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 ss.240.14a-11(c) or ss.240.14a-12
Consolidated Technology Group Ltd.
(Name of Registrant as Specified In Its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
...............................................................
2) Aggregate number of securities to which transaction applies:
...............................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
...............................................................
4) Proposed maximum aggregate value of transaction:
...............................................................
5) Total fee paid:
...............................................................
[ ] 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: ....................................
2) Form, Schedule or Registration Statement No.: ..............
3) Filing Party: ..............................................
4) Date Filed: ................................................
<PAGE>
Consolidated Technology Group Ltd.
160 Broadway
New York, New York 10036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December , 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders (the
"Annual Meeting") of Consolidated Technology Group Ltd., a New York corporation
(the "Company"), will be held at Gramercy Park Hotel, 21st Street at Lexington
Avenue, New York, New York 10010, on , 1997, at 8:45 A.M. local
time, for the purpose of considering and acting upon the following matters:
(1) The election of four (4) directors to serve until the 1998 Annual
Meeting of Shareholders and until their successors shall be elected and
qualified;
(2) The approval of a one-for-30 reverse split of the Company's common
stock;
(3) The approval of an amendment to the Company's certificate of
incorporation to change the number of authorized shares of common stock
to (a) 25,000,000 if the one-for-30 reverse spilt is approved by the
shareholders or (b) 150,000,000 if the one-for-30 reverse split is not
approved by the shareholders;
(4) The approval of the reincorporation of the Company into Delaware
through the merger of the Company into its wholly-owned subsidiary,
Consolidated Technology Group Ltd., a Delaware corporation;
(5) The approval of the Company's 1997 Long-Term Incentive Plan;
(6) The approval of Moore Stephens, P.C. as the Company's independent
certified public accountants for the year ending December 31, 1997; and
(7) The transaction of such other and further business as may properly come
before the meeting.
The Board of Directors of the Company has fixed the close of business on
November , 1997 as the record date (the "Record Date") for the determination
of shareholders entitled to notice of and to vote at the 1997 Annual Meeting.
The enclosed Proxy Statement contains information pertaining to the matters
to be voted on at the Annual Meeting. A copy of the Company's Annual Report to
Shareholders for 1996 is being mailed with this Proxy Statement.
By order of the Board of Directors
Grazyna B. Wnuk
Secretary
New York, New York
November , 1997
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY,
AND CERTAIN OF THE MATTERS REQUIRE THE APPROVAL OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK. IN ORDER THAT YOUR VOTE IS COUNTED AT
THE ANNUAL MEETING, PLEASE EXECUTE, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT
THE ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE PROXY
STATEMENT.
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PROXY STATEMENT
1997 Annual Meeting of Shareholders
GENERAL INFORMATION
The accompanying proxy and this Proxy Statement are furnished in
connection with the solicitation by the Board of Directors of Consolidated
Technology Group Ltd., a New York corporation (the "Company"), of proxies for
use at the Company's 1997 Annual Meeting of Shareholders (the "Annual Meeting")
to be held at the Gramercy Park Hotel, 21st Street at Lexington Avenue, New
York, New York 10010, on , 1997 at 8:45 A.M. or at any adjournment
thereof. This Proxy Statement and the related proxy and the 1996 Annual Report
to Shareholders (the "Annual Report") are being mailed to shareholders of the
Company on or about , 1997.
At the Annual Meeting, shareholders will vote on (a) the election of
four (4) directors to serve until the 1998 Annual Meeting of Shareholders and
until their successors shall be elected and qualified, (b) the approval of a
one- for-30 reverse split, (c) the approval of an amendment to the Company's
certificate of incorporation to change the number of authorized shares of common
stock to (i) 20,000,000 if the one-for-30 reverse spilt is approved by the
shareholders or (ii) 150,000,000 if the one-for-30 reverse split is not approved
by the shareholders; (d) the approval of the reincorporation of the Company into
Delaware through the merger of the Company into its wholly-owned subsidiary,
Consolidated Technology Group Ltd., a Delaware corporation ("Consolidated --
Delaware"); (e) the approval of the Company's 1997 Long-Term Incentive Plan; (e)
the approval of Moore Stephens, P.C. as the Company's independent certified
public accountants for the year ending December 31, 1997, and (f) the
transaction of such other and further business as may properly come before the
meeting. The Board of Directors does not know of any other matters which will be
voted upon at the Annual Meeting.
Shareholders are encouraged to review the detailed discussion presented
in this Proxy Statement and either return the completed and executed proxy or
attend the Annual Meeting.
Record Date; Outstanding Shares; Voting Rights and Proxies
Shareholders of record at the close of business on November , 1997
(the "Record Date"), are entitled to notice and to vote at the Annual Meeting.
As of the close of business on the Record Date there were outstanding 49,910,992
shares of common stock of the Company ("Common Stock"). The holders of the
Common Stock are entitled to one vote for each share owned of record on the
Record Date.
The presence in person or by proxy of holders of a majority of the
shares of Common Stock of the Company entitled to be voted will constitute a
quorum for the transaction of business at the Annual Meeting. If a shareholder
files a proxy or attends the Annual Meeting, his or her shares are counted as
being present at the Annual Meeting for purposes of determining whether there is
a quorum, even if the shareholder abstains from voting on all matters. The vote
required for the election of directors and approval of other proposals is set
forth in the discussion of each proposal.
Each shareholder of the Company is requested to complete, sign, date
and return the enclosed proxy without delay in order to ensure that his or her
shares are voted at the Annual Meeting. The return of a signed proxy will not
affect a shareholder's right to attend the Annual Meeting and vote in person.
Any shareholder giving a proxy has the right to revoke it at any time before it
is exercised by executing and returning a proxy bearing a later date, by giving
a written notice of revocation to the Secretary of the Company, or by attending
the Annual Meeting and voting in person. There is no required form for a proxy
revocation. All properly executed proxies not revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein.
If a proxy is signed and returned, but no specification is made with
respect to any or all of the proposals listed therein, the shares represented by
such proxy will be voted for all the proposals, including the Election of
Directors. Abstentions and broker non-votes are not counted as votes "for" or
"against" a proposal, but where the affirmative
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<PAGE>
vote on the subject matter is required for approval, abstentions and broker
non-votes are counted in determining the number of shares present or
represented.
Cost of Solicitation
The Company will bear the costs of soliciting proxies. The Company will
request that brokers and other custodians, nominees and fiduciaries forward
proxy material to the beneficial holders of the Common Stock held of record by
such persons, where appropriate, and will, upon request, reimburse such persons
for their reasonable out-of-pocket expenses incurred in connection therewith.
The Company intends to engage American Stock Transfer & Trust Company to assist
in the solicitation of proxies for the Annual Meeting. The fees of such company
are estimated at approximately $5,000.
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY HOLDINGS OF MANAGEMENT
Set forth below is information as of September 30, 1997, based on
information provided to the Company by the persons named below, as to each
person owning of record or known by the Company, to own beneficially at least 5%
of the Company's Common Stock, each director and all officers and directors as a
group.
Name and Address(1) Shares Percent
- ------------------- ------ -------
Lewis S. Schiller 1,623,333(2) 3.3%
160 Broadway
New York, NY 10038
Norman J. Hoskin 158,073 (*)
2200 Corporate Blvd.
Boca Raton, FL 33431
Grazyna B. Wnuk 150,000 (*)
160 Broadway
New York, NY 10038
E. Gerald Kay 471,634 (*)
201 Route 22
Hillside, NJ 07205
All directors and officers as a group 2,403,040(2) 4.8%
(three individuals owning stock)
- --------------
(*) Less than 1%.
(1) Unless otherwise indicated, each person has the sole voting and sole
investment power and direct beneficial ownership of the shares.
(2) In addition to the shares of Common Stock owned by Mr. Schiller, Mr.
Schiller has agreed to purchase and paid for 5,000,000 shares of Common
Stock for himself and designees, subject to availability of such shares,
if shares are not available January 31, 1998 the purchase will be
canceled, but the right to purchase shall remain until such shares are
available, either as a result of the proposed one-for-30 reverse split or
the proposed increase in the authorized Common Stock. See "Executive
Compensation -- Management Stock Transactions, Warrants and Options."
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ELECTION OF DIRECTORS
Directors of the Company are elected annually by the shareholders to
serve until the next annual meeting of shareholders and until their respective
successors are duly elected. The bylaws of the Company provide that the number
of directors comprising the whole board shall be determined from time to time by
the Board of Directors. The Board of Directors has established the size of the
board for the ensuing year at four directors and is recommending that the four
incumbent directors of the Company be re-elected. If any nominee becomes
unavailable for any reason, a situation which is not anticipated, a substitute
nominee may be proposed by the Board of Directors, and any shares represented by
proxy will be voted for any substitute nominee, unless the Board reduces the
number of directors.
The Board of Directors is presently comprised of four individuals,
Messrs. Lewis S. Schiller, Norman J. Hoskin and E. Gerald Kay and Ms. Grazyna B.
Wnuk. Messrs. Schiller and Hoskin were elected by the shareholders at the most
recent meeting for which proxies were solicited, which was the 1993 annual
meeting of shareholders. Ms. Wnuk was elected by the board of directors in June
1997, and Mr. Kay was elected by the board of directors in October 1997.
The following table sets forth certain information concerning the
nominees for director:
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
Lewis S. Schiller 66 Chairman of the board, 1986
chief executive officer
and director
Grazyna B. Wnuk 34 Secretary and director 1997
Norman J. Hoskin 63 Director 1992
E. Gerald Kay 57 Director 1997
Mr. Lewis S. Schiller has been chairman of the board, chief executive
officer and a director of the Company for more than the past five years. Mr.
Schiller is a director and chairman of the board and/or chief executive officer
of the Company's public and private subsidiaries, including Trans Global
Services, Inc. ("Trans Global"), a publicly-held subsidiary of the Company that
is engaged in contract engineering, and Netsmart Technologies, Inc.,
("Netsmart"), a publicly-held subsidiary of the Company that markets health
information systems and other network based software systems, which are public
subsidiaries of the Company, and he is also a director and chairman of the board
and/or chief executive officer of privately owned subsidiaries of the Company.
Ms. Grazyna B. Wnuk has been the secretary of the Company since 1991.
Ms. Wnuk is also secretary of Trans Global.
Mr. Norman J. Hoskin is chairman of Atlantic Capital Group, a financial
advisory services company, a position he has held for more than the past five
years. He is also chairman of the board and a director of Tapistron
International, Inc., a high tech manufacturer of carpeting, and is a director of
Trans Global, Netsmart, Aqua Care Systems, Inc., a water media filtration and
remediation company, and Spintek Gaming, Inc., a manufacturer of gaming
equipment. He is also a director of certain privately-owned subsidiaries of the
Company.
Mr. E. Gerald Kay has been chairman of the board and chief executive
officer of Chem International, Inc., a pharmaceutical manufacturer, Manhattan
Drug Co., Inc., a wholesaler of pharmaceutical products, The Vitamin Factory,
Inc., a chain of retail vitamin stores, and Connaught Press, Inc., a publisher,
for more than the past five years. From 1988 to 1990, he was also president and
a director of The Rexall Group, Inc., a distributor of Rexall brand products.
Mr. Kay is also a director of Trans Global, and he is a director of certain
privately-owned subsidiaries of the Company.
The Board of Directors recommends a vote FOR the nominees listed above.
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<PAGE>
Approval Required
Provided that a quorum is present at the Annual Meeting, the four
directors receiving the most votes are elected as directors for a term of one
year and until their successors are elected and qualified.
Meetings, Committees of the Board of Directors, Directors Compensation and
filings under the Securities Exchange Act of 1934
The Board of Directors has no committees other than the compensation
committee consisting of Norman Hoskin and E. Gerald Kay.
During 1995 and 1996, the Board of Directors held twelve and one
meetings, respectively, which were attended by all of the directors. All other
action by the Board of Directors was taken by unanimous written consents in lieu
of a meeting, which were signed by all directors.
The Company paid Mr. Norman Hoskin, who was the only non-management
director during 1996, a fee of $2,500 per month. Mr. Hoskin also receives a fee
of $2,000 per month from a privately-owned subsidiary of the Company of which he
is a director.
During 1996, Mr. Lewis Schiller and Ms. Grazyna Wnuk did not file Form
4 or Form 5 pursuant to Section 16(a) of the Securities Exchange Act of 1934
with respect to their acquisition of certain securities. Mr. Schiller has
advised the Company that he did not engage in any stock transactions during
1996.
EXECUTIVE OFFICERS
Set forth below are the executive officers of the Company and
information concerning that officer who is not also a director of the Company.
Name Position
- ---- --------
Lewis S. Schiller Chairman of the board and chief executive officer
George W. Mahoney Chief financial officer
Grazyna B. Wnuk Secretary
Mr. George W. Mahoney has been chief financial officer of the Company
since October 1, 1994. He is also chief financial officer of International
Magnetic Imaging, Inc., a Delaware corporation ("IMI") which is a subsidiary of
the Company. For more than three years prior thereto, Mr. Mahoney was chief
financial officer of International Magnetic Imaging, Inc., a Florida corporation
("IMI-Florida"). In September 1994, IMI acquired the assets of IMI-Florida.
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<PAGE>
EXECUTIVE COMPENSATION
Set forth below is information with respect to compensation paid or
accrued by the Company and its subsidiaries for 1996, 1995 and the transitional
period from August 1 through December 31, 1994 to its chief executive officer
and to each other officer whose compensation exceeded $100,000 for 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation (Awards)
Name and Principal ------------------- Restricted Stock Options, SARs
- ------------------ ---------------- -------------
Position Year Salary Bonus Other Awards (Dollars) (Number)
- -------- ---- ------ ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lewis S. Schiller, CEO 1996 $286,000 -- -- 3 3
1995 250,000 -- --
1994(1) 199,000 -- --
George W. Mahoney, chief 1996 189,910 $193,095 $6,898 3 3
financial officer 1995 177,462 25,649 4,342
1994(2) 35,412 15,000 --
</TABLE>
(1) In 1994, the Company changed its fiscal year from a fiscal year ended
July 31 to a calendar year. The information presented is for the twelve
months ended December 31, 1994.
(2) Mr. Mahoney became the chief financial officer for the Company and its
subsidiary, IMI, on September 30, 1994. The information presented for
Mr. Mahoney for 1994 reflects his salary and bonus for the period from
October 1, 1994 to December 31,1994. For the first nine months of 1994,
Mr. Mahoney was chief financial officer of IMI's predecessor. During
such period, he his compensation and bonus were $80,499 and $25,000,
respectively.
(3) See "Executive Compensation -- Management Stock Grants, Warrants and
Options" for information relating to the grant by the Company and its
subsidiaries of stock, warrants and options to the Company's officers
and directors, including Messrs. Schiller and Mahoney.
Employment Agreements
The annual salary payable by Consolidated to Mr. Schiller pursuant to
his previous employment agreement with the Company was $250,000, subject to a
cost of living increase. Effective September 1, 1996, Mr. Schiller's annual
salary from Consolidated was increased to $500,000.
The Company and Lewis S. Schiller, the chairman of the board and chief
executive officer of the Company, are parties to a Restated Employment Agreement
(the "Schiller Employment Agreement") dated as of January 1, 1997. Pursuant to
the Agreement, Mr. Schiller is employed as the Company's chief executive officer
and as an executive officer of all wholly-owned or controlled subsidiaries of
the Company, for a term of four years, subject to extension by Mr. Schiller for
an additional five years. The Schiller Employment Agreement automatically
terminates, subject to certain cure provisions, in the event of Mr. Schiller's
deliberate and repeated misconduct, breach of trust or other repeated action by
which material personal gain is obtained by Mr. Schiller to the detriment of the
Company, or the failure by Mr. Schiller to perform his duties. The Schiller
Employment Agreement also terminates in the event of Mr. Schiller's death or
disability. Mr. Schiller may terminate the Schiller Employment Agreement,
subject to certain cure provisions, in the event of a breach or default by the
Company in any of its obligations under the Schiller Employment Agreement, a
change of control of the Company (as defined in the Schiller Employment
Agreement), at the option of Mr. Schiller if he is removed without cause as a
director of the Company or if the Company files, or has filed against it, a
petition in bankruptcy or insolvency or for relief in similar circumstances. In
the event of the termination of the Schiller Employment Agreement by the Company
for reasons other than the fault or non-performance on the part of Mr. Schiller,
Mr. Schiller is entitled to certain additional benefits.
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<PAGE>
Mr. Schiller is entitled to receive an annual salary of $500,000
(subject to annual increases equal to the greater of 5% of the current annual
salary or the increase in the Cost of Living Index), and an annual bonus equal
to 10% of the greater of the increase in the Company's consolidated net worth or
net cash flow, as defined in the Schiller Employment Agreement, in excess of
$600,000. Mr. Schiller is also entitled to a profit-sharing bonus equal to 20%
of the gross profit realized by the Company or any subsidiary thereof on the
sale of investment securities, as defined in the Schiller Employment Agreement,
or its business. Mr. Schiller is entitled to a ten year retirement package
consisting of salary continuation in an amount equal to the greater of his
annual salary for the year in which retirement occurs or the average of his
annual salary and bonus for the five years preceding retirement. Mr. Schiller is
also granted the right to participate in the future growth and expansion of the
Company. Pursuant to these provisions, Mr. Schiller has the right to form, at
his own cost and expense, any new subsidiary of the Company or any subsidiary
thereof in exchange for 10% of the stock of such subsidiary, subject to future
dilution resulting from the subsequent issuance by such newly formed subsidiary
of additional securities. Mr. Schiller also has the right to purchase, at any
time, 10% of the equity securities of SIS Capital Corp., a first-tier,
wholly-owned subsidiary of the Company ("SISC"), at a price per share equal to
the fair market value thereof on the date of purchase. Payment of such purchase
price may be made by delivery by Mr. Schiller of his ten year, full recourse,
interest bearing promissory note. If, as and when Mr. Schiller exercises this
right, the fair market value of the securities to be purchased will be
determined by the Company's chief financial officer and, if Mr. Schiller
disputes such determination, the dispute is to be resolved by the Company's
independent auditors.
The Schiller Employment Agreement subjects Mr. Schiller to certain
confidentiality and non-disclosure requirements the violation or threatened
violation of which entitles the Company to seek and obtain injunctive relief
against Mr. Schiller.
The Schiller Employment Agreement also provides Mr. Schiller with paid
vacation and sick days, an automobile allowance or reimbursement for automobile
expenses, certain life and disability insurance benefits, relocation benefits
and allowance, expense reimbursements and certain other benefits.
Mr. George W. Mahoney, chief financial officer of both the Company and
International Magnetic Imaging, Inc., a subsidiary of the Company ("IMI"), has
an employment agreement with the Company for a term commencing October 1, 1994
and ending December 31, 2007 or such later date as Mr. Mahoney may be required
to be employed by IMI pursuant to IMI's agreements with its principal lender,
pursuant to which he received an annual salary of $177,000 and $189,000 for the
contract years ended September 30, 1996 and 1997, respectively. His salary,
which is $202,000 for the contract year ending September 30, 1998, increases
annually until the year ended December 31, 2007, for which his base salary will
be $353,000. The agreement also provides for two bonuses to Mr. Mahoney. One
bonus is equal to the greater of 2 1/2% of the Company's net pre-tax profits or
2 1/2% of the Company's net cash flow, and the other is equal to the greater of
2 1/2% of IMI's net pre-tax profits or 2 1/2% of IMI's net cash flow. In
addition, IMI paid Mr. Mahoney bonuses of $100,000 and $40,000 in 1996 for
services relating to certain of the IMI's loans from its principal lender
pursuant to amendments to his employment agreement. Mr. Mahoney also receives a
$6,000 allowance for an automobile which may be used for personal as well as
business purposes and life insurance of $1,000,000 on which he may designate the
beneficiary. Mr. Mahoney devotes approximately 25% of his time to the business
of the Company and 75% of his time to the business of IMI.
Pursuant to certain of IMI's loan agreements with its principal lender,
the failure of Mr. Mahoney to serve as IMI's chief financial officer could
result in a default under such loan agreements and other loan agreements with a
cross-default provision between IMI and such lender or between IMI and any other
lenders. As of the date of this Proxy Statement, IMI does not have any
agreements with other lenders with such cross-default provisions.
The Company also has an indemnification agreement with Mr. Mahoney
pursuant to which the Company agrees to indemnify Mr. Mahoney to the maximum
extent permitted under the New York Business Corporation Law.
The Company and Grazyna B. Wnuk, the secretary and a director of the
Company, entered into an Employment Agreement (the "Wnuk Employment Agreement")
dated as of June 30, 1997. Pursuant to the Wnuk Employment Agreement, Ms. Wnuk
is employed as the Company's secretary and as the secretary of all wholly-owned
or controlled
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subsidiaries of the Company, until December 31, 2002 subject to extension by Ms.
Wnuk for an additional five years. The Wnuk Employment Agreement automatically
terminates, subject to certain cure provisions, in the event of Ms. Wnuk's
deliberate and repeated misconduct, breach of trust or other repeated action by
which material personal gain is obtained by Ms. Wnuk to the detriment of the
Company, or the failure by Ms. Wnuk to perform her duties. The Wnuk Employment
Agreement also terminates in the event of Ms. Wnuk's death or disability. Ms.
Wnuk may terminate the Wnuk Employment Agreement, subject to certain cure
provisions, in the event of a breach or default by the Company in any of its
obligations under the Wnuk Employment Agreement, a change of control of the
Company (as defined in the Wnuk Employment Agreement), at the option of Ms. Wnuk
if she is removed without cause as a Director of the Company or if the Company
files, or has filed against it, a petition in bankruptcy or insolvency or for
relief in similar circumstances. In the event of the termination of the Wnuk
Employment Agreement by the Company for reasons other than the fault or
non-performance on the part of Ms. Wnuk, Ms. Wnuk is entitled to certain
additional benefits.
Ms. Wnuk is entitled to receive an annual salary of $200,000 (subject
to annual increases, commencing January 1, 1998, equal to the greater of 5% of
the current annual salary or the increase in the Cost of Living Index), and an
annual bonus equal to .5% of the greater of the increase in the Company's
consolidated net worth or net cash flow, as defined in the Wnuk Employment
Agreement, in excess of $600,000. Ms. Wnuk is also entitled to a profit-sharing
bonus equal to 1% of the gross profit realized by the Company or any subsidiary
thereof on the sale of investment securities, as defined in the Wnuk Employment
Agreement, or its business. Ms. Wnuk is entitled to a ten year retirement
package consisting of salary continuation in an amount equal to the greater of
her annual salary for the year in which retirement occurs or the average of her
annual salary and bonus for the five years preceding retirement. Ms. Wnuk is
also granted the right to participate in the future growth and expansion of the
Company. Pursuant to these provisions, Ms. Wnuk has the right to participate in
the formation, at her own cost and expense, of any new subsidiary of the Company
or any subsidiary thereof in exchange for 1% of the stock of such subsidiary,
subject to future dilution resulting from the subsequent issuance by such newly
formed subsidiary of additional securities.
The Wnuk Employment Agreement subjects Ms. Wnuk to certain
confidentiality and non-disclosure requirements the violation or threatened
violation of which entitle Company to seek and obtain injunctive relief against
Ms. Wnuk.
The Wnuk Employment Agreement also provides Ms. Wnuk with paid vacation
and sick days, certain life and disability insurance benefits, relocation
benefits and allowances, expense reimbursements and certain other benefits.
Mr. Norman J. Hoskin receives a director's fee of $3,500 per month from
May and from January through April received a director's fee of $2,500 from the
Company and a fee of $2,000 per month from IMI, of which he is a director.
Management Stock Transactions, Warrants and Options
In July 1997, Mr. Schiller purchased 1,190,000 shares of Common Stock
from the Company at $.03 per share, reflecting a discount from the bid price on
the date of sale, which was $.06 per share. Payment for the purchase price of
such shares was effected by a reduction of the Company's obligation to Mr.
Schiller for past compensation. The past compensation due to Mr. Schiller was
further reduced by the amount of the withholding tax due. Contemporaneously with
the purchase of the 1,190,000 shares of Common Stock, Mr. Schiller agreed to
purchase, and the Company agreed to sell to Mr. Schiller, an additional
5,000,000 shares of Common Stock at $.03 per share. Such shares are to be issued
and paid for at such time as the Company has a sufficient number of shares of
Common Stock for issuance pursuant to the Company's certificate of
incorporation, whether as a result of the proposed one-for-30 reverse split, the
increase in authorized capital stock or the reincorporation of the Company in
Delaware, provided, that if none of such events occurs by January 31, 1998, such
subscription may be canceled by Mr. Schiller. Payment of the purchase price of
such shares and the related withholding tax are also expected to be paid through
a reduction of the Company's obligations to Mr. Schiller. At October 15, 1997,
the amount due to Mr. Schiller for accrued compensation was $675,000, of which
$317,000 represented accrued salary and vacation and $358,200 represented money
due Mr. Schiller pursuant to his employment agreement as a result of sales by
the Company of its investment
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securities. The money due Mr. Schiller as a result of sales by the Company of
its investment securities represents money accrued during the nine months ended
September 30, 1997.
Pursuant to his employment agreement with the Company, Mr. Schiller has
the right to 10% of each of the Company's subsidiaries. Such shares were issued
to Mr. Schiller and his designees. Two of the Company's subsidiaries are
publicly traded. Trans Global Services, Inc. ("Trans Global") and Netsmart
Technologies, Inc. ("Netsmart"). Set forth below are recent equity transactions
relating to Mr. Schiller and Trans Global and Netsmart. Mr. Schiller is chairman
of the board, chief executive officer and a director of Trans Global and
Netsmart, Mr. Norman J. Hoskin is a director of Trans Global and Netsmart, and
Ms. Grazyna B. Wnuk is secretary of Trans Global.
Netsmart. In January 1996, SISC exchanged 1,000 shares of a series of
Netsmart preferred stock for 1,125,000 shares of Netsmart's common stock. SISC
transferred an aggregate of 1,280 shares of such shares of common stock to Mr.
Schiller pursuant to Mr. Schiller's employment agreement with the Company.
In February 1996, Netsmart issued an aggregate of 3,573,125 warrants,
of which 1,677,500 were exercisable at $2.00 per share and 1,895,625 are
exercisable at $4.00 per share. The fair value of the Common Stock on the date
of board approval was $3.20 per share. The warrants expire on December 31, 1999.
The warrants issued included warrants to purchase 1,968,750 shares of Netsmart's
common stock at $2.00 per share, which were issued to SISC, and warrants to
purchase 53,500 shares of Netsmart's common stock at $5.00 per share, which were
issued to Mr. Schiller. SISC has transferred warrants to purchase 206,250 shares
of Netsmart common stock at $2.00 per share to Mr. Lewis S. Schiller. SISC also
transferred warrants to purchase 50,000, 50,000 and 56,667 shares of Netsmart
common stock at $2.00 per share, to Mr. Norman J. Hoskin, a director of the
Company, Ms. Grazyna B. Wnuk, secretary and a director of the Company, and
George W. Mahoney, chief financial officer of the Company, respectively.
In July 1996, pursuant to a warrant exchange, (a) the holders of the
Netsmart warrants having a $2.00 exercise price exchanged one third of such
warrants for warrants to purchase, at an exercise price of $4.00 per share, 150%
of the number of shares of Common Stock issuable upon exercise of the warrants
that were exchanged, and (b) the exercise price of the warrants having a $5.00
exercise price was reduced to $4.00.
Trans Global. During 1996, pursuant to a debt and equity restructure
(the "SISC Recapitalization"), SISC exchanged $750,000 of its debt from Trans
Global, which was $1.1 million in the aggregate, and all of its shares of three
other series of Trans Global preferred stock, including accrued dividends on one
of such series, for 9,900 shares of Trans Global's Series F Preferred Stock and
warrants to purchase 533,333 shares of Common Stock at $7.50 per share. As part
of the SISC Recapitalization, the Company issued 100 shares of Series F
Preferred Stock to DLB, Inc. ("DLB"), which owned 5% of two other series of
Trans Global preferred stock. DLB is owned by Mr. Schiller's wife, but Mr.
Schiller disclaims beneficial interest in DLB or any securities owned by DLB.
SISC transferred 1,000 shares of Series F Preferred Stock to Mr. Schiller
pursuant to Mr. Schiller's employment agreement with the Company. The 10,000
shares of Series F Preferred Stock held by SISC, Mr. Schiller and DLB were
converted into 1,666,666 shares of Trans Global common stock in October and
December 1996. Prior to the SISC Recapitalization, the Company owed SISC
approximately $1.1 million. During 1996, pursuant to the SISC Recapitalization,
the Company issued to SISC 9,900 shares of Series F Preferred Stock and warrants
to purchase 533,333 shares of Common Stock at $7.50 per share in exchange for
the cancellation of $750,000 principal amount of the Company's debt to SISC and
all of the shares of Series B, C and D Preferred Stock owned by SISC, including
accrued dividends due on the Series D Preferred Stock. The 9,900 shares of
Series F Preferred Stock were convertible into 1,650,000 shares of Common Stock.
Pursuant to Mr. Schiller's employment agreement with the Company, Mr.
Schiller received 65,500 shares of Trans Global common stock, warrants to
purchase 7,916 shares of Trans Global common stock and 2,500 shares of two
series of Trans Global preferred stock in May 1995. In connection with the SISC
Recapitalization, SISC transferred to Mr. Schiller 1,000 shares of Series F
Preferred Stock, and Mr. Schiller's shares of two series of Trans Global
preferred stock were canceled. Also in connection with the SISC
Recapitalization, DLB exchanged its shares of two series of Trans Global
preferred stock for 100 shares of Series F Preferred Stock.
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<PAGE>
In October 1996, SISC converted 5,000 shares of Series F Preferred
Stock into 833,333 shares of Common Stock, and in December 1996, SISC converted
the remaining 3,900 shares of Series F Preferred Stock into 650,000 shares of
Common Stock, and Mr. Schiller and DLB converted their 1,000 and 100 shares of
Series F Preferred Stock into 166,666 and 16,666 shares of Common Stock,
respectively.
In April 1996, Trans Global issued to Mr. Lewis S. Schiller and Mr.
Norman J. Hoskin warrants to purchase 66,666 shares and 50,000 shares,
respectively, of Trans Global common stock at $7.50 per share.
In August 1997, SISC transferred the warrants to purchase 533,333
shares of Trans Global common stock at $7.50 per share, to its officers,
directors and other key employees, of which warrants to purchase 291,667 shares
were transferred to Mr. Lewis S. Schiller and his designees, warrants to
purchase 50,000 shares were transferred to Ms. Grazyna B. Wnuk, and warrants to
purchase 33,333 shares were transferred to Mr. George W. Mahoney.
Privately held subsidiaries. In addition to issuance to Mr. Schiller of
stock in the Company's privately- owned subsidiaries, the subsidiaries have
issued warrants and options to Mr. Schiller, Mr. Hoskin and Ms. Wnuk which have
exercise prices which are in excess of the fair market value of the underlying
shares of common stock. In addition, Mr. Mahoney holds incentive stock options
and warrants granted by IMI and warrants in certain of the Company's
privately-held subsidiaries.
Performance Graph
The following graph, based on data provided by the Center for Research
in Security Prices, shows changes in the value of $100 invested at December 31,
1992, of: (a) shares of Company Common Stock; (b) the Nasdaq stock index (US
companies); and (c) an SIC peer group consisting of companies in the SIC
classification 6719, which is the classification for holding companies other
than banks. The SIC classification formerly used by the Company was 3823, which
covers a range companies in the process control instrument industry, which was
the Company's principal business activity prior to 1994. The year-end values of
each investment are based on the share price appreciation plus the monthly
reinvestment of dividends. Total shareholder returns from each investment can be
calculated from the year-end investment values shown beneath the graph provided
below.
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 8/31/97
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Technology Group Ltd. 100.00 100.00 10.40 4.20 1.60 1.60
Nasdaq Market Index 100.00 112.90 110.60 150.90 182.60 222.40
Peer Group Index 100.00 112.30 110.50 128.30 186.50 202.50
</TABLE>
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation -- Management Stock Grants, Warrants and
Options" for information relating to the issuance of stock, warrants and options
to the Company's officers and directors by the Company and its subsidiaries.
APPROVAL OF ONE-FOR-30 REVERSE SPLIT
The Board of Directors has approved, subject to shareholder approval, a
proposal for a one-for-30 reverse split (the "Reverse Split") of the Company's
Common Stock. As a result of the Reverse Split, each share of Common Stock
outstanding at the effective time of the Reverse Split, will, without any action
on the part of the holder thereof, become one-thirtieth share of Common Stock.
The par value of the Common Stock will not be affected by the Reverse Split. For
purposes of this proposal, the Common Stock, as presently constituted, is
referred to as the "Old Common Stock" and the Common Stock resulting from the
Reverse Split is referred to as the "New Common Stock."
The Reverse Split will become effective upon the filing with the
Secretary of State of an amendment to the Company's certificate of incorporation
which states that, upon the filing of the Certificate of Amendment, each share
of Common Stock then issued and outstanding would automatically become and be
converted into one-thirtieth share of Common Stock. If the merger of the Company
into Consolidated -- Delaware is approved by the shareholders, the certificate
of incorporation will not be amended to reflect the reverse split since the
reverse split will be effected as a result of such merger.
Principal Effects of the Reverse Split
The principal effects of the Reverse Split will be as follows:
1. Based upon the 49,910,992 shares of Old Common Stock outstanding on
the Record Date, the Reverse Split would decrease the outstanding shares of Old
Common Stock by 962/3%, and, upon the effectiveness of the Reverse Split,
approximately 1,663,699 shares of New Common Stock would be outstanding.
2. On the Record Date, there was outstanding a warrant to purchase
1,000,000 shares of Old Common Stock at $.75 per share, which was issued to the
principal lender of one of the Company's subsidiaries. As a result of the
Reverse Split, the number of shares of New Common Stock issuable upon exercise
of such warrant will be 33,333 and the exercise price of such warrant will be
$22.50 per share of New Common Stock.
3. As of the Record Date, Mr. Lewis S. Schiller had subscribed for
5,000,000 shares of Old Common Stock at $.03 per share. As a result of the
Reverse Split, the subscription will become a subscription to purchase 166,666
shares of New Common Stock at $.90 per share.
4. As of the Record Date, the holders of the Company's notes in the
principal amount of $139,329 had the right to convert the notes into Old Common
Stock at $.03 per share, which would result in the issuance of approximately
4,644,000 shares of Old Common Stock. As a result of the Reverse Split, the
conversion price will be $.90 per share of New Common Stock and the number of
shares of New Common Stock will be approximately 154,810.
5. As of the Record Date, Trans Global held shares of Series G
Preferred Stock which are automatically converted into Common Stock of the
Company on September 30, 2000. The number of shares of Common Stock issuable
upon such conversion is determined by dividing $2.1 million by the fair market
value per share, as defined, at such date. The number of shares issuable upon
such conversion cannot be determined at this time.
The Company will obtain new CUSIP numbers for the New Common Stock and
publicly traded warrants effective at the time of the Reverse Split. Following
the effectiveness of the Reverse Split, the Company will provide
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<PAGE>
each record holder of Old Common Stock and publicly traded warrants with
information to enable such holder to obtain new stock and warrant certificates.
Subject to the provisions for elimination of fractional shares, as
described below, consummation of the Reverse Split will not result in a change
in the relative equity position or voting power of the holders of Old Common
Stock.
Assuming the Reverse Split is approved and implemented, the Certificate
of Amendment amending the Certificate of Incorporation will be filed with the
Secretary of State of Delaware as promptly as practicable thereafter. The
Reverse Split would become effective as of the date of such filing (the
"Effective Date").
Purposes of the Reverse Stock Split
The Reverse Split would decrease the number of shares of Old Common
Stock outstanding and presumably increase the per share market price for the New
Common Stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who acquires
it, or the Company's reputation in the financial community, but in practice this
is not necessarily the case, as many investors look upon a stock trading in the
range of $.06 per share as unduly speculative in nature and, as a matter of
policy, avoid investment in such stocks.
Prior to January 1994, the Common Stock was traded on the
over-the-counter market. From January 1994 until August 13, 1997, the Common
Stock was traded on The Nasdaq SmallCap Market. Since August 14, 1997, the
Common Stock has been trading on the OTC Electronic Bulletin Board. The Common
Stock was deleted from The Nasdaq SmallCap Market because of the failure of the
Company to meet Nasdaq's capital and surplus and bid price requirements. The
approval and implementation of the Reverse Split are not expected to have any
immediate impact upon the ability of the Company to list its Common Stock on The
Nasdaq SmallCap Market. In order for the Company to have its Common Stock listed
on The Nasdaq SmallCap Market, it will be necessary for the Company to meet the
initial listing requirements for The Nasdaq SmallCap Market. Based upon its
financial position at June 30, 1997, the Company will not meet the tests for
inclusion in The Nasdaq SmallCap Market as a result of the reverse split. No
assurance can be given that the Common Stock will ever be listed on The Nasdaq
SmallCap Market or any exchange.
Many leading brokerage firms are reluctant to recommend lower-priced
securities to their clients and a variety of brokerage house policies and
practices currently tend to discourage individual brokers within firms from
dealing in lower-priced stocks. Some of those policies and practices pertain to
the payment of brokers' commissions and to time consuming procedures that make
the handling of lower priced stocks unattractive to brokers from an economic
standpoint. In addition, the structure of trading commissions also tends to have
an adverse impact upon holders of lower priced stocks because the brokerage
commission on a sale of a lower priced stock generally represents a higher
percentage of the sales price than the commission on a relatively higher priced
issue.
The Board of Directors believes that the Reverse Split is in the best
interest of the Company and its shareholders. The price of the Old Common Stock
during the period from January 1, 1997 through October 15, 1997 ranged from a
low closing price of $.06 to a high closing price of $.19. On October 14, 1997,
the closing price of the Old Common Stock was $.19 per share. The Company
requires additional capital for its operations and does not believe that it will
be able to raise the necessary capital unless the price of the Common Stock is
higher than the current Common Stock price levels. However, no assurance can be
given that the Reverse Split will result in any increase in the Common Stock
price or that the Company will be able to complete any financing following the
Reverse Split.
Exchange of Certificate and Elimination of Fractional Share Interests
On the Effective Date, each 30 shares of Old Common Stock will
automatically be combined and changed into one share of New Common Stock. No
additional action on the part of the Company or any shareholder will be required
in order to effect the Reverse Split. Shareholders will be requested to exchange
their certificates representing shares of Common Stock held prior to the Reverse
Split for new certificates representing shares of Old Common Stock. Shareholders
will be furnished the necessary materials and instructions to effect such
exchange promptly following the
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<PAGE>
Effective Date. Certificates representing shares of Old Common Stock
subsequently presented for transfer will not be transferred on the books and
records of the Company but will be returned to the tendering person for
exchange. Shareholders should not submit any certificates until requested to do
so. In the event any certificate representing shares of Old Common Stock is not
presented for exchange upon request by the Company, any dividends that may be
declared after the Effective Date of the Reverse Split with respect to the
Common Stock represented by such certificate will be withheld by the Company
until such certificate has been properly presented for exchange, at which time
all such withheld dividends which have not yet been paid to a public official
pursuant to relevant abandoned property laws will be paid to the holder thereof
or his designee, without interest.
No fractional shares of New Common Stock will be issued to any
shareholder. Accordingly, shareholders of record who would otherwise be entitled
to receive fractional shares of New Common Stock, will, upon surrender of their
certificates representing shares of Old Common Stock, receive a cash payment in
lieu thereof equal to the fair value of such fractional share. Holders of less
than 30 shares of Old Common Stock as a result of the Reverse Split will on the
Effective Date no longer be shareholders of the Company. The Board of Directors
had determined that the fair value of the Common Stock will be based on the
closing price of the Common Stock on OTC Electronic Bulletin Board the Effective
Date (as adjusted to reflect the Reverse Split) or, if there are no reported
sales on such date, the average of the last reported high bid and low asked
price on such day shall be used.
Federal Income Tax Consequences of the Reverse Split
The combination of each 30 shares of the Old Common Stock into one
share of New Common Stock should be a tax-free transaction under the Internal
Revenue Code of 1986, as amended, and the holding period and tax basis of the
Old Common Stock will be transferred to the New Common Stock received in
exchange therefor.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares (although in unusual circumstances such cash
might possibly be deemed a dividend), and shareholders will recognize gain or
loss base upon the difference between the amount of cash received and the basis
in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Split may not be the same for all
shareholders. Shareholders should consult their own tax advisors to know their
individual Federal, state, local and foreign tax consequences.
Financial Statements
The Company's audited consolidated financial statements, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
respect to such financial statements, which are included in the Annual Report,
together with the unaudited financial statements for the six months ended June
30, 1997 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" with respect to such financial statements, which are
included in the Company's Form 10-Q for the six months ended June 30, 1997, are
incorporated by reference in this Proxy Statement. See "Incorporation by
Reference."
Vote Required
The amendment to the certificate of incorporation requires the approval
of the holders of a majority of the outstanding shares of Common Stock.
The Board of Directors recommends a vote FOR the Reverse Split.
APPROVAL OF CHANGE IN AUTHORIZED CAPITAL STOCK
The board of directors has approved, subject to shareholder approval,
an amendment to the Company's certificate of incorporation which would change
the number of authorized shares of Common Stock, par value $.01
- 12 -
<PAGE>
per share. If the one-for-30 reverse split is approved, the number of authorized
shares of Common Stock would be decreased from 50,000,000 shares to 20,000,000
shares. If the one-for-30 reverse split is not approved, the number of
authorized shares would be increased from 50,000,000 shares to 150,000,000
shares.
The adoption of the amendment would not effect any change in the
Company's outstanding Common Stock.
Financial Statements
The Company's audited consolidated financial statements for the year
ended December 31, 1996, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" with respect to such financial statements,
which are included in the Annual Report, together with the unaudited financial
statements for the six months ended June 30, 1997 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" with respect to
such financial statements, which are included in the Company's Form 10-Q for the
six months ended June 30, 1997, are incorporated by reference in this Proxy
Statement. See "Incorporation by Reference."
Discussion of the Amendment
On the Record Date, there were outstanding 49,910,992 shares of Common
Stock. In addition, at such date there were issuable 1,000,000 shares of Common
Stock upon the exercise of warrants held by IMI's principal lender, 5,000,000
shares pursuant to the subscription agreement with Mr. Lewis S. Schiller and
3,848,000 shares of Common Stock issuable upon conversion of certain outstanding
promissory notes. In addition, Trans Global held shares of Series G Preferred
Stock which are automatically converted into Common Stock of the Company on
September 30, 2000. The number of shares of Common Stock issuable upon such
conversion is determined by dividing $2.1 million by the fair market value per
share, as defined, at such date. The number of shares issuable upon such
conversion cannot be determined at this time, however, based upon a fair market
value of $.19 per share of Common Stock, an aggregate of 11,952,631 shares of
Common Stock would be issued upon such conversion.
Accordingly, the Company does not have sufficient shares of Common
Stock available for issuance pursuant to its existing commitments and for the
purpose of raising additional capital. However, if the one-for-30 Reverse Split
is approved, the 50,000,000 shares of authorized Common Stock exceeds the
reasonable requirements for such shares, and the board of directors believes
that a reduction in the number of authorized shares of Common Stock is in the
best interests of the Corporation.
In the event that the Reverse Split is not approved, the Company does
not have sufficient shares of Common Stock available to enable it to issue any
significant number of additional shares of Common Stock, including the shares
issuable upon conversion of certain notes, exercise of warrants held by a lender
or pursuant to a subscription agreement with Mr. Schiller. In such event, the
board of directors believes that the increased authorization to 150,000,000
shares of Common Stock is necessary for the Company to fulfill its obligations
to issue shares of Common Stock and to provide it with sufficient shares in the
event that such shares are necessary. However, except as set forth above, the
Company has no agreements or understandings with respect to the issuance of
additional shares of Common Stock.
Under the Company's certificate of incorporation, the Board of
Directors of the Company has authority to issue authorized and unissued shares
of capital stock of any class without obtaining approval from the holders of the
Common Stock. The holders of the Company's Common Stock and Preferred Stock do
not have preemptive rights. The Preferred Stock provisions give the Board of
Directors broad authority to issue shares of preferred stock in one or more
series and to determine such matters as the dividend rate and preference, voting
rights, conversion privileges, redemption provisions, liquidation preferences
and other rights of each series. Each share of Common Stock is entitled to one
vote. The holders of any series of preferred stock issued in the future will be
entitled to such voting rights as may be specified by the Board of Directors.
Because of the broad powers granted to the board of directors to issue
shares of Preferred Stock and determine the rights, preferences and privileges
of the holders of such series, the board has the power to issue shares of
Preferred
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<PAGE>
Stock in a manner which could be used as a defensive measure against a hostile
takeover or to keep the board of directors in power. However, the board of
directors has no present plans to issue shares for such purpose.
The board of directors of the Company believes it will benefit the
shareholders to have additional unreserved shares available for issuance in
order that adequate shares may be available for the possible issuance of Common
Stock, convertible Preferred Stock or convertible debt securities in connection
with a possible financing of the Company's business or an acquisition, although,
except for its proposed public offering, the Company has no plans, arrangements,
understanding or commitments with respect to the issuance of such shares.
Vote Required
The amendment to the certificate of incorporation requires the approval
of the holders of a majority of the outstanding shares of Common Stock.
The Board of Directors recommends a vote FOR the proposal.
APPROVAL OF REINCORPORATION INTO DELAWARE
The board of directors has approved the reincorporation of the Company
as a Delaware corporation through the merger by the Company into its
wholly-owned subsidiary, Consolidated Technology Group Ltd., a Delaware
corporation ("Consolidated -- Delaware"), subject to shareholder approval.
The board of directors recommends the reincorporation of the Company in
Delaware through a merger into Consolidated -- Delaware, because, in its
opinion, the best interests of the Company will be served. The change of
domicile will not involve any change in the business, properties or management
of the Company. The proposed Agreement of Merger between the Company and
Consolidated -- Delaware is set forth in full as Appendix A to this Proxy
Statement. As a result of the merger, without any action on the part of the
holder thereof, each outstanding share of common stock, par value $.01 per
share, of the Company will be converted into one-thirtieth (1/30) share of
common stock, par value $.01 per share, of the Consolidated -- Delaware; each
outstanding share of preferred stock, par value $1.00 per share, of the Company
will be converted into one share of preferred stock, par value $.01 per share,
of the Company, with the same rights, preferences and privileges (other than the
par value, which will be reduced from $1.00 to $.01 per share), and each option
or warrant to purchase shares of common stock of the Company will be converted
into an option or warrant to purchase one-thirtieth (1/30) shares of common
stock, par value $.01 per share, of Consolidated -- Delaware at an exercise
price equal to thirty times the prior exercised price. There may be effects of
the merger other than as described in this Proxy Statement.
The board of directors has unanimously approved the proposal to change
the Company's domicile to Delaware. The Agreement of Merger provides, however,
that the proposed merger may be abandoned at any time prior to becoming
effective if any circumstance should develop that, in the opinion of the Boards
of Directors of the Company and Consolidated -- Delaware, makes proceeding with
the merger inadvisable.
Exchange of Certificate and Elimination of Fractional Share Interests
At the effective time of the merger (the "Effective Time"), each 30
shares of Common Stock of the Company will automatically be combined and changed
into one share of Common Stock of Consolidated -- Delaware ("Delaware Common
Stock"). No additional action on the part of the Company or any shareholder will
be required. Shareholders will be requested to exchange their certificates
representing shares of Common Stock held prior to the merger for new
certificates representing shares of Delaware Common Stock. Shareholders will be
furnished the necessary materials and instructions to effect such exchange
promptly following the Effective Time. Certificates representing shares of
Delaware Common Stock subsequently presented for transfer will not be
transferred on the books and records of the Company but will be returned to the
tendering person for exchange. Shareholders should not submit any certificates
until requested to do so. In the event any certificate representing shares of
the Company's Common Stock is not
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<PAGE>
presented for exchange upon request by the Company, any dividends that may be
declared after the Effective Time with respect to the Company's Common Stock
represented by such certificate will be withheld by the Company until such
certificate has been properly presented for exchange, at which time all such
withheld dividends which have not yet been paid to a public official pursuant to
relevant abandoned property laws will be paid to the holder thereof or his
designee, without interest.
No fractional shares of Delaware Common Stock will be issued to any
shareholder. Accordingly, shareholders of record who would otherwise be entitled
to receive fractional shares of Delaware Common Stock, will, upon surrender of
their certificates representing shares of the Company's Common Stock, receive a
cash payment in lieu thereof equal to the fair value of such fractional share.
Holders of less than 30 shares of the Company's Common Stock as a result of the
merger split will at the Effective Time no longer be shareholders of the
Company. The board of directors has determined that the fair value of the
Delaware Common Stock will be based on the closing price of the Company's Common
Stock on OTC Electronic Bulletin Board the Effective Time, as adjusted for the
terms of the merger, or, if there are no reported sales on such date, the
average of the last reported high bid and low asked price on such day shall be
used.
Reasons for change in State of Incorporation.
The Company was originally incorporated in New York, because the laws
of that State were then deemed to be well adapted for the conduct of the
Company's business. In the past decade, the Company's operations, through its
subsidiaries, have expanded both geographically and commercially. The
corporation law of Delaware affords a flexible and modern basis for corporate
action including the ability to grant options to its directors, officers and
employees. Because more than 50,000 corporations are incorporated in Delaware,
including a substantial number of the corporations whose securities are publicly
traded, a large body of case law has developed, decided by a judiciary of
corporate specialists, interpreting Delaware law in the corporate field.
Organization of the Consolidated -- Delaware
Consolidated -- Delaware was organized by the Company in Delaware as a
wholly-owned subsidiary of the Company for the sole purpose of the merger. Upon
the merger becoming effective, authorized capital stock of Consolidated --
Delaware will consist of 2,500,000 shares of Preferred Stock, par value $.01 per
share, and 20,000,000 shares of common stock, par value $.01 per share.
The Directors of the Company who will be elected at the 1997 Annual
Meeting of Shareholders will become the directors of Consolidated -- Delaware
upon the merger becoming effective. The officers of the Company will be the
officers of Consolidated -- Delaware upon the merger becoming effective.
Federal Income Tax Consequences
No gain or loss will be recognized to the Company or to Consolidated --
Delaware as a result of the merger, and no gain or loss will be recognized under
such law to the holders of the common stock of the Company as a result thereof.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares (although in unusual circumstances such cash
might possibly be deemed a dividend), and shareholders will recognize gain or
loss based upon the difference between the amount of cash received and the basis
in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the merger may not be the same for all shareholders.
Shareholders should consult their own tax advisors to know their individual
Federal, state, local and foreign tax consequences.
Vote Required for Approval
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<PAGE>
The merger requires the approval of the holders of two-thirds of the
outstanding shares of Common Stock and a majority of the preferred stock. All of
the outstanding Preferred Stock is owned by Trans Global, which has approved the
merger.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE REINCORPORATION. IF A CHOICE IS
SPECIFIED BY THE SHAREHOLDERS, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "FOR" THE REINCORPORATION.
RIGHTS OF DISSENTING SHAREHOLDERS
Sections 623 and 910 of the New York Business Corporation Law give to
any shareholder of the Company who wishes to object to the proposed merger of
the Company into Consolidated -- Delaware (an "Objecting Shareholder") the right
to receive from the Company in cash, the fair value of his or her shares,
provided that the merger is not abandoned or fails to be approved and
authorized, and provided, further, that the following procedure is carefully
followed.
(a) The Objecting Shareholder must not vote in favor of the
Merger and, before the plan is submitted to a vote at the 1997 Annual
Meeting of Shareholders to be held on , 1997, he or she
must file with the Company written objection thereto stating his or her
intention to demand payment for his or her shares. The written
objection should be sent to Consolidated Technology Group Ltd., 160
Broadway, Suite 901, New York, New York 10038, Attention of Ms. Grazyna
B. Wnuk, Secretary. Registered Mail, Return Receipt Requested is
recommended. The objection may also be submitted at the meeting, but
before a vote is taken on the reincorporation. A Negative Proxy is Not
Sufficient. A shareholder may not dissent as to less than all of the
shares as to which he has a right to dissent.
(b) Prior to , 1997, the Company must give written
notice to each Objecting Shareholder that such merger has been
authorized by the vote of the Company's shareholders.
(c) Within twenty (20) days after such notice is given, the
Objecting Shareholder must make written demand on the Company in
accordance with the method of mailing as set forth in paragraph (a),
for payment of the fair value of his or her shares indicating his or
her name and residence address and the number of shares owned. Together
with the written demand or within one month thereafter, the Objecting
Shareholder must submit certificates representing all of his shares of
the Company's stock to the Company or its transfer agent for the
purpose of affixing a notation indicating that a demand for payment has
been made. Otherwise, at the option of the Company, he or she will lose
his objector's rights, unless a court, for good cause shown, otherwise
directs.
(d) Within seven (7) days after the later of the date the
Objecting Shareholder makes written demand upon the Company or the
period during which written demand must be made (but not later than
, 1998), the Company must make a written offer by registered
mail to each Objecting Shareholder to pay for his or her shares at a
specified price which the Company considers to be their fair value.
(e) If, within thirty (30) days after making such offer, the
Objecting Shareholder and the Company agree upon the price to be paid
for his or her shares, payment must be made by the Company within sixty
(60) days of the date of the making of such offer upon the surrender of
the certificates representing his or her shares.
(f) If the Company fails to make such offer or if the
Objecting Shareholder and the Company fail to agree upon the price to
be paid, the Company must within twenty (20) days after the expiration
of the time periods set forth in subparagraphs (d) and (e) (whichever
is applicable) institute a special proceeding in the Supreme Court of
the State of New York, County of New York to determine the rights of
the Objecting Shareholder and to fix the fair value of his or her
shares.
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(g) If the Company fails to institute such special proceeding
the Objecting Shareholder may do so within thirty (30) days after the
expiration of such twenty (20) day period. Failure of the Objecting
Shareholder to institute such proceedings will result in the loss of
his or her objector's rights unless the court, for good cause shown,
otherwise directs.
(h) Within sixty (60) days after the final determination of
the special proceedings, the Company must pay to each Objecting
Shareholder the amount found to be due him or her, upon surrender of
the certificates representing his or her shares.
The foregoing summary of the rights of Objecting Shareholders does not
purport to be complete and is qualified in its entirety by reference to Sections
623 and 910 of the New York Business Corporation Law, a copy of which appears in
Appendix B to this Proxy Statement.
COMPARISON OF DELAWARE AND NEW YORK LAW
Set forth below is a brief discussion of certain differences between
the New York Business Corporation Law ("NYBCL"), under which the Company is
incorporated, and the Delaware General Corporation Law (the "DGCL"), under which
Consolidated -- Delaware is incorporated.
The statements set forth under this heading with respect to the NYBCL
and the DGCL and the respective certificates of incorporation of the Company and
Consolidated -- Delaware are brief summaries thereof and do not purport to be
complete. The statements relating to the NYBCL and the DGCL are subject to the
detailed provisions of such statutes and the case law and other legal
interpretations relating to such statutes. The information relating to the
respective certificates of incorporation of the Company and Consolidated --
Delaware are qualified in their entireties by such documents, copies of which
are available from the Company.
Dividend Rights
Under the NYBCL, a corporation is prohibited from making a distribution
to shareholders if, after giving effect thereto: (i) such corporation would be
made insolvent, (ii) the declaration, payment or distribution would be contrary
to any restrictions contained in the corporation's certificate of incorporation,
(iii) such corporation's net assets remaining after such declaration, payment or
distribution is less than its stated capital. Under the DGCL, a corporation may
pay dividends out of surplus (defined as the excess, if any, of net assets over
capital), or, if no surplus exists, out of its net profits for the fiscal year
in which such dividends are declared and/or for its preceding fiscal year,
provided, that dividends may not be paid out of net profits if the capital of
such corporation is less than the aggregate amount of capital represented by the
outstanding stock of all classes having a preference upon the distribution of
assets.
Holders of common stock of both the Company and Consolidated --
Delaware are entitled to receive such dividends as may be declared by the board
of directors from funds, legally available for such purpose after payment of any
dividends due with respect to a series of preferred stock.
Voting Rights
Unless otherwise provided in the certificate of incorporation, the
NYBCL and the DGCL provide that every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share owned of record on the
record date for determining shareholders entitled to notice of and to vote at
meeting of shareholders. The certificates of incorporation of both the Company
and Consolidated -- Delaware do not contain any provision which alters this
right. The certificates of incorporation of both the Company and Consolidated --
Delaware give the board of directors the power to create series of preferred
stock and to provide for voting rights for the holders of such series.
Such rights may include the right to more than one vote per share.
Directors
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Under the NYBCL, the number of directors of a corporation may be (i)
fixed by the by-laws or (ii) by action of the shareholders or the board of
directors under the specific provisions of a by-law adopted by the shareholders.
If the number is not fixed, there must be a minimum of three directors. Pursuant
to an amendment to the NYBCL, which will become effective in 1998, the minimum
number of directors will be one. Under the DGCL the number of directors shall be
fixed by, or in the manner provided in, the by-laws unless the certificate of
incorporation fixes the number of directors, in which event, the number of
directors can be changed only by an amendment to the certificate of
incorporation. The number of directors of both the Company and Consolidated --
Delaware are determined pursuant to the by-laws of such corporation. Directors
of each of the Company and Consolidated --Delaware are elected by a plurality of
the votes cast at a meeting of shareholders by the holders of shares entitled to
vote in the election.
Ability to Grant Options to Employees and Directors
The NYBCL prohibits the issue of options and rights to purchase capital
stock of a corporation to directors, officers or employees of the corporation or
any subsidiary or affiliate as an incentive to service or continued service
unless authorized at a meeting of shareholders by the vote of the holders of a
majority of all outstanding shares entitled to vote thereon or authorized by and
consistent with a plan adopted by such vote of shareholders. The DGCL does not
include any requirement for obtaining shareholder approval for the issue of such
options or rights.
Fiduciary Duties of Directors
Under the NYBCL, directors owe a fiduciary duty to the corporation and
its shareholders and must perform their duties in good faith and with that
degree of care which an ordinarily prudent person in a like position would use
under similar circumstances. Directors must give reasonable attention to the
corporation's business. New York law presumes that, without evidence to the
contrary, in making a business decision, directors are acting in good faith and
exercising honest judgment. In taking action, directors may consider, among
other things, both the long-term and short-term interests of the corporation and
its shareholders. In addition, directors may consider the effects that the
corporation's actions may have in the short-term or in the long-term upon: (i)
the prospects for potential growth, development, productivity and profitability
of the corporation, (ii) the corporation's current employees, (iii) the
corporation's retired employees and other beneficiaries who are entitled to
receive retirement benefits, (iv) the corporation's customers and creditors, and
(v) the ability of the corporation to provide, as a going concern, goods,
services, employment opportunities and employment benefits to contribute to the
community in doing business. In performing his duties, a director shall be
entitled to rely upon information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared and/or
presented by: (i) officers of the corporation, (ii) legal counsel, public
accountants and other professionals, and (iii) a committee of the corporation.
Under the DGCL, the business and affairs of a corporation are managed
by or under the direction of its board of directors. In exercising their powers,
directors are charged with an unyielding fiduciary duty to protect the interests
of the corporation and to act in the best interests of its shareholders.
Delaware law in general presumes that, in making a business decision, directors
are disinterested and act on an informed basis, in good faith and in the honest
belief that the action taken was in the best interests of such corporation,
which presumption is known as the "business judgment rule." A party challenging
the propriety of a decision of a board of directors bears the burden of
rebutting the applicability of the presumption of the business judgment rule by
demonstrating that, in reaching their decision, the directors breached one or
more of their fiduciary duties -- good faith, loyalty and due care. If the
presumption is not rebutted, the business judgment rule attaches to protect the
directors and their decisions, and their business judgments will generally not
be judicially second guessed. Where, however, the presumption is rebutted, the
directors bear the burden of demonstrating the entire fairness of the relevant
transaction. Notwithstanding the foregoing, Delaware courts subject directors'
conduct to enhanced scrutiny in respect of defensive actions taken in response
to a threat to corporate control and approval of a transaction resulting in a
sale of such control.
Liability of Directors
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Under the NYBCL, a corporation's certificate of incorporation may
eliminate or limit the personal liability of directors to the corporation or its
shareholders for damages in connection with any breach of duty in such capacity,
provided that no such provision may eliminate or limit: (i) the liability of any
director if a judgment or other final adjudication adverse to him establishes
that his acts or omissions were in bad faith or involved intentional misconduct
or a knowing violation of any law or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled, (ii)
liability which arises from injury suffered by persons as a result of a
declaration of a dividend or other distribution, a purchase of the corporation's
shares, a distribution of assets after dissolution, the making of a loan, any of
which is effected in violation of the NYBCL or (iii) the liability of any
director for any act or omission prior to the adoption of a provision limiting
or eliminating such director's liability.
The DGCL permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to such corporation or its shareholders for monetary damages arising from a
breach of fiduciary duty, except for: (i) a breach of the duty of loyalty to the
corporation; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) a declaration of a
dividend or the authorization of the repurchase or redemption of stock in
violation of the DGCL or (iv) any transaction from which the director derived an
improper personal benefit. The certificate of incorporation of Consolidated --
Delaware eliminates director liability to the maximum extent permitted by the
DGCL, and it also contains broad indemnification provisions.
Call of Special Meetings
The NYBCL permits special meetings of the shareholders to be called by
the board of directors and such persons who may be authorized to do so by the
certificate of incorporation or the by-laws. At any such special meeting, only
such business may be transacted which is related to the purpose or purposes set
forth in the written notice provided to shareholders.
Under the DGCL, a special meeting of the shareholders may be called by
the board of directors or such other person as may be authorized by the
certificate of incorporation or by-laws.
Amendment to Charter Documents
Under the NYBCL, amendments or changes to the certificate of
incorporation may be authorized by vote of the board of directors, followed by
vote of the holders of a majority of all outstanding shares entitled to vote
thereon at a meeting of the shareholders. In addition, the holders of shares of
a class or series are entitled to vote and to vote as a class or series and the
amendment shall be authorized by vote of the holders of a majority of all
outstanding shares of the class or series when a proposed amendment would: (i)
exclude or limit such shareholders' right to vote on any matter, (ii) change
such shareholders' shares to reduce the par value, (iii) change such shares into
a different number of shares of the same class, or into the same or a different
number of shares of any one or more classes or any series thereof, (iv) fix,
change or abolish the designation of any authorized class, any of the relative
rights, preferences or limitations, including any provisions in respect of any
undeclared dividends, whether or not cumulative or accrued, or the redemption of
any shares, or any sinking fund for the redemption or purchase of any shares or
any preemptive rights to acquire shares or other securities (v) provide that
their shares may be converted into shares of any other class or into shares of
any other series of the same class, (vi) alter the terms or conditions upon
which their shares are convertible or change the shares issuable upon conversion
of their shares, if such action would adversely affect such holders's rights or
(vii) subordinate their rights, by authorizing shares having preferences which
would be in any respect superior to their rights. For amendments involving
mergers, see "Approval of Merger and Asset Sales."
Under the DGCL, any provision of the certificate of incorporation of
Consolidated -- Delaware may be amended by approval of the board of directors
and the affirmative vote of a majority of the voting power of the outstanding
shares entitled to vote thereon; provided, that any amendment which affects the
rights of the holders of any class or series of capital stock must be approved
by the holders of a majority of the shares of such class or series.
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<PAGE>
Approval of Merger and Asset Sales
Under the NYBCL, the board of directors, upon adopting a plan of merger
or consolidation, must submit such plan to a vote of shareholders. Notice of the
meeting to adopt the plan and an outline of the plan must be given to each
shareholder of record, as of the record date, whether or not such shareholder is
entitled to vote. The plan must be adopted at the meeting of shareholders by
vote of the holders of two-thirds of all outstanding shares entitled to vote
thereon. Notwithstanding any provision in the corporation's certificate of
incorporation, the holders of shares of a class or series of the corporation's
stock, shall be entitled to vote and to vote as a class if the plan contains any
provision entitling the holders of such shares to vote and vote as a class
thereon. In such case, in addition to the authorization of the merger or
consolidation by vote of the holders of two-thirds of all outstanding shares,
the merger or consolidation shall be authorized by a vote of the holders of a
majority of all outstanding shares of each such class or series. Notwithstanding
shareholder authorization, the board of directors may abandon the plan of merger
or consolidation at any time prior to the filing of the certificate of merger or
consolidation with the New York Secretary of State, but only pursuant to a
provision for such abandonment contained in the plan.
No shareholder authorization, from either the parent corporation or the
subsidiary corporation is required when a parent corporation merges any
subsidiary corporation into itself.
Under the NYBCL, a sale, lease, exchange or other disposition of all or
substantially all of the assets of the corporation, if not made in the usual or
regular course of business conducted by the corporation, shall be authorized
only by the following procedure: (i) the board of directors must authorize the
proposed sale, lease, exchange or other disposition and direct its submission to
a vote of shareholders, (ii) notice of meeting shall be given to each
shareholder of record, whether or not entitled to vote, and (iii) the
shareholders must approve such sale, lease, exchange or other disposition and
may fix, or may authorize the board to fix, any of the terms and conditions
thereof and the consideration to be received by the corporation therefor, by a
vote at a meeting of shareholders of the holders of two-thirds of all
outstanding shares entitled to vote thereon. Notwithstanding shareholder
approval, the board may abandon the proposed sale, lease, exchange or other
disposition without further action by the shareholders, subject to the rights,
if any, of third parties under any contract.
Under the DGCL, unless required by its certificate of incorporation,
and the certificate of incorporation of Consolidated -- Delaware contains no
such requirement, no vote of the shareholders of a constituent corporation
surviving a merger is necessary to authorize such merger if: (i) the agreement
of merger does not amend the certificate of incorporation of such constituent
corporation; (ii) each share of stock of such constituent corporation
outstanding prior to such merger is to be an identical outstanding or treasury
share of the surviving corporation after such merger; (iii) either no shares of
common stock of the surviving corporation and no shares, securities or
obligations convertible into such common stock are to be issued under such
agreement of merger, or the number of shares of common stock issued or so
issuable does not exceed 20% of the number thereof outstanding immediately prior
to such merger; and (iv) certain other conditions are satisfied. In addition,
the DGCL provides that a parent corporation that is the record holder of at
least 90% of the outstanding shares of each class of stock of a subsidiary may
merge such subsidiary into such parent corporation without the approval of such
subsidiary's shareholders or board of directors. Whenever the approval of the
shareholders of a corporation is required for an agreement of merger or
consolidation or for a sale, lease or exchange of all or substantially all of
its assets, such agreement, sale, lease or exchange must be approved by the
affirmative vote of the holders of a majority of outstanding shares of such
corporation entitled to vote thereon; provided, that under the DGCL, where a
corporation's certificate of incorporation provides for more or less than one
vote per share on any matter, the required vote is a majority of the combined
voting power of the corporation's stock.
Rights of Appraisal
Procedure to Dissent. Under the NYBCL, a shareholder has a right to
dissent to any plan of merger or consolidation or any sale, lease, exchange or
other disposition of all or substantially all of the assets of the corporation,
provided that this right exists only when the shareholder was entitled to vote
on the proposed corporate action. In order to dissent, a shareholder must 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
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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. 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.
Right to Receive Fair Value of Shares. Shareholders who properly
dissent to any merger or consolidation under the NYBCL also have the right to
receive payment of the fair value of their shares, if such shareholders were
entitled to vote and did not assent to any plan of merger or consolidation to
which the corporation is a party, except where such shareholders are (i) holders
of shares of the Parent Corporation in a merger of a Parent Corporation and a
Subsidiary Corporation, (ii) holders of shares of the Parent Corporation in a
merger or consolidation of domestic and foreign corporations, or (iii) holders
of shares in a surviving corporation. Notwithstanding the foregoing,
shareholders of a surviving corporation do have the right to receive payment for
their shares if the merger or consolidation alters or abolishes any preferential
rights, redemption or sinking fund rights, preemptive rights or excludes or
limits the rights of such holders to vote on any matter.
Furthermore, a shareholder has a right to receive payment of the fair
value of his shares in the case of any sale, lease, exchange or other
disposition of all or substantially all of the assets of a corporation which
requires shareholder approval, provided that shareholders do not have the right
to receive such payment in 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 the corporation's net assets to the
shareholders is made in accordance with their respective interests within one
year after the date of such transaction.
The DGCL provides for appraisal rights on the part of the shareholders
of a corporation only in the case of certain mergers or consolidations and not
(unless the certificate of incorporation of a corporation so provides, which the
certificate of incorporation of Consolidated -- Delaware does not) in the case
of other mergers, a sale or transfer of all or substantially all of such
corporation's assets or an amendment to such corporation's certificate of
incorporation. In addition, the DGCL denies appraisal rights to the shareholders
of the surviving corporation in a merger if such merger did not require for its
approval the vote of the shareholders of such surviving corporation.
Indemnification of Directors and Officers
The NYBCL provides in general that a corporation may indemnify any
director or officer made, or threatened to be made, a party to an action or
proceeding (a "Proceeding") (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney fees actually and necessarily incurred. In order to receive such
indemnification, the person must have acted in good faith, for a purpose which
he reasonably believed to be in, or in the case of service for any other
corporation or partnership, joint venture, trust, employee benefit plan or other
enterprise not opposed to the best interests of the corporation and in addition,
in criminal actions or proceedings such person had no reasonable cause to
believe that his conduct was unlawful. The NYBCL permits similar indemnification
in the case of actions by or in the right of the corporation, provided that
indemnification is not permitted in respect of (i) a threatened action or a
pending action which is settled or otherwise disposed of, or (ii) any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation, unless and only to the extent that the court in which the
action was brought, or if no action was brought, any court of competent
jurisdiction, determines upon application that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for such
portion of the settlement amount and expenses as such court deems proper. In any
case, the NYBCL provides that the indemnification permitted under the NYBCL is
not exclusive of any other rights to which a director or officer seeking
indemnification or advancement of expenses may be entitled. No indemnification
may be provided to a director or officer under the NYBCL if a judgment or other
final adjudication adverse to the director or officer establishes that his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action, or that he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled.
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The DGCL provides in general that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
In addition, the DGCL permits a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which that court shall deem proper.
Furthermore, under the DGCL, the determination of whether
indemnification is proper shall be made (1) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the shareholders of
the Corporation.
The DGCL provides that the expenses (including attorneys' fees)
incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this section.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
The DGCL further provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the DGCL shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The certificate of incorporation of Consolidated -- Delaware contains
broad indemnification provisions.
Anti-Takeover Provisions
Section 912 of the NYBCL applies to a broad range of business
combinations between a New York corporation and an interested shareholder. The
NYBCL defines a "business combination" to include mergers, consolidations,
sales, leases, exchanges of shares, mortgages, pledges, securities
reclassifications and other transactions. An "interested shareholder" is defined
as any person who (i) is the beneficial owner, directly or indirectly, of twenty
percent or more of the outstanding voting stock of a corporation or (ii) is an
affiliate or an associate of such corporation and at any time within the
five-year period immediately prior to the date in question was a beneficial
owner, directly or indirectly, of
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twenty percent or more of the then outstanding voting stock of such corporation.
The NYBCL prohibits a corporation from engaging in a business combination with
an interested shareholder for a period of five years following such interested
shareholder's stock acquisition date except under limited circumstances,
including when (i) such business combination or the purchase of stock made by
such interested shareholder on such interested shareholder's stock acquisition
date is approved by the board of directors of such corporation prior to such
interested shareholder's stock acquisition date, (ii) such business combination
is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock not beneficially owned by such interested shareholder
or any affiliate or associate of such interested shareholder at a meeting called
for such purpose no earlier than five years after such interested shareholder's
stock acquisition date.
Section 912 does not apply (i) to any business combination of a New
York corporation that does not have a class of voting stock registered with the
Securities and Exchange Commission pursuant to Section 12 of the Exchange Act
("Registered Voting Stock"), unless the certificate of incorporation provides
otherwise, or under certain circumstances, such as (ii) to any business
combination of a domestic corporation whose amendment certificate of
incorporation provides that Section 912 applies, which did not have a class of
Registered Voting Stock on the effective date of such amendment, and which is a
business combination with an interested shareholder (as defined therein) whose
stock acquisition date is prior to the effective date of such amendment, or
(iii) to any business combination of a domestic corporation the original
certificate of incorporation or an amended by-laws of which contains a provision
expressly electing not to be governed by Section 912, or (iv) to any business
combination of a domestic corporation with an interested shareholder of such
corporation who became an interested shareholder inadvertently.
Section 203 of the DGCL applies to a broad range of business
combinations (as defined in the DGCL) between a Delaware corporation and an
interested shareholder (as defined). The DGCL definition of "business
combination" includes mergers, sales of assets, issuance of voting stock and
certain other transactions. An "interested shareholder" is defined as any person
who owns, directly or indirectly, 15% or more of the outstanding voting stock of
a corporation. The DGCL prohibits a corporation from engaging in a business
combination with an interested shareholder for a period of three years following
the date on which the shareholder became an interested shareholder, unless (i)
the board of directors approved the business combination before the shareholder
became an interested shareholder, or the board of directors approved the
transaction that resulted in the shareholder becoming an interested shareholder,
(ii) upon consummation of the transaction which resulted in the shareholder
becoming an interested shareholder, such shareholder owned at least 85% of the
voting stock outstanding when the transaction began other than shares held by
directors who are also officers and by certain employee stock plans, or (iii)
the board of directors approved the business combination after the shareholder
became an interested shareholder and the business combination was approved at a
meeting by at least two-thirds of the outstanding voting stock not owned by such
shareholder.
Rights of Inspection
Under the NYBCL, every shareholder of record for at least six months
immediately preceding his demand, or any person holding at least five percent of
any class of outstanding shares, upon at least five days written demand, shall
have the right to examine in person or by agent or attorney, during normal
business hours, certain books and records, including the corporation minutes of
the proceedings of its shareholders, a record of shareholders, balance sheets
and profit and loss statements. The shareholder must request the inspection for
a purpose which is in the interest of the corporation or related to his status
as a shareholder.
Under the DGCL any shareholder shall, upon written demand under oath
stating the purpose thereof, have the right during the usual business hours to
inspect for any proper purpose the corporation's stock ledger, list of
shareholders and its other books and records and make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a shareholder.
Liquidation Rights
The holders of the Company's Common Stock and the common stock of
Consolidated -- Delaware have substantially the same rights on liquidation,
dissolution or winding up.
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APPROVAL OF THE COMPANY'S 1997 LONG-TERM INCENTIVE PLAN
The board of directors believes that in order for the Company and its
subsidiaries to attract and retain the services of executive and other key
employees, it is necessary for the Company to have the ability and flexibility
to provide a compensation package which compares favorably with those offered by
other companies. Accordingly, in July 1997, the Board of Directors adopted,
subject to stockholder approval, the 1997 Long-Term Incentive Plan (the "Plan"),
covering 2,490,000 shares of Common Stock. If the Reverse Split is approved, the
number of shares of Common Stock subject to the Plan will be, upon the
effectiveness of the Reverse Split, 83,000 shares. All officers and directors of
the Company are eligible for options under the Plan. Options to purchase
2,490,000 shares of Common Stock have been granted to the Company's officers,
directors and two key employees.
The Plan does not have an expiration date. Set forth below is a summary
of the Plan, but this summary is qualified in its entirety by reference to the
full text of the Plan, a copy of which is filed as Exhibit B to this Proxy
Statement.
The Plan is authorized for 2,490,000 shares of Common Stock (83,000
after giving effect to the Reverse Split). If shares subject to an option or
other right under the Plan cease to be subject to such option or right, or if
shares awarded under the Plan are forfeited, or otherwise terminate without a
payment being made to the participant in the form of stock, such shares will
again be available for future issuance under the Plan.
Awards under the Plan may be made to key employees, including officers,
directors and consultants to the Company and its subsidiaries, except that
options or rights cannot be granted to directors who are not otherwise employed
or engaged as a consultant by the Company or its subsidiaries. The Plan imposes
no limit on the number of officers and other key employees to whom awards may be
made.
The Plan will be administered by a committee of at least two
non-employee directors to be appointed by the board (the "Committee"). The
Committee has broad discretion in determining the persons to whom stock options
or other awards are to be granted, the terms and conditions of the award,
including the type of award, the exercise price and term, the vesting provisions
and the restrictions and forfeiture conditions. Members of the Committee are
eligible for the grant of options and other rights under the Plan. If no
committee is appointed, the functions of the committee shall be performed by the
board of directors. The Committee is presently comprised of Messrs. Norman
Hoskin and E. Gerald Kay.
The Committee will have the authority to grant the following types of
awards under the Plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The Plan is designed to provide the Committee
with broad discretion to grant incentive stock-based rights. In July 1997, the
Committee granted options to purchase 460,000 shares of Common Stock to each of
Messrs. Lewis S. Schiller, E. Gerald Kay, Norman J. Hoskin and George W. Mahoney
and Ms. Grazyna B. Wnuk, and options to purchase an aggregate of 190,000 shares
of Common Stock to three key employees. The options granted to Messrs. Schiller
and Mahoney, Ms. Wnuk and the three key employees are incentive stock options,
and the options granted to Messrs. Kay and Hoskin are non-qualified stock
options. The exercise price of the options is $.125 per share, which was the
fair market value on the date of grant. The options have a term of seven years
from the date of grant and are immediately exercisable, subject to stockholder
approval of the Plan. In the event that stockholder approval of the Plan is not
obtained, the options will terminate.
Tax consequences of awards provided under the Plan are dependent upon
the type of award granted. The grant of an incentive or nonqualified stock
options does not result in any taxable income to the recipient or deduction to
the Company. Upon exercise of a nonqualified stock option, the recipient
recognized income in the amount by which the fair market value on the date of
exercise exceeds the exercise price of the option, and the Company
- 24 -
<PAGE>
receives a corresponding tax deduction. In the case of incentive stock options,
no income is recognized to the employee, and no deduction is available to the
Company, if the stock issued upon exercise of the option is not transferred
within two years from the date of grant or one year from the date of exercise,
whichever occurs later. However, the exercise of an incentive stock option may
result in additional taxes through the application of the alternative minimum
tax. In the event of a sale or other disqualifying transfer of stock issued upon
exercise of an incentive stock option, the employee realizes income, and the
Company receives a tax deduction, equal to the amount by which the lesser of the
fair market value at the date of exercise or the proceeds from the sale exceeds
the exercise price. The issuance of stock pursuant to a stock grant results in
taxable income to the recipient at the date the rights to the stock become
nonforfeitable, and the Company receives a deduction in such amount. However, if
the recipient of the award makes an election in accordance with the Internal
Revenue Code of 1986, as amended, the amount of his or her income is based on
the fair market value on the date of grant rather than the fair market value on
the date the rights become nonforfeitable. When compensation is to be recognized
by the employee, appropriate arrangements are to be made with respect to the
payment of withholding tax.
Vote Required
The approval of the Plan requires the approval of the holders of a
majority of the outstanding shares of Common Stock.
The Board of Directors recommends a vote FOR the Plan.
SELECTION OF INDEPENDENT AUDITORS
It is proposed that the shareholders approve the selection of Moore
Stephens, P.C. as the independent auditors for the Company for the year ending
December 31, 1997. The Board of Directors has approved the selection of Moore
Stephens, P.C. as the Company's independent auditors. However, in the event
approval of the proposal is not obtained, the selection of the independent
auditors will be reconsidered by the Board of Directors.
Moore Stephens, P.C., previously named Mortenson and Associates, P.C.,
has been the independent certified public accountants for the Company since
1985, and their report is included in the Annual Report. At no time since their
engagement have they had any direct or indirect financial interest in or any
connection with the Company or any of its subsidiaries other than as independent
auditors.
Representatives of Moore Stephens, P.C. are expected to be present at
the Annual Meeting with the opportunity to make a statement if they so desire.
Such representatives are also expected to be available to respond to appropriate
questions. The Company does not have an audit committee, since the Board of
Directors performs such functions.
Vote Required
The proposal to approve the selection of Moore Stephens, P.C., as the
Company's independent auditors requires the approval of a majority of the shares
of Common Stock present and voting, provided that a quorum is present.
The Board of Directors recommends a vote FOR the proposal.
INCORPORATION BY REFERENCE
The Company incorporates the Annual Report by reference in this Proxy
Statement. The Annual Report, which includes, among other information, a
description of the Company's business, its audited financial statements
- 25 -
<PAGE>
for the years ended December 31, 1996 and 1995. A copy of the Annual Report is
being mailed to shareholders of record on the Record Date concurrently with the
mailing of this Proxy Statement. Additional copies of the Annual Report will be
provided by the Company without charge upon request. The Company's Form 10-Q for
the quarter ended June 30, 1997 is incorporated by reference, but is not
included in the Annual Report. Copies of such Form 10-Q will be provided without
charge upon request.
OTHER MATTERS
Any proposal which a shareholder wishes to present at the 1998 Annual
Meeting of Shareholders must be received by the Company at its executive offices
at 160 Broadway, New York, New York 11788, not later than March 31, 1998.
Copies of the Company's Form 10-K for the year ended December 31, 1996
and Form 10-Q for the quarter ended June 30, 1997, without exhibits, may be
obtained without charge by writing to Ms. Grazyna B. Wnuk, Secretary,
Consolidated Technology Group Ltd., 160 Broadway, New York, New York 10036.
Exhibits will be furnished upon request and upon payment of a handling charge of
$.25 per page, which represents the
Company's reasonable cost on furnishing such exhibits.
The Board of Directors does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, the persons named in the enclosed proxy intend to vote such proxy in
accordance with their best judgment on such matters.
By Order of the Board of Directors
Lewis S. Schiller,
Chairman of the Board
November , 1997
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<PAGE>
Exhibit A
Exhibit A
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Plan of Merger") made as of the th
day of November, 1997, by and between Consolidated Technology Group Ltd., a New
York corporation ("COTG New York"), and Consolidated Technology Group Ltd., a
Delaware corporation ("COTG Delaware"), COTG New York and COTG Delaware being
sometimes collectively referred to as the "Constituent Corporations." COTG
Delaware will be the surviving corporation, sometimes hereinafter referred to as
the "Surviving Corporation".
W I T N E S S E T H:
WHEREAS, COTG New York has authorized capital stock consisting of
2,000,000 shares of preferred stock, par value $1.00 per share, none of which
are issued or outstanding, and 50,000,000 shares of common stock, par value $.01
per share ("NY Common Stock") of which 49,910,992 shares are issued and
outstanding and none of which are held as treasury shares; and
WHEREAS, COTG Delaware has authorized capital stock consisting of
2,500,000 shares of preferred stock, par value $.01 per share, none of which are
outstanding, and 10,000,000 shares of common stock, par value, $.01 per share
("Delaware Common Stock"), of which 1,000 shares are issued and outstanding; and
WHEREAS, the Board of Directors of each of the Constituent Corporations
deems it advisable and to the advantage and welfare of their respective
Constituent Corporations and shareholders that COTG New York merge with and into
COTG Delaware, with COTG Delaware to be the Surviving Corporation, pursuant to
the provisions of Section 907 of the Business Corporation Law of the State of
New York (the "NYBCL") and Section 252 of the General Corporation Law of the
State of Delaware (the "DGCL");
NOW, THEREFORE, subject to the approval of this Plan of Merger by the
shareholders of COTG New York, the Constituent Corporations hereby agree as
follows:
1. At the Effective Time, as hereinafter defined, COTG New York will be
and it hereby is merged with and into COTG Delaware (the "Merger").
2. This Plan of Merger will become effective immediately upon filing.
Such date and time is herein referred to as the "Effective Time."
3. This Plan of Merger constitutes a plan of merger pursuant to Section
907 of the NYBCL and Section 252 of the DGCL, to be carried out in the manner,
on the terms and subject to the conditions herein set forth.
4. At the Effective Time, the separate existence of COTG New York will
cease, and COTG Delaware, as the surviving corporation of the Merger, will
continue to exist under and be governed by the laws of the State of Delaware.
The name of the Surviving Corporation will remain Consolidated Technology Group
Ltd.
5. At and after the Effective Time, the Surviving Corporation will
succeed to and possess, without further act or deed, all of the estate, rights,
privileges, powers, and franchises, both public and private, and all of the
property, real, personal and mixed, of the Constituent Corporations; all debts
due either of the Constituent Corporations will be vested in the Surviving
Corporation; all claims, demands, property, rights, privileges, powers and
franchises and every other interest of either of the Constituent Corporations
will be the property of the Surviving Corporation; the title to any real
property of either of the Constituent Corporations will not revert or be in any
way impaired by reason of the Merger, but will be vested in the Surviving
Corporation; all rights of creditors and all liens upon any property of either
of the Constituent Corporations will be preserved unimpaired, limited in lien to
the property affected by such lien at the Effective Time; and all debts,
liabilities and duties of the Constituent Corporations will thenceforth attach
to the Surviving Corporation and may be enforced against it to the same extent
as if such debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
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<PAGE>
6. At the Effective Time, each outstanding share of NY Common Stock
shall by operation of law and without further action on the part of the former
holders, automatically be converted into and become the right to receive
one-thirtieth (1/30) shares of Delaware Common Stock, validly issued, fully paid
and non-assessable subject to dissenting shareowner's rights under Sections 910
and 623 of the NYBCL, and each share of Delaware Common Stock outstanding
immediately prior to the Effective Time shall be canceled and shall be restored
to the status of an authorized but unissued share of Delaware common stock.
7. The certificate of incorporation of COTG Delaware as existing at the
Effective Time will be amended by deleting Paragraph (a) of Article FOURTH
thereof and replacing it with the following:
"(a) The total number of shares of capital stock which the
corporation is authorized to issue is twenty seven million, five
hundred thousand (27,500,000) shares, of which:
"(i) Two million five hundred thousand (2,500,000)
shares shall be designated as Preferred Stock and shall have a par
value of $.01 per share; and
"(ii) Twenty five million (25,000,000) shares shall
be designated as Common Stock, and shall have a par value of $.01 per
share."
8. The By-laws of COTG Delaware, as existing at the Effective Time,
will continue in force as the Bylaws of the Surviving Corporation until altered,
amended or repealed as provided therein or as provided by law.
9. The directors and officers of COTG New York immediately prior to the
Merger, will be the directors and officers of the Surviving Corporation, to hold
office until their respective successors have been elected and shall qualify, or
as otherwise provided in the By-Laws of the Surviving Corporation.
10. This Plan of Merger may be terminated and the Merger abandoned for
any reason whatsoever, by mutual consent of the Boards of Directors of the
Constituent Corporations, at any time prior to the Effective Time,
notwithstanding adoption and approval of this Plan of Merger by the shareholders
of the Constituent Corporations.
11. This Plan of Merger may be amended at any time prior to the
Effective Time by mutual consent of the Boards of Directors of the Constituent
Corporations; provided, however, that no such amendment shall adversely affect
the rights of the shareholders of COTG New York or COTG Delaware subsequent to
the adoption and approval of this Plan of Merger by the shareholders of COTG New
York or COTG Delaware, as the case may be.
IN WITNESS WHEREOF, the foregoing Plan of Merger, which was duly
adopted by the Board of Directors of each of the Constituent Corporations, has
been executed by the chairman of the board and secretary of each of the
Constituent Corporations on and as of the date first set forth above.
CONSOLIDATED TECHNOLOGY GROUP LTD.
a New York Corporation
By:_______________________________________
Lewis S. Schiller, Chairman and CEO
Attest:__________________________
Grazyna B. Wnuk, Secretary
A-2
<PAGE>
CONSOLIDATED TECHNOLOGY GROUP LTD.
a Delaware Corporation
By:_______________________________________
Lewis S. Schiller, Chairman and CEO
Attest:__________________________
Grazyna B. Wnuk, Secretary
A-3
<PAGE>
Exhibit B
CONSOLIDTED TECHNOLOGY GROUP LTD.
1997 Long Term Incentive Plan
12. Purpose; Definitions.
The purpose of the Consolidated Technology Group Ltd. 1997 Long Term
Incentive Plan (the "Plan") is to enable Consolidated Technology Group Ltd. (the
"Company") to attract, retain and reward key employees of the Company and its
Subsidiaries and Affiliates, and others who provide services to the Company and
its Subsidiaries and Affiliates, and strengthen the mutuality of interests
between such key employees and such other persons and the Company's
stockholders, by offering such key employees and such other persons incentives
and/or other equity interests or equity-based incentives in the Company, as well
as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any corporation, partnership, limited liability
company, joint venture or other entity, other than the Company and its
Subsidiaries, that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least 20%
of the ownership interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i)
the stockholders' equity in the Company as of the last day of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (ii) the number of then outstanding shares of Stock as of such
year-end date, as adjusted by the Committee for subsequent events.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Commission" means the Securities and Exchange Commission or any
successor thereto.
(f) "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(g) "Company" means Consolidated Technology Group Ltd., a New York
corporation, or any successor corporation.
(h) "Common Stock" means the Common Stock, par value $.01 per share, of
the Company or any class of common stock into which such common stock may
hereafter be converted or for which such common stock may be exchanged pursuant
to the Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(i) "Deferred Stock" means an award made pursuant to Section 8 of the
Plan of the right to receive Common Stock at the end of a specified deferral
period.
(j) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(k) "Early Retirement" means retirement, with the express consent for
purposes of this Plan of the Company at or before the time of such retirement,
from active employment with the Company and any Subsidiary or Affiliate pursuant
to the early retirement provisions of the applicable pension plan of such
entity.
B-1
<PAGE>
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, from time to time, and any successor thereto.
(m) "Fair Market Value" means, as of any given date, the market price
of the Common Stock as determined by or in accordance with the policies
established by the Committee in good faith; provided, that, in the case of an
Incentive Stock Option, the Fair Market Value shall be determined in accordance
with the Code and the Treasury regulations under the Code.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(o) "Non-Employee Director" means a director of the Company who is not
otherwise employed or engaged as a consultant by the Company or any Subsidiary
or Affiliate.
(p) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(q) "Normal Retirement" means retirement from active employment with
the Company and any Subsidiary or Affiliate on or after age 65.
(r) "Other Stock-Based Award" means an award under Section 10 of the
Plan that is valued in whole or in part by reference to, or is otherwise based
on, Common Stock.
(s) "Plan" means this Consolidated Technology Group Ltd. 1997 Long Term
Incentive Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means an award of shares of Common Stock that is
subject to restrictions under Section 7 of the Plan.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 of the Plan to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such award or Stock Option (or
such portion thereof) is surrendered, of the shares of Common Stock covered by
such Stock Option (or such portion thereof), subject, where applicable, to the
pricing provisions in Paragraph 6(b)(ii) of the Plan and (ii) the aggregate
exercise price of such Stock Option or base price with respect to such award (or
the portion thereof which is surrendered).
(w) "Stock Option" or "Option" means any option to purchase shares of
Common Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 of the Plan.
(x) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 9 of the Plan.
(y) "Subsidiary" means any corporation or other business association,
including a partnership or limited liability company (other than the Company) in
an unbroken chain of corporations or other business associations beginning with
the Company if each of the corporations or other business associations (other
than the last corporation in the unbroken chain) owns equity interests
(including stock or partnership interests) possessing 50% or more of the total
combined voting power of all classes of equity in one of the other corporations
or other business associations in the chain.
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<PAGE>
In addition, the terms "Change in Control," "Potential Change in
Control" and "Change in Control Price" shall have meanings set forth,
respectively, in Paragraphs 11(b), (c) and (d) of the Plan and the term "Cause"
shall have the meaning set forth in Paragraph 5(b)(viii) of the Plan.
13. Administration.
(a) The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. If and to the extent that no Committee exists
which has the authority to so administer the Plan, the functions of the
Committee specified in the Plan shall be exercised by the Board. Notwithstanding
the foregoing, in the event that the Company is not subject to the Exchange Act
or in the event that the administration of the Plan by a Committee of
Non-Employee Directors is not required in order for the Plan to meet the test of
Rule 16b-3 of the Commission under the Exchange Act, or any subsequent rule,
then the Committee need not be composed of Non-Employee Directors. As long as
said Rule 16b-3 requires, as a condition to the officers and directors obtaining
the benefit of such rule, that the Committee be composed of Non-Employee
Directors, each member or alternate member of the Committee shall not be
entitled to any grants under the Plan (except grants pursuant to Paragraph 4(b)
of the Plan) or under any other plans of the Corporation or its affiliates,
except to the extent that participation in a plan would not cause such person to
cease being a Non-Employee Directors for purposes of said Rule 16b-3.
(b) The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and other persons eligible under Section 4 of the
Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the
Committee shall have the authority:
(i) to select the officers and other eligible persons to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards may from time to time be
granted pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or
any combination thereof, are to be granted pursuant to the Plan, to one or more
eligible persons;
(iii) to determine the number of shares to be covered by each
such award granted pursuant to the Plan;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted under the Plan, including, but
not limited to, the share price or exercise price and any restriction or
limitation, or any vesting, acceleration or waiver of forfeiture restrictions
regarding any Stock Option or other award and/or the shares of Common Stock
relating thereto, based in each case on such factors as the Committee shall, in
its sole discretion, determine;
(v) to determine whether, to what extent and under what
circumstances a Stock Option may be settled in cash, Restricted Stock and/or
Deferred Stock under Paragraph 5(b)(x) or (xi) of the Plan, as applicable,
instead of Common Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other cash
awards made by the Company are to be made, and operate, on a tandem basis with
other awards under the Plan and/or cash awards made outside of the Plan in a
manner whereby the exercise of one award precludes, in whole or in part, the
exercise of another award, or on an additive basis;
B-3
<PAGE>
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant, including any provision for any determination or method of
determination of the amount (if any) deemed to be earned on any deferred amount
during any deferral period;
(viii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Common Stock purchased by exercising such Rights;
and
(ix) to determine an aggregate number of awards and the type
of awards to be granted to eligible persons employed or engaged by the Company
and/or any specific Subsidiary, Affiliate or division and grant to management
the authority to grant such awards, provided that no awards to any person
subject to the reporting and short-swing profit provisions of Section 16 of the
Exchange Act may be granted awards except by the Committee.
(c) The Committee shall have the authority to adopt, alter and repeal
such rules, guidelines and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any award issued under the Plan and any agreements relating thereto, and
otherwise to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
14. Stock Subject to Plan.
(a) The total number of shares of Common Stock reserved and available
for distribution under the Plan shall be two million four hundred ninety
thousand (2,490,000) shares of Common Stock. In the event that awards are
granted in tandem such that the exercise of one award precludes the exercise of
another award then, for the purpose of determining the number of shares of
Common Stock as to which awards shall have been granted, the maximum number of
shares of Common Stock issuable pursuant to such tandem awards shall be used.
(b) Subject to Paragraph 6(b)(v) of the Plan, if any shares of Common
Stock that have been optioned cease to be subject to a Stock Option, or if any
such shares of Common Stock that are subject to any Restricted Stock or Deferred
Stock award, Stock Purchase Right or Other Stock-Based Award granted under the
Plan are forfeited or any such award otherwise terminates without a payment
being made to the participant in the form of Common Stock, such shares shall
again be available for distribution in connection with future awards under the
Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Common Stock, such substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the base number of
shares, in the number and option price of shares subject to outstanding Options
granted under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights under the Plan, and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
15. Eligibility.
Officers and other key employees of, and consultants and independent
contractors to, and directors or, the Company and its Subsidiaries and
Affiliates who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan. Members of the
Committee shall be eligible for options under the Plan.
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<PAGE>
16. Stock Options.
(a) Administration. Stock Options may be granted alone, in addition to
or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve. Stock Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
(b) Option Grants. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee, in
its sole discretion, shall deem desirable:
(i) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more than twelve (12)
years after the date the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant. If the Committee provides, in its
sole discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at or after
grant in whole or in part, based on such factors as the Committee shall, in its
sole discretion, determine;
(iv) Method of Exercise.
(A) Subject to whatever installment exercise
provisions apply under Paragraph 5(b)(iii) of the Plan, Stock Options may be
exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price, either by check, note or such other instrument, securities or property as
the Committee may accept. As and to the extent determined by the Committee, in
its sole discretion, at or after grant, payments in full or in part may also be
made in the form of Common Stock already owned by the optionee or, in the case
of the exercise of a Non-Qualified Stock Option, Restricted Stock or Deferred
Stock subject to an award hereunder (based, in each case, on the Fair Market
Value of the Common Stock on the date the option is exercised, as determined by
the Committee).
(B) If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part in the form of Restricted
Stock or Deferred Stock, the Common Stock issuable upon such exercise (and any
replacement shares relating thereto) shall remain (or be) restricted or
deferred, as the case may be, in accordance with the original terms of the
Restricted Stock award or Deferred Stock award in question, and any additional
Common Stock received upon the exercise shall be subject to the same forfeiture
restrictions or deferral limitations, unless otherwise determined by the
Committee, in its sole discretion, at or after grant.
(C) No shares of Common Stock shall be issued until
full payment therefor has been received by the Company. In the event of any
exercise by note or other instrument, the shares of Common Stock shall not be
issued until such note or other instrument shall have been paid in full, and the
exercising optionee shall have no rights as a stockholder until such payment is
made.
(D) Subject to Paragraph 5(b)(iv)(C) of the Plan, an
optionee shall generally have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the optionee has
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given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in Paragraph 14(a) of the
Plan.
(v) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Termination by Death. Subject to Paragraph 5(b)(ix) of
the Plan with respect to Incentive Stock Options, if an optionee's employment by
the Company and any Subsidiary or Affiliate terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the extent
such option was exercisable at the time of death or on such accelerated basis as
the Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, for a period of one year (or such other period as the Committee
may specify at grant) from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability or Retirement.
Subject to Paragraph 5(b)(ix) of the Plan with respect to Incentive Stock
Options, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates by reason of a Disability or Normal or Early Retirement,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine at or after grant (or as may be
determined in accordance with procedures established by the Committee), for a
period of one year (or such other period as the Committee may specify at grant)
from the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such one-year period (or such other
period as the Committee shall specify at grant), any unexercised Stock Option
held by such optionee shall thereafter be exercisable to the extent to which it
was exercisable at the time of death for a period of one year from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability or Normal or Early Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(viii) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate; provided, however,
that if the optionee is involuntarily terminated by the Company or any
Subsidiary or Affiliate without Cause, including a termination resulting from
the Subsidiary, Affiliate or division in which the optionee is employed or
engaged, ceasing, for any reason, to be a Subsidiary, Affiliate or division of
the Company, such Stock Option may be exercised, to the extent otherwise
exercisable on the date of termination, for a period of three months (or seven
months in the case of a person subject to the reporting and short-swing profit
provisions of Section 16 of the Exchange Act) from the date of such termination
or until the expiration of the stated term of such Stock Option, whichever is
shorter. For purposes of this Plan, "Cause" means conviction of a participant of
any felony or of a misdemeanor involving theft or moral turpitude, or the
failure of a participant to contest prosecution for a felony or such
misdemeanor, or a participant's willful misconduct or dishonesty, or a
participant's failure to perform the duties for which the participant was
employed or engaged.
(ix) Incentive Stock Options.
(A) Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the optionee(s) affected, to
disqualify any Incentive Stock Option under such Section 422.
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(B) To the extent required for "incentive stock
option" status under Section 422(d) of the Code (taking into account applicable
Treasury regulations and pronouncements), the Plan shall be deemed to provide
that the aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by the optionee during any calendar year under the Plan and/or
any other stock option plan of the Company or any Subsidiary or parent
corporation (within the meaning of Section 425 of the Code) shall not exceed
$100,000. If Section 422 is hereafter amended to delete the requirement now in
Section 422(d) that the plan text expressly provide for the $100,000 limitation
set forth in Section 422(d), then this Paragraph 5(b)(ix)(B) shall no longer be
operative and the Committee may accelerate the dates on which the incentive
stock option may be exercised.
(C) To the extent permitted under Section 422 of the
Code or the applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement:
(I) If (x) a participant's employment is
terminated by reason of death, Disability or Retirement and (y) the portion of
any Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Paragraphs 5(b)(vi) and (vii) of the
Plan, applied without regard to the $100,000 limitation contained in Section
422(d) of the Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" during such
post-termination period under Section 422, such excess shall be treated as a
Non-Qualified Stock Option; and
(II) if the exercise of an Incentive Stock
Option is accelerated by reason of a Change in Control, any portion of such
option that is not exercisable as an Incentive Stock Option by reason of the
$100,000 limitation contained in Section 422(d) of the Code shall be treated as
a Non-Qualified Stock Option.
(x) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash, Common Stock, Deferred Stock or Restricted Stock
an option previously granted, based on such terms and conditions as the
Committee shall establish and communicate to the optionee at the time that such
offer is made.
(xi) Settlement Provisions. If the option agreement so
provides at grant or is amended after grant and prior to exercise to so provide
(with the optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised Option take
the form of Deferred or Restricted Stock which shall be valued on the date of
exercise on the basis of the Fair Market Value (as determined by the Committee)
of such Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
17. Stock Appreciation Rights.
(a) Grant and Exercise.
(i) Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
(ii) A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
(iii) A Stock Appreciation Right may be exercised by an
optionee, subject to Paragraph 6(b) of the Plan, in accordance with the
procedures established by the Committee for such purpose. Upon such exercise,
the optionee shall be entitled to receive an amount determined in the manner
prescribed in said Paragraph 6(b). Stock
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Options relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights have been
exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of this Section 6 and
Section 5 of the Plan; provided, however, that any Stock Appreciation Right
granted to an optionee subject to Section 16(b) of the Exchange Act subsequent
to the grant of the related Stock Option shall not be exercisable during the
first six months of its term, except that this special limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period. The exercise of Stock Appreciation Rights
held by optionees who are subject to Section 16(b) of the Exchange Act shall
comply with Rule 16b-3 thereunder to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash and/or shares of Common
Stock equal in value to the excess of the Fair Market Value of one share of
Common Stock over the option price per share specified in the related Stock
Option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment. When payment is to be made in shares of
Common Stock, the number of shares to be paid shall be calculated on the basis
of the Fair Market Value of the shares on the date of exercise. When payment is
to be made in cash, such amount shall be based upon the Fair Market Value of the
Common Stock on the date of exercise, determined in accordance with any
provisions of said Rule 16b-3 during the applicable period referred to in Rule
16b-3(e).
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be transferable
under Paragraph 5(b)(v) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised only to the extent of the number of
shares issued under the Stock Appreciation Right at the time of exercise based
on the value of the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant Stock
Appreciation Rights that become exercisable only in the event of a Change in
Control and/or a Potential Change in Control, subject to such terms and
conditions as the Committee may specify at grant; provided that any such Stock
Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/or a Potential Change in Control,
the amount to be paid upon the exercise of a Stock Appreciation Right shall be
based on the Change in Control Price, subject to such terms and conditions as
the Committee may specify at grant.
18. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient of Restricted Stock, subject to Paragraph 7(b) of the
Plan, the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards. The Committee may condition
the grant of Restricted Stock upon the attainment of
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specified performance goals or such other factors as the Committee may, in its
sole discretion, determine. The provisions of Restricted Stock awards need not
be the same with respect to each recipient.
(b) Awards and Certificates.
(i) The prospective recipient of a Restricted Stock award
shall not have any rights with respect to such award unless and until such
recipient has executed an agreement evidencing the award and has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such award.
(ii) The purchase price for shares of Restricted Stock may be
equal to or less than their par value and may be zero.
(iii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify at grant)
after the award date, by executing a Restricted Stock Award Agreement and paying
the price, if any, required under Paragraph 7(b)(ii).
(iv) Each participant receiving a Restricted Stock award shall
be issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such participant, and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v) The Committee shall require that (A) the stock
certificates evidencing shares of Restricted Stock be held in the custody of the
Company until the restrictions thereon shall have lapsed, and (B) as a condition
of any Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Restricted Stock covered by such
award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the date of such
award (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
(ii) Except as provided in this paragraph 7(c)(ii) and
Paragraph 7(c)(i) of the Plan, the participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a stockholder of the Company,
including the right to vote the shares and the right to receive any regular cash
dividends paid out of current earnings. The Committee, in its sole discretion,
as determined at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested,
subject to Paragraph 14(e) of the Plan, in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan, or otherwise
reinvested. Stock dividends, splits and distributions issued with respect to
Restricted Stock shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are issued, and the Committee
may require the participant to deliver an additional stock power covering the
shares issuable pursuant to such stock dividend, split or distribution. Any
other dividends or property distributed with regard to Restricted Stock, other
than regular dividends payable and paid out of current earnings, shall be held
by the Company subject to the same restrictions as the Restricted Stock.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a participant's employment
with the Company and any Subsidiary or Affiliate for any reason during
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the Restriction Period, all shares still subject to restriction will vest, or be
forfeited, in accordance with the terms and conditions established by the
Committee at or after grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares, and other
property held by the Company with respect to such Restricted Shares, shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Common Stock to the recipient of a Restricted Stock
award, subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
19. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Deferred Stock shall be awarded,
the number of shares of Deferred Stock to be awarded to any person, the duration
of the period (the "Deferral Period") during which, and the conditions under
which, receipt of the Common Stock will be deferred, and the other terms and
conditions of the award in addition to those set forth in Paragraph 8(b). The
Committee may condition the grant of Deferred Stock upon the attainment of
specified performance goals or such other factors or criteria as the Committee
shall, in its sole discretion, determine. The provisions of Deferred Stock
awards need not be the same with respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant
to this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award
agreement referred to in Paragraph 8(b)(vi) of the Plan, Deferred Stock awards
may not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or the Elective
Deferral Period referred to in Paragraph 8(b)(v) of the Plan, where applicable),
share certificates representing the shares covered by the Deferred Stock award
shall be delivered to the participant or his legal representative.
(ii) Unless otherwise determined by the Committee at grant,
amounts equal to any dividends declared during the Deferral Period with respect
to the number of shares covered by a Deferred Stock award will be paid to the
participant currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or after the time
of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and
this Section 8, upon termination of a participant's employment with the Company
and any Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other factors
or criteria as the Committee may determine, the Committee may, at or after
grant, accelerate the vesting of all or any part of any Deferred Stock award
and/or waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of an
award (or an installment of an award) for a specified period or until a
specified event (the "Elective Deferral Period"), subject in each case to the
Committee's approval and to such terms as are determined by the Committee, all
in its sole discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made at least twelve months prior to completion of
the Deferral Period for such Deferred Stock award (or such installment).
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(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the Company and the
participant.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Common Stock to the recipient of a deferred stock
award, subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
20. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant eligible
participants Stock Purchase Rights which shall enable such participants to
purchase Common Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at a percentage of such Fair Market Value on such date,
such percentage to be determined by the Committee in its sole discretion;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Common Stock
on such date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase
Rights awards need not be the same with respect to each participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be
exercisable for such period after grant as is determined by the Committee not to
exceed sixty (60) days. However, the Committee may provide, in its sole
discretion, that the Stock Purchase Rights of persons potentially subject to
Section 16(b) of the Exchange Act shall not become exercisable until six months
and one day after the grant date, and shall then be exercisable for ten trading
days at the purchase price specified by the Committee in accordance with
Paragraph 9(a) of the Plan.
21. Other Stock-Based Awards.
(a) Administration.
(i) Other awards of Common Stock and other awards that are
valued in whole or in part by reference to, or are otherwise based on, Common
Stock ("Other Stock-Based Awards"), including, without limitation, performance
shares, convertible preferred stock (to the extent a series of preferred stock
has been or may be created by, or in accordance with a procedure set forth in,
the Company's certificate of incorporation), convertible debentures, warrants,
exchangeable securities and Common Stock awards or options valued by reference
to Fair Market Value, Book Value or performance of the Company or any
Subsidiary, Affiliate or division, may be granted either alone or in addition to
or in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock or Stock Purchase Rights granted under the Plan and/or cash
awards made outside of the Plan.
(ii) Subject to the provisions of the Plan, the Committee
shall have authority to determine the persons to whom and the time or times at
which such award shall be made, the number of shares of Common Stock to be
awarded pursuant to such awards, and all other conditions of the awards. The
Committee may also provide for the grant of Common Stock upon the completion of
a specified performance period. The provisions of Other Stock-Based Awards need
not be the same with respect to each recipient.
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(b) Terms and Conditions. Other Stock-Based Awards made pursuant to
this Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award
agreement referred to in Paragraph 10(b)(v) of the Plan, shares of Common Stock
subject to awards made under this Section 10 may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which any applicable restriction,
performance or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award
agreement and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 10 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Common Stock or otherwise reinvested.
(iii) Any award under Section 10 and any Common Stock covered
by any such award shall vest or be forfeited to the extent so provided in the
award agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement, Disability
or death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining limitations
(if any) imposed with respect to any or all of an award pursuant to this Section
10.
(v) Each award under this Section 10 shall be confirmed by,
and subject to the terms of, an agreement or other instrument by the Company and
by the participant.
(vi) Common Stock (including securities convertible into
Common Stock) issued on a bonus basis under this Section 10 may be issued for no
cash consideration.
22. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control," as defined
in Paragraph 11(b) of the Plan, or a "Potential Change in Control," as defined
in Paragraph 11(c) of the Plan, if and to the extent so determined by the
Committee or the Board at or after grant (subject to any right of approval
expressly reserved by the Committee or the Board at the time of such
determination), the following acceleration and valuation provisions shall apply:
(i) Any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested.
(ii) The restrictions and deferral limitations applicable to
any Restricted Stock, Deferred Stock, Stock Purchase rights and Other
Stock-Based Awards, in each case to the extent not already vested under the
Plan, shall lapse and such shares and awards shall be deemed fully vested.
(iii) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and
Other Stock-Based Awards, in each case to the extent vested, shall unless
otherwise determined by the Committee in its sole discretion at or after grant
but prior to any Change in Control, be purchased by the Company ("cashout") in a
manner determined by the Committee, in its sole discretion, on the basis of the
"Change in Control Price" as defined in Paragraph 11(d) of the Plan as of the
date such Change in Control or such Potential Change in Control is determined to
have occurred or such other date as the Committee may determine prior to the
Change in Control.
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(b) Definition of "Change in Control". For purposes of Paragraph 11(a)
of the Plan, a "Change in Control" means the happening of any of the following:
(i) When any "person" (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) of the Exchange Act,
including a "group" as defined in Section 13(d) of the Exchange Act, but
excluding the Company and any Subsidiary and any employee benefit plan sponsored
or maintained by the Company or any Subsidiary and any trustee of such plan
acting as trustee) directly or indirectly becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of
securities of the Company representing twenty percent or more of the combined
voting power of the Company's then outstanding securities; provided, however,
that a Change of Control shall not arise if such acquisition is approved by the
board of directors or if the board of directors or the Committee determines that
such acquisition is not a Change of Control or if the board of directors
authorizes the issuance of the shares of Common Stock (or securities convertible
into Common Stock or upon the exercise of which shares of Common Stock may be
issued) to such persons; or
(ii) When, during any period of twenty-four consecutive months
during the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death, Disability or Retirement to constitute at least a majority
thereof, provided, however, that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of, or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this Paragraph 11(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a Subsidiary through purchase of assets, or by merger, or otherwise.
(c) Definition of Potential Change in Control. For purposes of
Paragraph 11(a) of the Plan, a "Potential Change in Control" means the happening
of any one of the following:
(i) The approval by stockholders of an agreement by the
Company, the consummation of which would result in a Change in Control of the
Company as defined in Section 11(b) of the Plan; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan or any trustee of such plan
acting as such trustee) of securities of the Company representing five percent
or more of the combined voting power of the Company's outstanding securities and
the adoption by the Board of Directors of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of this
Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change
in Control Price" means the highest price per share paid in any transaction
reported on the principal stock exchange on which the Stock is traded or the
average of the highest bid and asked prices as reported by NASDAQ, or paid or
offered in any bona fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which a cashout
occurs under Paragraph 11(a)(iii).
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23. Amendments and Termination.
(a) The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right (or Limited Stock Appreciation Right), Restricted or Deferred Stock award,
Stock Purchase Right or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent, and no amendment will be made without
approval of the stockholders if such amendment requires stockholder approval
under state law or if stockholder approval is necessary in order that the Plan
comply with Rule 16b-3 of the Commission under the Exchange Act or any
substitute or successor rule or if stockholder approval is necessary in order to
enable the grant pursuant to the Plan of options or other awards intended to
confer tax benefits upon the recipients thereof.
(b) The Committee may amend the terms of any Stock Option or other
award theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights or any holder without the holder's consent. The
Committee may also substitute new Stock Options for previously granted Stock
Options (on a one for one or other basis), including previously granted Stock
Options having higher option exercise prices.
(c) Subject to the provisions of Paragraphs 12(a) and (b) of the Plan,
the Board shall have broad authority to amend the Plan to take into account
changes in applicable securities and tax laws and accounting rules, as well as
other developments, and, in particular, without limiting in any way the
generality of the foregoing, to eliminate any provisions which are not required
to included as a result of any amendment to Rule 16b-3 of the Commission
pursuant to the Exchange Act.
24. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan.
25. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Common Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan nor the grant of any award
pursuant to the Plan shall confer upon any employee of the Company or any
Subsidiary or Affiliate any right to continued employment with the Company
B-14
<PAGE>
or a Subsidiary or Affiliate, as the case may be, nor shall it interfere in any
way with the right of the Company or a Subsidiary or Affiliate to terminate the
employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements and the Company and its Subsidiaries or
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are available under Section 3 of this Plan for
such reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights and other Plan awards).
26. Effective Date of Plan.
The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by the votes of a majority of the
holders of the Company's Common Stock at the next annual or special meeting of
stockholders. Any grants made under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the Committee at the time of
grant), but shall be conditioned on, and subject to, such approval of the Plan
by such stockholders.
27. Term of Plan.
Stock Option, Stock Appreciation Right, Restricted Stock award,
Deferred Stock award, Stock Purchase Right or Other Stock-Based Award may be
granted pursuant to the Plan, until this Plan shall be terminated, but awards
granted prior to such termination may extend beyond that date. Notwithstanding
the foregoing, no Incentive Stock Option may be granted after the tenth (10th)
anniversary of the date this Plan was approved by the Board, although Incentive
Stock Options granted prior to such date may extend beyond such date.
B-15
<PAGE>
PROXY
- -----
CONSOLIDATED TECHNOLOGY GROUP LTD.
1997 Annual Meeting of Shareholders -- , 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Lewis S. Schiller and Grazyna B. Wnuk
or either one of them acting in the absence of the other, with full power of
substitution or revocation, proxies for the undersigned, to vote at the 1997
Annual Meeting of Shareholders of Consolidated Technology Group Ltd. (the
"Company"), to be held at 8:45 a.m., local time, on ,
, 1997, at the Gramercy Park Hotel, 21st Street at Lexington
Avenue, New York, New York 10010, and at any adjournment or adjournments
thereof, according to the number of votes the undersigned might cast and with
all powers the undersigned would possess if personally present.
(1) To elect the following four (4) directors:
Lewis S. Schiller, E. Gerald Kay, Norman J. Hoskin and Grazyna B. Wnuk
[ ] FOR all nominees listed above (except as marked to the contrary below).
[ ] Withhold authority to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name below.
___________________________________________
(2) To approve a one-for-30 reverse split of the Company's common stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) The approval of an amendment to the Company's certificate of
incorporation to change the number of authorized shares of common stock
to (a) 25,000,000 if the one-for-30 reverse spilt is approved by the
shareholders or (b) 150,000,000 if the one-for-30 reverse split is not
approved by the shareholders;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) The approval of the reincorporation of the Company into Delaware
through the merger of the Company into its wholly-owned subsidiary,
Consolidated Technology Group Ltd., a Delaware corporation;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) The approval of the Company's 1997 Long-Term Incentive Plan;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(6) To approve the selection of Moore Stephens, P.C. as the independent
certified public accountants of the Company for the year ending
December 31, 1997:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(7) In their discretion, upon the transaction of such other business as may
properly come before the meeting;
all as set forth in the Proxy Statement, dated November , 1997.
<PAGE>
The shares represented by this proxy will be voted on Items 1, 2, 3, 4,
5 and 6 as directed by the shareholder, but if no direction is indicated, will
be voted FOR Items 1, 2, 3, 4, 5 and 6.
If you plan to attend the meeting please indicate below:
I plan to attend the meeting [ ]
Dated:_________________, 1997
______________________________
______________________________
(Signature(s))
Please sign exactly as name(s) appear hereon.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
Please date, sign and mail this proxy in the
enclosed envelope, which requires no postage
if mailed in the United States.
