The number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the Securities
Exchange Act and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under that rule, beneficial
ownership includes any shares as to which the individual or entity has voting
power or investment power and any shares that the individual has the right to
acquire within 60 days through the exercise of any stock option or other
right. Unless otherwise indicated in the footnotes or table, each
person or entity has sole voting and investment power, or shares such powers
with his or her spouse, with respect to the shares shown as beneficially
owned.
|
|
|
Common
Stock (1)
|
|
|
Total
Voting Percentage of Common Stock
|
|
|
Series
A Preferred Stock (2)
|
|
|
Total
Voting Percentage of Series A Preferred Stock (2)
|
|
|
Total
Shares The Series A Preferred Stock are Able to Vote
(2)
|
|
|
Series
C Preferred Stock
|
|
|
Total
Voting Percentage of Series C Preferred Stock
|
|
|
Total
Shares The Series C Preferred Stock are Able to Vote
|
|
|
Total
Voting Shares Based on All Voting Shares Outstanding
|
|
|
Total
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rena’
A Schena, Chief Executive Officer, Chief Financial Officer and
Director
524
East Weddell Drive
Sunnyvale,
California 94089
|
|
|
0 |
|
|
|
0.0 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
42,857 |
|
|
|
0 |
% |
|
|
14,999,950 |
|
|
|
14,999,950 |
|
|
|
30.4 |
% |
|
Mark
Schena, Director
524
East Weddell Drive
Sunnyvale,
California 94089
|
|
|
0 |
|
|
|
0.0 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
14,286 |
|
|
|
0 |
% |
|
|
5,000,100 |
|
|
|
5,000,100 |
|
|
|
10.1 |
% |
|
William
L. Sklar, Director
524
East Weddell Drive
Sunnyvale,
California 94089
|
|
|
125,000 |
|
|
|
1 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
125,000 |
|
|
|
0.3 |
% |
|
Todd
Martinsky, Director
524
East Weddell Drive
Sunnyvale,
California 94089
|
|
|
0 |
|
|
|
0.0 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
28,571 |
|
|
|
0 |
% |
|
|
9,999,850 |
|
|
|
9,999,850 |
|
|
|
20.2 |
% |
|
Paul
K. Haje
Director
of Advertising and Public Relations
524
East Weddell Drive
Sunnyvale,
California 94089
|
|
|
0 |
|
|
|
0.0 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
14,286 |
|
|
|
0 |
% |
|
|
5,000,100 |
|
|
|
5,000,100 |
|
|
|
10.1 |
% |
|
Greater than 5%
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEM
Equity Capital Investments, Ltd.
3111
Rosemary Park Lane
Houston,
Texas 77082(3)
|
|
|
2,000,000 |
|
|
|
15.3 |
% |
|
|
515,115 |
|
|
|
13.93 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
2,000,000 |
|
|
|
4.0 |
% |
|
Briarpatch,
Ltd.
2038
Albans,
Houston,
Texas 77005(4)
|
|
|
2,000,000 |
|
|
|
15.3 |
% |
|
|
515,115 |
|
|
|
13.93 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
2,000,000 |
|
|
|
4.0 |
% |
|
Donald
Sapaugh
12000
Westheimer
Suite
340
Houston,
Texas 77077
|
|
|
1,100,000 |
|
|
|
8.4 |
% |
|
|
259,313 |
|
|
|
7.01 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
1,100,000 |
|
|
|
2.2 |
% |
|
Hunter
Carr
12000
Westheimer
Suite
340
Houston,
Texas 77077
|
|
|
1,100,000 |
|
|
|
8.4 |
% |
|
|
259,313 |
|
|
|
7.01 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
1,100,000 |
|
|
|
2.2 |
% |
|
Phillip
Johnson
12000 Westheimer
Suite 340
Houston, Texas 77077
|
|
|
1,100,000 |
|
|
|
8.4 |
% |
|
|
259,313 |
|
|
|
7.01 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
1,100,000 |
|
|
|
2.2 |
% |
|
Jukka
Tolonen
|
|
|
1,000,000 |
|
|
|
7.7 |
% |
|
|
257,558 |
|
|
|
6.97 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
1,000,000 |
|
|
|
2.0 |
% |
|
Fairfield
Financing, Inc. (5)
221
West Exchange Ave. Suite 221
Ft.
Worth, Texas 76184
|
|
|
1,300,000 |
|
|
|
10.0 |
% |
|
|
247,739 |
|
|
|
6.70 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
1,300,000 |
|
|
|
2.6 |
% |
|
Kickapoo
Kapital (6)
12000
Westheimer
Suite
340
Houston,
Texas 77077
|
|
|
700,000 |
|
|
|
5.4 |
% |
|
|
230,631 |
|
|
|
6.24 |
% |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
700,000 |
|
|
|
1.4 |
% |
|
All
of the Officers and Directors as a Group (5 Persons)
|
|
|
125,000 |
|
|
|
1.0 |
% |
|
|
0 |
|
|
|
0 |
% |
|
|
0 |
|
|
|
100,000 |
|
|
|
97.0 |
% |
|
|
35,000,000 |
|
|
|
35,125,000 |
|
|
|
71.1 |
% |
* Less
than 1%.
(1)The
number of shares in this column assumes conversion of all shares of preferred
stock and conversion of all convertible debt immediately after the Effective
Date of the reverse split.
(2)
The Company is not aware of who the beneficial owners of its Series A Preferred
Stock will be following the Reverse Stock Split and Cancellations, but does not
believe that such information is material, since in aggregate, such holders will
only hold a total of approximately 0.50% of the voting power of the Company post
Reverse Stock Split and post-Cancellations due to the fact that the Conversion
Ratio (which determines the number of voting shares each Series A Preferred
Stock share can vote) of the Series A Preferred Stock will be reduced from 9.6
shares of common stock for each share of Series A Preferred Stock held to 0.32
shares for each Series A Preferred Stock held (9.6/30) as a result of the
Reverse Stock Split, which affects the Conversion Ratio of the Series A
Preferred Stock due to the recent amendments to the Series A Preferred
Stock.
(3) The
natural person with dispositive authority over securities of the company is
William E. McIlwain at the above address.
(4) The
natural person with dispositive authority over securities of the company is Brad
Fleming at the above address.
(5)
The natural person with dispositive authority over securities of the company is
O. Preston Smith.
(6)
The natural person with dispositive authority over securities of the company is
Joanna Hoover, the company’s controlling officer.
General
The board
of directors and the Majority Shareholders of the Company have approved a
Reverse Stock Split pursuant to a written consent dated February 8,
2008 and supplemented, to revise the Record Date and Effective Date, on
December 15, 2008. The Reverse Stock Split by unanimous written consent
of the board of directors and written consent of the Majority Shareholders
because the parties believe the corporate actions are in the best interests
of the Company and its stockholders.
Vote
Required
Adoption
of the Reverse Stock Split requires approval by holders of at least a majority
of the outstanding voting shares of the Company’s stock who are present, or
represented, and entitled to vote thereon, at a special or annual meeting of
stockholders. Section 228(a) of the DGCL provides that the written consent of
stockholders holding at least a majority of the voting power may be substituted
for such a special or annual meeting.
Our board
of directors fixed the close of business on, the date of mailing this
information statement as the Record Date for determining the stockholders
entitled to notice of the above described actions.
The
actions were authorized by the Majority Shareholders (as described above) who
collectively possess the power to authorize the corporate actions
without the concurrence of any of our other stockholders.
Distribution
and Costs
We will
pay all costs associated with the distribution of this information statement,
including the costs of printing and mailing. In addition, we will only deliver
one information statement to multiple stockholders sharing an address, unless we
have received contrary instructions from one or more of the stockholders. Also,
we will promptly deliver a separate copy of this information statement and
future stockholder communication documents to any stockholder at a shared
address to which a single copy of this information statement was delivered, or
deliver a single copy of this information statement and future stockholder
communication documents to any stockholder or stockholders sharing an address to
which multiple copies are now delivered, upon written request to us at our
address noted above.
Stockholders
may also address future requests regarding delivery of information statements
and/or annual reports by contacting us at the address noted above.
Dissenters’
Right of Appraisal
No action
will be taken in connection with the proposed corporate actions by our board of
directors or the voting stockholders for which the DGCL, our Amended and
Restated Certificate of Incorporation or the Company’s bylaws provide a right of
a stockholder to dissent and obtain appraisal of or payment for such
stockholder’s shares.
Effect
of the Reverse Stock Split
The
Reverse Stock Split will not affect the registration of our common stock under
the Securities Exchange Act of 1934, as amended, nor will it change our periodic
reporting and other obligations thereunder.
The
number of stockholders of record would not be affected by the Reverse Stock
Split except shareholders entitled to less than one share will be
eliminated. The authorized number of shares of our common stock and
the par value of our common stock under our Articles of Incorporation that will
become our Articles of Incorporation because of the reincorporation, will remain
the same following the Effective Date of the Reverse Stock
Split.
Common
Stock
The
number of shares of our common stock issued and outstanding as of the
Effective Date of the Reverse Stock Split, will be reduced on the
Effective Date of the Reverse Stock Split in accordance with the
following formula: every thirty (30) shares of our common stock owned by a
stockholder will automatically be changed into and become one new share of our
common stock.
After affecting the Reverse Stock Split
and the reincorporation, the Company will have a total of approximately 583,309
shares of common stock issued and outstanding (which amount does not take into
account the Cancellations). Subsequent to the Cancellations, the
Company will have 13,041,888 shares of common stock issued and outstanding,
which number includes the 583,309 shares of common stock outstanding immediately
following the Reverse Stock Split minus the 19,788 post-Reverse Stock Split
shares which certain shareholders have agreed to cancel in connection with the
Cancellations and the issuance of an aggregate of 12,478,357 shares of common
stock to certain shareholders in consideration for the
cancellations.
Preferred
Stock
Our
Series A Preferred Stock, as amended, contains a provision that adjusts the
conversion ratio in the event of a reverse stock split or combination.
Accordingly, the number of common shares issuable upon conversion of the Series
A Preferred Stock will be reduced by the Reverse Stock Split. Our
Series C Preferred Stock does not contain such a provision and will not
therefore be affected by the Reverse Stock Split.
After affecting the Reverse Stock Split
and the reincorporation and the Cancellations, the Company will have a total of
approximately 770,824 shares of Series A Preferred Stock issued and
outstanding. Due to the reduction in the Conversion Ratio of the
Series A Preferred Stock from 9.6 shares for each share of Series A Preferred
Stock to 0.32 shares for each share of Series A Preferred Stock converted, the
total number of shares which the post-Cancellation number of Series A Preferred
Stock will be eligible to be converted into will be reduced to approximately
246,663 shares of common stock.
After affecting the Reverse Stock Split
and reincorporation, the Company will still have 103,143 shares of Series C
Preferred Stock issued and outstanding, as such shares of Series C Preferred
Stock are not affected by the Reverse Stock Split or the
reincorporation.
As
described herein, all fractional common stock share amounts resulting from the
Reverse Stock Split will be paid for in cash by the Company based upon the
closing price per share reported by the Electronic Bulletin Board for the
trading day immediately prior to the Effective Date.
The
following table represents the capitalization of the Company after completion of
the reverse split, conversion of all Series C Preferred Stock shares and
convertible debt.
|
DESCRIPTION
|
|
TOTAL
POTENTIAL OUTSTANDING SHARES PRIOR TO THE REINCORPORATION AND REVERSE
STOCK SPLIT
|
|
|
SHARES
CANCELLED AS A RESULT OF THE CANCELLATIONS (IN PRE-REVERSE SPLIT
AMOUNTS)
|
|
|
SHARES
ISSUED AS A RESULT OF THE CANCELLATIONS (IN PRE-REVERSE SPLIT
AMOUNTS)
|
|
|
TOTAL
POTENTIAL OUTSTANDING SHARES FOLLOWING THE REINCORPORATION AND REVERSE
STOCK SPLIT
|
|
|
Outstanding
Common Shares
|
|
|
17,499,262 |
|
|
|
(593,314 |
) |
|
|
12,478,357 |
|
|
|
13,041,888 |
|
|
Issuable
upon Conversion of Series C Preferred
(to
TeleChem Shareholders)
|
|
|
36,100,050 |
(1) |
|
|
|
|
|
|
|
|
|
|
36,100,050 |
(1) |
|
Issuable
upon Conversion of Series A Preferred
|
|
|
35,497,066 |
|
|
|
(28,097,146 |
)
(2) |
|
|
|
|
|
|
246,663 |
(3) |
|
Reserved
for exercise of Stock Warrants
|
|
|
1,250,000 |
(4) |
|
|
|
|
|
|
|
|
|
|
100,000 |
(4) |
|
Reserved
under the Company’s 2004 Stock Option Plan
|
|
|
21,500,000 |
|
|
|
|
|
|
|
|
|
|
|
21,500,000 |
|
|
Total
Issued and Reserved and Unissued
|
|
|
111,846,378 |
|
|
|
|
|
|
|
|
|
|
|
70,988,601 |
|
|
TOTAL
AUTHORIZED
|
|
|
100,000,000 |
|
|
|
|
|
|
|
|
|
|
|
480,000,000 |
|
|
Difference
|
|
|
(11,846,378) |
|
|
|
|
|
|
|
|
|
|
|
409,011,399 |
|
(1)
Represents shares of Series C Preferred Stock which will be automatically
converted into shares of common stock upon the Effective Date of the
reincorporation. The Company’s Series C Preferred Stock will not be
affected by the terms of the Reverse Stock Split.
(2)
Represents the cancellation of 2,926,786 shares of Series A Preferred
Stock.
(3) The
number of shares of common stock in the table above reflects the total number of
shares of common stock which would be issued upon the conversion of the Series A
Preferred Stock subsequent to the Reverse Stock Split and Cancellations, which
will affect a change in the Conversion Ratio of the Series A Preferred Stock
from 9.6 shares of common stock for each share of Series A Preferred Stock
converted to 0.32 shares of common stock for each share of Series A Preferred
Stock converted.
(4)
Represents one warrant to purchase 1,250,000 shares of our common stock at an
exercise price of $0.01 per share, expiring January 19, 2013, which is held by
Recap Marketing and Consulting, L.L.P. (“Recap” and the “Recap Warrants”). The
number of shares issuable upon the exercise of the warrant and the exercise
price will be adjusted for the reverse split.
We currently
have no intention of going private, and this proposed Reverse Stock Split is not
intended to be a first step in a going private transaction and will not have the
effect of a going private transaction covered by Rule 13e-3 of the Exchange Act.
Moreover, the Reverse Stock Split does not increase the risk of us becoming a
private company in the future. We will continue to be subject to the periodic
reporting requirements of the Exchange Act following the Reverse Stock
Split.
The
number of authorized but unissued shares of our common stock will effectively be
increased significantly by the Reverse Stock Split of our common stock and the
Reincorporation described below. The Reverse Stock Split will have
the effect of decreasing the number of our outstanding shares of our common
stock.
The
issuance in the future of such additional authorized shares may have the effect
of diluting the earnings per share and book value per share, as well as the
stock ownership and voting rights, of the currently outstanding shares of our
common stock.
The
effective increase in the number of authorized but unissued shares of our common
stock may be construed as having an anti-takeover effect by permitting the
issuance of shares to purchasers who might oppose a hostile takeover bid or
oppose any efforts to amend or repeal certain provisions of our articles of
incorporation or bylaws. Such a use of these additional authorized shares could
render more difficult, or discourage, an attempt to acquire control of the
Company through a transaction opposed by our board of directors. At this time,
our board of directors does not have plans to issue any common shares resulting
from the effective increase in our authorized but unissued shares created by the
Reverse Stock Split and Reincorporation.
Federal
Income Tax Consequences
We will
not recognize any gain or loss as a result of the Reverse Stock
Split.
The
following description of the material federal income tax consequences of the
Reverse Stock Split to our stockholders is based on the Internal Revenue Code of
1986, as amended, applicable Treasury Regulations promulgated thereunder,
judicial authority and current administrative rulings and practices as in effect
on the date of this information statement. Changes to the laws could alter the
tax consequences described below, possibly with retroactive effect. We have not
sought and will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the Reverse
Stock Split. This discussion is for general information only and does not
discuss the tax consequences that may apply to special classes of taxpayers
(e.g., non-residents of the United States, broker/dealers or insurance
companies). The state and local tax consequences of the Reverse Stock Split may
vary significantly as to each stockholder, depending upon the jurisdiction in
which such stockholder resides. You are urged to consult your own tax advisors
to determine the particular consequences to you.
We
believe that the likely federal income tax effects of the Reverse Stock Split
will be that a stockholder who receives a reduced number of shares of our common
stock or Series A Preferred Stock will not recognize gain or loss. With respect
to a Reverse Stock Split, such a stockholder’s basis in the reduced number of
shares of our common stock or Series A Preferred Stock will equal the
stockholder’s basis in its old shares of our common stock or Series A Preferred
Stock, respectively. The holding period of the post-effective Reverse Stock
Split shares received will include the holding period of the pre-effective
Reverse Stock Split shares exchanged.
Effective
Date
The
Reverse Stock Split will become effective (the “Effective Date”) as of
5:00 p.m. Eastern Standard Time on the later of: (i) the date we file the
Certificate of Merger with the Delaware Secretary of State, (ii) we file the
Articles of Merger with the Nevada Secretary of State, or (iii) 20 days after
the date of mailing this Information Statement; however, the Reverse Stock
Split will only effect those shares of our common stock and Series A Preferred
Stock outstanding on the Effective Date. Accordingly, on such date, all shares
of our common stock that are issued and outstanding on the Effective Date
will be, automatically and without any action on the part of the stockholders,
converted into new shares of our common stock, in accordance with the one-for-
thirty exchange ratio. Any factional shares left after the Reverse
Stock Split will be paid for in cash by the Company at the rate of $__________
per share for common stock.
The
following discussion summarizes certain aspects of our reincorporation in Nevada
(the “Reincorporation”). This summary does not include all of the
provisions of the Amended and Restated Plan and Agreement of Merger between the
Company and Arrayit Corporation., a Nevada corporation (“Arrayit”), a copy of
which is attached hereto as Exhibit “A,” or the Articles of Incorporation of
Arrayit (formerly Integrated Media Holdings, Inc.) as amended a copy of which is
attached hereto as Exhibit “B.” Copies of the bylaws of Arrayit are
available for inspection at our principal office and we will send copies to
stockholders upon request.
The
Company entered into an Amended and Restated Plan and Agreement of Merger to
amend and clarify several sections of its original Plan and Agreement of Merger,
including to:
|
·
|
Clarify
that the corporate name of Arrayit, Arrayit’s registered office and agent,
and all of the Company’s outstanding agreements, stock option plans,
December 19, 2005, Form S-8 Registration Statement, the Company’s
committees, and code of ethics shall survive the Reincorporation;
and
|
|
·
|
To
reflect the prior name change of the Company’s wholly owned Nevada
subsidiary from Integrated Media Holdings, Inc. to Arrayit Corporation in
connection with the prior merger of TeleChem into Integrated Media
Holdings, Inc., the Company’s wholly owned subsidiary, which resulted in
the name change of the Company’s subsidiary to Arrayit
Corporation.
|
We
believe that the reincorporation in Nevada will give us more flexibility and
simplicity in various corporate transactions. Nevada has adopted
Revised Statutes that includes by statute many concepts created by judicial
rulings in other jurisdictions and provides additional rights in connection with
the issuance and redemption of stock.
We also
believe our reincorporation in Nevada will save expenses for taxes and fees
because Nevada imposes no corporate income taxes on corporations that are
incorporated in Nevada.
On the
Effective Date, each of our common stockholders will be entitled to receive one
fully paid and non-assessable share of common stock of Arrayit, respectively,
for each thirty (30) shares of our common stock, outstanding as of the
Effective Date , with any fractional shares being paid for in cash by the
Company at the rate of $__________ per share for common stock , and (ii) the
Company will cease its corporate existence in the State of
Delaware. We anticipate that the shares of the Company will cease
trading on the first trading date following the Effective Date and shares of
Arrayit will begin trading in their place but under a new CUSIP number and
trading symbol.
The
Articles of Incorporation and by-laws of Arrayit are significantly different
from the Certificate of Incorporation and by-laws of the
Company. Because of the differences between the Certificate of
Incorporation and by-laws of the Company and the laws of the State of Delaware,
which govern the Company, and the Articles of Incorporation and by-laws of
Arrayit and the laws of the State of Nevada, which govern Arrayit, your rights
as stockholders will be affected by the reincorporation. See the
information under “Significant
Differences Between the Corporation Laws of Nevada and Delaware” for a
summary of the differences between the Certificate of Incorporation and by-laws
of the Company and the laws of the State of Delaware and the Articles of
Incorporation and by-laws of Arrayit and the laws of the State of
Nevada.
Following
the Reincorporation, the members of our Board of Directors and officers will
remain the same and become officers and Directors of Arrayit. Our
daily business operations will continue at the principal executive offices at
524 East Weddell Drive, Sunnyvale, CA 94089.
Upon
completion of the reincorporation, the Articles of Incorporation of Arrayit will
become the Articles of Incorporation of the Company. Therefore the
number of common shares we are authorized to issue will increase from 100
million to 480 million. After the Effective Date of the
reverse split we plan to issue 12,478,357 shares of common stock in connection
with the Cancellations. We have no present plans to issue any
additional shares of common stock.
In
addition, upon completion of the reincorporation, when the Articles of
Incorporation of Arrayit become the Articles of Incorporation of the Company,
the number of preferred shares we are authorized to issue will increase
from 5 million to 20 million. We have no present plans to issue any
additional shares of preferred stock.
Enclosed
are (i) a form letter of transmittal and (ii) instructions for surrender of your
certificates representing our common stock, Series A Preferred Stock and Series
C Preferred Stock in exchange for certificates representing shares of Arrayit
common stock, Series A Preferred Stock, or Series C Preferred Stock,
respectively. Upon surrender of a certificate representing our common
stock, Series A Preferred Stock, or Series C Preferred Stock to Arrayit,
together with a duly executed letter of transmittal, Arrayit will issue, as soon
as practicable, a certificate representing the number of shares of Arrayit each
stockholder is entitled to receive.
If you
own our shares through a nominee or in a brokerage account, you do not have a
certificate to submit for exchange. Usually, your nominee or broker
will submit certificates representing our shares for exchange on your
behalf. We recommend that you contact your nominee or broker and
confirm that a certificate is submitted for exchange.
Because
of the reincorporation in Nevada, holders of our common stock, preferred stock,
warrants and options are not required to exchange their certificates for Arrayit
certificates. Dividends and other distributions declared after the
Effective Date with respect to common stock or preferred stock of the Company
and payable to holders of record thereof after the Effective Date will be paid
to the holder of any unsurrendered common stock or preferred stock certificate
of the Company and, which by virtue of the reincorporation are represented
thereby and such holder will be entitled to exercise any right as a shareholder
of the Company and, until such holder has surrendered the certificate of the
Company. Holders of warrants or options will be entitled to exercise
any right as a holder of the Company, until such holder has surrendered the
certificate of the Company.
Our
authorized capital consists of 100,000,000 shares of common stock, $.001 par
value, and 5,000,000 shares of Preferred stock, $.001 par value. As
of December 15, 2008 , there were 17,499,262 shares of our common stock
3,697,611 shares of our Series A Preferred Stock outstanding and 103,143 shares
of our Series C Preferred Stock issued and outstanding. The
authorized capital of Arrayit consists of 500,000,000 shares of capital stock
divided into 480,000,000 shares of common stock, $.001 par value per share, and
20,000,000 shares of preferred stock, $.001 par value per share. The
board of directors of Arrayit has adopted designations, rights and preferences
for Series A Convertible Preferred Stock, and Series C Preferred Stock which are
identical to the rights and preferences of the Series A Preferred Stock and
Series C Preferred Stock issued by the Company. As the Company does not
currently have any Series B Preferred Stock issued, no Series B Preferred Stock
has been designated in Arrayit. As a result of the reincorporation,
exchange of the common stock, the Cancellations, Arrayit will have outstanding
approximately 13,041,888 shares of common stock. The number of
outstanding shares of our Series A and Series C Preferred Stock will not be
affected by the Reverse Stock Split or Reincorporation. The
reincorporation will not affect our total stockholder equity or total
capitalization.
Significant
Differences Between the Corporation Laws of Nevada and Delaware
The
Company is incorporated under the laws of the State of Delaware. On the
Effective Date of the Reincorporation, our stockholders, whose rights are
currently governed by Delaware Law and the Company Certificate of Incorporation
and the Company by-laws, which were created pursuant to Delaware Law, will
become stockholders of a Nevada company with the name Arrayit Corporation, and
their rights as stockholders will then be governed by Nevada Law and the Nevada
Articles of Incorporation and the Nevada by-laws which were created under Nevada
Law.
The
corporate statutes of Nevada and Delaware have certain differences, summarized
below. This summary is not intended to be complete, and is qualified
by reference to the full text of, and decisions interpreting, Delaware law and
Nevada law.
Removal of
Directors. Under Delaware law, members of a classified board
of directors may only be removed for cause. Removal requires the vote of a
majority of the outstanding shares entitled to vote for the election of
directors. Nevada law provides that any or all directors may be
removed by the vote of two-thirds of the voting interests entitled to vote for
the election of directors. Nevada does not distinguish between
removal of directors with and without cause. However, the Nevada
Articles provide that directors may only be removed for cause by the vote of not
less than 75% of the outstanding shares entitled to vote for the election of
directors. The reincorporation will make it more difficult for the
stockholders of Arrayit to remove a member of the board of directors because it
increases the number of shares that must be voted for removal.
Special Meetings of
Stockholders. Delaware law permits special meetings of
stockholders to be called by the board of directors or by any other person
authorized in the certificate of incorporation or bylaws to call a special
stockholder meeting. Nevada law does not address the manner in which special
meetings of stockholders may be called but permits corporations to determine the
manner in which meetings are called in their bylaws. The Certificate of
Incorporation and bylaws of the Company and the Articles of Incorporation and
bylaws of Arrayit each provide that special meetings of the stockholders may be
called only by the board of directors or a committee of the board of directors
that is delegated the power to call special meetings by the board of
directors. There will be no change to this provision as a result of
the reincorporation.
Special Meetings Pursuant to
Petition of Stockholders. Delaware law provides that a director or a
stockholder of a corporation may apply to the Court of Chancery of the State of
Delaware if the corporation fails to hold an annual meeting for the election of
directors or there is no written consent to elect directors in lieu of an annual
meeting taken, in both cases for a period of thirty (30) days after the date
designated for the annual meeting or if there is no such date designated, within
thirteen (13) months after the last annual meeting. Nevada law is more
restrictive. Under Nevada law stockholders having not less than 15% of the
voting interest may petition the district court to order a meeting for the
election of directors if a corporation fails to call a meeting for that purpose
within eighteen (18) months after the last meeting at which directors were
elected. The reincorporation may make it more difficult for the
stockholders of Arrayit to require that an annual meeting be held without the
consent of the board of directors.
Cumulative Voting. Cumulative
voting for directors entitles stockholders to cast a number of votes that is
equal to the number of voting shares held multiplied by the number of directors
to be elected. Stockholders may cast all such votes either for one nominee or
distribute such votes among up to as many candidates as there are positions to
be filled. Cumulative voting may enable a minority stockholder or group of
stockholders to elect at least one representative to the board of directors
where such stockholders would not otherwise be able to elect any directors. Both
Delaware and Nevada law permit cumulative voting if provided for in the
certificate or articles of incorporation and pursuant to specified procedures.
Neither the Certificate of Incorporation of the Company nor the Articles of
Incorporation of Arrayit provide for cumulative voting. The reincorporation does
not change the rights of the stockholders to cumulate their votes.
Indemnification of Officers and
Directors and Advancement of Expenses. Delaware and Nevada have
substantially similar provisions regarding indemnification by a corporation of
its officers, directors, employees and agents. Delaware and Nevada law differ in
their provisions for advancement of expenses incurred by an officer or director
in defending a civil or criminal action, suit or proceeding. Delaware law
provides that expenses incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of the action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that he
or she is not entitled to be indemnified by the corporation. A Delaware
corporation has the discretion to decide whether or not to advance expenses,
unless its certificate of incorporation or bylaws provides for mandatory
advancement. Nevada law differs in two respects: First, Nevada law applies to
advance of expenses incurred by both officers and directors. Second, under
Nevada law, the articles of incorporation, bylaws or an agreement made by the
corporation may provide that the corporation must pay advancements of expenses
in advance of the final disposition of the action, suit or proceedings upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined that he or she is not entitled to be
indemnified by the corporation. There will be a difference in stockholders'
rights with respect to this issue because the bylaws of the Company do not
provide for the mandatory advancement of expenses of directors and officers and
the Arrayit by laws do so provide.
Limitation on Personal Liability of
Directors. Delaware law permits a corporation to adopt provisions
limiting or eliminating the liability of a director to a company and its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such liability does not arise from certain proscribed conduct,
including breach of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law or liability
to the corporation based on unlawful dividends or distributions or improper
personal benefit. The Certificate of Incorporation of the Company excludes
director liability to the maximum extent allowed by Delaware law. Nevada law
permits, and Arrayit has adopted, a broader exclusion of liability of both
officers and directors to the corporation and its stockholders, providing for an
exclusion of all monetary damages for breach of fiduciary duty unless they arise
from acts or omissions which involve intentional misconduct, fraud or a knowing
violation of law or payments of dividends or distributions in excess of the
amount allowed. The reincorporation will result in the elimination of any
liability of an officer or director for a breach of the duty of loyalty unless
arising from intentional misconduct, fraud, or a knowing violation of
law.
Dividends. Delaware law is
more restrictive than Nevada law with respect to when dividends may be paid.
Under the Delaware law, unless further restricted in the certificate of
incorporation, 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
dividend is declared and/or the preceding fiscal year (provided that the amount
of capital of the corporation is not less than the aggregate amount of the
capital represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets). In addition, the
Delaware law provides that a corporation may redeem or repurchase its shares
only if the capital of the corporation is not impaired and such redemption or
repurchase would not impair the capital of the corporation. Nevada
law provides that no distribution (including dividends on, or redemption or
repurchases of, shares of capital stock) may be made if, after giving effect to
such distribution, the corporation would not be able to pay its debts as they
become due in the usual course of business, or, except as specifically permitted
by the articles of incorporation, the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed at
the time of a dissolution to satisfy the preferential rights of preferred
stockholders. The reincorporation makes it possible for Arrayit to
pay dividends or other distributions that would not be payable under Delaware
law.
Restrictions on Business
Combinations. Both Delaware and Nevada law contain provisions restricting
the ability of a corporation to engage in business combinations with an
interested stockholder. Under Delaware law, a corporation which is listed on a
national securities exchange, included for quotation on the Nasdaq Stock Market
or held of record by more than 2,000 stockholders, is not permitted to engage in
a business combination with any interested stockholder for a three-year period
following the time such stockholder became an interested stockholder, unless (i)
the transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquires 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes it an interested stockholder
(excluding shares owned by persons who are both officers and directors of the
corporation, and shares held by certain employee stock ownership plans); or
(iii) on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and by
the holders of at least 66 2/3% of the corporation's outstanding voting stock at
an annual or special meeting (and not by written consent), excluding shares
owned by the interested stockholder. Delaware law defines “interested
stockholder” generally as a person who owns 15% or more of the outstanding
shares of a corporation's voting stock.
Nevada
law regulates business combinations more stringently. First, an
“interested stockholder” is defined as a beneficial owner (directly or
indirectly) of ten percent (10%) or more of the voting power of the outstanding
shares of the corporation. Second, the three-year moratorium can be lifted only
by advance approval by a corporation's board of directors. Finally, after the
three-year period, combinations with “interested stockholders” remain prohibited
unless (i) they are approved by the board of directors, the disinterested
stockholders or a majority of the outstanding voting power not beneficially
owned by the interested party, or (ii) the interested stockholders satisfy
certain fair value requirements. As in Delaware, a Nevada corporation may
opt-out of the statute with appropriate provisions in its articles of
incorporation.
We have
not opted out of the applicable statutes and the more stringent requirements of
Nevada law apply to mergers and combinations after the Effective Date of the
reincorporation.
Amendment to Articles of
Incorporation/Certificate of Incorporation or Bylaws. Both
Delaware and Nevada law require the approval of the holders of a majority of all
outstanding shares entitled to vote to approve proposed amendments to a
corporation's certificate or articles of incorporation. Both Delaware and Nevada
law also provide that in addition to the vote of the stockholders, the vote of a
majority of the outstanding shares of a class may be required to amend the
certificate of incorporation or articles of incorporation. Neither state
requires stockholder approval for the board of directors of a corporation to fix
the voting powers, designation, preferences, limitations, restrictions and
rights of a class of stock provided that the corporation's organizational
documents grant such power to its board of directors. Both Delaware
and Nevada law permit the number of authorized shares of any such class of stock
to be increased or decreased (but not below the number of shares then
outstanding) by the board of directors unless otherwise provided in the articles
of incorporation or resolution adopted pursuant to the certificate of
incorporation, respectively. The Arrayit Articles require not less
than 75% of the outstanding shares entitled to vote for the election of
directors.
Actions by Written Consent of
Stockholders. Both Delaware and Nevada law provide that,
unless the articles or certificate of incorporation provides otherwise, any
action required or permitted to be taken at a meeting of the stockholders may be
taken without a meeting if the holders of outstanding stock having at least 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 consents to the action in
writing. The Nevada Articles provide that action may be taken by
written consent of the shareholders only if expressly approved by the Board of
Directors. Delaware law requires the corporation to give prompt
notice of the taking of corporate action without a meeting by less than
unanimous written consent to those stockholders who did not consent in
writing. Nevada law does not require notice to the stockholders of
action taken by less than all of the stockholders.
Stockholder Vote for Mergers and
Other Corporation Reorganizations. Both jurisdictions require
authorization by an absolute majority of the outstanding voting rights, as well
as approval by the board of directors, of the terms of a merger or a sale of
substantially all of the assets of the corporation. Neither Delaware nor Nevada
law require a stockholder vote of the surviving corporation in a merger (unless
the corporation provides otherwise in its certificate of incorporation) if: (a)
the merger agreement does not amend the existing certificate of incorporation of
the surviving corporation; (b) each share of stock of the surviving corporation
outstanding immediately before the effective date of the merger is an identical
outstanding share after the merger; and (c) either no shares of common stock of
the surviving corporation and no shares, securities or obligations convertible
into such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or shares of common stock of the surviving
corporation to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed twenty
percent (20%) of the shares of common stock of such constituent corporation
outstanding immediately prior to the effective date of the merger.
The
following discussion summarizes the reasons for, and the operation and effects
of, certain provisions in the Arrayit Articles of Incorporation which management
has identified as potentially having an anti-takeover effect. It is not intended
to be a complete description of all potential anti-takeover effects, and it is
qualified in its entirety by reference to the Arrayit Articles of Incorporation.
Substantially similar provisions were contained in the Company’s Certificate of
Incorporation and the reincorporation does not change the nature of the
anti-takeover provisions or their effect.
The
anti-takeover provisions of the Arrayit Articles of Incorporation are designed
to minimize the possibility of a sudden acquisition of control of Arrayit which
has not been negotiated with and approved by the Arrayit board of directors.
These provisions may tend to make it more difficult to remove the incumbent
members of the board of directors. The provisions would not prohibit
an acquisition of control of Arrayit or a tender offer for all of its capital
stock. However, to the extent these provisions successfully discourage the
acquisition of control of Arrayit or tender offers for all or part of its
capital stock without approval of the board of directors, they may
have the effect of preventing an acquisition or tender offer which might be
viewed by stockholders to be in their best interests.
Tender
offers or other non-open market acquisitions of stock are usually made at prices
above the prevailing market price. In addition, acquisitions of stock by persons
attempting to acquire control through market purchases may cause the market
price of the stock to reach levels which are higher than would otherwise be the
case. Anti-takeover provisions may discourage such purchases, particularly those
of less than all of the outstanding capital stock, and may thereby deprive
stockholders of an opportunity to sell their stock at a temporarily higher
price. These provisions may therefore decrease the likelihood that a tender
offer will be made adversely affect those stockholders who would desire to
participate in a tender offer. These provisions may also serve to insulate
incumbent management from change and to discourage not only sudden or hostile
takeover attempts, but any attempts to acquire control which are not approved by
the board of directors, whether or not stockholders deem such transactions to be
in their best interests.
Authorized Shares of Capital
Stock. The Arrayit Articles of Incorporation authorizes the
issuance of up to 20,000,000 shares of serial preferred stock, without any
action on the part of the stockholders. Shares of Arrayit's serial preferred
stock with voting rights could be issued and would then represent an additional
class of stock required to approve any proposed acquisition. This preferred
stock, together with authorized but unissued shares of common stock (the
Articles of Incorporation authorizes the issuance of up to 480,000,000 shares of
common stock), could represent additional capital stock required to be purchased
by an acquiror. If the board of directors of Arrayit determined to issue an
additional class of voting preferred stock to a person opposed to a proposed
acquisition, such person might be able to prevent the acquisition
single-handedly.
Stockholder
Meetings. Nevada law provides that the annual stockholder
meeting may be called by a corporation's board of directors or by such person or
persons as may be authorized by a corporation's articles of incorporation or
bylaws. The Arrayit Articles of Incorporation provides that annual stockholder
meetings may be called only by the Arrayit board of directors or a duly
designated committee of the board. Although Arrayit believes that this provision
will discourage stockholder attempts to disrupt the business of Arrayit between
annual meetings, its effect may be to deter hostile takeovers by making it more
difficult for a person or entity to obtain immediate control of
Arrayit.
Classified Board of Directors and
Removal of Directors. Arrayit's Articles of Incorporation provide that
the board of directors is to be divided into three classes which shall be as
nearly equal in number as possible. The directors in each class serve for terms
of three years, with the terms of one class expiring each year. Each class
currently consists of approximately one-third of the number of directors. Each
director will serve until his successor is elected and qualified. A classified
board of directors could make it more difficult for stockholders, including
those holding a majority of Arrayit's outstanding stock, to force an immediate
change in the composition of a majority of the board of directors. Since the
terms of only one-third of the incumbent directors expire each year, it requires
at least two annual elections for the stockholders to change a majority, whereas
a majority of a non-classified board may be changed in one year. The
provision for a staggered board of directors affects every election of directors
and is not triggered by the occurrence of a particular event such as a hostile
takeover. Thus a staggered board of directors makes it more difficult for
stockholders to change the majority of directors even when the reason for the
change would be unrelated to a takeover.
Restriction of Maximum Number of
Directors and Filling Vacancies on the Board of Directors. Nevada law
requires that the board of directors of a corporation consist of one or more
members and that the number of directors shall be set by or in the manner
described in the corporation's articles of incorporation or bylaws. Arrayit's
Articles of Incorporation provides that the number of directors (exclusive of
directors, if any, to be elected by the holders of preferred stock) shall not be
less than one or more than 15, as shall be provided from time to time in
accordance with the bylaws. The power to determine the number of directors
within these numerical limitations is vested in the board of directors and
requires the concurrence of at least two-thirds of the entire board of
directors. The effect of such provisions may be to prevent a person or entity
from quickly acquiring control of Arrayit through an increase in the number of
the directors and election of nominees to fill the newly created
vacancies.
Restriction on Business Combination.
If, at any time during the ten years from the effective date of the
Arrayit Articles, any person shall acquire the beneficial ownership (as
determined pursuant to Rules 13d-3 and 13d-5 under the Act) of more than 20% of
any class of common stock, then the record holders of common stock beneficially
owned by such acquiring person shall have only the voting rights set forth in
this paragraph on any matter requiring their vote or consent. With
respect to each vote in excess of 20% of the voting power of the outstanding
shares of common stock which such record holders would otherwise be entitled to
cast without giving effect to this paragraph, the record holders in the
aggregate shall be entitled to cast only one-hundredth of one vote. A
person who is a record owner of shares of common stock that are beneficially
owned simultaneously by more than one person shall have, with respect to such
shares, the right to cast the least number of votes that such person would be
entitled to cast under this paragraph by virtue of such shares being so
beneficially owned by any of such acquiring persons. The effect of
the reduction in voting power required by this paragraph shall be given effect
in determination the presence of a quorum for purposes of convening a meeting of
the stockholders of the Corporation.
The
limitation on voting rights prescribed by this paragraph shall terminate and be
of no force and effect as of the earliest to occur of: (i) the date that any
person becomes the beneficial owner of shares of stock representing at least 75%
of the total number of votes entitled to be cast in respect of all outstanding
shares of stock, before giving effect to the reduction in votes prescribed by
this paragraph; or (ii) the date (the “Reference Date”) one day prior to the
date on which, as a result of such limitation of voting rights, the common stock
will be delisted from any stock exchange or automated quotation
system.
The term
“Related Person” means and includes (i) any individual, corporation, partnership
or other person or entity which together with its “affiliates” or “associates”
(as those terms are defined in the Securities Act of 1933, as amended (the
“Act”)) which “beneficially owns” (as that term is defined in the Act) in the
aggregate 10% or more of the outstanding shares of the common stock of the
Company; and (ii) any “affiliate” or “associate” (as those terms are defined in
the Act) of any such individual, Company, partnership or other person or entity;
provided, however, that the term “Related Person” does not include the Company,
any subsidiary of the Company, any employee benefit plan, employee stock plan of
the Company or of any subsidiary of the Company, or any trust established by the
Company in connection with the foregoing, or any person or entity organized,
appointed, established or holding shares of capital stock of the Company for or
pursuant to the terms of any such plan, nor shall such term encompass shares of
capital stock of the Company held by any of the foregoing (whether or not held
in a fiduciary capacity or otherwise). Without limitation, any shares of the
common stock of the Company which any Related Person has the right to acquire
pursuant to any agreement, or upon exercise or conversion rights, warrants or
options, or otherwise, shall be deemed “beneficially owned” by such Related
Person.
Approval of Certain Business
Combination. Except as otherwise expressly provided in the
Arrayit Articles and in addition to any other vote required by law, the
affirmative vote of the holders of (i) at least 75% of the voting power of the
outstanding shares entitled to vote thereon (and, if any class or series of
shares is entitled to vote thereon separately the affirmative vote of the
holders of at least 75% of the outstanding shares of each such class or series),
and (ii) at least a majority of the outstanding shares entitled to vote thereon,
not including shares deemed beneficially owned by a Related Person, is required
in order to authorize (a) any merger or consolidation of the Company or a
subsidiary of the Company with or into a Related Person; (b) any sale, lease,
exchange, transfer or other disposition, including without limitation, a
mortgage or pledge, of all or any substantial part of the assets of the Company
(including without limitation any voting securities of a subsidiary) or of a
subsidiary, to a Related Person; (c) any merger or consolidation of a Related
Person with or into the Company or a subsidiary of the Company; (d) any sale,
lease, exchange, transfer or other disposition of all or any Substantial Part of
the assets of a Related Person to the Company or a subsidiary of the Company;
(e) the issuance of any securities of the Company or a subsidiary of the Company
to a Related Person other than on a pro rata basis to all holders of capital
stock of the Company of the same class or classes held by the Related person,
pursuant to a stock split, stock dividend or distribution or warrants or rights,
and other than in connection with the exercise or conversion of securities
exercisable for or convertible into securities of the Company or any of its
subsidiaries which securities have been distributed pro rata to all holders of
capital stock of the Company; (f) the acquisition by the Company or a subsidiary
of the Company of any securities of a Related Person; (g) any reclassification
of the common stock of the Company, or any recapitalization involving the common
stock of the Company or any similar transaction (whether or not with or into or
otherwise involving a Related Person) that has the effect directly or
indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Company or any subsidiary that are directly or indirectly owned by any Related
Person; and (h) any agreement, contract or other arrangement providing for any
of the transactions described in this paragraph.
Such
affirmative vote is required notwithstanding any other provision of the
Articles, any provision of law, or any agreement with any regulatory agency or
national securities exchange which might otherwise permit a lesser vote or no
vote; provided, however, that in no instance shall the provisions of the Arrayit
Articles require the vote of greater than 85% of the voting power of the
outstanding shares entitled to vote thereon for the approval of a business
combination.
Advance Notice Requirements for
Nomination of Directors and Proposal of New Business at Annual Stockholder
Meetings. Arrayit's Articles of Incorporation provide that any
stockholder desiring to make a nomination for the election of directors or a
proposal for new business at a stockholder meeting must submit written notice
not less than 30 or more than 60 days in advance of the meeting: provided,
however, that if less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Company not later than the close of the tenth day
following the day on which notice of the meeting was mailed to
stockholders. This advance notice requirement may give management
time to solicit its own proxies in an attempt to defeat any dissident slate of
nominations. Similarly, adequate advance notice of stockholder
proposals will give management time to study such proposals and to determine
whether to recommend to the stockholders that such proposals be adopted. In
certain instances, such provisions could make it more difficult to oppose
management's nominees or proposals, even if the stockholders believe such
nominees or proposals are in their interests. These provisions may
tend to discourage persons from bringing up matters disclosed in the proxy
materials furnished to the stockholders and could inhibit the ability of
stockholders to bring up new business in response to recent
developments.
The
reincorporation will be conducted as a merger of the Company into our wholly
owned subsidiary pursuant to Section 253 of the General Corporation Law of the
State of Delaware. Delaware law does not provide for any right of
appraisal or redemption in connection with mergers of a parent corporation into
its subsidiary. The stockholders are not entitled to receive
consideration in lieu of the shares of Arrayit.
The name
change which will be affected in connection with the Reincorporation and
adoption of the Arrayit Articles will more accurately reflect the business of
the Company.
The board of directors and
Majority Shareholders amended our Series A Preferred Stock and Series C
Preferred Stock, described below, on November 24 2008 (the “Preferred Stock
Amendments”). Substantially similar amendments to the Preferred Stock
Amendments have also been made to Arrayit’s Articles of
Incorporation.
Specifically, the Preferred Stock
Amendments amended the Company’s Series A Preferred Stock to clarify that such
Series A Preferred Stock would be subject to a subdivision or reclassification
of the Company’s outstanding capital stock. As a result, the
conversion ratio of the Company’s Series A Preferred Stock will be reduced from
9.6 shares of common stock for each Series A Preferred Stock converted to 0.32
shares of common stock for each Series A Preferred Share Converted (9.6/30) in
connection with the Reverse Stock Split. Other than the amendment to
the Series A Preferred Stock clarifying that it would be subject to subdivisions
of the Company’s outstanding capital stock, similar to the Reverse Stock Split,
the Company’s Series A Preferred Stock remains the same as originally
designated.
The Company’s Series C Preferred Stock
was amended in connection with the Preferred Stock Amendments to revise the
conversion rights of such Series C Preferred Stock. Prior to the
Preferred Stock Amendments, any outstanding shares of Series C Preferred
Stock would automatically convert into shares of the Company’s common stock in a
ratio of one to three hundred and fifty (the “Conversion Ratio”) upon the
Company’s Reincorporation. Subsequent to the Preferred Stock
Amendments, the holders of the Company’s Series C Preferred Stock have the
option to convert up to 10% of the total number of shares of Series C Preferred
Stock issued to such holder into shares of the Company’s common stock at the
Conversion Ratio, during any 90 day period. Additionally, any shares
of Series C Preferred Stock not converted during any 90 day period are not
carried forward to the next 90 day period.
The Preferred Stock Amendments have
already been affected in the state of Delaware for the Company and Nevada for
Arrayit and no further action is required . As such, the
Company is not asking for your vote, but simply giving you notice of the
action that was taken.
The
Company has received no indication from any of its directors or non-employee
directors of any intent to oppose any action to be taken by the
Company. There have been no proposals for action submitted to the
Company by any stockholders other than the proposals which are the subject of
this Information Statement.
By Order
of the Board of Directors,
/s/ Rene'
A. Schena
____________________________________________
Rene’ A.
Schena, Chairman and Chief Executive Officer
December
_____, 2008
AMENDED
AND RESTATED PLAN AND AGREEMENT OF MERGER
of
Integrated
Media Holdings, Inc.
(A
Delaware Corporation)
and
Arrayit
Corporation
(A Nevada
Corporation)
AMENDED AND RESTATED PLAN AND
AGREEMENT OF MERGER entered into on April 08, 2008, by and between
Integrated Holdings, Inc., a Delaware corporation (“Integrated Media”), and
Arrayit Corporation, a Nevada corporation (“Arrayit”).
WHEREAS, Integrated Media is a
business corporation of the State of Delaware whose registered agent is The
Corporation Trust Company and its registered office therein is located at 1209
Orange Street, Wilmington, County of Newcastle, Delaware; and
WHEREAS, the total number of
shares of stock which Integrated Media has authority to issue is 105,000,000, of
which 100,000,000 are common stock, $.001 par value per share, and 5,000,000 are
preferred stock, $.001 par value per share; and
WHEREAS, Arrayit is a business
corporation of the State of Nevada whose registered agent is Inc. Plan of Nevada
and its registered office therein is located at 613 Saddle Rider Court,
Henderson, Nevada; and
WHEREAS, the total number of
shares of stock which Arrayit has authority to issue is 500,000,000, of which
480,000,000 are common stock, $.001 par value per share, and 20,000,000 are
preferred stock, $.001 par value per share; and
WHEREAS, the Delaware General
Corporation Law Act permits a merger of a business corporation of the State of
Delaware with and into a business corporation of another jurisdiction;
and
WHEREAS, the Revised Statutes
of the State of Nevada permit the merger of a business corporation of another
jurisdiction with and into a business corporation of the State of Nevada;
and
WHEREAS, Integrated Media and
Arrayit and the respective Boards of Directors thereof declare it advisable and
to the advantage, welfare, and best interests of said corporations and their
respective stockholders to merge Integrated Media with and into Arrayit pursuant
to the provisions of the Delaware General Corporation Law and pursuant to the
provisions of the General Corporation Law of the State of Nevada upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in
consideration of the premises and of the mutual agreement of the parties hereto
hereby determine and agree as follows.
ARTICLE
I
MERGER
1.1.
CONSTITUENT
CORPORATIONS. The name, address and jurisdiction of
organization of each of the constituent corporations are set forth
below.
A.
Integrated Media, a corporation organized under and governed by the laws of the
State of Delaware with a principal place of business at 524 East Weddell Drive,
Sunnyvale, CA 94089 (the “terminating corporation”).
B.
Arrayit, a corporation organized under and governed by the laws of the State of
Nevada with a principal place of business at 12000 Westheimer Rd, Ste 340,
Houston, Texas (the “surviving corporation”).
1.2.
SURVIVING
CORPORATION. Arrayit shall be the surviving
corporation. The corporate name, Articles of Incorporation, bylaws,
registered agent and registered office of Arrayit shall survive the merger
without amendment or revision and be the Articles of Incorporation, bylaws,
registered agent and registered office of the surviving
corporation.
1.3.
SURVIVING CORPORATE
MATTERS. The principal place of business, officers and
directors, indemnification agreements with officers and directors, all binding
agreements, the Amended and Restated 2004 Directors, Officers and Consultants
Stock Option, Stock Warrant and Stock Award Plan registered with the Securities
and Exchange Commission on Form S-8 effective December 19, 2005, as well as
creation and adoption of the Executive Committee, Compensation Committee, Audit
Committee, Code of Business Ethics, and Governance Committee shall survive the
merger without amendment or revision and be the indemnification agreements with
officers and directors, other binding agreements, the Amended and Restated 2004
Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award
Plan, the Executive Committee, Compensation Committee, Audit Committee, Code of
Business Ethics, and Governance Committee of the surviving
corporation.
1.3.
MERGER. On the Effective
Date (as hereinafter set forth) and subject to the terms and conditions of this
Agreement, the applicable provisions of the Delaware General Corporation Law
(“Delaware Law”), and the applicable provisions of Title 7, Chapter 78 of the
Nevada Revised Statutes (“Nevada Law”), Integrated Media is merged with and into
Arrayit. The separate existence of Integrated Media shall cease on
and after the Effective Date.
ARTICLE
II
EXCHANGE
AND CONVERSION OF SHARES
2.1.
CONVERSION OF CAPITAL
STOCK.
A. On the
Effective Date, each thirty (30) issued and outstanding shares of the common
stock, $.001 par value per share, of Integrated Media shall be converted into
the right to receive one (1) fully paid and non-assessable share of the common
stock, $.001 par value per share, of Arrayit.
B. On the
Effective Date, each issued and outstanding share of the preferred stock of any
series or class of Integrated Media shall be converted into the right to receive
one fully paid and non-assessable share of preferred stock, $.001 par value per
share, of Arrayit with substantially identical rights and
preferences.
2.2.
FRACTIONAL SHARES. No
fractional shares or script representing fractional shares shall be issued by
Arrayit as a result of the merger. Each fractional share that would otherwise
result from the merger shall be cancelled and returned to the authorized and
unissued capital stock of Arrayit and the holder shall be paid cash in an amount
equal to the market value of one full share.
2.3.
CANCELLATION OF EXISTING
SHARES. On the Effective date, each share of the common stock,
$.001 par value per share, of Arrayit outstanding immediately prior to the
merger shall be cancelled and returned to the authorized and unissued capital
stock of Arrayit.
ARTICLE
III
ADDITIONAL
COVENANTS AND AGREEMENTS
3.1.
OUTSTANDING OPTIONS AND
WARRANTS. Except to the extent otherwise provided in outstanding options,
warrants, and other rights to purchase shares of the common stock, $.001 par
value per share, of Integrated Media, each option, warrant or other right to
purchase thirty (30) shares of the common stock, $.001 par value per share, of
Integrated Media, shall be exercisable to purchase one (1) share of the common
stock, $.001 par value per share, of Arrayit for an exercise price in the amount
of 30 times the original exercise price on the remaining same terms and
conditions.
3.2.
SUBMISSION TO SERVICE IN
DELAWARE. Arrayit agrees that it may be served with process in the State
of Delaware in any proceeding for enforcement of any obligation of the Arrayit
arising from this merger, including any suit or other proceeding to enforce the
rights of any stockholders as determined in appraisal proceedings pursuant to
the provisions of Section 262 of the Delaware General Corporation laws, and
irrevocably appoints the Secretary of State of Delaware as its agent to accept
services of process in any such suit or proceeding.
3.3.
COOPERATION. The parties
hereto agree that they will cause to be executed and filed and recorded any
document or documents prescribed by Delaware Law or Nevada Law, and that they
will cause to be performed all necessary acts within the State of Delaware and
the State of Nevada and elsewhere to effectuate the merger herein provided
for.
3.4.
ADDITIONAL ASSURANCES.
Integrated Media hereby appoints the officers and directors, each acting alone,
as its true and lawful attorneys in fact to do any and all acts and things, and
to make, execute, deliver, file, and record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement or of the merger
herein provided for.
ARTICLE
IV
EFFECTIVE
DATE
4.1.
EFFECTIVE DATE. This
merger shall be effective in the State of Delaware and the State of Nevada on
the last to occur of the following (the “Effective Date”):
A.
twenty days after mailing an information statement to the shareholders that
meets the requirements of Rule 14c-101 of the Securities and Exchange
Commission; or
B. the
date this Agreement, or a certificate of merger meeting the requirements of
Delaware Law, is filed with the Secretary of State of the State of Delaware;
or
C. the
date this Agreement, or articles of merger meeting the requirements of Nevada
Law, is filed with the Secretary of State of the State of Nevada
4.2.
TERMINATION.
Notwithstanding the full approval and adoption of this Agreement, the said
Agreement may be terminated by either party at any time prior to the filing
thereof with the Secretary of State of the State of Nevada.
4.3.
AMENDMENT.
Notwithstanding the full approval and adoption of this Agreement, this Agreement
may be amended at any time and from time to time prior to the filing thereof
with the Secretary of State of the State of Nevada except that, without the
approval of the stockholders of Integrated Media and the stockholders of
Arrayit, no such amendment may (a) change the rate of exchange for any shares of
Integrated Media or the types or amounts of consideration that will be
distributed to the holders of the shares of stock of Integrated Media; (b)
change any term of the Articles of Incorporation of Arrayit; or (c) adversely
affect any of the rights of the stockholders of Integrated Media or
Arrayit.
ARTICLE
V
MISCELLANEOUS
5.1.
COUNTERPARTS. This
Agreement may be executed in one or more counterparts, each of which may have
different signatures and be signed at different times. When all parties have
signed at least one counterpart, each counterpart shall be deemed complete and
shall constitute the same instrument.
5.2.
ENTIRE AGREEMENT. This
Agreement and the is intended by the parties to be the final expression of their
agreement with respect to the matter set forth herein and is intended to contain
all of the terms of such agreement without the need to refer to other documents.
There are no other understandings, written or oral, among the parties with
respect to the matter set forth herein.
5.3.
AMENDMENT. This
Agreement may not be amended except by a written instrument signed by the
parties hereto.
IN WITNESS WHEREOF, this
Agreement is hereby executed upon behalf of each of the parties thereto as of
the 8th day of
April, 2008.
INTEGRATED
MEDIA HOLDINGS, INC. a Delaware corporation
|
By::
|
|
|
|
William
L. Sklar, Chief Executive Officer &
President
|
ARRAYIT
CORPORATION a Nevada corporation
|
By::
|
|
|
|
Rene’
A. Schena, Chairman & Chief Executive
Officer
|
ARTICLES
OF INCORPORATION
OF
INTEGRATED
MEDIA HOLDINGS, INC.
(a
Nevada corporation)
For the
purpose of associating to establish a corporation under the provisions and
subject to the requirements of Title 7, Chapter 78 of Nevada Revised Statutes,
and the acts amendatory thereof, and hereinafter sometimes referred to as the
General Corporation Law of the State of Nevada, the undersigned incorporator
does hereby adopt and make the following Articles of Incorporation:
ARTICLE
I
NAME
The name
of the Corporation is Integrated Media Holdings, Inc. (hereinafter, the
“Corporation”).
ARTICLE
II
REGISTERED
OFFICE AND AGENT
The name
of the Corporation's resident agent in the State of Nevada is Inc. Plan of
Nevada, Inc., and the street address of the said resident agent where process
may be served on the Corporation is 613 Saddle River Court, Henderson, Nevada
89015. The mailing address and the street address of the said resident agent are
identical.
ARTICLE
III
POWERS
The
purpose for which the Corporation is organized is to transact all lawful
business for which corporations may be incorporated pursuant to the laws of the
State of Nevada. The Corporation shall have all the powers of a corporation
organized under the General Corporation Law of the State of Nevada.
ARTICLE
IV
TERM
The
Corporation is to have perpetual existence.
ARTICLE
V
CAPITAL
STOCK
A. Number and
Designation. The total number of shares of all classes that
this Corporation shall have authority to issue shall be 500,000,000, of which
480,000,000 shall be shares of common stock, par value $0.001 per share (“Common
Stock”), and 20,000,000 shall be shares of preferred stock, par value $0.001 per
share (“Preferred Stock”). The shares may be issued by the
Corporation from time to time as approved by the board of directors of the
Corporation without the approval of the stockholders except as otherwise
provided in this Article V or the rules of a national securities exchange if
applicable. The consideration for subscriptions to, or the purchase
of, the capital stock to be issued by a corporation shall be paid in such form
and in such manner as the board of directors shall determine. The
board of directors may authorize capital stock to be issued for consideration
consisting of cash, any tangible or intangible property or any benefit to the
corporation, or any combination thereof. In the absence of actual
fraud in the transaction, the judgment of the directors as to the value of such
consideration shall be conclusive. The capital stock so issued shall
be deemed to be fully paid and nonassessable stock upon receipt by the
corporation of such consideration. In the case of a stock dividend,
the part of the surplus of the Corporation which is transferred to stated
capital upon the issuance of shares as a stock dividend shall be deemed to be
the consideration for their issuance.
A
description of the different classes and series (if any) of the Corporation's
capital stock, and a statement of the relative powers, designations, preferences
and rights of the shares of each class and series (if any) of capital stock, and
the qualifications, limitations or restrictions thereof, are as
follows:
B. Undesignated Common
Stock. Shares of Common Stock not at the time designated as
shares of a particular series pursuant to this Article (V)(B) or any other
provision of these Articles of Incorporation may be issued from time to time in
one or more additional series or without any distinctive
designation. The board of directors may determine, in whole or in
part, the preferences, voting powers, qualifications and special or relative
rights or privileges of any such series before the issuance of any shares of
that series. The board of directors shall determine the number of
shares constituting each series of Common Stock and each series shall have a
distinguishing designation.
C. Common
Stock. Except as provided in these Articles or the designation
of any series or class of capital stock, the holders of the Common Stock shall
exclusively posses all voting power. Subject to the provisions of
these Articles, each holder of shares of Common Stock shall be entitled to one
vote for each share held by such holders.
Whenever
there shall have been paid, or declared and set aside for payment, to the
holders of the outstanding shares of any class or series of stock having
preference over the Common Stock as to the payment of dividends, the full amount
of dividends and sinking fund or retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
Common Stock, then dividends may be paid on the Common Stock, and on any class
or series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when and as
declared by the board of directors of the Corporation.
In the
event of any liquidation, dissolution or winding up of the Corporation, after
there shall have been paid, or declared and set aside for payment, to the
holders of the outstanding shares of any class having preference over
the Common Stock in any such event, the full preferential amounts to which they
are respectively entitled, the holders of the Common Stock and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each
share of Common Stock shall have the same relative powers, preferences and
rights as, and shall be identical in all respects with, all the other shares of
Common Stock of the Corporation.
D. Serial Preferred
Stock. Shares of Preferred Stock not at the time designated as
shares of a particular series pursuant to this Article (V)(D) or any other
provision of these Articles of Incorporation may be issued from time to time in
one or more additional series. The board of directors may determine,
in whole or in part, the preferences, voting powers, qualifications and special
or relative rights or privileges of any such series before the issuance of any
shares of that series. The board of directors shall determine the
number of shares constituting each series of Preferred Stock and each series
shall have a distinguishing designation. Each share of each series of
serial preferred stock shall have the same relative powers, preferences and
rights as, and shall be identical in all respects with, all the other shares of
the Corporation of the same series, except the times from which dividends on
shares which may be issued from time to time of any such series may begin to
accrue.
E. Series A
Convertible Preferred Stock. There shall be a series of
Convertible Preferred Stock designated as “Series A Convertible Preferred
Stock.” Such series is referred to herein as the “Series A Preferred
Stock.”
1. Amount. The
number of shares constituting Series A Preferred Stock shall be
4,500,000.
2. Stated
Capital. The amount to be represented in stated capital at all
times for each share of Convertible Preferred Stock shall be $.001.
3. Rank. All
shares of Convertible Preferred Stock shall rank prior to all of the
Corporation’s Common Stock, par value $.001 per share (the “Common Stock”), now
or hereafter issued, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
4. Dividends. No
dividends shall be payable to the holder of shares of Convertible Preferred
Stock.
5. Liquidation
Preference.
(a) The
liquidation value of shares of this Series, in case of the voluntary or
involuntary liquidation, dissolution or winding-up of the Company, shall be
$.001 per share.
(b) In
the event of any voluntary or involuntary liquidation, dissolution or winding-up
of the Company, the holders of shares of this Series shall be entitled to
receive the liquidation value of such shares held by them until the liquidation
value of all shares of Convertible Preferred Stock shall have been paid in
full. Upon payment in full of the liquidation value to which the
holders of shares of the shares of Convertible Preferred Stock are entitled, the
holders of shares of this Series will not be entitled to any further
participation in any distribution of assets by the Company.
(c)
Neither a consolidation or merger of the Company with or into any other
corporation, nor a merger of any other corporation with or into the Company, nor
a sale or transfer of all or any part of the Company's assets for cash or
securities or other property shall be considered a liquidation, dissolution or
winding-up of the Company within the meaning of this Paragraph 5.
6. Voting
Rights. Except as otherwise required by law, each share of
outstanding Convertible Preferred Stock shall entitle the holder thereof to vote
on each matter submitted to a vote of the stockholders of the Corporation and to
have the number of votes equal to the number (including any fraction) of shares
of Common Stock into which such share of Convertible Preferred Stock is then, or
in the future if shareholder vote is within the 1st
anniversary of the issue date of Convertible Preferred Stock, convertible
pursuant to the provisions hereof at the record date for the determination of
shareholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders becomes effective. Except as otherwise required by law
or by these Articles, the holders of shares of Common Stock and Convertible
Preferred Stock shall vote together and not as separate classes.
7. No
Redemption. The shares of Convertible Preferred Stock are not
redeemable.
8. Conversion
Provisions.
(a) Conversion at Option of the
Holders. Provided that, and only to the extent that, the
Corporation has a sufficient number of shares of authorized but unissued and
unreserved Common Stock available to issue upon conversion, each share of
Convertible Preferred Stock shall be convertible, at the option of the holder
thereof, at any time on or after the date of issue, into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided, initially at the rate of 9.6 shares of Common Stock for
each full share of Convertible Preferred Stock (“Conversion
Ratio”).
For the
purpose of these Articles, the term “Common Stock” shall initially mean the
class designated as Common Stock, par value $.001 per share, of the Corporation
as of February 1, 2008 subject to adjustment as hereinafter
provided.
(b) Mechanics of
Conversion. Any holder of shares of Convertible Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate or certificates for such shares of Convertible Preferred Stock at
the office of the transfer agent for the Convertible Preferred Stock, which
certificate or certificates, if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer to the Corporation or in blank, accompanied by irrevocable written
notice to the Corporation that the holder elects so to convert such shares of
Convertible Preferred Stock and specifying the name or names (with address) in
which a certificate or certificates for Common Stock are to be
issued.
(c) Conversion Ratio. The
Conversion Ratio shall be subject to adjustment as follows:
(i) In
case the Company shall (A) pay a dividend or make a distribution in Common
Stock, or (B) subdivide or reclassify its outstanding shares of Common Stock
into a greater, but not smaller, number of shares, the Conversion Ratio in
effect immediately prior thereto shall be adjusted retroactively as provided
below so that the Conversion Ratio thereafter shall be by multiplying the
Conversion Ratio at which such shares of this Series were theretofore
convertible by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding immediately following such action and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior thereto. Such adjustment shall be made whenever any event
listed above shall occur and shall become effective retroactively immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision or
reclassification. In the event of a subdivision or reclassification of
Common Stock into a smaller number of shares, the Conversion Ratio shall not be
adjusted.
(ii) In
case the Company shall issue rights or warrants to all holders of its Common
Stock entitling them (for a period expiring within 45 days after the record date
therefore) to subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share of Common Stock (as
determined in accordance with the provisions of subclause (iv) of this clause
(d)) at the record date therefore (the “Current Market Price”), or in case the
Company shall issue other securities convertible into or exchangeable for Common
Stock for a consideration per share of Common Stock deliverable upon conversion
or exchange thereof less than the Current Market Price; then the Conversion
Ratio in effect immediately prior thereto shall be adjusted retroactively as
provided below so that the Conversion Ratio therefore shall be equal to the
price determined by multiplying the Conversion Ratio at which shares of this
Series were theretofore convertible by a fraction of which the denominator shall
be the number of shares of Common Stock outstanding on the date of issuance of
such convertible or exchangeable securities, rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase and of
which the numerator shall be the number of shares of Common Stock outstanding on
the date of issuance of such shares, convertible or exchangeable securities,
rights or warrants plus the number of additional shares of Common Stock which
the aggregate offering price of the number of shares of Common Stock so offered
would purchase at the Current Market Price per share of Common Stock (as
determined in accordance with the provisions of subclause (iv) of this clause
(d). Such adjustment shall be made whenever such convertible or
exchangeable securities rights or warrants are issued, and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such securities. However upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Conversion Ratio pursuant to this
subclause (ii), if any such right or warrant shall expire and shall not have
been exercised, the Conversion Ratio shall be recomputed immediately upon such
expiration and effective immediately upon such expiration shall be increased to
the price it would have been (but reflecting any other adjustments to the
Conversion Ratio made pursuant to the provisions of this clause (d) after the
issuance of such rights or warrants) had the adjustment of the Conversion Ratio
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iii) In
case the Company shall distribute to all holders of its Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) shares of capital stock (other than
Common Stock), evidences of its indebtedness or assets (excluding cash
dividends) or rights to subscribe (excluding those referred to in subclause (ii)
of this clause (d)), then in each such case the number of shares of Common Stock
into which each share of this Series shall thereafter be convertible shall be
determined by multiplying the number of shares of Common Stock into which such
share of this Series was theretofore convertible by a fraction of which the
numerator shall be the number of outstanding shares of Common Stock multiplied
by the Current Market Price per share of Common Stock (as determined in
accordance with the provisions of subclause (iv) of this clause (d)) on the date
of such distribution and of which the denominator shall be the product of the
number of outstanding shares of Common Stock and the Current Market Price per
share of Common Stock, less the aggregate fair market value (as determined by
the Board of Directors of the Company, whose determination shall be conclusive,
and described in a statement filed with the transfer agent for the shares of
this Series) of the capital stock, assets or evidences of indebtedness so
distributed or of such subscription rights. Such adjustment shall be
made whenever any such distribution is made, and shall become effective
retroactively immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iv) For
the purpose of any computation under subclause (ii) and (iii) of this clause
(d), the Current Market Price per share of Common Stock at any date shall be
deemed to be the average Sale Price for the thirty consecutive trading days
commencing forty-five trading days before the day in question. As
used herein, “Sale Price” means the closing sales price of the Common Stock (or
if no sale price is reported, the average of the high and low bid prices) as
reported by the principal national or regional stock exchange on which the
Common Stock is listed or, if the Common Stock is not listed on a national or
regional stock exchange, as reported by national Association of Securities
Dealers Automated Quotation System and if not so reported then as reported by
the Electronic Bulletin Board or the National Quotation Bureau
Incorporated.
(v) No
adjustment in the Conversion Ratio shall be required unless such adjustment
would require an increase of at least 1% in the price then in effect; provided,
however, that any adjustments which by reason of this subclause (v) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this paragraph 8 shall
be made to the nearest cent.
(vi) In
the event that, at any time as a result of an adjustment made pursuant to
subclause (i) or subclause (iii) of this clause (d), the holder of any share of
this Series thereafter surrendered for conversion shall become entitled to
receive any shares of the Company other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon conversion of any
share of this Series shall be subject to adjustment from time to time in a
manner and on the terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in subclauses (i) through (v) of this
clause (d), and the other provisions of this clause (d) with respect to the
Common Stock shall apply on like terms to any such other shares.
(vii)
Whenever the conversion rate is adjusted, as herein provided, the Company shall
promptly file with the transfer agent for this Series, a certificate of an
officer of the Company setting forth the conversion rate after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and a
computation thereof. Such certificate shall be conclusive evidence of
the correctness of such adjustment. The Company shall promptly cause
a notice of the adjusted conversion rate to be mailed to each registered holder
of shares of this Series.
(d) If
any of the following events occur, namely (i) any reclassification or change
(other than a combination of reclassification into a smaller number of shares)
of outstanding shares of Common Stock issuable upon conversion of shares of this
Series (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision) or (ii) any
consolidation or merger to which the Company is a party (other than a
consolidation or merger to which the Company is the continuing corporation and
which does not result in any classification of, or change (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision) in, outstanding shares of Common Stock);
then the Company or such successor, as the case may be, shall provide in its
Certificate of Incorporation that each share of this Series shall be convertible
into the kind and amount of shares of stock and other securities or property
receivable upon such reclassification, change, consolidation or merger by a
holder of the number of shares of Common Stock issuable upon conversion of each
such share of this Series immediately prior to such reclassification, change,
consolidation or merger. Such Certificate of Incorporation shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in clause (d). The
Company shall cause notice of the execution of any such event contemplated by
this paragraph to be mailed to each holder of shares of this Series as soon as
practicable.
The above
provisions of this clause (d) shall similarly apply to successive
reclassifications, consolidations and mergers.
(e) By
duly adopted resolution of its board of directors, the Company at any time may
increase the Conversion Ratio, temporarily or otherwise, by any amount, but in
no event shall such Conversion Ratio require the issuance of Common Stock for
less than the par value of the Common Stock at the time such reduction is
made.
Whenever
the Conversion Ratio is increased pursuant to this subclause (e), the Company
shall mail to the holders a notice of the increased Conversion
Ratio. The notice shall state the increased Conversion Ratio and the
period it will be in effect.
An
increase in the Conversion Ratio does not change or adjust the Conversion Ratio
otherwise in effect for purposes of subclauses (d) and (e) of this paragraph
8.
9. Protective
Provisions.
(a) Reservation of Shares;
Transfer Taxes; Etc. The Corporation shall at all times serve
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of the Convertible Preferred Stock, such
number of shares of its Common Stock free of preemptive rights as shall from
time to time be sufficient to effect the conversion of all shares of Convertible
Preferred Stock from time to time outstanding. The Corporation shall
from time to time, in accordance with the laws of the State of Nevada, increase
the authorized number of shares of Common Stock if at any time the number of
shares of Common Stock not outstanding shall not be sufficient to permit the
conversion of all the then outstanding shares of Convertible Preferred
Stock.
If any
shares of Common Stock required to be reserved for purposes of conversion of the
Convertible Preferred Stock hereunder require registration with or approval of
any governmental authority under any Federal or State law before such shares may
be issued upon conversion, the Corporation will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly registered or
approved, as the case may be. If the Common Stock is listed on the
New York Stock Exchange or any other national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock.
The
Corporation will pay any and all issue or other taxes that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of the
Convertible Preferred Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Common Stock (or other securities or assets) in a
name other than that which the shares of Convertible Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Corporation the
amount of such tax or has established, to the satisfaction of the Corporation,
that such tax has been paid.
(b) Class Voting
Rights. So long as the Convertible Preferred Stock is
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of at least a majority of all outstanding Convertible Preferred
Stock voting separately as a class, (i) Amend, alter or repeal (by merger or
otherwise) any provision of the Articles of Incorporation or the By-Laws of the
Corporation, as amended, so as adversely to affect the relative rights,
preferences, qualifications, limitations or restrictions of the Convertible
Preferred Stock, (ii) authorize or issue, or increase the authorized amount of,
any additional class or series of stock, or any security convertible into stock
of such class or series, ranking prior to the Convertible Preferred Stock in
respect of the payment of dividends or upon liquidation, dissolution or winding
up of the Corporation or (iii) effect any reclassification of the Convertible
Preferred Stock. A class vote on the part of the Convertible
Preferred Stock shall, without limitation, specifically not be deemed to be
required (except as otherwise required by law or resolution of the Corporation’s
Board of Directors) in connection with: (a) the authorization, issuance or
increase in the authorized amount of any shares of any other class or series of
stock which ranks junior to, or on a parity with, the Convertible Preferred
Stock in respect of the payment of dividends and distributions upon liquidation,
dissolution or winding up of the Corporation; or (b) the authorization, issuance
or increase in the amount of any bonds, mortgages, debentures or other
obligations of the Corporation.
The
affirmative vote or consent of the holders of a majority of the outstanding
Convertible Preferred Stock, voting or consenting separately as a class, shall
be required to (a) authorize any sale, lease or conveyance of all or
substantially all of the assets of the Corporation, or (b) approve any merger,
consolidation or compulsory share exchange of the Corporation with or into any
other person unless (i) the terms of such merger, consolidation or compulsory
share exchange do not provide for a change in the terms of the Convertible
Preferred Stock and (ii) the Convertible Preferred Stock is, after such merger,
consolidation or compulsory share exchange on a parity with or prior to any
other class or series of capital stock authorized by the surviving corporation
as to dividends and upon liquidation, dissolution or winding up other than any
class or series of stock of the Corporation prior to the Convertible Preferred
Stock as may have been created with the affirmative vote or consent of the
holders of at least 66-2/3% of the Convertible Preferred Stock (or other than a
class or series into which such prior stock is converted as a result of such
merger, consolidation or share exchange).
10. Outstanding
Shares. For purposes of these Articles, all shares of
Convertible Preferred Stock shall be deemed outstanding except (i) from the date
of surrender of certificates representing shares of Convertible Preferred Stock,
all shares of Convertible Preferred Stock converted into Common Stock; (ii) the
effective date of a recapitalization referred to in clause 8(c), and (iii) from
the date of registration of transfer, all shares of Convertible Preferred Stock
held of record by the Corporation or any subsidiary of the
Corporation.
11. Certain
Definitions. As used in these Articles, the following terms
shall have the following respective meanings:
“Affiliate” of any specified
person means any other person directly or indirectly controlling or controlled
by or under common control with such specified person. For purposes
of this definition, “control” when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities or otherwise; and
the term “controlling” and “controlled” having meanings correlative to the
foregoing.
“Common Shares” shall mean any
stock of the Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company and which is not subject to redemption
by the Company. However, Common Shares issuable upon conversion of
shares of this series shall include only shares of the class designated as
common Shares as of the original date of issuance of shares of this Series, or
shares of the Company of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from such reclassifications bears to the total
number of shares of all classes resulting from all such
reclassifications.
ARTICLE
VI
PREEMPTIVE
RIGHTS
No holder
of any of the shares of any class or series of stock or of options, warrants or
other rights to purchase shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive right to purchase or
subscribe for any unissued stock of any class or series, or any unissued bonds,
certificates of indebtedness, debentures or other securities convertible into or
exchangeable for stock or carrying any right to purchase stock may be issued
pursuant to resolution of the board of directors of the Corporation to such
persons, firms, corporations or associations, whether or not holders thereof,
and upon such terms as may be deemed advisable by the board of directors in the
exercise of its sole discretion.
ARTICLE
VII
REPURCHASE
OF SHARES
The
Corporation may from time to time, pursuant to authorization by the board of
directors of the Corporation and without action by the stockholders, purchase or
otherwise acquire shares of any class, bonds, debentures, notes, scrip,
warrants, obligations, evidences or indebtedness, or other securities of the
Corporation in such manner, upon such terms, and in such amounts as the board of
directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE
VIII
MEETINGS
OF STOCKHOLDERS; CUMULATIVE VOTING
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A.
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No
action that is required or permitted to be taken by the stockholders of
the Corporation at any annual or special meeting of stockholders may be
effected by written consent of stockholders in lieu of a meeting of
stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the board of directors of the
Corporation.
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B.
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Special
meeting of the stockholders of the Corporation for any purpose or purposes
may be called at any time by the board of directors of the Corporation, or
by a committee of the board of directors which has been duly designated by
the board of directors and whose powers and authorities, as provided in a
resolution of the board of directors or in the bylaws of the Corporation,
include the power and authority to call such meetings but such special
meetings may not be called by another person or
persons.
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C.
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There
shall be no cumulative voting by stockholders of any class or series in
the election of directors of the
Corporation.
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D.
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Meetings
of stockholders may be held at such place as the bylaws may
provide.
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ARTICLE
IX
NOTICE
FOR NOMINATIONS AND PROPOSALS
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A.
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Nominations
for the election of directors and proposals for any new business to be
taken up at any annual or special meeting of stockholders may be made by
the board of directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of directors. In
order for a stockholder of the Corporation to make any such nominations
and/or proposals at an annual meeting or such proposals at a special
meeting, he or she shall give notice thereof in writing, delivered or
mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation of not less than thirty days or more than
sixty days prior to any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary of
the Corporation not later than the close of the tenth day following the
day on which notice of the meeting was mailed to stockholders. Each such
notice given by a stockholder with respect to nominations for the election
of directors shall set forth (1) the name, age, business address and, if
known, residence address of each nominee proposed in such notice, (2) the
principal occupation or employment of each such nominee, and (3) the
number of shares of stock of the Corporation which are beneficially owned
by each such nominee. In addition, the stockholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporation.
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B.
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Each
such notice given by a stockholder to the Secretary with respect to
business proposals to bring before a meeting shall set forth in writing as
to each matter: (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at
the meeting; (2) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (3) the class and
number of shares of the Corporation which are beneficially owned by the
stockholder; and (4) any material interest of the stockholder in such
business. Notwithstanding anything in these Articles to the contrary, no
business shall be conducted at the meeting except in accordance with the
procedures set forth in this
Article.
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C.
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The
Chairman of the annual or special meeting of stockholders may, if the
facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if
he should so determine, he shall so declare to the meeting and the
defective nomination or proposal shall be disregarded and laid over for
action at the next succeeding adjourned, special or annual meeting of the
stockholders taking place thirty days or more thereafter. This provision
shall not require the holding of any adjourned or special meeting of
stockholders for the purpose of considering such defective nomination or
proposal.
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ARTICLE
X
DIRECTORS
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A.
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Initial Board of
Directors. The initial board of directors shall consist
of one person, who shall serve until the initial meeting of directors and
the election of his replacement. The initial director shall
be:
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William
L. Sklar 12000 Westheimer Rd Ste 340, Houston, TX
77077-6531
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B.
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Number;
Vacancies. The number of directors of the Corporation
shall be such number, not less than one nor more than 15 (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation), as shall be provided from time to time in a resolution
adopted by the board of directors, provided that no decrease in the number
of directors shall have the effect of shortening the term of any incumbent
director, and provided further that no action shall be taken to decrease
or increase the number of directors from time to time unless at least
two-thirds of the directors then in office shall concur in said
action. Exclusive of directors, if any, elected by holders of
preferred stock, vacancies in the board of directors of the Corporation,
however caused, and newly created directorships shall be filled by a vote
of two-thirds of the directors then in office, whether or not a quorum,
and any director so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which the
director has been chosen expires and when the director's successor is
elected and qualified. The board of directors shall be classified in
accordance with the provisions of Section B of this Article
X.
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C.
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Classified
Board. The board of directors of the Corporation (other
than directors which may be elected by the holders of preferred stock)
shall be divided into three classes of directors which shall be designated
Class I, Class II and Class III. The members of each class shall be
elected for a term of three years and until their successors are elected
and qualified. Such classes shall be as nearly equal in number as the then
total number of directors constituting the entire board of directors shall
permit, exclusive of directors, if any, elected by holders of preferred
stock, with the terms of office of all members of one class expiring each
year. Should the number of directors not be equally divisible by three,
the excess director or directors shall be assigned to Classes I or II as
follows: (1) if there shall be an excess of one directorship over the
number equally divisible by three, such extra directorship shall be
classified in Class I; and (2) if there be an excess of two directorships
over a number equally divisible by three, one shall be classified in Class
I and the other in Class II. At the first meeting of the board of
directors of the Corporation, directors of Class I shall be elected to
hold office for a term expiring at the first annual meeting of
stockholders, directors of Class II shall be elected to hold office for a
term expiring at the second succeeding annual meeting of stockholders and
directors of Class III shall be elected to hold office for a term expiring
at the third succeeding annual meeting thereafter. Thereafter, at each
succeeding annual meeting, directors of each class shall be elected for
three-year terms. Notwithstanding the foregoing, the director whose term
shall expire at any annual meeting shall continue to serve until such time
as his successor shall have been duly elected and shall have qualified
unless his position on the board of directors shall have been abolished by
action taken to reduce the size of the board of directors prior to said
meeting.
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D.
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Increase and Reduction in
Directors. Should the number of directors of the
Corporation be reduced, the directorship(s) eliminated shall be allocated
among classes as appropriate so that the number of directors in each class
is as specified in the position(s) to be abolished. Notwithstanding the
foregoing, no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Should the
number of directors of the Corporation be increased, other than directors
which may be elected by the holders of preferred stock, the additional
directorships shall be allocated among classes as appropriate so that the
number of directors in each class is as specified in the immediately
preceding paragraph.
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E.
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Directors Elected by Preferred
Stockholders. Whenever the holders of any one or more
series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation,
the board of directors shall include said directors so elected in addition
to the number of directors fixed as provided in this Article
X. Notwithstanding the foregoing, and except as otherwise may
be required by law, whenever the holders of any one or more series of
preferred stock of the Corporation elect one or more directors of the
Corporation, the terms of the director or directors elected by such
holders shall expire at the next succeeding annual meeting of
stockholders.
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F.
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In
furtherance, but not in limitation of the powers conferred by statute, the
board of directors is expressly authorized to do the
following:
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(a)
Designate one (1) or more committees, each committee to consist of one or more
of the directors of the Corporation and such number of natural persons who are
not directors as the board of directors shall designate, which to the extent
provided in the Resolution, or in the by-laws of the Corporation, shall have and
may exercise the powers of the board of directors in the management of the
business and affairs of the Corporation.
(b) As
provided by Nevada Revised Statutes 78.140, without repeating the section in
full here, the same is adopted and no contract or other transaction between this
Corporation and any of its officers, agents or directors shall be deemed void or
voidable solely for that reason. The balance of the provisions of the
code section cited, as it now exists, allowing such transactions, is hereby
incorporated into this Article as though more fully set forth, and such Article
shall be read and interpreted to provide the greatest latitude in its
application.
(c) As
provided by Nevada Revised Statutes 78.207, without repeating the section in
full here, the board of directors shall have the authority to change the number
of shares of any class or series, if any, of authorized stock by increasing or
decreasing the number of authorized shares of the class or series and
correspondingly increasing or decreasing the number of issued and outstanding
shares of the same class or series held by each stockholder of record at the
effective date and time of the change by a resolution adopted by the board of
directors, without obtaining the approval of the stockholders.
(d) If a
proposed increase or decrease in the number of issued and outstanding shares of
any class or series would adversely alter or change any preference or any
relative or other right given to any other class or series of outstanding
shares, then the decrease must be approved by the vote, in addition to any vote
required, of the holders of shares representing a majority of the voting power
of each class or series whose preference or rights are adversely affected by the
increase or decrease, regardless of limitations or restrictions on the voting
power thereof. The increase or decrease does not have to be approved
by the vote of the holders of shares representing a majority of the voting power
in each class or series whose preference or rights are not adversely affected by
the increase or decrease.
(e)
Special meetings of the stockholders may be called only by the board of
directors or a committee of the board of directors that is delegated the power
to call special meetings by the board of directors.
(f) Change
the name of the Corporation at any time and from time to time to any name
authorized by Nevada Revised Statutes 78.039.
ARTICLE
XI
REMOVAL
OF DIRECTORS
Notwithstanding
any other provision of these Articles or the bylaws of the Corporation, any
director or all the directors of a single class (but not the entire board of
directors) of the Corporation may be removed, at any time, but only for cause
and only by the affirmative vote of the holders of at least 75% of the voting
power of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that
purpose. Notwithstanding the foregoing, whenever the holders of any
one or more series of preferred stock of the Corporation shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the preceding provisions of this Article XI shall not apply with respect to the
director or directors elected by such holders of preferred stock.
ARTICLE
XII
ACQUISITION
OF CAPITAL STOCK
A. Definitions. For the purpose
of this Article:
(1) The
term “Act” shall mean the Securities Exchange Act of 1934, as amended, and any
successor statute.
(2) The
term “acting in concert” shall mean (i) knowing participation in a joint
activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, and (ii) a combination or pooling of voting or
other interest in the Corporation's outstanding shares of capitol stock for a
common purpose, pursuant to any contract, understanding, relationship, agreement
or other arrangement, whether written or otherwise.
(3) The
term “acquire,” “acquisition” or “acquiring” with respect to the acquisition of
any security of the Corporation shall refer to the acquisition of such security
by any means whatsoever, including without limitation, an acquisition of such
security by gift, by operation of law, by will or by intestacy, whether
voluntarily or involuntarily.
(4) The
term “Code” means the Internal Revenue Code of 1986, as amended, and any
successor statute.
(5) The
term “Common Stock” means all Common Stock of the Corporation and any other
securities issued by the Corporation which are treated as stock for purposes of
Section 382 of the Code.
(6) The
term “Fair Market Value” of the Common Stock shall mean the average of the daily
closing prices of the Common Stock for 15 consecutive trading days commencing 20
trading days before the date of such computation. The closing price is the last
reported sale price on the principal securities exchange on which the Common
Stock is listed or, if the Common Stock is not listed on any national securities
exchange, the NASDAQ National Marked System, or, if the Common Stock is not
designated for trading on the NASDAQ National Market System, the average of the
closing bid and asked prices as reported on NASDAQ or, if not so reported, as
furnished by the National Quotation Bureau Incorporated. In the absence of such
a quotation, the Corporation shall determine the current market price on a
reasonable and appropriate basis of the average of the daily closing prices for
15 consecutive trading days commencing 20 trading days before the date of such
computation.
(7)
The term “own,” “owing,” “ownership” or “owning” refer to the ownership of
securities within the meaning of Section 382 of the Code after taking into
account the attribution rules of Section 382(l)(3) of the Code and the
regulations promulgated hereunder.
(8) The
term “Person” shall mean any individual, firm, corporation, partnership, joint
venture or other entity and shall include any group composed of such person and
any other person with whom such person or any Affiliate or Associate (as those
terms are defined in Rule 12b-2 of the General Rules and Regulations under the
Act) of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purposes of acquiring, holding, voting or disposing of
Common Stock, and any other person who is a member of such group.
(9) The
term “Transfer Agent” shall mean the transfer agent with respect to the Common
Stock nominated and appointed by the board of directors from time to
time.
B. Acquisition of Control
Shares.
(1) If,
at any time during the ten years from the effective date of these Articles, any
Person shall acquire the beneficial ownership (as determined pursuant to Rules
13d-3 and 13d-5 under the Act) of more than 20% of any class of Common Stock,
then the record holders of Common Stock beneficially owned by such acquiring
Person shall have only the voting rights set forth in this paragraph B on any
matter requiring their vote or consent. With respect to each vote in excess of
20% of the voting power of the outstanding shares of Common Stock which such
record holders would otherwise be entitled to cast without giving effect to this
paragraph B, the record holders in the aggregate shall be entitled to cast only
one-hundredth of a vote. A Person who is a record owner of shares of Common
Stock that are beneficially owned simultaneously by more than one person shall
have, with respect to such shares, the right to cast the least number of votes
that such person would be entitled to cast under this paragraph B by virtue of
such shares being so beneficially owned by any of such acquiring Persons. The
effect of the reduction in voting power required by this paragraph B shall be
given effect in determination the presence of a quorum for purposes of convening
a meeting of the stockholders of the Corporation.
(2) The
limitation on voting rights prescribed by this paragraph B shall terminate and
be of no force and effect as of the earliest to occur of: (i) the date that any
person becomes the beneficial owner of shares of stock representing at least 75%
of the total number of votes entitled to be cast in respect of all outstanding
shares of stock, before giving effect to the reduction in votes prescribed by
this paragraph B; or (ii) the date (the “Reference Date”) one day prior to the
date on which, as a result of such limitation of voting rights, the Common Stock
will be delisted from any exchange (including by ceasing to be temporarily or
provisionally authorized for listing with) the New York Stock Exchange (the
“NYSE”) or the American Stock Exchange (the “AMEX”), or be no longer authorized
for inclusion (including by ceasing to be provisionally or temporarily
authorized for inclusion) on the National Association of Securities Dealers,
Inc. Automated Quotation System/National Market System (“NASDAQ/NMS”); provided,
however, that (a) such termination shall not occur until the earlier of (x) the
90th day after the Reference Date or (y) the first day on or after a Reference
Date that there is not pending a proceeding under the rules of the NYSE, the
AMEX or the NASDAQ/NMS or any other administrative or judicial proceeding
challenging such delisting or removal of authorization of the Common Stock, an
application for listing of the Common stock with the NYSE or the AMEX or for
authorization for the Common Stock to be including on the
NASDAQ/NMS, or an appeal with respect to any such application, and (b) such
termination shall not occur by virtue of such delisting or lack of authorization
if on or prior to the earlier of the 90th day after the Reference Date or the
day on which no proceeding, application or appeal of the type described in (y)
above is pending, the Common Stock is approved for listing or continued listing
on the NYSE or the AMEX or authorized for inclusion or continued inclusion on
the NASDAQ/NMS (including any such approval or authorization which is temporary
or provisional). Nothing contained herein shall be construed so as to prevent
the Common Stock from continuing to be listed with the NYSE or AMEX or
continuing to be authorized for inclusion on the NASDAQ/NMS in the event that
the NYSE, AMEX or NASDAQ/NMS, as the case may be, adopts a rule or is governed
by an order, decree, ruling or regulation of the Securities and Exchange
Commission which provides in whole or in part that companies having Common Stock
with differential voting rights listed on the NYSE or the Amex or authorized for
inclusion on the NASDAQ/NMS may continue to be so listed or
included.
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C.
Exceptions. The
restrictions contained in this Article XII shall not apply to (1) any
underwriter or member of an underwriting or selling group involving a
public sale or resale of securities of the Corporation or a subsidiary
thereof; provided, however, that upon completion of the sale or resale of
such securities, no such underwriter or member of such selling group is a
beneficial owner of more than 4.9% of any class of equity security of the
Corporation, (2) any revocable proxy granted pursuant to a proxy
solicitation in compliance with section 14 of the Act by a stockholder of
the Corporation or (3) any employee benefit plans of the Corporation. In
addition, the Continuing Directors of the Corporation, the officers and
employees of the Corporation and its subsidiaries, the directors of
subsidiaries of the Corporation, the employee benefit plans of the
Corporation and its subsidiaries, entities organized or established by the
Corporation or any subsidiary thereof pursuant to the terms of such plans
and trustees and fiduciaries with respect to such plans acting in such
capacity shall not be deemed to be a group with respect to their
beneficial ownership of voting stock of the Corporation solely by virtue
of their being directors, officers or employees of the Corporation or a
subsidiary thereof or by virtue of the Continuing Directors of the
Corporation, the officers and employees of the Corporation and its
subsidiaries and the directors of subsidiaries of the Corporation being
fiduciaries or beneficiaries of an employee benefit plan of the
Corporation or a subsidiary of the Corporation. Notwithstanding the
foregoing, no director, officer or employee of the Corporation or any of
its subsidiaries or group of any of them shall be exempt from the
provisions of this Article XII should any such person or group become a
beneficial owner of more than 20% of any class of equity security of the
Corporation.
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D.
Construction. A
majority of the Continuing Directors, as defined in Article XIII, shall
have the power to construe and apply the provisions of paragraphs B, C and
D of this Article XII and to make all determinations necessary or
desirable to implement such provisions, including but not limited to
matters with respect to (1) the number of shares beneficially owned by any
person, (2) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition
of beneficial ownership, (3) the application of any other definition or
operative provision of this Article XII to the given facts or (4) any
other matter relating to the applicability or effect of paragraphs B, C
and D of this Article XII. Any constructions, applications, or
determinations made by the Continuing Directors pursuant to paragraphs B,
C and D of this Article XII in good faith and on the basis of such
information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
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E.
Partial
Invalidity. If any provision of this Article XII or any application
of any such provision is determined to be invalid by any federal or state
court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision
shall be affected only to the extent necessary to comply with the
determination of such court.
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ARTICLE
XIII
APPROVAL
OF CERTAIN BUSINESS COMBINATIONS
The
stockholder vote required to approve Business Combinations (as hereinafter
defined) shall be as set forth in this section.
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A.
(1) Except as otherwise expressly provided in this Article XIII, and in
addition to any other vote required by law, the affirmative vote required
by law, the affirmative vote of the holders of (i) at least 75% of the
voting power of the outstanding shares entitled to vote thereon (and, if
any class or series of shares is entitled to vote thereon separately the
affirmative vote of the holders of at least 75% of the outstanding shares
of each such class or series), and (ii) at least a majority of the
outstanding shares entitled to vote thereon, not including shares deemed
beneficially owned by a Related Person (as hereinafter defined), shall be
required in order to authorize (a) any merger or consolidation of the
Corporation or a subsidiary of the Corporation with or into a Related
person (as hereinafter defined); (b) any sale, lease, exchange, transfer
or other disposition, including without limitation, a mortgage or pledge,
of all or any Substantial Part (as hereinafter defined) of the assets of
the Corporation (including without limitation any voting securities of a
subsidiary) or of a subsidiary, to a Related Person; (c) any merger or
consolidation of a Related Person with or into the Corporation or a
subsidiary of the Corporation; (d) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a subsidiary of the Corporation; (e)
the issuance of any securities of the Corporation or a subsidiary of the
Corporation to a Related Person other than on a pro rata basis to all
holders of capital stock of the Corporation of the same class or classes
held by the Related person, pursuant to a stock split, stock dividend or
distribution or warrants or rights, and other than in connection with the
exercise or conversion of securities exercisable for or convertible into
securities of the Corporation or any of its subsidiaries which securities
have been distributed pro rata to all holders of capital stock of the
Corporation; (f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person; (g) any
reclassification of the common stock of the Corporation, or any
recapitalization involving the common stock of the Corporation or any
similar transaction (whether or not with or into or otherwise involving a
Related Person) that has the effect directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
subsidiary that are directly or indirectly owned by any Related Person;
and (h) any agreement, contract or other arrangement providing for any of
the transactions described in this Article
XIII.
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(2) Such
affirmative vote shall be required notwithstanding any other provision of these
Articles, any provision of law, or any agreement with any regulatory agency or
national securities exchange which might otherwise permit a lesser vote or no
vote; provided, however, that in no instance shall the provisions of this
Article XIII require the vote of greater than 85% of the voting power of the
outstanding shares entitled to vote thereon for the approval of a Business
Combination.
(3) The
term “Business Combination” as used in this Article XIII shall mean any
transaction which is referred to in any one or more of subparagraphs A(1)(a)
through (h) above.
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B.
The provisions of paragraph A shall not be applicable to any particular
Business Combination, and such Business Combination shall require only
such affirmative vote as is required by any other provision of these
Articles, any provision of law, or any agreement with any regulatory
agency or national securities exchange, if the Business Combination shall
have been approved in advance by a two-thirds vote of the Continuing
Directors (as hereinafter defined; provided, however, that such approval
shall only be effective if obtained at a meeting at which a continuing
Director Quorum (as hereinafter defined) is
present.
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C.
For the purposes of this Article XIII the following definitions
apply:
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(1) The
term “Related Person” shall mean and include (i) any individual, corporation,
partnership or other person or entity which together with its “affiliates” or
“associates” (as those terms are defined in the Act) “beneficially owns” (as
that there is defined in the Act) in the aggregate 10% or more of the
outstanding shares of the common stock of the Corporation; and (ii) any
“affiliate” or “associate” (as those terms are defined in the Act) of any such
individual, Corporation, partnership or other person or entity; provided,
however, that the term “Related Person” shall not include the Corporation, any
subsidiary of the Corporation, any employee benefit plan, employee stock plan of
the Corporation or of any subsidiary of the Corporation, or any trust
established by the Corporation in connection with the foregoing, or any person
or entity organized, appointed, established or holding shares of capital stock
of the Corporation for or pursuant to the terms of any such plan, nor shall such
term encompass shares of capital stock of the Corporation held by any of the
foregoing (whether or not held in a fiduciary capacity or otherwise). Without
limitation, any shares of the common stock of the Corporation which any Related
Person has the right to acquire pursuant to any agreement, or upon exercise or
conversion rights, warrants or options, or otherwise, shall be deemed
“beneficially owned” by such Related Person.
(2) The
term “Substantial Part” shall mean more than 25% of the total assets of the
entity at issue, as of the end of its most recent fiscal year ending prior to
the time the determination is made.
(3) The
term “Continuing Director” shall mean any member of the board of directors of
the Corporation who is unaffiliated with and who is not the Related Person and
was a member of the board prior to the time that the Related Person became a
Related Person, and any successor of a Continuing Director who is unaffiliated
with and who is not the Related Person and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the board. (4)
The term “Continuing Director Quorum” shall mean two-thirds of the Continuing
Directors capable of exercising the powers conferred on them.
ARTICLE
XIV
EVALUATION
OF BUSINESS COMBINATIONS
In
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation and of the stockholders, when evaluating a Business
Combination (as defined in Article XIII) or a tender or exchange offer, the
board of directors of the Corporation shall, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant; (A) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees and customers, creditors and other
elements of the communities in which the Corporation and its subsidiaries
operate or are located; (B) the business and financial condition and earnings
prospects of the acquiring person or entity, including, but not limited to, debt
service and other existing financial obligations, financial obligations to be
incurred in connection with the acquisition and other likely financial
obligations of the acquiring person or entity and the possible effect of such
conditions upon the Corporation and its subsidiaries and the other elements of
the communities in which the Corporation and its subsidiaries operate or are
located; and (C) the competence, experience, and integrity of the acquiring
person or entity and its or their management.
ARTICLE
XV
INDEMNIFICATION
Any
person who was or is a party or is or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee,
partner, trustee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise (including an employee benefit plan), shall be
entitled to be indemnified by the Corporation to the full extent then permitted
by law against expenses (including counsel fees and disbursements), judgments,
fines (including excise taxes assessed on a person with respect to an employee
benefit plan), and amounts paid in settlement incurred by him in connection with
such action, suit, or proceeding and, if so requested, the Corporation shall
advance (within two business days of such request) any and all such expenses to
the person indemnified; provided, however, that (i) the foregoing obligation of
the Company shall not apply to a claim that was commenced by the person
indemnified without the prior approval of the Board of
Directors. Such right of indemnification shall inure whether or not
the claim asserted is based on matters which antedate the adoption of this
Article XV. Such right of indemnification shall continue as to a
person who has ceased to be a director, officer, incorporator, employee,
partner, trustee, or agent and shall inure to the benefit of the heirs and
personal representatives of such a person. The indemnification
provided by this Article XV shall not be deemed exclusive of any other rights
which may be provided now or in the future under any provision currently in
effect or hereafter adopted of the bylaws, by any agreement, by vote of
stockholders, by resolution of disinterested directors, by provisions of law, or
otherwise.
ARTICLE
XVI
LIMITATIONS
ON DIRECTORS' LIABILITY
No
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except: (A) for acts or omissions that involve intentional
misconduct, fraud or a knowing violation of law; or (B) the payment of
distributions in violation of Nevada Revised Statutes Sec.78.300. If
the General Corporation law of the State of Nevada is amended after the date of
filing of these Articles to further eliminate or limit 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 General Corporation
Law of the State of Nevada, as so amended. Any repeal or modification of the
foregoing paragraph by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
ARTICLE
XVII
AMENDMENT
OF BYLAWS
In
furtherance and not in limitation of the powers conferred by statute, the board
of directors of the Corporation is expressly authorized to adopt, repeal, alter,
amend and rescind the bylaws of the Corporation by a vote of two-thirds of the
board of directors. Notwithstanding any other provision of these Articles or the
bylaws of the Corporation, and in addition to any affirmative vote required by
law (and notwithstanding the fact that some lesser percentage may be specified
by law), the bylaws shall be adopted, repealed, altered, amended or rescinded by
the stockholders of the Corporation only by the vote of the holders of not less
than 75% of the voting power of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the stockholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such meeting),
or, as set forth above, by the board of directors.
ARTICLE
XVIII
AMENDMENT
OF ARTICLES OF INCORPORATION
Subject
to the provisions hereof, the Corporation reserves the right to repeal, alter,
amend or rescind any provision contained in these Articles in the manner now or
hereafter prescribed by law, and all rights conferred on stockholders herein are
granted subject to this reservation. Notwithstanding the foregoing at any time
and from time to time, the provisions set forth in Articles VIII, IX, X, XI,
XII, XIII, XIV, XV, XVI, XVII and this Article XVIII may be repealed, altered,
amended or rescinded in any respect only if the same is approved by the
affirmative vote of the holders of not less than 75% of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting).