SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|X||_| Preliminary Proxy Statement
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|_||X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
MAGNA-LAB INC.
________________________________________________________________________________- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________- --------------------------------------------------------------------------------
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[LOGO] MAGNA-LAB INC.
6800 Jericho Turnpike, Suite 120W
Syosset, New York 11797
516-393-5874
NOTICE OF 20002001 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
SEPTEMBER 28, 2000AUGUST 21, 2001
TO THE SHAREHOLDERS OF MAGNA-LAB INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
Magna-Lab Inc., a New York corporation (the "Company"), will be held at the
Long
Island Marriott Hotel, 101 James Doolittle Blvd., Uniondale, NY 11553,Sheraton Colonial, 1 Auburn Road, Wakefield, Massachusetts 01880, on Thursday, September 28, 2000Tuesday,
August 21, 2001 at 10:11:00 a.m. local time (the "Meeting"), for the following
purposes:
1. To consider and vote upon the election of fiveseven directors;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Class A
Common Stock to 100,000,000;120,000,000;
3. To approve an amendment to the Company's 1992 Stock Option Plan;
4. To ratify the appointment of Rothstein Kass & Company, P.C. as
independent auditors of the Company; and
5. To transact such other business as may properly be presented at the
Meeting or any adjournments thereof.
The close of business on August 24, 2000July 25, 2001 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. The stock transfer books of the Company will not be closed.
All shareholders are cordially invited to attend the Meeting. Whether or
not you expect to attend, you are respectfully requested by the Board of
Directors of the Company to sign, date and return the enclosed proxy promptly.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the voting thereof. A return envelope which requires no postage if
mailed in the United States is enclosed for your convenience.
By the order of the Board of Directors,
Daniel M. Mulvena
Chairman of the Board
Dated: September __, 2000August 1, 2001
MAGNA-LAB INC.
6800 Jericho Turnpike, Suite 120W
Syosset, New York 11797
516-393-5874
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Magna-Lab Inc., a New York
Corporation (the "Company"), for the Annual Meeting of Shareholders to be held
at the Long Island Marriott Hotel, 101 James Doolittle Blvd., Uniondale, NY
11553,Sheraton Wakefield, 1 Audubon Road, Wakefield, Massachusetts 01880, on
Thursday September 28, 2000Tuesday, August 21, 2001 at 10:11:00 a.m., local time, and for any adjournment or
adjournments thereof (the "Meeting"), for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Any shareholder giving
such a proxy has the power to revoke it at any time before it is voted. Written
notice of such revocation should be forwarded directly to the Secretary of the
Company, at the above stated address. Attendance at the Meeting will not have
the effect of revoking the proxy unless such written notice is given or the
shareholder votes by ballot at the Meeting, thereby canceling any proxy
previously given.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted and if a choice is specified in the proxy, the
shares represented thereby will be voted in accordance with the directions
thereon. Any proxy on which no direction is specified will be voted in favor of
the actions described in this Proxy Statement, for the election of the nominees
set forth under the caption "Election of Directors", for the amendment to the
Company's Restated Certificate of Incorporation increasing the authorized shares
of Class A Common Stock to 100,000,000,120,000,000, for the amendment to the Company's 1992
Stock Option Plan, and for the ratification of Rothstein Kass & Company, P.C. as
independent auditors for the Company.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be mailed or given to the Company's shareholders is
SeptemberAugust 1, 2000.2001.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the Meeting. If you do
attend, you may vote by ballot at the Meeting, thereby canceling any proxy
previously given.
VOTING
Only holders of shares of Class A Common Stock, par value $.001 per share,
and Class B Common Stock, par value $.001 per share (collectively, the
"Shares"), of record as at the close of business on August 24, 2000July 25, 2001 (the "Record
Date"), are entitled to vote at the Meeting. On the Record Date there were
issued and outstanding 39,279,26170,278,796 shares of Class A Common Stock and 408,821380,142
shares of Class B Common Stock. Each outstanding share of Class A Common Stock
and Class B Common Stock is entitled to one vote and five votes, respectively,
upon all matters to be acted upon at the Meeting. A majority in interest of the
voting power of the outstanding Shares represented at the Meeting in person or
by proxy shall constitute a quorum. The affirmative vote of a plurality of the
voting power of the outstanding Sharesvotes cast is necessary to elect the nominees as directors. The affirmative vote
of a majority of the outstanding voting power of the Shares is necessary to
approve the proposed amendment to the Company's Restated Certificate of
Incorporation,Incorporation. The affirmative vote of a majority of the votes cast in favor of
or against is required to approve the proposed amendment to the 1992 Stock
Option Plan and the affirmative vote of the majority of the
outstanding voting power of the Shares represented at the Meeting is necessary to ratify Rothstein Kass & Company, P.C. as the independent
auditors for the Company. The Shareholders vote at the Meeting by casting
ballots (in person or by proxy) which will be tabulated by a person appointed by
the Board of Directors before the Meeting to serve as the inspector of election
at the Meeting and who has executed and verified an oath of office. Abstentions
and broker non-votes are included in the determination of the number of Shares
present at the Meeting for quorum purposes but broker non-votes are not counted in the tabulation
of the votes cast on proposals presented to shareholders. Thus,In situations where
the approval of a specified percentage of our outstanding Shares is required for
passage of a proposal, such as the proposal to amend the Company's Restated
Certificate of Incorporation, an abstention from voting on any matter hasor broker non-vote will have the
same legalpractical effect as a vote "against"against the matter, even thoughproposal. For all other proposals,
which are based on votes cast, abstentions and broker non-votes will have no
effect on the shareholder may interpret such action
differently.voting results.
1
SOLICITATION OF PROXIES
The solicitation of proxies hereby is being made by the Company. The cost
of preparing, assembling and mailing the proxy, this Proxy Statement and the
other materials enclosed will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, employees and consultants
may solicit proxies by telephone or other means of communication. The Company,
through its transfer agent, will request brokerage houses, banking institutions,
and other custodians, nominees and fiduciaries, with respect to Shares held of
record in their names or in the names of their nominees, to forward the proxy
material to the beneficial owners of such Shares and will reimburse them for
their reasonable expenses in forwarding the proxy material.
1. ELECTION OF DIRECTORS
At the Meeting, fiveseven directors will be elected by the shareholders to
serve until the next Annual Meeting of Shareholders or until their successors
are elected and shall qualify. Each of the nominees is currently a director of
the Company. Mr. Adereth was added to the Board in July 2000 and Messrs. Feldman
and Kessler joined the Board in January 2000 following the resignations of Dr.
Teichholoz and Mr. Michael Rosenberg in December 1999. Messrs. Adereth, Feldman
and Kessler were named to the Board pursuant to agreements to provide equity
capital to the Company beginning in December 1999 and continuing until October
31, 2000. Management recommends that the persons named below be elected as
directors of the Company and it is intended that the accompanying proxy will be
voted for their election as directors, unless the proxy contains contrary
instructions. The Company has no reason to believe that any of the nominees will
not be a candidate or will be unable to serve. However, in the event that any of
the nominees should become unable or unwilling to serve as a director, the
persons named in the proxy have advised that they will vote for the election of
such person or persons as shall be designated by management.
The following sets forth the names and ages of the fiveseven nominees for
election to the Board of Directors, their respective principal occupations or
employment during the past five years and the period during which each has
served as a director of the Company.
Daniel M. Mulvena has been the Company's Chairman and Chief Executive
Officer since March 1998 and a
consultant to the Company since February 1997. Mr. Mulvena served as Chief
Executive Officer of the Company from March 1998 until January 1, 2001. Mr.
Mulvena devotes such time as is necessary to the business and affairs of the
Company. Mr. Mulvena is Chairman of the Board of EcoCath,EchoCath, Inc., a publicly
traded medical technology company, and serves as a consultant to and/or on the
Boarddirector
of several privately-held and publicly-held medical technology companies
including publicly-held companies Thoratec Laboratories, Inc.,Corporation, Zoll Medical Corporation and
Cambridge Heart. Mr. Mulvena is the principal owner of Commodore Associates, a
private firm providing consulting services to medical technology companies.
Mr. Mulvena has served in various capacities at Boston Scientific Corporation,
a publicly traded corporation whichthat manufactures and sells minimally invasive
medical products ("BSC"), from 1992 through 1995 including as Vice-President and
General Manager and ultimately as Group Vice-President Cardio/Cardiology
responsible for Mansfield, Cardiac Assist and Mansfield Electrophysiology
Divisions of BSC. From 1989 through 1991, Mr. Mulvena was Chairman, President
and Chief Executive Officer of, and from 1991 through 1992 was a consultant to,
Lithox Systems, Inc., a developer and manufacturer of medical devices. From 19841980
to 1989, Mr. Mulvena served as President of Bard Implants and Bard
Cardiosurgery, all divisions of C.R. Bard, Inc. C.R. Bard, Inc. is a leading
worldwide manufacturer of medical devices. Mr. Mulvena has served as Co-Chairman
of the Board of Directors of Life Medical Sciences, a publicly traded
corporation engaged in the research and development of technologies for use in
medical applications.
John R. Geisel has served as Chief Executive Officer and a Director of the
Company since January 2001. From December 1999 until it's acquisition by Cardiac
Science, Inc. in June 2000, Mr. Geisel served as Chief Executive Officer of
Cadent Medical Corporation, an early-stage medical device company focused on
developing personal, wearable defibrillators for patients who are at risk of
sudden cardiac arrest.
From 1988 to January 1999, Mr. Geisel served as President of
Datex-Engstrom, a U.S. subsidiary of a Finnish manufacturer of anesthesia
monitors. From 1986-1988, Mr. Geisel worked at Puritan-Bennett, a global
manufacturer of respiratory care products, and was promoted to General Manager
of the company's Spirometer & Monitor division in 1987. Mr. Geisel also held
positions in sales and sales management at Nellcor, a start-up company that
developed the market for pulse oximetry monitors and sensors. Mr. Geisel began
his career in the medical industry with the Hewlett-Packard Medical Products
Group, where he held various positions in marketing and sales.
Lawrence A. Minkoff, Ph.D., a founder of the Company, is presently the
Company's President and Chief Scientific Officer and has alsoOfficer. Dr. Minkoff served as itsthe
Company's Chairman of the Board and Chief Executive Officer from
2
inception in February 1991 until March 1998. From October 1989 until February
1991, Dr. Minkoff has
served as President and a director of Minkoff Research Labs,
Inc. ("MRL"), a privately held company engaged in the development of MRI
technology. Dr. Minkoff continues as President of Minkoff Research Labs, Inc. PriorMRL. MRL is a shareholder of
the Company and prior to the formation of the Company Minkoff Research Labs, Inc. conducted the development
activities relating to certain of the Company's technology. From July 1978 to
October 1989, Dr. Minkoff was an executive vice-president of Fonar Corporation,
a publicly traded corporation engaged in developing and commercializing the use
of magnetic
resonance imagingMagnetic Resonance Imaging for scanning the human body. Dr. Minkoff served as
a member of its boardBoard of directorsDirectors from January 1985 to February 1989.
2
J. M. Feldman, has been a Vice President and Director of the Company since
January 2000. For more than the past five years, Mr. Feldman has been a
financial advisor employed by various firms in the brokerage industry.
Jonathan Adereth has served as a Director ofand strategic consultant to the
Company since AugustJuly 2000. Mr. Adereth was CEO and President of Elscint Ltd., a
New York Stock Exchange traded medical imaging company, from 1994 until 1998.
Mr. Adereth joined Elscint Ltd. in 1972, starting as an R&D Physicist, then
Manager priorPrior to becomingthat he was involved in Corporate Marketing Management. In 1981,
Mr. Adereth establishedprogressively more responsible positions within
Elscint Australia and served as its first General
Manager. In 1983 Mr. Adereth was appointed a General Manager of the Digital
X-Ray Systems Division of the company andsince his joining that firm in 1986 he became a Corporate Vice
President Sales.1972. In 1998 the assets of Elscint were
sold to Marconi Medical Inc. and to GE Medical Systems. Mr. Adereth is currently
a partner of InnoMed Venture Capital, a member of the Jerusalem Global Ventures,
Chairman of the Board and CEO of Carmel Biosensors Ltd. and a Director atdirector of
Medivision - Ophthalmic Imaging Systems Ltd. and at Eliav - Oncology Imaging
Systems Ltd. He is also founder and a major shareholder of Techbridge Medical
Ltd., a worldwide network for distribution of medical products developed in
Israel. In addition, Mr. Adereth acts as a strategic consultant to a number of
high techtechnology medical equipment companies in Israel.Israel, including Ultraguide Ltd.
and Smartlight Ltd.
Joel S. Kanter, has served as a Director of the Company since March 1998.
Mr. Kanter has served as President of Windy City, Inc., a privately held
investment firm, since July 1986. Mr. Kanter has also served as President of
Chicago Advisory Group, Inc., a privately held private equity financing and
consulting company, since its inception in November 1999. From 1995 to November
1999, Mr. Kanter served as the Chief Executive Officer and President of Walnut
Financial Services, Inc., a publicly traded company. Walnut Financial's primary
business focus was the provision of different forms of financing to small
business, including equity financing to start-up and early stage development
companies, bridge financing to small and medium-sized companies, and later stage
institutional financing to more mature enterprises.
Mr. Kanter serves on the Board of Directors of several public companies
including Encore Medical Corporation, I-Flow Corporation, Mariner Post Acute
Network, Inc., and THCG, Inc., as well as a number of private concerns. He is
Chairman of the Coalition to Stop Gun Violence. He is also a member of the Board
of Trustees of The Langley School, it's Treasurer, and the Chairman of its
Finance Committee.
Seymour Kessler, D.P.M. has served as a Director of the Company since
January 2000. For more than the past five years Dr. Kessler has been a Managing
Director of RKP Capital Partners, LLC a private investment bank specializing in
small to medium size companies. Dr. Kessler received his Doctorate of Podiatric
Medicine from Illinois College of Podiatric Medicine in 1954 and servedhas had a long
career as a practicing Podiatric Surgeon as well as banker, investor and
corporate executive. He is a Board Certified Diplomat of the American Board of
Ambulatory Foot Surgery and the American Board of Podiatric Orthopedics. Dr.
Kessler is the developer of the "Kessler/Wilson Osteotomy", a minimally invasive
surgical
proceduresurgery and a co-founder and past president of the Academy of Foot and Ankle
Surgery. Dr. Kessler has served as CEO of Princeton Dental Management Corp. and
as a member of the Board of Directors of several banks in the Chicago area. He
has also served as a Director of RealShares, Inc., an NASD member firm.
The Company maintains key-person life insurance coverage in the face
amount of $5,000,000 for Dr. Lawrence A. Minkoff naming the Company as
beneficiary under such policies.policy.
General Information Concerning the Board of Directors and its Committees
The Board of the Company met eleven times in the fiscal year ended
February 29, 2000 and acted by unanimous written consent one time.28, 2001. The New York Business Corporation Law provides that the Board
of Directors, by resolution adopted by a majority of the entire board, may
designate one or more committees, each of which shall consist of threeone or more
directors. The Board
3
annually elects from its members the Executive Committee, the Audit Committee
and the Compensation Committee. During the last fiscal year each of the
directors attended at least 75% of the aggregate of (1) the total number of
meetings of the Board and (2) the total number of meetings held by all
committees of the Board on which he served.
Executive Committee. The Executive Committee was formed in January 2000.
The Executive Committee was formed to provide a forum for continuous
communication about issues of strategy, development, finance and operations
affecting the Company. The Executive Committee is empowered to convene between
Board meetings to undertake matters which are more efficiently acted upon by a
smaller group than the entire Board. The Executive Committee is composed of
Messrs. Mulvena, Minkoff, Kessler and Feldman. After its formation in January
2000, theThe Executive Committee held its first meeting in March 2000. There were,
therefore, no meetings of the Executive Committeemet two
times during the fiscal year ended February 29, 2000.28, 2001.
Audit Committee. The Audit Committee reviews the engagement of the
independent accountants and reviews the independence of the accounting firm. The
Audit Committee also reviews the audit and non-audit fees of the independent
accountants and the adequacy of the Company's internal control procedures. The
Audit Committee is currently composed of threetwo directors, Messrs. Feldman,
KesslerMr. Kanter, Chair, and
Rosenthal. Prior to January 2000, the Audit Committee was composed
of Messrs. Joel Kanter, Irwin Rosenthal and Michael Rosenberg.Mr. Kessler. The Audit Committee met oncethree times during the fiscal year ended
February 29, 2000.28, 2001.
Compensation Committee. The Compensation Committee reviews and recommends
to the Board remuneration arrangements and compensation plans for the Company's
officers and key employees and consultants. 3
The Compensation Committee also
administers the 1992 Stock Option Plan. The Compensation Committee is composed
of threetwo directors, presently Mr. Kessler, Chair, and two directors who did not stand for reelection, Messrs. Joel Kanter and Irwin
Rosenthal. Mr. Kessler replaced Dr. Teichholz who resigned from the Board in
December 1999.Kanter. The Compensation
Committee met twicethree times during the fiscal year ended February 29, 2000.28, 2001.
All Directors of the Company are elected by the shareholders, or in the
case of a vacancy, are elected by the Directors then in office, to hold office
until the next annual meeting of shareholders of the Company and until their
successors are elected and qualify or until their earlier resignation or
removal.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Class A and Class B Common Stock as of
August 24, 2000July 25, 2001 for (i) each of the Company's directors and each of the executive officers/consultants,officers
named in the Summary Compensation Table set forth below under "Executive
Compensation", (ii) each person known by the Company to own beneficially 5% or
more of the outstanding shares of any class of its voting securities and (iii)
all directors and executive officers as a group.
Percentage of
Number of of Total Class A
Class of Shares Percent and Class AB Percentage of
Name and Address Common Beneficially of and Class BCommon Total Voting
of Total
Of Beneficial Owner (1)(10) Stock (2) Owned(3) Class(3) Common Stock (3) Voting Power (2)(3)
- -------------------------------------------------- --------- -------- -------- ---------------- ---------------------------- ------------
Daniel M. Mulvena (4)(5) Class A 950,000 2.4% 2.3% 2.2%1,150,000 1.6% 1.6% 1.6%
Lawrence A. Minkoff, Ph.D. (4)(5) Class A 1,550,000 3.8%1,850,000 2.6%
Class B 238,915 56.1%62.7%
----------
1,788,915 4.3% 6.4%
----------
Irwin M. Rosenthal (4)(5) Class A 849,593 1.8% 1.8% 1.7%2,088,915 2.9% 4.1%
Allen Perres (4)(5) Class A 3,500,000 8.2% 8.1% 7.8%4.7% 4.7% 4.6%
Joel Kanter (4)(5)(6) Class A 1,616,754 2.3% 2.3% 2.2%
Jonathan Adereth (4)(5) Class A 1,250,000 1.6% 1.6% 1.6%
Irwin M. Rosenthal (4)(5)(8) Class A 1,062,848 1.5% 1.5% 1.5%
Kenneth C. Riscica (4)(5) Class A 717,500 1.8% 1.8% 1.7%874,166 1.2% 1.2% 1.2%
J.M. Feldman (4)(5) Class A 75,000150,000 0.2% 0.2% 0.2%
Seymour Kessler (4)(5) Class A 75,000 0.2% 0.2% 0.2%
Joel Kanter (4)(5)(6) Class A 641,754 1.8% 1.8% 1.7%
Jonathan Adereth (4)(9) Class A 2,500,000 6.0% 5.9% 5.7%604,545 0.9% 0.9% 0.8%
John R. Geisel (4)(5) Class A 0 0% 0% 0%
Noga Investments in Technology Ltd. (7) Class A 30,772,727 48.0% 47.7% 46.5%
Ltd. (7)
Robert M. Rubin (4)43.8% 43.6% 42.6%
All Executive Officers and Directors Class A 3,400,000 9.5% 9.4% 9.0%
Abbe/Berman "Group" (8) Class A 2,000,000 5.6% 5.5% 5.3%
All Executive Officer and Class A 10,858,847 22.0%
Directors11,109,380 14.4%
as a Group (9(7 persons) Class B 238,915 56.1%
----------
11,097,762 22.3% 23.4%62.7% 14.6% 15.5%
----------
(see following page for notes)
4
- ----------------------------------------------
The information presented in the table above is based solely upon Schedules 13Dreports
furnished to the Company and 13G, and schedules 3, 4 and 5 filed by the respective holders under the
Securities Exchange Act of 1934 and has not been otherwise independently
verified by the Company. To the extent that any holders have not timely filed
required reports, the Company would not be in a position to know the current
holdings of such persons.
(1) All shares are beneficially owned and sole voting and investment power is
held by the persons named, except as otherwise noted.
(2) Class B Common Stock is entitled to five votes per share but is otherwise
substantially identical to the Class A Common Stock, which has one vote
per share. Each share of Class B Common Stock is convertible into one
share of Class A Common Stock.
4
(3) Based upon 39,279,26170,278,140 shares of Class A common stock and 408,821380,798 shares of
Class B common stock outstanding at August 24, 2000July 25, 2001 and reflecting as
outstanding, with respect to the relevant owner, the shares which that
beneficial owner could acquire upon exercise of options which are
presently exercisable or will become exercisable within the next 60 days.
(4) The address for Mssrs.Messrs. Mulvena, Geisel, Minkoff, Rosenthal,Adereth, Perres,
Riscica, Rubin, Feldman, Kessler, KanterRosenthal and AderethKanter is c/o Magna-Lab Inc.,
6800 Jericho Turnpike, #120W, Syosset, NY 11791.
(5) Includes currently exercisable options to purchase the following shares of
Class A Common Stock; Mr. Mulvena, 950,000, Dr.1,150,000, Mr. Geisel, 0, Mr. Minkoff,
1,550,000,1,850,000, Mr. Adereth, 1,250,000, Mr. Riscica 874,166, Mr. Feldman,
150,000, Mr. Kessler, 150,000, Mr. Rosenthal, 500,000,800,000 and Mr. Perres, 3,500,000,Kanter,
150,000. Excludes options which are currently not exercisable as follows:
Mr. Mulvena, 400,000, Mr. Geisel, 3,900,000, Mr. Minkoff, 600,000, Mr.
Riscica 717,500,313,333, Mr. Feldman, 75,000, Mr. Kessler, 75,000, Mr. Kanter, 75,000 including amounts
which are subject to shareholder approval of an increase in the Company's
Stock Option Plan.Adereth, 1,250,000.
(6) Includes the holding of The Kanter Family Foundation and Windy City
Associates to which Mr. Kanter does not have sole voting or investment
power.
(7) The address for Noga Investments in Technology Ltd. is 6 Azoran Street,
South Industrial Zone, P.O. Box 8471, Netaninya,Netanya, Israel.
(8) Mr. Rosenthal served as a Director until September 28, 2000. Includes
5,681,818103,920 shares presently owned and 25,090,909 shares subject to
presently exercisable options andissuable upon satisfactionsheld by Magar, Inc., of existing
purchase commitments and scheduledwhich Mr. Rosenthal is believed to
be satisfieda stockholder, and to which Mr. Rosenthal does not have sole voting
authority.
(9) Includes 340,909 shares held by October 31, 2000.
(8) The Abbe/Berman Group consists of Coleman Abbe, Richard Abbe, Leo Abbethe JK Family Trust and Jeffrey Berman, each of whom beneficially owns 500,000113,636 shares
of Class A
common stock. The address for each of Messrs. Coleman Abbe, Richard Abbe,
Leo Abbeheld by Surgical and Jeffrey Berman is c/o Hampshire Securities Corp., 640 Fifth
Avenue, New York, NY 10016. Such reporting persons may be deemed to be
part of a "group" and such reporting persons disclaim any such "group"
membership. The "Abbe Group" reflects such amounts as though such
reporting persons were a member of a "group" (which they disclaim).
(9) The Company and Mr. Adereth are currently negotiating a consulting
agreement with Mr. Adereth which contemplates Mr. Adereth being granted
options to purchase 2,500,000 shares of Class A Common Stock at $0.49 per
share. Such shares are included in the above table.Orthopedic Podiatrist Retirement Trust.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Such persons are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file.
The Company believes, based solely on review of copies of such reports
furnished to the Company, that section 16(a) filing requirements applicable to a
portion of the options that were not subject to stockholder approval granted to
Company's officers and directors and consultants in May 1997 (Mulvena, Minkoff,
Riscica and Rosenthal) were delinquent until their filing in May 2000. Other
than this delinquency for options granted, the Company believes, based solely on
review of copies of such reports furnished to the Company, that Section 16(a) filing requirements applicable to
the Company's officers and directors and greater than ten percent shareholders
have been complied with during the last fiscal year.
5
EXECUTIVE COMPENSATION
The following tables set forth certain information relating to
compensation paid or accrued by the Company for the past three fiscal years to
its Chief Executive Officer and its executive officers whose cash paid
compensation exceeded $100,000 for the year ended February 29, 200028, 2001 (the "Named
Executive Officers"). Only those columns which call for information applicable
to the Company or the Named Executive Officers for the periods indicated have
been included in such tables.
5
Summary Compensation Table
Long Term
Year Annual Compensation
Ended Compensation Options/
Name & Principal Position Feb. 28 Salary ($) Bonus ($) SAR (#)
- ------------------------- ------- ---------- --------- -------
Daniel Mulvena, Chairman of the Board 2001 $185,000(a) -- --
2000 $ 106,765$106,765 -- 1,300,000
Board,1999 $114,757 -- --
John R. Geisel, Chief Executive Officer 1999 $ 114,7572001 33,333(b) -- --
1998 $ 42,000 -- 250,0003,900,000
Lawrence A. Minkoff, Ph.D., President and
Chief Scientific Officer 2001 $195,000 --
2000 $ 125,833(a) $ 100,000(a)$125,833(c) $100,000(c) 2,200,000
1999 $ 112,000$112,000 -- --
1998 $ 93,334(b)J. M. Feldman, Vice President and Director 2001 $256,500 -- 150,00075,000
2000 -- -- 75,000
1999 -- -- --
Kenneth C. Riscica, Treasurer and Secretary 2001 $129,625 -- --
2000 $61,550 -- 1,000,000
1999 $41,400 -- --
Allen Perres, Vice President 2001 $84,000 $100,000 --
2000 $80,000 -- 3,500,000
1999 -- -- --
- -----------------------
(a) In addition, Mr. Mulvena was paid approximately $68,256 during the fiscal
year ended February 28, 2001 for services of marketing and operations
consultants retained to assist the Company with operating, regulatory and
pre-market activities.
(b) Mr. Geisel began employment with the Company on January 1, 2001 at an
annual salary of $200,000 and the amount reflected in the above table
reflects two months' compensation.
(c) During the fiscal year ended February 29, 2000, Dr. Minkoff's salary was
adjusted from $112,000 per annum to $195,000 per annum and he was awarded
a performance bonus of $100,000, thatwhich was paid during May 2000.
(b) Net of approximately $18,666 due to Dr. Minkoff for services rendered and
forgiven by him under the Debt Reduction Program.6
Option/SAR Grants in Last Fiscal Year
The following table sets forth information with respect to options granted
during the last fiscal year to the Named Executive Officers of the Company.
Individual Grants
% of Total
Options/SARs Exercise
Options/ Granted to Exercise or
Options/SARs Employees in Base Price
Name SARs Granted(#) Fiscal Year ($/share) Expiration Date
- ---- ------------------------- ----------- --------- ---------------
Daniel M. Mulvena 1,300,000(a) 26% $0.22 700,000 11/16/04
200,000 11/16/05
200,000 11/16/-- -- -- --
John R. Geisel 3,900,000 54% $0.25 975,000, 12/31/06
200,000 11/16/975,000, 12/31/07
975,000, 12/31/08
975,000, 12/31/09
Lawrence A. Minkoff, Ph. D. 2,200,000(a) 46% $0.22 1,300,000 11/16/04
300,000 11/16/-- -- -- --
J.R. Feldman 75,000 1% $0.25 12/31/05
300,000 11/16/06
300,000 11/16/07Allen Perres -- -- -- --
Kenneth C. Riscica -- -- -- --
- -----------------
(a) All of which are subject to shareholder approval of an increase in the
options available under the Company's 1992 Stock Option Plan.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
The following table sets forth certain information with respect to stock
option exercises by the Named Executive Officers during the fiscal year ended
February 29, 200028, 2001 and the value of unexercised options held by them at the
fiscal year-ended February 29, 2000.
6
28, 2001.
Number of Value of Unexercised
Shares Unexercised In-the Money
SharesAcquired Options/SARs at Options/SARs
Acquiredon F/Y End (#) at F/Y End ($)
onExercise Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable(1)
- ---- --------------- ----------- ------------- ----------------
Daniel M. Mulvena 0 $0 1,150,000/400,000 $195,500/$68,000
John R. Geisel 0 1,050,000/600,000 $169,200/$0 0/3,900,000 $0/$111,600546,000
Lawrence A. Minkoff, Ph. D. 0 $0 1,850,000/600,000 $315,500/$102,000
J.R. Feldman 0 1,550,000/900,000 $280,800/$0 150,000/0 $23,250/$167,400 0
Allen Perres 3,500,000 $1,287,000 0 $0/$0
Kenneth C. Riscica 0 $0 874,166/313,332 $146,500/$53,000
- ---------------
(1) Based on a closing bid price of $0.406$0.39 per share of Class A Common Stock on
February 29, 2000,28, 2001, less the exercise price.
7
Employment Agreements
There are noThe Company has a consulting agreement with Mr. Mulvena and an employment
agreementsagreement with anyMr. Geisel. Under the consulting agreement with Mr. Mulvena, he
is to be paid $1,700 per day of consulting time for him or for associates he
brings to the service of the Company's employees.Company. The agreement extends through April 1,
2004. In addition, Mr. Mulvena is reimbursed for his medical insurance and
reasonable expenses incurred on behalf of the Company and the agreement with him
contains provisions for payments in the event of termination (one prior years'
fees). Mr. Mulvena is eligible for an annual bonus. Effective January 1, 2001,
the Company has entered into a four year employment agreement with Mr. Geisel
calling for annual salary of $200,000, reimbursement of medical insurance and
reasonable expenses and contains provisions for payments in the event of
termination. Mr. Geisel is eligible for an annual bonus of up to 40% of his base
compensation based upon annually set objectives. Dr. Minkoff continuedis employed by the
Company pursuant to receivea November 1999 agreement calling for compensation at the
rate of compensation
indicated in his prior contract ($112,000 per year) until December 31, 1999$195,000 commencing at which time his annual compensation was increased to $195,000January 1, 2000 and he received a performance
bonus of $100,000 in the fiscal year ended February 29, 2000, which was paid in
May 2000. Mr. MulvenaDr. Minkoff is reimbursed for expenses incurred on behalf of the
Company and is eligible for and annual bonus. Mr. Riscica provide services to
the Company based upon consulting agreementspursuant to an agreement with Riscica Associates, Inc., as amended
in November 1999, which callcalls for payment based upon time expended on the
affairs of the Company. Mr. Mulvena and Mr. Riscica agree to
spend such time as is necessary to advanceCompany at the affairsrate of $1,000 per day, reimbursement for
expenditures made on behalf of the Company.Company, eligibility for annual bonus and
certain payments in the event of termination. Mr. Perres is compensated based
upon a base salary and incentive compensation related to his efforts in raising
capital for the Company. Mr. Feldman is compensated based upon his efforts
related to raising capital for the Company. See "Certain Relationships and
Related Transactions."
Directors' Compensation
TheBeginning on January 1, 2001, the Company doespays its Directors who do not presently payreceive
ongoing compensation from the Company, a retainer of $10,000 in annual cash
compensation to its outside
Directors(payable quarterly) for attendance at Board orand committee meetings.
OutsideIn addition, the Company has a consulting agreement with Mr. Adereth to provide
strategic marketing and management consulting to the Company at the rate of
$4,000 per month, adjusted for certain additional time which is billed at $500
per day. Mr. Adereth is also reimbursed for expenses incurred on behalf of the
Company and is entitled to certain payments in the event of early termination.
In addition, Mr. Adereth was awarded options to purchase 2,500,000 shares of
Class A common stock at $0.49 per share vesting in six-month increments from
July 2000 through July 2002. Directors may be reimbursed for expenses incurred
by them in acting as a Director or as a member of any committee of the Board of
Directors.
During each of the fiscal yearyears ended February 28, 2001 and February 29,
2000, each of Mssrs. Feldman, Kanter and Kessler were each granted options to
purchase 75,000 shares at $0.25 and 75,000 at $0.22, respectively, and Mr.
Rosenthal (who served as a Director until September 28, 2000) was granted an
option to purchase 300,000 and 225,000 shares, at $0.22 and $0.25, respectively,
prior to November 16, 2000.2004 and September 19, 2005, respectively. Such options
are fully vested.
7
CERTAIN TRANSACTIONS
Mr. Rosenthal is a senior partner in a law firm which provides legal
services to the Company from time to time. During the fiscal year ended February
29, 2000, such firm billed the Company approximately $103,000 principally
related to financing transactions.
In December 1999, the Company entered into a letter agreement with Noga
Investments in Technology Ltd.Ltd (successor in interests to Noga Electrotechnica
Limited, "Noga") pursuant to which Noga agreed to purchase $3,000,000 worth of
common stock at $0.22 per share payable in installments over a five month period
ending in May 2000. To secure its commitment, Noga paid $250,000 as a
non-refundable deposit. In January and February 2000, Noga purchased a total of
$500,000 worth of common stock toward its commitment. In May 2000, the agreement
was amended to permit Noga to purchase the balance of its commitment prior to be paid by July 27, 2000 in exchange for an
additional $100,000 to be paid by Noga to the Company as an additional
non-refundable deposit to secure the timely payment of the balance ($2,150,000). If Noga fails to timely pay the balance, the Company is
entitled to keep the $350,000 in non-refundable deposits it has received and all
rights that Noga is entitled to under the letter agreement terminate.
According to the letter agreement, as amended, the Company agreed to provide
Noga with an option to purchase 3,500,000 shares of the Company's common stock
at $0.02 per share and an option (the"Listing Option"), exercisable prior to
July 27, 2000, to purchase the number of additional shares that are necessary at $0.22 per share, to
satisfy the requirements for listing of the Company's stock on the NASDAQ
SmallCap market. The Company also agreed that for a period of two years from the
date of this letter agreement, Noga has the right to nominate a number of
directors to the Company's board such that the total number of non-Noga
nominated directors exceeds the number of Noga-nominated directors by one. Mr.
Feldman was designated by Noga as its initial nominee. Additionally, the
8
Company agreed that any payment or withdrawal from the Company's bank account of
at least $2,000 requires the approval of Mr. Feldman. In March 2000, the Company
and Noga agreed that Noga would not have the right to nominate any additional
directors to the Company's Board until the completion of its $3,000,000
financing commitment was completed. At theUpon such completion of the funding commitment,financing, Mr.
Adereth will be Noga's secondbecame a Noga designated director.member. The Company has agreed to hold meetings
of its Boardboard at least once per month or at such intervals as is reasonably
acceptable to the Noga-nominated directors.
OnIn July 27, 2000, in exchange for new investment undertakings by Noga, the
Company and Noga have agreed that Noga will provide the additional $2,150,000
under the original $3,000,000 commitment as follows: $750,000 on July 28, 2000,
$700,000 by September 15, 2000 and $700,000 by October 15, 2000. Upon completion
of the full $3,000,000 commitment, Noga will have purchased 13,363,363 shares of
Class A Common Stock. In addition, the July 27, 2000 agreement replacesto replace Noga's right to purchase such additional shares as would be necessary to satisfy
minimum capital requirements for listing on Nasdaq SmallCapListing Option with (a) Noga's
commitment to purchase for $3,000,000, and with(b) the commitment by an officer of
the Company (Mr. Perres, see below) to purchase for $2,000,000 (after a portion is offered first to
certain investors and management), an aggregate of
22,727,272 shares of Class A
common stockCommon Stock of the Company. Noga's $3,000,000 investment has been made and
$500,000 of the amount offered first to management and existing investors has
been made, leaving a remaining commitment of $1,500,000 by an officer of the
Company ($0.22 per share).
Noga's $3,000,000 new investment is securedwhich has not been made by a non-interest bearing note
payablethe deadline, as amended, in March 2001. On
March 26, 2001, Noga offered to fulfill the Company and is to be paid as follows: $1,000,000 prior to
September 30, 2000remaining $1,500,000 commitment and
the remaining $2,000,000 priorBoard of Directors decided to October 31, 2000. As
Noga makes payments under the note, the Company will issue the proportionate
number of shares. The officer's new investment of $2,000,000 is required to be
paid by him (after a portion is offered first to current investors and
management) prior to September 30, 2000 and is secured by a note payable to the
Company. In addition, Noga has agreed to exercise its option to purchase 3.5
million shares of Class A common stock for $70,000 at the conclusion of their
initial financing commitment in October 2000 and the officer has agreed to
exercise his option to purchase 3.5 million shares for $70,000.accept such offer.
In December 1999, the Company entered into a letter agreement and an
amendment to the letter agreement(as
subsequently amended) with Mr. Perres, an officer of the Company, in connection
with Mr. Perres' assistance in raising financing for the Company in its
$2,000,000 private placement. Under the agreement, as amended, the Company
agreed to elect Mr. Kessler as a member of its Boardboard to fill a vacancy. The
Company also agreed to nominate Mr. Perres as a director in the event that Mr.
Perres assists the Company in raising funds in excess of $2,000,000 in its
private placement. Upon completion of the private placement, Mr. Perres has
declined the Company's invitation to serve as a director. Additionally, the Company has agreed that any increase in the
size of its Boardboard must be approved by Messrs. Perres and Kessler so long as they
are directors. Mr. Perres was invited to join the Board of Directors and has
declined the invitation. Under the letter agreement, as amended, the Company
agreed to create an Executive Committee consisting of Messrs. Kessler, Minkoff,
and Mulvena. The Company agreed to pay Mr. Perres 8
for his services a base salary
of $90,000 per year for two years (of which,
$164,000 has been paid) and to provide him with options to purchase 3,500,000 shares
of the Company's common stock at $0.02 per share.
In August 2000, Mr.
Perres was granted a discretionary bonus of $100,000 in cash.
Dr. Minkoff, a director and officer of the Company, was awardedreceived a performance
bonus of $100,000 during fiscal year ended February 29, 2000 which was paid
during May 2000. See "Executive Compensation - Employment Agreements."
The Company pays consulting fees to Riscica Associates, Inc. in connection
with the servicesMr. Perres, an officer of Mr. Riscica for financial planning, control, mangement,
administrative and reporting services. Riscica Associates Inc. billed the Company $61,550 forreceived a performance
bonus of $100,000 during the fiscal year ended February 28, 2001. See "Executive
Compensation" for a description of other compensation arrangements with
management.
There are no other material transactions with related parties during the
two fiscal years ended February 29, 2000 in connection with
such services.
The Company is currently negotiating a consulting agreement with Mr.
Jonathan Adereth, a director of the Company. As presently contemplated, Mr.
Adereth would provide various business strategy and development consulting
services in exchange for cash compensation in the amount of $3,500 per month
plus $500 per day spent on Company business when he is in the United States and
options to purchase 2,500,000 shares of Class A common stock at an exercise
price of $0.49.2000. Transactions between the Company and
its directors,Directors, officers and principal shareholders are approved by the
disinterested directors of the Company and determined to be on terms no less
favorable than those available from independent third parties.
2. APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF
CLASS A COMMON STOCK TO 100,000,000120,000,000
The Board has unanimously adopted a resolution to submit to the
shareholders a proposal to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Class A Common
Stock, par value $.001 per share, from 40,000,000100,000,000 to 100,000,000.120,000,000. Approval of
such an amendment is necessary in order to ensure a continued adequate supply of
Class A Common Stock for future issuances, including for issuances in connection
with pendingpossible future financing transactions and existing option grants.
The Company presently has 39,279,26170,278,796 shares of Class A common stock
and
408,821 shares of Class B common stock outstanding. An additional 47,431,81720,650,824 shares of Class A common stock are
issuable as follows: (i) 37,681,8176,818,182 shares upon satisfaction of the financing
arrangements described under Certain
Transactions"Certain Transactions" above, (25,090,908 for Noga and 12,590,909 for Mr. Perres or other
investors, including options held by each of Noga and Mr. Perres to purchase
3,500,000 shares) and (ii) 9,750,00013,452,500
shares upon exercise of outstanding options (including options the grantand (iii) 380,142 shares issuable
upon conversion of which is subjectClass B shares to shareholder approval as
provided in proposal #3 below).Class A. If all of the foregoing shares
were issued, the Company would have outstanding approximately 86,643,00090,929,620 shares
of Class A Common stock, an excess of approximately 46,643,000 over9,070,380 under the currently available
authorized amount. Without an increase in the authorized shares, the Company wouldmay
not be unableable to complete the raise of thesufficient additional capital that has been
committed or any further equity capital to support its business
9
development plans. Without suchthe availability of additional capital, the Company
would need to significantly alter its development plans.
In December 1999, when the Company first entered into the financing
arrangements described above under Certain Transactions, the Company was in need
of immediate funding. Management believed that it would not have been in the
best interests of the Company or its shareholders to postpone, and potentially
risk, the financings in order to first seek shareholder approval of the proposed
increase in authorized shares.
Approval of the proposed increase in authorized shares will generally
empower the directors of the Company to issue the additional shares without
first obtaining shareholder approval. Except as described herein, the Company
has no plans or proposals to use any portion of the additional shares that would
be made available upon adoption of the proposed amendment. The equity interests
of current shareholders will be significantly diluted upon the issuance of the
proposed additional authorized common stock, whether such issuance occurs in the
pending transactions or in the future transactions.stock. In limited circumstances, such as
certain types of mergers and business combinations, shareholders would be
entitled, under New York law, to vote on transactions involving the issuance of
additional shares. The Company is not presently subject to the rules of a
securities exchange or association, such as Nasdaq, that require shareholder
approval prior to issuing securities in certain types of transactions.
In addition to the authorized common stock, the Company's Restated
Certificate of Incorporation authorizes the issuance of a maximum of 5,000,000
shares of preferred stock on terms which may be fixed by the Company's Board of
Directors without further shareholder action. The terms of any series of
preferred stock which may include priority claims to assets and dividends, and
special voting rights, could adversely affect the rights of holders of the
common stock. No preferred stock has been issued to date and the Company has no
current plans to issue such preferred stock. The issuance of such preferred
stock could make the possible takeover of the Company or the removal of
management of the Company more difficult, discourage hostile bids for control of
the Company in which shareholders may receive premiums for their shares of
common stock, or otherwise dilute the rights of holders of common stock. The
proposal to increase the authorized shares has not been submitted as a result of
or in response to any accumulation of stock or threatened takeover. The Company
has no present plans to implement measures having antitakeover effects following
adoption of the proposed amendment.
The full text of paragraph 1 of Article Third of the Company's Restated
Certificate of Incorporation is proposed to be amended in its entirety as
follows:
9
"THIRD:
1. The aggregate number of shares which the Corporation shall have
the authority to issue is one hundred twenty eight million seven
hundred fifty thousand (108,750,000)(128,750,000), divided into three classes:
(i) five million (5,000,000) shares of preferred stock, $.01 par
value per share (the "Preferred Stock"), (ii) three million seven
hundred fifty thousand (3,750,000) shares of Class B common shares,stock,
$.001 par value per share (the "Class B Common Stock"), and (iii)
one hundred twenty million shares of Class A common stock, $.001 par
value per share (the "Class A common stock"Common Stock")."
If the proposed amendment is approved, the additional shares of Class A
Common Stock of the Company shall entitle holders thereof to identical rights,
privileges and duties as present holders of the Company's Class A Common Stock.
The shares of Class A Common Stock do not have any preemptive rights with
respect to the issuance of Class A Common Stock of the Company.
Recommendation and Vote Required
The Board has approved the amendment to the Restated Certificate of
Incorporation. Adoption of the amendment requires the affirmative vote of the
holders of a majority of the voting power of the outstanding shares of Class A
Common Stock and Class B Common Stock. If it is adopted, the amendment will
become effective as soon after the Meeting as practicable upon filing of the
Certificate of Amendment to the Restated Certificate of Incorporation with the
Secretary of the State of New York.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
10
3. PROPOSAL TO AMEND THE COMPANY'S 1992 STOCK OPTION PLAN
The Board of Directors has adopted an amendment to the 1992 Stock Option
Plan, subject to the approval of shareholders pursuant to Section 22 of the
Plan, to increase the total number of shares of Class A Common Stock with
respect to which options and SARs may be granted thereunder to 14,000,00018,000,000 shares
(the "Amendment"). At July 25, 2001, options to purchase a total of 13,452,500
shares were outstanding under the 1992 Stock Option Plan, leaving 547,500 shares
available for future option grants under the Plan. In connection with the
anticipated hiring of new employees in the near term, the Company intends to
grant options covering the full amount of the currently available shares. The
Amendment will enable the 1992 Stock Option Plan to continue to achieve its
purpose to retain and motivate the human resources of the Company. At August 24, 2000, without the Amendment, no shares would be
available for grant under the Stock Option Plan. Options for an aggregate of
5,247,500 shares have been granted subject to shareholder approval of the
Amendment, including options for 1,371,774, 2,243,065, 1,021,532, 268,065,
75,000, 75,000 and 75,000 shares granted to Daniel M. Mulvena, Lawrence A.
Minkoff, Kenneth C. Riscica, Irwin M. Rosenthal, J. M. Feldman, Joel Kanter and
Seymour Kessler. In addition, the Company intends to grant Mr. Adereth options
to purchase 2,500,000 shares of Class A Common Stock, all of which would be
subject to shareholder approval of the Amendment.
In December 1992, the Directors of the Company adopted, and the
shareholders of the Company approved, the 1992 Stock Option Plan. The purpose of
the 1992 Stock Option Plan is to enable the Company to attract and retain
competent employees, to make service on the Board of Directors of the Company
more attractive to present and prospective non-employee directors and to provide
a means to encourage stock ownership and proprietary interest in the Company by
officers, non-employee directors and valued employees and other individuals upon
whose judgment, initiative, and efforts the financial success and growth of the
Company largely depend.
The complete text of the 1992 Stock Option Plan, as proposed to be amended
by the Amendment (which is reflected in Section 2(a) thereof), will be
furnished, upon request, without charge to each person whose proxy is being
solicited. The complete text of the Plan as amended at the 1994 Annual Meeting
of Shareholders was set forth inafter Exhibit
A to the Proxy Statement for that
meeting.filed with the Securities and Exchange Commission. The
following summary of material features of the 1992 Stock Option Plan as proposed
to be amended by the Amendment does not purport to be complete and is qualified
in its entirety by reference to the complete text of the 1992 Stock Option Plan.
10
The 1992 Stock Option Plan may be administered by either the Board or a
committee (the "Committee") of two or more Directors appointed by the Board.
Members of the Committee must by "disinterested"be "non-employee directors" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934. The Board or
the Committee, as the case may be, shall determine, among other things, the
recipients of grants, whether a grant will consist of incentive stock options
("ISOs"), non qualified stock options or SARs (in tandem with an option or
free-standing) or combination thereof, and the number of shares to be subject to
such options. In the event that a duly constituted Committee is not in existence
at any time the Board of Directors is to administer the 1992 Stock Option Plan.
Options designated as ISOs may be granted only to officers and key
employees and consultants of the Company. Directors who are not otherwise
employees of the Company shall not be eligible to be granted ISOs pursuant to
the Plan. SARs and options designated as non-qualified options may be granted to
(i) officers and key employees of the Company, or (ii) agents, medical advisors
and directors of and consultants to the Company, whether or not otherwise
employees of the Company.
In determining the eligibility of an individual to be granted an option or
SAR, as well as in determining the number of shares to be optioned to any
individual, the Board of Directors or the Committee shall take into account the
position and responsibilities of the individual being considered, the nature and
value to the Company of his or her services and accomplishments, his or her
present and potential contribution to the success of the Company and such other
factors as the Board of Directors or the Committee may deem relevant.
The 1992 Stock Option Plan provides for the granting of ISOs to purchase
the Company's Class A Common Stock at not less than the fair market value on the
date of the option grant and the granting of nonqualified options and SARs at
such price as shall be determined by the Board of Directors or the Committee.
SARs granted in tandem with an option have the same exercise price as the
related option. The closing bid price of the Class A Common Stock on the OTC
Bulletin Board on August 24, 2000July 25, 2001 was $0.56.$0.31. The 1992 Stock Option Plan contains
certain limitations applicable only to ISOs granted thereunder. To the extent
that the aggregate fair market value, as of the date of grant, of the shares to
which ISOs become exercisable for the first time by an optionee during the
calendar year exceeds $100,000, the portion of such option which is in excess of
the $100,000 limitation will be treated as a nonqualified option. In addition,
if an optionee owns more than 10% of the total voting power of all classes of
the Company's stock at the time the individual is granted an ISO, the option
price per share cannot be less than 110% of the fair market value per share and
the term of the ISO cannot exceed five years from the date of grant. No option
or SAR may be granted under the 1992 Stock Option Plan after ten years from the
effective date of the 1992 Stock Option Plan and no option or SAR may be
outstanding for more than ten years after its grant.
11
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash, by check or, under certain
circumstances, in shares of the Company's Class A or Class B Common Stock, or in
any combination thereof. The 1992 Stock Option Plan permits the Company to lend
to the holder of an option funds sufficient to pay the exercise price. SARs
which give the holder the privilege of surrendering such rights for the
appreciation in the Class A Common Stock between the time of the grant and the
surrender, may be settled, in the discretion of the Board or Committee, as the
case may be in cash, Class A Common Stock, or in any combination thereof. The
exercise of an SAR granted in tandem with an option cancels the option to which
it related with respect to the same number of shares as to which the SAR was
exercised. The exercise of an option cancels any related SAR with respect to the
same number of shares as to which the option was exercised. Generally, options
and SARs may be exercised while the recipient is performing services for the
Company and within three months after termination of such services provided the
term has not expired. In the event that the employment of an option holder
terminates due to death or disability, the option or SAR may generally be
exercised by the holder or the holder's beneficiary until twelve months after
termination of employment provided that the term of the option or SAR at such
time has not expired. In the event an option holder is terminated for cause or
for breach of an employment agreement, the option or SAR will terminate on the
date the holder ceases to perform services for the Company.
The 1992 Stock Option Plan may be terminated at any time by the Board of
Directors, which may also amend the 1992 Stock Option Plan, except that without
shareholder approval it may not increase the number of shares subject to the
1992 Stock Option Plan or change the class of persons eligible to receive
options and SARs under the 1992 Stock Option Plan.
Plan Benefits
11
The specific future benefits or amounts to be received by executive
officers and employees under the 1992 Stock Option Plan as proposed to be
amended by the Amendment is not determinable. However, the following executive
officers, directors and consultants have received option grants which are
subject to the approval of the Amendment: Daniel M. Mulvena, (Chairman and CEO),
1,371,774 shares, Lawrence A. Minkoff (President, Chief Scientific Officer and
Director), 2,243,065 shares; Kenneth C. Riscica (Consultant), 1,021,532 shares;
Irwin M. Rosenthal (Director) 268,065 shares, J.M. Feldman (Director) 75,000
shares, Joel Kanter (Director) 75,000 shares, Seymour Kessler (Director) 75,000
shares. The exercise prices of the options granted to these individuals range
from $0.22 to $0.25 per share and such options expire at various times beginning
in May 2002 and ending in November 2007. All executive officers, directors and
consultants as a group and all other employees as a group (a "group" made up of
one consultant and one part-time administrative employee) received options for
5,247,500 shares and 75,000 shares, respectively, subject to shareholder
approval of the Amendment with the exercise price in all cases being between
$0.22 to $0.25 per share. For information on the options received during the
fiscal year ended February 29, 2000 by the Named Executive Officers and
directors, see the "Option/SAR Grants in Last Fiscal Year" table and "Directors
Compensation", above. No SARs have been granted under the 1992 Stock Option
Plan. In addition to the above, the Company is currently negotiating a
consulting agreement with Mr. Jonathan Adereth (Director) which contemplates his
being granted options to purchase 2,500,000 shares of Class A Common Stock at an
exercise price of $0.49 per share.
NEW PLAN BENEFITS TABLE
The following table sets forth, for the named executive, for executives and
executive consultants as a group, and for the non-executive director group the
new plan benefits which will accrue to these parties if the proposal to increase
the shares available under the Company's 1992 Stock Option Plan is approved. The
Company has no full time employees other than executive officers. The Dollar
Value is computed to be the difference between the exercise price of the
underlying option and the closing bid price on August 24, 2000 of $0.56.
Name and position Dollar Value ($) Number of Units
----------------- ---------------- ---------------
Daniel M. Mulvena, CEO $ 466,403 1,371,774
Lawrence A. Minkoff, Ph.D., President
and Chief Scientific Officer $ 762,642 2,243,065
Executive Group $1,601,886 4,711,371
Non-Executive Director Group $ 142,142 418,065
Non-Executive Officer Employee Group
(none) $ 25,500 75,000
Federal Income Tax Consequences
Neither the receipt nor the exercise of an ISO is a taxable event, and if
the optionee does not dispose of stock acquired under an ISO prior to the
expiration of the requisite holding periods, any gain resulting from the sale of
the stock is long termlong-term capital gain. In such case the Company is not entitled to
any tax deduction with respect to the grant or the exercise of the option.
However, the amount by which the fair market value of shares at the time of
exercise of the option exceeds the option price will constitute an item of tax
preference for purposes of the alternative minimum tax. The statutory holding
period is at least two years from the date the ISO is granted and one year from
the date the optionee receives his shares of Class A Common Stock pursuant to
the exercise. If the stock is disposed of before the end of the statutory
holding period, the lesser of the difference between the exercise price and the
fair market value of the stock on the date of exercise or the total amount of
gain realized on the sale must be reported by the optionee as ordinary income
and the Company is entitled to a tax deduction in that amount. The remaining
gain, if any, is taxed to the optionee as long or short termshort-term capital gain.
The receipt of a nonqualified stock option issued under the 1992 Stock
Option Plan will not result in any taxable income to the optionee or a tax
deduction to the Company at the time the option is granted. Generally, the
optionee will recognize ordinary income at the time the nonqualified stock
option is exercised in an amount equal to the excess of the fair market value on
the date of exercise of the shares received over the exercise price, and the
Company will be entitled to a tax deduction of an equal amount in the year the
optionee recognizes such income. The optionee will have a tax basis for his
shares equal to their fair market value at the time the optionee recognizes
ordinary income and any additional gain or loss recognized by the optionee on
disposition of the shares will 12
generally be a short or long termlong-term capital gain or
loss and will not result in any additional tax deduction to the Company.
The holder of an SAR will not realize any taxable income upon the grant of
such right. The holder will realize ordinary income in the tax year in which
payment is realized in an amount equal to the amount of cash and/or the then
fair market value of the shares of Class A Common Stock received upon exercise,
and the Company will normally be entitled to a tax deduction for an equal amount
for the same year.
Further Information
To become effective, the Amendment requires the affirmative vote of a
majority of the outstanding voting powervotes cast in favor of or against the Company's Shares.amendment.
12
The Board recommends that the shareholders vote FOR the proposal to
approve the Amendment.
4. RATIFICATION OF THE INDEPENDENT AUDITORS
Rothstein Kass & Co., P. C. has served as the Company's independent
accountants for the fiscal years ended February 28, 1992 through 2000.2001. The
Company has requested that a representative of Rothstein Kass & Company, P.C.
attend the Meeting. Such representative will have the opportunity to make a
statement, if he or she desires, and will be available to respond to appropriate
questions of shareholders.
The Board of Directors of the Company recommends a vote FOR the
ratification of Rothstein Kass & Company, P. C. as the independent auditors for
the Company.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth herein
that may come before the Meeting. If, however, further business properly comes
before the Meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee operates under a written charter adopted by the Board
of Directors, a copy of which is attached to this proxy statement as Exhibit A.
The Company believes each of the members of the Audit Committee to be
independent as defined under the NASD rules. The composition of the Audit
Committee, the attributes of its members, and the responsibilities of the
Committee, as reflected in its charter, are intended to comply with applicable
requirements for corporate audit committees. The Committee reviews and assesses
the adequacy of its charter on an annual basis.
The primary focus of the Audit Committee is to assist the Board of
Directors in its general oversight of the Company's financial reporting,
internal control and audit functions. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements,
accounting and financial reporting principles, internal controls and procedures
designed to assure compliance with accounting standards, applicable laws and
regulations. The Company's independent auditing firm is responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards.
The Committee serves an oversight role to the Board of Directors in which
it provides advice, counsel and direction to management and the auditors on the
basis of the information it receives, communications with management and the
auditors, and the experience of the Committee's members in business, financial
and accounting matters. The Committee members are not professional auditors or
auditors, and their functions are not intended to duplicate or to certify the
activities of management and the independent auditors, nor can the Committee
certify that the independent auditors are "independent" under applicable rules.
In this context, the Audit Committee has had communications with
management and Rothstein Kass & Company, P.C. Management represented to the
Audit Committee that the audited financial statements of Magna-Lab Inc.
contained in the Company's Annual Report on Form 10-KSB for the year ended
February 28, 2001, were prepared in accordance with generally accepted
accounting principles, and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The Audit Committee discussed with Rothstein Kass & Company, P.C. matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees."
The Audit Committee has received and reviewed the written disclosures and
the letter from Rothstein Kass & Company, P.C. required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and the Audit Committee discussed with Rothstein Kass & Company,
P.C. the firm's independence.
Based upon the Audit Committee's communications with management and the
independent auditors, and the Audit Committee's review of the representations of
management, and the report of the independent auditors to the Audit Committee,
the Committee recommended that the Board of Directors include the audited
consolidated
13
financial statements in Magna-Lab Inc.'s Annual Report on Form 10-KSB for the
year ended February 28, 2001, as filed with the Securities and Exchange
Commission.
Submitted by the Audit Committee of the Company's Board of Directors:
Joel S. Kanter, Chairman
Seymour Kessler
AUDIT AND RELATED FEES
Fees for the last annual audit were approximately $20,000, and all other
fees were approximately $15,000, including audit-related services of
approximately $13,500 and non-audit services of approximately $1,500.
Audit-related services generally include fees for quarterly reviews, accounting
and reporting consultations and SEC registration statements. Non-audit services
primarily include tax services.
The Audit Committee has considered whether the services provided under all
other fees are compatible with maintaining Rothstein Kass & Company, P.C.'s
independence.\
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder
action at annual meetings in accordance with regulations adopted by the
Securities and Exchange Commission. To be considered for inclusion in the proxy
statement and form of proxy relating to the 20012002 annual meeting, such proposals
must be received by the Company not later than March 6, 2001.April 3, 2002. Proposals should
be directed to the attention of the Secretary of the Company.
ANNUAL REPORT ON FORM 10-KSB
The Company has enclosed with this Proxy Statement to each person whose
proxy is being solicited a copy of the Company's annual report on Form 10-KSB
for the fiscal year ended February 29, 2000,28, 2001, including the financial statements,
but excluding the exhibits.
By the order of the Board of Directors,
Daniel M. Mulvena
Chairman of the Board
Dated: September __,August 1, 2001
14
Exhibit A
Magna-Lab Inc.
Audit Committee Charter
Organization
There shall be a committee of the board of directors to be known as the audit
committee. The audit committee shall be composed of two or more directors, as
determined by the Board, all of which shall be independent of the management of
the corporation and free of any relationship that, in the opinion of the board
of directors, would interfere with their exercise of independent judgment as a
committee member. All members of the Committee shall be able to read and
understand fundamental financial statements, including our Company's balance
sheet, statement of operations and statement of cash flows. To the extent
practicable, at least one member should have past employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background, including a current or past position
as a chief executive or financial officer or other senior officer with financial
oversight responsibilities.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
Statement of Policy/Responsibilities
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
financial management of the corporation and the independent auditors. The Audit
Committee's primary responsibilities are to:
Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Corporation's independent
accountants.
Provide an open avenue of communication among the financial and senior
management, independent auditors and the Board of Directors.
Activities of the Committee
In carrying out its responsibilities, the audit committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the corporation are in accordance with
requirements.
In carrying out its responsibilities, the audit committee will:
Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation.
Communicate with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors. Such communications can include in-person meetings,
written reports and telephonic and electronic communications.
15
Review with the independent auditors the company's financial and
accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the corporation, and elicit any recommendations for
the improvement of such internal control procedures or particular areas
where new or more detailed controls or procedures are desirable.
Particular emphasis should be given to the adequacy of such internal
controls to expose any payments, transactions, or procedures that might be
deemed illegal or otherwise improper.
Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Any changes in accounting principles should be reviewed.
Review summaries of the financial information to be included in the
Company's quarterly reports on Form 10-QSB for each quarter and
communicate with management and the auditors about the results of the
independent auditors Statement on Auditing Standards No. 61,
"Communication with Audit Committees."
Provide opportunity for the independent auditors to meet with the members
of the audit committee without members of management present.
Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
16
Attachment #1
1992 STOCK OPTION PLAN
MAGNA-LAB INC.
1. Purpose of the Plan.
The purpose of the Magna-Lab Inc. 1992 Stock Option Plan (the "Plan") is
to promote the interests of Magna-Lab Inc., a New York corporation (the
"Company") and its shareholders by strengthening the Company's ability to
attract and retain competent employees, to make service on the Board of
Directors of the Company more attractive to present and prospective non-employee
directors of the Company and to provide a means to encourage stock ownership and
proprietary interest in the Company by officers, non-employee directors and
valued employees and other individuals upon whose judgment, initiative, and
efforts the financial success and growth of the Company largely depend. This
Plan and the grant of any option or stock appreciation right hereunder shall be
effective upon approval by the Board of Directors and shareholders of the
Company.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
treasury shares of the Class A Common Stock, $.001 par value per share, of the
Company ("Common Stock") for which options and stock appreciation rights
("SARs") may be granted under the Plan shall be 18,000,000, subject to
adjustment as provided in Section 14 hereof.
(b) If an option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent option grants
under the Plan, provided, however, that shares as to which an option has been
surrendered in connection with the exercise of a related SAR will not again be
available for subsequent option or SAR grants under the Plan.
(c) Stock issuable upon exercise of an option or SAR granted under
the Plan may be subject to such restrictions on transfer, repurchase rights or
other restrictions as shall be determined by the Board of Directors.
3. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"). No member of the Board shall act upon any matter
exclusively affecting any option or SAR granted or to be granted to himself or
herself under the Plan. The decision of the Board as to all questions of
interpretation and application of the Plan shall be final, binding and
conclusive on all persons. The Board may, in its sole discretion, grant options
to purchase shares of the Company's Common Stock, grant SAR's and issue shares
upon exercise of such options and SAR's, as provided in the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to construe
the respective option and SAR agreements and the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option or SAR agreements, which may but need not be
identical, and to make all other determinations in the judgment of the Board
necessary or desirable for the administration of the Plan. The Board may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option agreement in the manner and to the extent it shall deem expedient
to
17
carry the Plan into effect and shall be the sole and final judge of such
expediency. No director shall be liable for any action or determination made in
good faith. The Board may, in its discretion, delegate its power, duties and
responsibilities to a committee, consisting of two or more members of the Board,
all of whom are "non-employee directors" (as hereinafter defined). If a
committee is so appointed, all references to the Board herein shall mean and
relate to such committee, unless the context otherwise requires. For the
purposes of the Plan, a director or member of such committee shall be deemed to
be "non-employee director" only if such person qualified as a "non-employee
director" within the meaning of paragraph (c)(2) of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Exchange Act"), as such term
is interpreted from time to time.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of the
Board (or a committee designated by the Board) and may be designated as either
incentive stock options meeting the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or non-qualified options which
are not intended to meet the requirements of such Section 422 of the Code, the
designation to be in the sole discretion of the Board. Options designated as
incentive stock options that fail to continue to meet the requirements of
Section 422 of the Code shall be redesignated as non-qualified options
automatically on the date of such failure to continue to meet the requirements
of Section 422 of the Code without further action by the Board.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder (the "Regulations").
Directors who are not otherwise employees of the Company or a subsidiary shall
not be eligible to be granted incentive stock options pursuant to the Plan. SARs
and options designated as non-qualified options may be granted to (i) officers
and key employees of the Company or of any of its subsidiaries, or (ii) agents,
medical advisors and directors of and consultants to the Company, whether or not
otherwise employees of the Company.
In determining the eligibility of an individual to be granted an option or
SAR, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the position and responsibilities
of the individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Board may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options) granted under this
Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which incentive stock
options are granted, (determined as of the date the incentive stock options are
granted), exercisable for the first time by an individual during any calendar
year shall not exceed $100,000. If an incentive stock option is granted pursuant
to which the aggregate fair market value of shares with respect to which it
first becomes exercisable in any calendar year by an individual exceeds such
$100,000 limitation, the portion of such option which is in excess of the
$100,000 limitation, and any such options issued subsequently in the same
calendar year, shall be treated as a non-qualified option pursuant to Section
422(d)(1) of the Code. In the event that an individual is eligible to
participate in any other stock option plan of the Company or
18
any parent or subsidiary of the Company which is also intended to comply with
the provisions of Section 422 of the Code, such $100,000 limitation shall apply
to the aggregate number of shares for which incentive stock options may be
granted under this Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an
incentive stock option is granted pursuant to the provisions of this Plan is on
the date of grant the owner of stock (as determined under Section 424(d) of the
Code) possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary of the Company, then the
following special provisions shall be applicable to the incentive stock options
granted to such individual:
(i) The option price per share subject to such incentive stock
options shall be not less than 110% of the fair market value
of the stock determined at the time such option was granted.
In determining the fair market value under this clause (i),
the provisions of Section 8 hereof shall apply.
(ii) The incentive stock option shall have a term expiring not more
than five (5) years from the date of the granting thereof.
7. Option Agreement.
Each option and SAR shall be evidenced by an agreement (the "Agreement")
duly executed on behalf of the Company and by the grantee to whom such option or
SAR is granted, which Agreement shall comply with and be subject to the terms
and conditions of the Plan. The Agreement may contain such other terms,
provisions and conditions which are not inconsistent with the Plan as may be
determined by the Board, provided that options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. No option or SAR shall be granted within the meaning
of the Plan and no purported grant of any option or SAR shall be effective until
the Agreement shall have been duly executed on behalf of the Company and the
optionee. More than one option and SAR may be granted to an individual.
8. Option Price.
(a) Subject to the conditions set forth in Section 8(d) hereof, the
option price or prices of shares of the Company's Common Stock for options
designated as non-qualified stock options shall be as determined by the Board.
(b) Subject to the conditions set forth in Sections 8(d) and 6(b)
hereof, the option price or prices of shares of the Company's Common Stock for
incentive stock options shall be at least the fair market value of such Common
Stock at the time the option is granted as determined by the Board in accordance
with the Regulations promulgated under Section 422 of the Code.
(c) If shares of the Company's Common Stock are then listed on any
national securities exchange, the fair market value shall be the mean between
the high and low sales prices, if any, on the largest such exchange on the date
of the grant of the option or, if none, shall be determined by taking a weighted
average of the mean between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in accordance with Treasury
Regulations Section 25.2512-2. If the shares are not then listed on any such
exchange, the fair market value of such shares shall be the mean between the
closing "Bid" and the closing "Ask" prices, if any, as
19
reported in the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") for the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant in accordance with Treasury Regulations Section 25.2512-2. If the shares
are not then either listed on any such exchange or quoted in NASDAQ, the fair
market value shall be the mean between the average of the "Bid" National Daily
Quotation Service for the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the date of
grant in accordance with Treasury Regulations Section 25.2512-2. If the fair
market value cannot be determined under the preceding three sentences, it shall
be determined in good faith by the Board.
(d) Prior to the effective date of the Company's contemplated
initial public offering, the Company may not grant options to purchase more than
142,500 shares of Common Stock. Such options, if any, so granted must be granted
at an exercise price per share of not less than the per share initial public
offering price of the Common Stock (without giving any value to warrants which
may be issued in conjunction with Common Stock in such initial public offering).
"Initial public offering" means an underwritten public offering on a firm
commitment basis pursuant to an effective registration statement under the
Securities Act of 1933, as amended ("1933 Act"), covering the offer and sale of
equity securities of and for the account of the Company.
9. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of
the exercise price by delivery of (i) cash or a check payable to the order of
the Company in an amount equal to the exercise price of such options, (ii)
shares of any class of common stock of the Company owned by the optionee having
a fair market value equal in amount to the exercise price of the options being
exercised, or (iii) any combination of (i) and (ii), provided, however, that
payment of the exercise price by delivery of shares of common stock of the
Company owned by such optionee may be made only upon the condition that such
payment does not result in a charge to earnings for financial accounting
purposes as determined by the Board, unless such condition is waived by the
Board. The fair market value of any shares of the Company's common stock which
may be delivered upon exercise of an option shall be determined by the Board in
accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an option
has accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the option.
10. Exercise of Options and SARs.
Each option and SAR granted under the Plan shall, subject to Section 11(b)
and Section 13 hereof, be exercisable at such time or times and during such
period as shall be set forth in the Agreement; provided, however, that no option
or SAR granted under the Plan shall have a term in excess of ten (10) years from
the date of grant. To the extent that an option or SAR is not exercised when it
becomes initially exercisable, it shall not expire but shall be carried forward
and shall be exercisable, on a cumulative basis, until the expiration of the
exercise period. No partial exercise may be made for less than one hundred (100)
full shares of Common Stock. The exercise of an option shall result in the
cancellation of the SAR to which it relates with respect to the same number of
shares of Common Stock as to which the option was exercised.
20
11. Term of Options and SARs; Exercisability.
(a) Term.
(i) Each option shall expire not more than ten (10) years from the
date of the granting thereof, except as (a) otherwise provided
pursuant to the provisions of Section 6(b) hereof, and (b)
earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11, an option or
SAR granted to any grantee who ceases to perform services for
the Company or one of its subsidiaries shall terminate on the
earlier of the last day of the third month or ninety days
after the date such grantee ceases to perform services for the
Company or one of its subsidiaries, or on the date on which
the option or SAR expires by its terms, whichever occurs
first.
(iii) If the grantee ceases to perform services for the Company
because of dismissal for cause or because the grantee is in
breach of any employment agreement, such option or SAR will
terminate on the date the grantee ceases to perform services
for the Company or one of its subsidiaries.
(iv) If the grantee ceases to perform services for the Company
because the grantee has become permanently disabled (within
the meaning of Section 22(e)(3) of the Code), such option or
SAR shall terminate on the last day of the twelfth month from
the date such grantee ceases to perform services for the
Company, or on the date on which the option or SAR expires by
its terms, whichever occurs first.
(v) In the event of the death of any grantee, any option or SAR
granted to such grantee shall terminate on the last day of the
twelfth month from the date of death, or on the date on which
the option or SAR expires by its terms, whichever occurs
first.
(b) Exercisability.
(i) Except as provided below, an option or SAR granted to a
grantee who ceases to perform services for the Company or one
of its subsidiaries shall be exercisable only to the extent
that such option or SAR has accrued and is in effect on the
date such grantee ceases to perform services for the Company
or one of its subsidiaries.
(ii) An option or SAR granted to a grantee who ceases to perform
services for the Company or one of its subsidiaries because he
or she has become permanently disabled, as defined above,
shall be exercisable with respect to the full number of shares
covered by such option or SAR.
(iii) In the event of the death of any grantee, the option or SAR
granted to such grantee may be exercised with respect to the
full number of shares covered thereby, whether
21
or not under the provisions of Section 10 hereof the grantee
was entitled to do so at the date of his or her death, by the
estate of such grantee, or by any person or persons who
acquired the right to exercise such option or SAR by bequest
or inheritance or by reason of the death of such grantee.
12. Options Not Transferable.
The right of any grantee to exercise any option or SAR granted to him or
her shall not be assignable or transferable by such grantee other than by will
or the laws of descent and distribution or pursuant to a domestic relations
order as defined in the Code or Title 1 of the Employee Retirement Income
Security Act, or the rules thereunder, and any such option or SAR shall be
exercisable during the lifetime of such grantee only by him. Any option or SAR
granted under the Plan shall be null and void and without effect upon the
bankruptcy of the grantee to whom the option is granted, or upon any attempted
assignment or transfer, except as herein provided, including without limitation,
any purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition, attachment, trustee process or similar
process, whether legal or equitable, upon such option or SAR.
13. Terms and Conditions of SARs.
(a) An SAR may be granted separately or in connection with an option
(either at the time of grant or at any time during the term of the option).
(b) The exercise of an SAR shall result in the cancellation of the
option to which it relates with respect to the same number of shares of Common
Stock as to which the SAR was exercised.
(c) An SAR granted in connection with an option shall be exercisable
or transferable only to the extent that such related option is exercisable or
transferable.
(d) Upon the exercise of an SAR related to an option, the holder
will be entitled to receive payment of an amount determined by multiplying
(i) The difference obtained by subtracting the purchase price
of a share of Common Stock specified in the related option from the fair market
value of a share of Common Stock on the date of exercise of such SAR (as
determined by the Board of Directors), by
(ii) The number of shares as to which such SAR is exercised.
(e) An SAR granted without relationship to an option shall be
exercisable as determined by the Board of Directors, but in no event after ten
years from the date of grant.
(f) An SAR granted without relationship to an option will entitle
the holder, upon exercise of the SAR, to receive payment of an amount determined
by multiplying:
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(i) The difference obtained by subtracting the fair market
value of a share of Common Stock on the date the SAR was granted (which for the
six month period following the effective date of the initial public offering
shall not be less than the per share initial public offering price of the Common
Stock (without giving any value to warrants which may be issued in conjunction
with Common Stock in the initial public offering), from the fair market value of
a share of Common Stock on the date of exercise of such SAR (as determined by
the Board), by
(ii) The number of shares as to which such SAR is exercised.
(g) Notwithstanding subsections (d) and (f) above, the Board may
limit the amount payable upon exercise of an SAR. Any such limitation shall be
determined as of the date of grant and noted on the instrument evidencing the
SAR granted.
(h) At the discretion of the Board, payment of the amount determined
under subsections (d) and (f) above may be made solely in whole shares of Common
Stock valued at their fair market value on the date of exercise of the SAR (as
determined by the Board), or solely in cash, or in a combination of cash and
shares. If the Board decides to make full payment in shares of Common Stock and
the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.
(i) Neither an SAR nor an option granted in connection with an SAR
granted to a person subject to Section 16(b) of the Act may be
exercised before six months after the date of grant.
14. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options and SARs may be granted under the Plan and as to which outstanding
options and SARs or portions thereof then unexercised shall be exercisable, to
the end that the proportionate interest of the grantee shall be maintained as
before the occurrence of such event; such adjustment in outstanding options and
SARs shall be made without change in the total price applicable to the
unexercised portion of such options and SARs and with a corresponding adjustment
in the exercise price per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock may, in his, her or its discretion, deliver to the
optionee the same kind of consideration that is delivered to the shareholders of
the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding options and SARs in exchange for consideration
in cash or in kind which consideration in both cases shall be equal in value to
the value of those shares of stock or other securities the optionee would have
received had the option been exercised (to the extent then exercisable) and no
disposition of the shares acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the exercise price therefor. Upon
receipt of such consideration, the options and SARs shall immediately terminate
and be of no further force and effect. The value of the stock or other
securities the grantee would have received if the option had been exercised
shall be determined in good faith by the Board of the Company, and in the case
of shares of the Common Stock of the Company, in accordance with the provisions
of Section 8 hereof.
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The Board shall also have the power and right to accelerate the
exercisability of any options or SARs, notwithstanding any limitations in this
Plan or in the Agreement upon such a sale, conveyance or Change in Control. Upon
such acceleration, any options or portion thereof originally designated as
incentive stock options that no longer qualify as incentive stock options under
Section 422 of the Code as a result of such acceleration shall be redesignated
as non-qualified stock options.
A "Change in Control" shall be deemed to have occurred if any person, or
any two or more persons acting as a group, and all affiliates of such person or
persons, who prior to such time owned less than fifty percent (50%) of the then
outstanding Common Stock of the Company, shall acquire such additional shares of
the Company's Common Stock in one or more transactions, or series of
transactions, such that following such transaction or transactions, such person
or group and affiliates beneficially own fifty percent (50%) or more of the
Company's Common Stock outstanding.
Upon dissolution or liquidation of the Company, all options and SARs
granted under this Plan shall terminate, but each grantee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise his or her option or SAR to the extent then
exercisable.
If by reason of a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization, or liquidation, the Board shall authorize
the issuance or assumption of a stock option or stock options in a transaction
to which Section 424(a) of the Code applies, then, notwithstanding any other
provision of the Plan, the Board may grant an option or options upon such terms
and conditions as it may deem appropriate for the purpose of assumption of the
old option, or substitution of a new option for the old option, in conformity
with the provisions of such Section 424(a) of the Code and the Regulations
thereunder, and any such option shall not reduce the number of shares otherwise
available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any option or SAR, but in the event of any adjustment hereunder in
the number of shares covered by the option or SAR shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
15. No Special Employment Rights.
Nothing contained in the Plan or in any option or SAR granted under the
Plan shall confer upon any grantee any right with respect to the continuation of
his or her employment by the Company (or any subsidiary) or interfere in any way
with the right of the Company (or any subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the grantee from the
rate in existence at the time of the grant of an option or SAR. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board at the
time.
16. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified option or SAR granted under the Plan shall be subject to the
option holder's satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements. The Company and optionee may agree
to withhold shares of Common Stock purchased upon exercise of an option or SAR
to satisfy the above-mentioned withholding requirements; provided, however, no
such agreement may be made by a grantee who is an "officer" or "director" within
the
24
meaning of Section 16 of the Exchange Act, except pursuant to a standing
election to so withhold shares of Common Stock purchased upon exercise of an
option, such election to be made not less than six months prior to such exercise
and which election may be revoked only upon six months prior written notice.
17. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9, the Company may
delay the issuance of shares covered by the exercise of an option or SAR and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option or SAR has been
exercised are at the time of the issue of such shares
effectively registered or qualified under applicable Federal
and state securities acts now in force or as hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld,
that such shares are exempt from registration and
qualification under applicable Federal and state securities
acts now in force or as hereafter amended.
(b) It is intended that all exercises of option and SARs shall be
effective, and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration statement to be
prepared for the purpose of covering the issue of shares in respect of which any
option may be exercised, except as otherwise agreed to by the Company in
writing.
18. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless the shares to be issued upon exercise of an option or SAR granted
under the Plan have been effectively registered under the 1933 Act, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option or SAR unless the person who exercises such
option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option or SAR for his or her own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the 1933 Act, or any other applicable law, and that if shares are issued
without such registration, a legend to this effect may be endorsed upon the
securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an option or SAR shall have been exercised, or to qualify
any such shares for exemption from the 1933 Act or other applicable statutes,
then the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
25
19. Loans.
At the discretion of the Board, the Company may loan to the optionee some
or all of the purchase price of the shares acquired upon exercise of an option
granted under the Plan.
20. Modification of Outstanding Options and SARs.
Subject to limitations contained herein, the Board may authorize the
amendment of any outstanding option or SAR with the consent of the grantee when
and subject to such conditions as are deemed to be in the best interests of the
Company and in accordance with the purposes of the Plan.
21. Approval of Shareholders.
The Plan shall be subject to approval by the vote of shareholders holding
at least a majority of the voting stock of the Company voting in person or by
proxy at a duly held shareholders' meeting, or by written consent of
shareholders in accordance with the laws of the State of New York, within twelve
(12) months after the adoption of the Plan by the Board and shall take effect as
of the date set forth in Section 1. The Board may grant options and SARs under
the Plan prior to such approval, but any such option shall become effective as
of the date of grant only upon such approval and, accordingly, no such option
may be exercisable prior to such approval.
22. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the effective date of the Plan, which shall be the date the Plan
is duly adopted by the Board and approved by the shareholders of the Company.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, (i) the Board may
not, without the approval of the shareholders of the Company obtained in the
manner stated in Section 21, increase the maximum number of shares for which
options and SARs may be granted or change the designation of the class of
persons eligible to receive options and SARs under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority of the
shareholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act, applicable state law, or applicable
NASD or exchange listing requirements. Termination or any modification or
amendment of the Plan shall not, without the consent of an optionee, affect his
or her rights under an option or SAR theretofore granted to him or her.
23. Limitation of Rights in the Underlying Shares.
A holder of an option or SAR shall not be deemed for any purpose to be a
stockholder of the Company with respect to such option or SAR except to the
extent that such option or SAR shall have been exercised with respect thereto
and, in addition, a stock certificate shall have been issued theretofore and
delivered to the holder.
24. Notices.
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Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business's
attention: President, and, if to the holder of an option or SAR, to the address
as appearing on the records of the Company.
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PROXY
MAGNA-LAB INC.
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby appoints Daniel M.
Mulvena and Kenneth C. Riscica, and each of them, proxies with power of
substitution to each, for and in the name of the undersigned to vote all shares
of Common Stock of Magna-Lab Inc. (the "Company"), held of record by the
undersigned on July 25, 2001, which the undersigned would be entitled to vote if
present at the Annual Meeting of Shareholders of the Company to be held on
August 21, 2001, at 11:00 A.M. at the Sheraton Colonial, 1 Auburn Road,
Wakefield, Massachusetts, 01880, and any adjournment or postponement thereof,
upon the matters set forth in the Notice of Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting,
Proxy Statement and the Company's 2000 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees below except as marked to the contrary below |_|
WITHOUT AUTHORITY to vote for all nominees listed below |_|
1. Daniel M. Mulvena, 2. John R. Geisel, 3. Lawrence A. Minkoff, 4. J.M.
Feldman, 5. Jonathan Adereth, 6. Joel S. Kanter 7. Seymour Kessler,
INSTRUCTION: To withhold authority to vote for any individual nominee, strike
out that nominee's name.
2. FOR |_| AGAINST |_| ABSTAIN |_|
Proposal to amend the Company's Reststed Certificate of Incorporation to
increase the number of authorized shares of Class A common stock to
120,000,000.
3. FOR |_| AGAINST |_| ABSTAIN |_|
Proposal to amend the Company's 1992 Stock Option Plan to increase the
number of shares reserved for issuance thereunder to 18,000,000.
(Continued and to be signed on the reverse side)
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(Continued from reverse side)
4. FOR |_| AGAINST |_| ABSTAIN |_|
Appointment of Rothstein Kass, & Company, LLP as independent auditors for
the Company.
5. FOR |_| AGAINST |_| ABSTAIN |_|
In their discretion, on such other matters as may properly come before the
meeting.
UNLESS OTHERWISE INDICATED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
MANAGEMENT NOMINEES, "FOR" PROPOSALS 2, 3, 4 & 5 AND OTHERWISE AT THE DISCRETION
OF THE PROXIES
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
|_| I plan to attend the Annual Meeting.
Dated:____________________________________, 2001
_______________________________________
Signature of Shareholder(s)
Please sign exactly as your name or names appear on this
proxy. Joint owners should both sign. Executors,
administrators, trustees, guardians and others signing
in a representative capacity should give their full
title. Corporations or partnerships should sign the full
corporation or partnership name by a duly authorized
officer or person.
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