SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MNI GROUP, INC.
------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: NA
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: NA
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): NA
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: NA
-------------------------------------------------------------------------
(5) Total fee paid: NA
-------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: NA
(2) Form, Schedule or Registration Statement No.: NA
(3) Filing Party: NA
(4) Date Filed: NA
Notes:
<PAGE>
THE MNI GROUP INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER __, 2000
The Annual Meeting of Shareholders of The MNI Group Inc. (the
"Company") will be held at 10 West Forest Street, Englewood, New Jersey 07631,
on October __, 2000, at [10:00 a.m.] (E.D.T.), for the following purposes:
1. To elect four directors of the Company, each for a one-year term;
2. To amend the Certificate of Incorporation to change the name of the
Company to Gender Sciences, Inc.;
3. To amend the Certificate of Incorporation to increase the
authorized number of shares of common stock from 10,000,000 to
50,000,000 shares;
4. To approve the Company's 2000 Long-Term Incentive Stock Plan;
5. To ratify the appointment by the Board of Directors of Goldstein &
Ganz P.C. as the Company's independent auditors for the year 2001; and
6. To transact any other business properly before the Annual Meeting.
Only shareholders of record at the close of business on September __,
2000 will be entitled to receive notice of and to vote at the Annual Meeting.
Shareholders are cordially invited to attend the Meeting in person.
Whether or not you expect to attend, we urge you to read the accompanying Proxy
Statement and then complete, sign, date and return the enclosed form of proxy
card in the accompanying postage-prepaid envelope. It is important that your
shares be represented at the Annual Meeting by virtue of your executed proxies
should you be unable to attend the Annual Meeting in person. Your promptness in
responding will assist us to prepare for the Annual Meeting and to avoid the
cost of a follow-up mailing. If you receive more than one form of proxy because
you own shares registered in different names or at different addresses, each
form of proxy should be completed and returned.
This Proxy Statement, the accompanying form of proxy card and the
Company's Annual Report to Shareholders are being mailed on or about September
__, 2000.
By order of the Board of Directors,
Myra D. Gans
Secretary
[insert], 2000
<PAGE>
The MNI Group Inc.
10 West Forest Avenue
Englewood, New Jersey 07631
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER __, 2000
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy card are being
furnished in connection with the solicitation of proxies by and on behalf of the
Board of Directors (the "Board") of The MNI Group Inc., a New Jersey corporation
(the "Company"), for use at the Company's 2000 Annual Meeting of Shareholders to
be held at 10:00 a.m. (E.D.T.) on October __, 2000, at the offices of the
Company, 10 West Forest Avenue, Englewood, New Jersey 07631, and at any
adjournment or postponement thereof (the "Annual Meeting"). This Proxy Statement
and the accompanying form of proxy card were first mailed to the holders of the
Company's common stock, no par value per share ("Common Stock"), on or about
September __, 2000.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, shareholders of the Company will consider and
vote upon (i) the election of four directors to serve until the Company's 2001
Annual Meeting of Shareholders and until their successors are duly elected and
qualified, (ii) a proposal to approve an amendment to the Certificate of
Incorporation to change the name of the Company to Gender Sciences, Inc., (iii)
a proposal to approve an amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock, (iv) a proposal to
adopt the Company's 2000 Long-Term Incentive Stock Plan, (v) the ratification of
the selection of independent certified public accountants for 2001 and (vi) such
other business as may properly come before the Annual Meeting. The Company is
not aware of any business to come before the Annual Meeting other than what is
set forth in this paragraph.
QUORUM AND VOTING RIGHTS; PROXY SOLICITATION
Shareholders as of the close of business on September __, 2000 (the
"Record Date") are entitled to vote at the Annual Meeting. Each shareholder is
entitled to one vote for each share of common stock held on the Record Date.
A majority of the outstanding shares, present or represented by proxy,
constitutes a quorum for the Annual Meeting. As of the Record Date, [insert]
shares of Common Stock were issued and outstanding. Proxies submitted by brokers
that do not indicate a vote for one or more of the proposals because the holders
do not have discretionary voting authority and have not received instructions
from the beneficial owners on how to vote on those proposals are called "broker
non-votes."
<PAGE>
There are differing shareholder vote requirements for the various
proposals. Directors will be elected by a plurality of the votes cast at the
Annual Meeting, meaning the four nominees receiving the most votes will be
elected directors. Only votes cast for a nominee will be counted, except that
the accompanying proxy will be voted for the four management nominees unless the
proxy contains instructions to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy to withhold authority to vote for one or
more of the nominees will result in those nominees receiving fewer votes.
However, such action will not reduce the number of votes otherwise received by
the nominee.
The two amendments to the Company's Certificate of Incorporation each
require an affirmative vote of a majority of the shares outstanding and entitled
to vote as of the Record Date. Abstentions and broker non-votes will have the
same effect as votes against these proposals.
The approval of the Company's 2000 Long-Term Incentive Stock Plan
requires an affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote at the Annual Meeting. For this proposal, an
abstention will have the same effect as a vote against the proposal. Broker
non-votes will not be voted for or against the proposal and will not be counted
as entitled to vote.
Finally, ratification of the auditors requires that the number of votes
cast for ratification exceed those cast against ratification. Abstentions and
broker non-votes will have no effect on this vote.
All shares of Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted on your behalf "FOR" the five proposals.
Any holder of Common Stock has the unconditional right to revoke his or her
proxy at any time prior to the voting thereof at the Annual Meeting by (i)
filing with the Company's Secretary written revocation of his or her proxy, (ii)
giving a duly executed proxy bearing a later date, or (iii) voting in person at
the Annual Meeting. Attendance by a shareholder at the Annual Meeting will not
in and of itself revoke his or her proxy.
This proxy solicitation is made by and on behalf of the Board.
Solicitation of proxies for use at the Annual Meeting may be made by mail,
telephone or in person, by directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. The Company will request banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of Common Stock held of record
by such entities, and the Company will, upon the request of such record holders,
reimburse reasonable forwarding expenses. The costs of preparing, printing,
assembling and mailing the Proxy Statement and form of proxy card and all
materials used in the solicitation of proxies from shareholders of the Company,
and all clerical and other expenses of such solicitation, will be borne by the
Company.
2
<PAGE>
American Stock Transfer & Trust Company, the transfer agent for the
Common Stock, has been appointed by the Board to serve as inspector of election
to determine the number of shares of Common Stock represented and voted at the
Annual Meeting.
As a matter of policy, proxies, ballots and voting tabulations that
identify individual shareholders are kept private by the Company. Such documents
are available for examination only by the inspectors of election and certain
personnel associated with processing proxy cards and tabulating the vote. The
vote of any shareholder is not disclosed except as may be necessary to meet
legal requirements.
3
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
Under the Company's by-laws, the Board is comprised of [insert]
directors, with all of the directors standing for election each year for a
one-year term. Nominees for election this year are: Arnold M. Gans, Myra D.
Gans, Lawrence Burstein and Alan Gaines.
If any director is unable to stand for election, the Board may, by
resolution, provide for a lesser number of directors or designate a substitute.
In the latter event, shares represented by proxies may be voted for a substitute
director. The Board expects that each nominee named in the following table will
be available for election.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES.
<TABLE>
<CAPTION>
Served as
Position with the Company Director
Name or Principal Occupation from Age
---- ------------------------------- --------- ---
<S> <C> <C> <C>
Arnold M. Gans........... President and Chief Executive Officer 1981 66
Myra D. Gans............. Executive Vice President and Secretary 1982 62
Lawrence Burstein........ Chairman 1991 57
Alan Gaines.............. Director -- 44
</TABLE>
ADDITIONAL BIOGRAPHICAL INFORMATION
Information as of August 30, 2000 regarding each nominee for election
as a director is set forth on the following pages.
ARNOLD M. GANS has been President and a director of the Company since
its formation in 1981. Prior thereto, Mr. Gans had been involved in the weight
control market for over 25 years during which time he, among other things,
developed certain appetite suppressants and anti-obesity programs. Prior to
founding the Company in 1981, Mr. Gans was President of Control Drug, Inc., a
private company engaged in the manufacture of nutritional protein supplements.
Mr. Gans was granted patents in 1977 for method-use manufacturing for certain
nutritional formula processes relating to the use of certain foods to treat
nutritional deficiency, which he has assigned to the Company.
MYRA D. GANS, wife of Arnold M. Gans, the Company's president, has been
an executive of the Company since 1981 and was employed at Control Drug, Inc. as
Vice President-Sales for five years prior thereto. She has worked extensively
with medical professionals and hospitals to integrate the Company's products and
programs. She directs and manages all the Internet project components for the
Company's His and Her Medicine.com web site.
4
<PAGE>
LAWRENCE BURSTEIN is and since March 1996 has been President, a
director and the principal shareholder of Unity Venture Capital Associates, a
private investment banking firm. He is also a director of CAS Medical Systems,
Inc. engaged in the manufacture and marketing of disposable medical devices,
T.H.Q., Inc., a developer of electronic game cartridges, Quintel Communications,
Inc., a direct marketing company, Brazil Fast Food Corporation, which operates
the second largest chain of fast food outlets in Brazil, and ID Systems, Inc., a
manufacturer of wireless tracking devices. Mr. Burstein became Chairman of MNI
in July 1999 upon the resignation of the former Chairman.
ALAN GAINES has served as President, Chief Executive Officer and a
director of hitthebeach.com, inc., a company engaged in the development,
acquisition and operation of online portal communities, since 1998. From 1983
until 1998 Mr. Gaines was an officer and director of Gaines, Berland Inc., a
full-service investment banking firm of which he was a co-founder.
DIRECTORS' FEES
The Company does not pay any cash compensation to its directors.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings during Fiscal Year 2000
(including actions taken by written consent). Each director attended at least
75% of these meetings.
The Board of Directors currently has no committees. Following the
Annual Meeting, the Board intends to establish an Audit Committee and a
Compensation Committee.
AUDIT COMMITTEE. The Audit Committee will recommend to the Board of
Directors the annual appointment of independent certified public accountants
with whom the Committee will review audit fees, the scope and timing of the
audit, the adequacy of internal controls, the auditors' review of the Company's
interim financial statements, and any other services rendered. The Audit
Committee will be comprised of two independent directors.
COMPENSATION COMMITTEE. The Compensation Committee will review and
recommend the compensation and bonuses of the executives of the Company. The
Committee will also administer the Company's 2000 Long-Term Incentive Stock
Plan, if adopted at the Annual Meeting. The Compensation Committee will be
comprised of two independent directors.
5
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules issued thereunder, the Company's executive
officers and directors are required to file with the Securities and Exchange
Commission. Copies of such reports are required to be furnished to the Company.
Arnold Gans did not timely file a Form 4 with respect to the grant to him of
750,000 options in August, 1999 and the purchase of 133,340 shares of Common
Stock and Myra Gans did not timely file a Form 4 with respect to the same
750,000 options granted to her in August 1999 and the same purchase of 133,340
shares of Common Stock. A Form 5 was filed by both on February 16, 2000. Based
solely on review of the copies of such reports furnished to the Company, or
written representations that no other reports were required, the Company
believes that during Fiscal Year 1999, all of its other executive officers and
directors complied with the requirements of Section 16(a).
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid in the fiscal
years ended January 31, 2000, 1999 and 1998, respectively, to the Company's
Chief Executive Officer and Executive Vice President.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION (b)
------------------- --------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY STOCK OPTIONS AWARDED
--------------------------- ---- ------ ---------------------
<S> <C> <C> <C>
Arnold Gans
President (CEO).......................... 2000 $140,000 750,000 (a)
1999 $140,000
1998 $140,000
Myra Gans
Executive Vice President & Secretary..... 2000 $ 85,000 750,000 (a)
1999 $ 85,000
1998 $ 85,000
</TABLE>
(a) These stock options are owned jointly by Mr. and Mrs. Gans.
(b) The Company does not offer any restricted stock awards, stock
appreciation rights, or other long term incentive programs.
Effective April 1, 2000, Arnold Gans' salary was increased to $200,000
per annum. Effective July 25, 2000, Myra Gans salary was increased to $110,000
per annum.
6
<PAGE>
STOCK OPTIONS
In October 1999, Lawrence Burstein, Chairman and a director of the
Company, and Alan Gaines, a nominee for election as a director, were
contingently awarded options to purchase 300,000 shares of the Company's common
stock at a price of $0.10 per share. The grant of these options is contingent
upon the adoption of the Long-Term Incentive Stock Plan by the stockholders of
the Company at the Annual Meeting. None of these options will vest unless and
until a stock option plan is adopted by the stockholders. The options will
expire on November 1, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE REALIZED OPTIONS AT YEAR END (#) AT FISCAL YEAR END ($) (A)
----------- -------- ---------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arnold Gans (a)... 0 0 1,400,000 $1,346,800 $
Myra Gans (a)..... 0 0 1,400,000 $1,346,800 $
</TABLE>
(a) Includes 750,000 options owned jointly by Mr. and Mrs. Gans.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
-------------------------------------- ------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS EXERCISE
OPTIONS GRANTED PRICE EXPIRATION 5% 10%
NAME GRANTED (#) TO EMPLOYEES ($/SH) DATE ($) (2) ($) (2)
---- ----------- ------------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Arnold Gans...... 750,000 87.6% $0.10 11/04 $920,837 $1,161,982
Myra Gans........ 750,000 87.6% $0.10 11/04 $920,837 $1,161,982
</TABLE>
(1) In accordance with Securities and Exchange Commission rules, these columns
show gains that might exist for the respective options, assuming that the
market price of MNI common stock appreciates from the date of grant over a
period of 10 years at the annualized rates of 5% and 10% , respectively.
If the stock price does not increase above the exercise price at the time
of exercise, realized value to the named executives from these options
will be zero.
7
<PAGE>
(2) Only reflects a five year period in accordance with the expiration date of
the options.
EMPLOYMENT AGREEMENTS
None of the Company's executive officers is a party to an employment
agreement with the Company.
STOCK OWNERSHIP
The following table sets forth certain information regarding the
Company's outstanding common stock beneficially owned on August 30, 2000 by (i)
each person who is known by the Company to beneficially own or exercise voting
or dispositive control over at least 5% of the Company's common stock, (ii) each
of the Company's directors and (iii) all of the Company's executive officers and
directors as a group:
<TABLE>
<CAPTION>
NAMES AND ADDRESSES NUMBER OF SHARES
OF BENEFICIAL OWNERS BENEFICIALLY OWNED (1) PERCENTAGE OF CLASS (1)
-------------------- ---------------------- -----------------------
<S> <C> <C>
Arnold Gans.......................... 2,399,830 (2) 36.21%
10 West Forest Avenue
Englewood, NJ 07631
Myra Gans............................ 2,399,830 (2) 36.21%
10 West Forest Avenue
Englewood, NJ 07631
Lawrence Burstein.................... 2,750 (3) 0.06%
245 Fifth Avenue
New York, NY 10016
Marianne J. Legato, M.D. 1,598,000 (4) 25.88%
200 East 66th Street
New York, New York 10021
American Stock Transfer & 400,000 8.74%
Trust Company
2 Broadway
New York, New York 10004
Coleman, Rhine & Goodwin LLP 300,000 6.55%
750 Lexington Avenue
New York, New York 10022
All directors and executive officers
as a group.............................. 2,402,580 (2) - (3) 36.25%
(3 persons) (2) - (3)
</TABLE>
(1) Includes all shares issuable pursuant to presently exercisable options
as well as all such options which will become exercisable within 60
days of the date hereof. Except as otherwise indicated, all shares are
beneficially owned, and their sole investment and voting power is held
by the persons named herein.
8
<PAGE>
(2) Includes 349,830 shares which are owned by Arnold and Myra Gans; also
includes options to acquire an aggregate of 2,050,000 shares for Arnold
and Myra Gans exercisable at $.10 per share through November 1, 2004.
(3) Excludes (i) 8,863 shares owned by Trinity Pension Trust, of which Mr.
Burstein is a trustee and beneficiary, (ii) 300,000 contingent options
which vest upon adoption by the shareholders of the Company's 2000 Long
Term Incentive Stock Plan as described under Item 4, and (iii)
2,133,333 shares issuable upon the conversion of $160,000 principal
amount of 10% Convertible Subordinated Debentures.
(4) Includes options to acquire 1,598,000 shares exercisable at $0.875 per
share
CERTAIN TRANSACTIONS
From time to time Arnold Gans, the Company's Chief Operating Officer,
made advances (which were derived from loans on his personal credit cards) to
the Company for working capital purposes. Interest charged by the issuing bank
on these advances, which Mr. Gans passed through to the Company, was at rates
varying from 11% to 18%. The balance due at February 1, 1999, was $196,300 and
the highest balance due during the year was $230,800. The total of all
repayments during the year, including interest, amounted to $278,200. At January
31, 2000, all advances were repaid out of the proceeds raised from the private
placement of 10% Convertible Subordinated Debentures and, accordingly, no
balance remained outstanding.
For the fiscal year ended January 31, 2000, the Company raised a total
of $1,521,250 in connection with a private placement of 10% Convertible
Subordinated Debentures convertible at $.075 per share (including $390,000 of
unsecured advances received during the second quarter which were converted into
10% convertible Subordinated Debentures). The Subordinated Debentures are due
and payable in their entirety on October 1, 2000, unless earlier converted. The
Subordinated Debentures will not be convertible unless the shareholders approve
the increase in the Company's authorized common stock described under Item 3.
Upon such approval, the Subordinated Debentures will automatically convert into
common stock. Mr. Lawrence Burstein, a Director and Chairman of the Company, and
an entity of which Mr. Burstein is a shareholder, officer and director, acquired
$160,000 principle amount of the Subordinated Debentures. Mr. Gaines, a nominee
for director, acquired $200,000 principal amount of the Subordinated Debentures.
Subsequent to January 31, 2000, the Company issued an additional
$425,000 principal amount of 10% Convertible Subordinated Debentures convertible
at $0.375 per share, which are due and payable in their entirety July 31, 2001,
unless earlier converted. These Subordinated Debentures also will not be
convertible unless the shareholders approve the increase in the Company's
authorized common stock described under Item 3. Of the additional $425,000 of
the Subordinated Debentures, Mr. Burstein and Mr. Gaines or entities affiliated
with them purchased $100,000 and $175,000 principal amount, respectively, of
such Subordinated Debentures.
9
<PAGE>
ITEM 2. CHANGE OF NAME
In March 2000, the Board adopted, subject to shareholder approval, an
amendment of the Company's Certificate of Incorporation to change the name of
the Company to Gender Sciences, Inc. The current name of the Company is "The MNI
Group Inc." The language in Article First of the existing Certificate of
Incorporation would be amended as follows (new language underscored):
"FIRST: The name of the corporation is GENDER SCIENCES, INC."
The Company was incorporated as Medical Nutrition Inc. in 1981, and
changed its name to The MNI Group Inc. in February 1992. This name is associated
with the Company's historical business of developing and distributing
nutritional support products and programs for humans and pets. The Board now
believes that this name does not accurately reflect the changing focus of the
Company's business strategy, which principally is to help women make informed
choices about their health through providing information to help women evaluate
their health choices as well as providing information about differences between
men and women now referred to as gender based medicine.
Over the past year the Company has devoted substantial resources to
developing its web site and to identifying itself in the public's mind as the
healthcare network for women and gender specific medicine and accordingly
believes the name change more accurately reflects its long term strategy.
There will be relatively little cost associated with the name change.
Virtually no advertising will be required, for example, because the Company's
web site (when launched), nutritional supplements and advertising will carry the
Company's logo.
The new name, Gender Sciences, Inc., will serve to identify the Company
as what it is today--a forward-looking enterprise whose range of businesses,
products and services puts it on the leading edge of the burgeoning interest in
women's health issues and alternative treatments.
The adoption of the proposed amendment of the Certificate of
Incorporation to change the corporate name will require the affirmative vote of
the holders of a majority of the outstanding shares of common stock. Any shares
not voted (whether by abstention, broker non-vote, or otherwise) have the effect
of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ADOPTION OF THE PROPOSED AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION.
10
<PAGE>
ITEM 3. INCREASE IN AUTHORIZED COMMON STOCK
The Board recommends an amendment to the Company's Certificate of
Incorporation to increase the authorized Common Stock of the Company from the
presently authorized 10,000,000 shares of Common Stock to 50,000,000 shares. The
language in Article Fourth of the existing Certificate of Incorporation would be
amended as follows (new language underscored):
"FOURTH: The aggregate number of shares that the corporation shall have
authority to issue is 50,000,000, all of which shall be without nominal
or par value. All or part of such shares may be issued by the company
from time to time, and for such consideration, as may be determined
upon and fixed by the Board of Directors, as provided by law. The Board
of Directors shall have the power to amend the company's Certificate of
Incorporation to effectuate the division of shares into classes and
into series within any class or classes, the determination of the
designation and number of shares of any class or series, the
determination of the relative rights, preferences and limitations of
the shares of any class or series, in any or all of such divisions and
determinations.
As of the Record Date, [insert] shares of Common Stock were issued and
outstanding, and an additional 9,225,250 shares are reserved for issuance to
cover outstanding stock options and warrants. In addition, the Company is
committed to issuing 21,416,666 shares of Common Stock upon the conversion of
its outstanding Subordinated Debentures, which encompasses $1,521,250 principal
amount convertible at $.075 per share and $425,000 principal amount convertible
at $.375 per share. Finally, the 2000 Long-Term Incentive Stock Plan, if adopted
at the Annual Meeting, will require the Company to reserve for issuance up to
4,500,000 shares of Common Stock upon the exercise of grants issued under the
plan.
The Board of Directors believes it is imperative to have additional
authorized shares of Common Stock available to enable the Company to meet its
commitments to the holders of the Debentures and to implement the 2000 Long-Term
Incentive Stock Plan, if adopted. Moreover, the Board of Directors believes it
is necessary to have additional authorized shares of Common Stock available for
future financing and acquisition transactions, stock dividends and stock splits,
new employee benefit plans and other general corporate purposes. Having
additional authorized shares of Common Stock available for issuance in the
future will afford the Company greater flexibility and may allow such shares to
be issued without the expense and delay of a special shareholders' meeting.
The Company currently has no plans, agreements or understandings for
the issuance of additional shares of Common Stock, except in connection with the
conversion of the Debentures and the exercise of grants issued under the 2000
Long-Term Incentive Stock Plan, if adopted at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ADOPTION OF THE PROPOSED AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION. PLEASE NOTE THAT PROPOSAL 4 BELOW WILL NOT BE CONSIDERED AT THE
ANNUAL MEETING UNLESS THE SHAREHOLDERS APPROVE THIS PROPOSAL 3.
11
<PAGE>
ITEM 4. PROPOSAL TO ADOPT THE COMPANY'S LONG-TERM INCENTIVE STOCK PLAN
GENERAL
The Board is proposing for shareholder approval the Company's 2000
Long-Term Incentive Stock Plan (the "2000 Plan"). The Company does not currently
have in effect any employee equity plans. The primary purposes of the 2000 Plan
are (i) to promote the interests of the Company and its shareholders by
strengthening the Company's ability to attract and retain highly competent
individuals to serve as officers and other key employees and (ii) to provide a
means to encourage stock ownership and proprietary interest by such persons in
the Company. Under the 2000 Plan, the Company may grant stock options, stock
appreciation rights ("SARs"), or stock awards, as discussed in greater detail
below. Awards may be granted singly, in combination, or in tandem and may be
evidenced by an agreement that sets forth the terms, conditions, and limitations
of such award. Awards may also be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form for, grants or rights
under any other compensation plan of the Company, including the plan of any
entity acquired by (or whose assets are acquired by) the Company. All employees
of the Company and its subsidiaries are eligible to participate in the 2000
Plan. Reference is made to Exhibit A to this Proxy Statement for the complete
text of the 2000 Plan, which is summarized below.
DESCRIPTION OF THE 2000 PLAN
ADMINISTRATION
The 2000 Plan will be administered by the Board of Directors and/or a
Compensation Committee of the Board of Directors (the "Committee"), which
Committee shall consist of at least two members, all of whom shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Exchange Act
and "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986 (the "Code").
The 2000 Plan is intended to provide participants with stock-based
incentive compensation that is not subject to the deduction limitations under
Section 162(m) of the Code. Section 162(m) of the Code generally limits to $1
million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to its chief executive officer and four most
highly compensated executive officers other than the chief executive officer.
However, "qualified performance-based compensation" is not subject to the $1
million deduction limit. To qualify as qualified performance-based compensation,
the following requirements must be satisfied: (i) the performance goals are
determined by a committee consisting solely of two or more "outside directors;"
(ii) the material terms under which the compensation is to be paid, including
the performance goals, are approved by a majority of the corporation's
shareholders; and (iii) if applicable, the committee certifies that the
applicable performance goals were satisfied before payment of any
performance-based compensation is made. As noted above, the Committee will
12
<PAGE>
consist solely of "outside directors" for purposes of Section 162(m) of the
Code. As a result, and based on regulations issued by the United States
Department of the Treasury, certain compensation under the 2000 Plan, such as
that payable with respect to stock options and SARs, is not expected to be
subject to the $1 million deduction limit, but other compensation payable under
the 2000 Plan, such as any restricted stock award which is not subject to a
performance condition to vesting, may be subject to such limit.
Subject to the express provisions of the 2000 Plan, the Committee will
have broad authority to administer and interpret the 2000 Plan as it deems
necessary and appropriate. This authority includes, but is not limited to,
selecting award recipients, establishing award terms and conditions, adopting
procedures and regulations governing awards, and making all other determinations
necessary or advisable for the administration of the 2000 Plan. The Committee
may provide for the transferability of an award, including transfers to
immediate family members of a participant. Except with respect to grants to
persons who are subject to Section 16 of the Exchange Act, or who are or are
likely to be "covered employees" within the meaning of Section 162(m) of the
Code, the Committee may delegate some or all of its authority to administer the
2000 Plan to the Chairman and Chief Executive Officer or another executive
officer of the Company.
AVAILABLE SHARES
The 2000 Plan authorizes the issuance, in the aggregate, of up to
4,500,000 shares of Common Stock, which may be unissued shares or treasury
shares; provided, that the number of shares subject to awards that are granted
in substitution of awards issued by an entity acquired by (or whose assets are
acquired by) the Company will not reduce the number of shares available under
the 2000 Plan. To the extent shares subject to outstanding awards under the 2000
Plan are not issued by reason of the expiration, termination, cancellation, or
forfeiture of such award or by reason of the tendering or withholding of shares
of Common Stock to pay all or a portion of the purchase price, or to satisfy all
or a portion of the tax withholding obligations relating to such award, and to
the extent shares acquired pursuant to the exercise of an option or other award
are repurchased by the Company, then such shares of Common Stock will again be
available under the 2000 Plan. In the event of a stock dividend, stock split,
merger, consolidation, recapitalization, spin-off, or other similar change or
event, the number of available shares may be adjusted, as the Committee in its
discretion deems appropriate.
The maximum number of shares of Common Stock for which awards may be
granted to any person in any fiscal year is 300,000.
CHANGE OF CONTROL
The Committee may make appropriate adjustments (including acceleration
of vesting and settlements of or substitutions for awards) in the event that (i)
a person (subject to certain exceptions) becomes the beneficial owner of 20% or
more of the voting power of the Company's outstanding stock which may be voted
on all matters submitted to shareholders generally, (ii) individuals who
13
<PAGE>
immediately after the Annual Meeting constitute the Board of Directors, and any
new director whose nomination for election or election is recommended or
approved by a majority of the directors who were directors immediately after the
Annual Meeting or whose nomination or election was previously so recommended or
approved, cease to constitute a majority of the Board of Directors, or (iii) the
shareholders approve a reorganization, merger, or consolidation or the Company
sells or disposes of all or substantially all of its property and assets (unless
the Company's shareholders receive 50% or more of the voting power of the
resulting entity) or the Company liquidates or dissolves, or in contemplation of
any such event.
EFFECTIVE DATE, TERMINATION AND AMENDMENT
If approved by shareholders, the 2000 Plan will become effective as of
the date of such approval. No stock options, SARs or other awards may be granted
under the 2000 Plan after October 27, 2009, which is the day before the tenth
anniversary of the date of the 2000 Plan's adoption by the Board of Directors.
The Board of Directors may amend the 2000 Plan at any time, subject to any
requirement of shareholder approval required by applicable law, rule or
regulation and provided that no amendment may be made without shareholder
approval if such amendment would (i) increase the maximum number of shares of
Common Stock available under the 2000 Plan or (ii) effect any change
inconsistent with Section 422 of the Code.
STOCK OPTIONS
A stock option represents the right to purchase a specified number of
shares of Common Stock during a specified period, typically up to ten years, as
determined by the Committee. The purchase price per share for each stock option
may not be less than 100% of the fair market value on the date of grant;
provided, that a stock option granted in substitution of an award granted by an
entity acquired by (or whose assets are acquired by) the Company may be granted
with a purchase price that preserves the economic value of the award and with
respect to a stock option granted retroactively in substitution for an option or
SAR, the purchase price per share may be the fair market value on the grant date
of the option or SAR. A stock option may be in the form of an incentive stock
option or a non-qualified stock option. In the case of an incentive stock option
granted to an optionee who, at the time of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or its parent or subsidiaries, as defined in the Code, the exercise
price per share may not be less than 110% of the fair market value on the date
of grant and the option may not be exercisable more than five years after the
date granted. The shares covered by a stock option may be purchased, in
accordance with the applicable award agreement, by cash payment or other method
permitted by the Committee, including (i) tendering shares of Common Stock, (ii)
authorizing third party exercise transactions, or (iii) any combination of the
above.
14
<PAGE>
SARS
An SAR represents a right to receive a payment, in cash, shares of
Common Stock, or a combination thereof, equal to the excess of the fair market
value of a specified number of shares of Common Stock on the date the SAR is
exercised over the fair market value of such shares on the date the SAR was
granted. However, if an SAR is granted retroactively in substitution for a stock
option, the fair market value may be the fair market value on the date the stock
option was granted. The Committee may grant SARs alone or together with stock
options.
STOCK AWARDS
A stock award represents an award made in or valued, in whole or in
part, by reference to shares of Common Stock. All or part of a stock award may
be payable in shares of Common Stock and may be subject to conditions and
restrictions established by the Committee. Such conditions may include, but are
not limited to, continuous service with the Company and its subsidiaries and/or
the achievement of performance goals. The performance criteria that may be used
by the Committee in granting stock awards contingent on performance goals
consist of total shareholder return, net sales, operating income, income before
taxes, net income, net income per share (basic or diluted), profitability as
measured by return ratios, including return on invested capital, return on
equity and return on investment, cash flows, market share, or cost reduction
goals. The Committee may select one criterion or multiple criteria for measuring
performance, and the measurement may be based on Company or business unit
performance, or on comparative performance with other companies.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain federal income tax
consequences generally arising with respect to awards under the 2000 Plan.
A participant will not recognize taxable income at the time a stock
option is granted and the Company will not be entitled to a tax deduction at
such time. A participant will recognize compensation taxable as ordinary income
(and subject to income tax withholding) upon exercise of a non-qualified stock
option equal to the excess of the fair market value of the shares purchased over
their exercise price, and the Company will be entitled to a corresponding
deduction, except to the extent the deduction limits of reasonable compensation
and Section 162(m) of the Code apply. A participant will not recognize income
(except for purposes of the alternative minimum tax) upon exercise of an
incentive stock option. If the shares acquired by exercise of an incentive stock
option are held for the longer of two years from the date the stock option was
granted and one year from the date it was exercised, any gain or loss arising
from a subsequent disposition of such shares will be taxed as long-term capital
gain or loss, and the Company will not be entitled to any deduction. If,
however, such shares are disposed of within the above-described period, then in
the year of such disposition the participant will recognize compensation taxable
as ordinary income equal to the excess of the lesser of (i) the amount realized
upon such disposition and (ii) the fair market value of such shares on the date
of exercise over the exercise price, and the Company will be entitled to a
corresponding deduction.
15
<PAGE>
A participant will not recognize taxable income at the time SARs are
granted and the Company will not be entitled to a tax deduction at such time.
Upon exercise, the participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) in an amount equal to the fair
market value of any shares delivered and the amount of cash paid by the Company.
This amount will be deductible by the Company as compensation expense, except to
the extent the deduction limits of reasonable compensation and Section 162(m) of
the Code apply.
A participant will not recognize taxable income at the time restricted
stock is granted and the Company will not be entitled to a tax deduction at such
time, unless the participant makes an election to be taxed at such time. If such
election is not made, the participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding) at the time the
restrictions lapse in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for such shares. The
amount of ordinary income recognized by making the above-described election or
upon the lapse of restrictions will be deductible by the Company as compensation
expense, except to the extent the deduction limits of reasonable compensation
and Section 162(m) of the Code apply. In addition, a participant receiving
dividends with respect to restricted stock for which the above-described
election has not been made and prior to the time the restrictions lapse will
recognize compensation taxable as ordinary income (and subject to income tax
withholding), rather than dividend income, in an amount equal to the dividends
paid and the Company will be entitled to a corresponding deduction, except to
the extent the deduction limits of reasonable compensation and Section 162(m) of
the Code apply.
A participant will recognize compensation taxable as ordinary income
(and subject to income tax withholding) at the time bonus stock (i.e., stock not
subject to restriction) is granted in an amount equal to the then fair market
value of such stock. This amount will be deductible by the Company as
compensation expense, except to the extent the deduction limits of reasonable
compensation and Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time performance
restricted units (i.e., stock awards which are subject to performance criteria)
are granted and the Company will not be entitled to a tax deduction at such
time. Upon the settlement of units, the participant will recognize compensation
taxable as ordinary income (and subject to income tax withholding) in an amount
equal to the fair market value of any shares delivered and the amount of cash
paid by the Company. This amount will be deductible by the Company as
compensation expense, except to the extent the deduction limits of reasonable
compensation and Section 162(m) of the Code apply.
STOCK PRICE
On the Record Date, the closing price of the Common Stock on the OTC
Bulletin Board was $[insert].
16
<PAGE>
NEW PLAN BENEFITS
Since awards under the 2000 Plan will be authorized by the Board or the
Committee in its sole discretion, it is not possible to determine the benefits
or amounts that will be received by any particular employee or group of
employees in the future. The number of shares subject to options which have been
awarded to date to the following groups of individuals are set forth below:
OPTIONS GRANTED UNDER
2000 PLAN
Executive Officers as a Group 0
Non-Executive Director Group 600,000
Non-Executive Officer Employee Group 0
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE COMPANY'S
2000 LONG-TERM INCENTIVE STOCK PLAN.
ITEM 5. RATIFICATION OF THE SELECTION OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
The Board has selected, subject to ratification by the shareholders,
Goldstein & Ganz P.C., independent certified public accountants, to audit the
consolidated financial statements of the Company and its subsidiaries for Fiscal
Year 2001. Goldstein & Ganz P.C. has previously audited the Company's financial
statements for Fiscal Year 2000. The Company expects representatives of
Goldstein & Ganz P.C. to attend the Annual Meeting, to be available to respond
to appropriate questions from shareholders, and to have the opportunity to make
a statement if so desired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF GOLDSTEIN & GANZ P.C. AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR FISCAL YEAR 2001.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors knows of
no business to be presented at the Meeting other than as set forth herein. If
other matters properly come before the Meeting, the persons named as proxies
will vote on such matters in their discretion.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's
2001 Annual Meeting of Shareholders must be received by the Company's Secretary,
at 10 West Forest Avenue, Englewood, New Jersey 07631, no later than [insert],
2001, in order to be considered for inclusion in the Company's Proxy Statement
17
<PAGE>
and form of proxy relating to such Meeting. Moreover, with regard to any
proposal by a shareholder not seeking to have such proposal included in the
Proxy Statement but seeking to have such proposal considered at the 2001 Annual
Meeting, if such shareholder fails to notify the Company in the manner set forth
above of such proposal no later than [insert], 2001, then the persons appointed
as proxies may exercise their discretionary voting authority if the proposal is
considered at the 2001 Annual Meeting notwithstanding that shareholders have not
been advised of the proposal in the Proxy Statement for the 2001 Annual Meeting.
Any proposals submitted by shareholders must comply in all respects with (i) the
rules and regulations of the Securities and Exchange Commission, (ii) the
provisions of the Company's Certificate of Incorporation and by-laws, and (iii)
New Jersey law.
ANNUAL REPORT
The Company's 2000 Annual Report, which incorporates the Company's
Annual Report on Form 10-K for the Year Ended January 31, 2000, is concurrently
being mailed to shareholders. The Annual Report contains consolidated financial
statements of the Company and its subsidiaries and the report thereon of
Goldstein & Ganz P.C., independent certified public accountants.
BY ORDER OF THE BOARD OF DIRECTORS
Myra D. Gans
Secretary
Dated: [insert], 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING FORM OF PROXY CARD IN
THE ENCLOSED ENVELOPE.
18
<PAGE>
Exhibit A
GENDER SCIENCES, INC.
2000 LONG-TERM INCENTIVE STOCK PLAN
ARTICLE I -- PURPOSES
The purposes of the Gender Sciences, Inc. 2000 Long_Term Incentive
Stock Plan are to promote the interests of Gender Sciences, Inc. (the
"Corporation") and its shareholders by strengthening the Corporation's ability
to attract and retain highly competent officers and other employees, and to
provide a means to encourage stock ownership and proprietary interest in the
Corporation by such persons. The 2000 Long_Term Incentive Stock Plan is intended
to provide plan participants with stock_based incentive compensation which is
not subject to the deduction limitation rules prescribed under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), and should be
construed to the extent possible as providing for remuneration which is
"performance_based compensation" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder.
ARTICLE II -- DEFINITIONS
Unless the context clearly indicates otherwise, the following terms
shall have the following meanings:
a. "AWARD" means, individually or in the aggregate, an award
granted to a Participant under the Plan in the form of an Option, a Stock Award,
or an SAR, or any combination of the foregoing.
b. "BOARD" means the Board of Directors of Gender Sciences, Inc.
c. "COMMITTEE" means the Compensation Committee of the Board of
Directors, a subcommittee thereof, or such other committee as may be appointed
by the Board of Directors. The Committee shall be comprised of two or more
members of the Board of Directors who shall be "non_employee directors" under
Rule 16b_3 of the Exchange Act and "outside directors" under Section 162(m) of
the Code.
d. "CORPORATION" means Gender Sciences, Inc., or any entity that
is directly or indirectly controlled by Gender Sciences, Inc., and its
subsidiaries.
e. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
f. "FAIR MARKET VALUE" means the fair market value of a Share as
of the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Committee. In the absence of any
<PAGE>
alternative valuation methodology approved by the Committee, the Fair Market
Value of a Share shall equal the average of the highest and the lowest quoted
selling price of a Share as reported on the composite tape for the principal
national securities exchange on which the Shares are traded on that date, or, in
the event that the Shares are not listed for trading on a national securities
exchange but are quoted on an automated system, on such1 automated system, in
any such case on the valuation date (or, if there were no sales on the valuation
date, the average of the highest and the lowest quoted selling prices as
reported on said composite tape or automated system for the most recent day
before the valuation date during which a sale occurred).
g. "INCENTIVE STOCK OPTION" means a stock option that complies
with Section 422 of the Code, or any successor law.
h. "NON_QUALIFIED STOCK OPTION" means a stock option that does
not meet the requirements of Section 422 of the Code, or any successor law.
i. "OPTION" means an option awarded under Article VI to purchase
Shares. An Option may be either an Incentive Stock Option or a Non_Qualified
Stock Option, as determined by the Committee in its sole discretion.
j. "PARTICIPANT" means, (i) with respect to an Incentive Stock
Option, any full-time employee of the Corporation, including an officer or
director of the Corporation and (ii) with respect to all other Awards which may
be granted under the Plan, any individual employed by, or performing services
for, the Corporation, including, without limitation, officers and directors of
the Corporation.
k. "PLAN" means this Gender Sciences, Inc. 2000 Long_Term
Incentive Stock Plan, as amended and restated from time to time.
l. "SAR" means a stock appreciation right.
m. "SHARES" means shares of the Corporation's common stock, $.01
par value per share.
n. "STOCK AWARD" means an Award made under Article VI in Shares.
0. "SUBSTITUTE AWARD" has the meaning set forth in Article V(b).
The term "CHANGE OF CONTROL" has the meaning set forth in Article X.
ARTICLE III -- EFFECTIVE DATE AND DURATION
The Plan shall become effective upon its approval by the shareholders
of the Corporation. Prior to such shareholder approval, the Committee may grant
Awards conditioned on shareholder approval. If such shareholder approval is not
obtained at or before the first annual meeting of shareholders to occur after
2
<PAGE>
the adoption of the Plan by the Board (including any adjournment or adjournments
thereof), the Plan and any Awards made thereunder shall terminate ab initio and
be of no further force and effect. In no event shall any Awards be made under
the Plan after October 27, 2009, which is the day before the tenth anniversary
of the date of the Plan's adoption by the Board.
ARTICLE IV -- ADMINISTRATION
The Board and/or the Committee shall be responsible for administering
the Plan, and shall have full power to interpret the Plan and to adopt such
rules, regulations and guidelines for carrying out the Plan as it may deem
necessary or appropriate. This power includes, but is not limited to, selecting
Award recipients, establishing all Award terms and conditions, adopting
procedures and regulations governing Awards, and making all other determinations
necessary or advisable for the administration of the Plan. All decisions made by
the Board and/or the Committee shall be final and binding on all persons.
The Committee may delegate some or all of its power to the Chairman and
Chief Executive Officer or other executive officer of the Corporation as the
Committee deems appropriate; provided, that (i) the Committee may not delegate
its power with regard to the grant of an Award to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code, or any successor
law, or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period an Award to such employee would be outstanding and
(ii) the Committee may not delegate its power with regard to the selection for
participation in the Plan of an officer or other person subject to Section 16 of
the Exchange Act or decisions concerning the timing, pricing or amount of an
Award to such an officer or other person.
ARTICLE V -- AVAILABLE SHARES
a. GENERAL. Subject to adjustment as provided in Article V(d) of
the Plan, the number of Shares that may be issued under the Plan shall not
exceed, in the aggregate, 4,500,000 shares.
Shares issued under this Plan may be either authorized but unissued
shares, treasury shares or any combination thereof. No fractional Shares shall
be issued. Cash may be paid in lieu of any fractional Shares in settlement of
Awards.
b. RULES APPLICABLE TO DETERMINING SHARES AVAILABLE FOR ISSUANCE.
For purposes of determining the number of Shares that remain available for
issuance, the following shares shall be added back to the limit set forth in
Article V(a) above and again be available for Awards:
(i) The number of Shares tendered to pay the exercise price
of an Option or other Award;
3
<PAGE>
(ii) The number of Shares withheld from any Award to satisfy
a Participant's tax withholding obligations or, if applicable, to pay the
exercise price of an Option or other Award;
(iii) The number of Shares subject to an Option or other
outstanding Award which are not issued by reason of the expiration, termination,
cancellation or forfeiture of such Award; and
(iv) Any Shares acquired pursuant to the exercise of an
Option or other Award which thereafter are repurchased by the Corporation.
In addition, the number of Shares subject to Awards that are granted in
substitution of an option or other award (a "Substitute Award") issued by an
entity acquired by (or whose assets are acquired by) the Corporation shall not
reduce the number of Shares available under the Plan.
c. SPECIAL LIMITS. The number of Shares for which Awards may be
granted to any person in any calendar year shall not exceed 300,000.
d. ADJUSTMENTS. In the event of any stock dividend, stock split,
combination or exchange of securities, merger, consoli-dation, recapitalization,
spin_off or other distribution (other than normal cash dividends) of any or all
of the assets of the Corporation to shareholders, or any other similar change or
event, such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change or event shall be made
with respect to the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding Option and the
purchase price per security, the terms of each outstanding SAR, and the number
and class of securities subject to each outstanding Stock Award shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding Options without an increase in the aggregate purchase price. If
any such adjustment would result in a fractional security being (a) available
under the Plan, such fractional security shall be disregarded, or (b) subject to
an Award, the Corporation shall pay the holder of such Award, in connection with
the first vesting, exercise or settlement of such Award in whole or in part
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise price, if any, of such Award.
ARTICLE VI -- AWARDS
a. GENERAL. The Committee shall determine the type or types of
Award(s) to be made to each Participant. Awards may be granted singly, in
combination or in tandem. In the sole discretion of the Committee, Awards also
may be made in combination or in tandem with, in replacement of, as alternatives
to, or as the payment form for grants or rights under any other compensation
plan of the Corporation including a plan of any entity acquired by (or whose
assets are acquired by) the Corporation. The Committee shall have full authority
to determine and specify in the applicable agreement reflecting an Award the
effect, if any, that a Participant's termination of employment for any reason
4
<PAGE>
will have on the vesting, exercisability, payment or lapse of restrictions
applicable to an Award. With respect to the foregoing, the terms and conditions
of an Incentive Stock Option may (but need not) include any of the following
provisions:
(i) In the event the full-time employment of a Participant
is terminated by the Corporation or any parent or subsidiary (as those terms are
defined in Sections 424(e) and 424(f) of the Code, or any successor law) of the
Corporation for any reason other than "for cause," as determined by the Board,
the unexercised portion of any Incentive Stock Option held by such Participant
at that time may only be exercised within three months after the date on which
the Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised such Incentive Stock Option as of the
date on which he ceased to be so employed.
(ii) In the event the full-time employment of a Participant
is terminated by the Corporation or any parent or subsidiary (as those terms are
defined in Sections 424(e) and 424(f) of the Code, or any successor law) of the
Corporation "for cause," as determined by the Board, or if such employment is
terminated voluntarily by the Participant, the unexercised portion of any
Incentive Stock Option held by such Participant shall terminate immediately
effective the date the Participant ceased to be so employed.
(iii) In the event a Participant shall cease to be employed by
the Corporation or any parent or subsidiary (as those terms are defined in
Sections 424(e) and 424(f) of the Code, or any successor law) of the Corporation
on a full time basis by reason of his "disability" (within the meaning of
Section 422 of the Code or any successor law) or on account of death or
retirement, the unexercised portion of any Incentive Stock Option held by such
Participant at that time may only be exercised within one year after the date on
which the Participant ceased to be so employed (or for such shorter exercise
periods that may apply for purposes of Section 422 of the Code, or any successor
law), and only to the extent that the Participant could have otherwise exercised
such Incentive Stock Option as of the date on which the Participant ceased to be
so employed.
b. TYPES OF AWARDS. The types of Awards that may be granted
under the Plan are:
(i) OPTIONS. An Option shall represent the right to purchase
a specified number of Shares during a specified period up to ten years as
determined by the Committee. The purchase price per Share for each Option shall
not be less than 100% (110% in the case of an Incentive Stock Option granted to
an optionee ("10% Stockholder") who, at the time of grant, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Corporation or its parent (as defined in Section 424(e) of the Code, or any
successor law) or its subsidiaries) of the Fair Market Value on the date of
grant; provided, that a Substitute Award may be granted with a purchase price
per Share that is intended to preserve the economic value of the award which the
Substitute Award replaced. The term of each Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years (five years, in the case of an Incentive Stock Option granted to a 10%
Stockholder) after the date on which the Option is granted. If an Option is
5
<PAGE>
granted retroactively in substitution for an SAR, the Fair Market Value in the
Award agreement may be the Fair Market Value on the grant date of the SAR. An
Option may be in the form of an Incentive Stock Option or a Non_Qualified Stock
Option, as determined by the Committee. The Shares covered by an Option may be
purchased, in accordance with the applicable Award agreement, by cash payment or
such other method permitted by the Committee, including (i) tendering Shares
valued at the Fair Market Value at the date of exercise; (ii) authorizing a
third party to sell the Shares (or a sufficient portion thereof) acquired upon
exercise of an Option, and assigning the delivery to the Corporation of a
sufficient amount of the sale proceeds to pay for all the Shares acquired
through such exercise and any tax withholding obligations resulting from such
exercise; or (iii) any combination of the above. In the case of an Incentive
Stock Option, the aggregate Fair Market Value of Shares (determined at the time
of grant of the Option) 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 optionee's employer corporation and its parent and
subsidiaries (as those terms are defined in Sections 424(e) and 424(f) of the
Code, or any successor law)) shall not exceed $100,000.
(ii) SARS. An SAR shall represent a right to receive a
payment, in cash, Shares or a combination, equal to the excess of the Fair
Market Value of a specified number of Shares on the date the SAR is exercised
over the Fair Market Value on the grant date of the SAR as set forth in the
Award agreement, except that if an SAR is granted retroactively in substitution
for an Option, the designated Fair Market Value in the Award agreement may be
the Fair Market Value on the grant date of the Option. An SAR may be granted
alone or in addition to other Awards, or in tandem with an Option. An SAR
granted in tandem with an Option may be granted either at the same time as such
Option or subsequent thereto. If granted in tandem with an Option, an SAR shall
cover the same number of Shares as covered by the Option (or such lesser number
of shares as the Committee may determine) and shall be exercisable only at such
time or times and to the extent the related Option shall be exercisable, and
shall have the same term and exercise price as the related Option (which, in the
case of an SAR granted after the grant of the related Option, may be less than
the Fair Market Value per Share on the date of grant of the tandem SAR). Upon
exercise of an SAR granted in tandem with an Option, the related Option shall be
canceled automatically to the extent of the number of Shares covered by such
exercise; conversely, if the related Option is exercised as to some or all of
the Shares covered by the tandem grant, the tandem SAR shall be canceled
automatically to the extent of the number of Shares covered by the Option
exercise.
(iii) STOCK AWARDS. A Stock Award shall represent an Award
made in or valued in whole or in part by reference to Shares, such as
performance or phantom shares or units. Stock Awards may be payable in whole or
in part in Shares. All or part of any Stock Award may be subject to conditions
and restrictions established by the Committee, and set forth in the Award
agreement or other plan or document, which may include, but are not limited to,
continuous service with the Corporation, and/or the achievement of one or more
performance goals. The performance criteria that may be used by the Committee in
granting Stock Awards contingent on performance goals shall consist of total
shareholder return, net sales, operating income, income before income taxes, net
income, net income per share (basic or diluted), profitability as measured by
return ratios, including return on invested capital, return on equity and return
6
<PAGE>
on investment, cash flows, market share or cost reduction goals. The Committee
may select one criterion or multiple criteria for measuring performance, and the
measurement may be based on Corporation or business unit performance, or based
on comparative performance with other companies.
ARTICLE VII -- DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that any Awards under the Plan earn dividends
or dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a Participant's Plan account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
Shares or Share equivalents.
ARTICLE VIII -- PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash under such rules and
procedures as it may establish under the Plan. It also may provide that deferred
settlements include the payment or crediting of interest on the deferral
amounts, or the payment or crediting of dividend equivalents where the deferral
amounts are denominated in Share equivalents.
ARTICLE IX -- TRANSFERABILITY
a. Unless otherwise specified in an Award agreement, Awards shall
not be transferable or assignable other than by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. The interests of Participants under the Plan are not subject to their
debts or other obligations and, except as may be required by the tax withholding
provisions of Code or any state's income tax act, or pursuant to an agreement
between a Participant and the Corporation, may not be voluntarily sold,
transferred, alienated, assigned or encumbered.
b. Notwithstanding the foregoing, the Committee, in its
discretion and subject to such limitations and conditions as the Committee deems
appropriate, may (i) amend Awards of Incentive Stock Options to convert the
Options granted thereby to Non-Qualified Stock Options, or (ii) grant
Non-Qualified Stock Options, in each case on terms which permit the Participant
to transfer all or a part of the Option, for estate or tax planning purposes or
for donative purposes, and without consideration, to a member of the
Participant's immediate family (as defined by the Committee), a trust for the
exclusive benefit of such immediate family members, or a partnership,
corporation or limited liability company the equity interests of which are owned
exclusively by the Participant and/or one or more members of the Participant's
family.
7
<PAGE>
ARTICLE X -- CHANGE OF CONTROL
Either in contemplation of or in the event of a Change of Control (as
defined below), the Committee may provide for appropriate adjustments (including
acceleration of vesting and settlements of or substitutions for Awards either at
the time an Award is granted or at a subsequent date).
A "Change of Control" shall occur when:
(a) a "Person" (which term, when used in this Article X,
shall have the meaning it has when it is used in Section 13(d) of the Exchange
Act, but shall not include the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, or any
corporation owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of Voting
Stock (as defined below) of the Corporation) is or becomes, without the prior
consent of a majority of the Continuing Directors of the Corporation (as defined
below), the Beneficial Owner (as defined in Rule 13d_3 promulgated under the
Exchange Act), directly or indirectly, of Voting Stock (as defined below)
representing twenty percent or more of the combined voting power of the
Corporation's then outstanding securities; or
(b) the shareholders of the Corporation approve a
reorganization, merger or consolidation or the Corporation sells, or otherwise
disposes of, all or substantially all of the Corporation's property and assets,
or the Corporation liquidates or dissolves (other than a reorganization, merger,
consolidation or sale which would result in all or substantially all of the
beneficial owners of the Voting Stock of the Corporation outstanding immediately
prior thereto continuing to beneficially own, directly or indirectly (either by
remaining outstanding or by being converted into voting securities of the
resulting entity), more than fifty percent of the combined voting power of the
voting securities of the Corporation or such entity resulting from the
transaction (including, without limitation, an entity which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's property or assets, directly or indirectly) outstanding
immediately after such transaction in substantially the same proportions
relative to each other as their ownership immediately prior to such
transaction); or
(c) the individuals who are Continuing Directors of the
Corporation (as defined below) cease for any reason to constitute at least a
majority of the Board of the Corporation.
The term "Continuing Director" means (i) any member of the Board who is
a member of the Board immediately after the 2000 annual meeting of shareholders,
or (ii) any person who subsequently becomes a member of the Board whose
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors. The term "Voting Stock" means all capital
stock of the Corporation which by its terms may be voted on all matters
submitted to shareholders of the Corporation generally.
8
<PAGE>
ARTICLE XI -- AWARD AGREEMENTS
Awards may be evidenced by an agreement that sets forth the terms,
conditions and limitations of such Award. Such terms may include, but are not
limited to, the term of the Award, the provisions applicable in the event the
Participant's employment terminates, and the Corporation's authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind any Award.
The Committee need not require the execution of any such agreement by a
Participant, in which case acceptance of the Award by the respective Participant
shall constitute agreement by the Participant to the terms of the Award.
ARTICLE XII -- AMENDMENTS
The Board may amend the Plan at any time as it deems necessary or
appropriate, subject to any requirement of shareholder approval required by
applicable law, rule or regulation, including Section 162(m) and Section 422 of
the Code, or any successor law; provided, however, that no amendment shall be
made without shareholder approval if such amendment would increase the maximum
number of Shares available under the Plan (subject to Article V(d)), or effect
any change inconsistent with Section 422 of the Code, or any successor law. No
amendment may impair the rights of a holder of an outstanding Award without the
consent of such holder. The Board may suspend the Plan or discontinue the Plan
at any time; provided, that no such action shall adversely affect any
outstanding Award.
ARTICLE XIII -- MISCELLANEOUS PROVISIONS
a. EMPLOYMENT RIGHTS. The Plan does not constitute a contract of
employment and participation in the Plan will not give a Participant the right
to continue in the employ of the Corporation on a full_time, part_time, or any
other basis. Participation in the Plan will not give any Participant any right
or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
b. GOVERNING LAW. Except to the extent superseded by the laws of
the United States, the laws of the State of New Jersey, without regard to its
conflict of laws principles, shall govern in all matters relating to the Plan.
c. SEVERABILITY. In the event any provision of the Plan shall be
held to be illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if such illegal or invalid provisions had never been
contained in the Plan.
d. WITHHOLDING. The Corporation shall have the right to withhold
from any amounts payable under the Plan all federal, state, foreign, city and
local taxes as shall be legally required.
9
<PAGE>
e. EFFECT ON OTHER PLANS OR AGREEMENTS. Payments or benefits
provided to a Participant under any stock, deferred compensation, savings,
retirement or other employee benefit plan are governed solely by the terms of
such plan.
f. FOREIGN EMPLOYEES. Without amending the Plan, the Committee
may grant awards to eligible persons who are foreign nationals on such terms and
conditions different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to foster and promote achievement of
the purposes of the Plan and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Corporation or its subsidiaries operates or has
employees.
10
<PAGE>
THE MNI GROUP INC.
Solicited by Board of Directors
For Annual Meeting of Shareholders - September , 2000
The undersigned appoints Arnold M. Gans and Myra D. Gans, or either of
them, attorneys and proxies with power of substitution to vote all of the Common
Shares of The MNI Group Inc. standing in the name of the undersigned at the
Annual Meeting of Shareholders on September , 2000, and at all adjournments or
postponements thereof, upon the matters set forth in the Notice and Proxy
Statement of said meeting, receipt of which is acknowledged.
The shares represented by this proxy will be voted as directed by the
Shareholder. If you wish to vote in accordance with the recommendations of the
Board of Directors, you may sign on the reverse side and mail in the enclosed
envelope. If no direction is given, shares will be voted FOR items 1, 2, 3, 4
and 5. Specific choices may be made on the reverse side.
(Continued and to be signed on the reverse side)
The MNI Group Inc.
10 West Forest Street
Englewood, New Jersey 07631
YOUR VOTE IS IMPORTANT
o Mark, sign and date your proxy card.
o Detach your proxy card.
o Return your proxy card in the prepaid envelope provided.
** PLEASE DETACH PROXY CARD HERE**
--------------------------------------------------------------------------------
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5.
1. Election of Directors: Nominees for 1-year terms: 1- Arnold M. Gans: 2 -
Myra D. Gans: 3 - Lawrence Burstein: 4 - Alan Gaines
FOR WITHHOLD AUTHORITY EXCEPTIONS [ ]
all nominees [ ] to vote for all nominees [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"EXCEPTIONS" box and write the nominee's name in the space provided below.)
*Exceptions __________________________________________
2. Proposal to amend the Certificate of Incorporation to change the name of
the Corporation
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to amend the Certificate of Incorporation to increase the
authorized number of shares of Common Stock
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to approve the 2000 Long-Term Incentive Stock Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Ratification of Designation of Independent Auditors
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. To transact such other business as may properly come before the meeting or
any adjournment thereof
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy will be voted FOR Items 1, 2, 3, 4 and 5, unless instructions to the
contrary are indicated.
Please sign exactly as name or names appear hereon. Full title of one signing in
representative capacity should be clearly designated after signature. Names of
all joint holders should be written even if signed by only one.
Dated:__________________________________, 2000
----------------------------------------------
Signature
----------------------------------------------
Signature
Votes MUST be indicated
(x) in Black or Blue Ink.
PLEASE DETACH HERE
* You Must Detach this Portion of the Proxy Card *
Before Returning it in the Enclosed Envelope
Please sign, date and return the proxy card promptly using the enclosed
envelope.
