Notice, Proxy Statement and Proxy
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
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Definitive
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COGNITRONICS
CORPORATION
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COGNITRONICS
CORPORATION
3
CORPORATE
DRIVE
DANBURY,
CONNECTICUT
06810-4130
Notice
of Annual Meeting of Stockholders
December
14, 2006
To
the Stockholders:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Stockholders of Cognitronics Corporation
(the “Company”) will be held at the Best Western Royal Plaza Hotel, 181 Boston
Post Road W, Marlborough, Massachusetts on December 14, 2006, at 10:00 a.m.,
for
the following purposes:
1. |
To
elect six directors to the Board of
Directors.
|
2. |
To approve
the Reincorporation of the Company into the State of Delaware through
a
merger with a newly formed, wholly-owned Delaware subsidiary and
the terms
of the definitive agreements related
thereto.
|
3. |
To
amend the Company’s Certificate of Incorporation to change the Company’s
name from “Cognitronics Corporation” to “ThinkEngine Networks, Inc.” (in
the event Proposal 2 of this Proxy Statement is not duly adopted
and
approved).
|
4. |
To
approve the Company’s 1990 Stock Option Plan, as amended, including an
increase in the number of shares reserved for issuance thereunder
by
550,000.
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5. |
To
approve the Company’s Restricted Stock Plan, as amended, including an
increase in the number of shares reserved for issuance thereunder
by
300,000.
|
6. |
To
approve the Company’s Directors’ Stock Option Plan, as amended, including
an increase in the number of shares reserved for issuance thereunder
by
150,000.
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7. |
To
ratify the selection of Carlin, Charron & Rosen, LLP, an independent
registered public accounting
firm, as independent auditors for the Company for the year ending
December
31, 2006.
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8. |
To
conduct such other business as may properly come before the meeting,
including any adjournment
thereof.
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Only
holders of Common Stock of the Company of record at the close of business on
October 30, 2006 will be entitled to vote at the meeting or any adjournment
thereof.
A
proxy
statement and proxy are enclosed.
By
order
of the Board of Directors,
Secretary
November
10, 2006
YOUR
VOTE IS IMPORTANT
You
are urged to sign, date and promptly return your proxy in the enclosed
envelope.
COGNITRONICS
CORPORATION
Annual
Meeting of Stockholders
December
14, 2006
PROXY
STATEMENT
This
proxy statement is furnished to the stockholders of Cognitronics Corporation
(the “Company”) in connection with the solicitation of proxies for the Annual
Meeting of Stockholders to be held at the Best Western Royal Plaza Hotel, 181
Boston Post Road W, Marlborough, Massachusetts on December 14, 2006 at
10:00
a.m. and any adjournment thereof (the “Annual Meeting”).
The
enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of
the Company. Execution of the proxy will not affect a stockholder’s right to
attend the Annual Meeting and vote in person, and stockholders giving proxies
may revoke them at any time before they are exercised by a written revocation
or
by a duly exercised proxy bearing a later date delivered to the
Secretary of
the
Company. Proxies in the form enclosed, unless previously revoked, will be voted
at the Annual Meeting as set forth in the proxies or, if no choice is indicated,
in favor of each of the proposals outlined below. Should any matter other than
those indicated herein properly come before the Annual Meeting for a vote
(including any adjournment), the persons designated as proxies will vote thereon
in accordance with their best judgment. If any proposal has not received
sufficient votes for approval at the Annual Meeting, management will consider
one or more adjournments to permit additional voting on the
proposal.
The
owners of Common Stock have all voting rights with respect to matters to come
before the Annual Meeting. Each share of Common Stock entitles its holder to
one
vote. At the close of business on the record date, October 30,
2006,
there were outstanding and entitled to vote 6,652,370 shares
of
Common Stock. Only holders of Common Stock of record at the close of business
on
October 30 , 2006 are entitled to notice of and to vote at the Annual Meeting.
This proxy statement and the accompanying notice of meeting are first being
mailed on or about November 10,
2006.
The vote required with respect to each proposal is set forth below. Broker
non-votes have no effect on proposals 1, 4, 5, 6 and 7, and have the effect
of a
vote against proposals 2 and 3.
Security
Ownership
The
following table sets forth information as to ownership of the Common Stock
of
the Company as of October 20, 2006 with respect to (i) current directors
and
nominees of the Company; (ii) the executive officers listed on the Summary
Compensation Table; (iii) current directors, nominees and executive officers
as
a group; and (iv) beneficial owners of more than 5% of the outstanding Common
Stock.
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Shares
Beneficially
Owned
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Percent
of
Shares
Outstanding
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Bruce
Galloway
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461,600
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(l)
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6.9
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%
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Prism
Venture Partners III, LLC
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1,149,705
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(j)
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17.3
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%
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Robert
C. Fleming, Director
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0
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(k)
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0.0
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%
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Brian
J. Kelley, former President, CEO and Director
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654,480
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(b)(d)(e)
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9.4
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%
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William
A. Merritt, Director
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39,200
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(b)(c)
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|
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Michael
G. Mitchell, President, CEO and Director
|
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200,000
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3.0
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%
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Robert
H. Scott, Director
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0
|
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0.0
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%
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William
J. Stuart, Director
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38,895
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(b)(f)
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John
E. Sweeney, Nominee
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0
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0.0
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%
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Kenneth
G. Brix, former Vice President
|
|
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52,324
|
|
|
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Michael
N. Keefe, former Vice President
|
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118,262
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(h)
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1.8
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%
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Roy
A. Strutt, former Vice President
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4,875
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(g)
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Garrett
Sullivan, Treasurer and CFO
|
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233,455
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(b)(i)
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3.5
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%
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group,
including those listed above, consisting of 10 persons
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622,501
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(b)(c)(m)
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9.0
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%
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(a)
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The
percentage of shares beneficially owned does not exceed one
percent.
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(b)
|
Of
the shares of Common Stock shown above as beneficially owned, the
number
of shares with respect to which the following persons had a right
to
acquire beneficial ownership within 60 days were: Brian J. Kelly
-
342,500, William A. Merritt - 29,500, William J. Stuart - 29,750,
Garrett
Sullivan - 101,667 and all current directors, nominees and executive
officers as a group - 232,084. Other than shares as to which he had
a
right to acquire beneficial ownership or as noted below, each person
held
sole voting and sole investment power with respect to the shares
shown
above.
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(c)
|
Does
not include stock units recorded in the books and records of the
Company
as deferred compensation pursuant to which 41,912 shares of Common
Stock
are issuable to Mr. Merritt more than 60 days hereafter and to all
current
directors, nominees and executive officers as a group - 41,912
shares.
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(d) |
With
respect to 110,133 of the shares, voting and investment power is
shared
with Mr. Kelley’s spouse.
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(e) |
Includes
3,000 shares held in Mr. Kelley’s name as custodian for two of his
children.
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(f) |
With
respect to 8,145 of the shares, voting and investment power is shared
with
Mr. Stuart’s spouse.
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(g)
|
Consists
of 4,875 shares held in the name of Mr. Strutt’s
spouse.
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(h)
|
With
respect to 2,955
of the shares, voting and investment power is shared with Mr. Keefe’s
spouse.
|
(i)
|
With
respect to 32,257 of the shares, voting and investment power is shared
with Mr. Sullivan’s spouse.
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(j)
|
Based
upon information set forth in a Schedule 13D filed with the SEC on
November 25, 2005 by Prism Venture Partners III, L.P. (“PVP III”), which
owns of record 1,116,134 shares and Prism Venture Partners III-A,
L.P.
(“PVP III-A”), which owns of record 33,571 shares, and additional
information provided by PVP III and PVP III-A on October 26, 2006.
The 13D
was also filed by Prism Venture Partners III, LLC (“PVP LLC”), John L.
Brooks, III, Robert C. Fleming and William M. Seifert. Each of Messrs.
Brooks and Seifert has shared voting and dispositive power over all
of the
shares. Messrs. Brooks and Seifert are members of PVP LLC which is
the
sole general partner of PVP III and PVP III-A.
|
(k)
|
Mr.
Fleming is the designated representative of PVP III and PVP III-A.
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(l)
|
Based
upon information set forth in a Schedule 13G filed with the SEC on
February 23, 2006 by Strategic Turnaround Equity Partners, LP (“STEP”),
Bruce Galloway and Gary Herman. Mr. Galloway has sole voting and
dispositive power over 99,300 shares and shared voting and dispositive
power over 362,300 shares. Mr. Herman has sole voting and dispositive
power over 2,500 shares and shared voting and dispositive power over
157,200 shares. STEP has sole voting and dispositive power over no
shares
and shared voting and dispositive power over 156,200 shares. Messrs.
Galloway and Herman are managing members of the general partner of
STEP.
|
(m)
|
With
respect to 40,402 of the shares, voting and investment power is shared
with the spouses or other affiliates of the beneficial
owners.
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(n)
|
The
business address of each of the named beneficial owners is c/o
Cognitronics Corporation, 3 Corporate Drive, Danbury, CT 06810-4130,
except for Mr. Mitchell whose business address is 100 Nickerson Road,
Marlborough, MA 01752, Mr. Strutt whose business address is c/o Dacon
Electronics Plc, 1 Enterprise Way, Hemel Hempstead, Hertfordshire,
HP2
7Y3, United Kingdom, Mr. Fleming and Prism Venture Partners III,
LLC whose
business address is 100 Lowder Brook Drive, Suite 2500, Westwood,
MA
02090, Mr. Scott whose business address is c/o Xelor Software Inc.,
5
Industrial Way, Salem, NH 03079, Mr. Sweeney whose business address
is c/o
RSA, 200 Lowder Brook Drive, Suite 2000, Westwood, MA 02090 and Bruce
Galloway whose business is c/o Galloway Capital Management, LLC,
720 Fifth
Avenue, New York, New York 10019.
|
At
the
Annual Meeting, six directors are to be elected, to serve until the 2007 Annual
Meeting of Stockholders and until their respective successors are elected and
qualified. Proxies in the accompanying form will be voted for the election
of
the nominees listed below unless instructions are given on the proxy to withhold
authority to vote for one or more of the nominees. In the event that one or
more
of such persons become unavailable for election as a director, which is not
anticipated, the shares represented by the accompanying proxy will be voted
for
one or more substitutes approved by the Board, or the size of the Board will
be
reduced.
Information
Concerning Nominees
The
following table sets forth with respect to each director and nominee: (1) his
name and age, all positions and offices with the Company currently held by
him,
and his principal occupation over the last five years (including other
directorships and business experience) and (2) the period during which he has
served as a director of the Company.
Name,
Age, Positions, Principal Occupation,
Directorships
and Business Experience
|
|
Director
Since
|
|
ROBERT
C. FLEMING,
50, is a co- founder of Prism Venture Partners (“Prism”), a venture
capital investment firm, and was a partner of the firm from 1996
until
March 1, 2006.
|
|
|
2005
|
|
|
|
|
|
|
WILLIAM
A.
MERRITT,
70, has been President of Integrated Communications Systems Corp.
since
1992, Vice President and General Counsel of Seaboard Properties,
Inc. and
a Managing Member of the Seaboard Group of companies since 1992 and
acting
Chief Financial Officer of McAllister Towing and Transportation Company,
Inc. since 1997.
|
|
|
1994
|
|
|
|
|
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|
MICHAEL
G. MITCHELL,
46, has been President and Chief Executive Officer of the Company
since
August 2006. Prior to that he had been Executive Vice President,
Business
Development of ThinkEngine Networks, Inc., a subsidiary of the Company,
from November 2005 to April 2006 and President and Chief Executive
Officer
of ThinkEngine Networks, Inc., prior to its acquisition by the Company,
from 2001 until November 2005.
|
|
|
2006
|
|
|
|
|
|
|
ROBERT
H.
SCOTT,
51, has been President and Chief Executive Officer of Xelor Software
Inc.
since September 2004. Prior to that he was President and Chief Executive
Officer of IPeria, Inc. from 2003 to 2004 and Chairman of Octave
Communications Inc. from 1998 to 2003.
|
|
|
2006
|
|
|
|
|
|
|
WILLIAM
J.
STUART,
55, has been Senior Vice President and Chief Financial Officer of
Avici
Systems Inc. since August 2006. Prior to that he had been a general
partner of Still River Funds since September 2001.
|
|
|
2001
|
|
|
|
|
|
|
JOHN
E.
SWEENEY,
48, has been Vice President and General Manager of RSA, the Information
and Security Division of EMC Corp. since September 2006 and President
and
Chief Executive Officer of its predecessor, Network Intelligence
Corporation, since 2004. Prior to that he was President and Chief
Executive Officer of Stargus Communications, Inc. during 2003 and
a
partner of Prism Venture Partners from 2000 to 2003.
|
|
|
—
|
|
The
foregoing nominees are all currently members of the Board, except Mr. Sweeney.
Messrs. Merritt and Stuart were reelected directors at the 2005 Annual Meeting
of Stockholders; others elected by the Board since the last Annual Meeting
are:
Mr. Fleming on December 16, 2005 pursuant to contractual terms in connection
with the acquisition of ThinkEngine Networks, Inc. in November 2005, Mr.
Mitchell on August 16, 2006 and Mr. Scott on October 19, 2006. With respect
to
Mr. Fleming, the contractual terms provide that, so long as Prism or one of
its
affiliated funds holds 400,000 or more shares of the Company’s Common Stock, the
Company shall cause an individual designated by Prism and acceptable to the
Company’s Board to be elected a director. Mr. Sweeney has been nominated to
first stand for election as a director at the 2006 Annual Meeting of
Stockholders.
Voting
Procedure
The
presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock of the Company is necessary to constitute a quorum at the Annual
Meeting. To be elected, a nominee must receive the affirmative vote of the
holders of a plurality of the outstanding shares of Common Stock represented
at
the Annual Meeting. Shares represented at the meeting by proxy which are not
voted because the stockholder has elected to abstain or has withheld authority
will be counted in determining the presence of a quorum but will not be counted
as “for” the election of the director or directors. Shares represented at the
meeting by a duly signed and dated proxy for which the proxy card has been
otherwise left blank will be counted as votes “for” the election of each
director.
Information
Concerning Executive Officers
The
following table sets forth with respect to each executive officer of the Company
on October 20, 2006, his name, position with the Company, age and the period
during which he has served as an officer of the Company.
Name
|
|
Positions
and Office(s)
|
|
Age
|
|
Officer
Since
|
|
Michael
G. Mitchell
|
|
President
and Chief Executive Officer
|
|
46
|
|
2006
|
|
Paul
Gagne
|
|
Vice
President, Engineering
|
|
53
|
|
2006
|
|
Harold
F. Mayer
|
|
Secretary
|
|
77
|
|
1975
|
|
Garrett
Sullivan
|
|
Treasurer
and Chief Financial Officer
|
|
61
|
|
1989
|
|
No
family
relationships exist between the executive officers of the Company. Each of
the
executive officers was elected to serve until the next annual meeting of the
Board of Directors or until his successor shall have been elected and
qualified.
Executive
Compensation
The
following tables and notes set forth the compensation paid or accrued by
the
Company during the fiscal years ended December 31, 2005, 2004 and 2003 to
its
five most highly compensated executive officers whose aggregate cash
compensation exceeded $100,000 for services rendered to the Company in
2005.
Summary
Compensation Table
|
|
|
|
Annual
Compensation
|
|
Long-term
Compensation
Awards
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
$
|
|
Bonus
$
|
|
Other
Annual
Compensation
$(2)
|
|
Restricted
Stock
$(1)
|
|
Options/
SARs
#
|
|
All
Other
Comp.
$(3)
|
|
Brian
J. Kelley (4)
President
and Chief
|
|
|
2005
2004
|
|
|
294,808
270,000
|
|
|
60,000
|
|
|
|
|
|
|
|
|
80,000
|
|
|
11,929
8,353
|
|
Executive
Officer
|
|
|
2003
|
|
|
282,116
|
|
|
|
|
|
|
|
|
73,011
|
|
|
60,000
|
|
|
9,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
G. Brix (5) |
|
|
2005 |
|
|
161,114 |
|
|
30,000
|
|
|
|
|
|
|
|
|
40,000 |
|
|
990 |
|
Vice
President, Sales
|
|
|
2004
2003
|
|
|
148,500
155,160
|
|
|
|
|
|
|
|
|
26,400
|
|
|
25,000
|
|
|
990
2,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roy
A. Strutt (6)
Vice
President, European
Operations
and Managing
Director,
Dacon Electronics Plc
|
|
|
2005
2004
2003
|
|
|
206,309
214,185
197,184
|
|
|
|
|
|
|
|
|
26,400
|
|
|
25,000
|
|
|
14,505
14,656
13,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
N. Keefe (7)
Vice
President, Engineering
|
|
|
2005
2004
2003
|
|
|
137,442
126,000
131,654
|
|
|
|
|
|
|
|
|
26,400
|
|
|
10,000
25,000
|
|
|
840
840
1,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garrett
Sullivan |
|
|
2005 |
|
|
137,442 |
|
|
30,000
|
|
|
|
|
|
|
|
|
20,000 |
|
|
840 |
|
Treasurer
and Chief
|
|
|
2004
|
|
|
126,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840
|
|
Financial
Officer
|
|
|
2003
|
|
|
131,654
|
|
|
|
|
|
|
|
|
26,400
|
|
|
25,000
|
|
|
1,979
|
|
(1)
|
The
Compensation Committee awarded restricted shares of Common Stock
under the
terms of the Restricted Stock Plan on October 24, 2003, as follows:
Mr.
Kelley - 33,187 shares and Messrs. Brix, Strutt, Keefe and Sullivan
-
12,000 shares each . The value of the shares on the award date is
reflected in the table above. The shares vest 20% annually beginning
on
the second anniversary of the award provided the officer remains
employed
by the Company until the vesting date (except that if the officer
is
terminated prior to the vesting date by reason of a change in control,
all
restricted shares become vested immediately). Dividends will be paid
on
the restricted shares. Aggregate shares vested in 2003 as follows:
Mr.
Kelley – 11,550 shares, Messrs. Brix, Keefe and Sullivan - 4,000 shares
each and Mr. Strutt – 2,030 shares. Aggregate shares vested in 2004 as
follows: Mr. Kelley – 19,000 shares, Messrs. Brix, Keefe and Sullivan –
6,950 shares each and Mr. Strutt –
4,500
shares. Aggregate shares vested in 2005 as follows: Mr. Kelley – 24,137
shares, Messrs. Brix, Keefe and Sullivan – 8,900 shares each and Mr.
Strutt – 6,900 shares. The number of shares and value of the aggregate
restricted stock holdings at December 31, 2005 are: Mr. Kelley – 70,050
shares, $168,821; Messrs. Brix, Keefe and Sullivan – each 26,100 shares,
$62,901; and Mr. Strutt – 0 shares,
$0.
|
(2)
|
The
amount of perquisites was less than the lesser of $50,000 or 10%
of total
annual salary for the named executive
officers.
|
(3)
|
These
amounts for 2005 represent (a) pension contributions, (b) term life
insurance premiums paid by the Company for the benefit of the officers’
beneficiaries and (c) personal use of automobile in the following
amounts:
Mr. Kelley — $1,200 in insurance premiums and personal use of automobile –
$10,729, Mr. Brix —$990 in insurance premiums, Messrs. Keefe and Sullivan
—$840 in insurance premiums and Mr. Strutt – $14,505 in pension
contributions.
There are no cash values associated with the term life
insurance.
|
(4)
|
On
August 16, 2006, Mr. Kelley’s employment as President and Chief Executive
Officer terminated. Under the terms of his severance, the Company
paid
severance compensation of $361,000 in a lump
sum.
|
(5)
|
On
June 30, 2006, Mr. Brix’s employment as Vice President, Sales terminated.
Under the terms of his severance, the Company will pay severance
compensation of $80,385 through January 5,
2007.
|
(6)
|
On
December 22, 2005, Mr. Strutt’s employment as Vice President, European
Operations terminated upon the divestiture of Dacon Electronics PLC,
a
subsidiary of the Company, on that
date.
|
(7)
|
On
March 31, 2006, Mr. Keefe’s employment as Vice President, Engineering
terminated. Under the terms of his severance, the Company will pay
severance compensation in installments aggregating a minimum of $88,846
through November 24, 2006 and a maximum of $110,385 through January
19,
2007 under certain circumstances.
|
Option
Grants in 2005
|
|
Individual
Grants
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
Name
|
|
Options
Granted
(#)(1)
|
|
%
of Total
Options
Granted
to
Employees
in
2005
|
|
Exercise
Price
($/Sh)
|
|
Expiration
Date
|
|
Potential
Realized Value at
Assumed
Annual Rates of
Stock
Price Appreciation
for
Option Term (2)
|
|
|
|
|
|
|
|
|
|
|
|
5%($)
|
|
10%($)
|
|
Brian
J. Kelley
|
|
|
80,000
|
|
|
9.2
|
%
|
|
2.70
|
|
|
10/25/15
|
|
|
135,841
|
|
|
344,248
|
|
Kenneth
G. Brix
|
|
|
40,000
|
|
|
4.6
|
%
|
|
2.70
|
|
|
10/25/15
|
|
|
67,921
|
|
|
172124
|
|
Roy
A. Strutt
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
N. Keefe
|
|
|
10,000
|
|
|
1.1
|
%
|
|
2.70
|
|
|
10/25/15
|
|
|
16,980
|
|
|
43,031
|
|
Garrett
Sullivan
|
|
|
20,000
|
|
|
2.3
|
%
|
|
2.70
|
|
|
10/25/15
|
|
|
33,960
|
|
|
86,062
|
|
(1)
|
These
options were granted under the Company’s 1990 Stock Option Plan at an
exercise price equal to the closing market price on the date of grant
and
are exercisable in three equal installments over 30 months. Normally,
options are granted in connection with the review of annual compensation;
however, the Compensation Committee may grant options at other dates
at
its discretion.
|
(2)
|
The
potential realizable value of the options in the table above is calculated
based upon the term of the option at its time of grant, and by assuming
that the aggregate exercise price appreciates at the indicated annual
rate
compounded annually for the entire term of the option, and that the
option
is exercised and sold on the last day of its term for the appreciated
price. The hypothetical 5% and 10% assumed annual compounded rates
of
stock price appreciation are mandated by the rules of the Securities
and
Exchange Commission and do not represent the Company’s estimates or
projections of future common stock prices. There can be no assurance
that
the common stock will appreciate at any particular rate or at
all.
|
Aggregate
Option Exercises in 2005 and 2005 Year-end Option Values
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Name
|
|
Shares
Acquired
on
Exercise
(#)
|
|
Value
Realized
on
Exercise
($)
|
|
Number
of
Unexercised
Options
at
Year-end(#)
Exercisable/
Unexercisable
|
|
Value
of
Unexercised
In-the-Money
Options
at
Year-end
($)
Exercisable/
Unexercisable
|
Brian
J. Kelley
|
|
None
|
|
|
|
242,500/100,000
|
|
$60,000/
$4,200
|
Kenneth
G. Brix
|
|
None
|
|
|
|
86,667/48,333
|
|
$25,000/
$1,750
|
Roy
A. Strutt
|
|
None
|
|
|
|
86,667/0
|
|
$25,000/
$0
|
Michael
N. Keefe
|
|
None
|
|
|
|
86,667/18,333
|
|
$25,000/$1,750
|
Garrett
Sullivan
|
|
None
|
|
|
|
86,667/28,333
|
|
$25,000/$1,750
|
Pension
Plans
In
1977,
the Company adopted a non-contributory, defined benefit pension plan covering
substantially all employees in the United States. The Company’s funding policy
is to contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the Company may determine to be appropriate
from
time to time.
In
1994,
the Company amended the pension plan to eliminate future benefit accruals after
June 30, 1994. Accordingly, new employees are not eligible to participate in
the
plan and the accrued pension benefit of earlier participants will remain at
the
level earned based on service through June 30, 1994. At January 1, 2006, the
accrued annual pension benefits payable upon the retirement of the officers
identified in the Summary Compensation Table were: Brian J. Kelley – $0; Kenneth
G. Brix – $0; Michael N. Keefe – $6,319; Garrett Sullivan – $4,623; and Roy A.
Strutt – $0.
Compensation
of Directors
Directors
who were not employees of the Company in 2005 were entitled to payment of (a)
an
annual fee of $8,000, (b) $1,000 for each Board meeting attended, of which
there
were six during
2005, and for each meeting of a committee of the Board not held in conjunction
with a Board meeting, of which there were none in 2005 and (c) $1,000 for each
substantive part of a business day that a director is requested to assist
management in the future development of the Company’s business, of which there
were three such
occasions in 2005. Directors may voluntarily defer the receipt of such fees
to a
future year. Directors may elect to be paid in cash or in shares of Common
Stock
of the Company. If a director elected to be paid in shares, he was entitled
to
125% of the equivalent value in shares. Directors are also entitled to
reimbursement of reasonable travel expenses.
In
September 1998, the Board unanimously approved the Directors’ Stock Option Plan
covering directors and officers who are not employees of the Company; the
stockholders approved the adoption of the Directors’ Stock Option Plan (the
“Directors’ Plan”) and the awards thereunder at the Annual Meeting of
Stockholders on May 13, 1999. The Board of Directors amended the Directors’ Plan
in 2000, 2001 and 2003, which amendments were approved by stockholders on May
11, 2000, May 17, 2001 and May 8, 2003, respectively. The terms of the
Directors’ Plan provide for an automatic award on August 1 of each year to each
person who is a participant of options to purchase (1) 6,000 shares of Common
Stock in each subsequent year thereafter and (2) sixty days following the
initial election of a director by the Board of Directors a pro rata portion
of
shares of the annual award. The option exercise price is 100% of the fair market
value per share of Common Stock on the date of the award, as defined in the
Directors’ Plan. Generally, the options become exercisable one year after the
date of award and expire ten years after the date of award. During 2005, Messrs.
Connors, Meehan, Merritt and Stuart were awarded options to purchase 6,000
shares of Common Stock each on August 1 at an exercise price of $3.22 per share.
None of the Directors exercised options in 2005.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee is composed of Messrs. Merritt and Stuart, each of whom
are “non-employee directors” for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and “independent” directors under the American
Stock Exchange listing standards. John T. Connors and Jack Meehan served on
the
Compensation Committee until their resignations from the Board on September
5,
2006 and October 16, 2006, respectively. Mr. Connors was counsel with the law
firm of Pillsbury Winthrop Shaw Pittman LLP until September 2005, which the
Company retained during that period.
The
Company has advanced to officers amounts principally for income taxes related
to
stock awards under its 1990 Stock Option and Restricted Stock Plans and stock
bonuses. In connection therewith, the largest aggregate amount the executive
officers were indebted to the Company since January 1, 2005, are as follows:
Mr.
Kelley, former President and a former director – $562,067; Mr. Brix, a former
Vice President – $193,375; Mr. Keefe, a former Vice President –$96,955; and Mr.
Strutt, a former Vice President – $683,023, all of which was fully repaid by
each in 2006. The largest aggregate amount which Mr. Sullivan, Treasurer, was
indebted to the Company since January 1, 2005, which is also the aggregate
amount due at October 20, 2006 was $436,607. The above indebtedness, which
is
partially unsecured and is payable on demand, bears interest at varying rates
approximating market rates. There were no such advances subsequent to July
28,
2002.
Report
of the Compensation Committee
The
Compensation Committee of the Board of the Company has prepared the following
report for inclusion in this Proxy Statement.
The
Compensation Committee annually reviews the performance contributions of the
officers of the Company (including the Chief Executive Officer) and makes
adjustments to all forms of compensation to those officers. In this capacity
the
Compensation Committee has oversight capacity, reviews the structure and cost
effectiveness and sets performance objectives for the Company’s various
compensation programs. The Compensation Committee also administers all
compensation plans of the Company payable to employees in securities of the
Company. The Compensation Committee endorses the position that stock ownership
by management is beneficial in aligning management’s and stockholders’ interests
in the enhancement of stockholder value and has increasingly used these elements
in the Company’s compensation packages for its executive officers.
Compensation
Philosophy
The
Company’s compensation programs are designed to serve the Company’s goals of
long-term growth and to help achieve the Company’s business objectives. The
Company seeks to integrate all compensation programs with the Company’s annual
and long-term business objectives and strategy and focus executive behavior
on
the fulfillment of those objectives.
To
that
end the Company follows certain principles in its compensation of
executives:
· |
The
Company pays competitively.
|
· |
The
Company is committed to providing a compensation program that helps
attract, motivate and retain the best people in the industry. To
ensure
that pay remains competitive, the Company compares its pay practices
with
those of comparable companies.
|
· |
The
Company pays for relative sustained
performance.
|
· |
Executive
officers are rewarded based upon corporate performance and individual
performance. Corporate performance is evaluated by reviewing the
extent to
which strategic and business plan goals are met, including such
factors as
operating profit, performance relative to competitors and timely
new
product introductions. Individual performance is evaluated by reviewing
organizational and management development progress and the degree
to which
teamwork and Company values are
fostered.
|
· |
The
Company seeks fairness in the administration of
compensation.
|
· |
The
Company applies its compensation philosophy Company-wide. The Company
tries to achieve a balance of the compensation paid to a particular
individual and the compensation paid to other executives inside
the
Company and its subsidiaries and at comparable
companies.
|
To
serve
these objectives and maintain these principles the executive compensation
program of the Company is comprised of several elements, including base salary,
a cash or stock bonus, stock option, restricted stock and stock purchase plans
as well as certain welfare and retirement benefits.
2005
Executive Compensation
Based
on
the Company’s performance over the past several years, generally, no increases
in cash compensation have been awarded to executive officers since 2000. In
mid-2003, salaries of all the executive officers and substantially all other
employees were reduced 10%. In 2005, in recognition of the attainment of certain
performance goals (including the identification of new strategic initiatives;
the successful identification of a potential acquisition candidate; the
acquisition and integration of ThinkEngine Networks, Inc.; product development
and the identification of new markets), the Company restored the executive
officers’ salaries to pre-reduction levels and stock options, the value of which
is dependent upon the future value of the Company’s Common Stock, and cash
bonuses were awarded to the executive officers.
2005
CEO Compensation
The
Chief
Executive Officer’s compensation is based on the same policies and criteria as
the other executive officers. Accordingly, in 2005, in light of the performance
goals identified above: (i) Mr. Kelley’s salary was restored to its 2000 level
of $300,000; (ii) Mr. Kelley was granted options to purchase 80,000 shares
of
the Company’s Common Stock under the Company’s 1990 Stock Option Plan and (iii)
Mr. Kelley was awarded a cash bonus of $60,000.
|
By: COMPENSATION
COMMITTEE
|
|
|
|
William
A. Merritt William J.
Stuart
|
Equity
Compensation Plan Information
The
following table sets forth securities authorized for issuance under all equity
compensation plans of the Company at December 31, 2005.
Equity
Compensation Plan Information
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Plan
Category
|
|
Number
of Securities to be
issued
upon exercise
of
outstanding options,
warrants
and rights
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
|
Number
of securities
remaining
available for future
issuance
under equity
compensation
plans
(excluding
securities
reflected
in column(a))
|
|
Equity
compensation plans approved by security holders
|
|
|
1,237,970
|
|
$
|
3.83
|
|
|
112,642
|
(1)
|
Equity
compensation plans not approved by security holders
|
|
|
1,281,083
|
(2)
|
$
|
2.55
|
|
|
60,497
|
(3)
|
Total
|
|
|
2,519,053
|
|
$
|
3.37
|
|
|
173,139
|
|
(1)
|
Consists
of (a) 52,478 shares available for grant of rights under the 1967
Employee
Stock Purchase Plan, (b) 37,264 shares available for grant of stock
options and (c) 22,900 shares for grant under the Restricted Stock
Plan.
|
(2)
|
Consists
of shares available for issuance, as
follows:
|
|
(a)
|
Rights
granted in 2002 to executives to receive 395,000 shares of Common
Stock
vested on January 2, 2006. Such rights are subject to immediate vesting
in
the event of a change in control of the Company and pro-rata vesting
in
the event of death or involuntary termination for reasons other than
cause. The total value of the rights at the date of grant was $612,000
based on the fair market value of the Common Stock ($1.55 per share)
on
the date of grant; $160,000 was charged to expense in 2005 related
to this
grant.
|
|
(b)
|
Rights
of directors to receive 110,083 shares of Common Stock. Directors
may
elect to receive their fees in shares of Common Stock and defer receipt
of
such shares to a future date. If a director elects to be paid in
shares,
he is entitled to 125% of the equivalent value of the fees in shares.
|
|
(c)
|
Rights
granted in 2001 to executives to receive 71,000 shares of Common
Stock,
the receipt of which has been voluntarily deferred by the executives
to a
future year. The total value of the rights was $338,000 based on
the
average fair market value of the Common Stock as the shares vested
during
2001 ($4.76 per share), which amount was charged to expense in
2001.
|
|
(d)
|
Employment
inducement stock options granted to newly hired employees during
2005 to
purchase 705,000 shares of Common Stock at an average exercise price
of
$2.55 per share; the exercise price is equal to the fair market value
of
the Common Stock on the date of
grant.
|
(3)
|
Consists
of shares available for issuance for directors’
fees.
|
Performance
Graph
The
following graph compares the cumulative total return on the Company’s Common
Stock with the cumulative total return of the S&P 500 Index and the Hemscott
(formerly Media General) Telecommunications Processing Systems and Products
Industry Group (the “Peer Group”) for the five years ended December 31,
2005.1
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN
OF
COMPANY, PEER GROUP AND BROAD MARKET
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
Cognitronics
|
$100
|
$53
|
$29
|
$38
|
$46
|
$27
|
Peer
Group
|
$100
|
$31
|
$8
|
$18
|
$18
|
$14
|
S&P
500
|
$100
|
$88
|
$69
|
$88
|
$98
|
$103
|
1 |
Assumes
that the value of the investment in the Company’s Common Stock and each
index was $100 on December 31, 2000 and that all dividends were
reinvested.
|
ADDITIONAL
INFORMATION
Report
of the Audit Committee
The
Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal controls.
In fulfilling its oversight responsibilities, the Committee reviewed the audited
financial statements in the Annual Report with management, including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The
Audit
Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of the financial statements with
accounting principles generally accepted in the United States, the audited
financial statements and such other matters as are required to be discussed
with
the Audit Committee under generally accepted auditing standards. The Audit
Committee has received the written disclosures and letter from the independent
auditors required by Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees.” The Audit Committee has discussed with the
independent auditors the matters required to be discussed by SAS 61
“Codification of Statements on Auditing Standards” as may be modified or
supplemented. In addition, the Audit Committee has discussed with the
independent auditors the auditors’ independence from management and the Company,
including the matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of non-audit services with
the
auditors’ independence.
The
Audit
Committee discussed with the Company’s independent auditors the overall scope
and plans for the respective audits. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company’s internal
controls, and the overall quality of the Company’s financial reporting.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board (and the Board has approved) that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2005 for filing with the Securities and Exchange Commission. The
Audit Committee also selected Carlin, Charron and Rosen, LLP as the Company’s
independent auditors for the year ending December 31, 2006.
|
By: AUDIT
COMMITTEE
|
|
|
|
William A. Merritt William J. Stuart,
Chairman
|
Qualifications
of Audit Committee Members
The
Company’s Board has reviewed the qualifications of each of the members of the
Audit Committee, comprised of Messrs. Merritt, Scott and Stuart, and has
determined that all of them are independent (as independence is defined in
the
American Stock Exchange’s listing standards). The Board also determined that
William J. Stuart qualifies as an “audit committee financial expert” as defined
in the regulations of the Securities and Exchange Commission.
Audit
Committee Charter
In
May
2000, the Board adopted an Audit Committee Charter. In May and September 2001,
the Audit Committee reassessed the charter and recommended amendments, which
the
Board approved. The Committee made no changes to its charter in 2002 or 2003.
In
2004, the Committee reassessed its charter and recommended amendments, which
the
Board approved, to reflect changes in the American Stock Exchange listing
standards, Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the Sarbanes-Oxley Act. The charter sets forth the
organization of the Audit Committee, a statement of policy and the Audit
Committee’s responsibilities and processes. In 2005, the Audit Committee
reviewed and reassessed the charter without change. The Audit Committee shall
review and reassess the charter at least annually and request the approval
of
the Board of any changes thereto.
Independent
Auditors’ Fees
The
Company’s Audit Committee has policies and procedures that require the
pre-approval by the Audit Committee of all fees paid to, and services provided
by, the Company’s independent auditing firm. Pursuant to the Sarbanes-Oxley Act
of 2002, the fees and services provided as noted in the table below were
authorized and approved by the Audit Committee in compliance with the Company’s
pre-approval policies and procedures.
The
aggregate fees billed or expected to be billed by the Company’s principal
independent auditors for its 2005 services are as follows:
|
|
2005
|
|
2004
|
|
Audit
Fees –
Review of the Company’s quarterly financial statements, audit of the
annual financial statements and related consultation.
|
|
$
|
138,600
|
|
$
|
99,000
|
|
Audit-Related
Fees
|
|
|
None
|
|
|
None
|
|
Tax
Fees
|
|
|
None
|
|
|
None
|
|
Other
fees
|
|
|
None
|
|
|
None
|
|
Other
Information Concerning the Board or Its Committees
The
Company’s Board has four Committees - Audit, Compensation, Executive and
Nominating. The Audit Committee, of which Messrs. Merritt, Scott and Stuart
are
members, meets with the independent auditors and reviews and reports to the
Board of Directors on the scope and results of audits. The Compensation
Committee, of which Messrs. Merritt and Stuart are members, is charged with
reviewing officers’ compensation and administers the Company’s 1967 Employee
Stock Purchase Plan, 1990 Stock Option Plan and Restricted Stock Plan. The
Executive Committee, of which Messrs. Connors, Kelley and Meehan were members
until their resignations as directors on September 5, 2006, August 16, 2006
and
October 16, 2006, respectively, is authorized to consider and take action on
matters in the absence of a full Board of meeting. The Nominating Committee,
of
which Messrs. Merritt and Stuart are members, is charged with reviewing the
performance of directors and considering all nominations (including nominations
by stockholders) to the Board of Directors of the Company. During 2005, the
Committees met as follows: Audit – four times; Nominating Committee – once;
the
Compensation Committee – twice. The
Executive Committee did not meet in 2005.
During
2005, the Board met six times, during four of which the non-management Directors
met in executive session without non-independent directors and management.
Each
Director of the Company attended 75% or more
of
the total number of meetings of the Board held during the year and of the
Committees of the Board on which he served. It is the Company’s policy that it
is the responsibility of individual directors to make themselves available
to
attend scheduled and special Board meetings and annual meetings of the Company’s
stockholders. All of the Company’s directors as of the date of the 2005 annual
meeting of the Company’s stockholders were in attendance for the 2005 annual
stockholder meeting.
Nominating
Committee
In
September 2004, the Board adopted a Nominating Committee Charter which reflects
changes in the American Stock Exchange listing standards, Regulation 14A of
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
Sarbanes-Oxley Act. The charter sets forth the organization of the Nominating
Committee, a statement of policy and the Nominating Committee’s responsibilities
and processes. The Nominating Committee shall review and reassess the charter
at
least annually and request the approval of the Board of any changes
thereto.
All
members of the Nominating Committee qualify as independent under the American
Stock Exchange listing standards.
The
Nominating Committee will consider stockholder recommendations of candidates
to
serve as Directors when the recommendations are properly submitted. In
evaluating a prospective candidate, the Nominating Committee considers the
extent to which the candidate possesses the following qualifications,
characteristics and skills: (a) achievement in the individual’s career; (b)
breadth of experience; (c) soundness of judgment; (d) high personal and
professional ethics, integrity and values; (e) ability to make independent,
analytical inquiries; (f) ability to contribute to a diversity of viewpoints
among Board members; (g) willingness and ability to devote the time required
to
adequately perform Board activities and (h) ability to represent the corporate
interests of the Company. The Nominating Committee evaluates director candidates
recommended by stockholders in the same manner as it evaluates director
candidates recommended by the Company’s directors, management or employees. Any
stockholder recommendations which are submitted must include the candidate’s
name and qualifications for Board membership and must be addressed to Corporate
Secretary, Cognitronics Corporation, 3 Corporate Drive, Danbury, Connecticut
06810-4130. For potential nominees to be considered for election at the 2007
Annual Meeting of Stockholders, the Corporate Secretary must receive this
information by January 19, 2007. The notice must set forth the candidate’s name,
age, business address, residence address and principal occupation or employment.
In order to be presented as a nominee, the candidate would also be required
to
provide the number of shares of Common Stock beneficially owned by the candidate
and other information that would be required to solicit a proxy under the
federal securities laws. In addition, the notice must include the submitting
stockholder’s name, address, the number of shares of Common Stock beneficially
owned as of the date the recommendation is made and the period of time that
the
shares have been held.
Stockholders
may communicate with the Board, including non-management directors, by sending
an e-mail to bod@cognitronics.com
or a
letter to the Cognitronics Board of Directors, c/o Corporate Secretary at the
address set forth in the above paragraph. All correspondence will be reviewed
by
the Corporate Secretary and forwarded directly to the addressee.
Certain
Relationships and Related Transactions
Indemnity
Agreements between the Company and individual officers and directors have been
executed to allow those officers and directors to benefit from New York’s
indemnification statute. In accordance with the provisions of these Indemnity
Agreements, the Company has agreed, subject to limitations, to indemnify and
pay
the reasonable expenses of officers and directors adjudicated liable in any
civil, criminal or other action or proceeding, including any derivative action,
for the acts or decisions made by them in good faith while performing services
for the Company. Such indemnification would be made by the Company as specified
in the Indemnity Agreements and any expenses or other amounts paid by way of
indemnification, otherwise than by court order or action of the stockholders,
would be reported to stockholders as provided by law. No indemnification by
the
Company would be made to or on behalf of any officer or director if a judgment
or other final adjudication adverse to such officer or director established
that
his acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that
he
personally gained in fact a financial profit or other advantage to which he
was
not legally entitled. The Indemnity Agreements also obligate the Company to
advance to officers and directors funds to pay the reasonable expenses incurred
from time to time before any final determination of their rights to
indemnification, subject to repayment to the extent required by the
indemnification terms.
The
Company’s Certificate of Incorporation limits the personal liability of
directors to the Company or its stockholders for certain breaches of duty as
directors, as permitted by New York law.
The
Company carried Directors’ and Officers’ Liability Insurance covering directors
and officers for amounts up to $5 million in 2005.
Until
October 2005, the Company retained Pillsbury Winthrop Shaw Pittman LLP. John
T.
Connors, a former director, was counsel of that firm until September
2005.
The
Company has entered into Executive Severance Agreements (the “Agreements”)
regarding change in control with Messrs. Kelley, Brix, Strutt, Keefe and
Sullivan (individually, the “Executive”; collectively, the “Executives”). Under
these Agreements, a “change in control” occurs if (a) the stockholders of the
Company approve (i) any merger or consolidation of the Company (unless the
voting stock of the Company outstanding immediately prior thereto continues
to
represent more than 50% of the combined voting power of the Company or the
surviving entity thereafter or at least a majority of the directors of the
Company or the surviving entity after the merger or consolidation were directors
of the Company prior thereto), (ii) the sale, lease, exchange or other transfer
of all or substantially all of the Company’s assets to any other company or
(iii) any plan or proposal for the liquidation or dissolution of the Company,
(b) persons who were directors of the Company on November 1, 1995 (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the Board of Directors, provided, however, that any person subsequently becoming
a director whose election is approved by a vote of at least a majority of the
then Incumbent Directors will be considered an Incumbent Director or (c) any
person (other than the Company, its subsidiaries or any employee benefit plan
of
the Company), together with all affiliates and associates of such person,
becomes the beneficial owner, directly or indirectly, of 20% or more of the
Company’s Common Stock. The Agreements provide that the Executive’s
compensation, responsibilities and employee benefits will not be reduced
following a change in control. The Agreements also provide that if the
Executive’s employment with the Company is terminated under certain
circumstances the Executive will continue to receive certain medical, insurance
and other employee benefits for a period of two years and will receive a lump
sum payment equal to 200% of the sum of (A) the greater of (i) the Executive’s
annual salary as in effect immediately prior to the termination or (ii) the
Executive’s salary as in effect immediately prior to the change in control and
(B) the greater of (i) the Executive’s annual bonus for the prior annual period,
including performance bonus, amounts vested under the Company’s Restricted Stock
Plan and amounts under any other bonus program of the Company (the “Bonus
Amounts”) or (ii) the average Bonus Amounts for the prior two years. These
benefits will be provided to the Executives, other than Mr. Kelley, in the
event
that the Executive’s employment is terminated within two years following a
change in control (i) by the Company for any reason other than death, disability
or cause or (ii) by the Executive under certain, limited circumstances, and
to
Mr. Kelley if his employment is voluntarily or involuntarily terminated (other
than for death, disability or cause) within two years following a change in
control. Notwithstanding the foregoing, payments to the Executives under the
Agreements are limited to such amounts to permit all payments to the Executives
to be made by the Company to be deductible in accordance with Section 280G
of
the Internal Revenue Code. The terms of these Agreements expire on October
16,
2010, unless a change in control has occurred on or prior to such date, in
which
case the Agreements will continue in effect for two years following the change
in control.
In
the
event of a change in control, the Company’s 1990 Stock Option Plan provides that
50% of the outstanding stock options will become exercisable and the Directors’
Stock Option Plan provides that all outstanding stock options will become
exercisable. In the event of a change in control followed by termination of
employment, the Company’s Restricted Stock Plan provides that the restrictions
on 50% of the shares of the Company’s Common Stock previously awarded will
terminate.
Information
with respect to advances to officers is set forth herein under the caption
Compensation Committee Interlocks and Insider Participation.
On
November 18, 2005, the Company acquired Think Engine Networks, Inc. from Prism
Venture Partners III L.P. and Prism Venture Partners III-A, L.P. (“PVP III” and
PVP III-A”, respectively). Robert C. Fleming was a member of Prism Venture
Partners III, LLC which is the sole general partner of PVP III and PVP III-A.
Mr. Fleming is also a director of the Company.
On
December 22, 2005, the Company sold its ownership interest of its wholly-owned
subsidiary, Dacon Electronics, PLC (“Dacon”), located in the United Kingdom to
Silbury 307 Limited (“Silbury”), in an arms length transaction. Roy A. Strutt,
former Vice President of European Operations of the Company and Managing
Director of Dacon, is the sole shareholder of Silbury.
On
August
16, 2006, in connection with his resignation as President and Chief Executive
Officer and as a director of the Company, the Company entered into a Severance
and Release Agreement with Brian J. Kelley (the “Severance Agreement”). Pursuant
to the Severance Agreement, the Company paid Mr. Kelley a lump sum of $390,723
(which amount includes accrued vacation and other expenses) and will arrange
to
provide Mr. Kelley with payment of such amounts under COBRA as are required
to
maintain existing health insurance coverage until August 2007 (less amounts
payable by Mr. Kelley had he remained employed by Cognitronics). The Company
will also allow Mr. Kelley the continued use of his Company automobile for
ninety days and agreed to reimburse Mr. Kelley for his legal and accounting
expenses of up to an aggregate of $10,000. Mr. Kelley and the Company also
provided each other with a general release of claims. Further, the Company
also
extended the period for Mr. Kelley to exercise his outstanding Company stock
options to two years from the date of the Severance Agreement and accelerated
the vesting of a previously unvested option to purchase 53,333 shares of Company
common stock. The Company also agreed to remove the restrictions on 62,550
shares of unvested restricted Company common stock. Mr. Kelley also agreed
to
repay his outstanding loan to the Company in the amount of $524,133.27 by
tendering to the Company for cancellation 259,472 shares of Company common
stock
(valued at the closing price on the American Stock Exchange on the date
immediately preceding the date of the Severance Agreement). Pursuant to the
Severance Agreement, Mr. Kelley will continue to provide certain consulting
services to the Company with respect to sales and marketing of the Company’s CX
product line for a period of twelve (12) months. In consideration for these
services, Mr. Kelley will receive a consulting fee equal to five percent (5%)
of
any revenues received by the Company as a result of new orders of the Company’s
CX product line (“Qualified Sales”) during the Consulting Period.
On
March
31, 2006, Mr. Keefe’s employment as Vice President, Engineering terminated.
Under the terms of his severance, the Company will pay severance compensation
in
installments aggregating a minimum of $88,846 through November 24, 2006 and
a
maximum of $110,385 through January 19, 2007 under certain circumstances.
Further, the Company will provide Mr. Keefe with payment of such amounts under
COBRA as are required to maintain his existing health insurance coverage until
the end of the severance period (less amounts payable by him had he remained
employed by Cognitronics).
On
June
30, 2006, Mr. Brix’s’s employment as Vice President, Sales terminated. Under the
terms of his severance, the Company will pay severance compensation, including
accrued vacation, in installments aggregating a minimum of $95,000 through
January 5, 2007. Further, the Company agreed to allow Mr. Brix the continued
use
of his Company automobile through December 2006.
On
October 18, 2006, Mr. Zizzo’s employment as Vice President, Operations
terminated. Under the terms of his severance, the Company will pay severance
compensation in installments aggregating a minimum of $55,000 through April
27,
2007. Further, the Company will provide Mr. Zizzo with payment of such amounts
under COBRA as are required to maintain his existing health insurance coverage
until the end of the severance period (less amounts payable by him had he
remained employed by Cognitronics).
On
August
16, 2006, the Company entered into an Employment Agreement with Mr. Mitchell
under which he serves the Company as its President and Chief Executive Officer.
The terms of the agreement provide for (i) employment “at will”, (ii)
compensation at a base salary at the annual rate of $250,000 payable in
installments and (iii) an “inducement” grant of 200,000 shares of the Company’s
Common Stock which will vest on the fourth anniversary of his employment with
the Company or, if sooner, upon a change of control of the Company. Further,
if
Mr. Mitchell’s employment is terminated (i) by the Company without Serious Cause
or (ii) by him for Good Reason, the Company will continue to pay his
then-current base salary for a period of six months from the date of such
termination. Also, if his employment is terminated without Serious Cause or
for
Good Reason within two years following a Change of Control of the Company,
he
will be entitled to receive his then-current base salary for a period of one
year from the date of such termination.
On
October 31, 2005, the Company’s wholly-owned subsidiary, ThinkEngine Networks,
Inc., entered into an Employment Agreement with Mr. Gagne under which he will
serve as Vice President, Engineering; on March 23, 2006, Mr. Gagne was elected
Vice President, Engineering of the Company. The agreement provides (i)
compensation at a base salary at the annual rate of $190,000 payable in
installments, (ii) incentive compensation equal to the greater of one percent
of
ThinkEngine’s product sales or $30,000 per annum and (iii) “inducement” options
to purchase 125,000 shares of the Company’s Common Stock which will become
exercisable in three equal annual installments commencing on May 1, 2006 or,
if
sooner, upon a change of control of the Company. Further, if Mr. Gagne’s
employment is terminated for other than “cause”, the Company will pay him a lump
sum severance payment equal to his then-current annual base salary. The term
of
the agreement terminates on December 31, 2008.
Except
as
described above, no director or officer had any material interest in any
material transaction of the Company or any of its subsidiaries during the period
from January 1, 2005 to October 20, 2006
or
any such proposed transaction, nor had any of their associates.
Code
of Business Conduct and Ethics
The
Company has adopted a Code of Business Conduct that applies to all of its
directors, officers and employees, including its chief executive officer and
chief financial officer. The Board reassessed and restated the Code of Business
Conduct and Ethics in 2005, a copy of which will be provided without charge
upon
a written request addressed to Corporate Secretary, Cognitronics Corporation,
3
Corporate Drive, Danbury, CT 06810-4130.
Section
16(a) Beneficial Ownership Reporting Compliance
In
accordance with Section 16(a) of the Exchange Act, the Company’s directors,
officers and any person holding more than ten percent of the Company’s Common
Stock are
required to file reports of ownership of the Company’s equity securities and any
changes in such ownership with the Securities and Exchange Commission, the
American Stock Exchange and the Company. The Company believes that all of these
filing requirements were timely satisfied during 2005 by its directors, officers
and ten percent holders, except each of the following made late filings of
such
reports: Messrs. Brix, Connors, Keefe, Kelley, Mayer, Meehan, Sullivan, Stuart
and Zizzo – 1
report, 1 transaction each and Mr. Merritt – 7 reports,
8
transactions.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that a vote in favor of election of the nominees to serve
as members of the Board is in the best interests of the Company. The affirmative
vote of the plurality of outstanding shares of Common Stock represented at
the
Annual Meeting is required for approval of this proposal. Shares represented
at
the meeting by proxy which are not voted because the stockholder has elected
to
abstain will be counted in determining the presence of a quorum but will not
be
counted as “for” the election. Shares represented at the meeting by proxy for
which the proxy cards have been left blank will be counted as “for” the
election.
The
Board of Directors recommends a vote FOR the election of the six nominees
to the
Board of Directors.
2.
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APPROVAL
OF THE CHANGE OF THE STATE OF INCORPORATION FROM NEW YORK TO
DELAWARE
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Overview
The
Board
has unanimously adopted and approved, and recommends that the Company’s
shareholders adopt and approve, the change to the state of incorporation of
the
Company from New York to Delaware through a merger (referred to herein as the
“Reincorporation”) of the Company with and into its newly-formed, wholly-owned
subsidiary, ThinkEngine Networks, Inc., a Delaware corporation (the
“Subsidiary”), pursuant to a merger agreement by and between the Company and the
Subsidiary (the “Merger Agreement”). A copy of the Merger Agreement is attached
hereto as Exhibit A.
The
Reincorporation and the transactions incident thereto will not result in any
change in the business or the assets, liabilities, or net worth of the
reincorporated entity. In addition, the directors and officers of the Surviving
Corporation (as defined below) will be the same as those of the Company. The
Reincorporation will provide the Company with the advantages of the corporate
laws of Delaware and will in connection therewith effect changes to the
Company’s certificate of incorporation and bylaws as described
below.
The
Merger Agreement provides for a tax-free reorganization pursuant to the
provisions of Section 368 of the Internal Revenue Code (the “Code”), whereby the
Company will be merged with and into the Subsidiary, the Company’s separate
corporate existence shall cease, and the Subsidiary shall continue as the
surviving corporation (the surviving Delaware corporation is referred to herein
after giving effect to the Reincorporation as the “Surviving Corporation”). At
the effective time of the Reincorporation, all issued and outstanding shares
of
the Company common stock (“Common Stock”) will automatically be converted into
shares of common stock of the Surviving Corporation (the “Delaware Common
Stock”) with no action required on the part the shareholders of the
Company.
The
Merger Agreement in the form attached hereto has been adopted and approved
by
the Board. The Merger Agreement provides, however, that the Board of Directors
may terminate the Merger Agreement and abandon the merger, even after requisite
shareholder approval thereof, if for any reason, the Board determines that
it is
inadvisable to proceed with the merger.
As
soon
as practicable after receiving shareholder approval, the Company will file
a
Certificate of Merger with the Secretary of State of the State of New York
and a
Certificate of Ownership and Merger with the Secretary of State of the State
of
Delaware, at which time the Reincorporation will be effective.
At
the
effective time of the Reincorporation, and without any additional action by
the
shareholders, each issued and outstanding share of Common Stock will be
converted into one share of Delaware Common Stock resulting in all shareholders
automatically becoming shareholders of the Surviving Corporation.
After
the
effective time of the Reincorporation, shareholders of the Surviving Corporation
will not be required to exchange stock certificates that represent Common Stock
for stock certificates representing Delaware Common Stock. As of the effective
time of the Reincorporation, all stock certificates representing shares of
Common Stock will automatically be deemed to represent an equal number of shares
of Delaware Common Stock.
SHAREHOLDERS
SHOULD NOT DESTROY STOCK CERTIFICATES REPRESENTING COMMON STOCK AND SHOULD
NOT
SEND STOCK CERTIFICATES REPRESENTING COMMON STOCK TO THE COMPANY OR THE
COMPANY’S TRANSFER AGENT, EITHER BEFORE OR AFTER THE REINCORPORATION.
After
the
Reincorporation, shareholders of the Surviving Corporation may use stock
certificates issued prior to the Reincorporation to sell or transfer shares
of
Delaware Common Stock. New stock certificates representing shares of Delaware
Common Stock will be issued in connection with transfers of Delaware Common
Stock that take place after the Reincorporation. After the effective time of
the
Reincorporation, on the written request of any shareholder of the Surviving
Corporation, the Surviving Corporation will cause its transfer agent to issue
to
such shareholder a new stock certificate in exchange for a stock certificate
held by such shareholder issued prior to the time of the Reincorporation subject
to normal stock transfer requirements, which include compliance with all
applicable federal and state securities laws and regulations, delivery of the
original stock certificate with proper endorsement and stock power, acceptable
authorization for such transfer, and payment of applicable taxes and transfer
agent fees.
Shares
of
Common Stock that were freely tradable before the effective time of the
Reincorporation will be automatically converted into shares of freely tradable
Delaware Common Stock and shares of Common Stock with transfer restrictions
before the effective time of the Reincorporation will be automatically converted
into shares of Delaware Common Stock with the same transfer restrictions. For
purposes of Rule 144 under the Securities Act of 1933, as amended (the
“Securities Act”), the Reincorporation on its own will not affect the
acquisition date of the shares of Common Stock converted into shares of Delaware
Common Stock. Immediately after the effective time of the Reincorporation,
all
shares of Delaware Common Stock will be deemed, for Rule 144 purposes, to have
been acquired on the date the shares of Common Stock were acquired.
Summary
Term Sheet
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Cognitronics
Corporation, a New York corporation incorporated in New York on January
2,
1962. The Company designs, manufactures and markets voice processing
systems.
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ThinkEngine
Networks, Inc., a Delaware corporation and wholly-owned subsidiary
of the
Company that prior to the Reincorporation, will not have engaged
in any
activities except in connection with the
Reincorporation.
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Approval:
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The
Reincorporation and the terms of the Merger Agreement were approved
at a
meeting of the Board of Directors held on October 6,
2006.
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Transaction
Structure:
|
To
effect the Reincorporation, the Company will merge with and into
the
Subsidiary and thereafter the Company will cease to exist as a separate
entity. The Subsidiary will be the surviving Delaware
corporation.
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Exchange
of Common Stock:
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Shares
of common stock of Cognitronics Corporation, the New York corporation
(the
“Common Stock”) will automatically be converted on a one-for-one basis
into shares of common stock of ThinkEngine Networks, Inc., the Delaware
corporation (the “Delaware Common Stock”) at the effective time of the
Reincorporation without any action required by the
shareholders.
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Upon
the effective time of the Reincorporation, the Surviving Corporation
shall
assume and continue any and all stock option, stock incentive and
other
equity-based award plans heretofore adopted by Cognitronics Corporation
(individually, an “Equity Plan” and, collectively, the “Equity Plans”),
and shall reserve for issuance under each Equity Plan a number of
shares
of Delaware Common Stock equal to the number of shares of Common
Stock so
reserved immediately prior to the effective time of the Reincorporation.
Each unexercised option or other right to purchase Common Stock granted
under and by virtue of any such Equity Plan which is outstanding
immediately prior to the effective time of the Reincorporation shall,
upon
the effective time of the Reincorporation, become an option or right
to
purchase Delaware Common Stock on the basis of one share of Delaware
Common Stock for each share of Common Stock issuable pursuant to
any such
option or stock purchase right, and otherwise on the same terms and
conditions and at an exercise or conversion price per share equal
to the
exercise or conversion price per share applicable to any such Cognitronics
Corporation option or stock purchase right. Each other equity-based
award
relating to Common Stock granted or awarded under any of the Equity
Plans
which is outstanding immediately prior to the effective time of the
Reincorporation shall, upon the effective time of the Reincorporation,
become an award relating to Delaware Common Stock on the basis of
one
share of Delaware Common Stock for each share of Common Stock to
which
such award relates and otherwise on the same terms and conditions
applicable to such award immediately prior to the effective time
of the
Reincorporation.
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Purpose:
|
The
purpose of the Reincorporation is to change the Company’s state of
incorporation from New York to Delaware and is intended to permit
the
Company to be governed by the Delaware General Corporation Law (“Delaware
Law”) rather than by the New York Business Corporation Law (“New York
Law”).
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Effective
Time:
|
The
Reincorporation will become effective on the filing of the Certificate
of
Ownership and Merger with the Secretary of State of Delaware and
the
Certificate of Merger with the Secretary of State of New York. These
filings are anticipated to be made as soon as practicable after receiving
the requisite shareholder approval and as soon as permitted by the
notice
requirements of the Exchange Act or as early as practicable
thereafter.
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Effect
of Reincorporation:
|
At
the effective time of the Reincorporation:
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|
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·
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the
Company will cease to exist as a separate entity;
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·
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the
shareholders of the Company will become shareholders of the Surviving
Corporation;
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|
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|
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·
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the
outstanding shares of Common Stock will automatically be converted
on a
one-for-one basis into shares of Delaware Common Stock;
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·
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the
Surviving Corporation shall possess all of the assets, liabilities,
rights, privileges, and powers of the Company and the
Subsidiary;
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·
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the
Surviving Corporation shall be governed by the applicable laws of
Delaware
and the Certificate of Incorporation (the “Delaware Certificate”) and
Bylaws (the “Delaware Bylaws”) of the Subsidiary in effect at the
effective time of the Reincorporation;
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·
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the
officers and directors of the Company will be the officers and directors
of the Surviving Corporation; and
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·
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the
Surviving Corporation will operate under the name ThinkEngine Networks,
Inc., with a ticker symbol of THN.
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Tax
Consequences:
|
The
Reincorporation is intended to qualify as a tax-free reorganization
for
federal income tax purposes. If the Reincorporation does so qualify,
no
gain or loss would generally be recognized by the shareholders of
the
Company upon conversion of shares of Common Stock into shares of
Delaware
Common Stock. We believe, but cannot assure you, that there will
no tax
consequences for the shareholders of the Company. You are urged to
consult
your own tax advisor for tax implications related to your particular
situation.
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Reasons
for the Reincorporation
The
purpose of the Reincorporation is to change the legal domicile of the Company
from New York to Delaware. The Board believes that this change in domicile
would
be in the best interests of the shareholders of the Company for a number of
reasons.
Historically,
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has adopted comprehensive, modern, and flexible
corporate laws that are updated and revised regularly in response to the legal
and business needs of corporations organized under its laws. Because of these
efforts, many corporations initially choose Delaware for their domicile or
subsequently reincorporate there in a manner similar to that proposed by the
Company. Because of Delaware’s preeminence as the state of incorporation for
many major corporations, both Delaware’s legislature and its courts have
demonstrated an ability and willingness to act quickly to meet changing business
needs. The Delaware courts have developed considerable expertise in dealing
with
corporate issues and a substantial body of case law, establishing public
policies with respect to corporate legal affairs. Delaware has a more highly
developed body of corporate case law than does New York, and this case law
advantage gives Delaware corporate law an added measure of predictability that
is useful in a judicial system based largely on precedent. These factors often
provide the directors and management of Delaware corporations with greater
certainty and predictability in managing the affairs of the corporation.
The
Board
believes that reincorporation from New York to Delaware will enhance the
Company’s ability to attract potential business combination candidates and to
attract and retain qualified members to its Board.
Material
Terms of Merger Agreement
The
following discussion summarizes the material terms of the Merger Agreement;
however, such summary is not and does not purport to be a complete statement
of
all of the terms and provisions of the Merger Agreement and is qualified in
its
entirety by reference to the full text of the Merger Agreement, a copy of which
is attached to this Proxy Statement as Exhibit A. The shareholders of the
Company are urged to read the entire Merger Agreement carefully as it is the
legal document governing the Reincorporation.
To
effect
the Reincorporation, and subject to the terms and conditions of the Merger
Agreement, the Company will merge with and into the Subsidiary and, immediately
thereafter, the Company’s separate legal existence shall cease and the
Subsidiary shall continue as the surviving Delaware corporation. The Surviving
Corporation shall be governed by the Delaware Law and succeed to all rights,
assets, liabilities, and obligations of the Company and the Subsidiary.
At
the
effective time of the Merger, the outstanding shares of Common Stock will
automatically be converted on a one-for-one basis into shares of Delaware Common
Stock.
The
Merger Agreement provides that the Delaware Certificate and the Delaware Bylaws
will be the certificate of incorporation and bylaws of the Surviving Corporation
following the Reincorporation, which will result in changes to the governance
and operation of the Company. A summary of material changes to the charter
documents is provided below under the section entitled Significant
Differences in Charter Documents.
The
Merger Agreement provides that the officers and directors of the Company, as
of
the effective time of the Merger, shall remain as the officers and directors
of
the Surviving Corporation after the Reincorporation who shall serve as such
until their successors are duly elected or appointed and qualified.
Approval
of the Reincorporation will also constitute approval of the form of Merger
Agreement, the Delaware Certificate and the Delaware Bylaws, which are attached
hereto as Exhibit A, Exhibit B, and Exhibit C, respectively. Approval of the
Merger Agreement, the Delaware Certificate and the Delaware Bylaws is necessary
as incidental to the Reincorporation. The discussion contained in and
information provided by this Proxy Statement is qualified in its entirety by
reference to the full text of the agreements and documents attached hereto
as
Exhibits.
Certain
United States Federal Income Tax Consequences
The
following summary of certain material federal income tax consequences of the
Reincorporation does not purport to be a complete discussion of all of the
possible federal income tax consequences, and is included for general
information only. Further, it does not address any state, local, foreign, or
other income tax consequences, nor does it address the tax consequences to
the
shareholders of the Company that are subject to special tax rules, such as
banks, insurance companies, regulated investment companies, personal holding
companies, foreign entities, nonresident alien individuals, broker-dealers,
and
tax-exempt entities. The discussion is based on the United States federal income
tax laws as of the date of this Proxy Statement. Such laws are subject to change
retroactively as well as prospectively. This summary also assumes that shares
of
Common Stock are held as “capital assets,” as defined in the Code. The tax
treatment of a shareholder may vary depending on the facts and circumstances
of
such shareholder.
EACH
SHAREHOLDER IS URGED TO CONSULT WITH SUCH SHAREHOLDER’S TAX ADVISOR WITH RESPECT
TO THE PARTICULAR TAX CONSEQUENCES OF THE REINCORPORATION.
The
Reincorporation is intended to qualify for federal income tax purposes as a
“reorganization” within the meaning of Section 368 of the Code. If it does so
qualify, no gain or loss will be recognized for federal income tax purposes
by
the shareholders of the Company on the conversion of their Common Stock into
shares of Delaware Common Stock, and no gain or loss will be recognized for
federal income tax purposes by the Company or the Subsidiary.
The
Company’s views regarding the tax consequences of the Reincorporation are not
binding upon the Internal Revenue Service or the courts, and there is no
assurance that the Internal Revenue Service or the courts would accept the
positions expressed above. The state and local tax consequences of the
Reincorporation may vary significantly as to each shareholder of the Company,
depending on the state in which such shareholder resides.
Accounting
Treatment
The
transaction is expected to be accounted for as a reverse acquisition in which
the Company is the accounting acquirer and the Subsidiary is the legal acquirer.
The management of the Company will be the management of the Surviving
Corporation. Because the Reincorporation is expected to be accounted for as
a
reverse acquisition and not a business combination, no goodwill is expected
to
be recorded in connection therewith and the costs incurred in connection with
the Reincorporation are expected to be accounted for as a reduction of
additional paid-in capital.
Regulatory
Approvals
The
Company does not expect the Reincorporation to occur until it has all required
consents of governmental authorities, including the filing of a Certificate
of
Ownership and Merger with the Secretary of State of the State of Delaware,
and
the filing of a Certificate of Merger with the Secretary of State of the State
of New York, and satisfied applicable requirements of the American Stock
Exchange.
Interests
of Certain Persons in the Reincorporation
No
director, executive officer, associate of any director or executive officer,
or
any other person has any substantial interest, direct or indirect, by security
holdings or otherwise, resulting from the Reincorporation, which is not shared
by all other shareholders of the Company pro rata, and in accordance with their
respective interests.
Operations
Following the Reincorporation
The
Company designs, manufactures and markets voice processing systems. The
Surviving Corporation is expected to continue the business of the
Company.
SIGNIFICANT
CHANGES RESULTING FROM THE REINCORPORATION
Overview
Provided
below is a discussion of certain changes that will result from the
Reincorporation, including significant differences between New York Law and
Delaware Law and between the charter documents of the Company and the
Subsidiary. Many provisions of Delaware Law and New York Law may be subject
to
differing interpretations, and the interpretations offered in this Proxy
Statement may be incomplete in certain respects. The discussion is no substitute
for direct reference to the New York Law and Delaware Law themselves or for
professional guidance as to how to interpret such laws. In addition, the
discussion is qualified in its entirety by reference to Delaware Law, New York
Law, applicable case law, and the full text of the organizational documents
of
each of the companies. The shareholders of the Company should read the following
discussion in conjunction with the rest of the information provided in this
Proxy Statement and the agreements and documents attached hereto as Exhibits,
and the New York Law and Delaware Law.
The
Board
has recommended that the Company’s state of incorporation be changed from New
York to Delaware. Reincorporation in Delaware will not result in any change
in
the business, management, assets, liabilities, or net worth of the Company.
Reincorporation in Delaware will allow the Company to take advantage of certain
provisions of the corporate laws of Delaware. The most significant effects of
the Reincorporation are summarized below.
Upon
acceptance for filing of the appropriate certificates of merger by the Secretary
of State of Delaware and the Secretary of State of New York, the Company will
be
merged with and into the Subsidiary pursuant to the Merger Agreement, resulting
in a change in the Company’s state of incorporation. After the effective time of
the Merger, the Surviving Corporation will be subject to the Delaware Law and
the Delaware Certificate and Delaware Bylaws.
Significant
Differences in Charter Documents
The
Surviving Corporation will be governed by the Delaware Certificate and Delaware
Bylaws. The Delaware Certificate and the Delaware Bylaws are substantially
similar to those currently governing the Company and the shareholders of the
Company. The following discussion summarizes some of the most significant
differences in the charter documents currently governing the Company and the
charter documents that will govern the Surviving Corporation after the
Reincorporation. The discussion does not purport to be a complete statement
of
all differences between such charter documents or the changes that may occur
as
a result of the Reincorporation to the rights of the Company shareholders or
the
rights and obligations of the Company and such discussion is qualified in its
entirety by reference to the full text of the Delaware Certificate and the
Delaware Bylaws which are attached to this Proxy Statement as Exhibits, the
Certificate of Incorporation and Bylaws of the Company, which are available
in
the public filings made by the Company with the SEC, and the entire Delaware
Law
and New York Law. The Company shareholders are urged to read and review the
all
such documents and laws carefully.
Par
Value
The
par
value of the Common Stock, consisting of 20 million shares, is $0.20 per
share.
The
par
value of the Delaware Common Stock, also consisting of 20 million shares, is
$0.001 per share. The change in par value from $0.20 to $0.001 per share is
intended to bring the Company in line with the practice of other corporations.
The reduction in par value would also mitigate its franchise tax liability.
The
reduction in par value would be effected by a reduction in the capital stock
account and a corresponding increase in the additional paid-in capital account
and thus would have no impact in the Company’s capital structure.
Notice
of Shareholder Meetings
The
Bylaws of the Company requires that written notice for regular and special
meetings of the shareholders be given no less than ten (10) nor more than fifty
(50) days before the date of the meeting.
The
Delaware Bylaws requires that written notice for regular and special meetings
of
the shareholders be given no less than ten (10) nor more than sixty (60) days
before the date of the meeting. The increased notice period is intended to
bring
the Company in line with the practices of other Delaware
corporations.
Meetings
of the Board of Directors
The
Bylaws of the Company provide that regular meetings of the Board of Directors
require at least five (5) days prior written notice, and special meetings
require at least two (2) days prior written notice.
The
Delaware Bylaws provide that regular meetings of the Board of Directors may
be
held without notice at such time and place as determined by the Board, and
special meetings require at least one (1) day prior written notice. Emergency
meetings may also be held without notice if a quorum of directors participates
personally or by conference telephone. The reduced notice requirements will
help
facilitate improved director communication and action for the benefit of the
Surviving Corporation.
Number
of Directors
The
Bylaws of the Company provide that the number of directors on the Board shall
not be less than three, and the number may be fixed from time to time by a
majority vote of the entire Board of Directors or shareholders holding a
majority of outstanding shares.
The
Delaware Bylaws provide that the number of directors on the Board shall not
be
less than three nor more than fifteen, as may be designated from time to time
by
the Board.
Fiscal
Year
The
Bylaws of the Company provide that the fiscal year shall be fixed at the
discretion of the Board of Directors.
The
Delaware Bylaws provide that the fiscal year shall begin on the first of January
and end on the thirty-first of December of every year. The fixing of the fiscal
year is intended to bring the Company in line with the accounting practices
of
other corporations.
Indemnification
The
Bylaws of the Company provide that the Company shall indemnify a party to
any
actual or threatened action or proceeding by reason of the fact that such
party
is a director or officer of the Company. The Bylaws also expressly grant
the
Company the power to enter into additional indemnification arrangements with
its
officers and directors.
The
Delaware charter documents provide a further condition to the Surviving
Corporation’s indemnity obligations to the effect that a party’s actions give
rise to the Company’s indemnification responsibilities only when such actions
are taken in good faith and in a manner reasonably believed to be in or not
opposed to the best interest of the Company, or to the fullest extent permitted
by Delaware Law. The Delaware Bylaws further provide that the Company’s
indemnification obligations continue as to a party who ceases to be a director,
officer, employee or agent of the Company.
Limitation
of Liability
The
Certificate of Incorporation of the Company provides that no director shall
be
personally liable to the Company or its shareholders for damages for any breach
of duty in such capacity, provided the director’s breach was not judged to be in
bad faith, for reasons of personal gain, or in violation of New York
Law.
The
Delaware Certificate provides that no director shall be liable to the Surviving
Corporation or its shareholders for monetary damages for any breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.
Purpose
The
Certificate of Incorporation of the Company explicitly sets forth the purposes
for which the Company was formed and activities in which the Company may
engage.
The
Delaware Certificate provides that the Company may engage in any lawful activity
for which corporations may be organized under Delaware Law. The change from
a
specific to a general purpose clause affords the Company greater flexibility
in
its actions without the requirement of amending its Certificate of Incorporation
for each new or different activity in which it intends on engaging.
Significant
Differences Between New York Law and Delaware Law
The
Company is governed by New York Law. After the effective time of the
Reincorporation, the Surviving Corporation will be governed by the Delaware
Certificate, the Delaware Bylaws and Delaware Law. The change in application
of
the law governing the Surviving Corporation will result in certain changes
to
the Company’s rights, governance and structure and changes in the rights and
obligations of the Company’s shareholders. The following discussion summarizes
some of the most significant differences which will result after the effective
time of the Reincorporation as a result of the application of Delaware Law
versus New York Law. The discussion does not purport to be a complete discussion
of all differences between such laws or the changes that may occur as a result
of the Reincorporation to the rights of the Company’s shareholders or the rights
and obligations of the Company and such discussion is qualified in its entirety
by reference to the full text of the Delaware Certificate and the Delaware
Bylaws which are attached to this Proxy Statement as Exhibits, the Certificate
of Incorporation and Bylaws of the Company which are available in the public
filings made by the Company with the SEC and the entire Delaware Law and New
York Law. The Company’s shareholders are urged to read and review all such
documents and laws carefully.
Delaware
Law provides for the removal of directors with or without cause on the
affirmative vote by holders representing a majority of the shares of voting
stock entitled to vote in an election of directors.
New
York
Law provides for the removal of directors only for cause on the affirmative
vote
by holders representing a majority of the shares of voting stock entitled to
vote. A New York corporation’s certificate of incorporation or by-laws may grant
the board of directors the power to remove a director for cause, unless the
director was elected by (i) cumulative voting, (ii) the holders of the shares
of
any class or series or (iii) the holders of bonds voting as a
class.
Shareholder
Lists and Inspection Rights
Under
Delaware Law, a shareholder may inspect the Delaware corporation’s stock ledger,
list of shareholders and other books and records for any proper purpose
reasonably related to such person’s interest as a shareholder. A list of
shareholders is to be open to the examination of any shareholder, for any
purpose germane to a meeting of shareholders, during ordinary business hours,
for a period of at least 10 days prior to such meeting. The list is also to
be
produced and kept at the place of the meeting during the entire meeting, and
may
be inspected by any shareholder who is present.
New
York
Law provides that a shareholder of record has a right to inspect a New York
corporation’s shareholder minutes and record of shareholders, during usual
business hours, on at least five days’ written demand. The examination of the
shareholder minutes and record of shareholders must be for a purpose reasonably
related to the person’s interest as a shareholder.
Corporation’s
Best Interests
Delaware
Law does not include a specific provision regarding constituencies other than
shareholders and creditors to be considered by the directors in determining
the
corporation’s best interests.
Under
New
York Law, a director, in taking action, including any action which may involve
a
change in control of the corporation, is entitled to consider both the long-term
and short-term interests of the corporation and its shareholders and the effects
that the corporation’s actions may have in the short-term or long-term upon any
of the following:
|
· |
the
prospects of growth, development, productivity and profitability
of
the corporation,
|
|
· |
the
corporation’s current
employees,
|
|
· |
the
corporation’s retired employees and others receiving or entitled to
receive retirement, welfare or similar benefits from or pursuant
to any
plan sponsored, or agreement entered into, by the
corporation,
|
|
· |
the
corporation’s customers and creditors,
and
|
|
· |
the
ability of the corporation to provide, as a going concern, goods,
services, employment opportunities and employment benefits and
otherwise
contribute to the communities in which it does
business.
|
Authorization
of Certain Actions
Delaware
Law requires the approval of the board of directors and at least a majority
of
the corporation’s outstanding shares entitled to vote to authorize a merger or
consolidation, except in certain cases where the corporation is the surviving
corporation and its securities being issued in the transaction do not exceed
20%
of the shares of common stock of the corporation outstanding immediately prior
to the effective date of the transaction. A sale of all or substantially all
of
a Delaware corporation’s assets or a voluntary dissolution of a Delaware
corporation requires the affirmative vote of the board of directors and at
least
a majority of such corporation’s outstanding shares entitled to vote.
Under
New
York Law, the consummation of a merger, consolidation, dissolution or
disposition of substantially all of the assets of the New York corporation
requires the approval of the corporation’s board of directors and two-thirds of
all outstanding shares of the corporation entitled to vote and, in certain
situations, the affirmative vote by the holders of a majority of all outstanding
shares of each class or series of shares.
Indemnification
and Limitation of Liability of Directors and Officers
Delaware
Law permits a Delaware corporation to indemnify any person who was or is a
party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than one by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys’
fees actually and necessarily incurred as a result of such action or proceeding,
if such director or officer acted, in good faith, for a purpose which such
person reasonably believed to be in, or not opposed to, the best interests
of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that such conduct was unlawful. Delaware Law permits
a corporation to include in its certificate of incorporation a provision
eliminating or limiting a director’s liability to a corporation or its
shareholders for monetary damages for breaches of fiduciary duty. Delaware
Law
provides, however, that liability for breaches of the duty of loyalty, acts
or
omissions not in good faith or involving intentional misconduct, or knowing
violation of the law, and the unlawful purchase or redemption of stock or
payment of unlawful dividends or the receipt of improper personal benefits
cannot be eliminated or limited in this manner.
With
certain limitations, New York Law permits a New York corporation to indemnify
its directors and officers made, or threatened to be made, a party to an action
or proceeding by reason of the fact that such person was a director or officer
of such corporation unless a judgment or other final adjudication adverse to
the
director or officer establishes that his or her acts were committed in bad
faith
or were the result of active and deliberative dishonesty and were material
to
the cause of action so adjudicated, or that he or she personally gained in
fact
financial profit or other advantage to which he or she was not legally entitled.
New York Law permits corporations to eliminate, or limit, the personal liability
of directors to the corporation or its shareholders for damages for any breach
of duty in such capacity except liability of a director (i) whose acts or
omissions were in bad faith, involved intentional misconduct or a knowing
violation of law, (ii) who personally gained a financial profit or other
advantage to which he or she was not legally entitled or (ii) whose acts
violated certain other provisions of New York Law or for acts or omissions
prior
to May 4, 1988.
Dividends
Delaware
Law generally provides that the directors of a Delaware corporation, subject
to
any restrictions contained in its certificate of incorporation, may declare
and
pay dividends out of surplus or, when no surplus exists, out of net profits
for
the fiscal year in which the dividend is declared or the preceding fiscal year.
Dividends may not be paid out of net profits if the capital of the corporation
is less than the amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of
assets.
New
York
Law generally provides that a New York corporation, subject to any restrictions
contained in its certificate of incorporation, may declare and pay dividends
on
its outstanding shares, except when the corporation is insolvent or would
thereby be made insolvent. Dividends may be declared or paid out of surplus
only, so that net assets of the corporation after such declaration or payment
shall at least equal the amount of its stated capital.
Business
Combinations
In
general, Delaware Law prohibits an interested shareholder (generally defined
as
a person who owns 15% or more of a corporation’s outstanding voting stock) from
engaging in a business combination with that corporation for three years
following the date he or she became an interested shareholder. The three-year
moratorium is not applicable when: (i) prior to the date the shareholder became
an interested shareholder, the board of directors of the corporation approved
the business combination or the transaction that resulted in the shareholder
becoming an interested shareholder, (ii) upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, he or
she
owned at least 85% of the outstanding voting stock of the corporation (excluding
shares owned by directors who are also officers of the corporation and by
certain employee stock plans), or (iii) at or subsequent to such time, the
business combination is approved by the board of directors of the corporation
and by the shareholder affirmative vote at a meeting of shareholders of at
least
two-thirds of the outstanding voting stock entitled to vote thereon, excluding
shares owned by the interested shareholder. These restrictions of Delaware
law
generally do not apply to business combinations with an interested shareholder
that are proposed subsequent to the public announcement of, and prior to the
consummation or abandonment of, certain mergers, sales of 50% or more of a
corporation’s assets or tender offers for 50% or more of a corporation’s voting
stock.
New
York
Law prohibits certain business combinations between a New York corporation
and
an interested shareholder for five years after the date that the interested
shareholder becomes an interested shareholder unless, prior to that date, the
board of directors of the corporation approved the business combination or
the
transaction that resulted in the interested shareholder becoming an interested
shareholder. After five years, such business combination is permitted only
if
(1) it is approved by a majority of the shares not owned by the interested
shareholder or (2) certain statutory fair price requirements are met. An
“interested shareholder” is any person who beneficially owns, directly or
indirectly, 20% or more of the outstanding voting shares of the
corporation.
Shareholder
Meetings and Action by Written Consent
Unless
the certificate of incorporation provides otherwise, Delaware Law generally
permits shareholders to take action by written consent with the same percentage
of voting power (generally, a majority) that would be required for action at
a
shareholders’ meeting, assuming the presence of all shareholders entitled to
vote.
New
York
Law requires unanimous written consent of shareholders to act by written consent
in lieu of a meeting unless the certificate of incorporation specifies a lesser
percentage within certain parameters set out in such law.
Issuance
of Equity to Directors, Officers and Employees
New
York
Law requires that the issuance of options or rights to purchase stock to
directors, officers or employees of a corporation, as an incentive to service
or
continued service with the corporation, must be authorized as required by the
policies of the stock exchange or automated quotation system on which the
corporation’s shares are listed or authorized for trading; or if the
corporation’s shares are not so listed or authorized, by a majority of the votes
validly cast at a shareholders meeting or by and consistent with a plan adopted
with the vote of a majority of shareholders.
Delaware
Law does not require shareholder approval of such transactions.
Consideration
Received for Equity
Under
Delaware Law, a corporation can receive cash, services, personal or real
property, leases of real property or any combination of these as payment in
full
or in part for the issuance of shares. A purchaser of shares under Delaware
Law
may pay an amount equal to or greater than the par value of those shares if
the
corporation receives a binding obligation of the purchaser to pay the balance
of
the purchase price.
Under
New
York Law, consideration for the issuance of shares may consist of money or
other
property, labor or services actually received, a binding obligation to pay
the
purchase price in cash or other property, a binding obligation to perform
services, or any combination of the above. Stock certificates may not be issued
until the amount of consideration determined to be stated capital has been
paid
in the form of cash, personal or real property, services actually rendered
or
any combination of these, plus consideration for any balance, which may include,
in addition, binding obligations described in the preceding sentence.
Appraisal
Rights
Generally,
“appraisal rights” entitle dissenting shareholders to receive the fair value of
their shares in a merger or consolidation of a corporation or in a sale of
all
or substantially all its assets.
Under
Delaware Law, appraisal rights are not available to a shareholder if, among
other things: (i) the corporation’s shares are listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.; (ii)
held of record by more than 2,000 shareholders; or (iii) the corporation will
be
the surviving corporation in a merger that does not require the approval of
such
corporation’s shareholders. However, regardless of the foregoing, a dissenting
shareholder in a merger or consolidation has appraisal rights under Delaware
Law
if the transaction requires the exchange of shares for anything of value other
than one or more of the following:
|
1.
|
shares
of stock of the surviving corporation or of a new corporation that
results
from the merger or consolidation;
|
|
2.
|
shares
of another corporation that will be listed on a national securities
exchange, designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by more than 2,000 shareholders
after the
merger or consolidation occurs; or
|
|
3. |
cash
instead of fractional shares of the surviving corporation or another
corporation.
|
New
York
Law extends appraisal rights to an exchange of a corporation’s shares as well.
New York Law provides that dissenting shareholders have no appraisal rights
if
their shares are listed on the New York Stock Exchange or another national
securities exchange or designated as a market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. Where
shares are not listed on an exchange, appraisal rights under New York Law allow
a voting and dissenting shareholder of a New York corporation, with various
exceptions, to receive fair value for its shares in such transactions. One
exception is a merger between a parent corporation and its subsidiary when
the
parent owns at least 90% of the subsidiary. In this case, a shareholder of
the
parent corporation has no appraisal rights. On the other hand, appraisal rights
are available to shareholders who are not allowed to vote on a merger or
consolidation and whose shares will be cancelled or exchanged for something
of
value other than shares of the surviving corporation or another corporation.
When appraisal rights are available, the shareholder may have to request the
appraisal and follow other required procedures.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that a vote in favor of the change of the state of
incorporation from New York to Delaware is in the best interests of the Company
for the reasons set forth above. The affirmative vote of two-thirds of the
outstanding shares entitled to vote thereon is required for approval of this
proposal. Shares represented at the meeting by proxy which are not voted because
the shareholder has elected to abstain will be counted in determining the
presence of a quorum but will not be counted as “for” the election. Shares
represented at the meeting by proxy for which the proxy cards have been left
blank will be counted as “for” the election.
The
Board of Directors recommends a vote FOR approval of the change of the state
of
incorporation from New York to Delaware.
3.
|
APPROVAL
OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY’S NAME FROM “COGNITRONICS CORPORATION” TO “THINKENGINE
NETWORKS, INC.”
|
Overview
In
the
event the proposal for Reincorporation described above is not duly adopted
and
approved, the Board recommends that the shareholders of the Company adopt and
approve a change to the Company’s name from “Cognitronics Corporation” to
“ThinkEngine Networks, Inc.”
An
amendment to the Company’s Certificate of Incorporation to change the Company’s
name from “Cognitronics Corporation” to “ThinkEngine Networks, Inc.” has been
determined by the Board to be in the best interests of the Company and has
been
approved and declared advisable by the Board as means to convey a more
contemporary and forward-looking company, and the Board has directed that the
proposed amendment be considered and presented for shareholder
approval.
Implementation
If
the
proposal for Reincorporation is not duly adopted and approved, and this Proposal
3 is approved by the shareholders of the Company, the Company plans to file
a
Certificate of Amendment to the Company’s Certificate of Incorporation. Pursuant
to the Certificate of Amendment, Article I of the Company’s Certificate of
Incorporation will be amended to read in its entirety as follows:
“The
name
of the corporation is: ThinkEngine Networks, Inc. (the
“Corporation”).”
Notwithstanding
anything herein to the contrary, and notwithstanding shareholder approval of
this proposal, the Board of Directors may abandon such amendment to the
Company’s Certificate of Incorporation prior to its effectiveness under
applicable law.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that a vote in favor of the amendment to the Company’s
Certificate of Incorporation to change the Company’s name from “Cognitronics
Corporation” to “ThinkEngine Networks, Inc.” is in the best interests of the
Company. The affirmative vote of a majority of all outstanding shares entitled
to vote thereon is required for approval of this proposal. Shares represented
at
the meeting by proxy which are not voted because the shareholder has elected
to
abstain will be counted in determining the presence of a quorum but will not
be
counted as “for” the election. Shares represented at the meeting by proxy for
which the proxy cards have been left blank will be counted as “for” the
election.
The
Board of Directors recommends a vote FOR approval of the amendment to the
Company’s Certificate of Incorporation to change the Company’s name from
“Cognitronics Corporation” to “ThinkEngine Networks, Inc.”
4.
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APPROVAL
OF THE COMPANY’S 1990 STOCK OPTION PLAN, AS AMENDED, INCLUDING AN INCREASE
IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON
THE
EXERCISE OF OPTIONS GRANTED UNDER THE 1990 PLAN BY 550,000
|
General
In
July
1990, the stockholders of the Company approved the adoption of the Company’s 1990
Stock
Option Plan (as amended and approved by the stockholders in May 2003, the “1990
Plan”). Under the 1990 Plan, an aggregate of 1,932,500 shares of Common Stock
(adjusted for stock splits) were reserved for issuance pursuant to stock
options.
In
October 2006, subject to stockholder approval at the 2006 Annual Meeting, the
Board of Directors adopted an amendment to the 1990 Plan to increase the number
of shares of Common Stock reserved for issuance upon the exercise of options
granted under the 1990 Plan by 550,000 to a total of 2,482,500 shares. The
Board
also amended the 1990 Plan to include directors of the Company and advisors
and
consultants to the Company as eligible persons to participate in the 1990
Plan.
As
of
October 20, 2006 outstanding and unexercised options to purchase 675,383 shares
were held by 23 persons, with exercise prices ranging from $1.55 to $9.06 per
share and a weighted average
exercise price of $3.94 per share. Taking into account the increase of 550,000
shares reserved for the 1990 Plan approved by the Board of Directors and to
be
submitted for stockholder approval at the 2006 Annual Meeting, 897,483 shares
will be available for future option grants.
During
2005, the Company granted options under the 1990 Plan to purchase an aggregate
of 167,000 shares of Common Stock at an exercise price of $2.70 per share,
7,000
of which were granted to one employee and the balance were granted to five
executive officers. Options to purchase 27,166 shares were exercised in 2005
under the 1990 Plan by non-executive officers.
On
October 20, 2006, the closing price on the American Stock Exchange of the
Company’s Common Stock was $2.04.
The
following table shows, as to (i) the persons identified in the Summary
Compensation Table; (ii) each nominee for election as a director who is, or
has
been in the past, eligible to participate in the 1990 Plan; (iii) any person
who
has received 5% or more of grants; (iv) all current executive officers as a
group; and (v) all employees as a group (excluding all executive officers),
the
number of shares for which options are outstanding under the 1990 Plan as of
October 20, 2006:
Name
of Individual or Group
|
|
Number
of Shares
For
Which Options
Are
Outstanding
|
|
Brian
J. Kelley
|
|
|
342,000
|
|
Roy
A. Strutt
|
|
|
0
|
|
Kenneth
G. Brix
|
|
|
0
|
|
Michael
N. Keefe
|
|
|
0
|
|
Garrett
Sullivan
|
|
|
115,000
|
|
All
current executive officers as a group (4 persons)
|
|
|
115,000
|
|
|
|
|
129,550
|
|
Summary
of the Provisions of the Option Plan
The
following summary of the 1990 Plan, including the proposed amendment, is
qualified in its entirety by the specific language of the 1990 Plan, a copy
of
which is attached to this Proxy Statement as Exhibit D for stockholder
review.
The
1990
Plan is administered by the Compensation Committee of the Board of Directors
of
the Company (the “Committee”). The Committee will be comprised of not less than
three members of the Board who are “non-employee directors” within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”).
The Committee has authority, subject to the terms of the 1990 Plan, to determine
the persons to whom options may be granted, the number of shares to be covered
by each option and the time or times at which options will be granted, and
to
interpret the 1990 Plan and make all determinations necessary or advisable
for
its administration. The Committee may consult with legal counsel, who may
be
counsel to the Company, and will not incur any liability for any action taken
in
good faith in reliance upon the advice of counsel. The Board has the right
to
exercise any authority granted to the Committee under the 1990
Plan.
Full-time
employees, including officers, and non-employee directors of the Company
and its
subsidiaries and advisors and consultants to the Company are eligible to
participate in the 1990 Plan. The approximate number of persons eligible
to
participate in the 1990 Plan on October 20, 2006 was 45.
No
employee may be granted options with respect to more than 100,000 shares
of
Common Stock in any calendar year.
The
date
of grant of an option under the 1990 Plan will be the date on which the option
is awarded by the Committee.
The
option price per share of Common Stock is the closing price of Common Stock
recorded on the American Stock Exchange on the day the option is granted or
on
the last trading day prior thereto.
Each
option expires no later than the tenth anniversary of the date of its grant.
The
Committee determines the vesting schedule and other terms and conditions of
each
grant. The Committee may accelerate the vesting of any option. After becoming
exercisable, each installment remains exercisable until expiration or
termination of the option. An option may be exercised from time to time, in
whole or part, up to the total number of shares with respect to which it is
then
exercisable. Payment of the purchase price will be made in such manner as the
Committee may provide in the option, which may include cash (including cash
equivalents) or payroll deductions, any other manner permitted by law and
determined by the Committee, or any combination of the foregoing.
If
an
optionee ceases, other than by reason of death or retirement, to be employed
by
or affiliated with the Company or a subsidiary, all options granted to him
and
exercisable on the date of his termination of employment terminate on the
earlier of such options’ expiration or three months after the date his
employment ends or as otherwise determined by the Committee. Any installments
not exercisable on the date of such termination lapse and are thenceforth
unexercisable. Whether authorized leave of absence or absence in military or
governmental service may constitute employment for the purposes of the 1990
Plan
is to be conclusively determined by the Committee.
If
an
optionee retires, all options held by him on the date of his retirement shall
become exercisable on such date and shall terminate on the earlier of the
option’s expiration or the first anniversary of the day of his
retirement.
If
an
optionee dies, his option may be exercised, to the extent of the number of
shares with respect to which he could have exercised it on the date of his
death, by his estate, personal representative or beneficiary who acquires the
option by will or by the laws of descent and distribution, at any time prior
to
the earlier of the option’s expiration or the first anniversary of the
optionee’s death. On the earlier of such dates, the option
terminates.
No
option
is assignable or transferable by the optionee except by will or by laws of
descent and distribution, and during the lifetime of the optionee the option
may
be exercised only by him. At the request of an optionee, shares of Common Stock
purchased on exercise of an option may be issued in or transferred to the name
of the optionee and another person jointly with the right of
survivorship.
The
number and exercise price of shares of Common Stock covered by each option,
the
total number of shares that may be sold under the 1990 Plan, and the maximum
number of shares that may be sold, issued or transferred to an employee, will
be
adjusted to reflect, as deemed equitable and appropriate by the Committee,
any
stock dividend, stock split or share combination of the Common Stock or
recapitalization, merger, consolidation, extraordinary dividend, spin-off,
split-off or other change in capital structure of the Company. Any such change
shall preserve the aggregate value of outstanding options.
In
October 2006, the Board amended the 1990 Plan to provide that in the event
of a
change in control (as defined in the 1990 Plan) fifty percent (50%) of all
unexercisable outstanding options will become fully exercisable; for all
unexercisable options granted prior to October 2006, the Plan provides that
all
outstanding options will become fully exercisable upon a change in
control.
The
Board
may discontinue the 1990 Plan at any time and may amend it from time to time.
No
amendment or discontinuation of the 1990 Plan may adversely affect any award
previously granted without the optionee’s written consent. Amendments may be
made without stockholder approval except as required to satisfy applicable
law
or stock exchange requirements.
Summary
of Federal Income Tax Consequences of the 1990 Plan
Options
granted under the 1990 Plan may be either incentive or non-qualified stock
options. Incentive stock options are those that are intended to be treated
as
“incentive stock options” within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the “Code”). The grant of either an incentive stock option
or a non-qualified option under the Plan will not be taxed at the time of grant.
When
a
non-qualified option is exercised, the excess of the fair market value of the
shares received over the option price (the “option spread”) is taxable as
ordinary income to the option holder. Any gain or loss on a later disposition
of
the shares acquired through the exercise of an option will constitute capital
gain or loss to the optionee in an amount equal to the difference between the
sale proceeds and the fair value market value at the time of
exercise.
The
holder of an incentive stock option generally will not be taxed when the option
is exercised prior to termination of employment or within specified periods
(generally three months) thereafter. However, the option spread will constitute
an item of tax preference which may cause an option holder to be subject to
the
alternative minimum tax. Provided the Common Stock received upon exercise of
the
incentive stock option is not disposed of within one year of receipt of the
shares upon exercise and two years of the date on which the option is granted,
the gain on the subsequent disposition will receive capital gains treatment.
If
the shares acquired upon the exercise of an incentive stock option are disposed
of before the end of such holding periods, the option holder will recognize
ordinary income in an amount equal to the lesser of (1) the option spread on
the
date of exercise, or (2) the excess of the amount received upon disposition
of
the shares over the option exercise price. Any excess of the amount received
upon disposition of the shares over the value of the shares on the exercise
date
will be taxed as capital gain.
For
a
non-qualified option, the Company generally will be entitled to a deduction
at
the same time and in the same amount that the option holder recognizes ordinary
income, to the extent that such income is considered reasonable compensation
under the Code. For an incentive stock option, the Company generally will not
be
entitled to a deduction upon the exercise of the option. However, if an
incentive stock option holder does not satisfy the employment or holding period
requirements described above, the Company generally would be entitled to a
deduction in an amount equal to the amount of ordinary income recognized by
the
option holder.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that this amendment to the 1990 Plan is in the best
interests of the Company, as the availability of an adequate number of shares
or
issuance pursuant to the 1990 Plan is important to attracting, motivating and
retaining qualified personnel essential to the continued success of the Company.
The affirmative vote of a majority of the votes cast at the Annual Meeting
is
required for approval of this proposal. Shares represented at the meeting by
proxy which are not voted because the stockholder has elected to abstain will
be
counted in determining the presence of a quorum but will not be counted as
“for”
the amendment. Shares represented at the meeting by proxy for which the proxy
cards have been left blank will be counted as “for” the amendment.
The
Board of Directors recommends a vote FOR the approval of the 1990 Plan, as
amended, including an increase in the number of shares of Common Stock reserved
for issuance upon the exercise of options granted under the 1990 Plan by
550,000.
5.
|
APPROVAL
OF THE COMPANY’S RESTRICTED STOCK PLAN, AS AMENDED, INCLUDING AN INCREASE
IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON
AWARDS
TO KEY EMPLOYEES BY 300,000.
|
General
In
May
1995, the stockholders of the Company approved the adoption of the Company’s
Restricted Stock Plan (as amended and approved by stockholders in May 1998,
2000, 2001 and 2003, the “Restricted Plan”). Under the Restricted Plan, an
aggregate of 635,000 shares of Common Stock (adjusted for a stock split) were
reserved for awards to be made. The purpose of the Restricted Plan is: (a)
to
increase the proprietary interest in the Company of those Key Employees whose
responsibilities and decisions directly affect the performance of the Company
and its subsidiaries; (b) to provide rewards for those Key Employees who make
contributions to the success of the Company and its subsidiaries; and (c) to
attract and retain persons of superior ability as Key Employees of the Company
and its subsidiaries. A “Key Employee” is an officer or other employee who, in
the judgment of the Committee administering the Restricted Plan, is responsible
for or contributes to the management, growth, technology, or profitability
of
the business of the Company or any subsidiary or other affiliate of the Company
(a “Participating Company”).
In
October 2006, subject to stockholder approval at the Annual Meeting, the Board
of Directors adopted an amendment to the Restricted Plan, to increase the number
of shares of Common Stock reserved for issuance upon awards to Key Employees
by
300,000 to a total of 935,000 shares.
Since
the
inception of the Restricted Plan to October 20, 2006, 637,187 shares of Common
Stock have been issued to 19 Key Employees with market values on the date of
the
awards ranging from $1.55 to $9.06 per share and a weighted average market
value
of $5.34 per share, and 51,587 shares have been forfeited. Taking into account
the increase of 300,000 shares reserved for the Restricted Plan approved by
the
Board of Directors and to be submitted for stockholder approval at the Annual
Meeting, 349,400 shares will be available for future stock awards.
On
October 20, 2006, the closing price on the American Stock Exchange of the
Company’s Common Stock was $2.04.
Summary
of the Provisions of the Restricted Plan
The
following summary of the Restricted Plan, including the proposed amendment,
is
qualified in its entirety by the specific language of the Restricted Plan,
a
copy which is attached to the Proxy Statement as Exhibit E for stockholder
review.
The
Restricted Plan is administered by the Compensation Committee (the “Committee”)
of the Board of Directors of the Company. The Committee will be comprised of
not
less than two members of the Board who are “non-employee directors” within the
meaning of Rule 16b-3 under the Exchange Act. The Committee is authorized to
establish such rules and regulations as it deems necessary or advisable for
the
proper administration of the Restricted Plan and to take such other action
in
connection with or in relation to the Restricted Plan as it deems necessary
or
advisable. Each decision made or action taken pursuant to the Restricted Plan,
including interpretation of the Restricted Plan and the awards granted
thereunder by the Committee, will be final and conclusive for all
purposes.
The
Board
may, at any time, amend or terminate the Restricted Plan. The Restricted Plan
may also be amended by the Committee if such amendments are reported to the
Board. Amendments may be made without stockholder approval except as required
by
applicable law or stock exchange requirements. No amendment or termination
of
the Restricted Plan may affect an award theretofore granted under the Restricted
Plan without the written consent of the Key Employee affected. The Restricted
Plan also provides for adjustment of the number of shares available under the
Restricted Plan and subject to outstanding awards in the event of specified
changes in the Company’s capital structure.
No
member
or former member of the Committee or the Board will be liable for any action
or
determination made in good faith with respect to the Restricted Plan or any
award granted under it.
Participation
in the Restricted Plan will be limited to Key Employees of the Participating
Companies who have been selected by the Committee to participate in the
Restricted Plan.
The
Chief
Executive Officer (“CEO”) of the Company may recommend Key Employees to
participate in the Restricted Plan, and may recommend the timing, amount and
restrictions, if any, and other terms and conditions of an award, subject to
the
terms of the Restricted Plan. The Committee, in its sole discretion, has the
authority to grant awards under the Restricted Plan, which may be made in
accordance with the recommendations of the CEO or otherwise.
Each
award will be evidenced by a written award agreement, in a form to be adopted
by
the Committee. Each award agreement will be subject to and incorporate the
express terms and conditions, if any, required by the Restricted Plan, and
contain such corporate or personal performance goals, restrictions, terms and
conditions as the Committee may determine.
In
October 2006, the Board amended the Restricted Plan to provide that the vesting
schedule be determined by the Committee at the time of grant. For grants issued
prior to October 2006, to the extent that a Key Employee remains continuously
employed by a Participating Company, Common Stock received as an award will
vest
annually in 20% increments beginning on the second anniversary date of the
award, to be 100% vested on the sixth anniversary date of the award. However,
upon a Key Employee’s death, total disability or retirement on or after reaching
the age of 62, shares of Restricted Stock will vest on a pro rata basis over
six
years from the date of grant of the award.
The
Committee may elect to waive or accelerate the vesting schedule, in whole or
in
part, at any time at or after an award. Shares of Common Stock which do not
vest
will be forfeited to the Company. In October 2006, the Board amended the
Restricted Plan to provide that, if following a change in control, a Key
Employee’s employment is terminated without cause or there is a constructive
termination without cause as defined in the Restricted Plan, fifty percent
(50%)
of all shares of Restricted Stock subject to that Key Employee’s awards will
become immediately vested; in the event of a change in control, all shares
of
Restricted Stock granted prior to October 2006 will become immediately vested.
Change of control includes (i) specified mergers, sales of assets and plans
of
liquidation, (ii) a majority of the Board ceasing to be incumbent directors
as
defined in the Restricted Plan, and (iii) any person becoming the owner of
more
than 20% of the Company’s voting securities as defined in the Restricted
Plan.
Each
certificate representing shares of Common Stock issued pursuant to an award
under the Restricted Plan will be registered in the name of the Key Employee
and
held, together with a stock power endorsed in blank, by the Company. Unless
and
until such shares of Common Stock fail to vest, the Key Employee will be
entitled to vote all such shares of Common Stock and receive all dividends
thereon, if any.
Certificates
held by the Company representing shares of Common Stock which are no longer
subject to vesting under the Restricted Plan will be delivered by the Company
to
the Key Employee in the form of a freely transferable certificate promptly
after
becoming vested, provided the Key Employee has paid all taxes required to be
withheld.
The
terms
of the Restricted Plan are binding upon the Company and its successors and
assigns.
The
Board
may at any time terminate the Restricted Plan as of any date specified in a
resolution adopted by the Board. No award may be granted after the Restricted
Plan has terminated. Termination of the Restricted Plan will not affect any
award previously granted.
Summary
of Federal Income Tax Consequences of the Restricted Plan
The
U.S.
Federal income tax consequences to the Company and its recipients of awards
under the Restricted Plan are complex and subject to change. The following
discussion is only a summary of the general rules applicable to the Restricted
Plan. Generally, the recipient of a stock award will not recognize taxable
income at the time the Company’s common stock associated with such stock award
is received. At the time or times that the Common Stock becomes vested, the
recipient will recognize taxable ordinary income equal the fair market value
of
the Common Stock on the date it becomes vested. The income realized by the
recipient will generally be subject to both U.S. income and employment
taxes.
The
recipient’s basis for determination of gain or loss upon the subsequent
disposition of shares of Common Stock acquired as stock awards will be the
amount recognized as taxable ordinary income recognized when the stock became
vested. Upon the disposition of any stock received as a stock award under the
Plan, the difference between the sale price and the recipient’s basis in the
shares will be treated as a capital gain or loss and generally will be
characterized as long-term capital gain or loss if, at the time of disposition,
the shares have been held for more than one year since the recipient recognized
compensation income with respect to such shares.
In
the
year that the recipient of a stock award recognizes ordinary taxable income
in
respect of such award, the Company will be entitled to a deduction for federal
income tax purposes equal to the amount of ordinary income that the recipient
is
required to recognize, provided that the deduction is not otherwise disallowed
under the Code.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that this amendment to the Restricted Plan is in the
best
interests of the Company, as the availability of an adequate number of shares
for issuance pursuant to the Restricted Plan is important to attracting,
motivating and retaining qualified personnel essential to the continued success
of the Company. The affirmative vote of a majority of the votes cast the Annual
Meeting is required for approval of this proposal. Shares represented at the
meeting by proxy which are not voted because the stockholder has elected to
abstain will be counted in determining the presence of a quorum but will not
be
counted as “for” the amendment. Shares represented at the meeting by proxy for
which the proxy cards have been left blank will be counted as “for” the
amendment.
The
Board of Directors recommends a vote FOR the approval of the Restricted Plan,
as
amended, including an increase in the numberof shares of Common Stock reserved
for issuance upon awards to Key Employees by 300,000.
6.
|
APPROVAL
OF THE COMPANY’S DIRECTORS’ STOCK OPTION PLAN, AS AMENDED, INCLUDING AN
INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UPON EXERCISE
OF
OPTIONS GRANTED UNDER THE DIRECTORS’ STOCK OPTION PLAN BY
150,000.
|
General
In
May
1999, the stockholders of the Company approved the adoption of the Company’s
Directors’ Stock Option Plan (as amended and approved by the stockholders in May
2000, 2001 and 2003, the “Directors’ Plan”). Under the Directors’ Plan, 187,500
shares of the Company’s Common Stock (adjusted for stock splits) were reserved
for issuance upon the exercise of options awarded thereunder.
In
October 2006, the Board amended the Directors Plan to limit eligibility to
non-employee directors. Prior to that amendment, non-employee officers were
also
eligible.
The
purpose of the Directors’ Plan is to increase the ownership interest in the
Company of non-employee directors whose services are considered essential to
the
Company’s continued progress, to align such interests with those of the
stockholders of the Company and to provide a further incentive to serve as
a
director of the Company.
In
October 2006, subject to stockholder approval at the Annual Meeting, the Board
adopted an amendment to the Directors’ Plan, to increase the number of shares of
Common Stock reserved for issuance upon the exercise of options granted under
the Directors’ Plan by 150,000 to a total of 337,500 shares.
On
October 20, 2006, outstanding and unexercised options to purchase 174,250 shares
of the Company’s Common Stock were held by 6 participants with exercise prices
ranging from $1.45 to $6.10 per share and a weighted average exercise price
of
$3.94 per share. Taking into account the increase of 150,000 shares reserved
for
the 1990 Plan approved by the Board of Directors and to be submitted for
stockholder approval at the 2006 Annual Meeting, 163,250 shares will be
available for future option grants.
On
October 20, 2006, the closing price of the Company’s Common Stock on the
American Stock Exchange was $2.04.
The
following table shows, as to (i) each nominee for election as a director who
is
eligible to participate in the Directors’ Plan; (ii) the persons identified in
the Summary Compensation Table; (iii) any person who has received 5% or more
of
grants ; and (iv) all current participants as a group, the number of shares
for
which options are outstanding under the Directors’ Plan as of October 20,
2006:
Name
of Individual or Group
|
|
Number
of Shares For
Which
Options Are Outstanding
|
|
John
T. Connors
|
|
|
29,500
|
|
Robert
C. Fleming
|
|
|
8,500
|
|
Jack
Meehan
|
|
|
29,500
|
|
Harold
F. Mayer
|
|
|
35,500
|
|
William
A. Merritt
|
|
|
35,500
|
|
|
|
|
35,750
|
|
All
current participants as a group (6 persons)
|
|
|
174,250
|
|
Summary
of the Provisions of the Directors’ Plan
The
following
summary of the Directors’ Plan is qualified in its entirety by the specific
language of the Directors’ Plan which is attached to this proxy statement as
Exhibit F.
The
Directors’ Plan is administered by the Board of Directors.
The
Directors’ Plan covers outside directors which means a director of the Company
who is neither an employee of the Company nor of any subsidiary of the Company
(“Participant”).
The
Directors’ Plan provides for an automatic award of an option to purchase (1)
6,000 shares of Common Stock on August 1of each year, but not to a Participant
elected by the Board of Directors subsequent to the Annual Meeting of
Stockholders immediately preceding such August 1, and (2) sixty days following
the initial election of a director by the Board of Directors, an option to
purchase a portion of the number of shares set forth in (1) above based on
the
ratio between the number of months between the date of such election and the
next Annual Meeting of Stockholders and twelve (12) months.
The
option price is 100% of the Fair Market Value per share of Common Stock on
the
Date of Award, as defined in the Directors’ Plan.
Each
option expires no later than the tenth anniversary of its Date of Award and
becomes exercisable on the date one year after the Date of Award. The Board
may
waive any exercise conditions or accelerate the exercisability of the option
at
any time. After becoming exercisable, each option remains exercisable until
its
expiration or termination. An option may be exercised from time to time, in
whole or part, up to the total number of shares with respect to which it is
then
exercisable. Payment of the option price will be made in such manner as the
Board may provide in the option, which may include cash (including cash
equivalents) or any other manner permitted by law as determined by the Board
or
any combination of the foregoing.
If
a
Participant ceases, other than by reason of death or retirement, to be a
director or officer of the Company, all options awarded to him and exercisable
on the date he ceases to be a director or officer terminate on the earlier
of
such options’ expiration or one year after the date he ceases to be a director
or officer or as otherwise determined by the Board. Any options not exercisable
on the date of such termination lapse and are thenceforth unexercisable.
If
a
Participant retires, all options held by him on the date of his retirement
shall
become exercisable on the date of his retirement and terminate on the earlier
of
such option’s expiration or the first anniversary of the day of his
retirement.
If
a
Participant dies, all options held by him on the date of his death become
exercisable on the date of his death and may be exercised by his estate,
personal representative or beneficiary who acquires the options by will or
by
the laws of descent and distribution and shall terminate on the earlier of
such
option’s expiration or the first anniversary of the date of his
death.
To
the
extent an outstanding option expires or terminates unexercised or is canceled
or
forfeited, the shares subject to the expired, unexercised, canceled or forfeited
portion of such option are available again for awards of options under the
Directors’ Plan.
No
option
is assignable or transferable by the optionee except by will or by laws of
descent and distribution, and, during the lifetime of the optionee, the option
may be exercised only by him. At the request of an optionee, shares of Common
Stock purchased on exercise of an option may be issued in or transferred to
the
name of the optionee and another person jointly with the right of
survivorship.
Upon
the
occurrence of a change in control, as defined in the Directors’ Plan, all
outstanding options become fully exercisable in accordance with the terms and
conditions of the Directors’ Plan.
The
number and price of shares of Common Stock covered by each option, the total
number of shares that may be sold under the Directors’ Plan, and the maximum
number of shares that may be sold, issued or transferred to a Participant,
will
be proportionately adjusted to reflect, as deemed equitable and appropriate
by
the Board, any stock dividend, stock split or share combination of the Common
Stock or recapitalization of the Company. To the extent deemed equitable and
appropriate by the Board, subject to any required action by stockholders, in
any
merger, consolidation, reorganization, liquidation or dissolution, any option
granted under the Directors’ Plan will be adjusted to reflect the securities and
other property to which a holder of the number of shares of Common Stock covered
by the option would have been entitled to receive in connection with such
event.
The
Board
may discontinue the Directors’ Plan at any time and may amend it from time to
time. No amendment or discontinuation of the Directors’ Plan may adversely
affect any option previously awarded without the optionee’s written consent.
Amendments may be made without stockholder approval except as required to
satisfy applicable law or stock exchange requirements.
Summary
of Federal Income Tax Consequences of the Directors’ Plan
The
Company believes that under present law, the following are the federal tax
consequences generally arising with respect to option awards under the
Directors’ Plan. The award of an option will create no tax consequences for an
optionee or the Company. Upon exercising an option, the optionee must recognize
ordinary income equal to the difference between the exercise price and the
fair
market value of the shares on the date of exercise. The Company will be entitled
to a deduction for the same amount at that time. Any gain or loss on a later
disposition of shares acquired through the exercise of an option will constitute
capital gain or loss to the optionee equivalent to the difference between the
sale proceeds and the aforementioned fair market value. The applicable holding
period to determine whether such gain is long- or short-term is measured from
the date of the option exercise. There will be no tax consequences to the
Company in connection with a disposition of shares acquired under an
option.
Vote
Required and Board of Directors’ Recommendation
The
Board
of Directors believes that adoption and approval of this amendment to the
Directors’ Plan is in the best interests of the Company, as it is important to
attracting, motivating and retaining qualified non-employee directors and
officers essential to the continued success of the Company. The affirmative
vote
of a majority of the votes cast at the Annual Meeting is required for approval
of this proposal. Shares represented at the meeting by proxy which are not
voted
because the stockholder has elected to abstain will be counted in determining
the presence of a quorum but will not be counted as “for” the proposal. Shares
represented at the meeting by proxy for which the proxy cards have been left
blank will be counted as “for” the proposal.
The
Board of Directors recommends a vote FOR the approval of the Directors’ Plan, as
amended, including an increase in the number of shares reserved for issuance
upon exercise of options granted under the Directors’ Plan by
150,000.
7.
|
RATIFICATION
OF SELECTION OF INDEPENDENT
AUDITORS
|
Carlin,
Charron & Rosen LLP, an independent registered public accounting firm, has
been selected as independent auditors to audit the Company’s financial
statements for the year ending December 31, 2006, and the Board of Directors
recommends that the selection be ratified by the stockholders. Representatives
of Carlin, Charron & Rosen LLP are expected to be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
are
expected to be available to answer appropriate questions. Carlin, Charron &
Rosen LLP has audited the Company’s financial statements since 2003, and the
Audit Committee considers Carlin, Charron & Rosen LLP to be well qualified.
Should the holders of a majority of the shares of Common Stock represented
at
the Annual Meeting in person or by proxy not ratify the selection of Carlin,
Charron & Rosen LLP, the Company will consider seeking other auditors.
Shares represented at the meeting by proxy which are not voted because the
stockholder has elected to abstain will be counted in determining the presence
of a quorum but will not be counted as “for” the selection. Shares represented
at the meeting by proxy for which the proxy cards have been left blank will
be
counted as “for” the selection.
The
Board of Directors recommends a vote FOR the ratification of the selection
of
Carlin, Charron & Rosen LLP as Independent Auditors of the
Company.
Proxies
will be voted on such other business as may properly come before the Annual
Meeting, although as of the date of this proxy statement the only matters which
management intends to present or knows that others will present at the meeting
or any adjournment thereof are the matters listed in the accompanying notice
of
meeting. As to other business, if any, which may properly come before the
meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
such proxies.
The
entire cost of soliciting proxies will be borne by the Company. The Company
has
engaged Georgeson Inc. as proxy solicitor for a fee of $8,500 plus out-of-pocket
expenses. To the extent necessary in order to insure sufficient representation,
officers and regular employees of the Company may also request the return of
proxies in person, or by email or telephone.
Stockholder
Proposals for the 2007 Annual Meeting of Stockholders
Any
stockholder proposal intended to be presented at the 2007 Annual Meeting of
Stockholders of the Company must be received at the offices of the Company,
3
Corporate Drive, Danbury, Connecticut 06810-4130, on or before 5:00 p.m. on
January 19, 2007 to be included in the Company’s proxy materials relating to the
meeting. Timely receipt of a stockholder proposal satisfies only one of the
various requirements for inclusion of such a proposal in the Company’s proxy
materials.
By Order
of the Board of Directors,
Dated:
November 10, 2006
EXHIBIT
A
AGREEMENT
AND PLAN OF MERGER
This
Agreement and Plan of Merger (this “Merger
Agreement”),
is
entered into as of _____________________________, 2006, between Cognitronics
Corporation, a New York corporation (“Cognitronics”),
and
ThinkEngine Networks, Inc., a Delaware corporation and wholly-owned subsidiary
of Cognitronics (“Subsidiary”).
Recitals:
WHEREAS,
Cognitronics is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York with authorized capital
stock
consisting of 20,000,000 shares of common stock, $0.20 par value per share
(the
“New
York Common Stock”);
WHEREAS,
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with authorized capital
stock
consisting of 20,000,000 shares of common stock, $0.001 par value per share
(the
“Delaware
Common Stock”);
WHEREAS,
the Board of Directors of Cognitronics has determined that, for purposes
of
effecting the reincorporation of Cognitronics in the State of Delaware, it
is
advisable and in the best interests of Cognitronics and the holders of shares
of
New York Common Stock (the “Cognitronics
Shareholders”)
for
Cognitronics to merge with and into Subsidiary upon the terms and conditions
set
forth herein;
WHEREAS,
the respective Boards of Directors of Cognitronics and Subsidiary have
authorized and approved the merger of Cognitronics with and into Subsidiary
subject to and upon the terms and conditions of this Merger Agreement, and
have
approved the terms of this Merger Agreement and directed that it be executed
by
the undersigned officers and submitted to the Cognitronics Shareholders and
the
stockholder of the Subsidiary for their approval; and
WHEREAS,
it is the intention of Cognitronics and Subsidiary that the merger be a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue
Code of
1986, as amended (the “Code”).
NOW,
THEREFORE, for and in consideration of the mutual premises contained herein
and
for other good and valuable consideration, the receipt and sufficiency of
which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I.
THE
MERGER
Section
1.1. Merger
of Cognitronics into Subsidiary.
At the
Effective Time (as defined in Section 2.1), Cognitronics shall merge with
and
into Subsidiary in accordance with the New York Business Corporation Law
(the
“New
York Law”)
and
the General Corporation Law of the State of Delaware (the “Delaware
Law”).
The
separate existence of Cognitronics shall thereupon cease and Subsidiary shall
be
the surviving corporation (hereinafter referred to as the “Surviving
Corporation”)
and
shall possess all the rights, privileges, powers and franchises of a public
as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of Cognitronics and Subsidiary (together
referred to as the “Constituent
Corporations”);
and
all the rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due
to
either of the Constituent Corporations, on whatever account, as well as for
stock subscriptions and all other things in action or belonging to each of
the
Constituent Corporations, shall be vested in the Surviving Corporation; and
all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they had been of the several and respective Constituent
Corporations, and the title to any real estate vested by deed or otherwise,
under the laws of the State of Delaware, in either of such Constituent
Corporations shall not revert or be in any way impaired by reason of the
Delaware Law; but all rights of creditors and all liens upon any property
of any
of the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the respective Constituent Corporations shall
thereafter attach to the Surviving Corporation and may be enforced against
it to
the same extent as if those debts, liabilities and duties had been incurred
or
contracted by it. All corporate acts, plans, policies, agreements, arrangements,
approvals and authorizations of Cognitronics, the Cognitronics Shareholders,
the
Board of Directors of Cognitronics and committees thereof, and the officers
and
agents thereof which were valid and effective immediately prior to the Effective
Time, shall be taken for all purposes as acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation and
shall be as effective and binding thereon as the same were with respect to
Cognitronics. The employees and agents of Cognitronics shall become the
employees and agents of Subsidiary and continue to be entitled to the same
rights and benefits which they enjoyed as employees and agents of Cognitronics.
The requirements of any plans or agreements of Cognitronics involving the
issuance or purchase by Cognitronics of certain shares of its capital stock
shall be satisfied by the issuance or purchase of a like number of shares
of the
Surviving Corporation. The subsidiaries of Cognitronics shall become the
subsidiaries of the Surviving Corporation.
ARTICLE
II.
EFFECTIVE
TIME; EFFECT OF MERGER
Section
2.1. Effective
Time.
The
Merger shall become effective on the date the Certificate of Merger is filed
by
with the Department of State of the State of New York, or the date a Certificate
of Ownership and Merger is filed with the Secretary of State of the State
of
Delaware, whichever filing occurs last (the “Effective
Time”).
Section
2.2. Effects
of the Merger.
At the
Effective Time, the Merger shall have the effects specified in the New York
Law,
the Delaware Law and this Merger Agreement.
Section
2.3. Certificate
of Incorporation and Bylaws.
At the
Effective Time, the Certificate of Incorporation and the Bylaws of Subsidiary,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation.
Section
2.4. Directors
and Officers.
At the
Effective Time, the directors and officers of Cognitronics in office at the
Effective Time shall retain their positions as the directors and officers,
respectively, of the Surviving Corporation, each of such directors and officers
to hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation and the Delaware law,
until his or her successor is duly elected or appointed and shall qualify,
or
until his or her earlier death, resignation or removal.
Section
2.5. Change
of Name.
At the
Effective Time, ThinkEngine Networks, Inc., the name set forth in Paragraph
First of the Subsidiary’s Certificate of Incorporation, shall be the name of the
Surviving Corporation.
ARTICLE
III.
CONVERSION
AND EXCHANGE OF STOCK
Section
3.1. Conversion.
(a) Shares.
At the
Effective Time, each share of New York Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the merger and
without any action on the part of the holder thereof, be converted into and
become one share of Delaware Common Stock.
(b) Cancellation.
At the
Effective Time, each share of Delaware Common Stock issued and outstanding
immediately prior to the Effective Time and held by Cognitronics shall be
canceled without any consideration being issued or paid therefor.
(c)
Stock
Awards.
At the
Effective Time, each stock option, restricted stock award or other stock
appreciation right (each, a “Stock
Award”)
of
Cognitronics then outstanding, whether vested or unvested, exercisable or
unexercisable, without any action on the part of the holder thereof shall
be
converted into a Stock Award of the Surviving Corporation with respect to
an
equivalent number of shares of Delaware Common Stock.
Section
3.2. Exchange
of Certificates.
At the
Effective Time, stock certificates representing New York Common Stock will
automatically represent an equal number of shares of Delaware Common Stock.
At
any time after the Effective Time, the holders of Delaware Common Stock
represented by certificates issued prior to the Effective Time, will be
entitled, upon request, and surrender of such certificates, to the Surviving
Corporation, to receive in exchange therefor a new stock certificate evidencing
ownership of the same number of shares of Delaware Common Stock. If any new
certificate is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a condition of
the
issuance thereof that the certificate or other writing so surrendered shall
be
properly endorsed and otherwise in proper form for transfer and that the
person
requesting such exchange shall pay to the Surviving Corporation or its transfer
agent any transfer or other taxes required by reason of the issuance of a
certificate representing shares of Delaware Common Stock in any name other
than
that of the registered holder of the certificate surrendered, or otherwise
required, or shall establish to the satisfaction of the transfer agent that
such
tax has been paid or is not payable.
ARTICLE
IV.
MISCELLANEOUS
Section
4.1. Amendment.
This
Merger Agreement may be amended, modified or supplemented, in whole or in
part,
at any time prior to the Effective Time with the mutual consent of the
respective Boards of Directors of Cognitronics and Subsidiary to the full
extent
permitted under applicable law.
Section
4.2. Notices.
All
communication hereunder shall be in writing and, sent by mail, or by facsimile
as set forth below:
If
to
Cognitronics to:
Cognitronics
Corporation
3
Corporate Drive
Danbury,
CT 06810
If
to
Subsidiary to:
ThinkEngine
Networks, Inc.
c/o
Cognitronics Corporation
3
Corporate Drive
Danbury,
CT 06810
Section
4.3. Abandonment;
Postponement.
At any
time prior to the Effective Time, this Merger Agreement may be terminated
and
the Merger may be abandoned by the respective Boards of Directors of
Cognitronics or Subsidiary, or the consummation of the Merger may be postponed
for a reasonable period of time, without any action of the Cognitronics
Shareholders or stockholders of Subsidiary, notwithstanding the approval
of this
Merger Agreement by the Cognitronics Shareholders or Board of Directors of
either Cognitronics or Subsidiary.
Section
4.4. Further
Assurances.
If at
any time after the Effective Time of the Merger, the Surviving Corporation
shall
consider that any assignments, transfers, deeds or other assurances in law
are
necessary or desirable to vest, perfect or confirm, of record or otherwise,
in
the Surviving Corporation, title to any property or rights of Cognitronics,
Cognitronics and its directors and officers holding office at the Effective
Time
shall execute and deliver such documents and do all things necessary and
proper
to vest, perfect or confirm title to such property or rights in the Surviving
Corporation, and the officers and directors of the Surviving Corporation
are
fully authorized in the name of Cognitronics or otherwise to take any and
all
such action.
Section
4.5. Counterparts.
This
Merger Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall be deemed
to
be one and the same instrument. In the event that any signature is delivered
by
facsimile or other means of electronic image transmission, such signature
shall
create a valid and binding obligation of the party executing (or on whose
behalf
such signature is executed) with the same force and effect as if such facsimile
or electronically transmitted signature page were an original
thereof.
Section
4.6. Governing
Law.
This
Merger Agreement shall be construed in accordance with the laws of the State
of
Delaware, without regard to the principles of conflicts of laws of such state.
IN
WITNESS WHEREOF, the parties to this Merger Agreement have executed this
Merger
Agreement on and as of the day first written above.
COGNITRONICS
CORPORATION |
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THINKENGINE
NETWORKS, INC.
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EXHIBIT
B
CERTIFICATE
OF INCORPORATION
OF
THINKENGINE
NETWORKS, INC.
FIRST:
The name
of the corporation is: ThinkEngine Networks, Inc. (the
“Corporation”).
SECOND:
The
Corporation is organized pursuant to the General Corporation Law of the State
of
Delaware (the “Delaware Law”). The registered office of the Corporation in the
State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware
19808, and the name and address of its registered agent for service of process
is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.
THIRD:
The
purpose of the Corporation is to engage in any lawful act or activity for
which
corporations may be organized under the Delaware Law, and the Corporation
shall
have all powers necessary to engage in such acts or activities, including,
but
not limited to, the powers enumerated in the Delaware Law.
FOURTH: (a)
Shares
Authorized.
The
Corporation shall be authorized to issue is 20,000,000 shares of Common Stock,
$.001 par value per share (the “Common Stock”).
(b)
Common
Stock.
The
shares of Common Stock shall together have unlimited voting rights, shall
be
entitled to receive, when and as declared by the Board of Directors out of
the
assets of the Corporation legally available therefor, such dividends as may
be
declared from time to time by the Board of Directors, and shall be entitled
to
receive the net assets of the Corporation upon dissolution.
(c)
No
Preemptive Rights.
No
holder of any stock or any other securities of the Corporation, whether now
or
hereafter authorized, shall have any preemptive rights to subscribe for or
purchase any stock or any other securities of the Corporation other than
such
rights, if any, as the Board of Directors, in its sole discretion, may fix;
and
any stock or other securities which the Board of Directors may determine
to
offer for subscription may, within the Board of Directors’ sole discretion, be
offered to the holders of any class, series or type of stock or other securities
at the time outstanding to the exclusion of holders of any or all other classes,
series or types of stock or other securities at the time
outstanding.
FIFTH:
The name
and mailing address of the sole incorporator is as follows:
Michael
Grundei, Esq.
Wiggin
and Dana LLP
400
Atlantic Street
Stamford,
Connecticut 06901
SIXTH:
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(a)
The business and affairs of the Corporation shall be managed by
or under
the direction of a Board of Directors, the number of Directors
to be
determined from time to time solely by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors.
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(b)
There
shall be no cumulative voting in the election of Directors.
(c)
Election of Directors need not be by written ballot unless the bylaws of
the
Corporation so provide.
(d)
Vacancies on the Board of Directors resulting from death, resignation, removal
or otherwise and newly created directorships resulting from any increase
in the
number of Directors may be filled solely by a majority of the Directors then
in
office (although less than a quorum) or by the sole remaining
Director.
SEVENTH:
Any
action required or permitted to be taken at any annual or special meeting
of
stockholders may be taken only upon the vote of stockholders at an annual
or
special meeting duly noticed and called in accordance with the Delaware Law
and
may not be taken by written consent of stockholders without a meeting, provided,
however, that such action may be taken by unanimous written consent of the
stockholders without a meeting.
EIGHTH:
Special
meetings of the stockholders may be called only by the Board of Directors,
pursuant to a resolution approved by a majority of the full Board of Directors.
NINTH:
In
furtherance, and not in limitation, of the powers conferred by statute, the
Board of Directors is expressly authorized to adopt, make, alter or repeal
the
Bylaws of the Corporation.
TENTH:
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(a)
A Director of the Corporation shall not be liable to the Corporation
or
its stockholders for monetary damages for breach of fiduciary duty
as a
Director to the fullest extent permitted by the Delaware
Law.
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(b)
Indemnification.
(i)
Each
person (and the heirs, executors or administrators of such person) who was
or is
a party or is threatened to be made a party to, or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a Director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of
another corporation, partnership, joint venture, trust or other enterprise
or as
a member of any committee or similar body, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by the Delaware
Law.
The right to indemnification conferred in this Article TENTH shall also include
the right to be paid by the Corporation the expenses incurred in connection
with
any such proceeding in advance of its final disposition to the fullest extent
authorized by the Delaware Law. The right to indemnification conferred in
this
Article TENTH shall be a contract right.
(ii)
The
Corporation may, by action of the Board of Directors, provide indemnification
to
such of the employees and agents of the Corporation to such extent and to
such
effect as the Board of Directors shall determine to be appropriate and
authorized by the Delaware Law.
(c)
The
Corporation shall have power to purchase and maintain insurance on behalf
of any
person who is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise against any expense, liability or loss incurred by such
person
in any such capacity or arising out of his status as such, whether or not
the
Corporation would have the power to indemnify him against such liability
under
the Delaware Law.
(d)
The
rights and authority conferred in this Article TENTH shall not be exclusive
of
any other right which any person may otherwise have or hereafter
acquire.
(e)
Neither the amendment nor repeal of this Article TENTH, nor the adoption
of any
provision of this Certificate of Incorporation or the Bylaws of the Corporation,
nor, to the fullest extent permitted by the Delaware Law, any modification
of
law, shall eliminate or reduce the effect of this Article TENTH in respect
of
any acts or omissions occurring prior to such amendment, repeal, adoption
or
modification.
ELEVENTH:
The
Corporation reserves the right to amend this Certificate of Incorporation
in any
manner permitted by the Delaware Law and, except as otherwise provided in
Article TENTH, all rights and powers conferred herein on stockholders, Directors
and officers, if any, are subject to this reserved power.
IN
WITNESS WHEREOF, this Certificate of Incorporation has been executed by the
Sole
Incorporator on this ____ day of __________________________, 2006.
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EXHIBIT
C
ThinkEngine
Networks, Inc.
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BY-LAWS
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ARTICLE
I
OFFICES
Section
1. The registered office shall be in the State of Delaware.
Section
2. The corporation may also have offices at such other places both within
and
without the State of Delaware as the board of directors may from time to
time
determine or the business of the corporation may require.
ARTICLE
II
MEETINGS
OF STOCKHOLDERS
Section
1. All meetings of the stockholders for the election of directors shall be
held
in the offices of the corporation, or at such other place either within or
without the State of Delaware as shall be designated from time to time by
the
board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within
or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section
2. Annual meetings of stockholders shall be held at such date and time as
shall
be designated from time to time by the board of directors and stated in the
notice of the meeting, at which they shall elect a board of directors by
a
plurality vote, which may or may not be by written ballot as determined by
the
board of directors, and transact such other business as may properly be brought
before the meeting.
Section
3. Written notice of the annual meeting stating the place, date and hour
of the
meeting shall be given to each stockholder entitled to vote at such meeting
not
less than ten
(10)
nor more than sixty (60) days before the date of the meeting. At
any
annual meeting of the stockholders, only such business shall be conducted
as
shall have been brought before the annual meeting (i) by or at the direction
of
the chairman of the meeting or (ii) by any stockholder who is a holder of
record
at the time of the giving of the notice provided for in this Section 3, who
is
entitled to vote at the meeting and who complies with the procedures set
forth
in this Section 3. For business properly to be brought before an annual meeting
of stockholders by a stockholder, the stockholder must have given timely
notice
thereof in proper written form to the Secretary of the corporation. To be
timely, a stockholder’s notice
must be
delivered to or mailed and received at the principal executive offices of
the
corporation not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the immediately preceding annual meeting; provided,
however, that in the event that the date of the annual meeting is more than
30
days earlier or more than 60 days later than such anniversary date, notice
by
the stockholder to be timely must be so delivered or received not earlier
than
the 120th day prior to such annual meeting and not later than the close of
business on the later of the 90th day prior to such annual meeting or the
10th
day following the day on which public announcement of the date of such meeting
is first made. To be in proper written form, a stockholder’s notice to the
Secretary shall set forth
in
writing as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; (ii) the name and address, as they appear on the corporation’s books,
of the stockholder proposing such business; (iii) the class or series and
number
of shares of the corporation which are beneficially owned by the stockholder;
(iv) any material interest of the stockholder in such business; and (v) if
the
stockholder intends to solicit proxies in support of such stockholder’s
proposal, a representation to that effect. The foregoing notice requirements
shall be deemed satisfied by a stockholder if the stockholder has notified
the
corporation of his or her intention to present a proposal at an annual meeting
and such stockholder’s proposal has been included in a proxy statement that has
been prepared by management of the corporation to solicit proxies for such
annual meeting; provided, however, that if such stockholder does not appear
or
send a qualified representative to present such proposal at such annual meeting,
the corporation need not present such proposal for a vote at such meeting,
notwithstanding that proxies in respect of such vote may have been received
by
the corporation. Notwithstanding anything in these By-laws to the contrary,
no
business shall be conducted at any annual meeting except in accordance with
the
procedures set forth in this Section 3. The chairman of an annual meeting
may
refuse to permit any business to be brought before an annual meeting which
fails
to comply with the foregoing procedures or, in the case of a stockholder
proposal, if the stockholder solicits proxies in support of such stockholder’s
proposal without having made the representation required by clause (v) of
the
third preceding sentence.
Section
4. The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a
complete list of the stockholders entitled to vote at the meeting, arranged
in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be
open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to
the meeting, either at a place within the city where the meeting is to be
held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section
5. Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by law or by the certificate of incorporation, may be
called by the chairman of the board or president and shall be called by the
chairman of the board, president or secretary at the request in writing of
a
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting. Written notice of a special
meeting
stating the place, date and hour of the meeting and the purpose or purposes
for
which the meeting is called shall be given not less than ten (10) nor more
than
sixty (60) days before the date of the meeting, to each stockholder entitled
to
vote at such meeting.
Section
6. (a) Any holder or holders of record of capital stock requesting the
corporation to call a special meeting of stockholders pursuant to Section
5 of
this Article I (collectively, the “Initiating Stockholder”) shall deliver or
mail written notice of such request to the Secretary of the corporation at
its
principal executive offices (the “Notice”). The Notice shall contain all the
information that would be required in a notice to the Secretary given pursuant
to Section 3 of this Article I in connection with an annual meeting of
stockholders.
(b)
Within 14 days after the Secretary’s receipt of the Notice from the Initiating
Stockholder containing all the information required by subsection (a) of
this
Section 6, the Board of Directors shall fix a record date for determining
the
stockholders of record entitled to join in the request for the calling of
the
special meeting of stockholders. Such record date shall not be earlier than
the
date on which the Board of Directors fixes the same and shall not be later
than
30 days after such date. Only holders of record of common stock on the record
date shall be entitled to join in the request. The corporation shall give
prompt
written notice of the fixing of the record date to the Initiating Stockholder.
If stockholders of record on the record date owning of record on such date
at
least a majority of the outstanding capital stock entitled to vote deliver
or
mail written requests to the Secretary of the corporation at its principal
executive offices that the corporation call the special meeting, the corporation
shall promptly appoint an inspector to perform a ministerial review of, and
render a report to the corporation and the Initiating Stockholder concerning,
the validity of such requests and any revocations thereof. The inspector
will be
instructed to perform such review and render such report promptly. The
corporation shall not be required to call the special meeting until the
inspector has rendered such report and certified in writing to the corporation
and the Initiating Stockholder that valid, unrevoked requests for the calling
of
the special meeting were received from stockholders of record on the record
date
owning of record on such date at least a majority of the outstanding capital
stock entitled to vote. Nothing contained in this subsection (b) shall be
construed to mean or imply that the Board of Directors or any stockholder
shall
not be entitled to contest the validity of any written request or revocation
thereof, whether before or after certification by the inspector, through
court
proceedings or otherwise. Any dispute as to whether or not the corporation
is
required to call the special meeting of stockholders will be resolved through
appropriate court proceedings, in which the corporation will request the
court
to resolve the dispute as expeditiously as possible.
(c)
Notwithstanding any other provision of these By-laws, no written request
to call
a special meeting of stockholders shall be effective unless, within 70 days
after the record date fixed pursuant to subsection (b) of this Section 6,
the
corporation has received such written requests from stockholders of record
on
such record date owning on such date at least a majority of the outstanding
voting capital stock.
(d)
The
record date for determining the stockholders of record entitled to vote at
a
special meeting called pursuant to this Section 6 shall be fixed by the Board
of
Directors, but shall not be later than 14 days after it is determined that
the
corporation is required to call such meeting. Written notice of the meeting
shall be mailed by the corporation to stockholders of record on such record
date
within 10 days after the record date (or such longer period as may be necessary
for the Corporation to file its proxy materials with, and receive and respond
to
the comments of, the Securities and Exchange Commission), and the meeting
will
be held within 50 days after the date of mailing of the notice, as determined
by
the Board of Directors.
(e)
The
business to be conducted at a special meeting called pursuant to this Section
6
shall be limited to the business set forth in the Notice and such other business
or proposals as the Board of Directors shall determine and shall be set forth
in
the notice of meeting. The Board of Directors or the Chairman of the Board
of
Directors may determine rules and procedures for the conduct of the
meeting.
Section
7. Business transacted at any special meeting of stockholders shall be limited
to the purposes stated in the notice.
Section
8. The holders of a majority of the stock issued and outstanding and entitled
to
vote thereat, present in person or represented by proxy, shall constitute
a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by law or by the certificate of incorporation.
If,
however, such quorum shall not be present or represented at any meeting of
the
stockholders, the stockholders entitled to vote thereat, present in person
or
represented by proxy, shall have power to adjourn the meeting from time to
time,
without notice other than announcement at the meeting, until a quorum shall
be
present or represented. At such adjourned meeting, at which a quorum shall
be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for
more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given
to
each stockholder of record entitled to vote at the meeting.
Section
9. When a quorum is present at any meeting, the vote of the holders of
a
majority of the stock having voting power present in
person
or represented by proxy and which has actually voted shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of law or of the certificate of incorporation, a different vote
is
required in which case such express provision shall govern and control the
decision of such question.
Section
10. Except as otherwise provided by law or by the Certificate of Incorporation,
each stockholder shall at every meeting of the stockholders be entitled to
one
(1) vote in person or by proxy for each share of the capital stock having
voting
power held by such stockholder, but no proxy shall be voted on after three
(3)
years from its date, unless the proxy provides for a longer period.
Section
11. Whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken for or in connection with any corporate action, by
any
provision of law, the meeting and vote of stockholders may be dispensed with
if
all of the stockholders who would have been entitled to vote upon the action
if
such meeting were held shall consent in writing to such corporate action
being
taken; or if the certificate of incorporation authorizes the action to be
taken
with the written consent of the holders of less than all of the stock who
would
have been entitled to vote upon the action if a meeting were held, then on
the
written consent of the stockholders having not less than such percentage
of the
number of votes as may be authorized in the certificate of incorporation;
provided that in no case shall the written consent be by the holders of stock
having less than the minimum percentage of the vote required by law for the
proposed corporate action, and provided that prompt notice must be given
to all
stockholders of the taking of corporate action without a meeting and by less
than unanimous written consent.
Section
12. In order that the corporation may determine the stockholders entitled
to
consent to corporate action in writing without a
meeting, the board of directors may fix a record date, which record date
shall
not precede the date upon which the resolution fixing the record date is
adopted
by the board of directors, and which date shall not be more than ten (10)
days
after the date upon which the resolution fixing the record date is adopted
by
the board of directors. Any stockholders of record seeking to have the
stockholders authorize or take corporate action by written consent shall,
by
written notice to the secretary, request the board of directors to fix a
record
date. The board of directors shall promptly, but in all events within ten
(10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the board of
directors within ten (10) days following the receipt of such a request, the
record date for determining stockholders entitled to consent to corporate
action
in writing without a meeting, when no prior action by the board of directors
is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered
to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of stockholders meetings
are
recorded, to the attention of the secretary of the corporation. Delivery
shall
be by hand or by certified or registered mail, return receipt requested.
If no
record date has been fixed by the board of directors, and prior action by
the
board of directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which
the
board of directors adopts the resolution taking such prior action.
Section
13. In advance of any meeting of stockholders, the board of directors may
appoint three or more inspectors of election, who need not be stockholders,
as
to the matters to be submitted to a vote at any such meeting. The inspectors
of
election shall (i) determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum
and the authenticity, validity and effect of proxies, (ii) receive votes
or
ballots, (iii) hear and determine all challenges and questions arising in
any
way in connection with the right to vote, (iv) count and tabulate all votes
and
(v) determine and report to the meeting the results. The inspectors shall
take
an oath that they will perform their duties impartially, in good faith, and
to
the best of their ability and as expeditiously as is practical. In the absence
of appointment by the board of directors, the inspectors may be appointed
by the
chairman of the board or the president.
Section
14. At each meeting of the stockholders, the Chairman of the Board or, in
the
absence of the Chairman of the Board, the Chief Executive Officer or, in
the
absence of the Chairman of the Board and the Chief Executive Officer, such
person as shall be selected by the Board shall act as chairman of the meeting.
The order of business at each such meeting shall be as determined by the
chairman of the meeting. The chairman of the meeting shall have the right
and
authority to prescribe such rules, regulations and procedures and to do all
such
acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for
the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof and the opening
and closing of the voting polls.
ARTICLE
III
DIRECTORS
Section
1. The number of directors which shall constitute the whole board shall be
not
less than three (3) nor more than fifteen (15), as may be designated from
time
to time by the board of directors. The directors shall be elected at the
annual
meeting of stockholders, except as provided in Section 2 of this Article,
and
each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section
2. Vacancies and newly created directorships resulting from any increase
in the
authorized number of directors may be filled by a majority of the directors
then
in office, though less than a quorum, or by a sole remaining director, and
the
directors so chosen shall hold-office until the next annual election and
until
their successors are duly elected and shall qualify, unless sooner displaced.
If
there are no directors in office, then an election of directors may be held
in
the manner provided by law. If, at the time of filling any vacancy or any
newly
created directorship, the directors then in office shall constitute less
than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder
or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors
then
in office. Any director of the corporation may be removed by the stockholders
at
any time, with or without cause, by majority vote of the outstanding shares
entitled to vote thereon, or by the Board of Directors, with cause, at any
meeting thereof called for the purpose.
Section
3. The business of the corporation shall be managed by its board of directors
which may exercise all such powers of the corporation and do all such lawful
acts and things as are not by law or by the certificate of incorporation
or by
these by-laws directed or required to be exercised or done by the
stockholders.
THE
CHAIRMAN OF THE BOARD
Section
4. The board of directors may choose a chairman of the board who shall hold
the
position until his or her successor is chosen and qualifies and who may be
removed from his or her position at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in the position
of
chairman of the board may be filled by the board of directors. The chairman
of
the board shall preside at all meetings of the board of directors and
stockholders, and shall have such other powers and duties as may from time
to
time be prescribed by the board of directors, upon written directions given
to
him or her pursuant to resolutions duly adopted by the board of directors.
The
chairman of the board shall not be an officer of the corporation.
THE
VICE
CHAIRMAN OF THE BOARD
Section
5. The board of directors may choose a vice chairman of the board who shall
hold
the position until his or her successor is chosen and qualifies and who may
be
removed from his or her position at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in the position
of
vice chairman of the board may be filled by the board of directors. The vice
chairman of the board shall perform the duties of the chairman of the board
in
the absence of the chairman or in the event of his or her inability or refusal
to act, and also shall perform such other duties as the board of directors
may
from time to time prescribe. The vice chairman of the board shall not be
an
officer of the corporation.
MEETINGS
OF THE BOARD OF DIRECTORS
Section
6. The board of directors of the corporation may hold meetings, both regular
and
special, either within or without the State of Delaware.
Section
7. The first meeting of each newly elected board of directors shall be held
without other notice than this by-law immediately after and at the same place
as
the annual meeting of stockholders. In the event such meeting is not held
at
said time and place, the meeting may be held at such time and place as shall
be
specified in a notice given as hereinafter provided for special meetings
of the
board of directors or as shall be specified in a written waiver signed by
all
the directors.
Section
8. Regular meetings of the board of directors may be held without notice
at such
time and at such place as shall from time to time be determined by the
board.
Section
9. Special meetings of the board of directors for any purpose or purposes
may be
called by the chairman of the board or president, and the chairman of the
board,
president or the secretary shall call a special meeting upon request of two
directors. If given personally, by telephone or by facsimile, the notice
shall
be given at least the day prior to the meeting. Notice may be given by mail
if
it is mailed at least five days before the meeting. In the event of an emergency
which in the judgment of the chairman of the board or president requires
immediate action, a special meeting may be convened without notice, consisting
of those directors who are immediately available by telephone and can be
joined
in the meeting by conference telephone. The actions taken at such a meeting
shall be valid if at least a quorum of the directors participates either
personally or by conference telephone.
Section
10. At all meetings of the board, a majority of the total number of directors
then in office shall constitute a quorum for the transaction of business
and the
act of a majority of the directors present at any meeting at which there
is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by law or by the certificate of incorporation. If a
quorum
shall not be present at any meeting of the board of directors, the directors
present thereat may adjourn the meeting from time to time, without notice
other
than announcement at the meeting, until a quorum shall be present.
Section
11. Unless otherwise restricted by the certificate of incorporation or these
by-laws, any action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken without a meeting,
if all members of the board or committee, as the case may be, consent thereto
in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
COMMITTEES
OF DIRECTORS
Section
12. The board of directors may, by resolution passed by a majority of the
whole
board, designate one (1) or more committees, each committee to consist of
one
(1) or more of the directors of the corporation. The board may designate
one (1)
or more directors as alternate members of any committee, who may replace
any
absent or disqualified member at any meeting of the committee. Except as
otherwise provided by law, any such committee, to the extent provided in
the
resolution, shall have and may exercise the powers of the board of directors
in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require
it;
provided, however, that in the absence or disqualification of any member
of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum,
may unanimously appoint another member of the board of directors to act at
the
meeting in the place of any such absent or disqualified member. Unless otherwise
prescribed by the board of directors, a majority of the members of the committee
shall constitute a quorum for the transaction of business, and the act of
a
majority of members present at a meeting at which there is a quorum shall
be the
act of such committee. Such committee or committees shall have such name
or
names as may be determined from time to time by resolution adopted by the
board
of directors.
Section
13. Each committee shall keep regular minutes of its meetings and report
the
same to the board of directors when required.
COMPENSATION
OF DIRECTORS
Section
14. The directors may be paid their expenses, if any, of attendance at each
meeting of the board of directors and may be paid a fixed sum for attendance
at
each meeting of the board of directors or a stated salary as director. No
such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee
meetings.
NOMINATION
OF DIRECTORS
Section
15. Nominations for the election of directors may be made by the board of
directors or a committee of the board of directors or by any stockholder
entitled to vote for the election of directors. Nominations by the board
of
directors or a committee of the board of directors may be made by oral or
written notice delivered to the Secretary of the corporation by any officer
or
director on behalf of the board of directors or committee at any time prior
to
or at any meeting of the stockholders at which directors are to be elected.
Each
notice of nomination of directors by the board of directors or a committee
of
the board of directors shall set forth the names of the nominees. Nominations
by
stockholders shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary of the corporation
not less than ninety (90) days nor more than one hundred twenty (120) days
prior
to (i) any meeting (other than an annual meeting) at which directors are
to be
elected, appointed or designated or, (ii) in the case of an annual meeting,
the
anniversary of the previous year’s annual meeting; provided, however, if, (x) in
the case of an annual meeting, the annual meeting is scheduled to be held
on a
date more than thirty (30) days prior to or delayed by more than sixty (60)
days
after such anniversary date or, (y) in the case of any other meeting, less
than
100 days’ notice of the meeting is given to stockholders, then notice by the
stockholder must be delivered to the corporation no later than the later
of the
close of business ninety (90) days prior to such meeting or the tenth day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was first made by the corporation
(and in no event shall the public announcement of an adjournment of the meeting
commence a new time period for a giving of a stockholder’s notice under this
Section 15). To be in proper written form, a stockholder’s notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes
to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment
of
the person, (iii) the class or series and number of shares of capital stock
of
the corporation which are owned beneficially or of record by the person and
(iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant
to
Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock
of
the corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear
in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to
be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent
of
each proposed nominee to being named as a nominee and to serve as a director
if
elected. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth
in this
Section 15. The chairman of any meeting of stockholders of the corporation
may,
if the facts warrant, determine and declare to the meeting that a nomination
was
not made in accordance with the foregoing procedure, and if the chairman
should
so determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE
IV
NOTICES
Section
1. Whenever, under the provisions of law or of the certificate of incorporation
or of these by-laws, notice is required to be given to any director or
stockholder, it shall not be construed to mean personal notice, but such
notice
may be given in writing, by mail, addressed to such director or stockholder,
at
his address as it appears on the records of the corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time
when
the same shall be deposited in the United States mail. Notice to directors
may
also be given by facsimile.
Section
2. Whenever any notice is required to be given under the provisions of law
or of
the certificate of incorporation or of these by-laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before
or after the time stated therein, shall be deemed equivalent thereto. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because
the
meeting is not lawfully called or convened.
ARTICLE
V
OFFICERS
Section
1. The officers of the corporation shall be chosen by the board of directors
and
shall be a president, a secretary and a treasurer. The board of directors
may
also choose a chief executive officer, a chief operating officer, a chief
financial officer, a controller, one (1) or more vice-presidents, including
senior vice-presidents, group vice presidents and assistant vice-presidents,
and
one (1) or more assistant secretaries, assistant treasurers and assistant
controllers. Any number of offices may be held by the same person, unless
the
certificate of incorporation or these by-laws otherwise provide.
Section
2. The board of directors at its first meeting after each annual meeting
of
stockholders shall choose a president, a secretary and a treasurer.
Section
3. The board of directors may appoint such other officers and agents as it
shall
deem necessary who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by
the board.
Section
4. The compensation of all officers and agents of the corporation shall be
fixed
by the board of directors.
Section
5. The officers of the corporation shall hold office until their successors
are
chosen and qualify. Any officer elected or appointed by the board of directors
may be removed at any time by the affirmative vote of a majority of the board
of
directors. Any vacancy occurring in any office of the corporation shall be
filled by the board of directors.
THE
PRESIDENT
Section
6. The president shall have responsibility for the general and active management
of the business of the corporation and shall see that all orders and resolutions
of the board of directors are carried into effect, and in the absence of
the
chairman of the board and the vice chairman of the board or in the event
of
their inability or refusal to act shall preside at all meetings of the
stockholders and the board of directors.
Section
7. He shall possess the power to sign all certificates, contracts and other
instruments which may be authorized by the board of directors, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the
corporation.
CHIEF
EXECUTIVE OFFICER
Section
8. The board of directors may from time to time appoint a chief executive
officer who shall, subject to the control of the board of directors, have
responsibility for the general supervision of all aspects of the business
of the
corporation and corporate development, expansion and contraction and long-range
planning of the corporation, including, without limitation, the acquisition,
development and disposition of facilities necessary to implement the foregoing.
The chief executive officer shall have and exercise such further powers and
duties as may be specifically delegated or vested in him from time to time
by
these by-laws or by the board of directors. He shall possess the power to
sign
all certificates, contracts and other instruments which may be authorized
by the
board of directors, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall
be
expressly delegated by the board of directors to some other officer or agent
of
the corporation. The chief executive officer may combine his duties with
those
of any other office assigned to him by the board of directors.
CHIEF
OPERATING OFFICER
Section
9. The board of directors may from time to time appoint a chief operating
officer who shall, subject to the control of the board of directors, have
responsibility for the operations and functioning of the corporation’s operating
units and programs and the allocation among the corporation’s operating units
and programs of other officers and principal executive personnel of the
corporation. The chief operating officer shall also perform such other duties
and have such other powers as may be assigned to him by the board of directors.
He shall possess the power to sign all certificates, contracts and other
instruments which may be authorized by the board of directors, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The
chief
operating officer may combine his duties with those of any other office assigned
to him by the board of directors.
CHIEF
FINANCIAL OFFICER
Section
10. The board of directors may from time to time appoint a chief financial
officer who shall, subject to the control of the board of directors, have
responsibility for the corporation’s finances and financial planning, the
allocation among the corporation’s operating units and programs of the
corporation’s financial resources and the corporation’s internal accounting,
auditing and financial controls. The chief financial officer shall also perform
such other duties and have such other powers as may be assigned to him by
the
board of directors. He shall possess the power to sign all certificates,
contracts and other instruments which may be authorized by the board of
directors, except where required or permitted by law to be otherwise signed
and
executed and except where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
corporation. The chief financial officer may combine his duties with those
of
any other office assigned to him by the board of directors.
THE
SENIOR VICE-PRESIDENTS AND VICE PRESIDENTS
Section
11. In the absence of the president or in the event of his inability or refusal
to act, the senior vice-president or vice-president (or in the event there
be
more than one (1) senior vice-president or vice-president, the senior
vice-presidents or vice-presidents in the order designated, or in the absence
of
any designation, then in the order of their election) shall perform the duties
of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. They shall possess the
power
to sign all certificates, contracts and other instruments which may be
authorized by the board of directors, except where required or permitted
by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the corporation. The senior vice-presidents and
vice-presidents shall perform such other duties and have such other powers
as
the board of directors may from time to time prescribe.
THE
SECRETARY AND ASSISTANT SECRETARIES
Section
12. The secretary shall attend all meetings of the board of directors and
all
meetings of the stockholders and record all the proceedings of the meetings
of
the corporation and of the board of directors in a book to be kept for that
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or president, under
whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix
the
same to any instrument requiring it and when so affixed, it may be attested
by
his signature or by the signature of such assistant secretary. The board
of
directors may give general authority to any other officer to affix the seal
of
the corporation and to attest the affixing by his signature.
Section
13. The assistant secretary, or if there be more than one (1), the assistant
secretaries in the order determined by the board of directors (or if there
be no
such determination, then in the order of their election), shall, in the absence
of the secretary or in the event of his inability or refusal to act, perform
the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time
to
time prescribe.
THE
TREASURER AND ASSISTANT TREASURERS
Section
14. The treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books
belonging to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories
as
may be designated by the board of directors.
Section
15. He shall disburse the funds of the corporation as may be ordered by the
board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings,
or
when the board of directors so requires, an account of all his transactions
as
treasurer and of the financial condition of the corporation.
Section
16. If required by the board of directors, he shall give the corporation
a bond
(which shall be renewed every six (6) years) in such sum and with such surety
or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
corporation.
Section
17. The assistant treasurer, or if there shall be more than one (1), the
assistant treasurers in the order determined by the board of directors (or
if
there be no such determination, then in the order of their election), shall,
in
the absence of the treasurer or in the event of his inability or refusal
to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may
from
time to time prescribe.
Section
18. The treasurer shall have the custody of the accounting records of the
corporation and shall keep full and accurate accounts of the financial condition
and results of operations of the corporation in books belonging to the
corporation and shall maintain the accounting and internal control systems
of
the corporation and implement the corporation’s policies and procedures with
respect to internal accounting and auditing and financial controls.
Section
19. The treasurer shall render to the president and the board of directors,
at
its regular meetings, or when the board of directors so requires, financial
statements reflecting the results of operations and financial condition of
the
corporation.
THE
CONTROLLER AND ASSISTANT CONTROLLERS
Section
20. The controller and assistant controller, or if there shall be more than
one
(1), the assistant controllers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election),
shall perform such duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE
VI
INDEMNIFICATION
Section
1. Indemnification
in Actions Other Than in an Action by or in the Right of the
Corporation.
To the
full extent permitted by Delaware law from time to time in effect and subject
to
the provisions of Section 3 of this Article, the corporation shall indemnify
any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than by or in the right
of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or
proceeding if he acted in good faith and in a manner he reasonably believed
to
be in or not opposed to the best interests of the corporation, and, with
respect
to any criminal action or proceeding, had no reasonable cause to believe
his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere
or its
equivalent, shall not, of itself, create a presumption that the person did
not
act in good faith and in a manner which he reasonably believed to be in or
not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section
2. Indemnification
in Actions by or in the Right of the Corporation.
To the
full extent permitted by Delaware law from time to time in effect and subject
to
the provisions of Section 3 of this Article, the corporation shall indemnify
any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
he is
or was a director, officer, employee or agent of the corporation, or is or
was
serving at the request of the corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys’ fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or
suit if he acted in good faith and in a manner he reasonably believed to
be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in
which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section
3. Determination
of Conduct.
Any
indemnification under Sections 1 and 2 of this Article (unless ordered by
a
court) shall be made by the corporation only as authorized in the specific
case
upon a determination that indemnification of the director, officer, employee
or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in said Sections 1 and 2. Such determination shall be
made
(i) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii)
if
such a quorum is not obtainable, or, even if obtainable and a quorum of
disinterested directors so directs, by independent legal counsel (compensated
by
the corporation) in a written opinion, or (iii) by the
stockholders.
Section
4. Right
to Payment of Expenses.
To the
extent that a director, officer, employee or agent of the corporation has
been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense
of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys’ fees) actually and reasonably incurred by him in
connection therewith.
Section
5. Payment
of Expenses in Advance.
Expenses incurred by an officer or director in defending a civil, criminal,
administrative or investigative action, suit or proceeding, or threat thereof,
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf
of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized
in
this Article. Such expenses incurred by other employees and agents may be
so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section
6. Non-Exclusivity.
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under
any
agreement, vote of stockholders or disinterested directors, or otherwise,
both
as to action in his official capacity and as to action in another capacity
while
holding such office.
Section
7. Insurance.
The
corporation may purchase and maintain insurance on behalf of any person who
is
or was a director, officer, employee or agent of the corporation, or is or
was
serving at the request of the corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him
in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under
the provisions of this Article or of Section 145 of the Delaware General
Corporation Law.
Section
8. Rights
to Continue.
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this Article shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee
or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section
9. Conditional
Indemnification for Certain Proceedings.
Notwithstanding anything in this Article to the contrary, no director, officer,
employee or agent shall be entitled to indemnification pursuant to this Article
in connection with any action, suit or proceeding initiated by such person
unless the board of directors has authorized or consented to the initiation
of
such action, suit or proceeding.
ARTICLE
VII
CERTIFICATES
OF STOCK
Section
1. Certificates representing shares of stock of the corporation shall be
in such
form as shall be determined by the board of directors, subject to applicable
legal requirements. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary
or
an assistant secretary of the corporation, certifying the number of shares
owned
by such holder in the corporation.
Certificates
may be issued for partly paid shares and in such case upon the face or back
of
the certificates issued to represent any such partly paid shares, the total
amount of the consideration to be paid therefor, and the amount paid thereon
shall be specified.
Section
2. Where a certificate is countersigned (i) by a transfer agent other than
the
corporation or its employee, or (ii) by a registrar other than the corporation
or its employee, any other signature on the certificate may be facsimile.
In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it
may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
LOST
CERTIFICATES
Section
3. The secretary may direct a new certificate or certificates to be issued
in
place of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost,
stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the secretary may, in his or her sole discretion and as a condition precedent
to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the
same
in such manner as it shall require and/or to give the corporation a bond
in such
sum as it may direct as indemnity against any claim that may be made against
the
corporation with respect to the certificate alleged to have been lost, stolen
or
destroyed.
TRANSFERS
OF STOCK
Section
4. Upon surrender to the corporation or the transfer agent of the corporation
of
a certificate for shares duly endorsed or accompanied by proper evidence
of
succession, assignment or authority to transfer, it shall be the duty of
the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
FIXING
RECORD DATE
Section
5. In order that the corporation may determine the stockholders entitled
to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
be
(i) more than sixty (60) nor less than ten (10) days before the date of such
meeting, (ii) more than ten (10) days after nor at any time before the date
upon
which the resolution fixing the record date is adopted by the board of directors
with respect to any consent to corporate action without a meeting or (iii)
more
than sixty (60) days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the board
of
directors may fix a new record date for the adjourned meeting.
REGISTERED
STOCKHOLDERS
Section
6. The corporation shall be entitled to recognize the exclusive right of
a
person registered on its books as the owner of shares to receive dividends,
and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as, the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE
VIII
GENERAL
PROVISIONS
DIVIDENDS
Section
1. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by
the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject
to
the provisions of the certificate of incorporation.
Section
2. Before payment of any dividend, there may be set aside out of any funds
of
the corporation available for dividends such sum or sums as the directors
from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or
maintaining any property of the corporation, or for such other purpose as
the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it
was
created.
CHECKS
Section
3. All checks or demands for money and notes of the corporation shall be
signed
by such officer or officers or such other person or persons as the board
of
directors may from time to time designate.
FISCAL
YEAR
Section
4. The fiscal year of the corporation begins on the first day of January
and
ends on the thirty-first day of December in each year.
SEAL
Section
5. The corporate seal shall have inscribed thereon the name of the corporation,
the year of its organization and the words “Corporate Seal, Delaware”. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed
or
reproduced or otherwise.
ARTICLE
IX
AMENDMENTS
Section
1. These by-laws may be altered, amended or repealed or new by-laws may be
adopted by the stockholders or by the board of directors, when such power
is
conferred upon the board of directors by the certificate of incorporation,
at
any regular meeting of the stockholders or of the board of directors or at
any
special meeting of the stockholders or of the board of directors if notice
of
such alteration, amendment, repeal or adoption of new by-laws be contained
in
the notice of such special meeting.
EXHIBIT
D
COGNITRONICS
CORPORATION
1990
STOCK OPTION PLAN, AS AMENDED
1.
Purpose
This
incentive stock option plan (the “Plan”) is intended to provide incentives to
executives and other key employees of Cognitronics Corporation (the “Company”)
and its Subsidiaries, directors of the Company and advisors to the Company
by
providing them with opportunities for stock ownership under the Plan.
“Subsidiary” means any corporation in which the Company or another Subsidiary or
both owns 50% or more of the combined voting power of all classes of
stock.
2.
Administration
The
Plan
shall be administered by a committee of not less than three directors of
the
Company (the “Committee”)selected by, and serving at the pleasure of, its Board
of Directors (the “Board”). A director may not serve on the Committee unless he
is a “non-employee director” for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, (or any successor rule thereto).
The
Committee shall have authority, subject to the terms of the Plan, to determine
the persons eligible for options and those to whom options shall be granted,
the
number of shares to be covered by each option, the time or times at which
options shall be granted, and the terms and provisions of the instruments
by
which options shall be evidenced, and to interpret the Plan and make all
determinations necessary or advisable for its administration. The Committee
may
consult with legal counsel, who may be counsel to the Company, and shall
not
incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The Board reserves to itself the right to exercise any
authority granted to the Committee hereunder.
3.
Eligibility
Full-time
employees, including officers, of the Company or any Subsidiary or both,
directors of the Company and advisors to the Company shall be eligible to
participate in the Plan. No person shall be granted options with respect
to more
than 100,000 shares of Common Stock in any calender year, subject to adjustment
pursuant to Section 7.
4.
Stock
The
stock
as to which options may be granted shall be the Company’s common stock, par
value $.20 per share (“Common Stock”). When options are exercised the Company
may either issue unissued Common Stock or transfer issued Common Stock held
in
its treasury. The total number of shares of Common Stock which may be sold
to
employees under the Plan pursuant to options shall not exceed 2,482,500 shares.
If an option expires, or is otherwise terminated prior to its exercise, the
Common Stock covered by such option immediately prior to such expiration
or
other termination shall continue to be available under the Plan.
5.
Granting of Options
The
“Date
of Grant” of an option under the Plan shall be the date on which the option is
awarded by the Committee. The grant of any option shall neither entitle such
recipient to, nor disqualify him from, participation in any other grant of
options.
6.
Terms and Conditions of Options
Options
shall be evidenced by instruments in form approved by the Committee. Such
instruments shall conform to the following terms and conditions:
(a)
Option
price.
The
option price per share of Common Stock shall be the Fair Market Value of
a share
of Common Stock on the Date of Grant. “Fair Market Value” shall be the closing
price of the Common Stock recorded on the American Stock Exchange on the
Date of
Grant or the last trading day prior thereto.
(b)
Term
and exercise of options.
Each
option shall expire no later than the tenth anniversary of its Date of Grant.
Options shall become exercisable at such time or times and subject to such
terms
and conditions as shall be determined by the Committee. The Committee may
waive
such exercise provisions or accelerate the exercisability of the option at
any
time. After becoming exercisable, each installment shall remain exercisable
until expiration or termination of the option. An option may be exercised
from
time to time, in whole or part, up to the total number of shares with respect
to
which it is then exercisable. Payment of the purchase price will be made
in such
manner as the Committee may provide in the option, which may include cash
(including cash equivalents), payroll deductions, any other manner permitted
by
law as determined by the Committee or any combination of the
foregoing.
(c)
Termination of employment.
If an
optionee ceases, other than by reason of death or retirement, to be employed
by
the Company or a Subsidiary, to serve on the Board of Directors of the Company
or to serve as an advisor to the Company,all options granted to him and
exercisable on the date of his termination of employment shall terminate
on the
earlier of such options’ expiration or three months after the day his employment
ends or as otherwise determined by the Committee. Any installment not
exercisable on the date of such termination shall lapse and be thenceforth
unexercisable. Whether authorized leave of absence or absence in military
or
governmental service may constitute employment for the purposes of the Plan
shall be conclusively determined by the Committee.
(d)
Retirement
of optionee.
If an
employee optionee retires, all options held by him on the date of his retirement
shall become exercisable on the date of his retirement and shall terminate
on
the earlier of such option’s expiration or the first anniversary of the day of
his retirement.
(e)
Death
of optionee.
If an
optionee dies, his option may be exercised, to the extent of the number of
shares with respect to which he could have exercised it on the date of his
death, by his estate, personal representative or beneficiary who acquires
the
option by will or by the laws of descent and distribution, at any time prior
to
the earlier of such option’s expiration or the first anniversary of the
optionee’s death. On the earlier of such dates, the option shall
terminate.
(f)
Assignability.
No
option shall be assignable or transferable by the optionee except by will
or by
laws of descent and distribution, and during the lifetime of the optionee
the
option shall be exercisable only by him. At the request of an optionee,
shares
of Common Stock purchased on exercise of an option may be issued or transferred
in the name of the optionee and another person jointly with the right of
survivorship.
(g)
Other
provisions.
Instruments evidencing options may contain such other provisions, not
inconsistent with the Plan, as the Committee deems advisable, including a
requirement that an optionee represent to the Company in writing, when an
option
is granted, or when he receives shares on its exercise, that he is accepting
such option, or receiving such shares (unless they are then covered by a
Securities Act of 1933 registration statement), for his own account for
investment only. All certificates representing shares issued under the Plan
may
bear a legend deemed appropriate by the Committee to confirm an exemption
from
the registration requirements of the Securities Act of 1933.
7.
Capital
Adjustments
The
number and price of shares of Common Stock covered by each option, the total
number of shares that may be sold under the Plan, and the maximum number
of
shares that may be sold, issued or transferred to an employee, shall be
proportionately adjusted to reflect, as deemed equitable and appropriate
by the
Committee, any stock dividend, stock split or share combination of the Common
Stock or recapitalization, merger, consolidation, extraordinary dividend,
spin-off, split-off or other change in the capital structure of the Company.
Any
such adjustment shall preserve the aggregate value of outstanding
options.
8.
Incentive
Stock Options
The
aggregate Fair Market Value (determined as of the time the option is granted)
of
the Common Stock with respect to which incentive stock options, as defined
in
Section 422 of the Internal Revenue Code of 1986, as amended, are exercisable
for the first time by an individual in any calendar year (under the Plan
or any
other plan of the Company or any of its parent or subsidiary corporations
(as
such terms are defined in Section 424(e) and (f), respectively, of the Internal
Revenue Code) pursuant to which such incentive stock options may be granted)
shall not exceed $100,000.
9.
Change of Control
Notwithstanding
the provisions of Section 6(b) hereof, in the event of a Change in Control,
as
hereinafter defined, fifty percent (50%) of all unexercisable options held
by an
optionee shall become exercisable on the date of the Change in Control and
the
remainder will be cancelled.
“Change
in Control” means an event in which:
(a)
the
stockholders of the Company approve (i) any consolidation or merger of the
Company or any of its subsidiaries where the stockholders of the Company,
immediately prior to the consolidation or merger, would not, immediately
after
the consolidation or merger, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of all votes to which all
stockholders of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any) would be entitled
under ordinary circumstances to vote in an election of directors or where
the
members of the Board, immediately prior to the consolidation or merger, would
not, immediately after the consolidation or merger, constitute a majority
of the
Board of Directors of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(ii)
any sale, lease, exchange or other transfer (in one transaction or a series
of
transactions contemplated or arranged by any person as a single plan) of
all or
substantially all of the assets of the Company or (iii) any plan or proposal
for
the liquidation or dissolution of the Company;
(b)
persons who, as of the effective date hereof, constitute the entire Board
(as of
the date hereof the “Incumbent Directors”) cease for any reason to constitute at
least a majority of the Board, provided,
however,
that
any person becoming a director subsequent to the date hereof whose election,
or
nomination for election by the Company’s shareholders, is approved by a vote of
at least a majority of the then Incumbent Directors (other than an election
or
nomination of a person whose assumption of office is the result of an actual
or
threatened election contest relating to the election of directors of the
Company, as such terms are used in Rule 14a-11 under the Securities Exchange
Act
of 1934, as amended from time to time (the “Exchange Act”)), shall be considered
an Incumbent Director; or
(c)
any
“person”, as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any of its subsidiaries, any employee benefit plan
of
the Company or any of its subsidiaries or any entity organized, appointed
or
established by the Company for or pursuant to the terms of such plan), together
with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, becomes the “beneficial owner” or
“beneficial owners” (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in
the
aggregate 20% or more of either (i) the then outstanding shares of Common
Stock
or (ii) the combined voting power of all then outstanding securities of the
Company having the right under ordinary circumstances to vote in an election
of
directors to the Board (“Voting Securities”) (in either such case other than as
a result of acquisitions of such securities directly from the
Company).
Notwithstanding
the foregoing, a “Change in Control” will not have occurred for purposes of
clause (c) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Common Stock or other Voting
Securities outstanding, increases (i) the proportionate number of shares
of
Common Stock beneficially owned by any person to 20% or more of the shares
of
Common Stock then outstanding or (ii) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 20% or more
of the
combined voting power of all then outstanding Voting Securities; provided,
however,
that if
any person referred to in clause (i) or (ii) of this sentence thereafter
becomes
the beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend or similar
transaction), then a “Change in Control” will have occurred for purposes of
clause (c).
10.
Term; Amendment of Plan
The
Board
may discontinue the Plan at any time and may amend it from time to time.
No
amendment or discontinuation of the Plan shall adversely affect any award
previously granted without the employee’s written consent. Amendments may be
made without stockholder approval except as required to satisfy applicable
law
or stock exchange requirements.
11.
Effective Date
The
Plan
is in accordance with a Resolution of Stockholders duly approved at an Annual
Meeting held on June 21,1990 and became effective on June 21, 1990. It was
amended by a Resolutions of Stockholders on July 12, 1994, May 9, 1996, May
14,
1998, May 13, 1999, May 11, 2000, May 19, 2001, May 9, 2002, and May 8, 2003
and
further amended by the Board on October 6, 2006.
The
Terms
of the Plan shall be governed by the laws of the State of New York.
__________________
EXHIBIT
E
COGNITRONICS
CORPORATION
RESTRICTED
STOCK PLAN,
AS
AMENDED
Section
1. Purpose.
The
purpose of the Cognitronics Corporation Restricted Stock Plan is:
|
(a)
|
to
increase the proprietary interest in the Company of those Key Employees
whose responsibilities and decisions directly affect the performance
of
the Company and its subsidiaries;
|
|
(b)
|
to
provide rewards for those Key Employees who make contributions
to the
success of the Company and its subsidiaries;
and
|
|
(c)
|
to
attract and retain persons of superior ability as Key Employees
of the
Company and its subsidiaries.
|
Section
2. Definitions.
“Award”
means an
award of Restricted Stock granted to any Key Employee in accordance with
the
provisions of the Plan.
“Award
Agreement”
means
the written agreement evidencing each Award between the Key Employee and
the
Company.
“Board”
means
the Board of Directors of the Company.
“Cause”
means
(i) the Key Employee is convicted of a felony involving moral turpitude;
or (ii)
the Key Employee is guilty of willful gross neglect or willful gross misconduct
in carrying out his duties, resulting, in either case, in material economic
harm
to the Company, unless the Key Employee believed in good faith that such
act or
nonact was in the best interests of the Company.
“Change
in Control”
means an
event in which:
|
(a)
|
the
stockholders of the Company approve (i) any consolidation or merger
of the
Company or any of its subsidiaries where the stockholders of the
Company,
immediately prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own, directly or
indirectly, shares representing in the aggregate more than 50%
of all
votes to which all stockholders of the corporation issuing cash
or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any) would be entitled under ordinary circumstances
to
vote in an election of directors or where the members of the Board,
immediately prior to the consolidation or merger, would not, immediately
after the consolidation or merger, constitute a majority of the
Board of
Directors of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation,
if any),
(ii) any sale, lease, exchange or other transfer (in one transaction
or a
series of transactions contemplated or arranged by any person as
a single
plan) of all or substantially all of the assets of the Company
or (iii)
any plan or proposal for the liquidation or dissolution of the
Company;
|
|
(b)
|
persons
who, as of the effective date hereof, constitute the entire Board
(as of
the date hereof the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided, however,
that any
person becoming a director subsequent to the date hereof whose
election,
or nomination for election by the Company’s stockholders, is approved by a
vote of at least a majority of the then Incumbent Directors (other
than an
election or nomination of a person whose assumption of office is
the
result of an actual or threatened election contest relating to
the
election of directors of the Company, as such terms are used in
Rule
14a-11 under the Exchange Act), shall be considered an Incumbent
Director;
or
|
|
(c)
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any
“person”, as such term is used in Sections 13(d) and 14(d) of the Exchange
Act (other than the Company, any of its subsidiaries, any employee
benefit
plan of the Company or any of its subsidiaries or any entity organized,
appointed or established by the Company for or pursuant to the
terms of
such plan), together with all “affiliates” and “associates” (as such terms
are defined in Rule 12b-2 under the Exchange Act) of such person,
becomes
the “beneficial owner” or “beneficial owners” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of securities
of the Company representing in the aggregate 20% or more of either
(i) the
then outstanding shares of Stock or (ii) the combined voting power
of all
then outstanding securities of the Company having the right under
ordinary
circumstances to vote in an election of directors to the Board
(“Voting
Securities”) (in either such case other than as a result of acquisitions
of such securities directly from the
Company).
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Notwithstanding
the foregoing, a “Change in Control” will not have occurred for purposes of
clause (c) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Stock or other Voting Securities
outstanding, increases (i) the proportionate number of shares of Stock
beneficially owned by any person to 20% or more of the shares of Stock then
outstanding or (ii) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 20% or more of the combined
voting power of all then outstanding Voting Securities; provided, however,
that
if any person referred to in clause (i) or (ii) of this sentence thereafter
becomes the beneficial owner of any additional shares of Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend or similar
transaction), then a “Change in Control” will have occurred for purposes of
clause (c).
“Committee”
means
the Committee appointed by the Board to administer the Plan pursuant to Section
4(a) hereof.
“Company”
means
Cognitronics Corporation and its successors and assigns.
“Constructive
Termination Without Cause”
means a
termination of a Key Employee’s employment at his initiative following the
occurrence, without the Key Employee’s prior written consent, of one or more of
the following events (except in consequence of a prior
termination):
(i)
a
reduction in the Key Employee’s base salary or the termination or material
reduction of any employee benefit or perquisite enjoyed by him (other than
as
part of an across-the-board reduction applicable to all executive officers
of
the Company);
(ii)
a
material diminution in the Key Employee’s duties or the assignment to the Key
Employee of duties which are materially inconsistent with his duties or which
materially impair the Key Employee’s ability to function in his position with
the Company.
(iii)
the
failure to continue the Key Employee’s participation in any incentive
compensation plan unless a plan providing a substantially similar opportunity
is
substituted; or
(iv)
the
relocation of the Key Employee’s office location as assigned to him by the
Company to a location more than 50 miles from his prior office
location.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended from time to time.
“Key
Employee”
means an
officer or other key employee of any Participating Company who, in the judgment
of the Committee, is responsible for or contributes to the management, growth,
technology or profitability of the business of any Participating
Company.
“Participating
Company” means
the
Company or any subsidiary or other affiliate of the Company.
“Plan”
means
the Cognitronics Corporation Restricted Stock Plan.
“Restricted
Stock” means
Stock delivered under the Plan subject to the requirements of Section 7 hereof
and such other restrictions as the Committee deems appropriate or
desirable.
“Stock”means
the
common stock ($.20 par value) of the Company.
“Total
Disability”
means
the complete and permanent inability of a Key Employee to perform substantially
all of his or her duties under the terms of his or her employment with any
Participating Company, as determined by the Committee upon the basis of such
evidence, including independent medical reports or data, as the Committee
deems
appropriate or necessary.
Section 3. Effective Date.
The
effective date of the Plan shall be January 1, 1995, subject to approval
of the
Plan by a majority of the Company’s stockholders. Notwithstanding anything in
the Plan to the contrary, if the Plan shall have been approved by the Board
prior to such stockholder approval, Key Employees may be selected and Award
criteria may be determined and Awards may be made as provided herein subject
to
subsequent stockholder approval.
Section
4. Plan Administration.
(a)
Committee.
The Plan
shall be administered by a Committee appointed by the Board and serving at
the
Board’s pleasure. The Committee shall be comprised of not less than two (2)
members of the Board. Members of the Committee shall be members of the Board
who
are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange
Act or a successor rule or regulation.
(b)
Powers.
The
Committee is authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary or advisable for the proper
administration of the Plan and to take such other action in connection with
or
in relation to the Plan as it deems necessary or advisable. Each decision
made
or action taken pursuant to the Plan, including interpretation of the Plan
and
the Awards granted hereunder by the Committee, shall be final and conclusive
for
all purposes and upon all persons, including without limitation, the
Participating Companies, the Committee, the Board, Key Employees and their
respective successors in interest.
(c)
Indemnification.
No
member or former member of the Committee or the Board shall be liable for
any
action or determination made in good faith with respect to the Plan or any
Award
granted under it. Each member or former member of the Committee or the Board
shall be indemnified and held harmless by the Company against all costs and
expenses (including counsel fees) and liability (including any sum paid in
settlement of a claim with the approval of the Board) arising out of any
act or
omission to act in connection with the Plan unless arising out of such member’s
own fraud or bad faith. Such indemnification shall be in addition to any
rights
of indemnification the members or former members may have as directors or
under
the by-laws of the Company.
(d)
Independent
Advisors.
The
Committee may employ such independent professional advisors, including without
limitation independent legal counsel and counsel regularly employed by the
Company, consultants and agents as the Committee may deem appropriate for
the
administration of the Plan and may rely upon any opinion received from any
such
counsel or consultant and any computations received from any such consultant
or
agent. All expenses incurred by the Committee in interpreting and administering
the Plan, including without limitation meeting fees and expenses and
professional fees, shall be paid by the Company.
Section
5. Participation.
Participation
in the Plan shall be limited to Key Employees of the Participating Companies
who
have received written notification from the Committee, or from a person
designated by the Committee, that they have been selected to participate
in the
Plan. No employee shall at any time have any right to be selected to participate
in the Plan. No Key Employee having been granted an Award shall have any
right
to be granted an additional Award in the future. Neither the Plan nor any
action
taken thereunder shall be construed as giving any Key Employee any right
to be
retained in the employ of the Participating Companies. The right and power
of
the Participating Companies to dismiss or discharge any Key Employee, with
or
without cause, is specifically reserved.
Section
6. Award Grants and Agreements.
(a)
Grants.
The
Chief Executive Officer (“CEO”) of the Company may recommend Key Employees to
participate in the Plan, and may recommend the timing, amount and restrictions,
if any, and other terms and conditions of an Award, subject to the terms
of the
Plan. The Committee, in its sole discretion, has the authority to grant Awards
under the Plan, which may be made in accordance with the recommendations
of the
CEO or otherwise.
(b)
Agreements.
Each
Award shall be evidenced by a written Award Agreement, in a form adopted
by the
Committee. Each Award Agreement shall be subject to and incorporate the express
terms and conditions, if any, required by the Plan, and contain such
restrictions, terms and conditions as the Committee may determine.
Section
7. Restricted Stock.
(a)
Shares
Subject to the Plan.
An
aggregate of 935,000 shares of Stock may be awarded under the Plan as Restricted
Stock. Any share of Restricted Stock that is subject to an Award but that
for
any reason does not vest shall again become available for an Award under
the
Plan.
(b)
Adjustments.
In
the
event of any change in the Stock subject to the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, split-up,
spin-off, combination of shares, exchange of shares, issuance of rights to
subscribe or other change in capital structure), the Committee shall make
appropriate adjustments in the amount of Stock available for Awards under
the
Plan or subject to outstanding Awards, or the terms, conditions or restrictions
of such Awards as the Committee deems equitable to prevent the dilution or
enlargement of the benefits intended pursuant to the Plan.
(c)
Custody
of Shares.
(i)
Each
certificate representing shares of Restricted Stock issued pursuant to an
Award
shall be registered in the name of the Key Employee and held, together with
a
stock power endorsed in blank, by the Company. Unless and until such shares
of
Restricted Stock fail to vest and are forfeited as provided herein, the Key
Employee shall be entitled to vote all such shares of Restricted Stock and
receive all cash dividends, if any, with respect thereto. All other
distributions with respect to such Restricted Stock, including, but not limited
to, Stock received as a result of a stock dividend, stock split, combination
of
shares or otherwise, shall be retained by the Company in escrow. Each
certificate of Restricted Stock issued pursuant to an Award shall bear the
following (or similar) legend:
“The
transferability of this certificate and of the shares of Common Stock
represented hereby are subject to the terms and conditions (including vesting)
contained in the Cognitronics Corporation Restricted Stock Plan and an Award
Agreement entered into between the registered owner and Cognitronics
Corporation. A copy of such Plan and Award Agreement is on file in the office
of
the Secretary of Cognitronics Corporation.”
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In
lieu of the foregoing, the Company may issue stop transfer instructions
to
its transfer agent or take such other steps as are necessary to
preclude
the transfer of Restricted Stock.
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(ii)
Certificates
representing shares of Restricted Stock which have become vested pursuant
to
Section 7 hereof and which have been held by the Company pursuant to Section
7(c) hereof shall be delivered by the Company to the Key Employee (or the
Key
Employee’s legal representative) in the form of a freely transferable
certificate, without legend (provided that the Key Employee is not an
“affiliate” of the Company within the meaning of Rule 405 adopted pursuant to
the Securities Act of 1933, as amended) promptly after becoming vested,
provided, however, that the Company need not deliver such certificates to
a Key
Employee until the Key Employee has paid or caused to be paid all taxes required
to be withheld pursuant to Section 8 hereof.
(d)
Restriction
Period.
(i)
Vesting
Schedule. Except as provided in Section 7(d)(ii), 7(d)(iii) or 7(d)(iv) hereof,
to the extent that a Key Employee remains continuously employed by a
Participating Company, Restricted Stock received as an award shall become
vested
and shall not be subject to forfeiture in accordance with the vesting schedule
determined by the Committee at the time of grant.
(ii)
Waiver
of
Vesting Schedule. Notwithstanding the provisions of Section 7(d)(i) hereof,
with
respect to any Key Employee or group of Key Employees, the Committee may
elect
to waive or accelerate the vesting schedule set forth in Section 7(d)(i)
hereof,
in whole or in part, at any time at or after the time an Award is
granted.
(iii)
Death,
Disability and Retirement. Notwithstanding the provisions of Section 7(d)(i)
hereof,
upon a Key Employee’s death, Total Disability or retirement on or after reaching
the age of 62, shares of Restricted Stock shall vest on a pro rata basis,
comparing the number of years from the date of the Award to the date of death,
Total Disability or retirement to the final vesting date in the grant. Shares
of
Restricted Stock which do not so vest shall be forfeited to the
Company.
(iv)
Termination
of Employment Following a Change in Control. Notwithstanding the provisions
of
Section 7(d)(i) hereof, if following a Change in Control, a Key Employee’s
employment is terminated without Cause or there is a Constructive Termination
Without Cause, fifty percent (50%) of the shares of Restricted Stock held
by
that Key Employee shall become immediately vested.
(e) Restrictions.
Until
shares of Restricted Stock have vested in accordance with Section 7(d) hereof,
an Award shall be subject to the following restrictions:
(i)
Nontransferability.
Except as otherwise required by law, Restricted Stock which has not vested
may
not be sold, assigned, exchanged, transferred, pledged, hypothecated or
otherwise disposed of, except to the Company as provided herein.
(ii)
Other
Restrictions. The Committee may impose such other restrictions on any Award
as
it may deem advisable, including without limitation, stop-transfer orders
and
other restrictions set forth in the terms of the Award Agreement or as the
Committee may deem advisable under the rules and regulations, and other
requirements of the Securities and Exchange Commission, and any applicable
federal or state securities or other laws.
Section
8. Miscellaneous.
(a) Awards
Not Considered Compensation. No
Award
made under the Plan shall be deemed salary or compensation for the purpose
of
computing benefits under any employee benefit plan or other arrangement of
any
Participating Company for the benefit of its employees unless the Company
shall
determine otherwise.
(b) Absences.
Absence
on leave approved by a duly constituted officer of the Company shall not
be
considered interruption or termination of employment for any purposes of
the
Plan; provided, however, that no Award may be granted to an employee while
he or
she is absent on leave.
(c) Delivery
to Persons Other Than Key Employee.
If the
Committee finds that shares of Restricted Stock are to be delivered under
the
Plan to a Key Employee who is unable to care for his or her affairs because
of
illness or accident, then any payment due him or her (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if
the
Committee so directs, be paid to his or her spouse, a child, a relative,
an
institution maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such person
otherwise entitled to delivery. Any such delivery shall be a complete discharge
of the liability of the Company therefor.
(d) Plan
Copies.
Copies
of the Plan and all amendments, administrative rules and procedures
and
interpretations
shall be made available to all Key Employees at all reasonable times at the
Company’s headquarters.
(e) Withholding
Taxes.
The
Company may withhold any taxes in connection with the Plan that the Company
determines it is required to withhold under the laws and regulations of any
governmental authority, whether federal, state or local and whether domestic
or
foreign, including, without limitation, taxes in connection with the delivery
of
shares of Restricted Stock or the vesting of Restricted Stock. A Key Employee
may elect to satisfy such withholding requirements either by (i) delivery
to the
Company of a certified check prior to the delivery of shares of Restricted
Stock
which are vested pursuant to Section 7 hereof, (ii) instructing the Company
to
retain a sufficient number of shares of Stock to cover the withholding
requirements, or (iii) instructing the Company to satisfy the withholding
requirements from the Key Employee’s salary.
(f) Governing
Law. The
Plan
and all rights hereunder shall be governed by and construed in accordance
with
the law as of the State of New York, without giving effect to its rules on
conflicts of law.
(g) Key
Employee Communications.
All
elections, designations, requests, notices, instructions and other
communications from a Key Employee or other person to the Committee required
or
permitted under the Plan shall be in such form as is prescribed from time
to
time by the Committee and shall be mailed by first class or delivered to
such
location as shall be specified by the Committee.
(h) Binding
on Successors. The
terms
of the Plan shall be binding upon the Company and its successors and
assigns.
(i) Captions.
Captions
preceding the sections and clauses hereof are inserted solely as a matter
of
convenience and in no way define or limit the scope or intent of any provisions
hereof.
(j) Severability.
Whenever
possible, each provision of the Plan shall be interpreted in such manner
as to
be effective and valid under applicable law. If any provision of the Plan
or the
application thereof to any person or circumstances is prohibited by or invalid
under applicable law, such provision shall be ineffective to the minimal
extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of the Plan or the application of such
provision to other persons or circumstances.
(k) Duration,
Amendment, and Termination. The
Plan
shall continue in effect until terminated by the Board The
Board
may at any time amend or terminate this Plan as of any date specified in
a
resolution adopted by the Board. The Plan may also be amended by the Committee,
provided that all such amendments are reported to the Board. Amendments may
be
made without stockholder approval except as required to satisfy applicable
law
or stock exchange requirements. No amendment of the Plan may affect an Award
theretofore granted under the Plan without the written consent of the Key
Employee affected. No Award may be granted after this Plan has terminated.
After
the Plan has terminated, the functions of the Committee shall be limited
to
supervising the administration of Awards previously granted. Termination
of the
Plan shall not affect any Award previously granted.
EXHIBIT
F
COGNITRONICS
CORPORATION
DIRECTORS’
STOCK OPTION PLAN, AS AMENDED
1.
Purpose
The
Directors’ Stock Option Plan (the “Plan”) is intended to provide incentives to
non-employee directors and officers of Cognitronics Corporation (the “Company”)
by more closely aligning their compensation with stockholder value.
2.
Administration
The
Plan
shall be administered by the Company’s Board of Directors.
The
Board
shall have authority, subject to the terms of the Plan, to interpret the
Plan
and make all determinations necessary or advisable for its administration.
The
Board may consult with legal counsel, who may be counsel to the Company,
and
shall not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
3.
Eligibility
All
outside directors and officers (individually “Participants”, collectively
“Participants”) shall be eligible to participate in the Plan, provided that
officers shall not be eligible to receive grants under the Plan after October
8,
2006. An outside director or officer means a director or officer who is neither
an employee of the Company nor of any subsidiary of the Company.
4.
Stock
The
stock
as to which options may be granted shall be the Company’s common stock, par
value $.20 per share (“Common Stock”). When options are exercised the Company
may either issue unissued Common Stock or transfer issued Common Stock held
in
its treasury. The total number of shares of Common Stock which may be sold
to
Participants under the Plan pursuant to options shall not exceed 337,500
shares.
If an option expires, or is otherwise terminated prior to its exercise, the
Common Stock covered by such option immediately prior to such expiration
or
other termination shall continue to be available under the Plan.
5.
Awarding of Options
Options
shall be awarded to Participants as follows:
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(a) |
Upon
the Effective Date, an option to purchase 3,000 shares of Common
Stock.
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(b) |
On
each August 1 of each subsequent year, an option to purchase
6,000 shares
of Common Stock, but not to a Participant elected by the Board
of
Directors subsequent to the Annual Meeting of Stockholders immediately
preceding such August 1.
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(c) |
Sixty
(60) days following the initial election of a director by the
Board of
Directors, an option to purchase a portion of the number of shares
set
forth in (b) above based on the ratio between the number of months
the
number of months between the date of such election and the next
Annual
Meeting of Stockholders divided by twelve (12)
months.
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(d) |
On
November 9, 2002, an option to purchase 5,500 shares of Common
Stock.
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The
“Date
of Award” of an option shall be the date on which the option is awarded under
the Plan. The award of any option to any Participant shall neither entitle
such
Participant to, nor disqualify him from, participation in any other plan
which
provides for the issuance of Common Stock.
6.
Terms and Conditions of Options
Options
shall be evidenced by instruments in form approved by the Board. Such
instruments shall conform to the following terms and conditions:
(a)
Option
price.
The
option price per share of Common Stock shall be the Fair Market Value of
a share
of Common Stock on the Date of Award. “Fair Market Value” shall be the closing
price of the Common Stock recorded on the American Stock Exchange on the
Date of
Award or, if the Common Stock is not traded on such date, on the last trading
day prior thereto.
(b)
Term
and exercise of options.
Each
option shall expire no later than the tenth anniversary of its Date of Grant
and
shall become exercisable on the date one year after the Date of Grant. The
Board
may waive any exercise conditions or accelerate the exercisability of the
option
at any time. After becoming exercisable, each option shall remain exercisable
until its expiration or termination. An option may be exercised from time
to
time, in whole or part, up to the total number of shares with respect to
which
it is then exercisable. Payment of the purchase price will be made in such
manner as the Board may provide in the option, which may include cash (including
cash equivalents) or any other manner permitted by law as determined by the
Board or any combination of the foregoing.
(c)
Termination of Participant.
If a
Participant ceases, other than by reason of death or retirement, to be a
director or officer of the Company, all options awarded to him and exercisable
on the date of he ceases to be a director or officer shall terminate on the
earlier of such options’ expiration or one year after the day he ceases to be a
director or officer or as otherwise determined by the Board. Any option not
exercisable on the date of such termination shall lapse and be thenceforth
unexercisable.
(d)
Retirement
of Participant.
If a
Participant retires, all options held by him on the date of his retirement
shall
become exercisable on the date of his retirement and shall terminate on the
earlier of such option’s expiration or the first anniversary of the day of his
retirement.
(e)
Death
of Participant.
If a
Participant dies, his options may be exercised, to the extent of the number
of
shares with respect to which he could have exercised on the date of his death,
by his estate, personal representative or beneficiary who acquires the option
by
will or by the laws of descent and distribution, at any time prior to the
earlier of such option’s expiration or the first anniversary of the
Participant’s death. On the earlier of such dates, the option shall terminate.
(f)
Assignability.
No
option shall be assignable or transferable by the Participant except by will
or
by laws of descent and distribution, and during the lifetime of the Participant
the option shall be exercisable only by him. At the request of a Participant,
shares of Common Stock purchased on exercise of an option may be issued or
transferred in the name of the Participant and another person jointly with
the
right of survivorship.
(g)
Other
provisions.
Instruments evidencing options may contain such other provisions, not
inconsistent with the Plan, as the Board deems advisable, including a
requirement that a Participant represent to the Company in writing, when
an
option is awarded, or when he receives shares on its exercise, that he is
accepting such option, or receiving such shares (unless they are then covered
by
a Securities Act of 1933 registration statement), for his own account for
investment only. All certificates representing shares issued under the Plan
may
bear a legend deemed appropriate by the Committee to confirm an exemption
from
the registration requirements of the Securities Act of 1933.
7. Capital
Adjustments
In
the
event of any merger, reorganization, consolidation, sale of substantially
all
assets, recapitalization, stock dividend, stock split, spin-off, distribution
of
assets or other change in corporate structure affecting the Common Stock
such
that an adjustment is determined by majority of the Incumbent Directors to
be
appropriate, a majority of the Incumbent Directors shall, in such a manner
as it
may deem equitable in its sole discretion, substitute or adjust any or all
of
(i) the aggregate number and kind of shares reserved for issuance under the
Plan, (ii) the number and kind of shares as to which awards may be granted
to
any individual in any fiscal year, (iii) the number and kind of shares subject
to outstanding awards, and (iv) the exercise price of outstanding stock options;
provided, however, that no such adjustment shall increase the aggregate value
of
any outstanding award.
In
addition, upon the dissolution or liquidation of the Company or upon any
reorganization, merger, or consolidation as a result of which the Company
is not
the surviving corporation (or survives as a wholly-owned subsidiary of another
corporation), or upon a sale of substantially all the assets of the Company,
a
majority of the Incumbent Directors may take such action as it in its discretion
deems appropriate to (i) accelerate the time when stock options may be
exercised, (ii) cash out such stock options at or immediately prior to the
date
of such event, or (iii) provide for the assumption of outstanding stock options
by surviving, successor or transferee corporations.
The
Board’s determination as to which adjustments shall be made and the extent
thereof shall be final, binding and conclusive.
Notwithstanding
the provisions of Section 6(b) hereof, in the event of a Change in Control,
as
hereinafter defined, all options held by a Participant shall become exercisable
on the date of the Change in Control.
“Change
in Control” means an event in which:
(a)
the
stockholders of the Company approve (i) any consolidation or merger of the
Company or any of its subsidiaries where the stockholders of the Company,
immediately prior to the consolidation or merger, would not, immediately
after
the consolidation or merger, beneficially own, directly or indirectly, shares
representing in the aggregate more than 50% of all votes to which all
stockholders of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any) would be entitled
under ordinary circumstances to vote in an election of directors or where
the
members of the Board, immediately prior to the consolidation or merger, would
not, immediately after the consolidation or merger, constitute a majority
of the
Board of Directors of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(ii)
any sale, lease, exchange or other transfer (in one transaction or a series
of
transactions contemplated or arranged by any person as a single plan) of
all or
substantially all of the assets of the Company or (iii) any plan or proposal
for
the liquidation or dissolution of the Company;
(b)
persons who, as of the effective date hereof, constitute the entire Board
(as of
the date hereof the “Incumbent Directors”) cease for any reason to constitute at
least a majority of the Board, provided, however, that any person becoming
a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, is approved by a vote of at least a
majority of the then Incumbent Directors (other than an election or nomination
of a person whose assumption of office is the result of an actual or threatened
election contest relating to the election of directors of the Company, as
such
terms are used in Rule 14a-11 under the Securities Exchange Act of 1934,
as
amended from time to time (the “Exchange Act”)), shall be considered an
Incumbent Director; or
(c)
any
“person”, as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any of its subsidiaries, any employee benefit plan
of
the Company or any of its subsidiaries or any entity organized, appointed
or
established by the Company for or pursuant to the terms of such plan), together
with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, becomes the “beneficial owner” or
“beneficial owners” (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in
the
aggregate 20% or more of either (i) the then outstanding shares of Common
Stock
or (ii) the combined voting power of all then outstanding securities of the
Company having the right under ordinary circumstances to vote in an election
of
directors to the Board (“Voting Securities”) (in either such case other than as
a result of acquisitions of such securities directly from the
Company).
Notwithstanding
the foregoing, a “Change in Control” will not have occurred for purposes of
clause (c) solely as the result of an acquisition of securities by the Company
which, by reducing the number of shares of Common Stock or other Voting
Securities outstanding, increases (i) the proportionate number of shares
of
Common Stock beneficially owned by any person to 20% or more of the shares
of
Common Stock then outstanding or (ii) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 20% or more
of the
combined voting power of all then outstanding Voting Securities; provided,
however,
that if
any person referred to in clause (i) or (ii) of this sentence thereafter
becomes
the beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend or similar
transaction), then a “Change in Control” will have occurred for purposes of
clause (c).
9.
Term; Amendment of Plan
The
Board
may discontinue the Plan at any time and may amend it from time to time.
No
amendment or discontinuation of the Plan shall adversely affect any outstanding
award without the Participant’s written consent. Amendments may be made without
stockholder approval except as required to satisfy applicable law or stock
exchange requirements.
10.
Effective Date
The
Plan
is in accordance with a Resolution of the Board duly adopted and approved
by
unanimous written consent on September 17, 1998 (the “Effective Date”) and a
Resolution of Stockholders on May 13, 1999 and amended by Resolutions of
Stockholders on May 11, 2000 and May 17, 2001 and by a Resolution of the
Board
on October 6, 2006.
11.
New York State Law
The
Terms
of the Plan shall be governed by the laws of the State of New York.
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x
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PLEASE
MARK VOTES
AS
IN THIS EXAMPLE
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PROXY
COGNITRONICS
CORPORATION
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For
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With-
hold
Authority
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For
All
Except
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PROXY
SOLICITED ON BEHALF OF
THE
BOARD OF DIRECTORS
The
undersigned hereby appoints R. C. Fleming and M. G. Mitchell
as Proxies,
each with the power to appoint his substitute, and hereby
authorizes them
to represent and to vote as designated hereon all shares
of Common Stock
of Cognitronics Corporation held of record by the undersigned
on October
30, 2006 at the Annual Meeting of Stockholders to be held
at the Best
Western Royal Plaza Hotel, 181 Boston Post Road W, Marlborough,
Massachusetts, on December 14, 2006 at 10:00 a.m., and any
adjournments
thereof.
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1.
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ELECTION
OF DIRECTORS
Nominees:
Robert C. Fleming, W. A. Merritt,
Michael
G. Mitchell, Robert H. Scott,
W.
J. Stuart and John E. Sweeney
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¨
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¨
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¨
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INSTRUCTION:
To withhold authority to vote for any individual nominee,
mark “For All
Except” and write that nominee’s name in the space provided
below.
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This Proxy when properly executed will be executed in the
manner directed
herein by the undersigned stockholder. If no direction is made,
this Proxy will be voted FOR Proposals 1, 2, 3, 4, 5, 6 and
7.
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2.
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TO
APPROVE THE REINCORPORATION OF THE COMPANY INTO THE STATE
OF DELAWARE
through a merger with a newly formed, wholly-owned Delaware
subsidiary and
the terms of the definitive agreements related thereto.
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For
¨
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Against
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Abstain
¨
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3.
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TO
AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION to change the Company's
name from “Cognitronics Corporation” to “ThinkEngine Networks,
Inc.”
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¨
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¨
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¨
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4.
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TO
APPROVE THE COMPANY'S 1990 STOCK OPTION PLAN, as amended,
including an
increase in the number of shares reserved for issuance thereunder
by
550,000.
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¨
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¨
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¨
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For
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Against
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Abstain
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5.
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TO
APPROVE THE COMPANY'S RESTRICTED STOCK PLAN, as amended,
including an
increase in the number of shares reserved for issuance thereunder
by
300,000.
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¨
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¨
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¨
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6.
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TO
APPROVE THE COMPANY'S DIRECTORS’ STOCK OPTION PLAN, as amended, including
an increase in the number of shares reserved for issuance
thereunder by
150,000.
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¨
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¨
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¨
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Please
be sure to sign and date
this
Proxy in the box below.
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Date
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7.
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TO
RATIFY THE SELECTION Of CARLIN, CHARRON & ROSEN, LLP, as independent
auditors of the Company.
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¨
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¨
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¨
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Stockholder
sign
above
Co-holder
(if any) sign above
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8.
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In
their discretion, the Proxies are authorized to vote such
other business
as may properly come before the meeting, including any adjournments
thereof.
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