PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
Friday, November 8, 2019
The Annual Meeting of Stockholders of Legacy Housing Corporation ("Legacy" or the "Company") will be held on Friday, November 8, 2019, at our offices
located at 1600 Airport Freeway, Suite 100, Bedford, Texas 76022, at 9:00 a.m., local time.
Our Board of Directors is soliciting your proxy to vote your shares of common stock at the annual meeting or any adjournments of that meeting. This proxy statement, which was prepared by
our management for the Board of Directors, contains information about the matters to be considered at the meeting or any adjournments or postponements of the meeting. All proxies will be voted in
accordance with the instructions they contain. If you do not specify your voting instructions on the proxy you submit for the meeting, it will be voted in accordance with the recommendation of the
Board of Directors. You may revoke your proxy at any time before it is exercised at the meeting by giving our Secretary written notice to that effect. This proxy statement and our annual report are
first being sent to stockholders on or about October 2, 2019.
ABOUT THE MEETING
What is being considered at the annual meeting?
You will be voting for:
-
-
the election of five directors for a term of one year or until their successors are elected and qualified;
-
-
the ratification of the appointment of BKD, LLP as our auditors for 2019; and
-
-
the approval of the reincorporation of the Company from the state of Delaware to the state of Texas.
In
addition, our management will report on our performance and respond to your questions.
The
Board of Directors does not intend to present to the meeting any matters not referred to in the form of proxy. If any proposal not set forth in this proxy statement should be
presented for action at the meeting, and is a matter which should come before the meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in
accordance with the judgment of the persons voting them.
How many votes must be present to hold the meeting?
Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by mail. In
order for us to conduct our meeting, a majority of our outstanding shares as of September 13, 2019, the record date, must be present at the meeting, in person or by proxy. This is referred to
as a quorum. On September 13, 2019, we had 24,722,936 shares issued and outstanding.
1
Table of Contents
Who can vote at the meeting?
You may vote if you owned common stock as of the close of business on September 13, 2019. Each share of stock is entitled to one vote.
Who is being nominated for director?
The only director candidates nominated for election at the annual meeting are Curtis D. Hodgson, Kenneth E. Shipley, Mark E. Bennett, John A.
Isakson and Stephen L. Crawford. The only prospective Board member who is not already a member of the Board is Mr. Crawford, who is proposed to replace Philip T. Blazek, who is not standing for
reelection.
What should I do if I receive more than one proxy card or other set of proxy materials from the
Company?
If you hold your shares in multiple accounts or registrations, or in both registered and street name, you will receive a proxy card for each
account. Please sign, date and return all proxy cards you receive from the Company. Only your latest dated proxy for each account will be voted. We recommend that you contact your broker and/or our
transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Continental Stock Transfer & Trust Company, tel.: (212) 509-4000.
How do I vote?
If you are a record holder of shares of common stock, you can vote in two ways:
-
1.
-
By Mail: If you received your proxy materials by mail, complete and sign your proxy card or voting
instruction form and mail it in the enclosed postage prepaid envelope we provided so that it is received by November 7, 2019, one day before the annual meeting, to be sure it is received in
time to count.
-
2.
-
In Person at the Meeting: If you attend the annual meeting, you may deliver your completed proxy card in
person or you may vote by completing a ballot, which we will provide to you at the annual meeting.
Can I vote if my shares are held in "street name"?
If the shares you own are held in "street name" by a brokerage firm, your brokerage firm, as the record holder of your shares, is required to
vote your shares according to your instructions. In order to vote your shares, you will need to follow the directions your brokerage firm provides you. Many brokers also offer the option of voting
over the Internet or by telephone, instructions for which would be provided by your brokerage firm on your vote instruction form.
Will my shares be voted if I do not provide my proxy?
Under applicable rules, if you do not give instructions to your brokerage firm, it will still be able to vote your shares with respect to
certain "discretionary" items, but it will not be allowed to vote your shares with respect to certain "non-discretionary" items. The ratification of BKD, LLP as our independent registered
public accounting firm is considered to be a discretionary item under applicable rules and your brokerage firm will be able to vote on that item even if it does not receive instructions from you, so
long as it holds your shares in its name. The remaining items of business at the annual meeting are "non-discretionary" and if you do not instruct your broker how to vote with respect to such
proposals, your broker may not vote with respect to these proposals and those votes will be counted as "broker non-votes." "Broker non-votes" are shares that are held in "street name" by a bank or
brokerage firm that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular matter. Please see "What vote is required to approve each of the
2
Table of Contents
matters
to be considered at the meeting?" for information regarding the vote required to approve the matters being considered at the annual meeting and the treatment of broker non-votes.
If
you hold your shares directly in your own name, they will not be voted if you do not provide a proxy.
If
your shares are held in street name, you must bring an account statement or letter from your bank or brokerage firm showing that you are the beneficial owner of the shares as of the
September 13, 2019 record date in order to be admitted to the meeting on November 8, 2019. To be able to vote your shares held in street name at the meeting, you will need to obtain a
proxy card from the holder of record.
Can I change my mind after I vote?
Yes, you may revoke your proxy and change your vote at any time before the polls close at the meeting. You can do this by (1) signing
another proxy with a later date and returning it to us prior to the meeting or (2) voting again at the meeting.
What if I return my proxy card but do not include voting instructions?
Proxy cards that are signed and returned but do not include voting instructions will be voted "FOR" the election of the nominee directors
recommended by the Board of Directors,"FOR" the ratification of the appointment of BKD, LLP and "FOR" the reincorporation of the Company from Delaware to Texas.
What vote is required to approve each of the matters to be considered at the meeting?
Proposal 1: Election of Directors. In an uncontested election, Directors of the Company are elected by the affirmative vote of the
majority of the
shares of stock present in person or represented by proxy at a shareholders meeting having a quorum and entitled to vote on the subject matter. The election at the annual meeting will be uncontested.
You may vote either "FOR" or "AGAINST" for any one or more of the nominees. Under a majority of the votes standard, the shares voted "FOR" a nominee must exceed the number of shares voted "AGAINST"
that nominee. An abstention will have the same effect
as a vote "AGAINST" a nominee. If you do not instruct your broker how to vote with respect to this item, your broker may not vote your shares with respect to the election of
directors. Any shares not voted by a customer will be treated as broker non-votes, and broker non-votes will have no effect on the results of the election of directors.
Proposal 2: Ratification of Independent Registered Public Accounting Firm. To be approved, this proposal to ratify our selection of an
independent
registered public accounting firm must receive an affirmative vote from stockholders present in person or represented by proxy at the annual meeting representing a majority of the votes cast on the
proposal. Abstentions will have the same effect as a vote "AGAINST" this proposal. For this proposal, brokerage firms have authority to vote shares of their customers that are held in "street name."
If a broker does not exercise this authority, it will result in a broker non-vote. Broker non-votes will have no effect on the outcome of this proposal.
Proposal 3: Reincorporation of Company in Texas. Approval of this proposal requires the affirmative vote of a majority of the voting
power of the
outstanding Common Stock entitled to vote on this proposal. Abstentions and broker non-votes will be counted as a vote "AGAINST" this proposal.
How will votes be counted?
Each share of common stock will be counted as one vote according to the instructions contained on a proper proxy card, whether submitted in
person, by mail, internet, on a ballot voted in person at the meeting, or in accordance with the instructions provided by your broker. With respect to all
3
Table of Contents
proposals,
shares will not be voted in favor of the matter, and will not be counted as voting on the matter, if they are broker non-votes. Assuming the presence of a quorum, abstentions and broker
non-votes for a particular proposal will not be counted as votes cast to determine the outcome of a particular proposal.
Who will count the votes?
Representatives of Continental Stock Transfer & Trust Company, the transfer agent for our common stock ("Common Stock") will tabulate the
votes.
Will my vote be kept confidential?
Yes, your vote will be kept confidential and we will not disclose your vote, unless (1) we are required to do so by law (including in
connection with the pursuit or defense of a legal or administrative action or proceeding) or (2) there is a contested election for the Board of Directors.
How does the Board of Directors recommend that I vote on the proposals?
The Board of Directors recommends that you vote on the proxy card:
"FOR" the election of each of the five nominees, Curtis D. Hodgson, Kenneth E. Shipley, Mark E. Bennett, John A. Isakson and Stephen
Crawford, each for a term of one year (Proposal 1);
"FOR" the ratification of the selection of BKD, LLP as our independent registered public accounting firm for the 2019 fiscal year
(Proposal 2); and
"FOR" the reincorporation of the Company from the state of Delaware to the state of Texas (Proposal 3).
Where can I find the voting results?
We will report the voting results in a current report on Form 8-K within four business days after the conclusion of our annual meeting.
How and when may I submit a stockholder proposal, including a stockholder nomination for director, for
the 2020 Annual Meeting?
If you are interested in submitting a proposal for inclusion in our proxy statement for the 2020 Annual Meeting, you need to follow the
procedures outlined in Rule 14a-8 of the Securities Exchange Act of 1934, or the Exchange Act. To be eligible for inclusion, we must receive your stockholder proposal for our proxy statement
for the 2020 Annual Meeting of Stockholders at our principal executive offices in Bedford, Texas no earlier than July 11, 2020, and no later than August 10, 2020.
The
stockholder's notice to the Secretary must set forth (1) as to each person whom the stockholder proposes to nominate for election as a director (a) his/her name, age,
business address and residence address, (b) his/her principal occupation and employment, (c) the number of shares of Common Stock of Legacy which are owned beneficially or of record by
him/her as well as, among other things, any derivative or synthetic instrument, convertible security, put, option, stock appreciation right or similar rights; (d) a description of any
agreement, arrangement or understanding; and (e) any other information relating to the nominee 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; (2) as to any
other business that the stockholder proposes to bring before the meeting, (a) a brief description of the business desired to be brought before the meeting, (b) the text of the proposal
or business (including the text of any resolutions proposed for consideration and, in the event that such
4
Table of Contents
business
includes a proposal to amend the Bylaws, the language of the proposed amendment), (c) the reasons for conducting such business at the meeting, and (d) any material interest in
such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (3) as to the stockholder giving the notice (a) his/her name and record
address and (b) the number of shares of
Legacy's Common Stock that are owned beneficially or of record by him/her. The notice delivered by a stockholder 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. The stockholder must be a stockholder of record on the date on which he/she gives the notice described above and on the record date for the determination
of stockholders entitled to vote at the meeting.
If
notice of any stockholder proposal is received before July 11, 2020, or after August 10, 2020, then the notice will be considered untimely and we are not required to
present such proposal at the 2020 Annual Meeting.
These
requirements are separate from and in addition to the requirements of the Securities and Exchange Commission (the "SEC") that a stockholder must meet in order to have a stockholder
proposal included in our proxy statement.
Any
proposals, nominations or notices should be sent to:
What are the costs of soliciting these proxies and who will pay?
We will bear the costs of mailing the proxy statement and solicitation of proxies, which we estimate to be approximately $4,000. In addition to
solicitations by mail, our directors, officers and regular employees may solicit proxies by telephone, email and personal communication. No additional remuneration will be paid to any director,
officer or employee of the Company for such solicitation. We will request brokers, custodians and fiduciaries to forward proxy soliciting material to the owners of shares of our Common Stock that they
hold in their names. To the extent necessary in order to assure sufficient representation, our officers and regular employees may request the return of proxies personally, by telephone or email. The
extent to which this will be necessary depends entirely upon how promptly proxies are received, and stockholders are urged to send in their proxies without delay.
5
Table of Contents
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports.
This means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in your household unless we have received contrary instructions from one or more
stockholders. We will promptly deliver a separate copy of either document to you if you contact us at the following address or telephone number: Legacy Housing Corporation, 1600 Airport Freeway,
Suite 100, Bedford, Texas 76022, tel.: (817) 799-4900. If you want to receive separate copies of the proxy statement or annual report in the future, or if you are receiving multiple
copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address.
6
Table of Contents
PROPOSAL 3: REINCORPORATION OF THE COMPANY FROM THE STATE OF DELAWARE TO THE STATE OF TEXAS
General
The Board has unanimously approved and recommends that the stockholders approve the reincorporation of the Company from the state of Delaware to
the state of Texas (the "Reincorporation" or the "Reincorporation Proposal"). This approval and recommendation has been provided by the entire Board and by the directors unaffiliated with Legacy.
Upon
the Reincorporation:
-
(1)
-
The
affairs of the Company will cease to be governed by Delaware corporation laws and will become subject to Texas corporation laws. See "Comparison of Shareholder
Rights Before and After the Reincorporation" below.
-
(2)
-
The
legal existence of the Company as a separate Delaware corporation ("Legacy Delaware") will cease and Legacy Texas will continue with all of the rights, titles
and interests of Legacy Delaware, will continue with the same officers and directors of Legacy Delaware, the rights of creditors of Legacy Delaware will continue to exist as creditors of Legacy Texas,
and the ownership interest of the stockholders of Legacy Delaware will be converted to an identical interest in Legacy Texas.
-
(3)
-
All
of the Company's employee benefit and incentive plans and arrangements will be assumed by Legacy Texas upon the same terms and subject to the same conditions set
forth in such plans and arrangements as before the Reincorporation.
-
(4)
-
Each
outstanding share of our Common Stock will automatically be converted into one share of common stock, par value $0.04 per share, of Legacy Texas ("Legacy Texas
Common Stock").
-
(5)
-
Each
outstanding option to purchase our Common Stock will automatically be converted into an option to purchase an identical number of shares of Legacy Texas Common
Stock at the same option price per share and upon the same terms and subject to the same conditions set forth in the applicable plan and related award agreement.
-
(6)
-
Legacy
Texas Common Stock will become issuable upon the vesting of Legacy Delaware's existing restricted shares and awards of restricted stock units upon the same
terms and subject to the same conditions set forth in the applicable plan and related award agreement.
-
(7)
-
Our
ticker symbol "LEGH" will remain unchanged as a result of the Reincorporation.
The
Reincorporation will become effective upon filing with the Secretary of State of each of Delaware and Texas, which filings are expected to be made as soon as practicable after
stockholder adoption of the Reincorporation. Attached hereto as exhibits are drafts of our proposed Texas certificate of formation and bylaws. No regulatory approval (other than various filings with
Secretary of State of Texas and Delaware discussed above) is required to effect the Reincorporation.
Reasons for the Reincorporation
The Company's headquarters and its principal operations, management and employees are located in Texas, meaning that the Company's status as a
Delaware corporation physically located in Texas requires the Company to comply with reporting and tax obligations in both Delaware and Texas. For the most recent franchise tax period, the Company
paid approximately $200,000 in franchise taxes to the state of Delaware. The Company is obligated to pay the same amount of Texas franchise tax regardless of where it is incorporated, and the
Company's Texas tax obligations will not change as a
11
Table of Contents
result
of the Reincorporation. Accordingly, the Reincorporation will result in a net savings by the Company of approximately $200,000 annually.
The
Company does not conduct any operations in Delaware and thus does not believe it receives any material financial benefit as a result of being incorporated in Delaware. The Company
also considered its relatively small capitalization and its desire to cut unnecessary costs. If the Reincorporation Proposal is implemented, Legacy Texas would benefit from a recurring reduction in
franchise taxes compared to Legacy Delaware because Legacy Texas would no longer have a franchise tax obligation in Delaware.
Furthermore,
incorporation in Delaware subjects the Company to the jurisdiction and venue of federal and state courts in Delaware in possible litigation, even though the Company has no
management, employees or operations there. Delaware courts may require the retention of Delaware counsel in Delaware proceedings in addition to the Company's Texas counsel. The Company believes the
risk of
this potential expense and other hurdles of litigation conducted far from its Texas offices is unwarranted.
The
Company believes that the Texas legislature has demonstrated a willingness to maintain modern and effective corporation laws to meet changing business needs. While some regard
Delaware corporate law as the most extensive and well-defined body of corporate law in the United States, the Company does not believe there is significant risk to the Company or its shareholders if
the Company is governed under Texas corporate law rather than Delaware corporate law. While there are some advantages under Delaware corporate law to being a Delaware corporation, there are also
advantages under Texas corporate law to being a Texas corporation. The Company believes that, on balance, the impact on the Company of implementing the Reincorporation Proposal from a corporate law
perspective will be positive to the Company and its shareholders.
We
have provided a discussion of differences between the Delaware and Texas corporation laws below under the heading "Comparison of Shareholder Rights Before and After the
Reincorporation."
No Change in Business, Jobs, or Physical Location
The Reincorporation Proposal will effect a change in the legal domicile of the Company and other changes of a legal nature, the most significant
of which are described below under the heading "Comparison of Shareholder Rights Before and After the Reincorporation." The Reincorporation Proposal will not result in any change in headquarters,
business, jobs, management, location of any of our offices or facilities, number of employees, assets, liabilities or net worth (other than as a result of the costs incident to the Reincorporation and
the Delaware franchise tax savings discussed above). Our management, including all directors and officers, will remain the same in connection with the Reincorporation and will have identical positions
with Legacy Texas. To the extent the Reincorporation will require the consent or waiver of a third party (for example, the consent of the Company's primary lender), the Company will use commercially
reasonable efforts to obtain such consent or waiver before completing the Reincorporation. If a material consent cannot be obtained, the Company will not proceed with the Reincorporation. The
Reincorporation will not otherwise affect any of the Company's material contracts with any third parties and the Company's rights and obligations under such material contractual arrangements will
continue as rights and obligations of Legacy Texas as a Texas corporation.
Authorized Shares of Common Stock
If the Reincorporation Proposal is approved by the Company's stockholders, then the number of the Company's authorized shares before and after
the Reincorporation will be the same.
12
Table of Contents
Comparison of Shareholder Rights Before and After the Reincorporation
The Reincorporation will effect some changes in the rights of the Company's shareholders. This is as a result of differences between the Texas
Business Organizations Code ("TBOC") and the Delaware General Corporation Law ("DGCL"), as well as differences between each of the Company's charter documents before and after the
Reincorporation. The proposed Texas bylaws will contain a similar provision regarding stockholder proposals as is set forth under "How and when may I submit a stockholder proposal, including a
stockholder nomination for director, for the 2020 Annual Meeting?"
Summarized
below are the most significant differences between the rights of the Company's shareholders before and after the Reincorporation. The differences between the current Delaware
Certificate of Incorporation and bylaws and the proposed Texas certificate of formation and bylaws, as relevant to such rights, are noted within this summary. The summary below is not intended to be
relied upon as an exhaustive list of all the differences or a complete description of the differences resulting from the Reincorporation. Furthermore, this summary is qualified in its entirety by
reference to the DGCL, the Company's existing Delaware Certificate of Incorporation and bylaws, the TBOC, and the Company's proposed Texas certificate of formation and bylaws.
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Approval of Mergers
|
|
Under Delaware law, any merger with a third party must be approved by a majority of the corporation's shareholders.
The existing Delaware Certificate of Incorporation and
bylaws do not set forth a different approval standard.
|
|
Under Texas law, any merger with a third party requires approval by two-thirds of the outstanding shares of the Texas corporation unless a different threshold, not less than a majority, is specified in the certificate of formation.
The proposed Texas certificate of formation overrides the default statutory vote requirement and requires the approval of such transactions by affirmative vote of the holders of a
majority of the outstanding shares entitled to vote.
|
13
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Appraisal Rights
|
|
Under Delaware law, stockholders have no appraisal rights in the event of a merger or consolidation of the corporation if the stock of the Delaware corporation is listed on a national securities exchange (the Company currently meets this condition
by virtue of its listing on the Nasdaq market) or if such stock is held of record by more than 2,000 stockholders. Stockholders of a Delaware parent corporation have no appraisal rights in a merger between that parent corporation and a subsidiary
corporation wholly owned by that parent corporation. Even if appraisal rights would not otherwise be available under Delaware law in the cases described above, stockholders would still have appraisal rights if they are required by the terms of the
agreement of merger and consolidation to accept for their stock anything other than:
(1) shares of stock;
(A) of the surviving corporation; or
(B) of any other corporation which shares at the effective date of the merger or consolidation will be either listed on a
national securities exchange or held of record by more than 2,000 stockholders;
(2) cash in lieu of fractional shares; or
(3) a combination of such shares and such cash.
Under Delaware law, any corporation may provide in its certificate
of incorporation that appraisal rights will also be available as a result of an amendment to its certificate of incorporation, any merger or consolidation involving such corporation, or the sale of all or substantially all of the assets of the
corporation.
|
|
Except for the limited classes of mergers, consolidations, sales and asset dispositions for which no shareholder approval is required under Texas law, shareholders of Texas corporations with voting rights have dissenters' rights in the event of a
merger, consolidation, conversion, sale, lease, exchange or other disposition of all, or substantially all, the property and assets of the corporation. However, a shareholder of a Texas corporation has no dissenters' rights with respect to any plan
or merger or conversion in which there is a single surviving or new domestic or foreign corporation, or with respect to any plan of exchange if:
(1) the ownership interest,
or a depository receipt in respect of the ownership interest, held by the owner is part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are, on the record date set for purposes of
determining which owners are entitled to vote on the plan of merger, conversion, or exchange, as appropriate:
(A) listed on a national securities exchange (the Company
currently meets this condition by virtue of its listing on the Nasdaq market); or
(B) held of record by at least 2,000 owners;
(2) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner's ownership interest any consideration that is different from
the consideration to be provided to any other holder of an ownership interest of the same class or series as the ownership interest held by the owner, other than cash instead of fractional shares or interests the owner would otherwise be entitled to
receive; and
|
14
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
|
|
The existing Delaware Certificate of Incorporation and bylaws have no provisions with respect to appraisal rights.
|
|
(3) the owner is not required by the terms of the plan of merger, conversion, or exchange, as appropriate, to accept for the owner's ownership interest any consideration other than:
(A) ownership interests, or depository receipts in respect of ownership interests, of another entity of the same general organizational type that, immediately after the effective date of the merger, conversion, or exchange, as
appropriate, will be part of a class or series of ownership interests, or depository receipts in respect of ownership interests, that are:
(i) listed on a national
securities exchange or authorized for listing on the exchange on official notice of issuance;
(ii) held of record by at least 2,000 owners;
(B) cash instead of fractional ownership interests the owner would otherwise be entitled to receive; or
(C) any
combination of the ownership interests and cash above.
|
Shareholder Consent to Action Without a Meeting
|
|
Under Delaware law, unless otherwise provided in the Certificate of Incorporation, any action that can be taken at a meeting of the stockholders can be taken without such meeting if written consent thereto is signed by the holders of outstanding
stock having the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were presented and voted.
The
existing Delaware bylaws and Certificate of Incorporation prohibits stockholder action by written consent.
|
|
Under Texas law, any action that may be taken at a meeting of the shareholders may be taken without a meeting if written consent thereto is signed by all the holders of shares entitled to vote on that action. The certificate of formation of a Texas
corporation may provide that action by written consent in lieu of a meeting may be taken by the holders of that number of votes which would be required to take the action which is the subject of the consent at a meeting at which each of the shares
entitled to vote were present and voted.
The proposed Texas certificate of formation and bylaws mirrors the existing Delaware bylaws and Certificate of
Incorporation.
|
15
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Procedures for Filling Vacant Directorships
|
|
Under Delaware law, unless the certificate of incorporation or bylaws provide otherwise, 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, although less than a quorum, or by a sole remaining director.
The existing Delaware bylaws and Certificate of Incorporation require the vote of a majority of the
directors then in office, although less than a quorum, to fill vacancies.
|
|
Under Texas law, any vacancy occurring in the board of directors may, unless otherwise authorized by a corporation's certificate of formation, fill a vacancy or a newly created vacancy in a director position only: (i) by the affirmative vote of
the majority of the directors then in office, even if less than a quorum, (ii) by the sole remaining director, or (iii) by the affirmative vote of the shareholders.
A directorship to be filled because of an increase in the number of directors may be filled by the shareholders or by the board of directors for a term of office continuing only until the next election of one or more directors by the
shareholders. The board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders.
The
proposed Texas bylaws require the affirmative vote of the majority of directors then in office, even if less than a quorum, to fill any vacancy in the board of directors.
|
Right to Call Meetings
|
|
Delaware law provides that special meetings of the stockholders may be called by the board of directors or such other persons as are authorized in the certificate of incorporation or bylaws.
The existing Delaware bylaws and Certificate of Incorporation provide that special meetings of the stockholders may be called the Board, the Chairman of the Board, or the CEO at any time, and
are required to be called upon the written request of the holders of at least 331/3% of the Company's outstanding shares entitled to vote.
|
|
Unlike in Delaware, under Texas law, shareholders are guaranteed the right to call special meetings. Unless otherwise specified in the corporation's certificate of formation, holders of not less than 10% of all of the
shares entitled to vote at the proposed meeting have the right to call a special shareholders' meeting. The certificate of formation may allow for special meetings to be called by a number of shares greater than or less than 10%, but it may not set
the required number of shares above 50%. The CEO, board of directors, or any other person authorized to call special meetings by the certificate of formation or bylaws of the corporation may also call special shareholders' meetings.
|
|
|
|
|
The proposed Texas bylaws provide that special meetings of the stockholders may be called by two or more members of the Board of Directors, the Chairman of the Board, or the CEO at any time, and are required to be
called upon the written request of the holders of at least 50% of the Company's outstanding shares entitled to vote.
|
16
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Voting by Proxy
|
|
Under Delaware law, a stockholder may authorize another person or persons to act for such stockholder by proxy. A proxy is valid for three years from its date unless otherwise provided in the proxy.
|
|
Under Texas law, a shareholder may authorize another person or persons to act for such shareholder by proxy. A proxy is only valid for eleven months from its date unless otherwise provided in the proxy.
|
Charter Amendments
|
|
Delaware law provides that amendments to the certificate of incorporation must be approved by the holders of a majority of the corporation's stock entitled to vote, unless the certificate of incorporation provides for a greater number.
The existing Delaware Certificate of Incorporation provides that amendments to the Certificate of Incorporation which are inconsistent with certain provisions such as the
indemnification provision of the Certificate of Incorporation must be approved by an affirmative vote of the holders of at least 662/3% of the outstanding shares entitled to vote.
|
|
Under Texas law, an amendment to the certificate of formation requires the approval of the holders of at least two-thirds of the outstanding shares of the corporation, unless a different threshold, not less than a majority, is specified in the
certificate of formation.
The proposed Texas certificate of formation does not alter the default requirements.
|
Bylaw Amendments
|
|
Under Delaware law, stockholders of a corporation entitled to vote have the right to amend, repeal or adopt the bylaws. If the corporation's certificate of incorporation so provides, the corporation's board of directors may also have the right to
amend, repeal or adopt the bylaws.
The existing Delaware bylaws and Certificate of Incorporation provide that the bylaws may be amended, repealed, altered or adopted by the
Board of Directors. In addition, the bylaws provide that they may be amended, repealed or altered by a vote of the majority of the shares entitled to vote; provided, however, that certain provisions of
the bylaws may only be amended by the affirmative vote of at least 662/3% of the outstanding shares entitled to vote.
|
|
Generally, under Texas law, the board of directors may amend, repeal, or adopt a corporation's bylaws. However, a corporation's certificate of formation may reserve this power exclusively to a majority of the shareholders. Similarly, the
shareholders, in amending, repealing, or adopting a particular bylaw, may expressly provide that the board of directors may not amend, readopt, or repeal that bylaw. Texas case law permits the corporation to increase the required threshold of
shareholders necessary to amend the bylaws.
The proposed Texas certificate of formation allows amendments to the bylaws by the vote of the members of the board of directors
or by two-thirds of the holders of the outstanding shares entitled to vote.
|
17
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Removal of Directors
|
|
Under Delaware law, subject to the exceptions discussed below, a majority of stockholders then entitled to vote at an election of directors may remove a director with or without cause.
If the board of directors of a Delaware corporation is classified (i.e., elected for staggered terms), a director may only be removed for cause, unless the corporation's certificate of incorporation provides otherwise.
If a corporation uses cumulative voting and less than the entire board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the entire board of directors. Where a corporation's certificate of incorporation provides that separate classes or series of stockholders are entitled, as such a class or
series, to elect separate directors, in calculating the sufficiency of votes for removal of such a director, only the votes of the holders of such a class or series are considered.
The existing Delaware bylaws allow the removal of directors with or without cause by the affirmative vote of a majority of outstanding shares entitled to vote.
|
|
Under Texas law, subject to the exceptions discussed below or as otherwise provided by the certificate of formation or bylaws of a corporation, the shareholders may remove a director, with or without cause, by a vote of the holders of a majority of
the shares entitled to vote at an election of the directors.
If the corporation's directors serve staggered terms, a director may not be removed except for cause unless the
certificate of formation provides otherwise.
If the certificate of formation permits cumulative voting and less than the entire board is to be removed, a director may not be
removed if the votes cast against the removal would be sufficient to elect him or her if cumulatively voted at an election of the entire board of directors. Where a corporation's certificate of formation provides that separate classes or series of
shareholders are entitled, as such a class or series, to elect separate directors, in calculating the sufficiency of votes for removal of such a director, only the votes of the holders of such a class or series are considered.
The proposed Texas bylaws are consistent with the existing Delaware certificate of incorporation and bylaws regarding the removal of directors.
|
Number of Directors
|
|
Delaware law provides that the number of directors will be fixed by, or in the manner provided in, the bylaws, unless the certificate of incorporation fixes the number of directors, in which case the number of directors may be changed only by
amendment of the certificate of incorporation.
The existing Delaware Certificate of Incorporation provide that the number of directors will be determined by the Board of
Directors.
|
|
The TBOC provides that, after specifying the initial number of directors in the certificate of formation, the number of directors will be set by or in the manner provided in the certificate of formation or the bylaws.
The proposed Texas bylaws provide that the size of the board will be determined by the board of directors.
|
18
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Inspection of Books and Records
|
|
Under Delaware law, any stockholder may inspect the corporation's books and records upon written demand under oath stating the purpose of the inspection. If the corporation refuses to permit inspection or does not reply
to the demand within five business days after the demand has been made, the stockholder may apply to the Court of Chancery for an order to compel such inspection.
|
|
Under Texas law, a shareholder may, upon written demand stating a proper purpose, inspect the books and records of a corporation if such shareholder holds at least 5% of the outstanding shares of stock of the corporation
or has been a holder of shares for at least six months prior to such demand.
|
Distributions and Dividends
|
|
Under Delaware law, a corporation may, subject to any restrictions contained in its certificate of incorporation, pay dividends out of surplus and, if there is not surplus, out of net profits for the current and/or the preceding fiscal year, unless
the capital of the corporation is less than the capital represented by issued and outstanding stock having preferences on asset distributions.
The existing Delaware
Certificate of Incorporation provides that dividends may be declared as provided by law.
|
|
Under Texas law, a distribution is defined as a transfer of cash or other property (except a corporation's own shares or rights to acquire its shares), or an issuance of debt, by a corporation to its shareholders in the form of: (i) a dividend
on any class or series of the corporation's outstanding shares, (ii) a purchase or redemption, directly or indirectly, of its shares, or (iii) a payment in liquidation of all or a portion of its assets.
Under Texas law, a corporation may not make a distribution if such distribution violates its certificate of formation or, unless the corporation is in receivership, if it either renders the
corporation unable to pay its debts as they become due in the course of its business or affairs, or exceeds, depending on the type of distribution, either the net assets or the surplus of the corporation.
The proposed Texas bylaws provide that dividends may be declared as provided by law.
|
Stock Redemption and Repurchase
|
|
Under Delaware law, a corporation may purchase or redeem shares of any class except when its capital is impaired or would be impaired by such purchase or redemption. A corporation may, however, purchase or redeem out
of capital, shares that are entitled upon any distribution of its assets to a preference over another class or series of its stock, or, if no shares entitled to such a preference are outstanding, any of its own shares, if such shares are to be
retired and the capital reduced.
|
|
Under Texas law, the purchase or redemption by a corporation of its shares constitutes a distribution. Accordingly, any such purchase or redemption is subject to the restrictions on distributions discussed
above.
|
19
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Indemnification of Directors and Officers
|
|
The DGCL permits a corporation to indemnify present or former directors, officers, employees and agents and persons serving at the request of the corporation as officers, directors, employees or agents of another entity or employee benefit plan
against expenses (including attorneys' fees), judgments, fines, excise taxes and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding, other than an action by or in the right of
the corporation, to which such indemnifiable person may be a party, provided such indemnifiable person shall have acted in good faith and in a manner such person shall have reasonably believed to be in or not opposed to the best interests of the
corporation, and in the case of a criminal proceeding, such person had no reasonable cause to believe such person's conduct was unlawful. The termination of an action, suit or proceeding by judgment, order, settlement, conviction or plea of nolo
contendere does not, of itself, create a presumption that the applicable standard of conduct has not been met.
In connection with an action by or in the right of the
corporation against an indemnifiable person, the corporation has the power to indemnify such person for expenses (including attorneys' fees) actually and reasonably incurred in connection with such suit (a) if such person acted in good faith and
in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, but (b) if such person is found liable to the corporation, only if ordered by a court of law. The DGCL does not authorize
indemnification of judgments, fines, excise taxes or amounts paid in settlement in derivative actions.
The DGCL provides that such section is not exclusive of any other
indemnification rights, which may be granted by a corporation to its indemnifiable persons, but under Delaware law such person's conduct must generally meet the standard of conduct required by the DGCL.
|
|
Texas law permits a corporation to indemnify a director or former director against judgments and expenses reasonably and actually incurred by the person in connection with a proceeding if the person: (i) acted in good faith, (ii)
reasonably believed, in the case of conduct in the person's official capacity, that the person's conduct was in the corporation's best interests, and otherwise, that the person's conduct was not opposed to the corporation's best interests, and
(iii) in the case of a criminal proceeding, did not have a reasonable cause to believe the person's conduct was unlawful.
If, however, the person is found liable to
the corporation, or is found liable on the basis he received an improper personal benefit, then indemnification under Texas law is limited to the reimbursement of reasonable expenses actually incurred and no indemnification will be available if the
person is found liable for: (i) willful or intentional misconduct in the performance of the person's duty to the corporation, (ii) breach of the person's duty of loyalty owed to the enterprise, or (iii) an act or omission not committed
in good faith that constitutes a breach of a duty owed by the person to the corporation.
The proposed Texas bylaws provide for indemnification of directors and officers
(including advancement of expenses) to the fullest extent permitted by applicable law.
|
20
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
|
|
The existing Delaware Certificate of Incorporation and bylaws provide for indemnification of directors and officers (including advancement of expenses) to the fullest extent permitted by applicable law.
|
|
|
Mandatory Indemnification
|
|
Delaware law requires indemnification for expenses actually and reasonably incurred with respect to any claim, issue or matter on which the director is successful on the merits or otherwise in the defense of the
proceeding.
|
|
Under Texas law, indemnification by the corporation for reasonable expenses actually incurred is mandatory only if the director is wholly successful on the merits or otherwise in the defense of the
proceeding.
|
Insurance
|
|
Delaware law allows a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against such person and incurred by such person in
such a capacity or arising out of his status as such a person. This is so, regardless of whether the corporation would have the power to indemnify such person against that liability.
Under Delaware law, a corporation may also establish and maintain arrangements, other than insurance, to protect such persons, including a trust fund or surety arrangement.
|
|
Texas law is substantially the same as Delaware law for this issue.
|
Persons Covered
|
|
Delaware law provides the same indemnification rights to officers, employees, and agents that it provides for directors.
|
|
Texas law expressly and separately addresses the indemnification of officers, employees, and agents. The corporation may indemnify and advance expenses to an officer, employee, or agent as provided by the
corporation's governing documents, general or specific action of the board of directors, resolution of the shareholders, contract, or common law. The corporation must indemnify an officer to the same extent as a director. The corporation may pay or
reimburse, in advance of the final disposition of a proceeding and on terms the corporation considers appropriate, reasonable expenses incurred by: (1) a former governing person or delegate who was, is, or is threatened to be made a respondent
in the proceeding; or (2) a present or former employee, agent, or officer who is not a governing person of the corporation and who was, is, or is threatened to be made a respondent in the proceeding. The procedure for indemnification under Texas
law summarized above need not be followed for officers, employees, or agents.
|
|
|
|
|
|
21
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Standard of Care
|
|
In general, directors are charged with the duty in their decision-making process and oversight responsibilities to act as would a reasonably prudent person in the conduct of such person's own affairs.
|
|
Texas law is substantially the same as Delaware law for this issue.
|
Limited Liability of Directors
|
|
Delaware law permits the adoption of a provision in the certificate of incorporation limiting or eliminating the monetary liability of a director to a corporation or its stockholders by reason of a director's breach of the fiduciary duty of care.
Delaware law does not, however, permit any limitation of the liability of a director for: (i) breaching the duty of loyalty to the corporation or its stockholders,
(ii) failing to act in good faith, (iii) engaging in intentional misconduct or a knowing violation of law, (iv) obtaining an improper personal benefit from the corporation, or (v) declaring an illegal dividend or approving an
illegal stock purchase or redemption.
The existing Delaware Certificate of Incorporation eliminates the monetary liability of a director to the fullest extent permitted by
applicable law.
|
|
Texas law permits a corporation to eliminate in its certificate of formation all monetary liability of a director to the corporation or its shareholders for conduct in the performance of such director's duties.
Texas law does not, however, permit any limitation of the liability of a director for: (i) a breach of the duty of loyalty to the corporation or its shareholders, (ii) an act or
omission not in good faith that constitutes a breach of duty of the person to the corporation or involves intentional misconduct or a knowing violation of law, (iii) a transaction from which the director obtains an improper benefit, or
(iv) a violation of applicable statutes which expressly provide for the liability of a director.
The proposed Texas certificate of formation eliminates the monetary
liability of a director to the fullest extent permitted by applicable law.
|
Fiduciary Duties of Directors
|
|
Delaware imposes duties of care and loyalty on directors of Delaware corporations subject to the business judgment rule, which provides a presumption that a director acted on an informed basis, in good faith, and in the honest belief that the action
taken was in the best interests of the corporation. Delaware imposes liability upon directors who willfully or recklessly disregard their duties as directors so as to constitute an utter failure to carry out their fiduciary duties.
Directors of a Delaware corporation owe fiduciary duties both to the stockholders and the corporation.
|
|
Texas imposes duties of loyalty, care, and obedience on directors of a Texas corporations, but will generally not, absent fraud, impose liability upon a non-interested director unless the action challenged is outside of the expressed purpose of the
corporation or inconsistent with an express limitation on authority.
Directors of a Texas corporation owe fiduciary duties only to the corporation.
|
Shareholder Rights Plans
|
|
Delaware courts have generally allowed the use of shareholder rights plans by a corporation if their adoption is reasonable in response to a reasonably identified threat posed.
|
|
Texas statutorily approves shareholder rights plans.
|
22
Table of Contents
|
|
|
|
|
|
|
Delaware
|
|
Texas
|
Considerations of Directors
|
|
Delaware does not have a statute stating what constituencies the board may consider when making decisions.
|
|
Texas corporate law includes statutory approval of directors considering both the long-term and short-term interests of the corporation and the shareholders.
|
Shareholder Actions
|
|
Delaware allows certain lawsuits to be brought against directors directly by shareholders, in some instances, without making a demand on the corporation's board. Generally, lawsuits are tried before a Delaware
chancellor without a jury.
|
|
Texas generally requires that lawsuits against directors be brought derivatively by the corporation only after making demand on the corporation's board setting out the contours of the demand. Texas law may, in certain
circumstances, such as in a proceeding determining liability of directors, allow for a jury trial.
|
Forum Selection
|
|
Delaware law permits corporations to include in their certificates of incorporation or bylaws a provision that confers exclusive jurisdiction on the courts of Delaware as to any internal corporate claims, which include derivative claims that are
based upon breach of duties of a director or shareholder in such capacity and other matters for which the DGCL confers jurisdiction upon the Delaware courts.
The existing
Delaware Certificate of Incorporation make this election regarding the Chancery Court's exclusive jurisdiction to the maximum extent allowable. However, this sole and exclusive forum provision does not apply in those instances where there is
exclusive federal jurisdiction, including but not limited to certain actions arising under the Securities Act or the Exchange Act.
|
|
Texas law does not have an authorizing statutory provision similar to the forum selection provision in the DGCL.
The proposed Texas bylaws mirror the Delaware Certificate
of Incorporation, except that they contain references to the TBOC and Texas law and provide that the exclusive forum shall be the United States District Court for the Northern District of Texas, or if that court lacks jurisdiction, state district
courts of Tarrant County, Texas. However, this sole and exclusive forum provision will not apply in those instances where there is exclusive federal jurisdiction, including but not limited to certain actions arising under the Securities Act or the
Exchange Act.
|
Stock and Equity Incentive Awards
At the effective time of the Reincorporation, each outstanding share of Common Stock of Legacy Delaware will automatically be converted into one
share of common stock of Legacy Texas. If you hold physical stock certificates, you do not have to exchange your existing stock certificates of the Company for stock certificates of the resulting
Texas corporation; however, after the Reincorporation, any shareholder desiring a new form of stock certificate may submit the existing stock certificate to Continental Stock Transfer, the Company's
transfer agent, for cancellation and obtain a new certificate by contacting Continental Stock Transfer at (212) 509-4000. Legacy Texas will assume all of the Company's obligations under the
Company's 2018 Incentive Compensation Plan. Each outstanding option to purchase shares of Common Stock under these plans will be converted into an option to purchase an equal number of shares of the
resulting Texas corporation's common stock on the same terms and conditions as in effect immediately prior to the Reincorporation. Each other stock award will be converted to an equivalent award with
the same terms issued by the Texas corporation.
23
Table of Contents
Federal Tax Consequences of the Reincorporation
We believe that for federal income tax purposes no gain or loss will be recognized by the Company, Legacy Texas, or the shareholders of the
Company who receive Legacy Texas Common Stock for their Company Common Stock in connection with the Reincorporation. The aggregate tax basis of Legacy Texas Common Stock received by a shareholder of
the Company as a result of the Reincorporation will be the same as the aggregate tax basis of the Company Common Stock converted into that Legacy Texas Common Stock held by that shareholder as a
capital asset at the time of the Reincorporation. Each shareholder's holding period of the Legacy Texas Common Stock received in the Reincorporation will include the holding period of the Company
Common Stock converted into that Legacy Texas Common Stock, provided the shares are held by such shareholder as a capital asset at the time of the Reincorporation.
This
proxy statement only discusses U.S. federal income tax consequences and has done so only for general information. It does not address all of the U.S. federal income tax consequences
that may be relevant to particular shareholders based upon individual circumstances or to shareholders who are subject to special rules, such as financial institutions, tax-exempt organizations,
insurance companies,
dealers in securities, shareholders who hold their stock through a partnership or as part of a straddle or other derivative arrangement, foreign holders or holders who acquired their shares as
compensation, whether through employee stock options or otherwise. This proxy statement does not address the tax consequences under state, local, or foreign laws. State, local or foreign income tax
consequences to shareholders may vary from the federal income tax consequences described above, and shareholders are urged to consult their own tax advisors as to the consequences to them of the
Reincorporation under all applicable tax laws.
This
discussion is based on the Tax Code, applicable Treasury Regulations, judicial authority and administrative rulings and practice, all in effect as of the date of this proxy
statement, all of which are subject to differing interpretations and change, possibly with retroactive effect. The Company has neither requested nor received a tax opinion from legal counsel or
rulings from the Internal Revenue Service regarding the consequences of the Reincorporation. There can be no assurance that future legislation, regulations, administrative rulings, or court decisions
would not alter the consequences discussed above.
You
should consult your own tax advisor to determine the particular tax consequences to you of the Reincorporation, including the applicability and effect of U.S. federal, state, local,
foreign and other tax laws.
Securities Law Consequences
After the Reincorporation, Legacy Texas will be a publicly held company, Legacy Texas Common Stock will continue to be listed on The Nasdaq
Global Select Market under the symbol "LEGH," and Legacy Texas will file with the SEC and provide to its shareholders the same type of information that the Company has previously filed and provided.
Stockholders, whose shares of Company Common Stock are freely tradable before the Reincorporation, will continue to have freely tradable shares of Legacy Texas Common Stock. Stockholders holding
restricted shares of Company Common Stock will have shares of Legacy Texas Common Stock that are subject to the same restrictions on transfer as those to which their present shares of Company Common
Stock are subject. In summary, Legacy Texas and its shareholders will be in the same respective positions under the federal securities laws after the Reincorporation as the Company and its
stockholders prior to the Reincorporation.
Effect of Not Obtaining the Required Vote for Approval
If the Reincorporation Proposal fails to obtain the requisite vote for approval, the Reincorporation will not be consummated, and the Company
will continue to be incorporated in the state of Delaware.
OUR BOARD RECOMMENDS A VOTE "FOR" THE REINCORPORATION FROM THE STATE OF DELAWARE TO THE STATE OF TEXAS.
24
Table of Contents
CORPORATE GOVERNANCE
Board Leadership
The Executive Chairman of the Board is Curtis D. Hodgson. The Chairman and Chief Executive Officer roles are split, and Kenneth E. Shipley
serves as Chief Executive Officer. As the former Chief Executive Officer, the Executive Chairman of the Board provides guidance to the Chief Executive Officer with respect to strategic initiatives.
The Executive Chairman also leads the Board in its discussions. The Chief Executive Officer is responsible for implementing the Company's
strategic and operating objectives and day-to-day decision-making related to such implementation. The Board believes that the separation of the offices of Executive Chairman and Chief Executive
Officer is appropriate as it allows Mr. Shipley to focus primarily on his management responsibilities and is a corporate governance best practice.
The
Board currently has three standing committees (Audit, Compensation, and Nominating and Corporate Governance) that are chaired and composed entirely of directors who are independent
under Nasdaq and SEC rules. Given the role and scope of authority of these committees, and that a majority of the Board is composed of independent directors, the Board believes that its leadership
structure is appropriate. We select directors as members of these committees with the expectation that they will be free of relationships that might interfere with the exercise of independent
judgement.
Our
Board of Directors is our Company's ultimate decision-making body, except with respect to those matters reserved to the stockholders. Our Board selects our senior management team,
which is charged with the conduct of our business. Our Board acts as an advisor and counselor to senior management and oversees its performance.
Code of Ethics
Our Board of Directors has adopted a Financial Officer Code of Ethics applicable to the Company's Executive Chairman, Chief Executive Officer,
Chief Financial Officer and all other members of the Company's Finance Department. This Code of Ethics is posted on the Company's website at www.legacyhousingusa.com under the Investor Relations
section. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, the provision of our Code of Ethics that applies to our
principal executive officer, principal financial officer, principal accounting officer or controllers, or persons performing similar functions and that relates to any element of such provision of our
Code of Ethics by posting such information on our website within four business days of the date of such amendment or waiver. In the case of a waiver, the nature of the waiver, the name of the person
to whom the waiver was granted, and the date of the waiver will also be disclosed.
Risk Oversight
As part of its oversight functions, the Board of Directors is responsible for oversight of risk management at the Company. Responsibility for
oversight of risk management is delegated from the Board to the Audit Committee.
Director Independence
The Board of Directors has determined that each of Messrs. Bennett, Isakson and Crawford are independent in accordance with Nasdaq rules,
and it also determined that retiring director, Philip T. Blazek, met the requirements of independence. To determine independence, the Board of Directors adopted and applied the categorical standards
of independence included in Nasdaq Listing Rule 5605(a)(2), which include a series of objective tests, such as that the director is not an employee of the company and has not engaged in various
types of business dealings with the company. Audit committee members also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
25
Table of Contents
Board of Directors Meetings
There was one meeting of the Board of Directors in 2018 as the Company's IPO was not effective until December 13, 2018. There have been
four meetings of the Board of Directors so far during the 2019 fiscal year. All Directors attended all meetings of the Board of Directors either in-person or telephonically. We select independent
directors as members of these committees with the expectation that they will be free of relationships that might interfere with their exercise of independent judgment.
Audit Committee
There were no meetings of the Audit Committee in 2018 as the Company's IPO was not effective until December 13, 2018. So far during the
2019 fiscal year, there have been three meetings of the Audit Committee. All of the members of the Audit Committee have attended all of the
Audit Committee meetings either in-person or telephonically. Our Audit Committee is involved in:
-
-
the appointment, compensation, review and oversight of the work of the independent registered public accounting firm, and where appropriate,
the replacement of the independent registered public accounting firm;
-
-
discussions with management and the independent auditor, prior to public dissemination, the Company's annual audited financial statements and
quarterly financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and discuss with the independent
auditors the matters required to be discussed by Statement of Auditing Standards No. 61;
-
-
discussions with management and our independent public accountants with respect to the scope and results of our year-end audit, our internal
accounting controls, and the professional services furnished to us by the independent auditors;
-
-
discussions with management and the independent auditor the Company's major financial risk exposures, the guidelines and policies by which risk
assessment and management is undertaken, and the steps management has taken to monitor and control risk exposure; and
-
-
the review of the adequacy and effectiveness of our internal controls over financial reporting.
The
members of our Audit Committee currently are Philip Blazek (Chairman), John Isakson and Mark Bennett. A copy of our Audit Committee Charter is available on our website at
www.legacyhousingusa.com under the Investor Relations section. Should Proposal 1 be approved regarding the election of directors, Stephen Crawford would replace Mr. Blazek as a member of the
Audit Committee. Either the Audit Committee or the full board of directors would then determine who will serve as the chair of the Audit Committee.
In
addition, the Board determined that John Isakson is qualified as a financial expert.
Compensation Committee
There were no meetings of the Compensation Committee in 2018 as the Company's IPO was not effective until December 13, 2018. So far in
2019, the Compensation Committee has not yet met, but is expected to meet before the end of 2019. Our Compensation Committee:
-
-
evaluates the performance of the CEO and other executive officers and, based on such evaluation, approve, or recommend to the full Board of
Directors the approval of, the annual salary, bonus, stock options, and other benefits, direct and indirect, of the CEO and other executive officers;
-
-
reviews compensation programs for our officers and key employees, including cash bonus levels and grants under our stock option and incentive
plans;
26
Table of Contents
-
-
to the extent not delegated to the Audit Committee by the Board of Directors, review and approve all related-party transactions (as specified
in Item 404 of Regulation S-K) and review and make recommendations to the full Board of Directors; and
-
-
reviews director compensation.
Pursuant
to its charter, the Compensation Committee has the ability to delegate its authority to subcommittees, although to date it has not done so.
The
members of the Compensation Committee in 2019 were John Isakson (Chairman) and Philip Blazek. Should Proposal 1 be approved regarding the election of directors, Stephen Crawford
would replace Mr. Blazek as a member of the Compensation Committee. A copy of our Compensation Committee Charter is available on our website at www.legacyhousingusa.com under the Investor
Relations section.
Nominating and Corporate Governance Committee
There were no meetings of the Nominating and Corporate Governance Committee in 2018 as the Company's IPO was not effective until
December 13, 2018. So far in 2019, the Nominating and Corporate Governance Committee has met once. Our Nominating and Corporate Governance Committee is responsible
for:
-
-
reviewing suggestions of candidates for director made by directors, stockholders, and management;
-
-
making recommendations to the Board regarding the composition of the Board;
-
-
nominating individual candidates for election to the Board;
-
-
conducting all necessary and appropriate inquiries into the backgrounds and qualifications of possible candidates;
-
-
consider questions of independence and possible conflicts of interest of members of the Board of Directors and executive officers;
-
-
overseeing and approving the management continuity planning process;
-
-
developing and recommending to the Board of Directors a set of corporate governance principles applicable to the Company and keep abreast of
developments with regard to corporate governance to enable the Committee to make recommendations to the Board of Directors in light of such developments as may be appropriate; and
-
-
considering nominee recommendations made by stockholders provided that the names of such nominees, accompanied by relevant biographical
information, are submitted in accordance with the procedures set forth above under "How and when may I submit a stockholder proposal, including a stockholder nomination for director, for the 2020
Annual Meeting?"
In
fulfilling its responsibilities for identifying and evaluating nominees for director, the Nominating and Corporate Governance Committee takes into account the prior experience of
director nominees and its application to their responsibilities as a director of Legacy; however, there are no stated minimum qualifications for director nominees.
The
Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Nominating and Corporate Governance Committee strives to
nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company's businesses. In addition to
considering a candidate's background and accomplishments, candidates are reviewed in the context of the current
27
Table of Contents
composition
of the Board and the evolving needs of our businesses. The Company's policy is to have at least a majority of directors qualify as "independent" under the listing requirements of Nasdaq.
In
the event of a vacancy on the Board, the Nominating and Corporate Governance Committee intends to identify and evaluate candidates by making requests of Board members and others for
recommendations, meeting from time to time to evaluate biographical information and background material relating to potential candidates, and having members of the Nominating and Corporate Governance
Committee and the Board interview selected candidates. Assuming that appropriate biographical and background material is provided for candidates recommended by stockholders on a timely basis, and that
any such nomination accompanied by a written consent of the candidate to being named as a nominee and to serve as a director if elected, the Nominating and Corporate Governance Committee will evaluate
director candidates recommended by stockholders by following substantially the same process, and applying substantially the same criteria, as it follows for director candidates submitted by Board
members.
The
members of the Nominating and Corporate Governance Committee are Mark Bennett (Chairman) and John Isakson. A copy of our Nominating and Corporate Governance Committee Charter is
available on our website at www.legacyhousingusa.com under the Investor Relations section.
Director Attendance at Annual Meetings
Our Board of Directors encourages director attendance at our annual meetings of stockholders. This is our Company's first annual meeting.
Policy for Stockholder Communications
Mail can be addressed to directors in care of the Office of the Corporate Secretary, Legacy Housing Corporation, 1600 Airport Freeway,
Suite 100, Bedford, Texas 76022. At the direction of the Board of Directors, all mail received will be opened and screened for security
purposes. All mail, other than junk mail or obscene items, will be forwarded either by the United States Postal Service or by electronic mail. Mail addressed to a particular director will be forwarded
or delivered to that director. Mail addressed to "Outside Directors" or "Non-Management Directors" will be forwarded or delivered to each of the non-employee directors. Mail addressed to the "Board of
Directors" will be forwarded or delivered to the Executive Chairman of the Board.
Related Party Transactions
Pursuant to a policy approved by the Board, all related party transactions above the threshold of $20,000 requires Board consultation and
approval or ratification by the independent members of our Board.
The
independent members of the Board will determine whether the terms of a covered transaction are fair to the Company and no less favorable to the Company than would be generally
available absent the relationship with the related party, whether there are business reasons for the transaction, whether the transaction impairs the independence of an outside director and whether
the transaction is material, among other considerations.
28
Table of Contents
CHANGE IN ACCOUNTANTS
Effective July 12, 2019, the Board of Directors of the Company approved the engagement of BKD, LLP as the Company's independent
registered public accounting firm for the Company's fiscal year ending December 31, 2019, and dismissed Grant Thornton LLP as the Company's independent registered public accounting firm.
The change in the Company's independent registered public accounting firm was made to reduce the fees payable by the Company in connection with the audit of its financial statements.
Grant
Thornton LLP's audit reports on the Company's consolidated financial statements as of and for the fiscal years ended December 31, 2018 and 2017 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During
the fiscal years ended December 31, 2018 and 2017, and the subsequent interim period through July 12, 2019, there were (i) no disagreements (as described in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Grant Thornton LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to Grant Thornton LLP's satisfaction, would have caused Grant Thornton LLP to make reference thereto in its
reports on the financial statements for such years, and (ii) no "reportable events" within the meaning of Item 304(a)(1)(v) of Regulation S-K.
The
Company provided Grant Thornton LLP with a copy of the disclosures the Company was making in its Form 8-K and requested that Grant Thornton LLP furnish a letter
addressed to the Securities and Exchange Commission stating whether or not it agrees with the statements made herein. A copy of Grant Thornton LLP's letter dated July 17, 2019 was filed
as Exhibit 16.1 to the Company's Form 8-K dated July 17, 2019, and such letter stated that it agreed with the statements concerning Grant Thornton LLP contained therein.
During
the audits for the years ended December 31, 2018 and 2017, material weaknesses were identified in our internal control over financial reporting, as disclosed in our
Registration Statement on Form S-1 (File No. 333-228288) and in our Annual Report on Form 10-K for the year ended December 31, 2018. The material weaknesses were due to
insufficient accounting processes and procedures for certain accounts, insufficient experienced personnel to support preparation of financial statements and insufficient policies and procedures to
ensure the appropriate review and approval of user access rights to our accounting system; and lack of approval of journal entries and segregation of duties in our financial reporting process. Grant
Thornton discussed these matters with the Audit Committee, and the Company has authorized Grant Thornton to fully respond to any inquiries by BKD, LLP concerning these matters.
During
the fiscal years ended December 31, 2018 and 2017, and the subsequent interim period through July 12, 2019, neither the Company nor anyone acting on its behalf
consulted with BKD, LLP regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements or the effectiveness of internal control over financial reporting, and neither a written report or oral advice was provided to the Company that
BKD, LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the
subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of
Regulation S-K.
29
Table of Contents
AUDIT FEES
Principal Accountant Fees and Services
Grant Thornton LLP served as our independent registered public accountants for the years ended December 31, 2018 and 2017.
Audit Fees
For our fiscal years ended December 31, 2018 and 2017, we were billed approximately $1,507,067 and $0, respectively, for professional
services rendered by our independent auditors. Audit fees consist of the aggregate fees billed for (i) the audit of our annual financial statements included herein, (ii) audits and
reviews included in our Registration Statement on Form S-1 related to our IPO in 2018, (iii) services that are normally provided in connection with statutory and regulatory filings or
engagements such as comfort letters, consents and other services, and (iv) accounting consultations. As a result of our IPO, the amounts reported are not necessarily representative of the fees
we expect to pay our auditors in future years.
Audit Related Fees
There were no fees for audit-related services rendered by our independent auditors for the years ended December 31, 2018 and 2017.
Tax Fees
For our fiscal years ended December 31, 2018 and 2017, there were no fees for professional services rendered by our independent auditors
for tax compliance, tax advice, and tax planning.
All Other Fees
There were no fees that fell into the classification of "Other Fees" for our fiscal years ended December 31, 2018 and 2017.
Pre-Approval Policies
Following the appointment of all three current members to the Board's audit committee, such committee began its activities in December 2018.
Prior to then, all of the above services and fees were reviewed and approved by the entire Board. No services were performed before or without approval.
30
Table of Contents
ANNUAL REPORT
A copy of our Annual Report on Form 10-K for the year ended December 31, 2018 has been provided to all stockholders as of
September 13, 2019. Stockholders are referred to the report for financial and other information about us, but such report is not incorporated in this proxy statement and is not a part of the
proxy soliciting material.
We
will provide without charge to any stockholder, as of the record date, copies of our Annual Report, upon written request delivered to Neal J. Suit, Executive Vice President, General
Counsel and Secretary, at the Company's offices at 1600 Airport Freeway, Suite 100, Bedford, Texas 76022.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
Neal J. Suit
Executive Vice President, General Counsel and Secretary
|
October 2, 2019
|
|
|
Bedford, Texas
|
|
|
40
Table of Contents
Annex A
CERTIFICATE OF FORMATION
OF
LEGACY HOUSING CORPORATION
a Texas for-profit corporation
Legacy
Housing Corporation, a Texas for-profit corporation (the "Corporation") is formed under a plan of conversion and the
(i) name, (ii) address, (iii) date of formation, (iv) prior form of organization and (v) jurisdiction of formation of the converting entity in accordance with
§3.005(7) of the Texas Business Organizations Code ("TBOC") is as follows:
-
i.
-
Name: Legacy Housing Corporation
-
ii.
-
Address: 1600 Airport Freeway, Suite #100, Bedford, Texas 76022
-
iii.
-
Organizational Form: Corporation
-
iv.
-
Jurisdiction of Formation: State of Delaware
ARTICLE I
The name of the Corporation is: Legacy Housing Corporation.
ARTICLE II
The initial registered agent of the Corporation is Curtis D. Hodgson and the business address of the registered agent is: 4801 Mark IV
Parkway, Fort Worth, Texas 76106.
ARTICLE III
The purpose for which the Corporation is formed is for the transaction of any and all lawful business for which a for-profit corporation may be
organized under the TBOC.
ARTICLE IV
4.1 Authorized Capital Stock. The aggregate number of shares of capital stock that the Corporation is
authorized to issue is 100 Million (100,000,000), of which 90 Million
(90,000,000) shares are common stock having a par value of $0.001 per share (the "Common Stock"), and 10 Million (10,000,000) shares are
preferred stock having a par value of $0.001 per share (the "Preferred Stock").
4.2 Increase or Decrease in Authorized Capital Stock. The number of authorized shares of Preferred Stock or
Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, irrespective of the provisions of TBOC (or
any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or
decreased, unless a vote by any holders of one or more series of Preferred Stock is required by the express terms of any series of Preferred Stock as provided for or fixed pursuant to the provisions
of Section 4.3 of this Article IV.
4.3 Preferred Stock.
(A) The
Board of Directors of the Corporation (the "Board") is hereby authorized, subject to any limitations prescribed by
law, to provide for the issuance of shares of Preferred Stock from
A-1
Table of Contents
time
to time in one or more series pursuant to a resolution or resolutions providing for such issuance duly adopted by the Board. The Board is further authorized, subject to limitations prescribed by
law, to file a certificate of designation pursuant to the applicable law of the State of Texas (any such certificate, a "Preferred Stock
Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares
of each such series and the qualifications, limitations, and restrictions thereof. The authority of the Board with respect to each series shall include, but shall not be limited to and shall not
require (unless otherwise required by applicable law), determination of the following:
(i) The
designation of the series, which may be by distinguishing number, letter, or title;
(ii) The
number of shares of the series, which number the Board may thereafter (except where otherwise provided in the applicable Preferred Stock Designation) increase or
decrease (but not below the number of shares thereof then outstanding);
(iii) The
amounts payable on, and the preferences, if any, of, shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or
noncumulative;
(iv) The
dates on which dividends, if any, shall be payable;
(v) The
redemption rights and price or prices, if any, for shares of the series;
(vi) The
terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;
(vii) The
amounts payable on, and the preferences, if any, of, shares of the series in the event of any voluntary or involuntary liquidation, dissolution, or winding up of
the affairs of the Corporation;
(viii) Whether
the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Corporation or any
other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereto, the date or
dates at which such shares shall be convertible or exchangeable, and all other terms and conditions upon which such conversion or exchange may be made;
(ix) Restrictions
on the issuance of shares of the same series or of any other class or series; and
(x) The
voting rights, if any, of the holders of shares of the series.
(B) Except
as may otherwise be provided in this Certificate of Formation, in a Preferred Stock Designation, or by applicable law, only shares of Common Stock shall be voted
in elections of directors and for all other purposes and shares of Preferred Stock shall not entitle the holder thereof to vote at or receive notice of any meeting of the shareholders of the
Corporation.
4.4 Common Stock.
(A) Common
Stock shall be subject to the express terms of any series of Preferred Stock. Each holder of Common Stock shall be entitled to one vote for each such share of
Common Stock so held upon each matter properly submitted to a vote of the shareholders.
(B) Subject
to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions
(payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to
A-2
Table of Contents
time
out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.
(C) In
the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to such amounts as provided
under applicable law.
4.5 No Preemptive Rights. No share of Common Stock or Preferred Stock shall entitle any holder thereof any
preemptive right to subscribe for any shares of any class or series of stock of
the Corporation whether now or hereafter authorized.
ARTICLE V
Provisions for the management of the business and for the conduct of the affairs of the Corporation and provisions creating, defining, limiting,
and regulating the powers of the Corporation, the Board, and the shareholders are as follows:
5.0 Initial Board. The number of directors constituting the initial board of directors and the names and
addresses of the person or persons who are to serve as directors until the
next annual meeting of shareholders or until their successors are elected and qualified are as follows:
|
|
|
Names
|
|
Address
|
Curtis D. Hodgson
|
|
1600 Airport Freeway, Suite #100, Bedford, Texas 76022
|
Kenneth E. Shipley
|
|
1600 Airport Freeway, Suite #100, Bedford, Texas 76022
|
Mark E. Bennett
|
|
1600 Airport Freeway, Suite #100, Bedford, Texas 76022
|
Stephen Crawford
|
|
1600 Airport Freeway, Suite #100, Bedford, Texas 76022
|
John A. Isakson
|
|
1600 Airport Freeway, Suite #100, Bedford, Texas 76022
|
5.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction
of the Board. In addition to the powers and authority herein or by statute
expressly conferred upon it, the Board is hereby expressly empowered to exercise all such powers and to do all such acts and things as may be exercised or done by the Corporation; subject,
nevertheless, to the provisions of the statutes of the State of Texas and of this Certificate of Formation as they may be amended, altered, or changed from time to time, and to any bylaws from time to
time made by the Board or shareholders; provided, however, that no bylaw so made shall invalidate any
prior act of the Board that would have been valid if such bylaw had not been made.
5.2 Number of Directors; Election; Term.
(A) Subject
to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of authorized
directors constituting the Board shall be fixed solely by resolution of the Board.
(B) Subject
to the rights of holders of any series of Preferred Stock with respect to the election of directors, each director shall serve until his or her successor is duly
elected and qualified or until his or her earlier death, resignation or removal.
(C) Election
of directors of the Corporation need not be by written ballot unless the bylaws so provide.
(D) No
shareholder will be permitted to cumulate votes at any election of directors.
5.3 Vacancies and Newly Created Directorships. Subject to the rights of holders of any series of Preferred
Stock, and except as otherwise provided in the TBOC, vacancies occurring on the Board for
A-3
Table of Contents
any
reason and newly created directorships resulting from any increase in the authorized number of directors shall be filled only by vote of a majority of the remaining members of the Board, although
less than a quorum, or by a sole remaining director, at any meeting of the Board. A person so elected by the Board to fill a vacancy or newly created directorship shall hold office until his or her
successor shall be duly elected and qualified, or until such Director's earlier death, resignation, or removal.
5.4 No Action by Written Consent. Subject to the rights of the holders of any series of Preferred Stock, any
action required or permitted to be taken by the shareholders of the Corporation must be
effected at a duly called annual or special meeting of the shareholders of the Corporation and may not be effected by any consent in writing by the shareholders.
5.5 Advance Notice. Advance notice of shareholder nominations for election of directors and other business
to be brought by shareholders at any meeting of shareholders shall be given
in the manner provided in the bylaws.
5.6 Special Meetings. Except as otherwise expressly provided by the terms of any series of Preferred Stock
or applicable law, special meetings of shareholders of the Corporation may be
called by the Board, the Chairman of the Board, the Chief Executive Officer and shall be called by the Corporation if requested by one or more record shareholders representing ownership of at least
fifty percent (50%) of the outstanding shares of the Corporation's stock entitled to vote and who has complied with the requirements set forth in the bylaws. A special meeting of shareholders may not
be called by any other person.
5.7 Amendments to the Bylaws. (a) In furtherance and not in limitation of the powers conferred by statute,
the Board is hereby expressly authorized to adopt, alter, amend or repeal the bylaws
of the Corporation without the assent or vote of the shareholders, including without limitation the power to fix, from time to time, the number of directors that shall constitute the whole Board,
subject to the right of the shareholders to alter, amend, or repeal the bylaws made by the Board.
(b) The
shareholders also shall have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders
of any class or series of stock of the Corporation required by law or by this Certificate of
Formation of the Corporation, any amendment or modification of Section 2.2, Section 2.3, Section 2.7, Section 2.8, Section 3.1, Section 3.2,
Section 3.9, Section 3.10 and Section 7.4 of the Corporation's Bylaws, shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent
(662/3%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
5.8 Submission of Contracts to Shareholder Vote. The Board in its discretion may submit any contract or act
for approval or ratification at any annual meeting of the shareholders or at any meeting of the
shareholders called for the purpose of considering any such contract or act, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the
Corporation that is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of shareholders be
there represented in person or by proxy) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved or ratified by every shareholder of the
Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest or for any other reason.
5.9 Shareholder Approval of Mergers. Irrespective of the provisions of Article 5 of the TBOC (or any
successor provision thereto), a merger requiring shareholder approval under
Article 5 of the TBOC shall require the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on that matter.
A-4
Table of Contents
ARTICLE VI
6.1 Limitation of Personal Liability. To the fullest extent permitted by the TBOC, as the same exists or may
hereafter be amended, a director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. If the TBOC is amended after the effective date hereof to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the TBOC as so
amended. Any repeal or modification of this Article VI by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification or with respect to events occurring prior to such time.
6.2 Indemnification. The Corporation shall indemnify, to the fullest extent permitted by law, any person who
was, is, or is threatened to be made a named defendant or respondent in
any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such action, suit, or proceeding, and any
inquiry or investigation that could lead to such an action, suit, or proceeding, by reason of the fact that such person is or was a director or officer of the Corporation, or, while such person was a
director of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, against judgments, penalties (including excise and similar taxes), fines, settlements,
and reasonable expenses (including attorney's fees) actually incurred by such person in connection with such action, suit, or proceeding. In addition to the foregoing, the Corporation shall, upon
request of any such person described above and to the fullest extent permitted by law, pay or reimburse the reasonable expenses incurred by such person in any action, suit, or proceeding described
above in advance of the final disposition of such action, suit, or proceeding.
The
Corporation shall indemnify and advance expenses to and may provide indemnity insurance for persons who are named in any lawsuits or other proceedings as a result of their service to
the Corporation as directors or officers of the Corporation to the fullest extent permitted by the laws of the State of Texas as such laws may now or hereafter exist. The Corporation may, but is not
required to, indemnify, advance expenses to, and provide indemnity insurance for, persons who are named in any lawsuits or other proceedings as a result of their service to the Corporation as
employees or agents of the Corporation to the fullest extent permitted by the laws of the State of Texas as such laws may now or hereafter exist. Any repeal or amendment of this Article VI
shall operate prospectively only and shall not adversely affect any right to receive indemnification which then exists as a result hereof.
ARTICLE VII
Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation
and its shareholders or any class of them, any court of equitable jurisdiction within the State of Texas may, on the application in a summary way of this Corporation or of any creditor or shareholder
thereof or on the application of any receiver or receivers appointed for the Corporation under Subchapter I of Chapter 21 of Title 2 of the TBOC or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under Subchapter I of Chapter 21 of Title 2 of the TBOC order a meeting of the creditors or class of creditors,
and/or of the shareholders or class of shareholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any
reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of creditors, and/or on all the shareholders or class of shareholders, of the Corporation, as the case may be, and also on the
Corporation.
A-5
Table of Contents
ARTICLE VIII
Unless the Corporation consents in writing to the selection of an alternative forum, United States District Court for the Northern District of
Texas, or if that court lacks jurisdiction, state district courts of Tarrant County, Texas shall be the sole and exclusive forum for (A) any derivative action or proceeding brought on behalf of
the Corporation, (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the Corporation to the Corporation or the Corporation's
shareholders, (C) any action asserting a claim arising pursuant to any provision of the TBOC, or (D) any action asserting a claim governed by the internal affairs doctrine as such
doctrine exists under the law of the State of Delaware. However, this sole and exclusive forum provision will not apply in those instances where there is exclusive federal jurisdiction, including but
not limited to certain actions arising under the Securities Act or the Exchange Act.
ARTICLE IX
The Corporation reserves the right to restate this Certificate of Formation and to amend, alter, change, or repeal any provision contained in
this Certificate of Formation (including any rights, preferences or other designations of Preferred Stock) in the manner now or hereafter prescribed by law, and all rights and powers conferred herein
on shareholders, directors, and officers are subject to this reserved power. Notwithstanding any other provision of this Certificate of Formation, and in addition to any other vote that may be
required by law or the terms of any series of Preferred Stock, the affirmative vote of the holders of at least 662/3% of the voting power of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision of this Certificate of
Formation inconsistent with the purpose and intent of, Section 4.3 of Article IV, Article V, Article VI or this Article IX (including, without limitation, any such
Article as renumbered as a result of any amendment, alteration, change, repeal or adoption of any other Article).
ARTICLE X
This document becomes effective when the document is filed by the Secretary of State of the State of Texas.
A-6
Table of Contents
THE
UNDERSIGNED, affirms that the person designated as registered agent has consented to the appointment. The undersigned signs this document subject to the penalties imposed by law for
the submission of a materially false or fraudulent instrument and certifies under penalty of perjury that the undersigned is authorized to execute the filing instrument.
Executed
on this day of October, 2019
|
|
|
|
|
|
|
|
Kenneth E. Shipley
President & Chief Executive Officer
c/o Legacy Housing Corporation
1600 Airport Freeway, Suite #100
Bedford, Texas 76022
|
A-7
Table of Contents
Annex B
BYLAWS
OF
LEGACY HOUSING CORPORATION
A Texas corporation
(Adopted
as of November , 2019)
TABLE OF CONTENTS
B-1
Table of Contents
B-2
Table of Contents
BYLAWS
OF
LEGACY HOUSING CORPORATION
A Texas corporation
ARTICLE 1
OFFICES
Section 1.1. Registered Office. The address of the registered office
of the Corporation in Texas shall be 1600 Airport Freeway, Suite #100, Bedford, Texas 76022. The registered agent at such
address in charge thereof shall be Curtis D. Hodgson, all of which shall be subject to change from time to time as permitted by law.
Section 1.2. Other Offices. The Corporation may also have an office
or offices or place or places of business within or without the State of Texas as the Board may from time to time
designate.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
Section 2.1. Annual Meeting. The annual meeting of the shareholders
shall be held at the principal place of business of the Corporation or at such other place within or outside of Texas (or
may not be held at any place, but may instead be held solely by means of remote communication if so decided by the Board in its sole discretion), on such date and at such time as shall be determined
from time to time by the Board, for the purpose of electing directors and for transacting other proper business.
Section 2.2. Special Meetings.
(a) Special
meetings of the shareholders for any purpose or purposes, other than those required by statute, may be called at any time by the Board, the Chairman of the
Board, or the Chief Executive Officer and shall be called by the Corporation upon the request of the shareholders as set forth in Section 2.2(b) below. Except as set forth in this
Section 2.2, no other person may call a special meeting of shareholders. Special meetings of the shareholders shall be held at the principal place of business of the Corporation or at such
other place within or outside of Texas (or may not be held at any place, but may instead be held solely by means of remote communication if so decided by the Board in its sole discretion), on such
date and at such time as shall be determined from time to time by the Board, for the purpose set forth in the Corporations notice of meeting.
(b) A
special meeting of the shareholders shall be called by the Corporation following the receipt by the Secretary of a written request for a special meeting of the
shareholders (a "Special Meeting Request") from one or more record shareholders representing ownership of at least fifty percent (50%) of the outstanding shares of the Corporation's stock entitled to
vote (the "Requisite Holders") if such Special Meeting Request complies with the requirements set forth in this Section 2.2(b). A Special Meeting Request shall only be valid if it is signed and
dated by each of the Requisite Holders (or their duly authorized agents) and if such request sets forth all information required in Section 2.3(a)(2). If a Special Meeting Request complies with
this Section 2.2, the Board may fix a record date (in accordance with Section 2.5 herein), which shall not precede and shall not be more than ten (10) days after the close of
business on the date on which the resolution fixing the record date is adopted by the Board. If the Board, within ten (10) days after the date on which a valid Special Meeting Request is
received, fails to adopt a resolution fixing the record date, the record date shall be the close of business on the tenth (10th) day after the first date on which the Special Meeting
Request is received by the Secretary. The Board shall also establish the place (if any), date and time of the special meeting of shareholders
B-3
Table of Contents
requested
in such Special Meeting Request. The date of any such special meeting shall not be more than ninety (90) days after the Secretary's receipt of the properly submitted Special Meeting
Request; provided, however, that in the event that a Special Meeting Request is received after the
expiration of the advance notice period set forth in Section 2.3(a)(2), but before the annual meeting of shareholders, the Board may use its discretion to set the date of a special meeting no
more than ten (10) days following the annual meeting of shareholders. Only matters that are stated in the Special Meeting Request shall be brought before and acted upon during the special
meeting of shareholders called according to the Special Meeting Request; provided, however, that nothing
herein shall prohibit the Board from submitting any matters to the shareholders at any special meeting of shareholders called by the shareholders pursuant to this Section 2.2(b). Requisite
Holders may revoke a Special Meeting Request by written revocation delivered to the Corporation at any time prior to the special meeting of shareholders; provided, however, the Board shall have the sole discretion to determine whether to proceed with the
special meeting of shareholders following such written revocation. Additionally, a Requisite Holder whose signature (or authorized agent's signature) appears on a Special Meeting Request may revoke
such Requisite Holder's participation in a Special Meeting Request at any time by written revocation delivered to the Secretary in the same manner as the Special Meeting Request and if, following any
such revocation, the remaining Requisite Holders participating in the Special Meeting Request do not represent at least the Requisite Percentage, the Special Meeting Request shall be
deemed revoked. Likewise, any reduction in percentage stock ownership of the Requisite Holders below the Requisite Percentage following delivery of the Special Meeting Request to the Secretary shall
be deemed to be a revocation of the Special Meeting Request. If written revocations of requests for the special meeting have been delivered to the Secretary and the result is that shareholders (or
their agents duly authorized in writing), as of the date of the Special Meeting Request, entitled to cast less than the Requisite Percentage have delivered, and not revoked, requests for a special
meeting to the Secretary, the Secretary shall refrain from mailing the notice of the meeting and send to all requesting shareholders who have not revoked such requests a written notice of any
revocation of a request for the special meeting or, if the notice of meeting has been mailed, the Secretary shall send to all requesting shareholders who have not revoked requests for a special
meeting a written notice of any revocation of a request for the special meeting and of the Secretary's intention to revoke the notice of the meeting, and shall there thereafter revoke the notice of
the meeting at any time before ten days before the commencement of the meeting. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be
considered a request for a new special meeting. A Special Meeting Request shall not be valid (and thus the special meeting of shareholders requested pursuant to the Special Meeting Request will not be
held) if (i) the Special Meeting Request relates to an item of business that is not a proper subject for shareholder action under applicable law; or (ii) the Special Meeting Request was
made in a manner that involved a violation of Section 14(a) under the Exchange Act and the rules and regulations thereunder. In addition, if none of the Requisite Holders appears or sends a
representative to present the business or nomination submitted by the shareholders in the Special Meeting Request to be conducted at the special meeting of shareholders, the Corporation need not
conduct any such business or nomination for a vote at such special meeting of shareholders.
Section 2.3. Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders.
(1) At
an annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an
annual meeting of shareholders, nominations of persons for election to the Board of the Corporation and the proposal of other business must be brought (A) pursuant to the Corporation's notice
of meeting (or any supplement thereto), (B) by or at the direction of the Board or any committee thereof, or (C) by any shareholder of the Corporation who is a shareholder of record at
the time the notice
B-4
Table of Contents
provided
for in this Section 2.3(a) is delivered to the Secretary of the Corporation and on the record date for the determination of shareholders entitled to vote at the annual meeting, who is
entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section 2.3(a). For the avoidance of doubt, clause (C) above shall be the exclusive means
for a shareholder to make nominations and submit other business (other than matters properly included in the Corporation's notice of meeting of shareholders and proxy statement under Rule 14a-8
of the Exchange Act) before an annual meeting of shareholders.
(2) For
any nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (C) of paragraph (a)(1) of this
Section 2.3, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation at the Corporation's principal executive offices, and any such proposed
business (other than the nominations of persons for election to the Board) must constitute a proper matter for shareholder action at such meeting. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one
hundred twentieth (120th) day, prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of
the annual meeting is advanced or delayed by more than thirty (30) days prior to such anniversary
date, notice by the shareholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a shareholder's
notice as described above. Such shareholder's notice shall set forth (A) as to each person whom the shareholder proposes to nominate for election as a director (i) the name, age,
business address and residence address of such nominee, (ii) the principal occupation or employment of such nominee, (iii) the class or series and number of shares of stock that are
owned beneficially and of record by such nominee as well as any derivative or synthetic instrument, convertible security, put, option, stock appreciation right, swap or similar contract, agreement,
arrangement or understanding the value of or return on which is based on or linked to the value of or return on any shares of stock, (iv) a description of any agreement, arrangement, or
understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or
loaned shares) that has been entered into as of the date of the shareholder's notice by, or on behalf of, such nominee, whether or not such instrument or right shall be subject to settlement in
underlying shares of stock, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such nominee with
respect to securities of the Corporation, (v) all information relating to such nominee that is required to be disclosed in solicitations of proxies for election of directors in an election
contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder, and (vi) such nominee's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (B) as to any other business
that the shareholder proposes to bring before the meeting, (i) a brief description of the
business desired to be brought before the meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such
business includes a proposal to amend the Bylaws, the language of the proposed amendment), (iii) the reasons for conducting such business at the meeting, and (iv) any material interest
in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the shareholder giving the notice and any beneficial owner, if any, on
whose behalf the nomination
B-5
Table of Contents
or
proposal is made (i) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class or series and number of shares
of stock that are owned beneficially and of record by such shareholder and such beneficial owner as well as any derivative or synthetic instrument, convertible security, put, option, stock
appreciation right, swap or similar contract, agreement, arrangement or understanding the value of or return on which is based on or linked to the value of or return on any shares of stock,
(iii) a description of any agreement, arrangement, or understanding with respect to the nomination or proposal between or among such shareholder and/or such beneficial owner, any of their
respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (iv) a description of any agreement,
arrangement, or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and
borrowed or loaned shares) that has been entered into as of the date of the shareholder's notice by, or on behalf of, such shareholder and such beneficial owners, whether or not such instrument or
right shall be subject to settlement in underlying shares of stock, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the
voting power of, such shareholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the shareholder is a holder of record of stock entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether the shareholder or the beneficial owner, if
any, intends or is part of a group that intends (I) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the outstanding stock required to approve or adopt
the proposal or elect the nominee and/or (II) otherwise to solicit proxies or votes from shareholders in support of such proposal or nomination, and (vii) any other information relating
to such shareholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the
proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.
(3) At
the request of the Board, any person nominated by a shareholder for election or reelection as a director must furnish to the Secretary of the Corporation
(A) that information required to be set forth in the shareholder's notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person's
nomination was given and (B) such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to
serve as an independent director or audit committee financial expert of the corporation under applicable law, securities exchange rule or regulation, or any publicly-disclosed corporate governance
guideline or committee charter of the Corporation and (C) that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of such nominee; in the
absence of the furnishing of such information if requested, such shareholder's nomination shall not be considered in proper form pursuant to this Section 2.3.
(4) Notwithstanding
anything in the second sentence of paragraph (a)(2) of this Section 2.3 to the contrary, in the event that the number of directors to be
elected to the Board of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (a)(2) of this
Section 2.3, and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of
the preceding year's annual meeting, a shareholder's notice required by this Section 2.3 shall also be considered timely, but only with respect to nominees for the additional directorships, if
it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
B-6
Table of Contents
(b) Special Meetings of Shareholders.
(1) Only
such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (A) by or
at the direction of the Board or (B) provided that the Board has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record
at the time the notice provided for in this Section 2.3(b) is delivered to the Secretary of the Corporation and on the record date for the determination of shareholders entitled to vote at the
special meeting , who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.3(b).
(2) In
the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors, any such shareholder entitled to vote in such
election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting, if the shareholder delivers a notice
in the form as is required by paragraph (a)(2) of this Section 2.3 to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the
one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new
time period (or extend any time period) for the giving of a shareholder's notice as described above.
(c) General.
(1) Except
as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with
the procedures set forth in this Section 2.3 shall be eligible to be elected at an annual or special meeting of shareholders to serve as directors, and only such business shall be conducted at
a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.3. Except as otherwise provided by law, the chairman of the
meeting shall have the power and duty (A) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance
with the procedures set forth in this Section 2.3, and (B) if any proposed nomination or business was not made or proposed in compliance with this Section 2.3, to declare that
such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.3, unless otherwise required by law, if
the shareholder (or a qualified representative of the shareholder) does not appear at the annual or special meeting of shareholders to present a nomination or proposed business, such nomination shall
be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this
Section 2.3, to be considered a qualified representative of the shareholder, a person must be a duly authorized officer, manager or partner of such shareholder or must be authorized by a
writing executed by such shareholder or an electronic transmission delivered by such shareholder to act for such shareholder as proxy at the meeting of shareholders, and such person must produce such
writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of shareholders.
(2) A
shareholder providing written notice required by this Section 2.3 shall update and supplement such notice in writing, if necessary, so that the information
provided or required to be
B-7
Table of Contents
provided
in such notice is true and correct in all material respects as of (i) the record date for the meeting and (ii) the date that is ten (10) business days prior to the
meeting and, in the event of any adjournment or postponement thereof, ten (10) business days prior to such adjourned or postponed meeting. In the case of an update and supplement pursuant to
clause (i) of this Section 2.3(c)(2), such
update and supplement shall be received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting. In
the case of an update and supplement pursuant to clause (ii) of this Section 2.3(c)(2), such update and supplement shall be received by the Secretary at the principal executive offices
of the Corporation not later than five (5) business days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, five (5) business days prior to
such adjourned or postponed meeting.
(3) For
purposes of this Section 2.3, "public announcement" shall include disclosure in a press release reported by
the Dow Jones News Service, Associated Press, or other national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14, or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(4) Notwithstanding
the foregoing provisions of this Section 2.3, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules
and regulations promulgated thereunder with respect to the matters set forth in this Section 2.3; provided, however, that any references in these
Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not
limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.3, and compliance with this Section 2.3 shall be the
exclusive means for a shareholder to make nominations or submit other business (other than, as provided in the last sentence of (a)(1), business other than nominations brought properly under and in
compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 2.3 shall be deemed to affect any rights (A) of shareholders to
request inclusion of proposals or nominations in the Corporation's proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act, or (B) of the holders of any
series of Preferred Stock to elect directors pursuant to any applicable provisions of the certificate of formation.
Section 2.4. Notice of Meetings.
(a) Notice
of all shareholders' meetings shall be given in writing by the Secretary or another officer of the Corporation authorized to give such notice, or (b) in
case of a special meeting duly requested by shareholders pursuant to Section 2.2 and for which the Secretary has refused to give notice, by the shareholders entitled to call such meeting.
Notice of any shareholders' meeting shall state the date and hour when and the place where it is to be held, if any (or, the means of remote communication, if any, by which shareholders may be deemed
to be present in person and vote at such meeting), the record date for determining the shareholders entitled to vote at such meeting if such date is different from the record date for determining the
shareholders entitled to notice of such meeting, and, in the case of a special meeting, the purpose or purposes for which such meeting is called. Subject to Section 7.3, and unless otherwise
required by law, not more than sixty (60) nor less than ten (10) days prior to any such meeting, such notice shall be given to each shareholder entitled to vote at such meeting as of the
record date for determining the shareholders entitled to notice of the meeting, directed by United States mail, postage prepaid, to such shareholder's address as it appears upon the records of the
Corporation.
(b) Notwithstanding
the preceding paragraph, notice of a shareholder meeting regarding a fundamental business transaction (as defined by the TBOC) must be given to each
shareholder of the
B-8
Table of Contents
Corporation
not later than twenty-one (21) days prior to the meeting, regardless of the shareholder's right to vote on the matter. Notice of such action shall comply with any other requirements
set by law.
Section 2.5. Record Date. The Board may fix a date, which date shall
not precede the date upon which the resolution fixing such date is adopted by the Board and shall not be more than
sixty (60) nor less than ten (10) days preceding any meeting of shareholders, as the record date for the determination of the shareholders entitled to notice of such meeting. If the
Board so fixes a date, such date shall also be the record date for determining the shareholders entitled to vote at such meeting. If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of and to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which such meeting is held. A determination of shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however, that the Board may set a
new record date to the extent it complies with Section 6.101 of the TBOC. In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the shareholders 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 may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days
prior to such action. If no record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
Section 2.6. List of Shareholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least eleven (11) days before every meeting of shareholders, a
complete list of the shareholders entitled to vote at the meeting; provided, however, that if the record
date for determining the shareholders entitled to vote is less than eleven (11) days before the meeting date, the list shall reflect the shareholders entitled to vote as of the eleventh (11th)
day before the meeting date, arranged in alphabetical order, and showing the address of each shareholder and the number of shares of stock registered in the name of each shareholder, the type of
shares held in the name of each shareholder, and the number of votes that each shareholder is entitled to if different from the number of shares held. Such list shall be open to the examination of any
shareholder for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting, during ordinary business hours, at the principal place of business of the
Corporation. A list of shareholders entitled to vote at the meeting shall be produced and kept at the time and place, if any, of the meeting during the whole time thereof and may be examined by any
shareholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any shareholder during the whole time of the
meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as
to who are the shareholders entitled to vote in person or by proxy at any meeting of shareholders.
Section 2.7. Voting. Except as may be otherwise required by law, the
Certificate of Formation, or these Bylaws, (a) every shareholder of record shall be entitled to one
(1) vote for each share of stock held of record by such shareholder on the record date for determining the shareholders entitled to vote or act by written consent; (b) in all matters
other than a contested election of directors, the affirmative vote of the majority of shares of stock present in person or represented by proxy at a shareholders' meeting having a quorum and entitled
to vote on the subject matter shall be the act of the shareholders; (c) in a contested election of directors, directors shall be elected by a plurality of the votes of the shares of stock
present in person or represented by proxy at a shareholders' meeting having a quorum and entitled to vote on the election of directors; (d) irrespective of the provisions of Article 5 of
the TBOC (or any successor provision thereto), a merger requiring shareholder approval
B-9
Table of Contents
under
Article 5 of the TBOC shall require the affirmative vote of the holders of a majority of the outstanding shares entitled to vote on that matter. No shareholder will be permitted to
cumulate votes at any election of directors.
Section 2.8. No Action by Written Consent. Subject to the rights of
the holders of any series of Preferred Stock, any action required or permitted to be taken by the shareholders of the Corporation must be
effected at a duly called annual or special meeting of the shareholders of the Corporation and may not be effected by any consent in writing by the shareholders.
Section 2.9. Proxies. At any meeting of the shareholders, any
shareholder entitled to vote thereat may authorize another person or persons to act for such shareholder by proxy
authorized by an instrument in writing or by transmission permitted by law filed in accordance with the procedure established for the meeting, but no proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of
Sections 21.368 and 21.369 of the TBOC. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information
from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person.
Section 2.10. Quorum. Except as may be otherwise required by law or
the Certificate of Formation, at any meeting of the shareholders, the presence in person or by proxy of the holders
of record of shares of stock that would constitute a majority of the votes if all the issued and outstanding shares of stock entitled to vote at such meeting were present and voted shall be necessary
to constitute a quorum; provided, however, that, where a separate vote by a class or series of stock is
required, a quorum shall consist of the presence in person or by proxy of the holders of record of shares of stock that would constitute a majority of the votes of such class or series if all issued
and outstanding shares of stock of such class or series entitled to vote at such meeting were present and voted. In the absence of a quorum and until a quorum is secured, either the chairman of the
meeting or a majority of the votes cast at the meeting by shareholders who are present in person or by proxy may adjourn the meeting, from time to time, without further notice if the time and place of
the adjourned meeting are announced at the meeting at which the adjournment is taken. No business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted
at the original meeting.
Section 2.11. Adjournment. Any meeting of shareholders may be
adjourned at the meeting from time to time, either by the chairman of the meeting, for an announced proper purpose, or by the
shareholders, for any purpose, to reconvene at a later time and at the same or some other place, if any, and by the same or other means of remote communication, if any, and, unless otherwise required
by law, notice need not be given of any such adjourned meeting if the time and place, if any, or the means of remote communication, if any, thereof are announced at the meeting at which the
adjournment is taken. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. If after the
adjournment a new record date for shareholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting in accordance with the
TBOC and section 2.5 herein and shall give notice of the adjourned meeting to each shareholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of
such adjourned meeting. No business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted at the original meeting.
Section 2.12. Organization of Meetings. Meetings of shareholders
shall be presided over by the chairman of the meeting, who shall be one of the following, here listed in the order of preference:
(a) the Chairman of the Board; or (b) in the Chairman's absence, the Chief Executive Officer; or (c) in the Chief Executive Officer's absence, the President; or (d) in the
President's absence, a Vice President; or (d) in the absence of the foregoing officers, a chairman chosen by the shareholders at the meeting.
B-10
Table of Contents
The
Secretary shall act as secretary of the meeting, but in such officer's absence, the chairman of the meeting shall appoint a secretary of the meeting.
Section 2.13. Conduct of Meetings. Subject to and to the extent
permitted by law, the Board may adopt by resolution such rules and regulations for the conduct of meetings of shareholders as it
shall deem appropriate. Except to the extent inconsistent with law or such rules and regulations as adopted by the Board, the chairman of any meeting of shareholders shall have the right and authority
to prescribe such rules, regulations, and procedures, and to do all such acts, as in the judgment of such chairman are appropriate for the proper conduct of the meeting. Such rules, regulations, or
procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business
for the meeting and announcement of the date and time of the opening and closing of the polls for each matter upon which the shareholders will vote at the meeting; (b) rules and procedures for
maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to shareholders, their duly authorized proxies, or such other
persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted
to questions or comments by participants; and (f) appointment of inspectors of election and other voting procedures. Unless and to the extent determined otherwise by the Board or the chairman
of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 2.14. Joint Owners Of Stock. If shares or other securities
having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting
shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if
more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally. If the instrument filed with the Secretary shows
that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1. Number. Except as may be otherwise provided in the
Certificate of Formation and subject to the rights of holders of any series of Preferred Stock, the entire Board shall
consist of one (1) or more directors, the total number thereof shall be authorized first by the incorporator of the Corporation and thereafter from time to time solely by resolution of the
Board. Each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal. Directors need not be shareholders of the Corporation.
Section 3.2. Resignations and Vacancies.
(a) Any
director may resign at any time upon notice given in writing or by electronic transmission to the Corporation; provided, however, that if such notice is
given by electronic transmission, such electronic transmission
must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the director. A resignation is effective when the resignation
is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Acceptance of such resignation shall not be necessary to
make it effective. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided
B-11
Table of Contents
in
the Certificate of Formation or these Bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
(b) Subject
to the rights of holders of any series of Preferred Stock with respect to the election of directors, and except as otherwise provided in the TBOC, vacancies
occurring on the Board for any reason and newly created directorships resulting from an increase in the authorized number of directors shall be filled only by vote of a majority of the remaining
members of the Board, although less than a quorum, or by a sole remaining director, at any meeting of the Board. A person so elected by the Board to fill a vacancy or newly created directorship shall
hold office until the next election of the class for which such director shall have been assigned by the Board and until his or her successor shall be duly elected and qualified, or until such
director's earlier death, resignation, or removal.
Section 3.3. Meetings. The Board may by resolution provide for
regular meetings to be held at such times and places as it may determine, and such meetings may be held without further
notice. Special meetings of the Board may be called by the Chairman, the Chief Executive Officer, the President, or by not less than a majority of the directors then in office. Subject to
Section 7.3, notice of the time and place of such meeting shall be given by or at the direction of the person or persons calling the meeting, and shall be delivered personally, telephoned, or
sent by electronic mail or facsimile, to each director at least twenty-four (24) hours prior to the time of the meeting, or sent by First Class United States mail, postage prepaid, to each
director at such director's address as shown on the records of the Corporation, in which case such notice shall be deposited in the United States mail no later than the fourth (4th) business day
preceding the day of the meeting. Unless otherwise specified in the notice of a special meeting, any and all business may be transacted at such meeting. Meetings of the Board, both regular and
special, may be held either within or outside the State of Texas. Unless otherwise restricted by the Certificate of Formation or these Bylaws, members of the board of directors, or any committee
designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
Section 3.4. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all the directors or all
members of the committee, as the case may be, consent thereto in writing or by electronic transmission, and such writings or electronic transmissions are filed with the minutes of proceedings of the
Board or committee, as the case may be.
Section 3.5. Quorum. At any meeting of the Board, the presence of
(a) a majority of the directors then in office or (b) one-third (1/3) of the total
number of directors, whichever is greater, shall be necessary to constitute a quorum for the transaction of business. Notwithstanding the foregoing, if at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn the meeting from time to time without further notice if the time and place of the adjourned meeting are announced at the meeting at which
the adjournment is taken.
Section 3.6. Vote Necessary to Act and Participation by Conference Telephone. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board, except as may otherwise be provided by
law, the Certificate of Formation, or these Bylaws. Participation in a meeting by conference telephone or similar means by which all participating directors can hear each other shall constitute
presence in person at such meeting.
Section 3.7 Fees and Compensation of Directors. Unless otherwise
restricted by the Certificate of Formation or these Bylaws, the Board shall have the authority to fix the compensation of directors.
B-12
Table of Contents
Section 3.8. Executive and Other Committees.
(a) The
Board may by resolution designate an Executive Committee and/or one or more other committees, each committee to consist of two (2) or more directors, except
that the Executive Committee, if any, shall consist of not less than (3) directors. Any such committee, to the extent provided in such resolution or in these Bylaws, shall have and may exercise
the powers and authority of the Board in the management of the business and affairs of the Corporation, except in reference to powers or authority expressly forbidden such committee by law, and may
authorize the seal of the corporation to be fixed to all papers that may require it.
(b) During
the intervals between meetings of the Board, the Executive Committee, unless restricted by resolution of the Board, shall possess and may exercise, under the
control and direction of the Board, all of the powers of the Board in the management and control of the business of the Corporation to the fullest extent permitted by law. All action taken by the
Executive Committee shall be reported to the Board at its first meeting thereafter and shall be subject to revision or rescission by the Board; provided, however, that rights of third parties shall not be affected by any such action by the Board.
(c) If
any member of any such committee other than the Executive Committee is absent or disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified
member.
(d) Any
such committee shall meet at stated times or on notice to all of its own number. It shall fix its own rules of procedure. A majority shall constitute a quorum, but
the affirmative vote of a majority of the whole committee shall be necessary to act in every case.
Section 3.9. Indemnification.
(a) General. This Section 3.9 is intended to provide, to the fullest extent permitted by law,
indemnification and advancement of expenses to each "Indemnified Person"
as defined below. If any provision of this Article or the application of this Article to any person or circumstance shall be found to be invalid or unenforceable, the remainder of this Article or the
application of this Article to any person or circumstance which is not invalid or unenforceable shall not be affected, and each provision of this Article shall be valid and enforced to the fullest
extent permitted by law.
(b) Indemnified Persons. Throughout this Section 3.9, "Indemnified Person" shall mean any individual or
firm who is or was a director, advisory director, officer or employee of the
Company, including any individual or firm who is or was serving at the request of the Company as a director, advisory director, officer, partner, trustee, administrator or employee of any
majority-owned subsidiary or an employment benefit plan of the Company. An "Indemnified Person" shall also include any person entitled to mandatory indemnification under Applicable Law.
(c) Right to Indemnification. Without limiting the generality of Section 1 of this Section 3.9, to
the fullest extent permitted by, and in accordance with the procedures
established by Applicable Law, the Company shall indemnify any Indemnified Person against any liabilities, judgments, penalties (including excise and similar taxes), fines, settlements, and reasonable
expenses actually incurred by the Indemnified Person in connection with any proceeding in which the Indemnified Person was, is, or is threatened to be made a named defendant or respondent because of
the Indemnified Person's service to the Company or at the Company's request.
(d) Advancement of Expenses. Without limiting the generality of Section 1 of this Section 3.9, to
the fullest extent permitted by, and in accordance with the procedures
established by Applicable Law, the reasonable expenses of an Indemnified Person who was, is, or is threatened to be made a named defendant or respondent in a proceeding for which indemnification shall
be provided pursuant
B-13
Table of Contents
to
this Section 3.9 shall be paid or reimbursed by the Company in advance of the final disposition of the proceeding. Further, the Company shall pay or reimburse expenses actually incurred by
an Indemnified Person in connection with his or her appearance as a witness or other participation in a proceeding arising out of the Indemnified Person's service to the Company or at the Company's
request, whether or not the Indemnified Person is a named defendant or respondent in the proceeding.
(e) Changes in Law. This Section 3.9 shall be deemed to incorporate by reference any future amendments,
additions to, or judicial or administrative interpretations of
Applicable Law that provide a fuller extent of indemnification or advancement of expenses to Indemnified Persons.
(f) Miscellaneous. The indemnification and advancement of expenses provided for in this Section 3.9 are
not exclusive of any other rights to which Indemnified Persons may be
entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Any repeal or modification of all or part of this Article by the Directors or stockholders of the
Company shall not adversely affect any right or protection of an Indemnified Person existing at the time of such repeal or modification. The right to indemnification provided under this Article shall
inure to the benefit of the heirs, administrators, executors, and assigns of any Indemnified Person. This Section 3.9 is not intended to limit, and shall not be construed as limiting, the
Company's permissive indemnification, consistent with the Applicable Law, of persons who are not Indemnified Persons.
(g) Insurance. The Company may purchase and maintain insurance, at its expense, to protect itself and any
Indemnified Person against any expense, liability or loss, whether or
not the Company would have the power to indemnify such person against such expense, liability or loss under this Section 3.9.
Section 3.10. Removal. Except as may be otherwise provided in the
Certificate of Formation and subject to the rights of holders of any series of Preferred Stock, any director or the
entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, at any meeting of shareholders called
expressly for that purpose.
Section 3.11. Chairman. The Board shall elect a Chairman from among
the directors. The Chairman shall preside at all meetings of the Board and shall perform such other duties as may be
directed by resolution of the Board or as otherwise set forth in these Bylaws.
ARTICLE 4
OFFICERS
Section 4.1. Officers Generally. The Corporation shall have the Chief
Executive Officer, the President, the Chief Financial Officer, Chief Operating Officer, the Secretary, the Treasurer and one
or more Vice Presidents, all of whom shall be chosen by the Board. The Corporation may also have one or more Assistant Secretaries, Assistant Treasurers, and other officers and agents as the Board may
deem advisable, all of whom shall be chosen by the Board. The Board may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of
offices of the Corporation at any one time unless specifically prohibited therefrom by law. All officers shall hold office for one (1) year and until their successors are selected and
qualified, unless otherwise specified by the Board; provided, however, that any officer shall be subject
to removal at any time by Board and the Board may fill any vacant officer position. The officers shall have such powers and shall perform such duties, executive or otherwise, as from time to time may
be assigned to them by the Board and, to the extent not so assigned, as generally pertain to their respective offices, subject to the control of the Board. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the Board.
B-14
Table of Contents
Section 4.2. Duties of Officers.
(a) Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the shareholders
and at all meetings of the Board, unless the Chairman of the Board has been
appointed and is present. Unless an officer has been appointed Chief Executive Officer of the Corporation, the President shall be the chief executive officer of the Corporation and shall, subject to
the control of the Board, have general supervision, direction and control of the business and officers of the Corporation. To the extent that a Chief Executive Officer has been appointed and no
President has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties commonly
incident to the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time.
(b) President. The President shall preside at all meetings of the shareholders and at all meetings of the
Board (if a director), unless the Chairman of the Board or the Chief
Executive Officer has been appointed and is present. Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and officers of the Corporation. The President shall perform other duties
commonly incident to the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time.
(c) Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account
of the Corporation in a thorough and proper manner and shall render statements of
the financial affairs of the Corporation in such form and as often as required by the Board or the President. The Chief Financial Officer, subject to the order of the Board, shall have the custody of
all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers
as the Board or the President shall designate from time to time. To the extent that a Chief Financial Officer has been appointed and no Treasurer has been appointed, all references in these Bylaws to
the Treasurer shall be deemed references to the Chief Financial Officer. The President may direct the Treasurer, if any, or any Assistant Treasurer, or the Controller or any Assistant Controller to
assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant
Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board or the President shall designate from time to
time.
(d) Chief Operating Officer. The Chief Operating Officer shall preside at all meetings of the shareholders
and at all meetings of the Board (if a director), unless the Chairman of the Board,
the Chief Executive Officer or the President has been appointed and is present. The Chief Operating Officer shall perform other duties commonly incident to the office and shall also perform such other
duties and have such other powers, as the Board, Chief Executive Officer or President shall designate from time to time.
(e) Secretary. The Secretary shall attend all meetings of the shareholders and of the Board and shall record
all acts and proceedings thereof in the minute book of the
Corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the shareholders and of all meetings of the Board and any committee thereof requiring notice. The
Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board
shall designate from time to time. The President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary,
and each Assistant Secretary shall perform other
B-15
Table of Contents
duties
commonly incident to the office and shall also perform such other duties and have such other powers as the Board or the President shall designate from time to time.
(f) Treasurer. Unless another officer has been appointed Chief Financial Officer of the Corporation, the
Treasurer shall be the chief financial officer of the Corporation and
shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often
as required by the Board, the Chief Executive Officer or the President, and, subject to the order of the Board, shall have the custody of all funds and securities of the Corporation. The Treasurer
shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board, the Chief Executive Officer or the President shall
designate from time to time.
(g) Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence
or disability of the President or whenever the office of President is
vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board or the Chief Executive
Officer, or, if the Chief Executive Officer has not been appointed or is absent, the President shall designate from time to time.
(h) Other Officers. Other officers of the Corporation shall have such powers and shall perform such duties
as may be assigned by the Board.
Section 4.3. Authority to Sign. The Board may, in its discretion,
determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the
Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where
otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation. All checks and drafts drawn on banks or other depositaries on funds to the credit of
the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board shall authorize so to do. Unless authorized or ratified by the Board or within the
agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 4.4. Voting Of Securities Owned By The Corporation. All stock
and other securities of other corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all
proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board, or, in the absence of such authorization, by the Chairman of the Board, the Chief
Executive Officer, the President, or any Vice President.
ARTICLE 5
SHARES
Section 5.1. Certificates. Shares of stock shall be represented by
certificates, provided that the Board may provide by resolution that some
or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the
Corporation. Every holder of record of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman, the Chief Executive
Officer, the President, the Chief Financial Officer, the Chief Operating Officer or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
certifying the number of shares of stock owned by such holder. Any of or all the signatures on the certificate may be a 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
B-16
Table of Contents
with
the same effect as if such person were such officer, transfer agent, or registrar at the date of issue. Each certificate representing shares of the Corporation shall state upon the face thereof:
(a) that the Corporation is organized under the laws of Texas; (b) the name of the person to whom issued; (c)the number and class of shares and the designation of the series, if any,
which that certificate represents; (d)the par value of each share represented by the certificate or a statement that the shares are without par value; (e) a conspicuous statement setting forth
restrictions on the transfer of the shares, if any.
Section 5.2. Lost, Stolen, or Destroyed Stock Certificates; Issuance of New Certificates. A new certificate or certificates shall 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. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner's legal representative, to agree to indemnify the
corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed.
Section 5.3. Transfers. Transfers of record of shares of stock of the
Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and,
in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares. The Corporation shall have power to enter into and
perform any agreement with any number of shareholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes
owned by such shareholders in any manner not prohibited by the TBOC.
Section 5.4. Registered Shareholders. 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 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 Texas.
ARTICLE 6
DIVIDENDS
Section 6.1. Declaration Of Dividends. Dividends upon the capital
stock of the Corporation, subject to the provisions of the Certificate of Formation and applicable law, if any, may be declared by the
Board pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Formation and
applicable law.
Section 6.2. Dividend Reserve. 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 Board 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 Board shall think conducive to the interests of the corporation, and the Board may modify or abolish any such reserve in the manner in which it was created.
B-17
Table of Contents
ARTICLE 7
GENERAL MATTERS
Section 7.1. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board.
Section 7.2. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board.
Section 7.3. Waiver of Notice of Meetings of Shareholders, Directors, and Committees. Any waiver of notice given by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. 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, and does object, at the beginning of such
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the
shareholders, directors, or members of a committee of the Board need be specified in a waiver of notice.
Section 7.4. Amendments to the Bylaws. Subject to the provisions of
the Certificate of Formation, the Board is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. The
shareholders also shall have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders
of any class or series of stock of the Corporation required by law or by the Certificate of
Formation, any amendment or modification of Section 2.2, Section 2.3, Section 2.7, Section 2.8, Section 3.1, Section 3.2, Section 3.9,
Section 3.10 and this Section 7.4 shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (662/3%) of the voting power of all of the
then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.
ARTICLE 8
CONSTRUCTION AND DEFINED TERMS
Section 8.1. Construction. As appropriate in context, whenever the
singular number is used in these Bylaws, the same includes the plural, and whenever the plural number is used in these
Bylaws, the same includes the singular. As used in these Bylaws, each of the neuter, masculine, and feminine genders includes the other two genders. As used in these Bylaws, "include," "includes," and
"including" shall be deemed to be followed by "without limitation".
Section 8.2. Defined Terms. As used in these Bylaws,
"Affiliates" and "associates" shall have the meanings set forth in Rule 405 under
the Securities Act.
"Board" means the board of directors of the Corporation.
"Bylaws" means these bylaws of the Corporation, as the same may be amended from time to
time.
"Certificate of Formation" means the Certificate of Formation of the Corporation, as the
same may be amended from time to time.
"Common Stock" means the common stock of the Corporation, par value $0.001 per share.
"Corporation" means Legacy Housing Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Securities Act" means the Securities Act of 1933, as amended.
"TBOC" means the Business Organization Code of the State of Texas, as the same may be
amended from time to time.
B-18
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. LEGACY HOUSING CORPORATION MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope provided. FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED PROXY THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3. X Please mark your votes like this 1. Election of Directors (1) Curtis D. Hodgson (2) Kenneth E. Shipley (3) Mark E. Bennett (4) John A. Isakson (5) Stephen L. Crawford FOR all Nominees WITHHOLD AUTHORITY (Instruction: To withhold authority to vote for any individual nominee, strike a line through that nominees name in the list above) 2. Ratification of independent registered public accounting firm. ABSTAIN FOR AGAINST FOR AGAINST ABSTAIN 3. Approval of the reincorporation of the Company from the state of Delaware to the state of Texas. CONTROL NUMBER Signature Signature, if held jointly Date , 2019 Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such.