregoing.
“Business
Day”
shall
have the meaning given in Section 13(d).
“Buy-In”
shall
have the meaning set forth in Section 7(d)(iii).
“Change
of Control Transaction”
means
the occurrence after the Original Issue Date of any of (i) an acquisition
by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether through
legal
or beneficial ownership of capital stock of the Corporation, by contract
or
otherwise) of in excess of 33% of the voting securities of the Corporation,
or
(ii) the Corporation or any Subsidiary merges into or consolidates with any
other Person, or any Person merges into or consolidates with the Corporation
or
any Subsidiary and, after giving effect to such transaction, the stockholders
of
the Corporation immediately before such transaction own less than 66% of
the
aggregate voting power of the Corporation or the successor entity of such
transaction, or (iii) the Corporation sells or transfers directly or through
its
Subsidiaries all or substantially all of its assets (on a consolidated basis)
to
another Person or Persons in a single transaction or a series of related
transactions and the stockholders of the Corporation immediately before such
transaction or transactions own (directly or indirectly) less than 66% of
the
aggregate voting power of the acquiring entity or entities immediately after
the
transaction or series of transactions, (iv) a replacement at one time or
within
a one year period of more than one half of the members of the Corporation’s
board of directors which is not approved by a majority of those individuals
who
are members of the board of directors on the Original Issue Date (or by those
individuals who are serving as members of the board of directors on any date
whose nomination to the board of directors was approved by a majority of
the
members of the board of directors who are members on the Original Issue Date)
(treating the Corporation and its Colorado predecessor as a single corporation
for this purpose), or (v) the execution by the Corporation of an agreement
to
which the Corporation is a party or by which it is bound, providing for any
of
the events set forth above in (i) or (iv). In no event shall the consummation
of
the transactions contemplated by the Starsys Merger Agreement be deemed a
Change
of Control Transaction.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the Corporation’s common stock, par value $0.0001 per share, and capital stock
of any other class into which the Common Stock may hereafter have been
reclassified or changed into.
“Common
Stock Equivalents”
means
any securities of the Corporation or the Subsidiaries which would entitle
the
holder thereof to acquire at any time Common Stock, including without
limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
“Conversion
Amount”
means
the aggregate Stated Value of the Series D-1 Preferred Stock at
issue.
“Conversion
Date”
shall
have the meaning set forth in Section 7(a).
“Conversion
Price”
shall
have the meaning set forth in Section 7(b).
“Conversion
Shares”
means,
collectively, the shares of Common Stock into which the shares of Series
D-1
Preferred Stock are convertible in accordance with the terms
hereof.
“Conversion
Shares Registration Statement”
means
a
registration statement that meets the requirements of the Registration Rights
Agreement and registers the resale of Conversion Shares (including any shares
of
common stock of the Corporation’s Colorado predecessor, which shares have
thereafter been converted into Common Stock), and other shares issuable pursuant
to the Transaction Documents by the Holder, who shall be named as a “selling
stockholder” in the prospectus, as supplemented from time to time, which forms a
part thereof, all as provided in, and subject to the terms and conditions
of,
the Registration Rights Agreement.
“Dividend
Payment Date”
shall
have the meaning set forth in Section 4(a).
“Dividend
Period”
means
each calendar quarter; provided that the initial Dividend Period for any
shares
of Series D-1 Preferred Stock shall be the Issue Date thereof to and including
the last day of the calendar quarter in which such Issue Date
occurs.
“Dividend
Price”
means
the arithmetic mean of the VWAPs for the 10 Trading Days immediately before
the
Dividend Payment Date.
“Dividend
Share Amount”
shall
have the meaning set forth in Section 4(a).
“Effective
Date”
means
with respect to a Conversion Shares Registration Statement, the date that
such
Conversion Shares Registration Statement becomes effective.
“Equity
Conditions”
shall
mean, during the period in question, (i) the Corporation shall have duly
honored
all conversions scheduled to occur or occurring by virtue of one or more
Notices
of Conversion of Holders, if any, (ii) all liquidated damages and other amounts
owing to Holders in respect of the Series D Preferred Stock shall have been
paid; (iii) there is an effective Conversion Shares Registration Statement
pursuant to which the Holder is permitted to utilize the prospectus thereunder
(as the same may have been amended from time to time) to resell all of the
shares of Common Stock issuable pursuant to the Transaction Documents (other
than shares of Common Stock relating to unissued shares of Additional Series
D
Preferred Stock and unissued Warrants), and the Corporation believes, in
good
faith, that such effectiveness will continue uninterrupted for the foreseeable
future, (iv) the Common Stock is trading on a Trading Market and all of the
shares of Common Stock issuable pursuant to the Transaction Documents (other
than shares relating to unissued shares of Series D Preferred Stock) are
listed
for trading on a Trading Market (and the Corporation believes, in good faith,
that trading of the Common Stock on a Trading Market will continue uninterrupted
for the foreseeable future), (v) there is a sufficient number of authorized
but
unissued and otherwise unreserved shares of Common Stock for the issuance
of the
Minimum Number of shares of Common Stock issuable pursuant to the Transaction
Documents, (vi) there is then existing no Triggering Event or event which,
with
the passage of time or the giving of notice, would constitute a Triggering
Event, (vii) the issuance of the shares in question to the Holder would not
violate the limitations set forth in Section 7(c), (viii) for a period of
20
consecutive Trading Days immediately before the applicable date in question,
the
daily average dollar volume for the Common Stock on the Trading Market exceeds
$100,000 per Trading Day with a VWAP for each such Trading Day equal to or
greater than $1.50 per share (subject to adjustment for forward and reverse
stock splits and the like) and (ix) no public announcement of a pending or
proposed Fundamental Transaction, Change of Control Transaction or acquisition
transaction has occurred that has not been consummated.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Forced
Conversion Notice”
has
the
meaning set forth in Section 10.
“Forced
Conversion Notice Date”
has
the
meaning set forth in Section 10.
“Fundamental
Transaction”
shall
have the meaning set forth in Section 8(c).
“GAAP”
means
United States generally accepted accounting principles applied on a consistent
basis during the periods involved.
“Holder”
and
“Holders”
shall
have the meaning given such terms in Section 3.
“Issue
Date”
means
with respect to any shares of Series D Preferred Stock (which shall include,
on
a tacked basis, shares of Series D-1 Amortizing Convertible Perpetual Preferred
Stock or other “Series D” preferred stock of the Corporation’s Colorado
predecessor), the date such share is originally issued.
“LIBOR”
means,
for each Dividend Period (i) the six-month London Interbank Offered Rate
for
deposits in U.S. dollars, as shown on the Trading Day immediately before
the
beginning of such Dividend Period in The Wall Street Journal (Eastern Edition)
under the caption “Money Rates - London Interbank Offered Rates (LIBOR)”; or
(ii) if The Wall Street Journal does not publish such rate, the offered
one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen
LIBO Page as of 10:00 a.m., New York time, the Trading Day immediately before
the beginning of such Dividend Period, provided that if at least two rates
appear on the Reuters Screen LIBO Page on any such Trading Day, the “LIBOR” for
such day shall be the arithmetic mean of such rates.
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other transfer restriction other than restrictions intended to secure
compliance with applicable securities laws.
“Liquidation”
shall
have the meaning given such term in Section 6.
“Liquidation
Funds”
has
the
meaning set forth in Section 6.
“Maximum
Rate”
means,
with respect to any rate or amount, the maximum rate or amount, as the case
may
be, permitted by applicable law.
“Minimum
Number”
means
as of any date, the maximum aggregate number of shares of Common Stock then
issuable or potentially issuable in the future pursuant to the Transaction
Documents including any underlying shares issuable upon exercise or conversion
in full of all Warrants, Preferred Stock Warrants and outstanding shares
of
Series D Preferred Stock, ignoring any conversion or exercise limits set
forth
herein or therein, and assuming that any previously unconverted shares of
Series
D Preferred Stock are held until the third anniversary from the date of
determination and all dividends (assuming LIBOR and VWAP stay fixed at the
rate
in effect as of the date of determination) are paid in shares of Common Stock
until such third anniversary, ignoring the limitation on the number of shares
of
Common Stock issuable hereunder or thereunder.
“Monthly
Optional Redemption Amount”
means
with respect to all shares of Series D-1 Preferred Stock, 1/54th
of the
aggregate Stated Value of the shares of Series D-1 Preferred Stock issued
on
such date.
“Monthly
Optional Redemption Date”
has
the
meaning set forth in Section 9(d).
“Monthly
Optional Redemption Notice”
has
the
meaning set forth in Section 9(d).
“Monthly
Optional Redemption Notice Date”
has
the
meaning set forth in Section 9(d).
“Notice
of Conversion”
shall
have the meaning given such term in Section 7(a).
“Optional
Redemption”
shall
have the meaning set forth in Section 9(a).
“Optional
Redemption Date”
shall
have the meaning set forth in Section 9(a).
“Optional
Redemption Amount”
shall
mean with respect to a share of Series D-1 Preferred Stock, the sum of (a)
(i)
115%, if the Optional Redemption Date is before the 9-month anniversary of
the
Issue Date, (ii) 110%, if the Optional Redemption Date is on or after the
9-month anniversary of the Issue Date but before the 24-month anniversary
of the
Issue Date and (iii) 100% if the Optional Redemption Date is on or after
the
24-month anniversary of the Issue Date, in each case of the Stated Value
of such
share of Series D-1 Preferred Stock to be redeemed, (b) accrued but unpaid
dividends on such share of Series D-1 Preferred Stock and (c) all liquidated
damages and other amounts due in respect of such share of Series D-1 Preferred
Stock.
“Original
Issue Date”
shall
mean the date of the issuance of the first shares of the Series D-1 Preferred
Stock (which shall include, on a tacked basis, shares of Series D-1 Amortizing
Convertible Perpetual Preferred Stock of the Corporation’s Colorado
predecessor).
“Pari
Passu Shares”
has
the
meaning set forth in Section 3.
“Permitted
Indebtedness”
shall
mean (a) the indebtedness of the Corporation (as successor to the Corporation’s
Colorado predecessor) and its Subsidiaries existing on the Original Issue
Date;
(b) indebtedness for borrowed money however denominated and preferred stock
or
debt securities, payment of which is expressly subordinate to the Series
D
Preferred Stock; (c) capitalized lease obligations; (d) the Starsys Bank
Debt
and until July 22, 2006, up to $250,000 of Stockholder Loans (as that term
is
defined in the Starsys Merger Agreement); (e) Series D Preferred Stock; and
(f)
indebtedness incurred to finance a specific project or contract of the
Corporation, provided such project or contract is related to the Corporation’s
business, is approved by the Corporation’s Board of Directors as in the best
interest of the Corporation, and does not exceed 15% of the amount of such
project or contract and, if secured, is secured solely by assets of such
project
or contract and not the assets generally used by the Corporation in its
operations; (g) indebtedness to finance an acquisition provided such acquisition
is of assets or a business which is synergistic with the business of the
Corporation, is approved by the Corporation’s Board of Directors as in the best
interest of the Corporation, is accretive to the Corporation and, if such
indebtedness is secured, is secured solely by assets acquired; and (h)
indebtedness by and between a Subsidiary and the Corporation.
“Permitted
Lien”
shall
mean the individual and collective reference to the following: (a) Liens
for
taxes, assessments and other governmental charges or levies not yet due or
Liens
for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves
(in the
good faith judgment of the management of the Corporation) have been established
in accordance with GAAP and (b) Liens imposed by law which were incurred
in the
ordinary course of business, such as carriers’, warehousemen’s and mechanics’
Liens, statutory landlords’ Liens, and other similar Liens arising in the
ordinary course of business, and (x) which do not individually or in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the
Corporation and its consolidated Subsidiaries or (y) which are being contested
in good faith by appropriate proceedings, which proceedings have the effect
of
preventing the forfeiture or sale of the property or asset subject to such
Lien;
(c) Liens on assets of Starsys securing the Starsys Bank Debt; (d) Liens
securing indebtedness under clauses (a), (c) and (d) of the definition of
Permitted Indebtedness; (e) Liens under government contracts entered into
in the
ordinary course of business; (f) Liens on assets of the specific project
or
contract to secured indebtedness under clause (f) of the definition of Permitted
Indebtedness; and (g) Liens on assets acquired to secured acquisition
indebtedness under clause (g) of the definition of Permitted
Indebtedness.
“Person”
means
a
corporation, an association, a partnership, an organization, a business,
an
individual, a government or political subdivision thereof or a governmental
agency.
“Preferred
Stock Warrant”
shall
have the meaning given in the Purchase Agreement.
“Purchase
Agreement”
means
the Securities Purchase Agreement, dated as of the Original Issue Date, to
which
the Corporation (as successor to the Corporation’s Colorado predecessor) and the
Holders on the Original Issue Date are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
“Purchaser”
or
“Purchasers”
means
the parties to the Purchase Agreement other than the Corporation’s Colorado
predecessor, and any permitted assignee of such party.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of the Purchase
Agreement, to which the Corporation (as successor to the Corporation’s Colorado
predecessor) and the Holders on the Original Issue Date are parties, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Securities”
means,
without duplication, the Series D Preferred Stock, the Warrants, the Preferred
Stock Warrants, the Warrant Shares and the Underlying Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series
D Preferred Stock”
means
this Series D-1 Preferred Stock plus such additional consecutively numbered
Series D denominated Preferred Stock of the Corporation which the Board of
Directors shall authorize and designate from time to time pursuant to the
Transaction Documents.
“Series
D Preferred Stock Register”
shall
have the meaning given in Section 13(c).
“Share
Delivery Date”
shall
have the meaning given such term in Section 7(d).
“Significant
Subsidiary”
shall
have the meaning given to such term in the definition of “Bankruptcy Event” in
this Section 1.
“Starsys”
means
Starsys Research Corporation, a Colorado corporation.
“Starsys
Bank Debt”
means
the indebtedness (including related amounts) of Starsys to Vectra Bank Colorado
existing at the time of the merger of Starsys with a subsidiary of the
Corporation’s Colorado predecessor pursuant to and in accordance with the
Starsys Merger Agreement.
“Starsys
Merger”
means
the merger contemplated by the Starsys Merger Agreement.
“Starsys
Merger Agreement”
means
the Agreement and Plan of Merger and Reorganization dated as of October 24,
2005
by and among the Corporation’s Colorado predecessor, Monoceros Acquisition
Corporation, a wholly-owned subsidiary of the Corporation’s Colorado
predecessor, Starsys and its key stockholders and stockholder
agent.
“Stated
Value”
shall
have the meaning given such term in Section 2.
“Subsequent
Issue Date”
means
any Issue Date other than the Original Issue Date.
“Subsidiary”
means
any subsidiary of the Corporation.
“Threshold
Period”
has
the
meaning set forth in Section 10.
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market or
the OTC
Bulletin Board.
“Transaction
Documents”
shall
have the meaning set forth in the Purchase Agreement.
“Triggering
Event”
shall
have the meaning set forth in Section 11(a).
“Triggering
Redemption Amount”
for
each share of Series D-1 Preferred Stock means the sum of (i) the greater
of (A)
130% of the Stated Value and (B) the product of (a) the VWAP on the Trading
Day
immediately preceding the date of the Triggering Event and (b) the Stated
Value
divided by the then Conversion Price, (ii) all accrued but unpaid dividends
thereon and (iii) all liquidated damages and other amounts due in respect
of
such share of Series D-1 Preferred Stock except in the case of a Triggering
Event described in clause (xiii) of Section 11(a), the Triggering Redemption
Amount for each share of Series D-1 Preferred Stock shall be the sum of (x)
100%
of the Stated Value, (y) all accrued but unpaid dividends thereon and (z)
all
liquidated damages and other amounts due in respect of such share of Series
D-1
Preferred Stock.
“Triggering
Redemption Payment Date”
shall
have the meaning set forth in Section 11(b).
“Variable
Rate Transaction”
means
any transaction in which the Corporation issues or sells (a) any debt or
equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (i)
at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common
Stock
at any time after the initial issuance of such debt or equity securities,
or
(ii) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly
or
indirectly related to the business of the Corporation or the market for the
Common Stock or (b) enters into any agreement, including, but not limited
to, an
equity line of credit, whereby the Corporation may sell securities at a price
determined or determinable after the date of the applicable agreement. For
avoidance of doubt, the transactions contemplated by the Starsys Merger
Agreement shall not be deemed a Variable Rate Transaction.
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
the
Common Stock is not then listed or quoted on a Trading Market and if prices
for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date (or the nearest preceding
date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or
quoted
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices),
the
most recent bid price per share of the Common Stock so reported; or (d) in
all
other cases, the fair market value of a share of Common Stock as determined
by
an independent appraiser selected in good faith by the Holders holding a
majority of outstanding shares of Series D-1 Preferred Stock and reasonably
acceptable to the Corporation.
“Warrant”
shall
have the meaning set forth in the Purchase Agreement.
(a) Rules
of Construction.
For all
purposes of Article IV(D), except as otherwise expressly provided or unless
the
context otherwise requires:
(i)
the
words
“include,” “includes,” and “including” shall be deemed to be followed by
“without limitation”;
(ii) pronouns
in masculine, feminine, and neuter genders shall be construed to include
any
other gender;
(iii) whenever
the singular number is used, if required by the context, the same shall include
the plural, and vice versa;
(iv) the
words
“herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to
this Certificate as a whole and not to any particular Section or other
subdivision hereof, or to the Certificate as a whole except as otherwise
referenced; and
(v) all
accounting terms shall be interpreted, and all accounting determinations
hereunder shall be made, in accordance with GAAP.
2.
Amount
and Stated Value.
The
number of shares of Series D-1 Preferred Stock shall not be subject to increase
without the consent of all of the record holders of the Series D-1 Preferred
Stock (each, a “Holder”
and
collectively, the “Holders”)
and
when the context so requires, the Holders of any of the Series D Preferred
Stock. Each share of Series D-1 Preferred Stock shall have a stated value
equal
to $1,000 (the “Stated
Value”).
3.
Rank.
The
Series D-1 Preferred Stock shall rank (i) before the Corporation’s Common Stock;
and (ii) on a parity with the Corporation’s Series C Preferred Stock. The Common
Stock and all other equity or equity equivalent securities of the Corporation
other than those securities that (i) were outstanding (as predecessor securities
of the Corporation’s Colorado predecessor) on the Original Issue Date and (ii)
which are explicitly senior or pari passu in rights or liquidation preference
to
the Series D-1 Preferred Stock, are collectively referred to in this Article
IV(D) as the “Junior
Securities.”
All
equity securities of the Corporation that are of equal rank with the Series
D-1
Preferred Stock as to payments of Liquidation Funds, including the Series
C
Preferred Stock, are collectively referred to in this Article IV(D) as the
“Pari
Passu Shares.”
All
equity securities of the Corporation to which the Series D-1 Preferred
Stock ranks junior (whether with respect to liquidation, dissolution, winding
up
or otherwise), are collectively referred to in this Article IV(D) as the
“Senior
Securities”.
The
respective definitions of Junior Securities, Pari Passu Shares and Senior
Securities shall also include any rights, options or warrants exercisable
for
any of the Junior Securities, Pari Passu Shares and Senior Securities, as
the
case may be. The Series D-1 Preferred Stock shall be subject to the
creation of Junior Securities, Pari Passu Shares and Senior Securities.
Notwithstanding the immediately foregoing, in no event shall the Corporation
issue or authorize for issuance any Senior Securities or Pari Passu Shares
without the prior express written consent of a majority in interest of the
Holders.
4. Dividends.
(a) Dividends
in Cash or in Kind.
Holders
of Series D-1 Preferred Stock (which shall include for all dividend accrual
and
accumulation purposes, on a tacked basis, shares of Series D-1 Amortizing
Convertible Perpetual Preferred Stock of the Corporation’s Colorado predecessor)
shall be entitled to receive and the Corporation shall pay, cumulative
preferential dividends at the rate per share (as a percentage of the Stated
Value per share) at the rate per annum equal to LIBOR for the applicable
Dividend Period plus 4.0% (subject to increase pursuant to this Section 4(a))
quarterly on each January 1, April 1, July 1 and October 1 (beginning, with
respect to the Series D-1 Preferred Stock on the first such date after the
Issue
Date thereof) and on any Conversion Date thereof (except in each case that,
if
such date is not a Trading Day, the payment date shall be the next succeeding
Trading Day) (each a “Dividend
Payment Date”);
provided,
however,
that
commencing with the 6-month anniversary of the Issue Date, the dividend rate
on
each month’s Monthly Optional Redemption Amount, to the extent the same has not
been redeemed pursuant to Section 9(d), shall be increased to 15% effective
as
of the Monthly Optional Redemption Notice Date; and provided
further,
that
the dividend rate on all outstanding shares of Series D-1 Preferred Stock
shall
be increased to the greater of 15% and LIBOR plus 10% commencing at the
beginning of the 37th
month
following the Issue Date for such shares of Series D-1 Preferred Stock.
Dividends shall be paid in cash or, if the Equity Conditions have been met,
at
the Corporation’s option, in shares of Common Stock as set forth in this Section
4(a), or a combination thereof (the dollar amount to be paid in shares of
Common
Stock, the “Dividend
Share Amount”).
If
the Corporation shall elect to pay all or any portion of a quarterly dividend
in
shares of Common Stock, the number of shares to be issued in payment of the
Dividend Share Amount to each Holder shall be determined by multiplying the
Dividend Share Amount payable to such Holder by 112% and dividing the product
obtained by the Dividend Price. If funds are not legally available for the
payment of dividends and the Equity Conditions have not been met then, subject
to the late fee referred to below and Section 11, such dividends shall accrue
to
the next Dividend Payment Date. The Holders shall have the same rights and
remedies with respect to the delivery of any shares in payment of a dividend
as
if such shares were being issued pursuant to Section 7. If at any time the
Corporation elects to pay dividends in Common Stock, the Corporation must
provide the Holders with at least 20 Trading Days’ prior notice of its election
to pay a regularly scheduled dividend in Common Stock. Dividends on the Series
D-1 Preferred Stock shall be calculated on the basis of a 360-day year, shall
accrue daily during each Dividend Period, and shall be deemed to accrue whether
or not earned or declared and whether or not there are profits, surplus or
other
funds of the Corporation legally available for the payment of dividends.
Except
as otherwise provided herein, if at any time the Corporation pays dividends
partially in cash and partially in shares of Common Stock, then the cash
and
shares shall be distributed pro rata in respect of each outstanding share
of
Series D-1 Preferred Stock. Any dividends, whether paid in cash or shares,
that
are not paid within three Trading Days following a Dividend Payment Date
shall
continue to accrue and shall entail a late fee, which must be paid in cash,
at
the rate of 18% per annum (or the Maximum Rate, if less), such fees to accrue
daily, from the Dividend Payment Date through and including the date of payment.
For the avoidance of doubt, failure to pay a quarterly dividend as provided
herein shall constitute a failure to perform a covenant and a breach of the
Transaction Documents. At any time the Corporation delivers a notice to the
Holders of its election to pay all or any portion of the dividends in shares
of
Common Stock, the Corporation shall file a prospectus supplement pursuant
to
Rule 424 promulgated under the Securities Act disclosing such election.
(b) So
long
as any Series D-1 Preferred Stock shall remain outstanding, the Corporation
shall not, and shall not cause or permit its Subsidiaries to, redeem, purchase
or otherwise acquire directly or indirectly any Junior Securities. So long
as
any Series D-1 Preferred Stock shall remain outstanding, neither the Corporation
nor any Subsidiary thereof shall directly or indirectly pay or declare any
dividend or make any distribution (other than dividends or distributions
on
Series D-1 Preferred Stock or other Pari Passu Shares in proportion to the
amount owed thereon) upon, nor shall any distribution be made in respect
of, any
Junior Securities so long as any dividends due on the Series D-1 Preferred
Stock
remain unpaid, nor shall any monies be set aside for or applied to the purchase
or redemption (through a sinking fund or otherwise) of any Junior Securities.
The various series of Series D Preferred Stock shall rank pari passu with
each
other and the Series C Preferred Stock shall rank pari passu with the various
series of Series D Preferred Stock both as to dividends and Liquidation and
all
such shares shall be Pari Passu Shares.
(c) The
Corporation shall not create any special reserves in the stockholder equity
section of its balance sheet or with respect to shares of its capital stock
that
would limit its ability to pay dividends on the Series D-1 Preferred Stock,
and
if the Corporation shall, for any reason, become subject to the Corporation
law
of another jurisdiction or the General Corporation Law of Delaware (or, if
the
Corporation is subject thereto by virtue of Section 2115 thereof, the California
Corporation Code) shall be amended so as to require a reserve from which
dividends cannot be paid, the Corporation will not create such a reserve
under
such circumstances in excess of the minimum required by such law or change.
In
addition, the Corporation shall not increase the par value of any of its
shares
of capital stock outstanding on the Original Issue Date.
5.
Voting
Rights.
Except
as
otherwise provided herein and as otherwise required by law, the Series D-1
Preferred Stock shall have no voting rights. However, so long as any shares
of
Series D-1 Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote of the Holders of a majority of the shares of Series
D-1
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Series D-1 Preferred Stock or alter or
amend
this Article IV(D), (b) authorize or create any class of stock ranking as
to
dividends, redemption or distribution of assets upon a Liquidation senior
to or
pari passu with the Series D Preferred Stock (other than each series of Series
D
Preferred Stock authorized and designated pursuant to the Transaction
Documents), (c) amend its Certificate of Incorporation or other charter
documents so as to affect adversely any rights of the Holders (for the avoidance
of doubt, other than the filing of amendments to the Corporation’s Certificate
of Incorporation to file a Certificate of Designations for any other series
of
Series D Preferred Stock authorized and designated pursuant to the Transaction
Documents), (d) increase the authorized number of shares of Series D-1 Preferred
Stock, or (e) enter into any agreement with respect to the
foregoing.
6.
Liquidation.
Upon
any liquidation, dissolution or winding-up of the Corporation, whether voluntary
or involuntary (a “Liquidation”),
the
Holders shall be entitled to receive out of the assets of the Corporation,
whether such assets are capital or surplus (the “Liquidation
Funds”),
for
each share of Series D-1 Preferred Stock an amount equal to the Stated Value
per
share plus any accrued and unpaid dividends thereon and any other fees or
liquidated damages owing thereon before any distribution or payment shall
be
made to the holders of any Junior Securities, and if the assets of the
Corporation shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the Holders shall be distributed among the Holders
ratably in accordance with the respective amounts that would be payable on
such
shares if all amounts payable thereon were paid in full, provided that,
if the
Liquidation Funds are insufficient to pay the full amount due to the holders
of
Series D-1 Preferred Stock and holders of Pari Passu Shares, then each record
holder of Series D-1 Preferred Stock and each holder of Pari Passu Shares
shall
receive a percentage of the Liquidation Funds that is equal to the amount
that
the full amount of Liquidation Funds otherwise payable to each such holder
in
accordance with the terms of such shares bears to the full amount of Liquidation
Funds otherwise payable to all holders of Series D-1 Preferred Stock and
Pari
Passu Shares. A Fundamental Transaction or Change of Control Transaction
shall
not be treated as a Liquidation. The Corporation shall mail written notice
of
any such Liquidation, not less than 45 days before the payment date stated
therein, to each Holder. The purchase or redemption by the Corporation of
stock
of any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a liquidation, dissolution or winding up of the
Corporation.
7.
Conversion.
(a) Conversions
at Option of Holder.
Each
share of Series D-1 Preferred Stock shall be convertible into that number
of
shares of Common Stock (subject to the limitations set forth in Section 7(c))
determined by dividing the Stated Value of such share of Series D-1 Preferred
Stock by the Conversion Price, at the option of the Holder, at any time and
from
time to time. Holders shall effect conversions by providing the Corporation
with
the form of conversion notice in the form provided by the Corporation (a
“Notice
of Conversion”).
Each
Notice of Conversion shall specify the number of shares of Series D-1 Preferred
Stock to be converted, the Issue Date of such Series D-1 Preferred Stock,
the
number of shares of Series D-1 Preferred Stock owned before the conversion
at
issue, the number of shares of Series D-1 Preferred Stock owned subsequent
to
the conversion at issue and the date on which such conversion is to be effected,
which date may not be before the date the Holder delivers such Notice of
Conversion to the Corporation by facsimile (the “Conversion
Date”).
If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion to the Corporation is deemed
delivered hereunder. The calculations and entries set forth in the Notice
of
Conversion shall control in the absence of manifest or mathematical error.
Shares of Series D-1 Preferred Stock converted into Common Stock or redeemed
in
accordance with the terms hereof shall be canceled and may not be
reissued.
(b) Conversion
Price.
The
conversion price for the Series D Preferred Stock shall be equal to $ 1.48,
subject to adjustment herein (the “Conversion
Price”).
(c) Beneficial
Ownership Limitation.
The
Corporation shall not effect any conversion of the Series D-1 Preferred Stock
or
otherwise issue shares of Common Stock to any Holder in respect of the Series
D-1 Preferred Stock, and a Holder shall not have the right to convert any
portion of the Series D-1 Preferred Stock or otherwise receive any shares
of
Common Stock in respect of the Series D-1 Preferred Stock, to the extent
that
after giving effect to such conversion and/or issuance, such Holder (together
with such Holder’s affiliates, and any other person or entity acting as a group
together with such Holder or any of such Holder’s affiliates), as set forth on
the applicable Notice of Conversion Form, would beneficially own (1) in excess
of 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to such conversion or issuance and (2) if the Holder
(together with such Holder’s affiliates, and any other person or entity acting
as a group together with such Holder or any of such Holder’s affiliates)
beneficially owns in excess of 4.99% of the number of shares of Common Stock
then outstanding or has waived the provisions of this Section 7(c) with respect
to the 4.99% limitation only, in excess of 9.99% of the number of shares
of
Common Stock outstanding immediately after giving effect to such conversion
or
issuance. For purposes of the foregoing sentence, the number of shares of
Common
Stock beneficially owned by such Holder and its affiliates shall include
the
number of shares of Common Stock issuable upon conversion of the Series D-1
Preferred Stock with respect to which the determination of such sentence
is
being made, but shall exclude the number of shares of Common Stock which
would
be issuable upon (A) conversion of the remaining, unconverted Stated Value
of
Series D-1 Preferred Stock beneficially owned by such Holder or any of its
affiliates and (B) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Corporation (including, without
limitation, any other preferred stock or Warrants) subject to a limitation
on
conversion or exercise analogous to the limitation contained herein beneficially
owned by such Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 7(c), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act
and the
rules and regulations promulgated thereunder, it being acknowledged by a
Holder
that the Corporation is not representing to such Holder that such calculation
is
in compliance with Section 13(d) of the Exchange Act and such Holder is solely
responsible for any schedules required to be filed in accordance therewith.
To
the extent that the limitation contained in this Section 7(c) applies, the
determination of whether the Series D-1 Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any affiliates)
and of which a portion of the Series D-1 Preferred Stock is convertible shall
be
in the sole discretion of a Holder, and the submission of a Notice of Conversion
shall be deemed to be each Holder’s determination of whether the shares of
Series D-1 Preferred Stock may be converted (in relation to other securities
owned by such Holder) and of which portion of the Series D-1 Preferred Stock
is
convertible, in each case subject to such aggregate percentage limitation,
and
the Corporation shall have no obligation to verify or confirm the accuracy
of
such determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of
the
Exchange Act and Rule 13d-3 promulgated thereunder. For purposes of this
Section
7(c), in determining the number of outstanding shares of Common Stock, a
Holder
may rely on the number of outstanding shares of Common Stock as reflected
in the
most recent of the following: (x) the Corporation’s most recent Form 10-QSB or
Form 10-KSB, as the case may be, (y) a more recent public announcement by
the
Corporation or (z) any other notice by the Corporation or the Corporation’s
Transfer Agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Corporation shall within
one
Trading Day confirm orally and in writing to such Holder the number of shares
of
Common Stock then outstanding. In any case, the number of outstanding shares
of
Common Stock shall be determined after giving effect to the conversion, exercise
or issuance of securities of the Corporation, including the shares of Series
D-1
Preferred Stock, by such Holder or its affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The provisions
of this Section 7(c) with respect to either or both of the 4.99% and 9.99%
limitations may be waived by such Holder, as to and at the election of such
Holder, upon not less than 61 days’ prior notice to the Corporation, and the
applicable provisions of this Section 7(c) shall continue to apply until
such
61st day (or such later date, as determined by such Holder, as may be specified
in such notice of waiver). Only the limitation that is specifically waived
shall
be waived so that a waiver of the 4.99% limitation shall not operate to waive
the 9.99% limitation unless specifically set forth in the Holder’s notice of
waiver. The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms of this Section 7(c) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended 4.99% or 9.99% beneficial ownership limitation
herein contained. The limitations contained in this paragraph shall apply
to a
successor Holder of the Series D-1 Preferred Stock.
(d) Mechanics
of Conversion
(i) Delivery
of Certificate Upon Conversion.
Not
later than three Trading Days after each Conversion Date (the “Share
Delivery Date”),
the
Corporation shall deliver or cause to be delivered to the Holder (A) a
certificate or certificates which, after the Effective Date, shall be free
of
restrictive legends and trading restrictions (other than those required by
the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Series D-1 Preferred Stock, and
(B) a
bank check (or at the discretion of the converting Holder, a wire transfer
in
immediately available funds) in the amount of accrued and unpaid dividends
unless the Corporation is entitled and has elected to pay such dividends
in
shares of Common Stock pursuant to (a)
(including the limitations under Section 7(c)), in which event the Corporation
shall deliver certificates as aforesaid representing shares of Common Stock
in
payment of such accrued and unpaid dividends valued at the Dividend Price
as if
the Conversion Date were the Dividend Payment Date. After the Effective Date
with respect to the Conversion Shares Registration Statement covering the
subject Conversion Shares, the Corporation shall, upon request of the Holder,
and if the Holder has provided the Corporation with the name of its prime
broker
that is a participant with the Depository Trust Company System through its
Deposit/Withdrawal At Custodian System, deliver any certificate or certificates
required to be delivered by the Corporation under this Section electronically
through the Depository Trust Company. If in the case of any Notice of Conversion
such certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date, the
Holder
shall be entitled to elect by written notice to the Corporation at any time
on
or before its receipt of such certificate or certificates thereafter, to
rescind
such conversion, in which event the Corporation shall immediately restore
on the
Series D-1 Preferred Stock Register the shares of Series D-1 Preferred Stock
tendered for conversion as outstanding in the name of such Holder, and the
Holder shall promptly return any Common Stock certificates received in
connection with such rescinded conversion.
(ii) Obligation
Absolute; Partial Liquidated Damages.
The
Corporation’s obligations to issue and deliver the Conversion Shares upon
conversion of Series D-1 Preferred Stock in accordance with the terms hereof
are
absolute and unconditional, irrespective of any action or inaction by the
Holder
to enforce the same, any waiver or consent with respect to any provision
hereof,
the recovery of any judgment against any Person or any action to enforce
the
same, or any setoff, counterclaim, recoupment, limitation or termination,
or any
breach or alleged breach by the Holder or any other Person of any obligation
to
the Corporation or any violation or alleged violation of law by the Holder
or
any other person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Corporation to the Holder in connection
with the issuance of such Conversion Shares. In the event a Holder shall
elect
to convert any or all of the Stated Value of its Series D-1 Preferred Stock,
the
Corporation may not refuse conversion based on any claim that such Holder
or any
one associated or affiliated with the Holder has been engaged in any violation
of law, agreement or for any other reason, unless an injunction from a court,
on
notice, restraining and or enjoining conversion of all or part of this Series
D-1 Preferred Stock shall have been sought and obtained and the Corporation
posts a surety bond for the benefit of the Holder in the amount of 150% of
the
Stated Value of Series D-1 Preferred Stock outstanding, which is subject
to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be
payable
to such Holder to the extent it obtains judgment. In the absence of an
injunction precluding the same, the Corporation shall issue Conversion Shares
or, if applicable, cash, upon a properly noticed conversion. If the Corporation
fails to deliver to the Holder such certificate or certificates pursuant
to
Section 7(d)(i) within two Trading Days of the Share Delivery Date applicable
to
such conversion, the Corporation shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, for each $5,000 of Stated Value
of
Series D-1 Preferred Stock being converted, $50 per Trading Day (increasing
to
$100 per Trading Day after 3 Trading Days and increasing to $200 per Trading
Day
6 Trading Days after such damages begin to accrue) for each Trading Day after
the Share Delivery Date until such certificates are delivered. Nothing herein
shall limit a Holder’s right to pursue actual damages for the Corporation’s
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have
the
right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(iii) Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion.
If the
Corporation fails to deliver to the Holder such certificate or certificates
pursuant to Section 7(d)(i) by a Share Delivery Date, and if after such Share
Delivery Date the Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”),
then
the Corporation shall pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number
of
shares of Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (2) the price at which the sell order giving
rise to such purchase obligation was executed. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover
a
Buy-In with respect to an attempted conversion of shares of Series D-1 Preferred
Stock with respect to which the aggregate sale price giving rise to such
purchase obligation is $10,000, under the immediately preceding sentence
the
Corporation shall be required to pay the Holder $1,000. The Holder shall
provide
the Corporation written notice indicating the amounts payable to the Holder
in
respect of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Corporation. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of the shares
of Series D-1 Preferred Stock as required pursuant to the terms
hereof.
(iv) Reservation
of Shares Issuable Upon Conversion.
The
Corporation shall at all times reserve and keep available out of its authorized
and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of the Series D-1 Preferred Stock and payment of dividends on
the
Series D-1 Preferred Stock, each as herein provided, free from preemptive
rights
or any other actual contingent purchase rights of Persons other than the
Holders
of the Series D-1 Preferred Stock, not less than such number of shares of
the
Common Stock as shall (subject to any additional requirements of the Corporation
as to reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section
8)
upon the conversion of all outstanding shares of Series D-1 Preferred Stock.
The
Corporation covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if the Conversion Shares Registration Statement with respect
to such shares is then effective under the Securities Act, registered for
public
resale in accordance with such Conversion Shares Registration
Statement.
(v) Fractional
Shares.
Upon a
conversion hereunder, the Corporation shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may
if
otherwise permitted, make a cash payment in respect of any final fraction
of a
share based on the VWAP at such time. If the Corporation elects not, or is
unable, to make such a cash payment, the Holder shall be entitled to receive,
in
lieu of the final fraction of a share, one whole share of Common
Stock.
(vi) Transfer
Taxes.
The
issuance of certificates for shares of the Common Stock on conversion of
Series
D-1 Preferred Stock shall be made without charge to the Holder hereof for
any
documentary stamp or similar taxes that may be payable in respect of the
issue
or delivery of such certificate, provided that the Corporation shall not
be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a
name
other than that of the Holder of such shares of Series D-1 Preferred Stock
so
converted and the Corporation shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall
have
established to the satisfaction of the Corporation that such tax has been
paid.
8.
Certain
Adjustments.
(a) Stock
Dividends and Stock Splits.
If the
Corporation, at any time while the Series D-1 Preferred Stock is outstanding:
(A) pays a stock dividend or otherwise makes a distribution or distributions
on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Corporation pursuant to
this
Article IV(D) or in respect of any of the Series D Preferred Stock or Pari
Passu
Shares), (B) subdivides outstanding shares of Common Stock into a larger
number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock
of
the Corporation, then the Conversion Price then in effect shall be multiplied
by
a fraction of which the numerator shall be the number of shares of Common
Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to
this
Section 8(a) shall become effective immediately after the record date for
the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case
of a
subdivision, combination or reclassification.
(b) Pro
Rata Distributions.
If the
Corporation, at any time while Series D-1 Preferred Stock is outstanding,
shall
distribute to all holders of Common Stock (and not to Holders) evidences
of its
indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than Common Stock then in
each
such case the Conversion Price shall be adjusted by multiplying the Conversion
Price in effect immediately before the record date fixed for determination
of
stockholders entitled to receive such distribution by a fraction of which
the
denominator shall be the VWAP determined as of the record date mentioned
above,
and of which the numerator shall be such VWAP on such record date less the
then
per share fair market value at such record date of the portion of such assets
or
evidence of indebtedness so distributed applicable to one outstanding share
of
the Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided to
the
Holder of the portion of assets or evidences of indebtedness so distributed
or
such subscription rights applicable to one share of Common Stock. An adjustment
shall be made under this Section 8(b) whenever any such distribution described
in Section 8(b) is made, and such adjustment shall become effective immediately
on the date of such distribution.
(c) Fundamental
Transaction.
If,
at
any time while any Series D-1 Preferred Stock is outstanding, (A) the
Corporation effects any merger or consolidation of the Corporation with or
into
another Person, (B) the Corporation effects any sale of all or substantially
all
of its assets on a consolidated basis in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the Corporation
or another Person) is completed pursuant to which holders of Common Stock
are
permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Corporation effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock
is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”),
then,
upon any subsequent conversion of Series D-1 Preferred Stock, the Holder
shall
have the right to receive, for each Conversion Share that would have been
issuable upon such conversion immediately before the occurrence of such
Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of
such
Fundamental Transaction if it had been, immediately before such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”).
For
purposes of any such conversion, the determination of the Conversion Price
shall
be appropriately adjusted to apply to such Alternate Consideration based
on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Corporation shall apportion
the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction,
then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any conversion of this Series D-1 Preferred Stock following
such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Corporation or surviving entity in such
Fundamental Transaction shall file a new Certificate of Designation with
the
same terms and conditions and issue to the Holder, in exchange for the shares
of
Series D-1 Preferred Stock, new preferred stock consistent with the foregoing
provisions and evidencing the Holder’s right to convert such preferred stock
into Alternate Consideration. The terms of any agreement pursuant to which
a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section
8(c)
and insuring that this Series D-1 Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.
(d) Calculations.
All
calculations under this Section 8 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section
8,
the number of shares of Common Stock deemed to be issued and outstanding
as of a
given date shall exclude treasury shares, if any.
(e) Notice
to Holders.
(i) Adjustment
to Conversion Price.
Whenever
the Conversion Price is adjusted pursuant to any of this Section 8, the
Corporation shall promptly mail to each Holder a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of
the facts requiring such adjustment.
(ii) Notice
to Allow Conversion by Holder.
If (A)
the Corporation shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Corporation shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Corporation shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of
any
rights (other than pursuant to a stockholder rights plan provided that under
such stockholder rights plan, such rights, before being detached, will be
attached to Conversion Shares when issued); (D) the approval of any stockholders
of the Corporation shall be required in connection with any reclassification
of
the Common Stock, any consolidation or merger to which the Corporation is
a
party, any sale or transfer of all or substantially all of the assets of
the
Corporation, of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the Corporation shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Corporation; then, in each case, the Corporation shall
cause
to be filed at each office or agency maintained for the purpose of conversion
of
this Series D Preferred Stock, and shall cause to be mailed to each Holder
at
its last address as its shall appear upon the Series D Preferred Stock Register,
at least 20 calendar days before the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is
to be
taken for the purpose of such dividend, distribution, redemption, rights
or
warrants, or if a record is not to be taken, the date as of which the holders
of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer
or
share exchange; provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. The Holders are entitled
to
convert the Conversion Amount of the Series D-1 Preferred Stock (or any part
hereof) during the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
9.
Optional
Redemption.
(a) Optional
Redemption at Election of Corporation.
Subject
to the provisions of this Section 9, at any time after the Original Issue
Date,
the Corporation may deliver a notice to the Holders (an “Optional
Redemption Notice”
and
the
date such notice is deemed delivered hereunder, the “Optional
Redemption Notice Date”)
of its
irrevocable election to redeem some or all of the then outstanding shares
of
Series D-1 Preferred Stock, for an amount, in cash, equal to the Optional
Redemption Amount on the 20th Trading Day following the Optional Redemption
Notice Date (such date, the “Optional
Redemption Date”
and
such redemption, the “Optional
Redemption”).
The
Optional Redemption Amount is due in full on the Optional Redemption Date.
The
Corporation may only effect an Optional Redemption if during the period
commencing on the Optional Redemption Notice Date through to the date final
payment is made, each of the Equity Conditions (exclusive of clause (viii)
of
the definition of Equity Conditions) shall have been met and the Corporation
shall not have entered into an agreement or understanding for a Change of
Control Transaction and there shall have been no public announcement of a
Change
of Control Transaction. If any of the Equity Conditions (exclusive of clause
(viii) of the definition of Equity Conditions) shall cease to be satisfied
at
any time during the required period, then each Holder may elect to nullify
its
respective Optional Redemption Notice by notice to the Corporation within
3
Trading Days after the first day on which any such Equity Condition (exclusive
of clause (viii) of the definition of Equity Conditions) has not been met
(provided that if, by a provision of the Transaction Documents the Corporation
is obligated to notify the Holders of the non-existence of an Equity Condition,
such notice period shall be extended to the third Trading Day after proper
notice from the Corporation) in which case such Optional Redemption Notice
shall
be null and void, ab
initio.
The
Corporation covenants and agrees that it will honor all Notice of Conversions
tendered from the time of delivery of the Optional Redemption Notice through
the
date all amounts owing thereon are due and paid in full. If within six months
following an Optional Redemption Date that occurs on or before the expiration
of
24 months from the Original Issue Date a Change of Control Transaction occurs,
then the Holders whose Series D-1 Preferred Stock was redeemed on such Optional
Redemption Date shall be entitled to be paid an additional amount equal to
the
amount by which the Optional Redemption Amount paid to such Holder is less
than
the amount such Holder would have received had such Holder’s Series D-1
Preferred Stock so redeemed been redeemed pursuant to (b)
upon the
occurrence of such Change of Control Transaction.
(b) Optional
Redemption Upon Change in Treatment.
The
Corporation intends to record the Series D-1 Preferred Stock on its balance
sheet as stockholder equity in accordance with GAAP. If the Corporation is
required to reclassify all of the value of the Series D-1 Preferred Stock
as a
liability on its balance sheet by reason of (i) comments from the Commission
received after the Original Issue Date; (ii) any literature (rules,
interpretations, releases and the like) published by the Commission after
the
Original Issue Date or (iii) any change in accounting literature made after
the
Original Issue Date, then the Corporation shall give prompt notice of such
event
to the Holders. Within 60 days (or if such 60 day period would expire within
the
Corporation’s first fiscal quarter in any fiscal year, then within 15 days
following the date on which the Corporation makes public its results of
operations for the immediately preceding fiscal year) of the giving of such
notice, the Corporation may redeem all of the outstanding shares of Series
D-1
Preferred Stock for a redemption price per share equal to the Stated Value
of
such Series D-1 Preferred Stock plus all accrued and unpaid dividends and
other
amounts due thereon to the date of redemption by delivery within such 60
day
period of an Optional Redemption Notice and shall otherwise be redeemed as
if it
were an Optional Redemption (without regard to any references to Equity
Conditions or any references to Change of Control Transactions or the
restrictions of Section 12) and references in Section 9(a) and Section 9(c)
to
Optional Redemption Amount shall be deemed to refer to the redemption amount
payable pursuant to this Section 9(b).
(c) Redemption
Procedure.
The
payment of cash pursuant to an Optional Redemption shall be made on the Optional
Redemption Date. If any portion of the cash payment for an Optional Redemption
shall not be paid by the Corporation by the due date, interest shall accrue
thereon at the rate of 18% per annum (or the Maximum Rate, if less) until
the
payment of the Optional Redemption Amount, plus all amounts owing thereon,
is
paid in full. Alternatively, if any portion of the Optional Redemption Amount
remains unpaid after such date, the Holders subject to such redemption may
elect, by written notice to the Corporation given at any time thereafter,
to
invalidate ab
initio
such
redemption with respect to the shares of Series D-1 Preferred Stock for which
the Optional Redemption Amount has not been paid in full, notwithstanding
anything herein contained to the contrary and the Corporation shall have
no
further right to exercise such Optional Redemption (but shall be entitled
to a
full refund of any Optional Redemption Amounts actually paid in respect of
the
invalidated redemption). Notwithstanding anything to the contrary in this
Section 9, the Corporation’s determination to redeem shares of Series D-1
Preferred Stock shall be applied among the Holders of the Series D-1 Preferred
Stock ratably. Each Holder may elect to convert shares of Series D-1 Preferred
Stock pursuant to Section 7 before actual payment in cash for any redemption
under this Section 9 by fax delivery of a Notice of Conversion to the
Corporation.
(d) Optional
Monthly Redemptions.
Subject
to the provisions of this Section 9, commencing on the 6-month anniversary
of
the Issue Date of the Series D-1 Preferred Stock, and on each monthly
anniversary of such Issue Date (each a “Monthly
Optional Redemption Notice Date”),
the
Corporation may deliver a notice to the Holders (a “Monthly
Optional Redemption Notice”)
of its
irrevocable election to redeem up to the Monthly Optional Redemption Amount
of
each share of Series D-1 Preferred Stock in cash, or, subject to satisfaction
of
the Equity Conditions, at the Corporation’s option, in shares of the
Corporation’s Common Stock. Such a redemption shall decrease the Stated Value of
each share of Series D-1 Preferred Stock by an amount per share equal to
the
Monthly Optional Redemption Amount divided by the number of then outstanding
Series D-1 Preferred Stock. Except as otherwise provided herein, if at any
time
the Corporation elects to redeem the Monthly Optional Redemption Amount
partially in cash and partially in shares of Common Stock, then such cash
and
shares shall be distributed ratably among the Holders based upon the number
of
shares of Series D-1 Preferred Stock held by each Holder. The number of shares
of Common Stock to be issued to each Holder in payment of the Monthly Redemption
Amount shall be determined by multiplying the Monthly Optional Redemption
Amount
to be paid to such Holder in shares of Common Stock by 112% and dividing
the
product obtained by the Amortization Price. The date for redemption (the
“Monthly
Optional Redemption Date”)
of
each month’s Monthly Redemption Amount shall be the 20th
Trading
Date following the Monthly Optional Redemption Notice Date. The Corporation
may
only effect a monthly optional redemption of Series D-1 Preferred Stock in
shares of Common Stock if during the period commencing on the most recent
monthly anniversary date of the Issue Date of the Series D-1 Preferred Stock
through the date payment is made, each of the Equity Conditions shall have
been
met. If any of the Equity Conditions shall cease to be satisfied at any time
during the required period, then each Holder may elect to nullify its respective
Monthly Optional Redemption Notice by notice to the Corporation within 3
Trading
Days after the first day on which any such Equity Condition has not been
met
(provided that if, by a provision of the Transaction Documents the Corporation
is obligated to notify the Holders of the non-existence of an Equity Condition,
such notice period shall be extended to the third Trading Day after proper
notice from the Corporation) in which case such Optional Redemption Notice
shall
be null and void, ab
initio.
The
Corporation covenants and agrees that it will honor all Notice of Conversions
tendered from the time of delivery of the Monthly Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full. Whenever
the Stated Value of any Series D-1 Preferred Stock has been reduced to zero,
such share shall be deemed cancelled and retired and shall no longer be deemed
outstanding.
(e) Monthly
Optional Redemption Procedure.
The
selection of Series D-1 Preferred Stock to be redeemed pursuant to a Monthly
Optional Redemption Notice and the payment of the Optional Redemption Amount
in
cash shall be made in accordance with Section 9(c) as if it were an Optional
Redemption. Issuance of shares of Common Stock in payment of any of the Monthly
Optional Redemption Amount (and penalties and procedures for failure to deliver
such shares) shall be consistent with the issuance of shares upon conversion
pursuant to Section 7 treating the Monthly Optional Redemption Date as the
Conversion Date.
10.
Forced
Conversion.
Notwithstanding
anything herein to the contrary, if from and after the expiration of 24 months
from the Issue Date the VWAP for each Trading Day in any 20 consecutive Trading
Day period (“Threshold
Period”),
which
Threshold Period shall have commenced only after such 24 month period, exceeds
the then Conversion Price (as adjusted from time to time as provided herein)
by
250%, the Corporation may, within 1 Trading Day after any such Threshold
Period,
deliver a notice to the Holder (a “Forced
Conversion Notice”
and
the
date such notice is received by the Holder, the “Forced
Conversion Notice Date”)
to
cause the Holders to immediately convert all or part of the then outstanding
shares of Series D-1 Preferred Stock into that number of shares of Common
Stock
determined by dividing the Stated Value of such share of Series D-1 Preferred
Stock by the Conversion Price within 3 Trading Days of the Forced Conversion
Notice Date. The Corporation may only effect a Forced Conversion Notice if
during the Threshold Period and until the 3rd Trading Day following the Forced
Conversion Notice Date, all of the Equity Conditions shall have been met.
If any
of the Equity Conditions shall cease to be satisfied at any time during the
required period, then the Forced Conversion Notice shall be null and void,
ab
initio.
Any
Forced Conversions hereunder shall be applied ratably to all Holders based
on
the number of shares of Series D-1 Preferred Stock held by each Holder. In
no
event may the Corporation require conversion of any Series D-1 Preferred
Stock
of any Holder in excess of the limitations of (c)
applicable to such Holder.
11.
Redemption
Upon Triggering Events.
(a) “Triggering
Event”
means
any
one or more of the following events (whatever the reason and whether it shall
be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation
of any
administrative or governmental body):
(i) the
failure of the initial Conversion Shares Registration Statement contemplated
by
Section 2(a) of the Registration Rights Agreement to be declared effective
by
the Commission on or before the 150th
day
after the Original Issue Date;
(ii) the
failure of any additional Conversion Shares Registration Statement contemplated
by the Registration Rights Agreement to be declared effective by the Commission
on or before the 120th
day
after the Issue Date of any Additional Series D Preferred Stock if applicable
or
in all other cases, on or before the 120th
day
after the Filing Date for such additional Conversion Shares Registration
Statement;
(iii) if,
during the applicable Effectiveness Period, as that term is defined in each
Registration Rights Agreement, the effectiveness of the Conversion Shares
Registration Statement lapses for any reason for more than an aggregate of
45
calendar days (which need not be consecutive days) during any 12 month period,
or the Holder shall not be permitted to resell Registrable Securities, as
that
terms is defined in the Registration Rights Agreement, under such Conversion
Shares Registration Statement for a period of 15 consecutive Trading Days
or
more than an aggregate of 45 calendar days (which need not be consecutive
days)
during any 12 month period, provided, however, that if the lapse of the
effectiveness or the lack of availability of the Registration Statement is
extended beyond the foregoing time periods as a result of delays by the SEC
in
the context of a review by the Commission of such Registration Statement
(including any post-effective amendments thereto, or any of the Corporation’s
periodic reports filed with the Commission) to provide comments to the
Corporation or to respond to the Corporation’s responses to the Commission’s
comments, then the foregoing time periods may be extended by the number of
days
attributable to such delays by the Commission up to a maximum of an additional
20 calendar days;
(iv) the
Corporation shall fail to deliver certificates representing Conversion Shares
issuable upon a conversion of Series D-1 Preferred Stock that comply with
the
provisions hereof before the 5th
Trading
Day after such shares are required to be delivered hereunder, or the Corporation
shall provide written notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any shares of Series D-1 Preferred Stock in accordance with
the
terms hereof;
(v) one
of
the Events (as defined in the Registration Rights Agreement) described in
subsections (i), (ii) or (iii) of Section 2(b) of the Registration Rights
Agreement shall not have been cured to the satisfaction of the Holders before
the expiration of 30 days from the Event Date (as defined in the Registration
Rights Agreement) relating thereto (other than an Event resulting from (x)
a
failure of the initial Conversion Shares Registration Statement to be declared
effective by the Commission on or before the 150th
day
after the Original Issue Date or (y) a failure of any Additional Conversion
Shares Registration Statement to be declared effective by the Commission
on or
before the 120th
day
after the applicable Issue Date or Filing Date, which shall be covered by
Section 11(a)(i);
(vi) the
Corporation shall fail for any reason to pay in full the amount of cash due
pursuant to a Buy-In within 15 days after notice therefor is delivered hereunder
or shall fail to pay all amounts owed on account of an Event within five
days of
the date due;
(vii) the
Corporation shall fail to have available a sufficient number of authorized
and
unreserved shares of Common Stock to issue to Holders upon a conversion
hereunder;
(viii) unless
specifically addressed elsewhere in this Certificate as a Triggering Event,
the
Corporation shall fail to observe or perform any other covenant, agreement
or
warranty contained in, or otherwise commit any breach of the terms of this
Certificate or the Transaction Documents, and such failure or breach shall
not,
if subject to the possibility of a cure by the Corporation, have been remedied
within 20 calendar days after the date on which written notice of such failure
or breach shall have been given by a Holder to the Corporation provided,
however, that if there shall have been a breach of a warranty which is
immaterial in nature and amount but cannot be cured, then such breach shall
not
constitute a Triggering Event;
(ix) the
Corporation shall redeem any Junior Securities;
(x) the
occurrence of a Change of Control Transaction;
(xi) there
shall have occurred a Bankruptcy Event; or
(xii) the
Common Stock shall fail to be listed or quoted for trading on a Trading Market
for more than 5 Trading Days, which need not be consecutive Trading
Days.
(b) Upon
the
occurrence of a Triggering Event, each Holder shall (in addition to all other
rights it may have hereunder or under applicable law) have the right,
exercisable at the sole option of such Holder, to require the Corporation
to
redeem out of funds legally available therefor all of the Series D-1 Preferred
Stock then held by such Holder for a redemption price, in cash, equal to
the
Triggering Redemption Amount; provided that in the case of the Triggering
Event
described in clause (x) of Section 11(a) occurring before the expiration
of 36
months from the Original Issue Date, the Triggering Redemption Amount shall
be
130% of the Stated Value; and, provided further, that, in the Event of a
Triggering Event described in clause (xiii) of Section 11(a), such Holder
shall
have fully exercised its right to require redemption on or before April 15,
2006. The Triggering Redemption Amount shall be due and payable within 5
Trading
Days of the date on which the notice for the payment therefor is provided
by a
Holder provided, however, that in the event of a Triggering Event specified
in
Section 11(a)(xiii), such 5 Trading Day period with respect to any Holder
shall
begin on the date on which the Corporation shall receive, in addition to
such
Holder’s notice, all of the then outstanding Preferred Stock Warrants issued to
such Holder on the Original Issue Date, together with such forms of assignment
or cancellation as the Corporation shall reasonably request from each applicable
Holder (the “Triggering
Redemption Payment Date”);
provided, further that, upon failure of the Corporation to timely pay the
Triggering Redemption Amount in respect of a Triggering Event specified in
Section 11(a)(xiii), the Corporation shall return all of such Holder’s Preferred
Stock Warrants to such Holder until such time as the Corporation shall satisfy
in full its obligations under this Section 11(b), as applicable, at which
time
such Holder shall tender its outstanding Preferred Stock Warrants to the
Corporation. If the Corporation fails to pay the Triggering Redemption Amount
hereunder in full pursuant to this Section on the date such amount is due
in
accordance with this Section, the Corporation will pay interest on any unpaid
amount thereof at a rate of 18% per annum (or the Maximum Rate, if less),
accruing daily from such date until the Triggering Redemption Amount, plus
all
such interest thereon, is paid in full. For purposes of this Section, a share
of
Series D-1 Preferred Stock is outstanding until such date as the Holder shall
have received Conversion Shares upon a conversion (or attempted conversion)
thereof that meets the requirements hereof or has been paid the Triggering
Redemption Amount plus all accrued but unpaid dividends and all accrued but
unpaid liquidated damages in cash.
12.
Negative
Covenants.
So long
as any shares of Series D-1 Preferred Stock are outstanding, without the
consent
of the holders owning of record a majority of the shares of Series D-1 Preferred
Stock then outstanding, the Corporation will not and will not permit any
of its
Subsidiaries to directly or indirectly:
(a) Except
for Permitted Indebtedness, enter into, create, incur, assume, guarantee
or
suffer to exist any indebtedness for borrowed money of any kind, including
but
not limited to, a guarantee, on or with respect to any of its property or
assets
now owned or hereafter acquired or any interest therein or any income or
profits
therefrom;
(b) Except
for Permitted Liens, enter into, create, incur, assume or suffer to exist
any
liens of any kind, on or with respect to any of its property or assets now
owned
or hereafter acquired or any interest therein or any income or profits
therefrom;
(c) amend
its
Certificate of Incorporation, bylaws or other charter documents so as to
materially and adversely affect any rights of any Holder (for the avoidance
of
doubt, the filing of amendments to the Corporation’s Certificate of
Incorporation to file a Certificate of Designations for any other series
of
Series D Preferred Stock authorized and designated pursuant to the Transaction
Documents or Pari Passu Shares pursuant to Section 4.24 of the Purchase
Agreement is specifically permitted);
(d) designate
any class or series of capital stock having any rights or preferences senior
or
pari passu with the rights and preferences of the Series D-1 Preferred Stock
except pursuant to Section 4.24 of the Purchase Agreement;
(e) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a
de
minimis number of shares of its Common Stock or Common Stock Equivalents
or any
other Junior Securities other than as to the Conversion Shares to the extent
permitted or required under the Transaction Documents or as otherwise permitted
by the Transaction Documents, except for repurchases of equity securities
(including cashless exercise of options) issued pursuant to the Corporation’s
equity compensation plans and net exercises of the options granted to the
Corporation’s executives on December 20, 2005;
(f) issue
any
variable priced equity securities or any variable priced equity linked
securities or enter into any Variable Rate Transaction except as permitted
by
Section 4.24 of the Purchase Agreement;
(g) enter
into any agreement with respect to any of the foregoing; or
(h) pay
cash
dividends or distributions on any equity securities of the Corporation other
than the Series D Preferred Stock, amounts paid as expressly provided herein
and
in the Transaction Documents and dividends due and paid in the ordinary course
on its Pari Passu Shares when the Corporation is in compliance with its payment
and other obligations hereunder.
13.
Miscellaneous.
(a) Notices.
Any and
all notices or other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion, shall
be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the Corporation, at the
following facsimile number and address, facsimile number 858.375.1000, Attn:
Richard B. Slansky, President, 13855 Stowe Drive, Poway, California 92064
or
such other address or facsimile number as the Corporation may specify for
such
purposes by notice to the Holders delivered in accordance with this Section.
Any
and all notices or other communications or deliveries to be provided by the
Corporation hereunder shall be in writing and delivered personally, by facsimile
or sent by a nationally recognized overnight courier service addressed to
each
Holder at the facsimile telephone number or address of such Holder appearing
on
the Series D Preferred Stock Register, or if no such facsimile telephone
number
or address appears, at the principal place of business of the Holder or at
such
other address as the Holder shall designate by notice given to the Corporation
pursuant to this Section 13(a). Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the
date of
transmission, if such notice or communication is delivered via facsimile
at the
facsimile telephone number specified in this Section before 5:30 p.m. (New
York
City time), (ii) the date after the date of transmission, if such notice
or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 5:30 p.m. (New York City time) on any
date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
second
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such
notice is required to be given.
(b) Absolute
Obligation.
Except
as expressly provided herein, no provision of this Certificate shall alter
or
impair the obligation of the Corporation, which is absolute and unconditional,
to pay the liquidated damages (if any) on the shares of Series D-1 Preferred
Stock at the time, place, and rate, and in the coin or currency, herein
prescribed.
(c) Series
D Preferred Stock Register.
The
Series D-1 Preferred Stock shall be issued without certificates. The Corporation
shall maintain a register for the Series D-1 Preferred Stock and all other
Series D Preferred Stock at its principal executive office in which it shall
record the issuance of all shares of Series D Preferred Stock, the name and
address of each record Holder of Series D Preferred Stock, all issuances
and
transfers of Series D Preferred Stock, all adjustments to the Stated Value
of
Series D Preferred Stock converted by any Holder and the dates of such
conversion, the payment of dividends thereon and notations with respect to
the
restrictions on transfer of any shares of Series D Preferred Stock pursuant
to
the Purchase Agreement or Registration Rights Agreement and such other
information as the Corporation shall deem appropriate to evidence the
outstanding Series D Preferred Stock from time to time (the “Series
D Preferred Stock Register”).
In
the event of any dispute or discrepancy in the number of outstanding shares
of
Series D Preferred Stock to which each Holder is entitled, the Series D
Preferred Stock Register shall be controlling absent manifest error. Within
one
Trading Day of a request by any Holder, the Corporation shall advise and
confirm
to a Holder the number of shares of Series D Preferred Stock registered in
the
name of the Holder, the Stated Value of such Series D Preferred Stock and
the
aggregate Stated Value of all outstanding Series D Preferred Stock. The
Corporation may treat the Person in whose name any Series D Preferred Stock
is
registered on the Series D Preferred Stock Register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but
in all
events recognizing any properly made transfers.
(d) Next
Business Day.
Whenever
any payment or other obligation hereunder shall be due on a day other than
a day
when banks are open for business in New York (such day, a “Business
Day”),
such
payment shall be made on the next succeeding Business Day.
ARTICLE
V
Subject
to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, the number of directors
shall be fixed from time to time exclusively by the Board of
Directors.
ARTICLE
VI
Subject
to the rights of any class or series of stock then outstanding, newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such newly
created directorship shall be filled by the stockholders, be filled only
by the
affirmative vote of the directors then in office, even though less than a
quorum
of the Board of Directors, or by a sole remaining director.
No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
ARTICLE
VII
Each
outstanding share of Common Stock shall entitle the holder thereof to one
vote
on each matter properly submitted to the stockholders of the Corporation
for
their vote, provided,
however,
that
except as otherwise required by law, holders of Common Stock shall not be
entitled to vote on any amendment to this Certificate (including any Certificate
of Designation relating to any series of Preferred Stock) that relates solely
to
the terms of one or more outstanding series of Preferred Stock if the holders
of
such affected series are entitled, either separately or together as a class
with
the holders of one or more other such series, to vote thereon pursuant to
this
Certificate or the DGCL (including any Certificate of Designation relating
to
any Preferred Stock).
The
directors of the Corporation need not be elected by written ballot unless
the
Bylaws so provide.
ARTICLE
VIII
The
business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. In addition to the powers and authority expressly conferred
upon the
Board of Directors by statute or by this Certificate or the Bylaws of the
Corporation, the Board of Directors is hereby empowered to exercise all
such
powers and do all such acts and things as may be exercised or done by the
Corporation.
ARTICLE
IX
The
Board
of Directors of the Corporation is expressly authorized to adopt, amend or
repeal the Bylaws of the Corporation (subject to any limitations which may
be
included, by Board of Directors action, in the Bylaws themselves). The
stockholders shall also have the power to adopt, amend or repeal the Bylaws
of
the Corporation; provided,
however,
that
that the stockholders may not amend or repeal the indemnification/advancement
provisions of the Bylaws except by a 75% supermajority vote.
The
Corporation reserves the right to amend or repeal any provision contained
in
this Certificate, in the manner now or hereafter prescribed by the DGCL,
and all
rights conferred upon stockholders herein are granted subject to this
reservation, provided,
however,
that
notwithstanding and in addition to any other provision of this Certificate
or
any provision of law that might otherwise permit a lesser vote or no vote,
a 75%
supermajority vote of stockholders shall be required to amend or repeal this
Article IX, and provided,
further,
that
notwithstanding anything in this Article IX to the contrary, so long as any
shares of Series D-1 Preferred Stock are outstanding, the amendment or repeal
of
this Certificate shall be subject to the provisions of Section 5 of Article
IV(D) and Section 12 of Article IV(D).
ARTICLE
X
To
the
fullest extent permitted by the DGCL, as the DGCL may be amended from time
to
time, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. If the DGCL is amended to authorize corporate action
further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended.
Any
repeal or modification of the foregoing provisions of this Article X shall
not
adversely affect any right or protection of a director of the Corporation
with
respect to any acts or omissions of such director first occurring before
such
repeal or modification.
ARTICLE
XI
To
the
fullest extent permitted by applicable law, the Corporation shall provide
indemnification of (and advancement of expenses to) directors and officers
(and
is authorized to provide indemnification of, and advancement of expenses
to, any
other persons to which Delaware law permits the Corporation to provide
indemnification) through Bylaw provisions, agreements with such directors
and
officers or other persons, vote of stockholders or disinterested directors
or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the DGCL, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach
of
duty to a corporation, its stockholders, and others.
Any
repeal or modification of any of the foregoing provisions of this Article
XI
shall not adversely affect any right or protection of a director, officer
or
other person existing at the time of such repeal or modification.
Executed
this 15th
day of
June, 2007.
/s/
Richard B. Slansky
Richard
B. Slansky, Incorporator
APPENDIX
C
BYLAWS
OF
SPACEDEV,
INC.
(A
Delaware Corporation)
ARTICLE
I
OFFICES
Section
1.1 Registered
Office. Unless
and until changed by the board of directors (the “Board of Directors”) of
SpaceDev, Inc. (the “Corporation”), the registered office of the Corporation in
the State of Delaware shall be established and maintained at 615 S. DuPont
Highway, Kent
County,
Dover, Delaware
and
National
Corporate Research, Ltd.
shall be
the registered agent of the Corporation in charge thereof.
Section
2.1 Other
Offices. The
Corporation may also have offices at such other places both within and outside
the State of Delaware as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLES
II
STOCKHOLDERS
Section
2.1 Annual
Meeting.
The
annual meeting of stockholders shall be held on such date and at such time
as
may be fixed by the Board of Directors and stated in the notice of the meeting,
for the purpose of electing directors and for the transaction of only such
other
business as is properly brought before the meeting in accordance with these
Bylaws (the “Bylaws”).
Section
2.2 Special
Meetings.
Special
meetings of the stockholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation of the Corporation
(the “Certificate of Incorporation”), may only be called by a majority of the
entire Board of Directors or the Chairman. Such request shall state the purpose
or purposes of the proposed meeting. Business transacted at special meetings
shall be confined to the purpose or purposes stated in the notice.
Section
2.3 Notice
Of Meetings. Written
notice of the place, date, and time of all meetings of the stockholders shall
be
given, not less than 10 nor more than 60 days before the date on which the
meeting is to be held, to each stockholder entitled to vote at such meeting,
except as otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the Delaware General Corporation
Law or the Certificate of Incorporation of the Corporation). All meetings
of the
stockholders shall be held at such time and place, either within or outside
the
State of Delaware, as shall be designated from time to time by the Board
of
Directors and stated in the notice of the meeting or in a duly executed waiver
of notice thereof.
When
a
meeting is adjourned to another place, date or time, written notice need
not be
given of the adjourned meeting if the place, date and time thereof are announced
at the meeting at which the adjournment is taken; provided, however, that
if the
date of any adjourned meeting is more than 30 days after the date for which
the
meeting was originally noticed, or if a new record date is fixed for the
adjourned meeting, written notice of the place, date, and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting,
any
business may be transacted which might have been transacted at the original
meeting.
Section
2.4 Quorum.
At
any
meeting of the stockholders, the holders of a majority of all of the shares
of
the stock entitled to vote at the meeting, present in person or by proxy,
shall
constitute a quorum for all purposes, unless or except to the extent that
the
presence of a larger number may be required by law. If a quorum shall fail
to
attend any meeting, the chairman of the meeting or the holders of a majority
of
the shares of stock entitled to vote who are present, in person or by proxy,
may
adjourn the meeting to another place, date, or time.
If
a
notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with
those
present constituting a quorum, then except as otherwise required by law,
those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such
meeting.
Section
2.5 Organization.
At every
meeting of the stockholders, the Chairman, if there is such an officer, or
any
other officer or director of the Corporation designated by the Board of
Directors, shall act as chairman of the meeting. The Board of Directors may
further provide for determining who shall act as chairman of any stockholders’
meeting in the absence of the Chairman of the Board of Directors and such
designee. The Secretary of the Corporation or a person designated by the
chairman shall act as Secretary of the meeting. Unless otherwise approved
by the
chairman, attendance at the stockholders’ meeting is restricted to stockholders
of record, persons authorized in accordance with Section 2.8 of these Bylaws
to
act by proxy, and officers of the Corporation.
Section
2.6 Conduct
Of Business.
The
chairman shall call the meeting to order, establish the agenda, and conduct
the
business of the meeting in accordance therewith or, at the chairman’s
discretion, it may be conducted otherwise in accordance with the wishes of
the
stockholders in attendance. The date and time of the opening and closing
of the
polls for each matter upon which the stockholders will vote at the meeting
shall
be announced at the meeting.
The
chairman shall also conduct the meeting in an orderly manner, rule on the
precedence of and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness
and
good faith toward all those entitled to take part. The chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion
in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the chairman shall have
the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 2.6 and
Section 2.7 below. The chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section
2.6 and
Section 2.7, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section
2.7 Notice
Of Stockholder Business.
At an
annual or special meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before a meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of
Directors, (b) properly brought before the meeting by or at the direction
of the
Board of Directors, (c) properly brought before an annual meeting by a
stockholder, or (d) properly brought before a special meeting by a stockholder,
but if, and only if, the notice of a special meeting provides for business
to be
brought before the meeting by stockholders. For business to be properly brought
before a meeting by a stockholder, the stockholder must have given timely
notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder proposal to be presented at an annual meeting shall be received
at
the Corporation’s principal executive offices not less than 90 nor more than 120
calendar days in advance of the anniversary of the date that the Corporation’s
(or the Corporation’s predecessor’s) proxy statement was mailed to stockholders
in connection with the previous year’s annual meeting of stockholders, except
that if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year’s proxy statement, or in the event
of a special meeting, notice by the stockholder to be timely must be received
not later than the close of business on the later of the 90th day before
such
annual meeting or the 10th day following the day on which public disclosure
of
the date of the meeting was made. A stockholder’s notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the
annual
or special meeting (a) a brief description of the business desired to be
brought
before the annual or special meeting and the reasons for conducting such
business at the special meeting, (b) the name and address, as they appear
on the
Corporation’s books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such
business.
Section
2.8 Proxies
And Voting.
At any
meeting of the stockholders, every stockholder entitled to vote may vote
in
person or by proxy authorized by an instrument in writing or by a transmission
permitted by law filed in accordance with the procedure established for the
meeting. No stockholder may authorize more than one proxy for his shares.
Each
stockholder shall have one vote for every share of stock entitled to vote
which
is registered in his name on the record date for the meeting, except as
otherwise provided herein or required by law.
All
voting, including on the election of directors but excepting where otherwise
required by law or by the Certificate of Incorporation, may be by a voice
vote;
provided, however, that upon demand therefore by a stockholder entitled to
vote
his proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy voting
and such other information as may be required under the procedure established
for the meeting. Every vote taken by ballots shall be counted by an inspector
or
inspectors appointed by the chairman of the meeting.
Unless
otherwise required by law, the Certificate of Incorporation or these Bylaws,
all
elections shall be determined by a plurality of the votes cast and all other
matters shall be determined by a majority of the votes cast.
Section
2.9 Stockholder
List.
A
complete list of stockholders entitled to vote at any meeting of stockholders,
arranged in alphabetical order for each class of stock and showing the address
of each such stockholder and the number of shares registered in his name,
shall
be open to the examination of any such stockholder, for any purpose germane
to
the meeting, during ordinary business hours for a period of at least 10 days
before the meeting, either at a place within the city where the 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 the meeting is to be held.
The
stock
list shall also be kept at the place of the meeting during the whole time
thereof and shall be open to the examination of any such stockholder who
is
present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held
by
each of them.
Section
2.10 Ratification.
Any
transaction questioned in any stockholders’ derivative suit, or any other suit
to enforce alleged rights of the Corporation or any of its stockholders,
on the
ground of lack of authority, defective or irregular execution, adverse interest
of any director, officer or stockholder, nondisclosure, miscomputation or
the
application of improper principles or practices of accounting may be approved,
ratified and confirmed before or after judgment by the Board of Directors
or by
the holders of common stock and, if so approved, ratified or confirmed, shall
have the same force and effect as if the questioned transaction had been
originally duly authorized, and said approval, ratification or confirmation
shall be binding upon the Corporation and all of its stockholders and shall
constitute a bar to any claim or execution of any judgment in respect of
such
questioned transaction.
Section
2.11 Action
of Stockholders Without Meeting.
Unless
otherwise provided by the Certificate of Incorporation, any action required
to
be taken at any annual or special meeting of stockholders, or any action
which
may be taken at any annual or special meeting of such stockholders, may be
taken
without a meeting, without prior notice and without a vote, if a consent
in
writing, setting forth the action so taken, shall be signed by the holders
of
outstanding stock having not less than the minimum number of votes that would
be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, and shall be delivered to
the
Corporation by delivery to its registered office in the State of Delaware,
its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation’s registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice
of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented
in
writing.
ARTICLE
III
BOARD
OF DIRECTORS
Section
3.1 Number
And Term Of Office.
The
number of directors shall be fixed from time to time exclusively by the Board
of
Directors. All directors shall hold office until the expiration of the term
for
which elected and until their respective successors are elected, except in
the
case of the death, resignation or removal of any director.
Section
3.2 Vacancies
And Newly Created Directorships. Subject
to the rights of the holders of any series of preferred stock then outstanding,
newly created directorships resulting from any increase in the authorized
number
of directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by a vote of the stockholders) may be filled only by a majority
vote
of the directors then in office, though less than a quorum, and directors
so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders. No decrease in the number of directors constituting the Board
of
Directors shall shorten the term of any incumbent director.
Section
3.3 Removal.
Subject
to the rights of holders of any series of preferred stock then outstanding,
any
directors, or the entire Board of Directors, may be removed from office at
any
time, with or without cause, but only by the affirmative vote of the holders
of
at least a majority of the voting power of all of the then outstanding shares
of
capital stock of the Corporation entitled to vote generally in the election
of
directors, voting together as a single class. Vacancies in the Board of
Directors resulting from such removal may be filled by a majority of the
directors then in office, though less than a quorum, or by the stockholders
at a
special meeting of the stockholders held for that purpose. Directors so chosen
shall hold office until the next annual meeting of stockholders.
Section
3.4 Regular
Meetings.
Regular
meetings of the Board of Directors shall be held at such place or places,
on
such date or dates, and at such time or times as shall have been established
by
the Board of Directors, and also immediately after each annual meeting of
stockholders (at the same place as such annual meeting unless the Board of
Directors establishes otherwise). A notice of each regular meeting shall
not be
required.
Section
3.5 Special
Meetings.
Special
meetings of the Board of Directors may be called by a majority of the directors
then in office or by the Chairman and shall be held at such place, on such
date,
and at such time as they or he shall fix. Notice of the place, date, and
time of
each such special meeting shall be given each director by whom it is not
waived
by mailing written notice not fewer than 4 days before the meeting or by
emailing, telephoning, telecopying or personally delivering the same not
fewer
than 24 hours before the meeting. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special
meeting.
Section
3.6 Quorum.
At any
meeting of the Board of Directors, a majority of the total number of authorized
directors shall constitute a quorum for all purposes, and the act of a majority
of the directors present at any meeting at which there is a quorum shall
be the
act of the Board of Directors. If a quorum shall fail to attend any meeting,
a
majority of those present may adjourn the meeting to another place, date,
or
time, without further notice or waiver thereof.
Section
3.7 Participation
In Meetings By Conference Telephone. Members
of the Board of Directors, or of any committee thereof, may participate in
a
meeting of such Board or committee by means of conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence
in
person at such meeting.
Section
3.8 Conduct
Of Business.
The
Board of Directors shall elect one of its members to be Chairman of the Board
of
Directors. The Chairman of the Board of Directors shall lead the Board
of
Directors in fulfilling its responsibilities as set forth in these Bylaws,
including its responsibility to oversee the performance of the Corporation,
and
shall determine the agenda and perform all other duties and exercise all
other
powers which are or from time to time may be delegated to him by the Board
of
Directors. At
any
meeting of the Board of Directors, business shall be transacted in such order
and manner as the Board may from time to time determine, and all matters
shall
be determined by the vote of a majority of the directors present, except
as
otherwise provided herein or required by law.
Section
3.9 Actions
Of Board Of Directors Without Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if
all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing or by electronic transmission, and the writing
or
writings or electronic transmission or transmissions are filed with the minutes
of proceedings of the Board of Directors or committee. Such filings shall
be in
paper form if the minutes are maintained in paper form and shall be in
electronic form if the minutes are maintained in electronic form.
Section
3.10 Powers.
The
Board of Directors may, except as otherwise required by law, exercise all
such
powers and do all such acts and things as may be exercised or done by the
Corporation, including, without limiting the generality of the foregoing,
the
unqualified power:
(a) To
declare dividends from time to time in accordance with law;
(b) To
purchase or otherwise acquire any property, rights or privileges on such
terms
as it shall determine;
(c) To
authorize the creation, making and issuance, in such form as it may determine,
of written obligations of every kind, negotiable or non-negotiable, secured
or
unsecured, and to do all things necessary in connection therewith;
(d) To
remove
any officer of the Corporation with or without cause, and from time to time
to
devolve the powers and duties of any officer upon any other person for the
time
being;
(e) To
confer
upon any officer of the Corporation the power to appoint, remove and suspend
subordinate officers, employees and agents;
(f) To
adopt
from time to time such stock, option, stock purchase, bonus or other
compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(g) To
adopt
from time to time such insurance, retirement, and other benefit plans for
directors, officers, employees and agents of the Corporation and its
subsidiaries as it may determine; and
(h) To
adopt
from time to time regulations, not inconsistent with these Bylaws, for the
management of the Corporation’s business and affairs.
Section
3.11 Compensation
Of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of
the
Board of Directors.
Section
3.12 Nomination
Of Director Candidates.
Subject
to the rights of holders of any class or series of preferred stock then
outstanding, nominations for the election of Directors may be made by the
Board
of Directors or a nominating and corporate governance committee appointed
by the
Board of Directors or by any stockholder entitled to vote in the election
of
Directors generally. However, any stockholder entitled to vote in the election
of Directors generally may nominate one or more persons for election as
Directors at a meeting only if timely notice of such stockholder’s intent to
make such nomination or nominations has been given in writing to the Secretary
of the Corporation. To be timely, a stockholder nomination for a director
to be
elected at an annual meeting shall be received at the Corporation’s principal
executive offices not less than 90 nor more than 120 calendar days in advance
of
the anniversary of the date that the Corporation’s (or the Corporation’s
predecessor’s) notice of meeting and/or proxy statement was mailed to
stockholders in connection with the previous year’s annual meeting of
stockholders, except that if no annual meeting was held in the previous year
or
the date of the annual meeting has been changed by more than 30 calendar
days
from the date contemplated at the time of the previous year’s proxy statement,
or in the event of a nomination for director to be elected at a special meeting,
notice by the stockholder to be timely must be received not later than the
close
of business on the later of the 90th day before such annual meeting or the
10th
day following the day on which public disclosure of the date of the meeting
was
made. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons
to
be nominated; (b) a representation that the stockholder is a holder of record
of
stock of the Corporation entitled to vote for the election of Directors on
the
date of such notice and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (c) a description
of
all arrangements or understandings between the stockholder and each nominee
and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such
other
information regarding each nominee proposed by such stockholder as would
be
required to be included in a proxy statement filed pursuant to the proxy
rules
of the Securities and Exchange Commission, had the nominee been nominated,
or
intended to be nominated, by the Board of Directors; and (e) the consent
of each
nominee to serve as a director of the Corporation if so elected.
In
the
event that a person is validly designated as a nominee in accordance with
this
Section 3.12 and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or, not fewer
than 5
days before the date of the meeting for the election of such nominee, the
stockholder who proposed such nominee, as the case may be, may designate
a
substitute nominee upon delivery of a written notice to the Secretary setting
forth such information regarding such substitute nominee as would have been
required to be delivered to the Secretary pursuant to this Section 3.12 had
such
substitute nominee been initially proposed as a nominee. Such notice shall
include a signed consent to serve as a director of the Corporation, if elected,
of each such substitute nominee.
If
the
chairman of the meeting for the election of Directors determines that a
nomination of any candidate for election as a Director at such meeting was
not
made in accordance with the applicable provisions of this Section 3.12, such
nomination shall be void.
Section
3.13 Interested
Directors.
No
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors
or
officers are directors or officers, or have a financial interest, shall be
void
or voidable solely for this reason, or solely because 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, or solely because his
or
their votes are counted for such purpose, if (i) the material facts as to
his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board
of Directors or committee in good faith authorizes 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 (ii) the material
facts as to his or their relationship or interest and as to the contract
or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith
by vote of the stockholders; or (iii) the contract or transaction is fair
as to
the Corporation as of the time it is authorized, approved or ratified, by
the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE
IV
COMMITTEES
Section
4.1 Committees
Of The Board Of Directors.
The
Board of Directors, by a vote of a majority of the whole Board, may from
time to
time designate committees of the Board, with such lawfully delegable powers
and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a director
or
directors to serve as the member or members, designating, if it desires,
other
directors as alternate members who may replace any absent or disqualified
member
at any meeting of the committee. Any such committee, to the extent provided
by
law and in the resolution of the Board of Directors establishing such committee,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation,
and
may authorize the seal of the Corporation to be affixed to all papers which
may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger
or
consolidation, recommending to the stockholders the sale, lease or exchange
of
all or substantially all of the Corporation’s property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution or amending the Bylaws of the Corporation; and, unless the
resolution expressly so provides, no such committee shall have the power
or
authority to declare a dividend or to authorize the issuance of stock or
to
adopt a certificate of ownership and merger. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required. In the absence or disqualification of any member of any committee
and
any alternate member in his place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he
or
they constitute a quorum, may by unanimous vote appoint another member of
the
Board of Directors to act at the meeting in the place of the absent or
disqualified member.
Section
4.2 Conduct
Of Business. Each
committee may determine the procedural rules for meeting and conducting its
business and shall act in accordance therewith, except as otherwise provided
herein or required by law. Adequate provision shall be made for notice to
members of all meetings; a majority of the authorized members shall constitute
a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed
with
the minutes of the proceedings of such committee.
ARTICLE
V
OFFICERS
Section
5.1 Generally. The
officers of the Corporation shall be elected by the Board of Directors and
shall
consist of: a Chairman of the Board, Chief Executive Officer, President,
Secretary and Treasurer or Chief Financial Officer. The Board of Directors,
in
its discretion, may also elect one or more Vice Presidents (including Executive
Vice Presidents and Senior Vice Presidents), Assistant Secretaries, Assistant
Treasurers, a Controller and such other officers as in the judgment of the
Board
of Directors may be necessary or desirable. Any number of offices may be
held by
the same person and more than one person may hold the same office, unless
otherwise prohibited by law, the Certificate of Incorporation or these Bylaws.
Each officer shall hold office until his successor is elected or until his
earlier resignation or removal.
Section
5.2 Election.
The
Board
of Directors at its first meeting held after each annual meeting of stockholders
shall elect the officers of the Corporation who shall hold their offices
for
such terms and shall exercise such powers and perform such duties as shall
be
determined from time to time by the Board of Directors; and all officers
of the
Corporation shall hold office until their successors are chosen, or until
their
earlier resignation or removal. Except as otherwise provided in this Article
V,
any officer elected by the Board of Directors may be removed at any time
by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the Corporation shall be filled by the Board of Directors.
The
salaries of all officers who are directors of the Corporation shall be fixed
by
the Board of Directors or a Board of Directors committee.
Section
5.3 Secretarial
duties.
The
Secretary shall attend all meetings of the Board of Directors and all meetings
of stockholders and record all the proceedings thereat in a book or books
to be
kept for that purpose; the Secretary shall also perform like duties for the
standing committees when required. The Secretary shall give, or cause to
be
given, notice of all meetings of the stockholders and special meetings of
the
Board of Directors, and shall perform such other duties as may be prescribed
by
the Board of Directors or the Chief Executive Officer, under whose supervision
the Secretary shall be. If the Secretary shall be unable or shall refuse
to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, then any Assistant Secretary shall perform
such actions. If there be no Assistant Secretary, then the Board of Directors
or
the Chief Executive Officer may choose another officer to cause such notice
to
be given. The Secretary shall have custody of the seal of the Corporation
and
the Secretary or any Assistant Secretary, if there be one, shall have authority
to affix the same to any instrument requiring it and when so affixed, it
may be
attested by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Board of Directors may give general authority to
any
other officer to affix the seal of the Corporation and to attest the affixing
by
his signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed
are properly kept or filed, as the case may be.
Section
5.4 Delegation
Of Authority.
The
Board of Directors may from time to time delegate the powers or duties of
any
officer to any other officers or agents, notwithstanding any provision
hereof.
Section
5.5 Removal.
Any
officer of the Corporation may be removed at any time, with or without cause,
by
the Board of Directors.
Section
5.6 Vacancies.
The
Board of Directors shall have the power to fill any vacancies in any office
occurring from whatever reason.
ARTICLE
VI
STOCK
Section
6.1 Certificates
Of Stock.
Any and
all signatures on any stock certificate may be a facsimile, including, but
not
limited to, signatures of officers of the Corporation and countersignatures
of a
transfer agent or registrar. In case an officer, transfer agent or registrar
who
has signed or whose facsimile signature has been placed upon a certificate
shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect
as if he were such officer, transfer agent or registrar at the date of
issue.
Section
6.2 Transfers
Of Stock.
Transfers of stock certificates shall be made on the books of the Corporation
only by the person named in the certificate or by his attorney lawfully
constituted in writing and upon the surrender of the certificate therefor,
which
shall be canceled before a new certificate shall be issued. The Corporation
shall have no duty to inquire into adverse claims with respect to a stock
transfer unless (a) the Corporation has received a written notification of
an
adverse claim at a time and in a manner which affords the Corporation a
reasonable opportunity to act on it before the issuance of a new, reissued
or
re-registered share certificate and the notification identifies the claimant,
the registered owner and the issue of which the share or shares is a part
and
provides an address for communications directed to the claimant; or (b) the
Corporation has required and obtained, with respect to a fiduciary, a copy
of a
will, trust, indenture, articles of co-partnership, bylaws or other controlling
instruments, for a purpose other than to obtain appropriate evidence of the
appointment or incumbency of the fiduciary, and such documents indicate,
upon
reasonable inspection, the existence of an adverse claim. The Corporation
may
discharge any duty of inquiry by any reasonable means, including notifying
an
adverse claimant by registered or certified mail at the address furnished
by him
or, if there be no such address, at his residence or regular place of business
that the security has been presented for registration of transfer by a named
person, and that the transfer will be registered unless within 30 days from
the
date of mailing the notification, either (a) an appropriate restraining order,
injunction or other process issues from a court of competent jurisdiction;
or
(b) an indemnity bond, sufficient in the Corporation’s judgment to protect the
Corporation and any transfer agent, registrar or other agent of the Corporation
involved from any loss which it or they may suffer by complying with the
adverse
claim, is filed with the Corporation.
Section
6.3 Record
Date.
The
Board of Directors may fix a record date, which shall not be more than 60
nor
fewer than 10 days before the date of any meeting of stockholders, nor more
than
60 days before the time for the other action hereinafter described, as of
which
there shall be determined the stockholders who are entitled: to notice of
or to
vote at any meeting of stockholders or any adjournment thereof; to receive
payment of any dividend or other distribution or allotment of any rights;
or to
exercise any rights with respect to any change, conversion or exchange of
stock
or with respect to any other lawful action. If no record date is
fixed:
(a) The
record date for determining stockholders entitled to notice of or to vote
at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting
is
held.
(b) The
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the
Board
of Directors is necessary, shall be the first date on which a signed written
consent is delivered to the Corporation.
(c) The
record date for determining stockholders for any other purpose shall be at
the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A
determination of stockholders of record entitled to notice of or to vote
at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section
6.4 Lost,
Stolen Or Destroyed Certificates.
The
Board of Directors may direct a new certificate or certificates to be issued
in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost,
stolen
or destroyed. When authorizing such issue of a new certificate, the Board
of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate,
or his
legal representative, to advertise the same in such manner as the Board of
Directors shall require and/or to give the Corporation a bond in such sum
as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or
destroyed.
Section
6.5 Regulations.
The
issue, transfer, conversion and registration of certificates of stock and
any
uncertificated shares shall be governed by such other regulations as the
Board
of Directors may establish.
Section
6.6 Registered
Stockholders.
Before
due presentment for transfer of any share or shares, the Corporation shall
treat
the registered owner thereof as the person exclusively entitled to vote,
to
receive notifications and to all other benefits of ownership with respect
to
such share or shares, and shall not be bound to recognize any equitable or
other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by U.S. federal law or the laws of the State of
Delaware.
ARTICLE
VII
NOTICES
Section
7.1 Notices.
Except
as otherwise specifically provided herein or required by law, all notices
required to be given to any stockholder, director, officer, employee or agent
shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by email, telecopy or commercial
courier
service. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his last known address as the same appears
on the
books of the Corporation. The time when such notice shall be deemed to be
given
shall be the time such notice is received by such stockholder, director,
officer, employee or agent, or by any person accepting such notice on behalf
of
such person, if hand delivered, or the time such notice is dispatched, if
delivered through the mails or by commercial courier service, email or
telecopy.
Section
7.2 Waivers.
A
written
waiver (including a waiver by electronic mail or other electronic transmission
by such person) of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required
to be
given to such stockholder, director, officer, employee or agent. Neither
the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 Facsimile
Signatures.
In
addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer
or
officers of the Corporation may be used whenever and as authorized by the
Board
of Directors or a committee thereof.
Section
8.2 Corporate
Seal.
The
Board of Directors may provide a suitable seal, containing the name of the
Corporation, which seal shall be in the charge of the Secretary. If and when
so
directed by the Board of Directors or a committee thereof, duplicates of
the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section
8.3 Reliance
Upon Books, Reports And Records.
Each
director, each member of any committee designated by the Board of Directors,
and
each officer of the Corporation shall, in the performance of his duties,
be
fully protected in relying in good faith upon the books of account or other
records of the Corporation, including reports made to the Corporation by
any of
its officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section
8.4 Fiscal
Year.
The
fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section
8.5 Time
Periods.
In
applying any provision of these Bylaws which require that an act be done
or not
done a specified number of days before an event or that an act be done during
a
period of a specified number of days before an event, calendar days shall
be
used, the day of the doing of the act shall be excluded, and the day of the
event shall be included.
Section
8.6 Interpretation.
All
words, terms and provisions of these Bylaws shall be interpreted and defined
by
and in accordance with the General Corporation Law of the State of Delaware,
as
amended, and as amended from time to time hereafter. In these Bylaws, unless
otherwise indicated, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references
to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word “or”
shall be deemed to include “and/or”, the words “including”, “includes” and
“include” shall be deemed to be followed by the words “without limitation”;
references to articles or sections (or subdivisions of sections) are to those
of
these Bylaws; and references to other instruments shall be deemed to include
all
subsequent amendments and other modifications to such instruments.
ARTICLE
IX
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Section
9.1 Right
To Indemnification.
(a) The
Corporation shall indemnify any 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
is or was a director, officer, employee or agent of the Corporation, or is
or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
no
reasonable cause to believe his conduct was unlawful. The termination of
any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The
Corporation shall indemnify any person who was or is a party, or is threatened
to be made a party to any threatened, pending or completed action or suit
by or
in the right of the Corporation to procure a judgment in its favor by reason
of
the fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership,
joint
venture, trust or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of
any
claim, issue or matter as to which such person shall have been adjudged to
be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all
the circumstances of the case, such person is fairly and reasonably entitled
to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To
the
extent that a director, officer, employee or agent of the Corporation has
been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 or 2 of this Article, or in defense
of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys’ fees) actually and reasonably incurred by him in
connection therewith.
(d) Any
indemnification under Sections 9.1(b) or (c) of this Article IX (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such section. Such determination
shall be made:
(i) By
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or
(ii) If
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or
(iii) By
the stockholders.
(e) 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
would
have with respect to such constituent Corporation of its separate existence
had
continued.
(f) For
purposes of this Article, 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 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
9.2 Expenses.
Expenses
(including attorneys’ fees) incurred by an officer or director 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 director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Section. Such expenses (including attorneys’ fees) incurred
by other employees and agents may be so paid upon such terms and conditions,
if
any, as the Board of Directors deems appropriate.
Section
9.3 Non-Exclusivity/Continuation
Of Rights.
The
rights conferred on any person in Sections 9.1 and 9.2 shall not be exclusive
of
any other right which such persons may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaw, agreement,
vote
of stockholders or disinterested directors or otherwise. The indemnification
and
advancement of expenses provided by, or granted pursuant to, this Article
IX
shall, unless otherwise provided when authorized or ratified, continue as
to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section
9.4 Indemnification
Contracts.
The
Board of Directors is authorized to enter into a contract with any director,
officer, employee or agent of the Corporation, or any person serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
employee benefit plans, providing for indemnification rights equivalent to
or,
if the Board of Directors so determinates, greater than, those provided for
in
this Article IX.
Section
9.5 Insurance.
The
Corporation shall have power to purchase and maintain insurance on behalf
of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust
or
other enterprise against any liability asserted against him and incurred
by him
in any such capacity, or arising out of his status as such, whether or not
the
Corporation would have the power to indemnify him against such liability
under
the provisions of this Article.
Section
9.6 Effect
Of Amendment.
Any
amendment, repeal or modification of any provision of this Article IX by
the
stockholders and the directors of the Corporation shall not adversely affect
any
right or protection of a director or officer of the Corporation existing
at the
time of such amendment, repeal or modification.
Section
9.7 Limitation
of Liability.
No
director or officer of the Corporation shall be personally liable to the
Corporation or to any stockholder of the Corporation for monetary damages
for
breach of fiduciary duty as a director or officer, provided that this provision
shall not limit the liability of a director or officer (i) for any breach
of the
director’s or the officer’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) under Section
174 of
the General Corporation Law of Delaware, or (iv) for any transaction from
which
the director or officer derived an improper personal benefit.
ARTICLE
X
AMENDMENTS
Section
10.1 Amendment
Of Bylaws.
The
Board of Directors is expressly empowered to adopt, amend or repeal Bylaws
of
the Corporation. The fact that such power has been so conferred upon the
Board
of Directors shall not divest the stockholders of the power nor limit their
power to adopt, amend or repeal Bylaws. Any adoption, amendment or repeal
of
Bylaws of the Corporation by the Board of Directors shall require the
affirmative approval of a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board); provided, that the Board of Directors may not amend
or
repeal Article IX of these Bylaws except by the affirmative approval of
two-thirds of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any
resolution providing for amendment or repeal is presented to the Board).
The
original or other Bylaws may be adopted, amended or repealed by the stockholders
entitled to vote thereon; provided, that the stockholders may not amend or
repeal Article IX of these Bylaws except by a 75% supermajority vote.
APPENDIX
D
COLORADO
BUSINESS CORPORATIONS ACT
Article
113
Dissenters’
Rights
For
purposes of this article:
(1) |
"Beneficial
shareholder" means the beneficial owner of shares held in a voting
trust
or by a nominee as the record
shareholder.
|
(2) |
"Corporation"
means the issuer of the shares held by a dissenter before the corporate
action, or the surviving or acquiring domestic or foreign corporation,
by
merger or share exchange of that
issuer.
|
(3) |
"Dissenter"
means a shareholder who is entitled to dissent from corporate action
under
section 7-113-102 and who exercises that right at the time and in
the
manner required by part 2 of this
article.
|
(4) |
"Fair
market value", with respect to a dissenter's shares, means the value
of
the shares immediately before the effective date of the corporate
action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action except to the extent that
exclusion would be inequitable.
|
(5) |
"Interest"
means interest from the effective date of the corporate action until
the
date of payment, at the average rate currently paid by the corporation
on
its principal bank loans or, if none, at the legal rate as specified
in
section 5-12-101, C.R.S.
|
(6) |
"Record
shareholder" means the person in whose name shares are registered
in the
records of a corporation or the beneficial owner of shares that are
registered in the name of a nominee to the extent such owner is recognized
by the corporation as the shareholder as provided in section
7-107-204.
|
(7) |
"Shareholder"
means either a record shareholder or a beneficial
shareholder.
|
7-113-102. RIGHT
TO DISSENT
(1) A
shareholder, whether or not entitled to vote, is entitled to dissent and obtain
payment of the fair market value of the shareholder's shares in the event of
any
of the following corporate actions:
(a)
Consummation of a plan of merger to which the corporation is a
party if:
(I) |
Approval
by the shareholders of that corporation is required for the merger
by
section 7-111-103 or 7-111-104 or by the articles of incorporation;
or
|
(II) |
The
corporation is a subsidiary that is merged with its parent corporation
under section 7-111-104;
|
(b) Consummation
of a plan of share exchange to which the corporation is a party as the
corporation whose shares will be acquired;
(c) Consummation
of a sale, lease, exchange, or other disposition of all, or substantially all,
of the property of the corporation for which a shareholder vote is required
under section 7-112-102 (1); and
(d) Consummation
of a sale, lease, exchange, or other disposition of all, or substantially all,
of the property of an entity controlled by the corporation if the shareholders
of the corporation were entitled to vote upon the consent of the corporation
to
the disposition pursuant to section 7-112-102 (2).
(e) Consummation
of a conversion in which teh corporation is the converting entity as provided
in
section 7-90-206(2).
(1.3) A
shareholder is not entitled to dissent and obtain payment, under subsection
(1)
of this section, of the fair market value of the shares of any class or series
of shares which either were listed on a
national
securities exchange registered under the federal "Securities Exchange Act of
1934," as amended, or on the national market system of the national association
of securities dealers automated quotation system, or were held of record by
more
than two thousand shareholders, at the time of:
(a) The
record date fixed under section 7-107-107 to determine the shareholders entitled
to receive notice of the shareholders' meeting at which the corporate action
is
submitted to a vote;
(b) The
record date fixed under section 7-107-104 to determine shareholders entitled
to
sign writings consenting to the corporate action; or
(c) The
effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(1.8) The
limitation set forth in subsection (1.3) of this section shall not apply if
the
shareholder will receive for the shareholder's shares, pursuant to the corporate
action, anything except:
(a) Shares
of the corporation surviving the consummation of the plan of merger or share
exchange;
(b) Shares
of any other corporation which at the effective date of the plan of merger
or
share exchange either will be listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934," as amended,
or
on the national market system of the national association of securities dealers
automated quotation system, or will be held of record by more than two thousand
shareholders;
(c) Cash
in lieu of fractional shares; or
(d) Any
combination of the foregoing described shares or cash in lieu of fractional
shares.
(2) (Deleted
by amendment, L. 96, p. 1321,ss.30, effective June 1, 1996.)
(2.5) A
shareholder, whether or not entitled to vote, is entitled to dissent and obtain
payment of the fair market value of the shareholder's shares in the event of
a
reverse split that reduces the number of shares owned by the shareholder to
a
fraction of a share or to scrip if the fractional share or scrip so created
is
to be acquired for cash or the scrip is to be voided under section
7-106-104.
(3) A
shareholder is entitled to dissent and obtain payment of the fair market value
of the shareholder's shares in the event of any corporate action to the extent
provided by the bylaws or a resolution of the board of directors.
(4) A
shareholder entitled to dissent and obtain payment for the shareholder's shares
under this article may not challenge the corporate action creating such
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
7-113-103. DISSENT
BY NOMINEES AND BENEFICIAL OWNERS
(1) A
record shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by any one person and
causes the corporation to receive written notice which states such dissent
and
the name, address, and federal taxpayer identification number, if any, of each
person on whose behalf the record shareholder asserts dissenters' rights. The
rights of a record shareholder under this subsection (1) are determined as
if
the shares as to which the record shareholder dissents and the other shares
of
the record shareholder were registered in the names of different
shareholders.
(2) A
beneficial shareholder may assert dissenters' rights as to the shares held
on
the beneficial shareholder's behalf only if:
(a) The
beneficial shareholder causes the corporation to receive the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The
beneficial shareholder dissents with respect to all shares beneficially owned
by
the beneficial shareholder.
(3) The
corporation may require that, when a record shareholder dissents with respect
to
the shares held by any one or more beneficial shareholders, each such beneficial
shareholder must certify to the corporation that the beneficial shareholder
and
the record shareholder or record shareholders of all shares owned beneficially
by the beneficial shareholder have asserted, or will timely assert, dissenters'
rights as to all such shares as to which there is no limitation on the ability
to exercise dissenters' rights. Any such requirement shall be stated in the
dissenters' notice given pursuant to section 7-113-203.
7-113-201. NOTICE
OF DISSENTERS' RIGHTS
(1) If
a proposed corporate action creating dissenters' rights under section 7-113-102
is submitted to a vote at a shareholders' meeting, the notice of the meeting
shall be given to all shareholders, whether or not entitled to vote. The notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and shall be accompanied by a copy of this article
and
the materials, if any, that, under articles 101 to 117 of this title, are
required to be given to shareholders entitled to vote on the proposed action
at
the meeting. Failure to give notice as provided by this subsection (1) shall
not
affect any action taken at the shareholders' meeting for which the notice was
to
have been given, but any shareholder who was entitled to dissent but who was
not
given such notice shall not be precluded from demanding payment for the
shareholder's shares under this article by reason of the shareholder's failure
to comply with the provisions of section 7-113-202 (1).
(2) If
a proposed corporate action creating dissenters' rights under section 7-113-102
is authorized without a meeting of shareholders pursuant to section 7-107-104,
any written or oral solicitation of a shareholder to execute a writing
consenting to such action contemplated in section 7-107-104 shall be accompanied
or preceded by a written notice stating that shareholders are or may be entitled
to assert dissenters' rights under this article, by a copy of this article,
and
by the materials, if any, that, under articles 101 to 117 of this title, would
have been required to be given to shareholders entitled to vote on the proposed
action if the proposed action were submitted to a vote at a shareholders'
meeting. Failure to give notice as provided by this subsection (2) shall not
affect any action taken pursuant to section 7-107-104 for which the notice
was
to have been given, but any shareholder who was entitled to dissent but who
was
not given such notice shall not be precluded from demanding payment for the
shareholder's shares under this article by reason of the shareholder's failure
to comply with the provisions of section 7-113-202 (2).
7-113-202. NOTICE
OF INTENT TO DEMAND PAYMENT
(1) If
a proposed corporate action creating dissenters' rights under section 7-113-102
is submitted to a vote at a shareholders' meeting and if notice of dissenters'
rights has been given to such shareholder in connection with the action pursuant
to section 7-113-201 (1), a shareholder who wishes to assert dissenters' rights
shall:
(a) Cause
the corporation to receive, before the vote is taken, written notice of the
shareholder's intention to demand payment for the shareholder's shares if the
proposed corporate action is effectuated; and
(b) Not
vote the shares in favor of the proposed corporate action.
(2) If
a proposed corporate action creating dissenters' rights under section 7-113-102
is authorized without a meeting of shareholders pursuant to section 7-107-104
and if notice of dissenters' rights has been given to such shareholder in
connection with the action pursuant to section 7-113-201 (2), a shareholder
who
wishes to assert dissenters' rights shall not execute a writing consenting
to
the proposed corporate action.
(3) A
shareholder who does not satisfy the requirements of subsection (1) or (2)
of
this section is not entitled to demand payment for the shareholder's shares
under this article.
7-113-203.
DISSENTERS' NOTICE
(1) If
a proposed corporate action creating dissenters' rights under section 7-113-102
is authorized, the corporation shall give a written dissenters' notice to all
shareholders who are entitled to demand payment for their shares under this
article.
(2) The
dissenters' notice required by subsection (1) of this section shall be given
no
later than ten days after the effective date of the corporate action creating
dissenters' rights under section 7-113-102 and shall:
(a) State
that the corporate action was authorized and state the effective date or
proposed effective date of the corporate action;
(b) State
an address at which the corporation will receive payment demands and the address
of a place where certificates for certificated shares must be
deposited;
(c) Inform
holders of uncertificated shares to what extent transfer of the shares will
be
restricted after the payment demand is received;
(d) Supply
a form for demanding payment, which form shall request a dissenter to state
an
address to which payment is to be made;
(e) Set
the date by which the corporation must receive the payment demand and
certificates for certificated shares, which date shall not be less than thirty
days after the date the notice required by subsection (1) of this section is
given;
(f) State
the requirement contemplated in section 7-113-103 (3), if such requirement
is
imposed; and
(g) Be
accompanied by a copy of this article.
7-113-204. PROCEDURE
TO DEMAND PAYMENT
(1) A
shareholder who is given a dissenters' notice pursuant to section 7-113-203
and
who wishes to assert dissenters' rights shall, in accordance with the terms
of
the dissenters' notice:
(a) Cause
the corporation to receive a payment demand, which may be the payment demand
form contemplated in section 7-113-203 (2) (d), duly completed, or may be stated
in another writing; and
(b) Deposit
the shareholder's certificates for certificated shares.
(2) A
shareholder who demands payment in accordance with subsection (1) of this
section retains all rights of a shareholder, except the right to transfer the
shares, until the effective date of the proposed corporate action giving rise
to
the shareholder's exercise of dissenters' rights and has only the right to
receive payment for the shares after the effective date of such corporate
action.
(3) Except
as provided in section 7-113-207 or 7-113-209 (1) (b), the demand for payment
and deposit of certificates are irrevocable.
(4) A
shareholder who does not demand payment and deposit the shareholder's share
certificates as required by the date or dates set in the dissenters' notice
is
not entitled to payment for the shares under this article.
7-113-205. UNCERTIFICATED
SHARES
(1) Upon
receipt of a demand for payment under section 7-113-204 from a shareholder
holding uncertificated shares, and in lieu of the deposit of certificates
representing the shares, the corporation may restrict the transfer
thereof.
(2) In
all other respects, the provisions of section 7-113-204 shall be applicable
to
shareholders who own uncertificated shares.
7-113-206. PAYMENT
(1) Except
as provided in section 7-113-208, upon the effective date of the corporate
action creating dissenters' rights under section 7-113-102 or upon receipt
of a
payment demand pursuant to
section
7-113-204, whichever is later, the corporation shall pay each dissenter who
complied with section 7-113-204, at the address stated in the payment demand,
or
if no such address is stated in the payment demand, at the address shown on
the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
market value of the dissenter's shares, plus accrued interest.
(2) The
payment made pursuant to subsection (1) of this section shall be accompanied
by:
(a) The
corporation's balance sheet as of the end of its most recent fiscal year or,
if
that is not available, the corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen months before the date of payment, an income
statement for that year, and, if the corporation customarily provides such
statements to shareholders, a statement of changes in shareholders' equity
for
that year and a statement of cash flow for that year, which balance sheet and
statements shall have been audited if the corporation customarily provides
audited financial statements to shareholders, as well as the latest available
financial statements, if any, for the interim or full-year period, which
financial statements need not be audited;
(b) A
statement of the corporation's estimate of the fair market value of the
shares;
(c) An
explanation of how the interest was calculated;
(d) A
statement of the dissenter's right to demand payment under section 7-113-209;
and
(e) A
copy of this article.
7-113-207. FAILURE
TO TAKE ACTION
(1) If
the effective date of the corporate action creating dissenters' rights under
section 7-113-102 does not occur within sixty days after the date set by the
corporation by which the corporation must receive the payment demand as provided
in section 7-113-203, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated
shares.
(2) If
the effective date of the corporate action creating dissenters' rights under
section 7-113-102 occurs more than sixty days after the date set by the
corporation by which the corporation must receive the payment demand as provided
in section 7-113-203, then the corporation shall send a new dissenters' notice,
as provided in section 7-113-203, and the provisions of sections 7-113-204
to
7-113-209 shall again be applicable.
7-113-208. SPECIAL
PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION
(1) The
corporation may, in or with the dissenters' notice given pursuant to section
7-113-203, state the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating dissenters'
rights under section 7-113-102 and state that the dissenter shall certify in
writing, in or with the dissenter's payment demand under section 7-113-204,
whether or not the dissenter (or the person on whose behalf dissenters' rights
are asserted) acquired beneficial ownership of the shares before that date.
With
respect to any dissenter who does not so certify in writing, in or with the
payment demand, that the dissenter or the person on whose behalf the dissenter
asserts dissenters' rights acquired beneficial ownership of the shares before
such date, the corporation may, in lieu of making the payment provided in
section 7-113-206, offer to make such payment if the dissenter agrees to accept
it in full satisfaction of the demand.
(2) An
offer to make payment under subsection (1) of this section shall include or
be
accompanied by the information required by section 7-113-206 (2).
7-113-209. PROCEDURE
IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER
(1) A
dissenter may give notice to the corporation in writing of the dissenter's
estimate of the fair market value of the dissenter's shares and of the amount
of
interest due and may demand payment of such
estimate,
less any payment made under section 7-113-206, or reject the corporation's
offer
under section 7-113-208 and demand payment of the fair market value of the
shares and interest due, if:
(a)
The
dissenter believes that the amount paid under section 7-113-206 or offered
under
section 7-113-208 is less than the fair market value of the shares or that
the
interest due was incorrectly calculated;
(b) The
corporation fails to make payment under section 7-113-206 within sixty-days
after the date set by the corporation by which the corporation must receive
the
payment demand; or
(c) The
corporation does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares as required by section 7-113-207
(1).
(2)
A dissenter waives the right to demand payment under this section unless the
dissenter causes the corporation to receive the notice required by subsection
(1) of this section within thirty days after the corporation made or offered
payment for the dissenter's shares.
7-113-301. COURT
ACTION
(1) If
a demand for payment under section 7-113-209 remains unresolved, the corporation
may, within sixty days after receiving the payment demand, commence a proceeding
and petition the court to determine the fair market value of the shares and
accrued interest. If the corporation does not commence the proceeding within
the
sixty-day period, it shall pay to each dissenter whose demand remains unresolved
the amount demanded.
(2) The
corporation shall commence the proceeding described in subsection (1) of this
section in the district court for the county in this state in which the street
address of the corporation's principal office is located or, if the corporation
has no principal office in this state, in the district court for the county
in
which the street address of its registered agent is located, or, if the
corporation has no registered agent, in the district court for the city and
county of Denver. If the corporation is a foreign corporation without a
registered agent, it shall commence the proceeding in the county in which the
domestic corporation merged into, or whose shares were acquired by, the foreign
corporation would have commenced the action if that corporation were subject
to
the first sentence of this subsection (2).
(3) The
corporation shall make all dissenters, whether or not residents of this state,
whose demands remain unresolved parties to the proceeding commenced under
subsection (2) of this section as in an action against their shares, and all
parties shall be served with a copy of the petition. Service on each dissenter
shall be by registered or certified mail, to the address stated in such
dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The
jurisdiction of the court in which the proceeding is commenced under subsection
(2) of this section is plenary and exclusive. The court may appoint one or
more
persons as appraisers to receive evidence and recommend a decision on the
question of fair market value. The appraisers have the powers described in
the
order appointing them, or in any amendment to such order. The parties to the
proceeding are entitled to the same discovery rights as parties in other civil
proceedings.
(5) Each
dissenter made a party to the proceeding commenced under subsection (2) of
this
section is entitled to judgment for the amount, if any, by which the court
finds
the fair market value of the dissenter's shares, plus interest, exceeds the
amount paid by the corporation, or for the fair market value, plus interest,
of
the dissenter's shares for which the corporation elected to withhold payment
under section 7-113-208.
7-113-302. COURT
COSTS AND COUNSEL FEES
(1) The
court in an appraisal proceeding commenced under section 7-113-301 shall
determine all costs of the proceeding, including the reasonable compensation
and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation; except that the court may assess
costs
against all or some of the dissenters, in amounts the court finds equitable,
to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or
not
in good faith in demanding payment under section 7-113-209.
(2) The
court may also assess the fees and expenses of counsel and experts for the
respective parties, in amounts the court finds equitable:
(a) Against
the corporation and in favor of any dissenters if the court finds the
corporation did not substantially comply with part 2 of this article;
or
(b) Against
either the corporation or one or more dissenters, in favor of any other party,
if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect
to
the rights provided by this article.
(3) If
the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may
award to said counsel reasonable fees to be paid out of the amounts awarded
to
the dissenters who were benefited.