WATER-JEL TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of WATER-JEL
TECHNOLOGIES, INC. (the 'Company') will be held at The Meadowlands Hilton, Two
Harmon Plaza, Secaucus, New Jersey on February 20, 1998 at 10:00 A.M. for the
following purposes as set forth in the accompanying Proxy Statement:
1. To elect three directors to serve for a term of one year;
2. To approve the creation of a new 1998 Stock Option Plan authorizing
the Company to issue options to acquire up to 2,000,000 shares of the
Company's Common Stock to directors, officers, employees and others who
render services to the Company.
3. To approve the merger of the Company into a Delaware subsidiary in
order to effect the change of the Company's state of incorporation from New
York to Delaware.
4. To approve amendments to the Company's Certificate of Incorporation
to:
(a) Change the Company's name to X-Ceed, Inc. and
(b) Increase the amount of Common Stock which the Company is
authorized to issue to 30,000,000 shares with a par value of $.01 per
share.
5. To ratify the selection and appointment by the Company's Board of
Directors of Holtz Rubenstein & Co. LLP, independent certified public
accountants, as auditors for the Company for the fiscal year ending August
31, 1998; and
6. To transact such other business as may properly come before the
meeting or any adjournments thereof.
If both proposals 3 and 4 are approved, the actions contemplated by proposal
4 will be effected through the merger reincorporating the Company in Delaware.
Holders of record of the Company's Common Stock at the close of business on
December 31, 1997, will be entitled to vote at the meeting.
By Order of the Board of Directors
WERNER G. HAASE
Chairman
Dated: December 31, 1997
Whether or not you plan to attend the meeting, please date and sign the
enclosed proxy and return it in the envelope provided. Any person giving a proxy
has the power to revoke it at any time prior to its exercise and if present at
the meeting may withdraw it and vote in person. Attendance at the meeting is
limited to stockholders, their proxies and invited guests of the Company.
WATER-JEL TECHNOLOGIES, INC.
488 Madison Avenue
New York, New York 10022
-------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 20, 1998
-------------------
PROXY STATEMENT
-------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies to be voted at the Annual Meeting of Stockholders
of the Company to be held at The Meadowlands Hilton, Two Harmon Plaza, Secaucus,
New Jersey at 10:00 A.M. on February 20, 1998 and at any adjournments thereof.
The shares represented by proxies that are received in the enclosed form and
properly filled out will be voted in accordance with the specifications made
thereon. In the absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to the proposals
described in this Proxy Statement. Proxies may be revoked by stockholders by
written notice received by the Secretary of the Company at the address set forth
above, at any time prior to the exercise thereof. Stockholders of record at the
close of business on December 31, 1997 are entitled to notice of and to vote at
the Annual Meeting or any adjournments thereof. The Company's only class of
voting securities is its Common Stock, par value $.08 per share, of which
7,043,180 shares were outstanding as of December 17, 1997.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed form of proxy,
unless such proxy specifies otherwise, to nominate and to vote the shares
represented by such proxy for the election of the nominees listed below to hold
office until the next Annual Meeting of Stockholders or until their respective
successors shall have been duly elected and qualified. Messrs. Werner Haase,
Norman Doctoroff and John A. Bermingham are presently directors of the Company.
The Company has no reason to believe that any of the nominees will become
unavailable to serve as directors for any reason before the Annual Meeting.
However, in the event that any of them shall become unavailable, the person
designated as proxy reserves the right to substitute another person of his
choice when voting at the Annual Meeting.
Certain information regarding each nominee is set forth in the table and
text below. The number of shares beneficially owned by each nominee is listed
below under 'Principal Stockholders and Share Ownership of Directors and
Officers.'
Werner Haase, the Company's Chairman and Chief Executive Officer, and Nurit
Kahane Haase, Senior Vice President, are married. There are no other family
relationships among directors, nominees or executive officers nor is there any
arrangement or understanding between any such director or nominee and any other
person pursuant to which any director or nominee was selected as such.
The following table sets forth the name, age and term of office as director
for each nominee for election as director and his present position(s) with the
Company:
Nominee for Election Director Since Position(s)
- ------------------------------ --------------- -----------------------------
Werner G. Haase (60).......... 1987 Chairman of the Board and Chief
Executive Officer
Norman Doctoroff (62)......... 1996 Director
John A. Bermingham (53)....... 1997 Director
Directors are elected to serve until the next annual meeting of stockholders
of the Company or until their successors are elected and qualified. The Board of
Directors held five meetings in the fiscal year ended August 31, 1997 and also
met informally and acted by written consents during the year. Officers serve at
the discretion of the Board of Directors subject to any contracts of employment.
Executive Officers
The following table sets forth the name, age and position of each executive
officer of the Company:
Name Position(s)
- ------------------------------------- ----------------------------------------
Werner G. Haase (60)................. Chairman and CEO
Nurit Kahane Haase (47).............. Senior Vice President and Secretary and
Acting President of Journeycorp Travel
Management
Other Officers
In addition to the Company's executive officers, the Company has other
officers as indicated:
Peter D. Cohen (41)....... Managing Director of Water-Jel Technologies, Inc's.
first aid division.
James Edwards (46)........ Chief Financial Officer of Water-Jel Technologies,
Inc.
Janice Goines (52)........ Managing Director and Senior Vice-President of the
Journeycorp Travel Management Division
Judith Uhl (52)........... Managing Director, TheraCom Integrated Medical
Communications, Inc.
Werner G. Haase has served as a Director of the Company since September
1987 and became Chairman and Chief Executive Officer in July, 1996 following
the acquisition of Journeycraft, Inc. ('Journeycraft') and TheraCom Integrated
Medical Communications, Inc. ('TheraCom'). For more than the past five years,
Mr. Haase has been a Director and Chief Executive Officer of Journeycraft. Mr.
Haase is also a director of PureTec Corporation, a company which manufactures
specialty plastic products and is engaged in the recycling of post consumer
plastics and plastic injection molding.
Nurit Kahane Haase became Senior Vice President of the Company in July 1996
following the acquisition of Journeycraft and TheraCom. For more than the past
five years, Mrs. Haase has been President of Journeycraft.
Norman Doctoroff was elected a Director of the Company in May 1996. Until
1995, he was President of Gemini Industries, a company engaged in the production
of consumer electronics accessories. Since then he has served as an independent
management consultant to Gemini Industries and other companies.
John A. Bermingham has served as consultant to the Company since April,
1997. Prior to that he served as president of Rolodex, Inc. for one year. From
1993 to 1996, Mr. Bermingham held the position of President and Chief Executive
Officer of AT&T Smart Card Systems and Solutions, a division of AT&T. On
November 13, 1997, Mr. Bermingham was elected to serve as an interim director of
The Company until the next annual meeting of stockholders.
Peter D. Cohen served as President and Chief Executive Officer of the
Company from May 1988 until July 1996. Since July 1996, he has served as
Managing Director of Water-Jel's first aid division. From May, 1985 until
August, 1985 he served as the Company's Vice President of Finance and from
August, 1985 until May, 1988, Mr. Cohen served as Treasurer of the Company.
Previous to that, he was employed by Holtz Rubenstein & Co. LLP, independent
public accountants.
James A. Edwards has served as the Company's Chief Financial Officer since
June, 1993. Prior to that he was employed at U.S. Travel, Inc. as a
comptroller.
Janice Goines has been employed by Journeycorp, a division of Journeycraft
since January, 1991, and as such has been responsible for the day-to-day
operations of Journeycorp. Ms. Goines was previously employed as a
Vice-President of Thomas Cook Travel, Inc. (Southern Division) from 1979 to
1990.
2
Judith Uhl has been Managing Director of TheraCom since 1992. Prior to that,
she was a director of Medical Symposia for Dragon Medical Communications, Inc.
Executive Compensation
The following table sets forth information with respect to compensation paid
by the Company for the services to the Company during the three years ended
August 31, 1997 to the Company's Chief Executive Officer and two other officers
with compensation in excess of $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------
Payouts
Awards -----------
---------------
Annual Compensation (g)
---------------------------------------------- (f) -----------
(a) (e) --------------- Securities (h)
- ------------------------ (b) (c) (d) ------------- Restricted Underlying -------------
Name and --------- --------- --------- Other Annual Stock Options/ LTIP
Principal Position Year Salary($) Bonus($) Compensation($) Awarded($) SARs(#) Payouts($)
- ------------------------ --------- --------- --------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Werner 1997 $ 500,000 $ 300,000 $ 82,152 $ 0 0 $ 0
Haase(1)(2)(3) ....... 1996 10,500 22,250 0 0 0 0
Chairman and CEO 1995
Nurit Haase(1) ......... 1997 250,000 0 0 0 0 0
Sr. Vice President 1996 10,500 63,900 0 0 0 0
1995
Yitz Grossman(4)(6) .... 1997 150,000 0 71,000 0 100,000 0
Former Chairman and 1996 139,000 45,000 15,000 0 100,000 0
Secretary 1995
Peter Cohen(5)(6) ...... 1997 111,000 0 75,000 0 100,000 0
Former President 1996 100,000 45,000 0 0 100,000 0
1995
<CAPTION>
(a) (i)
- ------------------------ -------------------
Name and All Other
Principal Position Compensation($)
- ------------------------ -------------------
<S> <C>
Werner $ 0
Haase(1)(2)(3) ....... 0
Chairman and CEO
Nurit Haase(1) ......... 0
Sr. Vice President 0
Yitz Grossman(4)(6) .... 0
Former Chairman and 0
Secretary
Peter Cohen(5)(6) ...... 0
Former President 0
- ---------
<FN>
(1) Werner Haase and Mr. Haase's wife, Nurit Kahane Haase, assumed their current
positions with the Company on July 2, 1996 following the acquisition of
Journeycraft and TheraCom. Information is given only for periods subsequent
to July 2, 1996.
(2) On November 13, 1997, the Board of Directors, Mr. Haase abstaining, awarded
a bonus of $300,000 to Mr. Haase based on the Company's performance for
fiscal 1997.
(3) Represents premiums for life insurance policies paid by the Company on
behalf of Mr. Haase.
(4) Mr. Grossman resigned from his positions with the Company effective December
12, 1996.
(5) Mr. Cohen resigned as President, Chief Executive Officer and Treasurer of
the Company effective July 2, 1996. He continues to serve as Managing
Director of the first aid division, which is not an executive officer
position.
(6) During fiscal 1996, the Company transferred certain life insurance policies
to Messrs. Grossman and Cohen which are included in 'Other Annual
Compensation.'
-------------------
</FN>
</TABLE>
The aggregate amount of personal benefits cannot be specifically or
precisely ascertained and do not, in any event, exceed $50,000 or 10% of
compensation as to any person. The Company offers health insurance to all of its
employees. At present time the Company does not have any retirement, pension,
profit sharing, or other similar programs or benefits for its executive
officers.
The Company has not paid remuneration of any nature for or on account of
services rendered by a director in such capacity.
3
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<CAPTION>
Number of Percent of Total
Securities Options/
Underlying SARs Granted to Exercise or
Options/SARs Employees in Base Price
Name Granted(#) Fiscal Year ($/Sh) Expiration Date
(a) (b) (c) (d) (e)
- ------------------------------------ ----------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
0 0 0
- ---------
<FN>
No options were granted to anyone during fiscal 1997.
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-ENDED OPTION/SAR VALUES
<CAPTION>
Number of Value of
Unexercised Unexercised
Options/SARs In-the-Money
at Options/SARs
FY-End(#) at FY-End($)
Shares Acquired Valued Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- ----------------------------------------- ------------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Werner Haase, Chairman and CEO........... 0 0 243,750 $ 354,680
-------------------
<FN>
All of the foregoing options are exercisable: 143,750 at an exercise price
of $1.52 and 100,000 at an exercise price of $2.19.
</FN>
</TABLE>
Employment Agreements
In July 1996, the Company entered into a five-year employment agreement with
Nurit Kahane Haase effective as of July 1, 1996. The agreement provides for
annual compensation of $250,000 per year. In the event of a change in control of
the Company, Mrs. Haase is entitled to receive a one-time payment equal to three
times her then current annual compensation. A change of control includes the
acquisition of over 30% of the Company's stock, the sale or transfer of over 50%
of the Company's assets, or certain mergers or other combinations.
In December 1996, the Company entered into a five-year employment agreement
with Werner Haase effective as of January 1, 1997. The agreement provides for
annual compensation of $500,000 per year as well as the maintenance of various
insurance policies. In the event of a change in control of the Company, Mr.
Haase is entitled to receive a one-time payment equal to three times his then
current annual compensation. A change of control includes the acquisition of
over 30% of the Company's stock, the sale or transfer of over 50% of the
Company's assets, or certain mergers or other combinations. Mr. Haase's
agreement also entitles him to receive bonuses at the discretion of the Board of
Directors.
Stock Option Plans
The Company has adopted three stock option plans. The Non-Qualified Stock
Option Plan ( the 'NQSO Plan') which expired on April 6, 1994 covering 187,500
shares of the Company's Common Stock, $.08 par value, pursuant to which officers
and employees of the Company were eligible to receive non-qualified stock
options. As of November 15, 1997, options to acquire 128,125 shares have been
granted under the NQSO Plan at exercise prices of $1.52 per share. All options
granted under the NQSO Plan have been at exercise prices at least equal to the
fair market value of the Common Stock on the date of grant.
Under the 1990 Stock Option Plan (the '1990 Plan') the Company may grant to
its officers, key employees and others who render services to the Company,
options to purchase up to 187,500 shares of the Company's Common Stock at a
price which may not be less than the fair market value per share in the case of
incentive stock options or 85% of fair market value in the case non-qualified
options for
4
such stock in the date of the granting of the Option. As of December 15, 1997,
options to acquire a total of 170,000 shares have been granted under the 1990
Plan at exercise prices ranging from $1.52 to $2.00 per share.
The 1995 Stock Option Plan (the '1995 Plan') operates on substantially the
same terms as the 1990 Plan except that it includes option to purchase up to
500,000 shares of the Company's Common Stock. Any options granted under the plan
expire ten years from the date of grant. The plan expires March 1, 2005. As of
November 15, 1997 all available options had been granted under the 1995 Plan and
options to acquire a total of 467,000 shares remain outstanding at an exercise
price of $2.19 per share.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 17, 1997 by: (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's officers and
directors; and (iii) all officers and directors of the Company as a group:
<TABLE>
SECURITY OWNERSHIP TABLE
<CAPTION>
Amount and
Nature of
Beneficial
Name and Address Ownership Percentage
- -------------------------------------------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Werner G. Haase(1) ..................................... 2,525,625 34.7%
488 Madison Avenue
New York, NY
Nurit Kahane Haase(1) .................................. 2,525,625 34.7
488 Madison Avenue
New York, NY
J. Morton Davis(2) ..................................... 543,389 7.7
44 Wall Street
New York, NY
William Walters ........................................ 500,000 7.0
650 Fifth Avenue
New York, NY
Seneca Associates ...................................... 400,000 5.7
56 Rechov Rochild
Bat Yam, Israel
Yitz Grossman(3) ....................................... 600,250 8.2
40 Fulton Street
New York, NY
Norman Doctoroff(4) .................................... 25,000 0.5
81 Two Bridges Road
Fairfield, NJ
All officers and directors as a group (3 persons)....... 2,560,625 35.0
- ---------
<FN>
(1) Consists of 1,131,875 shares of Common Stock owned by Mr. Haase, options to
acquire 243,750 shares held by Mr. Haase, 1,112,000 shares owned by Mrs.
Haase, and 37,500 shares held jointly by Mr. and Mrs. Haase.
(2) Consists of 161,454 redeemable Class A Common Stock Purchase Warrants
('Class A Warrants') and an option to purchase 81.6 Units owned by D.H.
Blair Investment Banking Corporation ('Blair'), of which Mr. Davis is
Chairman and sole stockholder. Each Unit entitles the holder to acquire
1,666 shares of Common Stock and 1,666 Class A Warrants. Each Class A
Warrant entitles the holder to purchase one share of Common Stock and to
receive one redeemable Class B Common Stock Purchase Warrant ('Class B
Warrants') at an exercise price of $3.00 per share
(footnotes continued on next page)
5
(footnotes continued from previous page)
exercisable prior to April 30, 1998. Each Class B Warrant entitles the
holder to purchase one share of Common Stock at $6.00 per share prior to
April 30, 1998.
(3) Includes shares issuable on exercise of options to purchase 300,000 shares
of Common Stock.
(4) Represents shares issuable on exercise of options to purchase 25,000 shares
of Common Stock.
</FN>
</TABLE>
Certain Relationships and Related Transactions
In July 1996, the Company entered into a four-year consulting agreement with
Target Capital Corp. and Yitz Grossman, which went into effect on September 1,
1996 and terminates on May 16, 2000. Mr. Grossman was Chairman and Secretary of
the Company at the time the agreement was entered into. Mr. Grossman resigned as
an officer and director of the Company in December 1996. The agreement provides
for annual compensation of $150,000 per year and an annual bonus of $30,000. Mr.
Grossman is not required to devote his full time to the Company. In the event of
a change of control of the Company, the agreement provides for a one-time
payment equal to three times the then current annual compensation. A change of
control includes the acquisition of over 30% of the Company's stock, the sale or
transfers of over 50% of the Company's assets, or certain mergers or other
combinations.
During fiscal 1997, the Company sold 50,000 shares of Mark Solutions, Inc.
('MSI') and received net proceeds of approximately $100,000. Subsequent to
fiscal 1997, the Company sold the remaining balance of 195,000 shares of common
stock and received net proceeds of approximately $740,500. Mr. Grossman, who was
a director and officer of the Company, was also a director of MSI at the time
these investments were made.
In September 1996, the Company loaned $100,000 to Multimedia Tutorial
Services, Inc, a publicly traded company of which Mr. Haase is a director. This
loan was evidenced by a note bearing interest at 8% per annum, originally
payable within 180 days of the date of loan or earlier if additional funding was
raised. In consideration for the loan, the Company received warrants to purchase
a minimum of 200,000 shares of common stock of the borrower. In May 1997, the
Company extended the maturity date of the loan until September 30, 1997. In July
1997, the Company through a limited offer converted its 200,000 warrants into
150,000 shares of common stock. As of November 30, 1997 the loan remains unpaid
and the Company is pursuing collection. However, as a result of the
deteriorating financial condition of the borrower, the Company wrote off the
receivable at August 31, 1997.
PROPOSAL NO. 2
ADOPTION OF THE 1998 STOCK OPTION PLAN
The Board has determined that the Company should adopt a new Stock Option
Plan in order to make options available to employees, officers, directors and
others who render services to the Company. Accordingly, the Board has adopted
the 1998 Stock Option Plan (the '1998 Plan') and recommends to the stockholders
that the 1998 Plan be approved.
Summary of the 1998 Plan
The Company may grant to its officers, key employees and others who render
services to the Company, options to purchase ('Options') up to 2,000,000 shares
of the Company's Common Stock at a price which may not be less than the fair
market value per share in the case of incentive stock options or 85% of fair
market value in the case of non-qualified options for such stock on the date of
the granting of the Option. Payment of the exercise price shall be made in cash,
or, with the consent of the Board, in whole or in part, in shares of Common
Stock or with a full recourse interest bearing promissory note of the Optionee
secured by a pledge of the shares received upon exercise of such Option. If an
option granted under the 1998 Plan shall expire, terminate or be canceled for
any reason without being exercised in full, the corresponding number of
unpurchased shares shall again be available for the purposes of the 1998 Plan.
Options may be granted in the form of incentive stock options or options which
do not qualify for treatment as incentive stock options.
6
The 1998 Plan will be administered by the Board of Directors (the 'Board').
The Board determines the persons who are to be granted Options based upon the
contribution of such persons to the management and growth of the Company. The
1998 Plan contains no preset criteria determining the identity or amount of
options to be granted to any person or group of persons. Therefore, no
determinations can be made at the present time as to the benefits or amounts
that will be or would have been issued to any specific person or group of
persons under the 1998 Plan. No Option may be exercised after the expiration of
10 years from the date of grant. No Option may be granted under the 1998 Plan
after March 1, 2008.
Incentive stock options are also subject to the following limitations: (i)
The aggregate fair market value (determined at the time an option is granted) of
stock with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all such plans of the
Company, its parent or subsidiary) shall not exceed $100,000, and (ii) if the
individual to whom the incentive stock options were granted is considered as
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, then (A) the option price at the time of grant
may not be less than 110% of the fair market value per share for such Common
Stock and (B) the option period must be no more than five years from the date of
grant.
Unless otherwise determined by the Board or by other provisions of the Plan,
upon the granting of any Option such Option may be immediately exercisable with
respect to 100% of the shares subject to the Option. The Board may, in its
discretion, (A) provide for the holding of such shares of Common Stock in escrow
for a period not exceeding five years, or (B) impose other restrictions on the
vesting of any Option or the vesting of any shares of Common Stock that an
Optionee receives upon exercise of any Option; provided that any and all such
restrictions shall lapse if there is a sale of (A) substantially all of the
assets or (B) 50 percent or more of the voting securities of the Company
(excluding for this purpose Company stock sold in a primary or secondary public
offering). Any restrictions the Board imposes on an Option pursuant to this
paragraph shall be specified in the stock option agreement governing such
Option.
Upon issuance of any shares of Common Stock to an optionee pursuant to the
exercise of a nonstatutory option the Company or a subsidiary may issue a
supplemental cash award to the Optionee which shall be the smaller of (a) 65% of
the difference between the fair market value of the shares and the option price,
or (b) 90% of the option price.
An individual whose employment terminates by reason other than death may
generally exercise an Option within a thirty-day (30) period, or if termination
is by reason of death, within the twelve month period after such termination,
and then only if and to the extent that such Option was exercisable at the date
of termination of employment.
The Board of Directors may, at any time, alter, suspend or terminate the
1998 Plan, except that the Board of Directors may not, without further approval
of the stockholders, (1) increase the maximum number of shares for which Options
may be granted under the 1998 Plan or which may be acquired by an individual
employee, (2) decrease the minimum purchase price for shares of Common Stock to
be issued upon exercise of Options or (3) change the class of persons eligible
to receive Options. Except in limited circumstances, the Board may not make any
change which would have a material adverse affect upon any Option previously
granted unless the consent of the Optionee is obtained. No person may be
divested of ownership of shares already issued under the 1998 Plan.
The foregoing summary of the 1998 Plan is qualified in its entirety by, and
reference is made to, the 1998 Plan, a copy of which is attached hereto as
Exhibit A.
The grant or exercise of an incentive stock option will not generally cause
recognition of income by the Optionee; however, the amount by which the fair
market value of a share of Common Stock at the time of exercise of an incentive
stock option exceeds the option price, is a 'tax preference item' for purposes
of the alternative minimum tax. In the event of a sale of the shares received
upon exercise of an incentive stock option more than two years from the date of
grant and more than one year from the date of exercise, any appreciation of the
shares received above the exercise price should qualify as long-term capital
gain. However, if shares of Common Stock acquired pursuant to the exercise of an
incentive stock option are sold by the Optionee before the completion of such
holding periods so much
7
of the gain as does not exceed the difference between the option price and the
lesser of the fair market value of the shares at the date of exercise or the
fair market value at the date of disposition will be taxable as ordinary income
for the taxable year in which the sale occurs. Any additional gain realized on
the sale should qualify as a capital gain. Although the Tax Reform Act of 1986
has eliminated the difference in tax rates between long term capital gains and
ordinary income, the concept of long term capital gains remains and may, in
certain circumstances be relevant.
The grant of an Option that is not an incentive stock option (a
'non-qualified option') should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option by an employee who is not an
officer or director or who is not otherwise subject to the provisions of Section
16(b) of the Exchange Act ('Section 16(b)'), the excess of the fair market value
of the shares on the exercise date over the option price should be considered
compensation taxable as ordinary income to the employee. If the Optionee is
subject to the restrictions of Section 16(b), income will be recognized at the
time the restrictions lapse and should be measured by the excess of the fair
market value of the shares at such time over the option price unless the
Optionee elects to be taxed at the time of exercise. In the event of a sale of
the shares, any appreciation after the date of exercise or lapse of the
restriction of Section 16(b), as the case may be, should qualify as capital
gain.
In connection with incentive stock options and non-qualified options, the
Company will be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the ordinary income recognized by the
employee provided any Federal income tax withholding requirements are satisfied.
If applicable holding period requirements in connection with an incentive stock
option are not satisfied, no deduction will be available to the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR THE 1998 STOCK OPTION PLAN
PROPOSAL NO. 3
MERGER INTO DELAWARE COMPANY
General
The Board of Directors has recommended that the Company merge (the
'Merger'), into X-Ceed, Inc., a Delaware corporation (the 'Delaware Company'),
recently organized by the Company as a wholly-owned subsidiary solely for this
purpose. Under the terms of the Merger, each outstanding share of the Company's
Common Stock $.08 par value per share will be converted into one share of the
Delaware Company's Common Stock $.01 par value per share. The Company presently
has 125,000 shares of authorized Preferred Stock $.08 par value, none of which
has been issued. Outstanding options and warrants to purchase shares of the
Company's Common Stock will be converted into options or warrants to purchase
the same number of shares of the Delaware Company's Common Stock.
The purpose of the Merger is to change the place of incorporation of the
Company from New York to Delaware, thereby enabling the Company to enjoy the
benefits of certain provisions of Delaware law that the Board of Directors
believes would be more beneficial to the Company than the comparable provisions
of New York law. The Merger would not involve any change in the business,
properties, management or capital structure of the Company except that the par
value of the Delaware Company's Common Stock will be $.01 per share instead of
$.08 per share and that the authorized Common Stock of the Delaware Company will
be 30,000,000 shares instead of 12,500,000 shares and the authorized Preferred
Stock will be 1,000,000 shares instead of 125,000 shares. The par value of the
Preferred shares will be $.05 per share instead of $.08 per share. Upon the
effective date of the Merger, the Delaware Company will be the continuing
corporation and will own all of the assets and will be responsible for all of
the liabilities of the Company.
Proposals to change the Company's name to X-Ceed, Inc. and to increase the
amount of authorized Common Stock to 30,000,000 shares, par value $.01 per
share, and the authorized Preferred Stock to 1,000,000 shares, par value $.05
per share, are being submitted separately in this Proxy Statement for
consideration at the Meeting. In the event that the Merger is approved, the
change of name and authorized stock will be accomplished in connection with the
Merger. In the event that the Merger is
8
not approved but that the proposed change of name and change in authorized stock
are approved, the Company will effect those actions by amending its New York
Certificate of Incorporation.
Results of the Change to Delaware
Summarized below are the principal differences between the New York Business
Corporation Law and the Delaware General Corporation Law which may affect the
interests of stockholders. This summary does not purport to be a complete
statement of the differences between the New York Business Corporation Law and
the Delaware General Corporation Law and related laws affecting stockholders'
rights, and the summary is qualified in its entirety by reference to the
provisions of these laws. Stockholders of the Company are advised to consult
with their own legal counsel regarding all such matters.
General Flexibility Due to Lower Voting Requirements. With limited
exceptions, New York law requires that mergers, consolidations, sales of all or
substantially all of the assets of a corporation and other extraordinary
corporate transactions be approved by two-thirds of each class of stock
outstanding and entitled to vote thereon. Delaware law generally requires that
such actions be approved only by stockholders holding a majority of the shares
outstanding and entitled to vote thereon (and a majority of each class entitled
to vote as a class on such matters). These lower requirements will provide the
Board of Directors with greater flexibility in effecting extraordinary
transactions of which it approves.
Appraisal Rights. New York law provides stockholders with appraisal rights
in more situations than does Delaware law. Under New York law, a stockholder may
be entitled to appraisal when the stockholders vote (1) to sell or exchange all
or substantially all of its property and assets, or (2) to merge or consolidate
with other corporations. Delaware, for example, does not permit appraisal rights
in the event of a merger or consolidation for the shares of any class or series
which are listed on a national securities exchange or which are held of record
by more than two thousand stockholders. The Company's Common Stock is listed on
a national securities exchange.
Loans to Directors. Under New York law, loans to directors are prohibited
unless approved by a majority of stockholders. Delaware law permits loans to
directors if approved by the Board of Directors; stockholder approval is not
required.
Employee Stock Options. New York law forbids New York corporations to grant
stock options to directors, officers or employees unless stockholder approval is
obtained. Delaware law permits the grant of such options upon Board approval.
Increased Limitation of Directors' Liability. Under New York law, a director
is responsible to the corporation and its stockholders for damages for breach of
the director's fiduciary duty regardless of whether or not such breach of duty
arose from acts or omissions carried out in good faith or were performed
unintentionally or without knowing it was a violation of law. Under Delaware
law, if the Certificate of Incorporation so provides, directors' liability for
damages to the corporation or its stockholders can be eliminated if the
director's breach of fiduciary duty arises from acts or omissions taken in good
faith or which do not involve intentional misconduct or a knowing violation of
law or do not involve unlawful payment of dividends or unlawful stock purchases
or redemptions or do not involve transactions from which the director derived an
improper personal benefit.
Under New York law, in the event of litigation against an officer, director
or employee, the officer, director or employee can be indemnified as authorized
by the Board of Directors in the specific case and the officers and directors
are obligated to repay any advancements of expenses unless such officer,
director or employee has been wholly successful on the merits or otherwise in
defense of the action or proceeding. Under Delaware law, indemnification can be
provided in the Certificate of Incorporation for all directors, officers and
employees without reference to the specific case and the directors, officers and
employees are not obligated to repay an advancement of expenses unless there is
a specific determination made that the director, officer or employee is not
entitled to indemnification.
As litigation against officers and directors has increased, qualified
eligible individuals have been reluctant to serve as directors of corporations
even if such corporations have directors' liability insurance coverage. The
provisions of Delaware law limiting directors' liability and providing for
directors', officers' and employees' indemnification as recited above will be
incorporated in the
9
Certificate of Incorporation of the Delaware Company and will be of great
assistance in attracting and retaining qualified persons to serve on the Board
of Directors of the Company.
Summary of Purpose and Provisions of the Delaware Company's Charter Documents
The purpose of the merger and the adoption of the Delaware Company's
Certificate of Incorporation and By-laws is to assure the continuity and
stability of the Company's business strategies and policies through the greater
limitation of directors' liability and indemnification to directors, officers
and employees of the Company as allowed under Delaware law and explained in the
immediate preceding section. Other than those additions in the Delaware
Company's Certificate of Incorporation relating to the limitation of directors
liability, the Delaware Company's Certificate of Incorporation and By-laws are
basically the same as the Company's present Certificate of Incorporation and
By-laws.
The material benefits of the merger into the Delaware Company would be to
eliminate director's liability to the Company or its stockholders for breach of
his fiduciary duty if such breach of duty arose from acts or omissions carried
out in good faith or were performed unintentionally or without knowing it was a
violation of law or did not involve transactions from which a director derived
an improper personal benefit. The proposal does not eliminate or limit the
liability of a director for breaching his duty of loyalty, failing to act in
good faith, engaging in intentional misconduct or knowingly violating a law or
paying a dividend or approving a stock repurchase which is illegal under
Delaware law or obtaining an improper personal benefit.
This merger proposal would have no effect on the availability of equitable
remedies such as injunction or rescission against the director for breach of
fiduciary duty and is limited to future actions of directors and officers acting
in their capacity as directors nor does the proposal protect directors from
liability for violation of the Federal Securities laws.
That portion of the Delaware Company's Certificate of Incorporation and
By-laws that relates to indemnification includes indemnification of directors,
officers, employees or agents of the Company and allows indemnification to such
persons in the event of litigation against them without specific approval of
each litigation and without obligation to repay any advancement of such expenses
unless there is a specific determination made that the director, officer,
employee or agent is not entitled to such indemnification.
There has been no recent litigation involving the Board or its members
regarding the indemnification which may have been affected by the
indemnification provisions being proposed had they been in effect at the time.
Neither the Company nor any of its Board of Directors is aware of any
pending or threatened litigation against the Company or its Board of Directors
at this time.
All directors of the Company have a personal interest in seeing the
limitation of liability and indemnity provisions set forth on the Delaware
Company's Certificate of Incorporation approved and all directors and officers
intend to vote their stock in favor of the merger proposal. The Board of
Directors recommends a vote in favor of the merger proposal.
The stockholders, by voting for the adoption of this merger proposal
limiting directors' liability and providing for indemnity for officers,
directors, employees and agents of the Company, are estopped from a later claim
that any such limitation of liability or agreement of indemnity were invalid.
The Company was incorporated under the law of the State of New York in 1979.
It is the opinion of the Board of Directors of the Company that certain
provisions of Delaware's corporate law make it advantageous for the Company to
change its state of incorporation to Delaware. This objective will be
accomplished through a 'migratory merger,' some of the principal features of
which are as follows.
(1) The Company will be merged into the newly-created Delaware company,
which will be the survivor of the merger.
(2) Subject to the applicable provisions regarding appraisal rights of
the Company's stockholders who file a written objection to the proposed
Merger, each share of the Company's Common Stock issued and outstanding on
the effective date of the Merger will automatically become one share of
Common Stock of the Delaware Company.
10
(3) For Federal income tax purposes, the Company is of the opinion that
no gain or loss will be recognized by the Company's stockholders, except
those who exercise their appraisal rights.
(4) The Delaware Company will succeed to the business of the Company,
and the stockholders of the Company will become stockholders of the Delaware
Company.
(5) The Merger is not intended to effect any change in the business,
property, management or capitalization of the Company except that the par
value of the Delaware Company's Common Stock will be $.01 per share instead
of $.08 per share and that the authorized Common Stock of the Delaware
Company will be 30,000,000 shares instead of 12,500,000 shares and Preferred
Stock will be 1,000,000 shares $.05 par value per share, instead of 125,000
shares, $.08 par value per share.
(6) The rights of the Company's stockholders, who upon consummation of
the Merger will become stockholders of the Delaware Company, will be
governed by the laws of the State of Delaware and by the terms and
provisions of the Certificate of Incorporation and By-laws of the Delaware
Company.
Stockholders have the right to dissent from the Merger and to demand and
receive appraisal rights for their shares of Common Stock in the Company by
complying with the requirements of Section 623 of the Business Corporation Law
of the State of New York. See 'Right to Dissent and Appraisal Rights of
Stockholders Objecting to the Proposed Merger.' Dissenting Stockholders are
urged to consult their tax advisors as to the federal, state or local tax
consequences of the Proposed Merger.
The Merger
It is presently anticipated that the date on which the Merger will be
consummated (the 'Effective Date') will be March 3, 1998 or as soon thereafter
as practicable. However, the Board of Directors of the Company has reserved
the right to abandon the Merger prior to the Effective Date of the Merger. See
'Termination.'
The officers and Directors serving the Company on the Effective Date of the
merger will thereupon hold the same offices with Delaware Company.
Upon the Effective Date of the Merger each share of Common Stock of the
Company will be converted automatically into one share of Common Stock of the
Delaware Company and thereafter the outstanding certificates for shares of the
Company's Common Stock will represent the same number of shares of Common Stock
of the Delaware Company. It will not be necessary for holders of shares of the
Company's Common Stock to exchange their existing stock certificates for stock
certificates of the Delaware Company. However, any stockholders desiring new
certificates of the Delaware Company may submit their existing certificates
representing shares of the Company to American Stock Transfer & Trust Company,
the transfer agent of the Delaware Company, and obtain new certificates.
Capital Stock of the Delaware Company
The Certificate of Incorporation of the Delaware Company will authorize
31,000,000 shares of which 30,000,000 shares are Common Stock having a par value
of $.01 per each and 1,000,000 shares are Preferred Stock having a par value of
$.05 per share. As mentioned, except for those shares purchased from dissenting
stockholders pursuant to their appraisal rights, each of the currently
outstanding 7,043,180 shares of the Company's Common Stock will be exchanged for
one share of the Delaware Company's Common Stock. The Common Stock of the
Delaware Company, like the Common Stock of the Company, will have no preemptive,
conversion, redemption or similar rights. Upon the liquidation of the Delaware
Company, the holders of Common Stock would be entitled to share ratably in the
net assets available for distribution to stockholders. Since the shares of
Common Stock of the Delaware Company, like those of the Company, do not have
cumulative voting rights, the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the directors if they choose to do
so.
11
Right to Dissent and Appraisal Rights of Stockholders Objecting to the
Proposed Merger
Section 910 of the New York Business Corporation Law ('BCL') sets forth the
rights of stockholders of the Company who object to the Merger. Any stockholder
of the Company who does not vote in favor of the Merger, or who duly revokes his
vote in favor of the Merger may, if the Merger is consummated, obtain payment in
cash of the fair value of his shares by complying with the requirements of
Section 623 of the BCL. The dissenting stockholder must file with the Company,
before the taking of the vote on the Merger proposal, a written objection
including a statement of intention to dissent, his name and residence address,
the number and class of shares as to which he dissents (which number must not be
less than all his shares) and demand for payment for his shares if the Merger is
consummated. Within ten days after the vote of stockholders authorizing the
Merger, the Company must give written notice of such authorization to each
dissenting stockholder. At the time of filing the notice of election to dissent
or within one month thereafter, the stockholder must submit the certificates
representing his shares to the Company or its transfer agent for notation
thereon of the election to dissent, after which such certificates will be
returned to the stockholder. Failure to submit the certificates will result in
the loss of the dissenter's appraisal rights. Within fifteen days after the
expiration of the period within which stockholders may file their notices of
election to dissent or within fifteen days after consummation of the Merger,
whichever is later (but not later than 90 days after the stockholders' vote
authorizing the Merger), the Company (or, if the Merger is already consummated,
the Delaware Company) must make a written offer (which, if the Merger has not
been consummated, may be conditioned upon such consummation) to each stockholder
who has filed such notice of election to pay for his shares at a specified price
which the Company considers to be fair value. If the Company and the dissenting
stockholder are unable to agree as to such value, section 623 of the BCL
provides for judicial determination of value. ln the event of such a
disagreement, a court proceeding shall be commenced by the Company in the
Supreme Court of the State of New York, County of New York, 60 Centre Street,
New York, New York or by the dissenting stockholder if the Company fails to
commence the proceeding within the time required by Section 623. The Company
intends to timely commence such a proceeding in the event of such a
disagreement. A negative vote on the Merger does not constitute a 'written
objection' required to be filed by an objecting stockholder. An abstention from
voting on the Merger or failure to specify any vote on the proxy card will not
constitute a waiver of rights under Section 910 and 623 of the BCL provided that
a written objection has been properly filed.
The foregoing summary does not purport to be a complete statement of the
provisions of Sections 910 and 623 of the BCL and is qualified in its entirety
by reference to those Sections copies of which are attached hereto as Exhibit B.
A dissenting stockholder who receives payment for his shares upon exercise
of his right of appraisal will, subject to the provisions of Section 302(b) of
the Internal Revenue Code, recognize capital gain or loss for Federal income tax
purposes, measured by the difference between the basis for his shares and the
amount of payment received. Stockholders who may dissent and seek right of
appraisal should consult with their tax advisors.
Termination
The Board of Directors may terminate and cancel the Merger at any time prior
to the Effective Date thereof, either before or after submission of the Merger
to a vote of stockholders.
Voting
The affirmative vote of at least two-thirds in interest of stockholders
having voting powers shall be necessary for the adoption of the proposed Merger.
As the sole stockholder of the Delaware Company, the Company has authorized the
Merger for the Delaware Company.
12
Members and affiliates of the Company's Board of Directors and affiliates of
the Company, who own in the aggregate approximately 35.4% of the total number of
shares entitled to vote, intend to vote for the Merger.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
MERGER INTO A DELAWARE COMPANY.
PROPOSAL NO. 4
CHANGING THE COMPANY'S NAME TO X-CEED, INC.
The Board of Directors has approved an amendment to the Certificate of
Incorporation which would change the name of the Company from Water-Jel
Technologies, Inc. to X-Ceed, Inc. The Board believes that by using the trade
name of the Company's largest division., the X-Ceed Performance Group, in its
corporate name, the Company will promote recognition of the trade name, identify
the Company with its principal products and services and more accurately reflect
in its name what the Company's business is about. The Company currently plans to
implement the change of name when it would be most cost efficient with regard to
the utilization of current supplies of packaging, stationery, etc. The Company
anticipates that the cost of publicizing the change of name will not be
significant.
In the event that the Merger is approved, the Company will effect the change
of name in connection with the Merger rather than by amendment of its New York
Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CHANGE OF THE
COMPANY'S NAME TO X-CEED, INC.
PROPOSAL NO. 5
INCREASING THE AMOUNT OF AUTHORIZED COMMON STOCK
At the meeting, stockholders will be asked to adopt an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock to 30,000,000 shares, par value of $0.01
per share and to increase the authorized shares of Preferred Stock to 1,000,000,
par value of $.05 per share (the 'Proposed Stock Amendment'). The Company's
Board of Directors has approved the Proposed Stock Amendment, subject to
stockholder authorization.
At December 15, 1997, the authorized capital of the Company consisted of
12,500,000 shares of Common Stock, par value $0.08 per share and 125,000 shares
of non-designated Preferred Stock, par value $0.08 per share. As of that date,
7,043,180 shares of Common Stock were outstanding and no shares of Preferred
Stock were outstanding. In addition, at that date, an aggregate of 5,041,588
shares of Common Stock were reserved for issuance upon: (1) exercise of options
which may be granted under the Company's Non-Qualified Stock Option Plan
(128,125 shares), (ii) exercise of options which may be granted under the
Company's 1990 Stock Option Plan (170,000 shares), (iii) exercise of options
which may be granted under the Company's 1995 Stock Option Plan (467,000
shares), (iv) exercise of the Company's outstanding public warrants (1,559,854
shares issuable pursuant to Class A Warrants and 1,766,623 shares issuable
pursuant to Class B Warrants), (v) exercise of Warrants granted to the
underwriter in connection with a public offering of the Company's securities
(529,986 shares), and (vi) exercise of various other outstanding warrants and
options (420,000). Therefore, the Company will have issued or reserved for
issuance a total of 12,109,738 shares of the 12,084,768 shares of Common Stock
currently authorized for issuance.
If the Proposed Stock Amendment is adopted by the Company's stockholders,
the additional shares of Common Stock would be issuable at any time and from
time to time, by action of the Board of Directors without further authorization
from the Company's stockholders, except as otherwise required by applicable law
or rules and regulations to which the Company may be subject, to such persons
and for such consideration (but not less than the par value thereof) as the
Board of Directors determines.
After taking into account the currently issued and reserved shares of Common
Stock discussed above, the Company would have only 415,232 shares of Common
Stock authorized which are not issued or reserved for future issuance. The
Company's Board of Directors believes that the authorization of
13
the additional shares of Common Stock are in the best interests of the Company
and its stockholders so that sufficient shares will be readily available for
use, if feasible, in acquisitions, in raising additional capital and for grants
as incentives to employees, officers, directors and consultants of the Company.
The Company presently has no understandings or arrangements which would
require the issuance of any of the additional shares of Common Stock which are
proposed to be authorized. However, management believes that the increase in the
number of authorized shares of Common Stock is in the best interest of the
Company and its stockholders since additional shares of Common Stock will
provide the Company with the flexibility of having a broader choice in the type
and number of equity securities available to it for the above corporate
purposes. Due to the Board of Directors' discretion in connection with the
issuance of additional shares of Common Stock to be issued in a private
placement, it would, under certain circumstances, be in a better position to
respond to a tender offer or other attempt to gain control of the Company. For
example, issuance of additional shares would increase the number of shares
outstanding and could necessitate the acquisition of a greater number of shares
by a person making a tender offer and could make such acquisition more difficult
since the recipient of such additional shares may favor the incumbent
management.
In addition to increasing the authorized amount of Common stock, the
Proposed Stock Amendment will change the par value of the Company's Common Stock
and Preferred Stock from $.08 per share to $.01 per share, and $.08 per share to
$.05 per share, respectively. The par value of $.08 per share resulted from the
Company's eight-to-one reverse stock split in 1994. The Board of Directors
believes that this par value is unusual and could result in misunderstandings
among the investing public.
In the event that the Merger is approved, the Company will effect the
Proposed Stock Amendment in connection with the Merger rather than by amendment
of its New York Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INCREASE IN THE AMOUNT
OF AUTHORIZED COMMON STOCK TO 30,000,000 SHARES.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to approval by the stockholders, the Board of Directors has
appointed Holtz Rubenstein & Co. LLP as the independent public accountants to
audit the financial statements of the Company for the fiscal year ending August
31, 1998. Holtz Rubenstein & Co. LLP also served as the Company's auditors for
the fiscal years ended August 31, 1995, 1996 and 1997. It is expected that a
representative of Holtz Rubenstein & Co. LLP will be present at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR RATIFICATION OF
THE APPOINTMENT OF HOLTZ RUBENSTEIN & CO., LLP
AS INDEPENDENT ACCOUNTANTS.
VOTE REQUIRED
Under New York law, the affirmative vote of the holders of a two thirds of
the shares of stock of the Company entitled to notice of, and to vote at, the
Annual Meeting is required to adopt the proposed merger in the Delaware Company.
The affirmative vote of a majority of the votes cast at the Annual Meeting is
required to approve the selection of auditors, adoption of the 1998 Stock Option
Plan and amendment of the Certificate of Incorporation to change the Company's
name to X-Ceed, Inc., to increase the amount of authorized Common Stock to
30,000,000 shares, and the authorized Preferred Stock to 1,000,000 Shares, and
to change the par value of the Common Stock to $.01 per share, and to the par
value of the Preferred Stock to $.05 per share. The affirmative vote of a
plurality of the votes cast at the Annual Meeting is required to elect
directors.
EXPENSE OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily
14
through the mail. The Company may also retain the services of a proxy
solicitation firm. The Company has not made any arrangements to do so as of the
date of this Proxy Statement, and does not presently have estimates as to the
cost of such services. Directors, officers and regular employees of the Company
may solicit proxies personally, by telephone or telegram. The Company will
request brokers and nominees to obtain voting instructions of beneficial owners
of stock registered in their names and will reimburse them for any expenses
incurred in connection therewith.
PROPOSALS OF STOCKHOLDERS
Stockholders of the Company who intend to present a proposal for action at
the 1998 Annual Meeting of Stockholders of the Company must notify the Company's
management of such intention by notice received at the Company's principal
executive offices not later than September 1, 1998, for such proposal to be
included in the Company's proxy statement and form of proxy relating to such
Meeting.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the year ended August
31,1997 is being delivered with this Proxy Statement to the Company's
stockholders.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be presented
for consideration at the Annual Meeting which are not described herein. However,
if other matters properly come before the Meeting, it is intended that the
persons named in the accompanying proxy will vote thereon in accordance with
their best judgment.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT
WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
WERNER HAASE
Chairman
15
WATER-JEL TECHNOLOGIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
February 20, 1998 10:00 a.m.
The undersigned hereby appoints Werner G. Haase and Nurit Kahane Haase, and
each of them jointly and severally, proxies with full power of substitution and
revocation, to vote on behalf of the undersigned all shares of Common Stock of
Water-Jel Technologies, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held February 20, 1998 or any adjournments
thereof.
1. Election of Directors.
FOR ALL THE NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR
ALL NOMINEES LISTED BELOW [ ] INSTRUCTION: To withhold authority to
vote for any individual nominee, mark the box next to the nominee's
name below. Werner Haase [ ] Norman Doctoroff [ ] John A. Bermingham
[ ]
2. Proposal to approve the creation of a new 1998 Stock Option [ ] FOR [
] AGAINST [ ] ABSTAIN Plan authorizing the Company to issue options
to acquire up to 2,000,000 shares of common stock to officers, key
employees and others who render services to the Company.
3. Proposal to approve the merger into a Delaware Company. [ ] FOR [ ]
AGAINST [ ] ABSTAIN 4. Proposal to amend the Certificate of Incorporation
to change [ ] FOR [ ] AGAINST [ ] ABSTAIN
the Company's name to
X-Ceed, Inc.
5. Proposal to amend the certificate of incorporation to [ ] FOR [ ]
AGAINST [ ] ABSTAIN increase the Authorized Common Stock to
30,000,000 shares, par value $.01 per share and the Authorized
Preferred to 1,000,000 shares, par value $.05 per share.
6. Proposal to ratify appointment of Holtz Rubenstein & Co., [ ] FOR [ ]
AGAINST [ ] ABSTAIN LLP, as the Independent Public Accountants of the
Company for the 1998 fiscal year.
In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the meeting or any adjournment(s) thereof.
(Continued and to be signed on reverse side.)
The shares represented by this proxy will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be voted
to elect Messrs. Haase, Doctoroff, and Bermingham as directors, to approve a new
1998 Stock Option Plan, to approve the merger into a Delaware Company, to
approve Amendments to the Certificate of Incorporation changing the Company's
name to X-Ceed, Inc. and increasing the amount of Authorized Common Stock to
30,000,000 shares, par value $.01 per share, and the Authorized Preferred Stock
to 1,000,000 shares, par value $.05 and to ratify the appointment of Holtz
Rubenstein & Co., LLP as the Company's Independent Public Accountants for the
fiscal year ending August 31, 1998.
Date: ______________________
Signature: _________________
Signature
if held jointly: __________
(Please sign exactly as
ownership appears on this
proxy. Where stock is held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.)
PLEASE MARK, DATE, SIGN AND
RETURN PROXY IN THE ENCLOSED
ENVELOPE.
EXHIBIT A
WATER-JEL TECHNOLOGIES, INC.
1998 STOCK OPTION PLAN
There is hereby established a 1998 Stock Option Plan (the 'Plan'). The Plan
provides for the grant to certain employees and others who render services to
Water-Jel Technologies, Inc. (the 'Company') or of any subsidiary thereof, of
options to purchase shares of the common stock, $.08 par value per share, of the
Company ('Options') and for the issuance, transfer or sale of such common stock
upon the exercise of such Options. The term 'Company', as used in the Plan,
shall include Water-Jel Technologies, Inc. and any present or future subsidiary
thereof, unless the context otherwise requires. It is intended that certain of
the Options will constitute Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code ('ISOs'), and the remainder of the
Options will constitute nonstatutory options ('Nonstatutory Options'). The Board
of Directors of the Company or a committee thereof appointed by the Board (the
term 'Committee' as used herein shall refer to either such committee or the
Board of Directors as a whole, as the case may be) shall determine which Options
are to be ISOs and which are to be Nonstatutory Options and shall enter into
option agreements with the recipients accordingly.
1. Purpose: The purpose of the Plan is to provide additional incentive to
the officers, key employees, and others who render services to the Company, who
are primarily responsible for the management and growth of the Company, or
otherwise materially contribute to the conduct and direction of its business,
operations and affairs, in order to strengthen their desire to remain in the
employ of the Company, stimulate their efforts on behalf of the Company and to
retain and attract persons of competence, and, by encouraging ownership of a
stock interest in the Company, to gain for the organization the advantages
inherent in employees and others who render services to the Company having a
sense of proprietorship.
2. The Stock: The aggregate number of shares of common stock, $.08 par value
per share, which may be issued, transferred or sold upon the exercise of Options
granted under the Plan shall not, except as such number may be adjusted in
accordance with paragraph (g) of Article 6 hereof, exceed 2,000,000 shares of
the common stock, $.08 par value per share, of the Company ('Common Shares')
which may be either authorized and unissued common stock, $.05 par value per
share, or issued common stock, $.05 par value per share, reacquired by the
Company. Notwithstanding the above limitation, if any Option granted under the
Plan shall expire, terminate or be canceled for any reason without having been
exercised in full, the corresponding number of unpurchased shares shall again be
available for the purposes of the Plan.
3. Employees: The term 'employees' as used in the Plan, shall mean officers
and other employees of the Company (including officers and other employees who
are also directors) within the classes referred to in Article 1 hereof.
4. Eligibility:
(a) Options may be granted to such employees of (or, in the case of
Nonstatutory Options only, to others who render services to) the Company or
its subsidiaries or parent as the Committee shall select from time to time
(the 'Optionees'). The term 'subsidiary' and 'parent' as used in the Plan
shall have the respective meanings set forth in Sections 425(f) and (e) of
the Internal Revenue Code.
(b) No individual who, at the time an ISO is granted, is considered
under Section 422A(b)(6) of the Internal Revenue Code as owning stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of its parent or any subsidiary
corporation shall be eligible to receive such ISO, provided that this
restriction shall not apply if at the time such ISO is granted the
provisions of 7(f)(ii) are complied with.
(c) An Optionee may hold more than one Option.
5. Subsidiary: The term 'subsidiary', as used herein, shall be deemed to
mean any corporation (other than Water-Jel Technologies, Inc.) in an unbroken
chain of corporations beginning with and including Water-Jel Technologies, Inc.
if, at the time of the granting of an Option, each of the corporations other
than the last corporation in said unbroken chain owns stock possessing 50
percent or
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more of the total combined voting power of all classes of stock in one of the
other corporation in such chain.
6. General Terms of Options:
(a) Consideration: The Committee shall determine the consideration to
the Company, for the granting of Options under the Plan, as well as the
conditions, if any, which it may deem appropriate to ensure that such
consideration will be receive by, or will accrue to the Company and, in the
discretion of the Committee, such consideration need not be the same, but
may vary for Options granted under the Plan at the same time or from time to
time.
(b) Number of Options which may be Granted to, and Number of Common
Shares which may be Acquired by Employees. The Committee may grant more than
one Option to an individual during the life of the Plan and, subject to the
requirements of Section 422A of the Internal Revenue Code of 1986, as
amended (the 'Code'), with respect to incentive stock options, such Option
may be in addition to, in tandem with, or in substitution for, Options
previously granted under the Plan or of another corporation and assumed by
the Company.
The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan to be conditioned upon the granting to the
employee of a new Option for the same or a different number of Common Shares
as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such employee. Such new
Option shall be exercisable at the price, during the period, and in
accordance with any other terms or conditions specified by the Committee at
the time the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the price, period of exercise, or
any other terms or conditions of the Option surrendered (except as otherwise
provided in paragraph (f) of Article 7 hereof).
(c) Period of Grant of Options. Options under the Plan may be granted at
any time after the Plan has been approved by the stockholders of the
Company. However, no Option shall be granted under the Plan after March 1,
2008.
(d) Option Agreement. The Company shall effect the grant of Options
under the Plan, in accordance with determinations made by the Committee by
execution of instruments in writing in a form approved by the Committee.
Each Option shall contain such terms and conditions (which need not be the
same for all Options, whether granted at the time or at different times) as
the Committee shall deem to be appropriate and not inconsistent with the
provisions of the Plan, and such terms and conditions shall be agreed to in
writing by the Optionee. The Committee may, in its sole discretion, and
subject to such terms and conditions as it may adopt, accelerate the date or
dates on which some or all outstanding Options may be exercised. Options
shall be exercised by submitting to the Company a signed copy of notice of
exercise in a form to be supplied by the Company. The exercise of an Option
shall be effective on the date on which the Company receives such notice at
its principal corporate offices.
(e) Supplemental Cash Award. Upon issuance of any Common Shares to an
Optionee pursuant to the exercise of a Non-statutory Option that may be
granted hereunder, the Company or a Subsidiary may issue a supplemental cash
award to the Optionee at the time that the stock certificates representing
such common stock are issued to him. The supplemental cash award shall be
the smaller of:
(i) 65% of the difference between the fair market value of the Common
Shares issued at the time of exercise and the option price tendered by
the Optionee for the Common Shares or
(ii) 90% of the Option price tendered by the Optionee pursuant to the
exercise of Options hereunder.
The Company (or its Subsidiary) may withhold from this supplemental cash
award all required amounts including that which may be required as a result
of the Optionee's exercise of the option.
(f) Non-Transferability of Option. No Option granted under the Plan to
an Optionee shall be transferable by the Optionee or otherwise than by will
or by the laws of descent and distribution and during the Optionee's
lifetime, such Option shall be exercisable only by such Optionee.
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(g) Effect of Change in Common Stock. In the event of a reorganization,
recapitalization, liquidation, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance, lease or other
transfer by the Company of all or substantially all of its property, or any
change in the corporate structure or shares of common stock of the Company
pursuant to any of which events the then outstanding shares of the common
stock are split up or combined or changed into, become exchangeable at the
holder's election for, or entitle the holder thereof to other shares of
common stock, or in the case of any other transaction described in Section
425(a) of the Code, the Committee may change the number and kind of shares
of Common Shares available under the Plan and any outstanding Option
(including substitution of shares of common stock of another corporation)
and the price of any Option and the fair market value determined under
paragraph (i) of Article 6 hereof in such manner as it shall deem equitable.
Options granted under the Plan shall contain such provisions as are
consistent with the foregoing with respect to adjustments to be made in the
number and kind of Common Shares covered thereby and in the option price per
share in the event of any such change.
(h) Optionees not Stockholders. An Optionee or a legal representative
thereof shall have none of the rights of a stockholder with respect to
Common Shares subject to Options until such shares shall be issued,
transferred or sold upon exercise of the Option.
(i) Fair Market Value. As used in the Plan, the term 'fair market value'
shall (i) if the common stock of the Company is traded in the
over-the-counter market, be the mean between the closing bid and asked sales
prices for the common stock of the Company as reported by the National
Quotation Bureau (or similar quotation agency) on the date the calculation
thereof shall be made or (ii) if the common stock of the Company is listed
on a national securities exchange, be the mean between the high and low
sales prices for the common stock of the Company on such exchange on the
date the calculation thereof shall be made, in each case with such
adjustments, if any, as shall be made in accordance with paragraph (g) of
this Article 6. In the event the date of calculation shall be a date on
which there shall not have been reported a closing bid and asked price for
common stock of the Company or a date which shall not be a trading date on
such national securities exchange as the case may be, determination of fair
market value shall be made as of the first date prior thereto on which there
shall have been reported a closing bid and asked price for common stock of
the Company or the first date prior thereto which shall have been a trading
date on such national securities exchange, as the case may be.
(j) Types of Options. Options granted under the Plan shall be in the
form of (i) incentive stock options as defined in Section 422A of the Code,
or (ii) options not qualifying under such Section, or both, in the
discretion of the Committee. The status of each Option shall be identified
in the Option Agreement.
7. Terms of Options:
(a) Option Price. The price or prices per share of Common Shares to be
sold pursuant to an Option shall be such as shall be fixed by the Committee
but not less in any case than the fair market value per share for such
Common Shares in the case of Incentive Stock Options, or 85% of the fair
market value in the case of Nonstatutory Options on the date of the granting
of the Option, subject to adjustment pursuant or paragraph (g) of Article 6
hereof.
For the purposes of this Article 7, the date of the granting of an
Option under the Plan shall be the date fixed by the Committee as the date
for such Option for the person who is to be the recipient thereof.
(b) Period of Option Vesting. (i) Unless otherwise determined by the
Committee or by other provisions of the Plan, upon the granting of any
Option such Option will be vested and be exercisable with respect to the
percentage of the Common Shares subject to the Option as determined by the
Committee. The Committee may, in its discretion, (A) provide for the holding
of such Common Shares in escrow for a period not exceeding five years, or
(B) impose other restrictions on the vesting of any Option or the vesting of
any Common Shares that an Optionee receives upon exercise of any Option;
provided that any and all such restrictions shall lapse if there is a sale
of (A) substantially all of the assets or (B) 50 percent or more of the
voting securities of
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the Company (excluding for this purpose Company stock sold in a primary or
secondary public offering). Any restrictions the Committee imposes on an
Option pursuant to this paragraph shall be specified in the stock option
agreement governing such Option.
(ii) Options will be exercisable thereafter over the Option Period
which, in the case of each Option, shall be for a period of not more than
ten years from the date of the grant of such Option, and, subject to the
provisions of paragraphs 4(b) or 6(d), will be exercisable, at such times
and in such amounts as determined by the Committee at the time each
Option is granted. Notwithstanding any other provision contained in the
Plan, no Option shall be exercisable after the expiration of the Option
Period. Except as provided in paragraphs (c) and (d) of this Article 7,
no Option may be exercised unless the Optionee is then in the employ of
the Company and shall have been continuously so employed since the date
of the grant of such Option. The Plan shall not convey upon any Optionee
any right with respect to continuation of employment by the Company, nor
shall it interfere in any way with the employee's right or the Company's
right to terminate employment at any time.
(c) Termination of Optionee's Employment or Other Services.
(i) In the event of the termination of an Optionee's employment with
or rendering of other services to the Company, any parent or subsidiary
of the Company, and any successor corporation to either the Company or
any parent or subsidiary of the Company other than by reason of death,
all Options previously granted to such Optionee shall terminate, except
with respect to Options which the Optionee was entitled to exercise prior
to the date of such termination (the 'Termination Date').
(ii) With respect to any Option which the Optionee was entitled to
exercise prior to the Termination Date but had not as yet done so as of
such date, such Option will lapse unless exercised by the Optionee within
the earlier of (A) thirty days after the Termination Date or (B) the last
date such Option could have been exercised had the Optionee's position
with the Company not terminated. Nothing in the Plan or in any Option or
stock option agreement shall confer on any Optionee any right to continue
in the service of the Company or any parent or subsidiary of the Company
or interfere with the right of Company to terminate such Optionee's
employment or other services at any time.
(iii) In the event that termination of an Optionee's services results
from (A) the Optionee having been convicted of a felony, a crime of moral
turpitude or any crime involving the Company (other than pursuant to
actions taken at the direction or with approval of the Committee), or (B)
a determination by the Committee that the Optionee was engaged in fraud,
misappropriation or embezzlement, the Company shall have the right,
exercisable within 60 days of the Termination Date, to repurchase any
Common Shares acquired by the Optionee pursuant or this Plan and owned by
the Optionee at the Termination Date at the lower of (A) the option price
of such Common Shares, (B) if such Common Shares are not publicly traded,
their book value on the Termination Date, or (C) if such Common Shares
are publicly traded, the average of their high and low market price on
the Termination Date.
(d) Death of Optionee. If an Optionee should die while in the employ of
the Company, the Option theretofore granted shall be exercisable by the
estate of the Optionee or by a person who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death of the
Optionee, but then only if and to the extent that the Optionee was entitled
to exercise the Option at the date of death, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant
or paragraph (b)(ii) of this Article 7 with respect to the percent of the
total number of Common Shares to which the Option relates which may be
purchased from time to time during the Option Period; provided, however,
that such Option shall be exercisable only within the twelve-month period
next succeeding the death of the Optionee and in no event after the
expiration of the Option Period.
(e) Payment for Common Shares. Upon exercise of an Option, the Optionee
shall make full payment of the Option Price (i) in cash; (ii) with the
common stock of the Company (valued at their fair market value, as
determined by the Committee, as of such date of exercise), (iii) with the
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consent of the Committee with a full recourse interest bearing promissory
note of the Optionee, secured by a pledge of the Common Shares received upon
exercise of such Option, and having such other terms and conditions as
determined by the Committee, or (iv) with the consent of the Committee, any
combination of (i), (ii), or (iii) above.
(f) Incentive Stock Options. Options granted in the form of incentive
stock options shall be subject in addition to the foregoing provisions of
this Article 7, to the following provisions:
(i) Aggregate Fair Market Value Limitation. The aggregate fair market
value (determined at the time the Option is granted) of the stock with
respect to which incentive stock options are exercisable for the first
time by an Optionee during any calendar year (under all such plans of the
Company, its parent or subsidiary) shall not exceed $100,000.
(ii) Ten Percent Shareholder. Any stock option granted to any
individual who, at the time of the proposed grant, owns common stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any subsidiary shall, in addition
to such other terms as may be required by this Article 7(f) provide that
(A) the prices per share for Common Shares to be sold pursuant or such
incentive stock option shall not be less than 110% of the fair market
value per share for such Common Shares on the date of the granting of the
incentive stock option, subject to adjustment pursuant to paragraph (g)
of Article 6 hereof and (B) the Option Period of such incentive stock
option shall be for a period of not more than five years from the date of
the grant of such incentive stock option.
The Company intends that Options designated by the Committee as
incentive stock options shall constitute incentive stock options under
Section 422A of the Code. Should any of the foregoing provisions not be
necessary in order to so comply or should any additional provisions be
required, the Board of Directors of the Company may amend the Plan
accordingly without the necessity of obtaining the approval of the
stockholders of the Company.
8. Withholding Taxes:
(a) In the case of Common Shares that an Optionee receives pursuant to
his exercise of an Option, the Company shall have the right to withhold from
any salary, wages, or other compensation for services payable by the Company
to such Optionee, amounts sufficient to satisfy any withholding tax
liability attributable to such Optionee's receipt of such Common Shares or
the supplemental cash award.
(b) In the case of Common Shares that an Optionee receives pursuant to
his exercise of an Option which is an ISO, if such Optionee disposes of such
Common Shares within two years from the date of the granting of the ISO or
within one year after the transfer of such Common Shares to him, the Company
shall have the right to withhold from any salary, wages, or other
compensation for services payable by the Company to such Optionee, amounts
sufficient to satisfy any withholding tax liability attributable to such
disposition.
(c) In the case of a disposition described in Section 8(b) above, the
Optionee shall give written notice to the Company of such disposition within
30 days following the disposition within 30 days following the disposition,
which notice shall include such information as the Company may reasonably
request to effectuate the provisions hereof.
9. Agreements and Representations to Optionees:
(a) As a condition to the exercise of an Option, unless counsel to the
Company opines that it is not necessary under the Securities Act of 1933, as
amended, and the pertinent rules thereunder, as the same are then in effect,
the Optionee shall represent in writing that the Common Shares being
purchased are being purchased only for investment and without any present
intent at the time of the acquisition of such Common Shares to sell or
otherwise dispose of the same.
(b) In the event there is a stockholders agreement in effect among the
Company and shareholders owning more than 50% of the Company's common stock
(the 'Shareholders'), or among substantially all the Shareholders, which
agreement deals with restrictions on the disposition of shares of common
stock, then, as a further condition to the exercise of an Option, the
Optionee may be required to execute appropriate papers, making him a party
to such agreement or
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agreements, or such part thereof as the Committee determines would be in the
best interests of the Company and the Shareholders.
10. Administration of the Plan: The Plan shall be administered by the Board
of Directors or by a Committee which shall consist of three or more members of
the Board of Directors whom the Board of Directors may appoint from time to time
(either the Board or such committee, as the case may be, being referred to
herein as the 'Committee'). Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine the individuals
to receive Options, the times when they shall receive them and the number of
Common Shares to be subject to each Option. Directors, including those that may
be members of the Committee, shall be eligible to receive Options under the
Plan.
Subject to the express provisions of the Plan, the Committee shall also have
authority to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements (which
need not be identical) and to make all other determinations necessary or
advisable for administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry it
into effect, and it shall be the sole and final judge of such expediency. The
determinations of the Committee on the matters referred to in this Section 10
shall be conclusive.
11. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any time alter, suspend
or terminate the Plan, but, except in accordance with the provisions of
paragraph (g) of Article 6 and Article 12 hereof, no change shall be made
which will have a material adverse effect upon any Option previously
granted, unless the consent of the Optionee is obtained; provided, however,
that except in the case of adjustment made pursuant or paragraph (g) of
Article 6 hereof, the Board of Directors may not without further approval of
the stockholders, (i) increase the maximum number of Common Shares for which
Options may be granted under the Plan or which may be purchased by an
individual Optionee, (ii) decrease the minimum option price provided in the
Plan, or (iii) change the class of persons eligible to receive Options.
(b) Notwithstanding the foregoing provisions of this Article 11, except
as may otherwise be provided herein, no person may be divested of the
ownership of Common Shares previously issued, sold or transferred under the
Plan.
12. Other Conditions: If at any time counsel to the Company shall be of the
opinion that any sale or delivery of Common Shares pursuant to an Option granted
under the Plan is or may in the circumstances be unlawful under the statutes,
rules or regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, and the Company shall not be required
to make any application or to effect or to maintain any qualification or
registration under the Securities Act of 1933 or otherwise with respect to
Common Shares or Options under the Plan, and the right to exercise any such
Option may be suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful.
Upon termination of any period of suspension under this Article 12, any
Option affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all Common Shares available upon exercise
of the Option before such suspension and as to Common Shares which would
otherwise have become available for purchase during he period of such
suspension, but no suspension shall extend any Option Period.
At the time of any grant or exercise of any Option, the Company may, if it
shall deem it necessary or desirable for any reason connected with any law or
regulation of any governmental authority relative to the regulation of
securities, condition the grant and/or exercise of such Option upon the Optionee
making certain representations to the Company and the satisfaction of the
Company with the correctness of such representations.
13. Approval; Effective Date: The Plan shall become effective upon the
approval by the stockholders of the Company at the Annual Meeting of
Stockholders to be held February 20, 1998 or at any adjournment thereof.
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EXHIBIT B
NEW YORK BUSINESS CORPORATION LAW
SS623. Procedure to Enforce Shareholder's Right to Receive Payment for Shares
(a) A shareholder intending to enforce his rights under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the
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time of such expiration or completion, but without prejudice otherwise to any
corporate proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
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(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such proceeding shall
be brought in the country where the office of the domestic corporation,
whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall have
the effect of an action quasi in rem against their shares. The corporation
shall serve a copy of the petition in such proceeding upon each dissenting
shareholder who is a resident of this state in the manner provided by law
for the service of a summons, and upon each nonresident dissenting
shareholder either by registered mail and publication, or in such other
manner as is permitted by law. The jurisdiction of the court shall be
plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the shares,
which, for the purposes of this section, shall be the fair value as of the
close of business on the day prior to the shareholders' authorization date.
In fixing the fair value of the shares, the court shall consider the nature
of the transaction giving rise to the shareholder's right to receive payment
for shares and its effects on the corporation and its shareholders, the
concepts and methods then customary in the relevant securities and financial
markets for determining fair value of shares of a corporation engaging in a
similar transaction under comparable circumstances and all other relevant
factors. The court shall determine the fair value of the shares without a
jury and without referral to an appraiser or referee. Upon application by
the corporation or by any shareholder who is a party to the proceeding, the
court may, in its discretion, permit pretrial disclosure, including, but not
limited to, disclosure of any expert's reports relating to the fair value of
the shares whether or not intended for use at the trial in the proceeding
and notwithstanding subdivision (d) of section 3101 of the civil practice
law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest, the
court shall consider all relevant factors, including the rate of interest
which the corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the refusal of any
shareholder to accept the corporate offer of payment for his shares was
arbitrary, vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties to
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the proceeding of the dissenting shareholders who are parties to the
proceeding against the corporation if the court finds any of the following:
(A) that the fair value of the shares as determined materially exceeds the
amount which the corporation offer to pay; (B) that no offer or required
advance payment was made by the corporation; (C) that the corporation failed
to institute the special proceeding within the period specified therefor; or
(D) that the action of the corporation in complying with its obligations as
provided in this section was arbitrary, vexatious or otherwise not in good
faith. In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair
value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at this option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the
corporation, but have rights superior to the non-dissenting shareholders,
and if it is not liquidated, retain his right to be paid for his shares,
which right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within
thirty days after the corporation has given him written notice that payment
for his shares cannot be made because of the restrictions of this paragraph.
If the dissenting shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to him within
twenty days after the expiration of such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporation action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in the
manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (3)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
SS910. Right of Shareholder to Receive Payment for Shares upon Merger,
Consolidation or Sale, Lease, Exchange or Other Disposition of Assets
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to receive
payment for shares), have the right to receive payment of the fair value of his
shares and the other rights and benefits provided by such section, in the
following cases:
(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in subparagraphs (A) and (B).
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(A) Any plan of merger or consolidation to which the corporation is a
party; except that the right to receive payment of the fair value of his
shares shall not be available:
(i) To a shareholder of the surviving corporation in a merger
authorized by section 905 (Merger of subsidiary corporation), or
paragraph (c) of section 907 (Merger or consolidation of domestic and
foreign corporations); and
(ii) To a shareholder of the surviving corporation in a merger
authorized by this article, other than a merger specified in subparagraph
(i), unless such merger effects one or more changes specified in
subparagraph (b)(6) of section 806 (Provisions as to certain proceedings)
in the rights of the shares held by such shareholder.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires shareholder
approval under section 909 (Sale, lease, exchange or other disposition of
assets) other than a transaction wholly for cash where the shareholders'
approval thereof is conditioned upon the dissolution of the corporation and
the distribution of substantially all of its net assets to the shareholders
in accordance with their respective interests within one year after the date
of such transaction.
(2) Any shareholder of the subsidiary corporation in a merger authorized
by section 905 or paragraph (c) of section 907, who files with the
corporation a written notice of election to dissent as provided in paragraph
(c) of section 623.
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