<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MAGNETIC TECHNOLOGIES CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 16-0961159
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
770 Linden Avenue, Rochester, New York 14625
--------------------------------------------
(Address of Principal Executive Offices)
1996 STOCK OPTION PLAN
----------------------
(Full title of the plan)
Gordon H. McNeil, President and CEO
Magnetic Technologies Corporation
770 Linden Avenue
Rochester, New York 14625
(716) 385-8711
--------------
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of Securities Amount to be offering price aggregate offering Amount of
to be registered registered per share price registration fee
---------------- ---------- --------- ----- ----------------
<S> <C> <C> <C> <C>
Common Stock, $.15 125,000 shares* $4.00** $471,250** $100.00
par value,
<FN>
* Issuable upon exercises of options granted, and to be granted, to
designated employees, directors and consultants.
** Inserted solely for the purpose of calculating the registration
fee pursuant to Rule 457(h), and based upon the probable prices at
which all options granted, or which could be granted, under the
Plan could conceivably be exercised (77,500 shares @ $3.50, 22,500
shares @ $4.00, 10,000 shares @ $3.50, and 15,000 shares @ $5.00).
- ----------------------------------------------------------------------------------------------------------
</TABLE>
In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described herein.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which have been filed by Magnetic Technologies
Corporation ("the registrant") with the Securities and Exchange Commission, are
incorporated in this registration statement by reference:
(a) The registrant's latest Annual Report on Form 10-KSB for the fiscal
year ended July 31, 1996, filed pursuant to the Section 13 of the
Securities Exchange Act of 1934.
(b) All other reports filed by the registrant pursuant to Sections
13(a) or 15(d) of the Securities
Exchange Act of 1934 since July 31, 1996.
(c) The description of the registrant's Common Stock contained in the
registrant's Certificate of Incorporation as amended to date, filed as
Exhibit A to the registrant's Form 10-KSB for its fiscal year ended
July 31, 1994.
All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this registration statement and to
be part hereof from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Counsel for the registrant, Gerald B. Fincke, has no interest, nor is
to receive any interest, in connection with this registration statement in any
securities of the registrant.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a
corporation's Board of Directors to grant, or a court to award, indemnification
to a corporation's directors and officers in connection with liabilities and
expenses incurred in both derivative and nonderivative litigation under broad
circumstances (generally, where the director or officer acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation).
2
<PAGE> 3
The registrant's Certificate of Incorporation provides that the
registrant, "shall indemnify its officers, directors, employees, and agents to
the extent permitted by the General Corporation Law of Delaware". The
registrant's By-Laws repeat this right of indemnification and details the rights
of an indemnitee to bring suit to enforce the right. Therefore, the registrant's
directors and officers have broad, enforceable rights of indemnification, even
as to acts for which they might be found liable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
The following Exhibits are filed with this registration statement:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.1 Magnetic Technologies Corporation 1996 Stock Option Plan.
4.2 Stock Option Contract granting Nancy E. Williams (an employee) the right
to purchase 10,000 shares of Common Stock at a price of $3.50 per share.
Stock option contracts were concurrently granted to 11 other employees.
Each such contract provides for the same exercise price and contains
identical other terms, except the number of shares subject to the
option. The number of optioned shares varies in each contract between
2,500 and 10,000 shares. The number of optioned shares covered by the 12
employee options aggregate 77,500 shares of the Company's Common Stock.
4.3 Stock Option Contract granting G. Thomas Clark (a Director) the right to
purchase 7,500 shares of Common Stock at a price of $4.00 per share. Two
other stock option contracts were concurrently granted to Directors
Catherine D'Amico and Bernard Kozel, each such option also being for
7,500 shares and providing for the same exercise price and containing
identical other terms. The three options provide aggregate grants to
purchase 22,500 shares.
5 Opinion of counsel as to legality of the securities being issued.
23 Consent of Price Waterhouse, independent accountants.
</TABLE>
3
<PAGE> 4
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information in the registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3 or
Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
4
<PAGE> 5
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
5
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8, and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Rochester, State of New York, on December 17,
1996.
MAGNETIC TECHNOLOGIES CORPORATION
By: /s/ Gordon H. McNeil
---------------------------------------
Gordon H. McNeil, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Date: December 17, 1996 By: /s/ Gordon H. McNeil
---------------------------------------
Gordon H. McNeil, Director,
President, Principal Executive Officer
and Principal Financial Officer
Date: December 17, 1996 By: /s/ Isadore Diamond
---------------------------------------
Isadore Diamond, Director,
Chairman of the Board
Date: December 17, 1996 By: /s/ Gloria Stulb
---------------------------------------
Gloria Stulb, Principal Accounting
Officer
Date: December 17, 1996 By: /s/ G. Thomas Clark
---------------------------------------
G. Thomas Clark, Director
Date: December 17, 1996 By: /s/ Catherine D'Amico
---------------------------------------
Catherine D'Amico, Director
Date: December 17, 1997 By: /s/ Bernard Kozel
---------------------------------------
Bernard Kozel, Director
6
<PAGE> 7
Pursuant to the requirements of the Securities Act of 1933, the Plan
Administrators have duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rochester,
State of New York, on December 17, 1996.
MAGNETIC TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN
By: Members of the Compensation By: Members of the Directors Option
Committee of the Board of Directors: Committee of the Board of Directors:
/s/ G. Thomas Clark /s/ Isadore Diamond
- ------------------------------ -------------------------------------
G. Thomas Clark Isadore Diamond
/s/ Catherine D'Amico /s/ Gordon H. McNeil
- ------------------------------ -------------------------------------
Catherine D'Amico Gordon H. McNeil
/s/ Bernard Kozel
- ------------------------------
Bernard Kozel
7
<PAGE> 1
Exhibit 4.1
-----------
EXHIBIT A
MAGNETIC TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE
-------
The purpose of the Magnetic Technologies Corporation 1996 Stock Option Plan
("the Plan") is to provide, through options to purchase Magnetic Technologies
Corporation $.15 par value Common Stock ("Stock"), long-term incentives to
directors, officers, key employees and consultants responsible for the success
and growth of Magnetic Technologies Corporation and its subsidiaries ("the
Company") in order to attract and retain such persons on a competitive basis and
to further the association of their interests with those of the Company.
SECTION 2. EFFECTIVE DATE
--------------
The Plan will become effective September 13, 1996, subject to its approval
by the Shareholders of the Company prior to December 31, 1996.
SECTION 3. SHARES OF STOCK SUBJECT TO PLAN
-------------------------------
Options may be granted under the Plan to purchase in the aggregate not more
than one hundred twenty-five thousand (125,000) shares of Stock, which shares
may consist in whole or in part of either authorized but unissued shares or
treasury shares. Any shares subject to unexercised options granted under the
Plan which for any reason expire or are terminated shall be available again for
new options under the Plan.
SECTION 4. PLAN ADMINISTRATION
-------------------
The Plan shall be administered by two Committees of the Company's Board of
Directors ("the Plan Administrator Committee(s)"): (1) the Compensation
Committee - with respect to options granted to the Company's officers, key
employees and consultants; and (2) a Directors Option Committee - with respect
to options granted to directors who are not officers or employees. Each
Committee shall have not less than two director members, all of whom shall be
"disinterested persons" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 ("the 1934 Act").
Each Plan Administrator Committee shall select the persons to whom options
may be granted and determine the number of shares of Stock to be granted to each
such optionee. Subject to the provisions of the Plan, each Plan Administrator
Committee shall have the authority to determine the other terms of options
granted under the Plan (which need not be uniform), to establish and rescind
rules and regulations as it deems necessary for the administration of the Plan
and to correct any defects and reconcile any inconsistency in any option granted
under the Plan as it deems necessary. All determinations of a Plan Administrator
Committee shall be by a majority of its members, and shall be final. No member
of a Plan Administrator Committee shall be liable for any action taken in good
faith with respect to the Plan or any option granted under the Plan.
The expenses of administering the Plan shall be paid by the Company. Each
option granted under the Plan shall be evidenced by a written contract executed
by both the Company and the optionee.
1
<PAGE> 2
SECTION 5. ELIGIBILITY AND SELECTION PROCESS
---------------------------------
Persons eligible to receive options under the Plan will consist of the
Company's directors, officers, key employees and consultants. The Plan
Administrator Committees will take into account the duties of prospective
optionees and their past and potential contributions to the Company in making
determinations as to the persons to be selected for option grants, the number of
shares of Stock to be included in each option and the other terms of the option.
The Compensation Committee will determine the participation of, and make
grants under the Plan to, the Company's officers, key employees and consultants,
including officers who are directors, and will determine whether each option
shall be an Incentive Stock Option [being an option in compliance with the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
("the Code") or any successor section] or a Non-Qualified Stock Option [being an
option not intended to meet the requirements of an Incentive Stock Option].
The Directors Option Committee will determine the participation of, and
make grants under the Plan to, directors who are not officers or employees of
the Company. All of such options shall be Non-Qualified Stock Options (as
defined above).
SECTION 6. PROVISIONS TO BE CONTAINED IN ALL STOCK OPTIONS
-----------------------------------------------
Each option granted under the Plan will contain the following provisions:
A. The exercise price shall be an amount not less than 100% of
the fair market value of the Stock as determined by the Plan
Administration Committee on the date the option is granted.
B. The period in which the option may be exercised shall not
exceed ten years from the date of the option grant.
C. The option may be exercised only by the optionee during the
optionee's lifetime, and the option will not be transferable by the
optionee other than by will or the laws of descent and distribution.
D. The optionee's agreement to make no disposition of the
Stock acquired upon the exercise of the option within a period of six
months after the date of the option grant.
E. In the cases of optionees who are employees, if an
optionee's employment with the Company is terminated for any reason,
then the option will expire if not exercised within three months after
such termination of employment. Notwithstanding the foregoing, if the
Compensation Committee determines that the optionee's employment was
terminated by reason of fraudulent, dishonest or disloyal conduct, then
the optionee will forfeit all rights under the option immediately upon
discharge from the Company's employment.
F. The optionee will have no rights as a shareholder of the
Company until the optionee has complied with all of the option exercise
terms, including full payment for the Stock purchased, and the
certificates of stock representing the Stock so purchased have been
issued to the optionee.
2
<PAGE> 3
SECTION 7. INCENTIVE STOCK OPTIONS
-----------------------
In addition to the provisions contained in Section 6 hereof, each Incentive
Stock Option granted under the Plan will contain the following provisions and
such other provisions as may be necessary to qualify as an Incentive Stock
Option under Section 422 of the Code:
A. In the event that the optionee owns more than 10% of the
Company's outstanding Stock (as defined in the Code and the regulations
thereunder) on the date the option is granted, then the exercise price
shall be not less than 110% of the fair market value of the Stock on
the grant date and the exercise period shall not exceed five years from
the grant date.
B. The aggregate fair market value of Stock (determined at the
date that the option is granted) with respect to which the option is
exercisable for the first time by the optionee during any calendar year
shall not exceed $100,000.
C. The optionee's agreement to make no disposition of the
Stock acquired upon the exercise of the option which would be deemed to
be a "disqualifying disposition" under Section 422 of the Code
(currently, any sale within two years from the option grant date or one
year from the exercise date); and, in the event that the optionee makes
a disqualifying disposition so as to require the withholding of
federal, State or local taxes (including social security taxes), the
optionee's agreement to promptly pay to the Company the amount of such
taxes if the Company is unable to withhold the necessary sums from
monies due to the optionee.
D. Such other provisions as determined by the Compensation
Committee.
SECTION 8. NON-QUALIFIED STOCK OPTIONS
---------------------------
In addition to the provisions contained in Section 6 hereof, each
Non-Qualified Stock Option granted under the Plan will contain the following
provisions:
A. In the cases of optionees who are employees, the optionee's
agreement to pay to the Company upon exercise of the option all
federal, State and local taxes (including social security taxes)
required to be withheld and, alternatively, to permit the Company, at
its sole discretion, to withhold from the Stock to be issued to the
optionee that number of shares at their then fair market value which
would satisfy the amount of taxes to be withheld.
B. Such other provisions as determined by the Compensation
Committee or the Directors Option Committee, as the case may be.
SECTION 9. ADJUSTMENTS FOR CHANGE OF SHARES
--------------------------------
The aggregate number and kind of shares of Stock available for options
under the Plan and subject to any outstanding option under the Plan, and the
exercise price of each outstanding option, shall be adjusted for any change in
the Stock resulting from a stock dividend or recapitalization (including a stock
split, merger, combination or exchange of shares; but excluding the Company's
issuance, sale or purchase of shares of Stock for money, services or property).
3
<PAGE> 4
SECTION 10. RIGHT OF COMPANY TO CANCEL OPTIONS
----------------------------------
The Company shall have the right to cancel any unexercised options granted
under the Plan at any time, without cause, upon a vote of the Company's Board of
Directors, which right may be exercised as to one or more optionees; provided
that, if exercised with respect to any optionee, all of the option grants held
by such optionee shall be canceled. Should the Company determine to cancel any
such option, it shall pay to the optionee a purchase price equal to the
difference between the exercise price of the option and the value of the
optioned Stock on the effective date of the Company's purchase as established in
the notice from the Company to the optionee; provided, however, that in no event
shall the purchase price be less than zero.
SECTION 11. TERMINATION AND AMENDMENT OF THE PLAN
-------------------------------------
The Plan will automatically terminate on July 31, 2006, and no options
shall be granted under the Plan thereafter. The Company's Board of Directors may
at any time amend or terminate the Plan provided that no amendment shall apply
to adversely affect the rights of any optionee with respect to an option already
granted and no amendment shall be made without shareholder approval which would
(a) increase the aggregate number of shares of Stock for which options may be
granted (except pursuant to Section 9 hereof), (b) change the eligibility
requirements for persons entitled to receive options, (c) extend the Plan
termination date, (d) reduce the minimum option exercise price specified herein,
(e) extend the maximum period during which an option may be exercised specified
herein, (f) otherwise materially increase benefits accruing to eligible persons
or (g) effect a change prohibited by Section 16(b) of the 1934 Act absent
shareholder approval.
SECTION 12. MISCELLANEOUS
-------------
A. The granting of options under the Plan shall be at the sole
discretion of the Plan Administrator Committees. The adoption of the
Plan shall not be construed to give any eligible person hereunder any
right to participate in the Plan or to receive options hereunder. The
granting of an option hereunder, and the execution of a Stock Option
Contract in connection with such grant, shall not be construed to
constitute an understanding or agreement, express or implied, on the
part of the Company to employ any optionee for any specified period of
time.
B. The Plan and options granted under the Plan will be subject
to all federal and State statutes, rules and regulations, including
securities laws. If, in the opinion of the Company's counsel, the
issuance, sale or transfer of shares of Stock under the Plan is not
lawful for any reason, the Company will not be obligated to issue, sell
or transfer the Stock notwithstanding conflicting provisions of the
Plan or any Stock Option Contracts entered into under the Plan.
C. The Company will be under no obligation to reserve shares
to fill options granted under the Plan. The Company will be deemed to
have complied with the terms of the Plan if, at the time of issuance of
an option under the Plan, it has a sufficient number of authorized and
unissued shares of Stock or treasury Stock which may be appropriated
and issued for that purpose.
D. The Plan and Stock Option Contracts entered into under the
Plan will be construed and enforced in accordance with the laws of the
State of Delaware.
4
<PAGE> 1
EXHIBIT 4.2
STOCK OPTION CONTRACT
THIS STOCK OPTION CONTRACT made by and between MAGNETIC TECHNOLOGIES
CORPORATION, having its offices located at 770 Linden Avenue, Rochester, New
York 14625 ("the Company") and NANCY E. WILLIAMS residing at 134 Wimbledon Road,
Rochester, New York 14617 ("the Employee").
WHEREAS, the Company's Board of Directors has adopted the "1996 Stock
Option Plan" ("the Plan"), under which an Incentive Stock Option ("ISO") may be
issued to the Employee pursuant to Section 422 of the Internal Revenue Code of
1986, as amended ("the Code"); and
WHEREAS, the Compensation Committee of the Company's Board of Directors
has determined that it is desirable to provide an incentive to the Employee to
maintain an employment relationship with the Company by enabling the Employee to
share in the success of the Company through an equity interest; and
WHEREAS, in the judgment of the Company's Board of Directors, the fair
market value of the Company's Common Stock on September 12, 1996 (the day before
this Stock Option Contract was authorized) was $3.50 per share;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the Company hereby grants to the Employee a stock
option in the form of an ISO to purchase an aggregate of ten thousand (10,000)
shares of the Company's $.15 par value Common Stock ("the Shares") at a price of
Three Dollars and Fifty Cents ($3.50) per Share, pursuant to the terms and
conditions of this Contract and of the Plan (the terms of the Plan are
incorporated by reference within this Contract).
1. EXERCISE TERM. The term of this stock option (that is, the period
during which it may be exercised by the Employee in whole or in part) will
expire upon the earliest to occur of the following dates: (a) September 12,
2006; (b) three (3) months after the termination of the employee's employment
with the Company for any reason including death or disability; (c) pursuant to
any of the provisions of the Plan; or (d) upon the mutual written agreement of
the Company and the Employee. Notwithstanding the foregoing clause (b), if the
Compensation Committee determines that the Employee's employment was terminated
by reason of fraudulent, dishonest or disloyal conduct, then the Employee will
forfeit all rights to exercise this stock option immediately upon discharge from
the Company's employment.
2. NON-ASSIGNABILITY. This stock option may be exercised only by the
Employee during the Employee's lifetime, and the rights granted under this
Contract may not be assigned, pledged or transferred by the Employee, except by
Will or the laws of descent and distribution.
3. ADJUSTMENTS FOR CHANGE OF SHARES. The aggregate number and kind of
Shares issuable under this Contract, and the exercise price of this stock
option, shall be adjusted for any change in the Shares resulting from a stock
dividend or recapitalization (including a stock split, merger, combination or
exchange of Shares; but excluding the Company's issuance, sale or purchase of
Shares for money, services or property).
<PAGE> 2
4. EXERCISE PROCEDURE. In order to exercise the stock option granted
hereunder, in whole or in part, the Employee must give written notice to the
Company, directed to its Secretary at its principal office, such notice to
specify the number of Shares being purchased and the purchase price being paid
therefor, accompanied by payment in full of such purchase price.
A. In addition, if the Shares are not then registered under
the Securities Act of 1933 ("the Act"), the Employee shall concurrently
tender a letter to the Company containing, in form and substance
satisfactory to counsel for the Company, written acknowledgments,
representations and covenants by the Employee with respect to such
limitations on the transferability of the Shares as counsel for the
Company may in its sole discretion determine to be in effect at that
time by reason of such non-registration of the Shares, including the
Employee's (i) acknowledgment that the Shares are being purchased under
a claim of exemption from registration under the Act as a transaction
not involving a public offering, (ii) representations and warranties
that the Shares are being acquired for investment purposes and not with
a view to the distribution thereof, and (iii) agreement not to
transfer, encumber or dispose of the Shares unless (x) a registration
statement with respect to the Shares shall be effective under the Act
and there shall have been compliance with applicable state laws or (y)
in compliance with Rule 144 or some other exemption from registration
under the Act.
B. The Company will issue stock certificate(s) to the Employee
representing the Shares purchased by the Employee hereunder as soon as
practical after the Company's receipt of the aforementioned notice and
payment, including clearance of funds. Each such certificate shall
contain such restrictive legends as may be established by counsel for
the Company evidencing the aforementioned transfer restrictions. The
Employee will acquire rights as a stockholder of the Company with
respect to the Shares so purchased upon the date of the issuance of
such stock certificate(s).
5. LIMITATIONS ON DISPOSITIONS OF THE SHARES. The Employee agrees to
comply with the following restrictions with respect to subsequent disposition of
any Shares acquired by reason of the Employee's exercise of this stock option:
A. The Employee will make no disposition of the Shares within
a period of six (6) months from the date of this Contract.
B. The Employee will make no disposition of the Shares which
would be deemed to be a "disqualifying disposition" under Section 422
of the Code (currently, any sale within two years from the option grant
date or one year from the exercise date); and, in the event that the
Employee makes a disqualifying disposition so as to require the
withholding of federal, State or local taxes (including social security
taxes), the Employee agrees to promptly pay to the Company the amount
of such taxes if the Company is unable to withhold the necessary sums
from monies due to the Employee.
6. NO GUARANTEE OF EMPLOYMENT. The granting of this stock option, and
the execution of this Contract in connection therewith, shall not be construed
to constitute an understanding or agreement, express or implied, on the part of
the Company to employ the Employee for any specified period to time.
<PAGE> 3
7. VESTING OF EXERCISE RIGHTS. The Employee's rights to exercise this
stock option shall vest at the rate of twenty five percent (25%) per year for
each of the Company's four fiscal years ending July 31, 1997, July 31, 1998,
July 31, 1999 and July 31, 2000; therefore, provided that the rights of the
Employee to exercise this stock option shall not have expired or been terminated
pursuant to the provisions of Paragraph 1 of this Contract as of any exercise
date, the Employee may exercise rights to purchase up to a total of: 25% of the
Shares from and after July 31,1997; 50% of the Shares from and after July 31,
1998; 75% of the Shares from and after July 31, 1999; and 100% of the Shares
from and after July 31, 2000. Notwithstanding the foregoing, the Employee's
rights to exercise this stock option will accelerate and become fully vested in
the event of, and upon, the occurrence of any of the following events: (a) the
death or permanent disability of the Employee (but still exercisable only for
three months after such event, per Paragraph 1 of this Contract); (b) the sale
of eighty percent (80%) or more of the outstanding shares of Common Stock of the
Company; (c) the merger of the Company with one or more other corporations in
which one of the other corporations is the surviving legal entity; or (d) the
sale of substantially all of the assets of the Company.
8. NO RESERVATION OF SHARES. Because of the substantial conditions
which must be met to entitle the Employee to exercise the stock option rights
hereunder, the Company is under no obligation to reserve the Shares under this
Contract, and no particular portion of the Company's Common Stock will be
construed as optioned or reserved for the Employee pursuant to this Contract.
The Company will be deemed to have complied with the terms of this Contract if,
at the time of the Employee's exercise of this stock option, the Company has a
sufficient number of authorized and unissued Shares or treasury Shares available
for such purpose.
9. RIGHT OF COMPANY TO CANCEL OPTIONS. The Company retains the right to
cancel any unexercised options granted under this Contract at any time, without
cause, upon a vote of the Company's Board of Directors. Should the Company
determine to cancel any such option, it shall pay to the Employee a purchase
price equal to the difference between the exercise price of this stock option
and the value of the Shares on the effective date of the Company's purchase as
established in the notice from the Company to the Employee; provided, however,
that in no event shall the purchase price be less than zero.
10. LEGAL RESERVATION. This Contract and the Plan are subject to all
federal and State statutes, rules and regulations, including securities laws.
If, in the opinion of the Company's counsel, the issuance, sale or transfer of
Shares under this Contract is not lawful for any reason, the Company will not be
obligated to issue, sell or transfer the Shares notwithstanding conflicting
provisions of this Contract or the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of September 13, 1996, in several counterparts, each of which shall be
considered to be an original and at least one of which has been delivered to
each party hereto.
MAGNETIC TECHNOLOGIES
CORPORATION EMPLOYEE:
By: /s/ Gordon H. McNeil By: /s/ Nancy E. Williams
---------------------------- -----------------------------
Gordon H. McNeil President Nancy E. Williams
<PAGE> 1
EXHIBIT 4.3
STOCK OPTION CONTRACT
THIS STOCK OPTION CONTRACT made by and between MAGNETIC TECHNOLOGIES
CORPORATION, having its offices located at 770 Linden Avenue, Rochester, New
York 14625 ("the Company") and G. THOMAS CLARK, residing at 1492 East Avenue,
Rochester, New York 14610 ("the Director").
WHEREAS, the Company's Board of Directors and stockholders
have adopted the "1996 Stock Option Plan" ("the Plan"), under which a
Non-Qualified Stock Option may be issued to the Director (that is an
option not intended to meet the requirements of an Incentive Stock
Option under Section 422 of the Internal Revenue Code of 1986); and
WHEREAS, the Directors Option Committee of the Company's Board
of Directors has determined that it is desirable to provide an
incentive to the Director to serve as a member of the Company's Board
of Directors by enabling the Director to share in the success of the
Company through an equity interest; and
WHEREAS, in the judgment of the Company's Board of Directors,
the fair market value of the Company's Common Stock on December 16,
1996 (the day before this Stock Option Contract was authorized) was
$4.00 per share;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the Company hereby grants to the Director a stock
option to purchase an aggregate of seven thousand five hundred (7,500) shares of
the Company's $.15 par value Common Stock ("the Shares") at a price of Four
Dollars ($4.00) per Share, pursuant to the terms and conditions of this Contract
and of the Plan (the terms of the Plan are incorporated by reference within this
Contract).
1. EXERCISE TERM. The term of this stock option (that is, the period
during which it may be exercised by the Director in whole or in part) will
commence on January 1, 1997, and will expire upon the earliest to occur of the
following dates: (a) December 16, 2006; (b) pursuant to any of the provisions of
the Plan or this Contract; (c) upon the mutual written agreement of the Company
and the Director or (d) upon the occurrence of, and in accordance with, the any
of the following events:
A. This stock option may be exercised during the Director's
lifetime only if, at all times beginning on the date hereof and ending
three (3) months before the exercise date, the Director is a member of
the Company's Board of Directors; provided, however, that, if such
directorship becomes terminated by reason of the Director's disability,
the three-month period after the cessation of the directorship during
which this stock option may be exercised will instead be a period of
one (1) year, but no event later than December 16, 2006.
B. In the event that the Director shall die prior to the
complete exercise of all rights under this Contract, the then
unexercised portion of this stock option may be exercised in whole or
in part for a period of six (6) months after the date of the Director's
death, either by the Director's estate or by or on behalf of such
persons to whom the Director's rights hereunder shall pass under the
Director's Will or the laws of descent and distribution, but in no
event later than December 16, 2006.
<PAGE> 2
2. NON-ASSIGNABILITY. This stock option may be exercised only by the
Director during the Director's lifetime, and the rights granted under this
Contract may not be assigned, pledged or transferred by the Director, except by
Will or the laws of descent and distribution as set forth in Paragraph 1 hereof.
3. ADJUSTMENTS FOR CHANGE OF SHARES. The aggregate number and kind of
Shares issuable under this Contract, and the exercise price of this stock
option, shall be adjusted for any change in the Shares resulting from a stock
dividend or recapitalization (including a stock split, merger, combination or
exchange of Shares; but excluding the Company's issuance, sale or purchase of
Shares for money, services or property).
4. EXERCISE PROCEDURE. In order to exercise the stock option granted
hereunder, in whole or in part, the Director (all references to the Director in
this Paragraph 4 will mean and include any party acting on behalf of the
Director's estate) must give written notice to the Company, directed to its
Secretary at its principal office, such notice to specify the number of Shares
being purchased and the purchase price being paid therefor, accompanied by
payment in full of such purchase price.
A. In addition, if the Shares are not then registered under
the Securities Act of 1933 ("the Act"), the Director shall concurrently
tender a letter to the Company containing, in form and substance
satisfactory to counsel for the Company, written acknowledgments,
representations and covenants by the Director with respect to such
limitations on the transferability of the Shares as counsel for the
Company may in its sole discretion determine to be in effect at that
time by reason of such non-registration of the Shares, including the
Director's (i) acknowledgment that the Shares are being purchased under
a claim of exemption from registration under the Act as a transaction
not involving a public offering, (ii) representations and warranties
that the Shares are being acquired for investment purposes and not with
a view to the distribution thereof, and (iii) agreement not to
transfer, encumber or dispose of the Shares unless (x) a registration
statement with respect to the Shares shall be effective under the Act
and there shall have been compliance with applicable state laws or (y)
in compliance with Rule 144 or some other exemption from registration
under the Act.
B. The Company will issue stock certificate(s) to the Director
representing the Shares purchased by the Director hereunder as soon as
practical after the Company's receipt of the aforementioned notice and
payment, including clearance of funds. Each such certificate shall
contain such restrictive legends as may be established by counsel for
the Company evidencing the aforementioned transfer restrictions. The
Director will acquire rights as a stockholder of the Company with
respect to the Shares so purchased upon the date of the issuance of
such stock certificate(s).
5. NO RESERVATION OF SHARES. Because of the substantial conditions
which must be met to entitle the Director to exercise the stock option rights
hereunder, the Company is under no obligation to reserve the Shares under this
Contract, and no particular portion of the Company's Common Stock will be
construed as optioned or reserved for the Director pursuant to this Contract.
The Company will be deemed to have complied with the terms of this Contract if
at the time of the Director's exercise of this stock option, the Company has a
sufficient number of authorized and unissued Shares or treasury Shares available
for such purpose.
<PAGE> 3
6. LIMITATIONS ON DISPOSITIONS OF THE SHARES. The Director agrees not
to make any subsequent disposition of any Shares acquired by reason of the
Director's exercise of this stock option for a period of six (6) months from and
after the date of this Contract.
7. RIGHT OF COMPANY TO CANCEL OPTIONS. The Company retains the right to
cancel any unexercised options granted under this Contract at any time, without
cause, upon a vote of the Company's Board of Directors. Should the Company
determine to cancel any such option, it shall pay to the Director a purchase
price equal to the difference between the exercise price of this stock option
and the value of the Shares on the effective date of the Company's purchase as
established in the notice from the Company to the Director; provided, however,
that in no event shall the purchase price be less than zero.
8. LEGAL RESERVATION. This Contract and the Plan are subject to all
federal and State statutes, rules and regulations, including securities laws.
If, in the opinion of the Company's counsel, the issuance, sale or transfer of
Shares under this Contract is not lawful for any reason, the Company will not be
obligated to issue, sell or transfer the Shares notwithstanding conflicting
provisions of this Contract or the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of December 17, 1996, in several counterparts, each of which shall be considered
to be an original and at least one of which has been delivered to each party
hereto.
MAGNETIC TECHNOLOGIES
CORPORATION
By: /s/ Gordon H. McNeil
-------------------------------
Gordon H. McNeil, President
THE DIRECTOR:
By: /s/ G. Thomas Clark
-------------------------------
G. Thomas Clark
<PAGE> 1
GERALD B. FINCKE
ATTORNEY AT LAW
2300 E. GRAVES AVENUE
ORANGE CITY, FLORIDA 32763
(904) 775-0221
(904) 775-1343 (FAX)
EXHIBIT 5
February 25, 1997
The Board of Directors
Magnetic Technologies Corporation
770 Linden Avenue
Rochester, New York 14625
Lady and Gentlemen:
As counsel for Magnetic Technologies Corporation ("the Company"), I have been
asked to render my opinion to you concerning the issuance of Stock Option
Contracts pursuant to the Company's 1996 Stock Option Plan ("the Plan"), under
which options to purchase up to an aggregate of 100,000 shares of the Company's
Common Stock have been granted to three of the Company's Directors and 12 of its
key employees ("the Contracts").
In rendering my opinion, I have reviewed the Plan, the Contracts, the Minutes of
the meetings of the Board of Directors and Shareholders of the Company
authorizing the Plan, the actions of the respective Committees of the Board of
Directors which authorized various of the Contracts and a Form S-8 Registration
Statement prepared for filing with the Securities and Exchange Commission, and I
have made such other investigations and inquiries as I have deemed advisable.
Based upon the foregoing, it is my opinion that:
1. The Plan was validly authorized by the Company's Board of Directors
and Shareholders under Delaware law.
2. The Contracts were validly authorized by the requisite Committees of
the Board of Directors as authorized by the Plan and Delaware law.
3. The shares of the Company's Common Stock to be issued upon the
exercise of the options under the terms of the Contracts will, upon
issuance of the shares to the optionees and upon subsequent sale
thereof by the optionees, be legally issued, fully-paid and
non-assessable, without any further action by the Company's Board of
Directors.
This opinion letter may be used by the Company as an exhibit to the
aforementioned S-8 Registration Statement.
Very truly yours,
/s/ Gerald B Fincke
- --------------------------
Gerald B Fincke
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-8 of Magnetic
Technologies Corporation of our report, dated September 30, 1996 appearing on
page 13 of Magnetic Technologies Corporation's Annual Report on Form 10-KSB for
the year ended July 31, 1996.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
- ----------------------------
Rochester, New York
February 28, 1997
