SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
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[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a 6(e)(2))
[ ] Soliciting Material Pursuant to
ss.240.14a-12
EDG Capital, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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EDG CAPITAL, INC.
700 STEWART AVENUE
GARDEN CITY, NEW YORK 11530
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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TO BE HELD ON NOVEMBER 14, 2001
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A special meeting of shareholders of EDG Capital, Inc. will be held at
the offices of Davis & Gilbert LLP, 1740 Broadway, New York, New York 10019, on
November 14, 2001, at 10:00 a.m. The matters to be considered and voted upon at
the meeting are set forth below and more fully described in the attached proxy
statement:
o A proposal to amend and restate our certificate of incorporation
to change our corporate name to Isotope Solutions Group, Inc., to
authorize us to issue up to 1,000,000 shares of preferred stock,
to authorize our shareholders to act by less than unanimous
written consent and to effect certain other changes described in
this proxy statement under the caption "Proposal I";
o A proposal to approve an amendment to our 2000 Long-Term Incentive
Plan increasing the number of shares of common stock available for
issuance upon exercise of options granted or that may be granted
thereunder to 2,500,000 shares;
o A proposal to approve and consent to certain proposed payments and
/or property transfers to be made pursuant to the employment
agreements between EDG and each of Jack Schwartzberg, our
Chairman, Chief Executive Officer and President, and Shraga David
Aranoff, our Vice President, Chief Operating Officer and
Treasurer, the reimbursement and termination provisions of the
option agreements between EDG and each of Jack Schwartzberg and
Shraga David Aranoff, and the vesting provisions of the 2000
Long-Term Incentive Plan for purposes of excluding such payments
and/or property transfers from the "parachute payment" provisions
of Sections 280G and 4999 of the Internal Revenue Code of 1986;
o To transact such other business as may properly be brought before
the meeting or any postponement or adjournment thereof.
Our board of directors has fixed the close of business on October 18,
2001, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting or any adjournment thereof.
By order of the Board of Directors,
Shraga David Aranoff
Secretary
Garden City, New York
October 19, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
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EDG CAPITAL, INC.
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement is furnished to our shareholders in connection
with the solicitation of proxies, in the accompanying form, by our board of
directors for use in voting at the special meeting of shareholders, to be held
at the offices of Davis & Gilbert LLP, 1740 Broadway, New York, New York 10019,
on Wednesday, November 14, 2001, at 10:00 a.m., and at any and all adjournments
thereof.
On or about October 19, 2001, this proxy statement and the accompanying
form of proxy are being mailed to each shareholder of record at the close of
business on October 18, 2001.
Our principal executive offices are located at 700 Stewart Avenue,
Garden City, New York 11530.
QUESTIONS AND ANSWERS
WHAT MATTERS AM I VOTING ON?
You are being asked to vote on the following matters:
o A proposal to amend and restate our certificate of incorporation
to change our corporate name to Isotope Solutions Group, Inc., to
authorize us to issue up to 1,000,000 shares of preferred stock,
to authorize our shareholders to act by less than unanimous
written consent and to effect certain other changes described in
this proxy statement under the caption "Proposal I";
o A proposal to approve an amendment to our the 2000 Long-Term
Incentive Plan increasing the number of shares of common stock
available for issuance upon exercise of options granted or that
may be granted thereunder to 2,500,000 shares.
o A proposal to approve and consent to certain proposed payments
and/or property transfers to be made pursuant to the employment
agreements between EDG and each of Jack Schwartzberg, our
Chairman, Chief Executive Officer and President, and Shraga David
Aranoff, our Vice President, Chief Operating Officer and
Treasurer, the reimbursement and termination provisions of the
option agreements between EDG and each of Jack Schwartzberg and
Shraga David Aranoff, and the vesting provisions of the 2000
Long-Term Incentive Plan for purposes of excluding such payments
and/or property transfers from the "parachute payment"
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provisions of Sections 280G and 4999 of the Internal Revenue Code
of 1986, as amended (the "Code").
WHO IS ENTITLED TO VOTE?
Persons who were holders of our common stock as of the close of
business on October 18, 2001, the record date, are entitled to vote at the
meeting. As of October 15, 2001, we had issued and outstanding approximately
11,052,000 shares of common stock, comprising all of our issued and outstanding
voting stock.
Each holder of our common stock is entitled to one vote for each share
held on the record date.
WHAT IS THE EFFECT OF GIVING A PROXY?
Proxies in the form enclosed are solicited by and on behalf of the
board. The persons named in the proxy have been designated as proxies by the
board. If you sign and return the proxy in accordance with the procedures set
forth in this proxy statement, the persons designated as proxies by the board
will vote your shares at the meeting as specified in your proxy.
If you sign and return your proxy in accordance with the procedures set
forth in this proxy statement but you do not provide any instructions as to how
your shares should be voted, your shares will be voted as follows:
o FOR the amendment and restatement of our certificate of
incorporation as described below under Proposal I;
o FOR the proposal to approve the amendment of our 2000 Long-Term
Incentive Plan as described below under Proposal II;
o FOR the proposal to approve and consent to certain proposed
payments and/or property transfers to be made pursuant to the
employment agreements between EDG Capital and each of Jack
Schwartzberg, our Chairman, Chief Executive Officer and President,
and Shraga David Aranoff, our Vice President, Chief Operating
Officer and Treasurer, the reimbursement and termination
provisions of the option agreements between EDG Capital and each
of Jack Schwartzberg and Shraga David Aranoff and the vesting
provisions of the 2000 plan for purposes of excluding such
payments and/or property transfers from the "parachute payment"
provisions of Sections 280G and 4999 of the Code as described
below under Proposal III;
If you give your proxy, your shares also will be voted in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the meeting and any adjournments thereof. In the
event that any other matters are properly presented at the meeting for action,
the persons named in the proxy will vote the proxies in accordance with their
best judgment.
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CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Any proxy given pursuant to this solicitation may be revoked by you at
any time before it is exercised. You may revoke your proxy by:
o delivering written notification of your revocation to our
corporate secretary;
o voting in person at the meeting; or
o delivering another proxy bearing a later date.
Please note that your attendance at the meeting will not alone serve to
revoke your proxy.
WHAT IS A QUORUM?
The presence, in person or by proxy, of at least one third of the votes
entitled to be cast at the meeting will constitute a quorum at the meeting. A
proxy submitted by a shareholder may indicate that all or a portion of the
shares represented by the proxy are not being voted ("shareholder withholding")
with respect to a particular matter. Similarly, a broker may not be permitted to
vote stock ("broker non-vote") held in street name on a particular matter in the
absence of instructions from the beneficial owner of the stock. The shares
subject to a proxy that are not being voted on a particular matter because of
either shareholder withholding or broker non-vote will not be considered shares
present and entitled to vote on that matter. These shares, however, may be
considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum if the shares are being voted
with respect to any matter at the meeting. If the proxy indicates that the
shares are not being voted on any matter at the meeting, the shares will not be
counted for purposes of determining the presence of a quorum. Abstentions are
voted neither "for" nor "against" a matter, but are counted in the determination
of a quorum.
WHAT IS A "BROKER NON-VOTE"?
A "broker non-vote" occurs when a broker submits a proxy that states
that the broker does not vote for some of the proposals because the broker has
not received instructions from the beneficial owners on how to vote on such
proposals and does not have discretionary authority to vote in the absence of
instructions.
HOW DO I VOTE?
You may vote your shares by mail or, if you attend the meeting in
person, by ballot. The prompt return of the completed proxy card will help us
prepare for the meeting.
To vote by mail, date, sign and return the accompanying proxy in the
envelope enclosed for that purpose (to which no postage need be affixed if
mailed in the United States). You can specify your choices by marking the
appropriate boxes on the proxy card. If you attend the
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meeting, you may deliver your completed proxy card in person or fill out and
return a ballot that will be supplied to you.
HOW MANY VOTES ARE NEEDED FOR APPROVAL OF EACH MATTER?
o Proposal I, the amendment and restatement of our certificate of
incorporation, must be approved by the affirmative vote of a
majority of the outstanding shares of common stock.
o Proposal II, the amendment of the 2000 Long-Term Incentive Plan,
must be approved by the affirmative vote of a majority of the
votes cast at the meeting.
o Proposal III, to approve and consent to certain proposed payments
and/or property transfers to be made pursuant to the employment
agreements between EDG and each of Jack Schwartzberg, our
Chairman, Chief Executive Officer and President, and Shraga David
Aranoff, our Vice President, Chief Operating Officer and
Treasurer, the reimbursement and termination provisions of the
option agreements between EDG and each of Jack Schwartzberg and
Shraga David Aranoff, and the vesting provisions of the 2000
Long-Term Incentive Plan for purposes of excluding such payments
and/or property transfers from the "parachute payment" provisions
of Sections 280G and 4999 of the Code, must be approved by the
affirmative vote of at least 75% of the outstanding shares of
common stock.
Abstentions from voting with respect to Proposal I or III are counted
as "votes cast" with respect to such proposal and, therefore, have the same
effect as a vote against the proposal. Shares deemed present at the meeting but
not entitled to vote on Proposal II (because of either shareholder withholding
or broker non-vote) are not deemed "votes cast" with respect to such proposal
and therefore will have no effect on such vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of October 15, 2001, there were approximately 11,052,000 shares of
common stock of EDG outstanding. Each share of common stock is entitled to one
vote.
The following table sets forth as of October 15, 2001, the number of
shares of common stock beneficially owned by:
o each person who is known by us to be the beneficial owner of more
than five percent of our common stock;
o each of our directors; and
o all directors and executive officers as a group.
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AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP (2) SHARES OWNED(3)
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Jack Schwartzberg (4) 1,534,644 13.8%
Shraga David Aranoff (5) 150,807 1.4%
Harry Barnett (6) 0 *
Stanley F. Barshay (7) 0 *
Jay M. Haft (8) 60,000 *
Bruce Baron 2,264,959 20.5%
2509 Avenue U
Brooklyn, New York 11229
Robert G.M. Keating 1,020,496 9.2%
105 Sixth Street
Garden City, New York 11530
Dennis Shields 783,158 7.1%
15 South Baylis Avenue
Port Washington, New York 11050
All directors and executive officers 1,745,451 15.6%
as a group (five persons) (9)
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* Less than one percent.
(1) The address of each of the persons named in the table, if not
included under each person's name, is 700 Stewart Avenue, Garden
City, New York 11530.
(2) Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power for all shares of
common stock beneficially owned by them. A person is deemed to be
the beneficial owner of common stock that can be acquired by such
person within 60 days from October 15, 2001 upon the exercise of
options or warrants or the conversion of convertible securities.
(3) Each beneficial owner's percentage ownership is determined by
assuming that options, warrants or convertible securities that are
held by the person (but not those held by any other person) and
that are exercisable within 60 days of the date of this proxy
statement have been exercised or converted.
(4) Includes 58,333 shares subject to options that are currently
exercisable, subject to shareholder approval of the 2000 Long-Term
Incentive Plan. Does not include 116,667 shares subject to options
that are not currently exercisable.
(5) Includes 33,333 shares subject to options that are currently
exercisable, subject to shareholder approval of the 2000 Long-Term
Incentive Plan. Does not include 166,667 shares subject to options
that are not currently exercisable.
(6) Does not include 80,000 shares subject to options that are not
currently exercisable.
(7) Does not include 80,000 shares subject to options that are not
currently exercisable.
(8) Includes 10,000 shares subject to options that are currently
exercisable, subject to shareholder approval of the 2000 Long-Term
Incentive Plan. Does not include 70,000 shares subject to options
that are not currently exercisable.
(9) Includes 101,666 shares subject to options that are currently
exercisable, subject to shareholder approval of the 2000 Long-Term
Incentive Plan. Does not include 513,334 shares subject to options
that are not currently exercisable.
Information contained in this table about stock ownership was obtained
from our shareholder list, filings with governmental authorities, or from the
named individuals, directors and officers.
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ACQUISITION OF ISOTOPE SOLUTIONS, INC.
On September 13, 2000, EDG acquired Isotope Solutions, Inc., a New York
corporation formerly known as "Molecular Radiation Management, Inc." To effect
the acquisition, all of ISI's outstanding capital stock, excluding its treasury
stock, which was canceled, was converted into the right to receive an aggregate
of 7,440,005 shares of EDG's common stock, and ISI was merged into a
wholly-owned subsidiary of EDG. Contemporaneously with the acquisition, EDG
effected a 2.57315-for-one stock split in the form of a stock dividend payable
to shareholders of record on August 23, 2000, and raised gross proceeds of
$2,100,000 in a private placement of 2,603,844 shares of common stock at a price
of $.8065 per share. All share and per share numbers in this proxy statement
have been adjusted to effect the acquisition of ISI and the stock split.
As a result of the transactions consummated on September 13, 2000, the
former shareholders of ISI collectively acquired an aggregate of 7,440,005
shares of common stock, or approximately 67% of the 11,052,232 outstanding
shares of common stock.
In connection with the acquisition of ISI, Linda Green and Seth Green
resigned as directors of EDG, the board of directors was increased to six
persons and Jack Schwartzberg, Shraga David Aranoff, Robert G. M. Keating, Gail
Shields, Jay M. Haft and Maurice Kolodin, all nominees of the former
shareholders of ISI, became the new directors to fill the vacancies on the
board.
On January 5, 2001, Robert G.M. Keating and Maurice Kolodin resigned
from the board and on January 15, 2001, Gail Shields resigned from the board. On
January 15, 2001, the remaining directors elected Stanley F. Barshay to fill one
of the vacancies on the board. The size of the board was reduced to five persons
by resolution adopted at a meeting of the board held on January 22, 2001.
Subsequently, on May 4, 2001, the board elected Harry Barnett to fill the
remaining vacancy on the board.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid to Jack Schwartzberg, our Chairman, Chief Executive Officer
and President, for services rendered by him in all capacities for the fiscal
years ended December 31, 2000, 1999 and 1998 and to Shraga David Aranoff, our
Vice President, Chief Operating Officer and Treasurer, for services rendered by
him in all capacities for the fiscal year ended December 31, 2000. There were no
other executive officers whose total annual salary and bonus exceeded $100,000
for those fiscal years. We sometimes refer to Messrs. Schwartzberg and Aranoff
in this proxy statement as the Named Executive Officers.
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ANNUAL COMPENSATION
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SALARY BONUS OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION ($)
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Jack Schwartzberg 2000 200,000 - 29,161(1)
Chairman, CEO and President 1999 200,000 - 30,673(1)
1998 200,000 - 28,167(1)
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Shraga David Aranoff 2000 103,333 - 22,081(1)
COO, Vice President and
Treasurer
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(1) Includes costs associated with a leased automobile and health
benefits package.
STOCK OPTION GRANTS
The following table sets forth certain information about stock options
granted during 2000 to the Named Executive Officers.
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PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE PRICE
NAME UNDERLYING OPTIONS GRANTED EMPLOYEES IN 2000 ($/SH) EXPIRATION DATE
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Jack Schwartzberg 175,000 57.8% $.8872 09/13/05
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Shraga David Aranoff 100,000 33.0% $.8065 09/13/10
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STOCK OPTION EXERCISES AND HOLDINGS
The Named Executive Officers did not exercise any options in 2000. The
following table sets forth the number of shares of common stock underlying
unexercised options held by the Named Executive Officers at December 31, 2000.
At December 31, 2000, neither Named Executive Officer held any "in-the-money"
stock options.
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NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT DECEMBER 31,
NAME 2000 EXERCISABLE/UNEXERCISABLE
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Jack Schwartzberg 0/175,000
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Shraga David Aranoff 0/100,000
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EMPLOYMENT AGREEMENTS
Effective September 8, 2000, EDG and Jack Schwartzberg entered into an
employment agreement for a term ending on September 7, 2003, subject to
automatic extension thereafter until either party gives 180 days' advance notice
of termination to the other party. The employment agreement provides for an
annual salary of $200,000, a cash bonus based on performance in an amount to be
determined by our board of directors, the grant of options to purchase 175,000
shares of our common stock at a price of $.8872 per share under the 2000 plan,
one leased automobile at our expense and participation in other executive and
employee benefit programs if and when put into effect by us. Mr. Schwartzberg
may be discharged for cause, including failure or refusal to perform his duties,
misappropriation of our funds or property, the use of alcohol or illegal drugs
in a manner that interferes with his duties to us, and conviction of
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a felony or a crime involving moral turpitude, dishonesty or theft. Mr.
Schwartzberg may terminate the employment agreement for "good reason," including
the assignment to Mr. Schwartzberg of any duties inconsistent with his position,
our requiring him to be based at an office outside the New York City
metropolitan area without his consent, a failure by us to comply with the
compensation provisions of the agreement, any other material breach by us of the
employment agreement, Mr. Schwartzberg's removal as a director or a change in
control of EDG (as defined in the employment agreement). If the employment
agreement is terminated by Mr. Schwartzberg for good reason or by us other than
for cause or at any time after the end of the initial term, Mr. Schwartzberg
will be entitled to be paid his base salary and bonus through the later of
September 7, 2004 or the 12-month anniversary of the date of termination, he
will be entitled to continue to participate during such period in all executive
and employee benefit programs, and his stock options will become fully vested.
The employment agreement includes noncompete restrictions during its term and
for 12 months thereafter and a confidentiality provision.
Effective September 8, 2000, EDG and Shraga David Aranoff entered into
an employment agreement for a term ending on September 7, 2003, subject to
automatic extension thereafter until either party gives 90 days' advance notice
of termination to the other party. The employment agreement provides for an
annual salary of $125,000, a cash bonus based on performance in an amount to be
determined by our board of directors, the grant of options to purchase 100,000
shares of our common stock at a price of $.8065 per share under the 2000 plan,
one leased automobile at our expense and participation in other executive and
employee benefit programs if and when put into effect by us. Mr. Aranoff may be
discharged for cause, including failure or refusal to perform his duties,
misappropriation of our funds or property, the use of alcohol or illegal drugs
in a manner that interferes with his duties to us, and conviction of a felony or
a crime involving moral turpitude, dishonesty or theft. Mr. Aranoff may
terminate the employment agreement for "good reason," including the assignment
to Mr. Aranoff of any duties inconsistent with his position, our requiring him
to be based at an office outside the New York City metropolitan area without his
consent, a failure by us to comply with the compensation provisions of the
employment agreement, any other material breach by us of the employment
agreement, Mr. Aranoff's removal as a director or a change in control of EDG (as
defined in the employment agreement). If the employment agreement is terminated
by Mr. Aranoff for good reason or by us other than for cause or at any time
after the end of the initial term, Mr. Aranoff will be entitled to be paid his
base salary and bonus through the later of September 7, 2003 or the three-month
anniversary of the date of termination, he will be entitled to continue to
participate during such period in all executive and employee benefit programs,
and his stock options will become fully vested. The employment agreement
includes noncompete restrictions during its term and for 12 months thereafter
and a confidentiality provision.
2000 LONG-TERM INCENTIVE PLAN
In September 2000, our board of directors adopted, subject to the
approval of our shareholders, the EDG Capital, Inc. 2000 Long-Term Incentive
Plan. Our shareholders approved the 2000 plan at the Annual Meeting of
Shareholders on August 16, 2001. The 2000 plan was established to enable EDG and
its subsidiaries to attract, retain and motivate employees, directors and
consultants. The 2000 plan authorizes the grant of individual incentive stock
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options or non-qualified options to purchase shares of our common stock. The
maximum number of shares that may be issued under the 2000 plan is 1,247,983,
subject to adjustment in the event of stock splits, stock dividends, split-ups,
spin-offs, combinations or exchanges or any other change affecting the common
stock. On September 20, 2001, our board of directors approved an amendment to
the 2000 plan pursuant to which the number of shares available for issuance
pursuant to grants made under the 2000 plan was increased to 2,500,000 shares,
subject to approval by our shareholders at the special meeting. Unless we
terminate it earlier, the 2000 plan will expire on December 31, 2010. Employees,
directors, advisory board members or consultants of EDG or subsidiaries of EDG
are eligible to receive options under the 2000 plan. The 2000 plan is
administered by our board of directors, which determines the persons to whom
awards will be granted, the number of options to be granted and the specific
terms of each grant. Under the 2000 plan, no incentive stock option may be
granted having a term of more than 10 years and an exercise price less than the
fair market value of our common stock on the date of grant, and no incentive
stock option having a term of more than five years and an exercise price less
than 110% of the fair market value of our common stock on the date of grant may
be granted to a person who holds 10% or more of our outstanding common stock. We
describe the 2000 plan in more detail in the discussion of Proposal II below.
As of the date of this proxy statement, options to purchase an
aggregate of 978,000 shares are outstanding under the 2000 plan.
PROPOSAL I
AMENDMENT AND RESTATEMENT OF EDG'S CERTIFICATE OF INCORPORATION
We are proposing to amend and restate EDG's certificate of
incorporation to:
o change the corporate name to Isotope Solutions Group, Inc.;
o authorize EDG to issue up to 1,000,000 shares of preferred stock,
par value $.001 per share, in one or more series, with each series
having such voting powers, designations, preferences and relative,
participating, optional or other special rights and such
qualifications, limitations or restrictions as our board of
directors may determine by resolution;
o authorize our shareholders to act by written consent of the
holders of shares having not less than the minimum number of votes
that would be sufficient to take action at a meeting at which all
shares entitled to vote were present and voted;
o permit our shareholders to vote in elections of directors other
than by written ballot;
o authorize our board of directors to amend, alter or repeal our
by-laws;
o authorize our board to submit contracts to the shareholders for
approval;
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o authorize our board of directors to appoint new directors to fill
vacancies on the board arising from the removal of a director
without cause;
o eliminate an unnecessary provision relating to transactions with
interested directors;
o eliminate the liability of our directors for damages for breach of
duty to the extent permitted by the New York Business Corporation
Law;
o replace a provision relating to the indemnification of directors
and officers with a provision stating that EDG will indemnify its
directors and officers to the fullest extent permitted by law;
o change the county in which EDG's office is located from Suffolk
County, New York to Nassau County, New York; and
o change the address to which the Secretary of State shall send
notice of any process against EDG served on the Secretary of
State.
In September 2000 EDG acquired all of the outstanding shares of common
stock of ISI. Prior to the acquisition of ISI, EDG had no business operations.
Presently, EDG's only business operations consist of the business conducted by
ISI. We believe it is appropriate and desirable to change EDG's corporate name
to Isotope Solutions Group, Inc. to reflect this fact.
Our certificate of incorporation currently lacks many provisions
ordinarily included in a modern certificate of incorporation, especially a
certificate of incorporation of a public, reporting company incorporated under
the laws of New York State.
Without the ability to issue preferred stock, our ability to raise
capital to pursue our business plan may be severely limited. While we have no
present plans to raise capital by issuing preferred stock, the need to amend the
certificate of incorporation at a later date may cause us to miss an opportunity
to sell preferred stock on the most advantageous terms. Also, our inability to
issue preferred stock may leave us without a key tool to fend off attempts by
third parties to acquire control of EDG on terms that are not in the best
interests of our shareholders, and may deprive us of the ability to negotiate
for better terms than may initially be offered by a third party.
The New York Business Corporation Law permits shareholders of a New
York corporation to act by written consent in lieu of a special meeting. This
can give a corporation and its shareholders the ability to act quickly to take
advantage of opportunities and respond to urgent situations without the need to
comply first with the formal notice and proxy procedures required to take action
at a meeting of shareholders. The Business Corporation Law provides, however,
that to be effective a written consent must be unanimous unless the
corporation's certificate of incorporation contains a provision specifically
permitting the shareholders to authorize corporate action to act by written
consent of the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize the action at a meeting at
which all shares entitled to vote on the action were present and voted. Our
Certificate
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of Incorporation presently does not contain such a provision. Because we are a
public, reporting company, with many shareholders, some of whom hold their
shares in "street name," it would not feasible for our shareholders to authorize
corporate action by unanimous written consent. Consequently, we propose to amend
the certificate of incorporation to include a provision permitting our
shareholders to authorize corporate action by written consent of the holders of
that number of outstanding shares as would have not less than the minimum number
of votes necessary to take action at a meeting at which all shares entitled to
vote on the action were present and voted.
The Business Corporation Law also provides that unless a corporation's
certificate of incorporation provides otherwise, all votes of shareholders must
be conducted by written ballot. We believe that in many cases the delay
occasioned by the need to distribute, collect and count ballots can be avoided
with a voice vote. Also, many corporations have recently begun to offer their
shareholders the ability to vote by telephone or electronically over the
Internet. We believe that these methods can make it more convenient for our
shareholders to vote on matters brought before them and may encourage
shareholders to vote who might otherwise not return their proxies. Consequently,
we propose to amend the certificate of incorporation to permit our shareholders
to vote other than by written ballot.
Our certificate of incorporation presently does not contain a
provision, permitted by the Business Corporation Law, providing that our
directors will not be liable for breach of duty to our corporation except in
certain limited circumstances. We believe that in order to attract the highest
caliber of persons to act as our directors, we must be able assure them that
they will be protected from liability for their actions taken in good faith on
our behalf. Consequently, we propose to amend the certificate of incorporation
to include a provision limiting the liability of our directors to the extent
permitted by the Business Corporation Law.
Our certificate of incorporation presently does not contain a
provision, permitted by the Business Corporation Law, authorizing the directors
to submit any contract or act for ratification at meetings of the shareholders.
Although the directors may submit acts or contracts to the shareholders pursuant
to authority granted in the Business Corporation Law, we propose to add a
provision to the certificate of incorporation clarifying that approval of any
such act or contract by affirmative vote of the holders of a majority of the
outstanding stock of EDG that is represented at the meeting and entitled to vote
will be valid and binding upon EDG and all of its shareholders, whether or not
the act or contract so approved would otherwise be open to attack for any
reason, including any conflict of interest of a director.
Our certificate of incorporation presently contains a provision
relating to transactions with interested directors that was modeled on a
predecessor statute to Section 713 of the Business Corporation Law. Section 713
provides, generally, that contracts between a corporation and one or more of its
directors, or between the corporation and an entity of which one or more of the
corporation's directors is a director or officer or in which one or more of the
corporation's directors has a financial interest, are not void if the material
facts as to the conflict of interest are known to the corporation's other
directors and the contract is approved by the disinterested directors, or if the
material facts as to the conflict are known by the shareholders and the contract
is approved by a vote of the shareholders. Because the statute has changed, and
11
because it is not necessary under the Business Corporation Law to set forth
Section 713 in the certificate of incorporation in order for it to apply to EDG,
we propose to eliminate the existing provision and instead rely directly on
Section 713 as it may be amended from time to time.
Our certificate of incorporation presently contains a provision
relating to indemnification of directors and officers of the corporation that
was modeled on a predecessor statute to Sections 722 through 726 of the Business
Corporation Law. These statutes have changed since our certificate of
incorporation was first adopted, and they may change again from time to time in
the future. Consequently, because we believe it is critical to our ability to
attract the best candidates to serve as officers of EDG and on our board of
directors that we provide the fullest indemnification possible to our directors
and officers, we proposed to amend the certificate of incorporation to replace
the existing provision with one that states that we will indemnify our directors
and officers to the fullest extent permitted by law.
Our certificate of incorporation presently designates Suffolk County,
New York, as the county in which our office is to be located. We propose to
change this to Nassau County, New York, as our offices are presently located in
Nassau County.
We also propose to amend the certificate of incorporation to change the
address to which the Secretary of State shall mail a copy of any process against
us served upon him or her to the address of our corporate counsel. We propose
this change to make sure that we have adequate opportunity to respond to any
process that may be served against us.
The form of the proposed Amended and Restated Certificate of
Incorporation is attached to this proxy statement as Annex A.
The board of directors recommends voting "FOR" Proposal I.
PROPOSAL II
APPROVAL OF THE AMENDMENT OF THE 2000 LONG TERM INCENTIVE PLAN
We maintain the 2000 Long-Term Incentive Plan under which an aggregate
of 1,247,983 shares of our common stock are reserved for issuance upon exercise
of options that may be granted under the 2000 plan. On September 20, 2001, our
Board of Directors approved an amendment to the 2000 plan pursuant to which the
number of shares available for issuance pursuant to grants made under the 2000
plan was increased to 2,500,000 shares, subject to approval by our shareholders
at the special meeting.
EDG is a growing company that operates in an intensely competitive
industry. A particularly competitive area of our business is attracting and
retaining talented employees and medical groups comprised of talented
physicians. It is our policy to compensate our employees and the physicians in
the medical groups we manage with stock options in order to incentivize them and
align their interests with those of our shareholders. Since the 2000 plan was
adopted in September 2000, we have granted options for a total of 978,000 shares
under the 2000 plan.
12
We anticipate significant growth in the next several years. It is
imperative that we continue to attract and retain quality employees and medical
groups in order to continue our growth and effect our business plan. If we are
unable to do this, we will be at a significant competitive disadvantage in the
marketplace and shareholder value could be adversely impacted. The ability to
continue to compensate employees and consultants with stock options is key to
competing for talent. For these reasons, we are requesting that the shareholders
approve an increase in the number of shares available under the 2000 plan to
2,500,000 shares.
The form of the 2000 Long-Term Incentive Plan, as amended, is attached
to this proxy statement as Annex B.
The board of directors recommends voting "FOR" Proposal II.
SUMMARY OF THE 2000 PLAN
ADMINISTRATION
The 2000 plan is administered by the board. The board has full
authority, subject to the provisions of the 2000 plan, to award stock options.
The board determines, among other things, the persons to whom from time to time
stock options may be granted, the number of shares subject to each stock option,
exercise prices, any restrictions or limitations on stock option awards, and the
vesting, surrender, cancellation, acceleration, termination, exercise or
forfeiture provisions related to stock option awards.
STOCK SUBJECT TO THE 2000 PLAN
The 2000 plan, as amended, authorizes the grant of stock options the
exercise of which would allow up to an aggregate of 2,500,000 shares of common
stock to be acquired by the holders of such stock options. In order to prevent
the dilution or enlargement of the rights of participants, the number of shares
of common stock authorized by the 2000 plan is subject to adjustment by the
board in the event of any dividend on shares of common stock payable in shares
of common stock, stock split, reverse stock split or other extraordinary or
unusual event that affects all outstanding shares of common stock as a whole. In
the event of any of the foregoing, the board will make equitable adjustments in
the terms of any awards and the aggregate number of shares reserved for issuance
under the 2000 plan.
The shares of common stock acquirable pursuant to options granted under
the 2000 plan will be made available, in whole or in part, from authorized and
unissued shares of common stock. If any option granted under the 2000 plan is
forfeited or terminated, the shares of common stock that were available pursuant
to such option will again be available for distribution in connection with
options subsequently granted under the 2000 plan. If any stock option granted
under the 2000 plan is forfeited, surrendered, canceled, terminated or settled
in cash in lieu of common stock, the shares of common stock that were available
pursuant to such stock option will again be available for distribution in
connection with stock options subsequently granted under the 2000 plan.
13
ELIGIBILITY
Subject to the provisions of the 2000 plan, stock options may be
granted to employees, officers, directors, advisory board members and
consultants who are responsible for or contribute to the management, growth and
protection of the business of EDG and its wholly- or majority-owned subsidiaries
or whose performance or contribution benefits or will benefit EDG. Incentive
Stock Options, as defined below, may be granted only to persons who, at the time
of grant, are, or have agreed to become, employees of EDG or its wholly- or
majority-owned subsidiaries. As of the date of this proxy statement, an
aggregate of 12 employees of, and consultants to, EDG and/or ISI, and three
non-employee directors of EDG, are eligible to participate in the 2000 Plan.
There are limits on the number of shares of common stock underlying
stock options that may be granted under the 2000 plan to any one participant in
any calendar year and to all participants in any one calendar year.
TYPES OF OPTIONS
The 2000 plan provides both for "incentive" stock options ("Incentive
Stock Options") as defined in Section 422 of the Code and for options not
qualifying as incentive options ("Non-Qualified Stock Options"). The board
determines the exercise price per share of common stock purchasable under an
Incentive or Non-Qualified Stock Option. The exercise price of Incentive Stock
Options may not be less than 100% of the fair market value on the day of the
grant. However, the exercise price of an Incentive Stock Option granted to a
person who owns more than 10% of the total combined voting power of all classes
of EDG's stock may not be less than 110% of such fair market value on the date
of grant. An Incentive Stock Option may be exercised only within ten years from
the date of the grant (or within five years in the case of an Incentive Stock
Option granted to a person who, at the time of the grant, owns stock possessing
more than 10% of the total combined voting power of all classes of EDG's stock).
Subject to vesting provisions and any limitations or conditions the board may
impose, a stock option may be exercised, in whole or in part, at any time during
the term of the stock option by giving written notice of exercise to EDG
specifying the number of shares of common stock to be purchased. Such notice
must be accompanied by payment in full of the purchase price, either in cash, by
certified check, bank draft or money order or, if permitted by the board and
applicable law, by delivery of, alone on in conjunction with a partial cash or
instrument payment, a fully-secured promissory note or notes, shares of common
stock already owned by the participant for at least six months, or some other
form of payment approved by the board. The board may also permit a participant
to simultaneously exercise a stock option and sell the shares of common stock
thereby acquired on a "cashless exercise" basis.
Generally, stock options granted under the 2000 plan may not be
transferred other than by will or by the laws of descent and distribution.
Generally, if a participant's employment with EDG terminates for any
reason any then unexercisable stock options
14
will be forfeited and canceled and any then exercisable stock options will be
forfeited and canceled 90 days after the date the participant's employment
terminates unless the stock options terminate sooner by their terms. The board
may determine that exercisable stock options may remain exercisable for an
additional specified period, but not beyond the stated term of the stock
options. If a participant's employment terminates due to death, retirement or
disability, the participant or his representative will have the right, with
respect to stock options that were exercisable immediately prior to the
termination of employment, to exercise the stock options at any time during the
one year period following the termination of employment (but not beyond the
stated term of the stock options).
WITHHOLDING TAXES
The board may deduct from the exercise of any stock option, or any
other payment or settlement under the 2000 plan, any federal, state, local or
other taxes of any kind that the board determines to be necessary to be withheld
to comply with applicable law, rule or regulation. If the board permits common
stock to be used to satisfy any withholding requirement, the common stock will
be valued at the fair market value of EDG's common stock on the date the tax
withholding is required to be made.
AGREEMENTS
Stock options granted under the 2000 plan will be evidenced by
agreements consistent with the 2000 plan in such form and having such additional
terms (not contrary to the requirements of the 2000 plan) as the board may
prescribe. Neither the 2000 plan, the grant of any stock options nor the
execution of any stock option agreement confer any right to continued employment
upon any participant.
TERM AND AMENDMENTS
Unless terminated by the board, the 2000 plan will terminate on
December 31, 2010, except with respect to stock options then outstanding. The
board may at any time, and from time to time, amend the 2000 plan, but no
amendment may be made that would materially impair the rights of a participant
under any agreement entered into pursuant to the 2000 plan without the
participant's consent.
MERGERS AND CHANGES IN CONTROL
The 2000 plan provides that in the event of a merger or consolidation
of EDG with another entity, participants will be entitled to receive substitute
options that substantially preserve the value, rights and benefits of the
options they had before the merger or consolidation, subject to the right of EDG
to instead pay them cash equal to the difference between the fair market value
of the stock underlying their options and the exercise price of the options.
The 2000 plan also contains certain change in control provisions that
could cause stock options to become immediately exercisable in the event:
15
o any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
acquires voting or investment control over 50% or more of EDG's
common stock or voting securities, subject to exceptions for
acquisitions by employee benefit plans sponsored by EDG or a
subsidiary, underwriters in connection with firm commitment
offerings of securities to be issued by EDG, or by any corporation
if the ownership of the acquiring corporation is substantially the
same as the ownership of EDG before the acquisition.
o members of the board on the effective date of the 2000 plan
(together with any directors elected after the effective date
whose election by the board or whose nomination for election by
the shareholders of EDG was approved by a vote of at least two
thirds of the directors then in office who were directors on the
effective date of the 2000 plan or whose election or nomination
was previously so approved but excluding any director who became a
director as a result of any actual or threatened election contest)
cease for any reason to constitute a majority of the board of
directors.
o of a reorganization, merger or consolidation of EDG, or the
approval by EDG's shareholders of a reorganization, merger or
consolidation of EDG, other than one in which the ownership of the
corporation resulting from such merger or consolidation is
substantially the same as the ownership of EDG before the
acquisition.
o of a complete liquidation or substantial dissolution of EDG, or
the sale or other disposition of all or substantially all of the
assets of EDG, or the approval by EDG's shareholders of such an
event or transaction, other than a sale of assets to a wholly
owned subsidiary or pursuant to a transaction in which the
ownership of the corporation or other business entity acquiring
the assets is substantially the same as the ownership of EDG
before the acquisition.
o of the occurrence of any other event that EDG would be required to
report in response to Item 1 (changes in control) or Item 2
(acquisition or disposition of assets) of Form 8-K under the
Securities Exchange Act of 1934.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
participation in the 2000 plan is only a summary of the general rules applicable
to the grant and exercise of stock options and does not give specific details or
cover, among other things, state, local and foreign tax treatment of
participation in the 2000 plan. The information contained in this section is
based on present law and regulations, which are subject to being changed
prospectively or retroactively.
16
INCENTIVE STOCK OPTIONS
A participant will recognize no taxable income upon the grant of an
Incentive Stock Option. The participant will realize no taxable income when the
Incentive Stock Option is exercised if the participant has been an employee of
EDG or its subsidiaries at all times from the date of the grant until three
months before the date of exercise (one year if the participant is disabled).
EDG will not qualify for any deduction in connection with the grant or exercise
of Incentive Stock Options. Upon a disposition of the shares after the later of
two years from the date of grant or one year after the transfer of the shares to
the participant, the participant will recognize the difference, if any, between
the amount realized and the exercise price as long-term capital gain or
long-term capital loss (as the case may be) if the shares are capital assets.
The excess, if any, of the fair market value of the shares on the date of
exercise of an Incentive Stock Option over the exercise price will be treated as
an item of adjustment for a participant's taxable year in which the exercise
occurs and may result in an alternative minimum tax liability for the
participant.
If common stock acquired upon the exercise of an Incentive Stock Option
is disposed of prior to the expiration of the holding periods described above,
the participant will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares,
and we will qualify for a deduction equal to the amount recognized by the
participant as ordinary compensation income, subject to the limitation that the
compensation be reasonable.
NON-QUALIFIED STOCK OPTIONS
With respect to Non-Qualified Stock Options:
o upon grant of the stock option, the participant will recognize no
income,
o upon exercise of the stock option (if the shares of common stock
are not subject to a substantial risk of forfeiture), the
participant will recognize ordinary compensation income in an
amount equal to the excess, if any, of the fair market value of
the shares on the date of exercise over the exercise price, and we
will qualify for a deduction in the same amount, subject to the
requirement that the compensation be reasonable, and
o EDG will be required to comply with applicable federal income tax
withholding requirements with respect to the amount of ordinary
compensation income recognized by the participant. On a
disposition of the shares, the participant will recognize gain or
loss equal to the difference between the amount realized and the
sum of the exercise price and the ordinary compensation income
recognized. The gain or loss will be treated as capital gain or
loss if the shares are capital assets and as short-term or
long-term capital gain or loss, depending upon the length of time
that the participant held the shares.
17
NEW PLAN BENEFITS
The following table sets forth as of October 15, 2001, the options
granted to each of our Named Executive Officers, each nominee for election as a
director, all current executive officers as a group, all current directors who
are not executive officers as a group, and all employees and consultants other
than executive officers as a group.
----------------------------------------------------------------------------------------------
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING
NAME AND POSITION OPTIONS GRANTED
----------------------------------------------------------------------------------------------
Jack Schwartzberg, Chairman, CEO and President 175,000
----------------------------------------------------------------------------------------------
Shraga David Aranoff, COO, Vice President and Treasurer 200,000
----------------------------------------------------------------------------------------------
Harry Barnett, Director 80,000
----------------------------------------------------------------------------------------------
Stanley F. Barshay, Director 80,000
----------------------------------------------------------------------------------------------
Jay M. Haft, Director 80,000
----------------------------------------------------------------------------------------------
All current executive officers as a group (two persons) 375,000
----------------------------------------------------------------------------------------------
All current directors who are not executive officers as a group 90,000
(three persons)
----------------------------------------------------------------------------------------------
All employees and consultants other than executive officers as a 373,000
group (nine persons)
----------------------------------------------------------------------------------------------
The average of the bid and ask prices of EDG's common stock as reported
by the OTC Bulletin Board on October 15, 2001, was $2.50 per share.
PROPOSAL III
APPROVAL OF "PARACHUTE PAYMENTS"
As more fully described below and in Annex C hereto, we propose that
the shareholders approve and consent to certain proposed payments and/or
property transfers to be made pursuant to the employment agreements and option
agreements we have entered into with each of Jack Schwartzberg, our Chairman,
Chief Executive Officer and President, and Shraga David Aranoff, our Vice
President, Chief Operating Officer and Treasurer, including severance payments
to be made pursuant to the employment agreements, certain reimbursement payments
that may be made pursuant to the option agreements, and provisions of the
employment agreements, option agreements and the 2000 plan that would cause the
options to become fully exercisable in the event of a change in control of EDG.
The "property transfers" consist of the accelerated vesting of the options
granted to Messrs. Schwartzberg and Aranoff in the event of a change in control
of EDG. The severance payments, the reimbursement payments and the acceleration
of the options that would occur in the event of a change in control of EDG may
be deemed to be "parachute payments" within the meaning of Section 280G(b)(2) of
the Internal Revenue Code of 1986 and Proposed Treasury Regulation Section
1.280G-1, Q&A 2. If these payments and the acceleration of the options were
deemed to be "parachute payments", Messrs. Schwartzberg and Aranoff
18
would be required to pay an excise tax equal to 20% of the amount by which such
payments exceeded a specified base amount, and EDG would lose the ability to
deduct such "excess parachute payments" for federal income tax purposes.
SUMMARY OF THE PAYMENTS
The discussion that follows is a summary only. For a more
detailed explanation of the payments for which we are requesting your approval,
you should review Annex C to this proxy statement.
The Employment Agreements
Section 6 of the employment agreements between EDG and each of Jack
Schwartzberg and Shraga David Aranoff provides for severance benefits in the
event of the termination of their employment by the executive upon a change in
control of EDG (as defined in the employment agreements). In the event of a
change in control of EDG, Messrs. Schwartzberg and Aranoff will each receive
from EDG the following:
o Severance compensation. If the termination occurs prior to or on
September 13, 2003, Jack Schwartzberg will receive his salary
compensation through September 13, 2004, and Shraga David Aranoff
will receive his salary compensation through December 13, 2003; if
the termination occurs after September 13, 2003, Mr. Schwartzberg
will receive his salary compensation through the 12 month
anniversary of the date of termination and Mr. Aranoff will
receive his salary compensation through the 3 month anniversary of
the date of termination.
o Any unpaid cash bonus for any calendar year preceding the
termination year.
o Any cash bonus for the year in which the termination occurs and
each year during which the severance compensation described above
is payable.
o Continued participation on the same basis as the other senior
executives of EDG in all medical, dental, hospitalization,
prescription, disability and life insurance coverage in which they
were participating on the date of termination until the earlier of
the end of the period during which the severance compensation is
payable or the date, or dates, he is entitled to receive coverage
and benefits under the same type of plan of a subsequent employer.
If Mr. Schwartzberg or Mr. Aranoff is precluded from continuing
his participation in any benefit plan, then EDG will be obligated
to pay him the economic equivalent of the benefits provided under
the plan in which he is unable to participate plus an amount equal
to the tax, if any, that he would be required to pay on the amount
he receives from EDG in lieu of the benefits.
o All stock options he holds will immediately vest.
19
The 2000 Plan
Section 11 of the 2000 plan provides that if a change of control of EDG
(as defined in the 2000 plan) occurs, and a participant is employed by EDG as of
the date of the change of control, all of the participant's stock options that
are unexercised and outstanding become fully vested and exercisable as of the
date of the change of control (if there are no contrary provisions in the
participant's award agreement). In certain cases, EDG may elect to pay
participants cash for their unexercised options in an amount equal to the excess
of the fair market value of the common stock underlying the options over the
aggregate exercise price of the options.
The Option Agreements
The option agreements between EDG and each of Messrs. Schwartzberg and
Aranoff provide that the options will accelerate, or become fully exercisable,
if the executive terminates his employment upon a change in control of EDG. The
option agreements also provide that if the executive becomes liable for the
payment of any excise tax under Section 4999 of the Internal Revenue Code of
1986 because of any payments or the acceleration of the options under the option
agreements or otherwise, EDG will make a special reimbursement to the executive
in an amount that, after payment by the executive of any federal, state and
local taxes, including any further excise tax under Section 4999 with respect to
or resulting from the special reimbursement, equals the net amount of the excise
tax. Thus, the executive will be entitled to a gross-up or indemnification
payment such that he will not suffer any economic loss because of the excise
tax.
If a change of control occurs after the holders of at least 75% of our
outstanding common stock approve and consent to the payments to be made pursuant
to the employment agreements and the option agreements and the acceleration of
the options under such agreements and the 2000 plan, and at a time when our
common stock is not readily tradable on an established securities market or
otherwise, these payments will not be deemed to be "parachute payments," no
excise tax will be payable by Messrs. Schwartzberg and Aranoff in the event
these payments are made, and EDG will be able to deduct the full amount of these
payments for federal income tax purposes.
The board of directors recommends voting "FOR" Proposal III.
OTHER MATTERS
The board knows of no matter that will be presented for consideration
at the meeting other than the matters referred to in this proxy statement.
Should any other matter properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote such proxy in accordance
with their best judgment.
20
SOLICITATION OF PROXIES
The cost of proxy solicitations will be borne by EDG. In addition to
solicitations of proxies by use of the mails, some officers or employees of EDG,
without additional remuneration, may solicit proxies personally or by telephone.
EDG may also request brokers, dealers, banks and their nominees to solicit
proxies from their clients, where appropriate, and may reimburse them for
reasonable expenses related thereto.
Shraga David Aranoff
Secretary
Garden City, New York
October 19, 2001
21
ANNEX A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
EDG CAPITAL, INC.
----------------------------------------------
PURSUANT TO SECTION 807 OF THE
BUSINESS CORPORATION LAW
OF THE STATE OF NEW YORK
----------------------------------------------
In accordance with Section 807 of the New York Business Corporation
Law, the undersigned, being the President and Secretary of EDG Capital, Inc.,
hereby certify as follows:
FIRST: The name of the Corporation is EDG Capital, Inc.
SECOND: The certificate of incorporation was filed by the Secretary of
State of New York on October 2, 1990.
THIRD: The certificate of incorporation is amended to effect the
following amendments: (i) to change the name of the Corporation to Isotope
Solutions Group, Inc.; (ii) to authorize the Corporation to issue up to
1,000,000 shares of preferred stock, in one or more series, with such voting
powers, designations, preferences and relative, participating, optional or other
special rights, and such qualifications, limitations and restrictions as the
board of directors of the Corporation shall by resolution designate; (iii) to
permit the shareholders to act by written consent signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take action at a meeting at which all shares
entitled to vote were present and voted; (iv) to adopt a provision stating that
election of directors need not be by written ballot unless the Corporation's
by-laws so provide; (v) to adopt a provision authorizing the board of directors
to amend, alter or repeal the by-laws of the Corporation; (vi) to adopt a
provision authorizing the board of directors to submit contracts to the
shareholders for approval; (vii) to adopt a provision authorizing the board of
directors to appoint new directors to fill vacancies on the board arising by
reason of removal of a director without cause; (viii) to
eliminate an unnecessary provision relating to transactions with interested
directors; (ix) to adopt updated provisions relating to limitation of directors'
liability to the Corporation and the Corporation's indemnification of its
officers and directors; (x) to change the county in which the Corporation's
office is located from Suffolk County, New York to Nassau County, New York, and
(xi) to change the address to which the Secretary of State shall send notice of
any process against the Corporation served on the Secretary of State.
The text of the certificate of incorporation, as amended heretofore, is
hereby restated as further amended to read as herein set forth in full:
1. The name of the Corporation is Isotope Solutions Group, Inc. (the
"Corporation").
2. The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Business Corporation
Law. The Corporation is not formed to engage in any act or activity requiring
the consent or approval of any New York State official, department, board,
agency or other body without such consent or approval first being obtained.
3. The office of the Corporation is to be located in the County of
Nassau.
4. The aggregate number of shares that the Corporation is authorized to
issue is 51,000,000 shares, of which 50,000,000 shares shall be common stock,
par value $.001 per share, and 1,000,000 shares shall be preferred stock, par
value $ .001 per share.
(a) The directors are expressly granted authority to provide for
the issue of any or all shares of the preferred stock, in one or more series,
and to fix for each such series such voting powers, full or limited, and such
designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof, including
one or more series of shares that do not share ratably with each other in the
payment of dividends and other distributions, as shall be stated and expressed
in the resolution or resolutions adopted by the directors providing for the
issue of such series (a "Preferred Stock Designation") and as may be permitted
by the Business Corporation Law.
(b) Except as otherwise required by law and except as otherwise
provided in any Preferred Stock Designation, the holders of common stock shall
possess exclusively all voting power of the Corporation. Each share of common
stock shall have one vote. Shareholders shall not have pre-emptive rights or be
entitled to cumulative voting in connection with the shares of the Corporation's
common stock or preferred stock.
5. Whenever shareholders are required or permitted to take any action
by vote, such action may be taken without a meeting by written consent, setting
forth the action so taken, signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled
2
to vote thereon were present and voted. Prompt notice of the taking of any such
action in such manner shall be given to those shareholders who have not
consented in writing.
6. The Secretary of State is designated as the agent of the Corporation
upon whom process against the Corporation may be served, and the address to
which the Secretary of State shall mail a copy of any process against the
Corporation served upon him or her is:
c/o: Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Docket Clerk and BJS
7. The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders:
(a) Election of directors need not be by written ballot unless the
by-laws of the Corporation so provide.
(b) The board of directors or the shareholders shall have the
power to make, adapt, amend or repeal the by-laws of the Corporation.
(c) The directors in their discretion may submit any contract or
act for approval or ratification at any annual meeting of the shareholders or at
any meeting of the shareholders called for the purpose of considering any such
act or contract, and any contract or act that shall be approved or be ratified
by the vote of the holders of a majority of the stock of the Corporation that is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of shareholders be there represented in person or
by proxy) shall be valid and binding upon the Corporation and upon all the
shareholders as though it had been approved or ratified by every shareholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(d) Any vacancy in the board of directors arising by reason of
removal of one or more directors without cause may be filled by the board.
(e) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation; subject, nevertheless, to the provisions of the
statutes of the State of New York, to the provisions of this Certificate of
Incorporation, and to any by-laws from time to time made by the shareholders;
provided, however, that no by-law so made shall invalidate any prior act of the
directors that would have been valid if such by-law had not been made.
3
8. The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the Business Corporation Law or
any successor statute.
9. The Corporation shall indemnify its officers and directors, to the
fullest extent permitted by law, including, but not limited to, the provisions
of Sections 721 through 726 of the Business Corporation Law, as the same may be
amended and supplemented from time to time, and shall pay the expenses incurred
by any such officer or director of the Corporation claiming to be entitled to
indemnification in any action or proceeding in advance of the final disposition
of such action or proceeding to the fullest extent permitted by law, including,
without limitation, the provisions of Section 723(c) of the Business Corporation
Law, as it may be amended and supplemented from time to time.
FOURTH: The amendment effected herein was authorized by the unanimous
written consent, setting forth the action so taken, of the directors of the
Corporation pursuant to Section 708(b) of the New York Business Corporation Law,
and by the vote of the holders of a majority of the shares present or
represented by proxy at a meeting of the shareholders of the Corporation held on
November 14, 2001.
4
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this ____ day of
November, 2001.
---------------------------------
Jack Schwartzberg, President
---------------------------------
Shraga David Aranoff, Secretary
5
ANNEX B
EDG CAPITAL, INC.
2000 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 2000 Long-Term Incentive Plan (the
"Plan") is to further and promote the interests of EDG Capital, Inc. (the
"Company"), its Subsidiaries and its shareholders by enabling the Company and
its Subsidiaries to attract, retain and motivate employees and consultants or
those who will become employees or consultants, and to align the interests of
those individuals and the Company's shareholders. To do this, the Plan offers
stock options providing such employees and consultants with a proprietary
interest in maximizing the growth, profitability and overall success of the
Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
have the meanings set forth below:
2.1 "AWARD" means an award or grant made to a Participant under
Section 6 of the Plan.
2.2 "AWARD AGREEMENT" means the agreement executed by a
Participant pursuant to Sections 3.2 and 17.7 of the Plan in connection with the
granting of an Award.
2.2 "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
2.3 "CODE" means the Internal Revenue Code of 1986, as in effect
and as amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
2.4 "COMMITTEE" means the committee of the Board established to
administer the Plan, as described in Section 3 of the Plan.
2.5 "COMMON STOCK" means the Common Stock, par value $.001 per
share, of the Company or any security of the Company issued by the Company in
substitution or exchange therefor.
2.6 "COMPANY" means EDG Capital, Inc., a New York corporation, or
any successor corporation to EDG Capital, Inc.
2.7 "DISABILITY" means disability as defined in the Participant's
then effective employment agreement, or if the participant is not then a party
to an effective employment agreement with the Company which defines disability,
"Disability" means disability as determined by the Committee in accordance with
standards and procedures similar to those under the Company's long-term
disability plan, if any. Subject to the first sentence of this Section 2.7, at
any time that the Company does not maintain a long-term disability plan,
"Disability" shall mean any physical or mental disability which is determined to
be total and permanent by a physician selected in good faith by the Company.
2.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
in effect and as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated thereunder
or with respect thereto.
2.9 "FAIR MARKET VALUE" means on, or with respect to, any given
date(s), the average of the highest and lowest market prices of the Common
Stock, as reported on the OTB Bulletin Board or other exchange or market for
such date(s) or, if the Common Stock was not traded on such date(s), on the next
preceding day or days on which the Common Stock was traded. If at any time the
Common Stock is not traded on such exchange, the Fair Market Value of a share of
the Common Stock shall be determined in good faith by the Board.
2.10 "INCENTIVE STOCK OPTION" means any stock option granted
pursuant to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is intended to be (and is specifically designated as) an
"incentive stock option" within the meaning of Section 422 of the Code.
2.11 "NON-QUALIFIED STOCK OPTION" means any stock option granted
pursuant to the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is not (and is specifically designated as not being) an
Incentive Stock Option.
2.12 "PARTICIPANT" means any individual who is selected from time
to time under Section 5 to receive an Award under the Plan.
2.13 "PLAN" means the EDG Capital, Inc. 2000 Long-Term Incentive
Plan, as set forth herein and as in effect and as amended from time to time
(together with any rules and regulations promulgated by the Committee with
respect thereto).
2.14 "RETIREMENT" means the voluntary retirement by the
Participant from active employment with the Company and its Subsidiaries on or
after the attainment of (i) age 65, or (ii) 60, with the consent of the Board.
2.15 "SUBSIDIARY(IES)" means any corporation (other than the
Company) in an unbroken chain of corporations, including and beginning with the
Company, if each of such corporations, other than the last corporation in the
unbroken chain, owns, directly or
2
indirectly, more than fifty percent (50%) of the voting stock in one of the
other corporations in such chain.
3. ADMINISTRATION.
3.1 THE COMMITTEE. The Plan shall be administered by the Board or
the Committee. The Committee shall be appointed from time to time by the Board
and shall be comprised of not less than two (2) of the then members of the Board
who are Non-Employee Directors (within the meaning of SEC Rule 16b-3(b)(3)) of
the Company. Consistent with the Bylaws of the Company, members of the Committee
shall serve at the pleasure of the Board and the Board, subject to the
immediately preceding sentence, may at any time and from time to time remove
members from, or add members to, the Committee.
3.2 PLAN ADMINISTRATION AND PLAN RULES. The Board or the Committee
is authorized to construe and interpret the Plan and to promulgate, amend and
rescind rules and regulations relating to the implementation, administration and
maintenance of the Plan. Subject to the terms and conditions of the Plan, the
Board or the Committee shall make all determinations necessary or advisable for
the implementation, administration and maintenance of the Plan including,
without limitation, (a) selecting the Plan's Participants, (b) making Awards in
such amounts and form as the Board or the Committee shall determine, (c)
imposing such restrictions, terms and conditions upon such Awards as the Board
or the Committee shall deem appropriate, and (d) correcting any technical
defect(s) or technical omission(s), or reconciling any technical
inconsistency(ies), in the Plan and/or any Award Agreement. The Committee may
designate persons other than members of the Board or the Committee to carry out
the day-to-day ministerial administration of the Plan under such conditions and
limitations as it may prescribe, except that the Board or the Committee shall
not delegate its authority with regard to the selection for participation in the
Plan and/or the granting of any Awards to Participants. The Board or the
Committee's determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are similarly
situated. Any determination, decision or action of the Board or the Committee in
connection with the construction, interpretation, administration, implementation
or maintenance of the Plan shall be final, conclusive and binding upon all
Participants and any person(s) claiming under or through any Participants. The
Company shall effect the granting of Awards under the Plan, in accordance with
the determinations made by the Board or the Committee, by execution of written
agreements and/or other instruments in such form as is approved by the Board or
the Committee.
3.3 LIABILITY LIMITATION. Neither the Board nor the Committee, nor
any member of either, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan (or
any Award Agreement), and the members of the Board and the Committee shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including, without limitation, attorneys' fees)
arising or resulting therefrom to the fullest
3
extent permitted by law and/or under any directors and officers liability
insurance coverage which may be in effect from time to time.
4. TERM OF PLAN/COMMON STOCK SUBJECT TO PLAN.
4.1 TERM. The Plan shall terminate on December 31, 2010, except
with respect to Awards then outstanding. After such date no further Awards shall
be granted under the Plan.
4.2 COMMON STOCK. The maximum number of shares of Common Stock in
respect of which Awards may be granted or paid out under the Plan, subject to
adjustment as provided in Section 10.2 of the Plan, shall not exceed 2,500,000
shares. In the event of a change in the Common Stock of the Company that is
limited to a change in the designation thereof to "Capital Stock" or other
similar designation, or to a change in the par value thereof, or from par value
to no par value, without increase or decrease in the number of issued shares,
the shares resulting from any such change shall be deemed to be the Common Stock
for purposes of the Plan. Common Stock which may be issued under the Plan may be
either authorized and unissued shares or issued shares which have been
reacquired by the Company (in the open-market or in private transactions) and
which are being held as treasury shares. No fractional shares of Common Stock
shall be issued under the Plan.
4.3 COMPUTATION OF AVAILABLE SHARES. For the purpose of computing
the total number of shares of Common Stock available for Awards under the Plan,
there shall be counted against the limitations set forth in Section 4.2 of the
Plan the maximum number of shares of Common Stock potentially subject to
issuance upon exercise or settlement of Awards granted under Section 6 of the
Plan, in each case determined as of the date on which such Awards are granted.
If any Awards expire unexercised or are forfeited, surrendered, cancelled,
terminated or settled in cash in lieu of Common Stock, the shares of Common
Stock which were theretofore subject (or potentially subject) to such Awards
shall again be available for Awards under the Plan to the extent of such
expiration, forfeiture, surrender, cancellation, termination or settlement of
such Awards.
5. ELIGIBILITY. Individuals eligible for Awards under the Plan shall
consist of all employees, directors, advisory board members and consultants, or
those who will become such employees , directors, advisory board members or
consultants, of the Company and/or its Subsidiaries who are responsible for or
contribute to the management, growth and protection of the business of the
Company and/or its Subsidiaries or whose performance or contribution, in the
sole discretion of the Board or the Committee, benefits or will benefit the
Company.
6. STOCK OPTIONS.
6.1 TERMS AND CONDITIONS. Stock options granted under the Plan
shall be in respect of Common Stock and may be in the form of Incentive Stock
Options or Non-Qualified Stock Options (sometimes referred to collectively
herein as the "Stock
4
Option(s))". Such Stock Options shall be subject to the terms and conditions set
forth in this Section 6 and any additional terms and conditions, not
inconsistent with the express terms and provisions of the Plan, as the Committee
shall set forth in the relevant Award Agreement.
6.2 GRANT. Stock Options may be granted under the Plan in such
form as the Board or the Committee may from time to time approve. Special
provisions shall apply to Incentive Stock Options granted to any employee who
owns (within the meaning of Section 422(b)(6) of the Code) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or its parent corporation or any subsidiary of the Company, within the meaning
of Sections 424(e) and (f) of the Code (a "10% Shareholder").
6.3 EXERCISE PRICE. The exercise price per share of Common Stock
subject to a Stock Option shall be determined by the Board or the Committee;
provided , however, that the exercise price of an Incentive Stock Option shall
not be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date of the grant of such Incentive Stock Option; provided,
further, however, that, in the case of a 10% Shareholder, the exercise price of
an Incentive Stock Option shall not be less than one hundred ten percent (110%)
of the Fair Market Value of the Common Stock on the date of grant.
6.4 TERM. The term of each Stock Option shall be such period of
time as is fixed by the Committee; provided, however, that the term of any
Incentive Stock Option shall not exceed ten (10) years (five (5) years, in the
case of a 10% Shareholder) after the date immediately preceding the date on
which the Incentive Stock Option is granted.
6.5 METHOD OF EXERCISE. A Stock Option may be exercised, in whole
or in part, by giving written notice of exercise to the Secretary of the
Company, or the Secretary's designee, specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in fall of the exercise
price in cash, by certified check, bank draft or money order payable to the
order of the Company or, if permitted by the Board or the Committee (in its sole
discretion) and applicable law, by delivery of, alone or in conjunction with a
partial cash or instrument payment, (a) a fully-secured promissory note or
notes, (b) shares of Common Stock already owned by the Participant for at least
six (6) months, or (c) some other form of payment acceptable to the Board or the
Committee. The Board or the Committee may also permit Participants (either on a
selective or group basis) to simultaneously exercise Stock Options and sell the
shares of Common Stock thereby acquired, pursuant to a "cashless exercise"
arrangement or program, selected by and approved of in all respects in advance
by the Committee. Payment instruments shall be received by the Company subject
to collection. The proceeds received by the Company upon exercise of any Stock
Option may be used by the Company for general corporate purposes. Any portion of
a Stock Option that is exercised may not be exercised again.
5
6.6 EXERCISABILITY. In respect of any Stock Option granted under
the Plan, unless otherwise provided in the Award Agreement at the time of grant
or in the Participant's employment agreement in respect of any such Stock
Option, such Stock Option shall become exercisable as to the aggregate number of
shares of Common Stock underlying such Stock Option, as determined on the date
of grant, as follows:
o 33%, on the first anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries;
o 66%, on the second anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries; and
o 100%, on the third anniversary of the date of grant of the Stock
Option, provided the Participant is then employed by the Company
and/or one of its Subsidiaries.
7. MAXIMUM YEARLY AWARDS. The maximum annual Common Stock amounts in
this Section 7 are subject to adjustment under Section 10.2 and are subject to
the Plan maximum under Section 4.2. All Participants in the aggregate may not
receive in any calendar year Awards of Options, in the aggregate, exceeding
1,500,000 underlying shares of Common Stock. Each individual Participant may not
receive in any calendar year Awards of Options exceeding 1,000,000 underlying
shares of Common Stock.
8. TERMINATION OF EMPLOYMENT. Except as is otherwise provided (a) in
the relevant Award Agreement as determined by the Board or Committee (in its
sole discretion) at the time of grant, or (b) in the Participant's then
effective employment agreement, if any, the following terms and conditions shall
apply as appropriate and as not inconsistent with the terms and conditions, if
any, contained in such Award Agreement and/or such employment agreement. If a
Participant's employment with the Company terminates for any reason any then
unexercisable Stock Options shall be forfeited and cancelled by the Company.
Except as otherwise provided in this Section 8, if a Participant's employment
with the Company and its Subsidiaries terminates for any reason, such
Participant's rights, if any, to exercise any then exercisable Stock Options, if
any, shall terminate ninety (90) days after the date of such termination (but
not beyond the stated term of any such Stock Option as determined under Section
6.4) and thereafter such Stock Option shall be forfeited and cancelled by the
Company. The Board or the Committee, in its sole discretion, may determine that
any such Participant's Stock Options, if any, to the extent exercisable
immediately prior to any termination of employment (other than a termination due
to death, Retirement or Disability), may remain exercisable for an additional
specified time period after such ninety (90) day period expires (subject to any
other applicable terms and provisions of the Plan and the relevant Award
Agreement), but not beyond the stated term of any such Stock Option. If any
termination of employment is due to death, Retirement or Disability, a
Participant (and such Participant's estate, designated beneficiary or other
legal representative, as the case may be and as determined by the Committee)
shall have the right, to the extent exercisable immediately prior to any such
termination, to exercise such Stock Options, if any, at any time within the one
(1) year period following such termination due to death, Retirement or
Disability (but not beyond the term of any such Stock Option as determined under
Section 6.4).
6
9. NON-TRANSFERABILITY OF AWARDS. Unless otherwise provided in the
Award Agreement, no Award under the Plan or any Award Agreement, and no rights
or interests herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by a
Participant or any beneficiary(ies) of any Participant, except by testamentary
disposition by the Participant or the laws of intestate succession. No such
interest shall be subject to execution, attachment or similar legal process,
including, without limitation, seizure for the payment of the Participant's
debts, judgments, alimony, or separate maintenance. Unless otherwise provided in
the Award Agreement, during the lifetime of a Participant, Stock Options are
exercisable only by the Participant.
10. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
10.1 NO CORPORATE ACTION RESTRICTION. The existence of the Plan,
any Award Agreement and/or the Awards granted hereunder shall not limit, affect
or restrict in any way the right or power of the Board or the shareholders of
the Company to make or authorize (a) any adjustment, recapitalization,
reorganization or other change in the Company's or any Subsidiary's capital
structure or its business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue of bonds, debentures,
capital, preferred or prior preference stocks ahead of or affecting the
Company's or any Subsidiary's capital stock or the rights thereof, (d) any
dissolution or liquidation of the Company or any Subsidiary, (e) any sale or
transfer of all or any part of the Company's or any Subsidiary's assets or
business, or (f) any other corporate act or proceeding by the Company or any
Subsidiary. No Participant, beneficiary or any other person shall have any claim
against any member of the Board or the Committee, the Company or any Subsidiary,
or any employees, officers or agents of the Company or any subsidiary, as a
result of any such action.
10.2 RECAPITALIZATION ADJUSTMENTS. In the event of any change in
capitalization affecting the Common Stock of the Company, including, without
limitation, a stock dividend or other distribution, stock split, reverse stock
split, recapitalization, consolidation, subdivision, split-up, spin-off,
split-off, combination or exchange of shares or other form of reorganization or
recapitalization, or any other change affecting the Common Stock, the Board or
the Committee shall authorize and make such proportionate adjustments, if any,
as the Board or the Committee deems appropriate to reflect such change,
including, without limitation, with respect to the aggregate number of shares of
the Common Stock for which Awards in respect thereof may be granted under the
Plan, the maximum number of shares of the Common Stock which may be granted or
awarded to any Participant, the number of shares of the Common Stock covered by
each outstanding Award, and the exercise price or other price per share of
Common Stock in respect of outstanding Awards.
7
10.3 CERTAIN MERGERS.
10.3.1 If, after September 13, 2000, the Company enters into
or is involved in any merger, reorganization or other business
combination with any person or entity (such merger, reorganization or
other business combination to be referred to herein as a "Merger
Event") and as a result of any such Merger Event the Company will be or
is the surviving corporation, a Participant shall be entitled, as of
the date of the execution of the agreement evidencing the Merger Event
(the "Execution Date") and with respect to both exercisable and
unexercisable Stock Options (but only to the extent not previously
exercised), to receive substitute stock options in respect of the
shares of the surviving corporation on such terms and conditions, as to
the number of shares, pricing and otherwise, which shall substantially
preserve the value, rights and benefits of any affected Stock Options
granted hereunder as of the date of the consummation of the Merger
Event. Notwithstanding anything to the contrary in this Section 10.3,
if any Merger Event occurs, the Company shall have the right, but not
the obligation, to pay to each affected Participant an amount in cash
or certified check equal to the excess of the Fair Market Value of the
Common Stock underlying any affected unexercised Stock Options as of
the Execution Date (whether then exercisable or not) over the aggregate
exercise price of such unexercised Stock Options, as the case may be.
10.3.2 If, in the case of a Merger Event in which the Company
will not be, or is not, the surviving corporation, and the Company
determines not to make the cash or certified check payment described in
Section 10.3.1 of the Plan, the Company shall compel and obligate, as a
condition of the consummation of the Merger Event, the surviving or
resulting corporation and/or the other party to the Merger Event, as
necessary, or any parent, subsidiary or acquiring corporation thereof,
to grant, with respect to both exercisable and unexercisable Stock
Options (but only to the extent not previously exercised), substitute
stock options in respect of the shares of common or other capital stock
of such surviving or resulting corporation on such terms and
conditions, as to the number of shares, pricing and otherwise, which
shall substantially preserve the value, rights and benefits of any
affected Stock Options previously granted hereunder as of the date of
the consummation of the Merger Event.
10.3.3 Upon receipt by any affected Participant of any such
cash, certified check, or substitute stock options as a result of any
such Merger Event, such Participant's affected Stock Options for which
such cash, certified check or substitute awards was received shall be
thereupon cancelled without the need for obtaining the consent of any
such affected Participant.
10.3.4 The foregoing adjustments and the manner of
application of the foregoing provisions, including, without limitation,
the issuance of any substitute stock options, shall be determined in
good faith by the Board or the Committee in its
8
sole discretion. Any such adjustment may provide for the elimination of
fractional shares.
11. CHANGE OF CONTROL.
11.1 ACCELERATION OF AWARDS VESTING. Anything in the Plan to the
contrary notwithstanding, if a Change of Control of the Company occurs, unless
otherwise provided in the Participant's Award Agreement, all Stock Options then
unexercised and outstanding shall become fully vested and exercisable as of the
date of the Change of Control. The immediately preceding sentence shall apply to
only those Participants (i) who are employed by the Company and/or one of its
Subsidiaries as of the date of the Change of Control, or (ii) to whom Section
11.3 below is applicable.
11.2 PAYMENT AFTER CHANGE OF CONTROL. Notwithstanding anything to
the contrary in the Plan, in the case only of a Change of Control under Section
11.4.1 of the Plan, the holders of any Stock Options shall have the right, but
not the obligation, to elect, within thirty (30) business days after the
Participant has actual knowledge of the occurrence of such Change of Control, to
require the Company to substitute for such Stock Options replacement stock
options of the acquiring company or any affiliate thereof covering the most
liquid thereof and on such terms and conditions, as to the number of shares,
pricing and otherwise which shall substantially preserve the value, rights and
benefits of any affected Stock Options.
11.3 TERMINATION AS A RESULT OF A CHANGE OF CONTROL. Anything in
the Plan to the contrary notwithstanding, if a Change of Control occurs and if
the Participant's employment is terminated before such Change of Control and it
is reasonably demonstrated by the Participant that such employment termination
(a) was at the request, directly or indirectly, of a third party who has taken
steps reasonably calculated to effect the Change of Control, or (b) otherwise
arose in connection with or in anticipation of the Change of Control, then for
purposes of this Section 11, the Change of Control, unless otherwise provided in
the Participant's Award Agreement, shall be deemed to have occurred immediately
prior to such Participant's employment termination (for all purposes other than
those set forth in Section 11.2 of the Plan).
11.4 CHANGE OF CONTROL. For the purpose of this Agreement, "Change
of Control" shall mean:
11.4.1 The acquisition, after the effective date of the Plan,
by an individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule l3d-3 promulgated under the Exchange Act)
of 50% or more of either (a) the shares of the Common Stock, or (b) the
combined voting power of the voting securities of the Company entitled
to vote generally in the election of directors (the "Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (x) any acquisition by any employee
benefit plan (or related
9
trust) sponsored or maintained by the Company or any Subsidiary, (y)
any acquisition by any underwriter in connection with any firm
commitment underwriting of securities to be issued by the Company, or
(z) any acquisition by any corporation if, immediately following such
acquisition, more than 50% of the then outstanding shares of common
stock or common ownership interests and the combined voting power of
the then outstanding voting securities or common ownership interests of
such corporation or other entity (entitled to vote generally in the
election of directors or other managers), is beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who, immediately prior to such acquisition, were the
beneficial owners of the Common Stock and the Voting Securities in
substantially the same proportions, respectively, as their ownership,
immediately prior to such acquisition, of the Common Stock and Voting
Securities; or
11.4.2 Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease thereafter for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
effective date of the Plan whose election, or nomination for election
by the Company's shareholders, was approved by at least two-thirds of
the directors then serving and comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a- 11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents; or
11.4.3 Approval by the shareholders of the Company of, or the
occurrence of, a reorganization, merger or consolidation, other than a
reorganization, merger or consolidation with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and Voting Securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation more than 50% of the then outstanding common
stock or common ownership interests and voting securities or voting
ownership interests (entitled to vote generally in the election of
directors or other managers) of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their respective ownership, immediately prior to such
reorganization, merger or consolidation, of the Common Stock and the
Voting Securities; or
11.4.4 Approval by the shareholders of the Company of, or the
occurrence of, (a) a complete liquidation or substantial dissolution of
the Company, or (b) the sale or other disposition of all or
substantially all of the assets of the Company, other than (i) to a
Subsidiary, wholly-owned, directly or indirectly, by the Company, or
(ii) pursuant to a transaction with respect to which all or
substantially
10
all of the individuals and entities who were the beneficial owners,
immediately prior to such transaction, of the Common Stock and the
Voting Securities beneficially own, directly or indirectly, immediately
after such transaction, more than 50% of the then outstanding common
stock or common ownership interests and voting securities or voting
ownership interests (entitled to vote generally in the election of
directors or other managers) of the corporation or other business
entity acquiring such assets in substantially the same proportions as
their respective ownership, immediately prior to such transaction, of
the Common Stock and the Voting Securities.
11.4.5 The occurrence of any event (not covered by clauses
(11.4.1 through 11.4.4 above) which would be required to be reported by
the Company in response to Items 1 or 2 of Form 8-K under the Exchange
Act.
12. AMENDMENT, SUSPENSION AND TERMINATION.
12.1 IN GENERAL. The Board may suspend or terminate the Plan (or
any portion thereof) at any time and may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable to insure that any
and all Awards conform to or otherwise reflect any change in applicable laws or
regulations, or to permit the Company or the Participants to benefit from any
change in applicable laws or regulations, or in any other respect the Board may
deem to be in the best interests of the Company or any Subsidiary. No such
amendment, suspension or termination shall (x) materially adversely effect the
rights of any Participant under any outstanding Stock Options, without the
consent of such Participant, or (y) make any change that would disqualify the
Plan, or any other plan of the Company or any Subsidiary intended to be so
qualified, from the benefits provided under Section 422 of the Code, or any
successor provisions thereto.
12.2 AWARD AGREEMENT MODIFICATIONS. The Committee may (in its sole
discretion) amend or modify at any time and from time to time the terms and
provisions of any outstanding Stock Options, in any manner to the extent that
the Committee under the Plan or any Award Agreement could have initially
determined the restrictions, terms and provisions of such Stock Options,
including, without limitation, changing or accelerating the date or dates as of
which such Stock Options shall become exercisable. No such amendment or
modification shall, however, materially adversely affect the rights of any
Participant under any such Award without the consent of such Participant.
13. MISCELLANEOUS.
13.1 TAX WITHHOLDING. The Company shall have the right to deduct
from any payment or settlement under the Plan, including, without limitation,
the exercise of any Stock Option, any federal, state, local or other taxes of
any kind which the Committee, in its sole discretion, deems necessary to be
withheld to comply with the Code and/or any other applicable law, rule or
regulation. If the Committee, in its sole discretion, permits shares of Common
Stock to be used to satisfy any such tax withholding, such Common Stock shall be
valued based on the Fair Market Value of such stock as of the date the tax
withholding is
11
required to be made, such date to be determined by the Committee. The Committee
may establish rules limiting the use of Common Stock to meet withholding
requirements by Participants who are subject to Section 16 of the Exchange Act.
13.2 NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan, the
granting of any Award, nor the execution of any Award Agreement, shall confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, as the case may be, nor shall it
interfere in any way with the right, if any, of the Company or any Subsidiary to
terminate the employment of any employee at any time for any reason.
13.3 UNFUNDED PLAN. The Plan shall be unfunded and the Company
shall not be required to segregate any assets in connection with any Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan or any Award Agreement shall be based solely upon the
contractual obligations that may be created as a result of the Plan or any such
award or agreement. No such obligation of the Company shall be deemed to be
secured by any pledge of, encumbrance on, or other interest in, any property or
asset of the Company or any Subsidiary. Nothing contained in the Plan or any
Award Agreement shall be construed as creating in respect of any Participant (or
beneficiary thereof or any other person) any equity or other interest of any
kind in any assets of the Company or any Subsidiary or creating a trust of any
kind or a fiduciary relationship of any kind between the Company, any Subsidiary
and/or any such Participant, any beneficiary thereof or any other person.
13.4 PAYMENTS TO A TRUST. The Committee is authorized to cause to
be established a trust agreement or several trust agreements or similar
arrangements from which the Committee may make payments of amounts due or to
become due to any Participants under the Plan.
13.5 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and
other benefits received by a Participant under an Award made pursuant to the
Plan shall not be deemed a part of a Participant's compensation for purposes of
the determination of benefits under any other employee welfare or benefit plans
or arrangements, if any, provided by the Company or any Subsidiary unless
expressly provided in such other plans or arrangements, or except where the
Board expressly determines in writing that inclusion of an Award or portion of
an Award should be included to accurately reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion of
competitive annual base salary or other cash compensation. Awards under the Plan
may be made in addition to, in combination with, or as alternatives to, grants,
awards or payments under any other plans or arrangements of the Company or its
Subsidiaries. The existence of the Plan notwithstanding, the Company or any
Subsidiary may adopt such other compensation plans or programs and additional
compensation arrangements as it deems necessary to attract, retain and motivate
employees.
12
13.6 LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No Awards
or shares of the Common Stock shall be required to be issued or granted under
the Plan unless legal counsel for the Company shall be satisfied that such
issuance or grant will be in compliance with all applicable federal and state
securities laws and regulations and any other applicable laws or regulations.
The Committee may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Committee may deem necessary or advisable, be executed or
provided to the Company to assure compliance with all such applicable laws or
regulations. Certificates for shares of the Common Stock delivered under the
Plan may be subject to such stock-transfer orders and such other restrictions as
the Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed, and any applicable federal or state
securities law. In addition, if, at any time specified herein (or in any Award
Agreement or otherwise) for (a) the making of any Award, or the making of any
determination, (b) the issuance or other distribution of Common Stock, or (c)
the payment of amounts to or through a Participant with respect to any Award,
any law, rule, regulation or other requirement of any governmental authority or
agency shall require either the Company, any Subsidiary or any Participant (or
any estate, designated beneficiary or other legal representative thereof) to
take any action in connection with any such determination, any such shares to be
issued or distributed, any such payment, or the making of any such
determination, as the case may be, shall be deferred until such required action
is taken. With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of SEC Rule 16b-3. To the extent any provision of the Plan or any
action by the administrators of the Plan fails to so comply with such rule, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
13.7 AWARD AGREEMENTS. Each Participant receiving an Award under
the Plan shall enter into an Award Agreement with the Company in a form
specified by the Committee. Each such Participant shall agree to the
restrictions, terms and conditions of the Award set forth therein and in the
Plan.
13.8 DESIGNATION OF BENEFICIARY. Each Participant to whom an Award
has been made under the Plan may designate a beneficiary or beneficiaries to
exercise any option or to receive any payment which under the terms of the Plan
and the relevant Award Agreement may become exercisable or payable on or after
the Participant's death. At any time, and from time to time, any such
designation may be changed or cancelled by the Participant without the consent
of any such beneficiary. Any such designation, change or cancellation must be on
a form provided for that purpose by the Committee and shall not be effective
until received by the Committee. If no beneficiary has been designated by a
deceased Participant, or if the designated beneficiaries have predeceased the
Participant, the beneficiary shall be the Participant's estate. If the
Participant designates more than one beneficiary, any payments under the Plan to
such beneficiaries shall be made in equal shares unless the Participant has
expressly designated otherwise, in which case the payments shall be made in the
shares designated by the Participant.
13
13.9 LEAVES OF ABSENCE/TRANSFERS. The Committee shall have the
power to promulgate rules and regulations and to make determinations, as it
deems appropriate, under the Plan in respect of any leave of absence from the
Company or any Subsidiary granted to a Participant. Without limiting the
generality of the foregoing, the Committee may determine whether any such leave
of absence shall be treated as if the Participant has terminated employment with
the Company or any such Subsidiary. If a Participant transfers within the
Company, or to or from any Subsidiary, such Participant shall not be deemed to
have terminated employment as a result of such transfers.
13.10 LOANS. Subject to applicable law, the Committee may provide,
pursuant to Plan rules, for the Company or any Subsidiary to make loans to
Participants to finance the exercise price of any Stock Options, as well as the
withholding obligation under Section 13.1 of the Plan and/or the estimated or
actual taxes payable by the Participant as a result of the exercise of such
Stock Option and the Committee may prescribe the terms and conditions of any
such loan.
13.11 GOVERNING LAW. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
New York, without reference to the principles of conflict of laws thereof. Any
titles and headings herein are for reference purposes only, and shall in no way
limit, define or otherwise affect the meaning, construction or interpretation of
any provisions of the Plan.
13.12 EFFECTIVE DATE. The Plan shall be effective upon its
approval by the Board and adoption by the Company, subject to the approval of
the Plan by the Company's shareholders in accordance with Sections 162(m) and
422 of the Code.
* * * * *
IN WITNESS WHEREOF, this Plan is adopted by the Company on September
13, 2000, as amended on September 20, 2001.
EDG CAPITAL, INC.
By:
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Name:
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Title:
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14
ANNEX C
EDG CAPITAL, INC.
CODE SECTION 280G
INFORMATION DISCLOSURE STATEMENT
(AND RELATED EXHIBITS)
AS OF OCTOBER 15, 2001
I. INTRODUCTION
This Information Disclosure Statement (this "STATEMENT") is being
provided by the management of EDG Capital, Inc., a New York corporation (the
"COMPANY"), to the holders of the issued and outstanding voting stock of the
Company (the "COMPANY STOCK") in connection with the Company's request for the
consent of such shareholders to, and their approval of, certain proposed
payments and/or property transfers to be made pursuant to (a) Section 6(f) of
the Employment Agreement by and between the Company and Jack Schwartzberg dated
September 2000 and Section 6(f) of the Employment Agreement by and between the
Company and Shraga David Aranoff dated September 2000 (the "EMPLOYMENT
AGREEMENTS"), (b) Section 11 of the EDG Capital, Inc. 2000 Long-Term Incentive
Plan dated September 2000 (the "INCENTIVE PLAN"), and (c) Section 5.3 of the
Incentive Stock Option Agreement by and between the Company and Jack
Schwartzberg dated September 2000 and Section 5.3 of the Incentive Stock Option
Agreement by and between the Company and Shraga David Aranoff dated September
2000 (the "OPTION AGREEMENTS") (collectively, the "Payments"). The Payments are
more fully described in Part II of this Statement. (Copies of the Employment
Agreements and the Option Agreements are attached hereto as Exhibits A, B, C and
D, respectively, and these agreements together with the Incentive Plan, which is
included as Annex C to the proxy statement to which this Statement is annexed,
may be collectively referred to herein as the "Agreements").
It is possible that the Internal Revenue Service (the "IRS") might
assert, in the event of a "change in the ownership or effective control" (as
defined in the Proposed Treasury Regulation Section 1.280G-1, Q&A 22, 27, 28 and
29, as promulgated under Section 280G of the Internal
Revenue Code of 1986, as amended (the "CODE")) of the Company, that some or all
of the Payments are "parachute payments" within the meaning of Code Section
280G(b)(2) and Proposed Treasury Regulation Section 1.280G-1, Q&A 2. For
example, the IRS might claim, as a result of the sale of all or substantially
all of the equity securities or assets of the Company, or a merger of the
Company with another corporation (the "TRIGGER EVENT"), that some or all of the
amounts payable under or as a result of the Agreements are "parachute payments"
because the Trigger Event constitutes a "change in ownership or effective
control" of the Company under Code Section 280G(b)(2)(A)(i)(I).
Any adverse tax consequences (that is, the loss of tax deductions by
the corporate payor and a 20% excise tax on the recipient of any "excess
parachute payment") resulting from any such "change in the ownership or
effective control" of the Company may be avoided by obtaining the shareholder
consent and approval described in Part IV of this Statement. The adverse tax
consequences referred to above are more fully described in Part III of this
Statement.
II. THE PAYMENTS
1. The Employment Agreements
Section 6 of each Employment Agreement provides for severance
benefits for Jack Schwartzberg and Shraga David Aranoff (each referred to
individually as an "Executive") in the event of the termination of their
employment by the Company for any reason other than for Cause (as defined under
Section 6(a) of each Employment Agreement), including the Executive's death or
Disability; a termination of the Executive's employment pursuant to a Notice of
termination (described under Section 2 of each Employment Agreement); or the
termination of the Executive's employment by the Executive for Good Reason (as
defined under Section 6(b) of each Employment Agreement). In any of these
situations, an Executive will receive from the Company the following:
(i) Severance compensation as follows: if the date of
termination occurs prior to or on September 7, 2003, Jack Schwartzberg will
receive his salary compensation through September 7, 2004, and Shraga David
Aranoff will receive his salary compensation through December 7, 2003; if the
date of termination occurs after September 7, 2003, Jack Schwartzberg will
receive his salary compensation through the 12 month anniversary of the date of
termination and Shraga David Aranoff will receive his salary compensation
through the 3 month anniversary of the date of termination (this period during
which the Executive is entitled to severance compensation is referred to as the
"SEVERANCE PERIOD");
2
(ii) Any unpaid Cash Bonus (as defined in Section 4(b) of the
Employment Agreements) for any calendar year preceding the termination year;
(iii) Any Cash Bonus for the termination year and each year
during the Severance Period, payable at the time it is otherwise payable under
Section 4(b) of the Employment Agreements as if the Executive's employment had
continued during the entire Severance Period (this Cash Bonus is to be no less
than the Cash Bonus paid with respect to the year prior to the termination
year);
(iv) Continued participation on the same basis (including cost
contributions) as the other senior executives of the Company in all medical,
dental, hospitalization, prescription, disability and life insurance coverage
(such benefits collectively called the "CONTINUED PLANS") in which he was
participating on the date of termination (as such Continued Plans are from time
to time in effect at the Company) until the earlier of (x) the end of the
Severance Period or (y) the date, or dates, he is entitled to receive coverage
and benefits under the same type of plan of a subsequent employer. If the
Executive is precluded from continuing his participation in any Continued Plan,
then the Company will be obligated to pay him the economic equivalent of the
benefits provided under the Continued Plan in which he is unable to participate,
for the period specified above, plus an amount equal to the tax, if any, payable
by him thereon. The economic equivalent of a benefit foregone is the average
cost in the State of New York that would be incurred by the Executive in
obtaining such benefit himself on an individual basis; and
(v) All stock options will immediately vest.
The Executive will not be obligated to seek other employment
or to take any other action to reduce the amounts payable to the Executive under
any of these provisions. Except as provided above, such amounts will not be
reduced whether or not the Executive obtains other employment.
2. The EDG Capital, Inc. 2000 Long-Term Incentive Plan
Section 11 of the Incentive Plan provides that if a Change of
Control (as defined in Section 11.4 of the Incentive Plan) of the Company
occurs, and a participant is employed by the Company as of the date of the
Change of Control, all of the participant's stock options that are unexercised
and outstanding become fully vested and exercisable as of the date of the
3
Change in Control (if there are no contrary provisions in the participant's
award agreement). In the case of a Change in Control that also constitutes a
Merger Event (as defined in Section 10.3.1 of the Incentive Plan), the Company
will be entitled to elect to pay participants cash for their unexercised stock
options in an amount equal to the excess of the Fair Market Value (as defined in
Section 2.9 of the Incentive Plan) of the common stock underlying the options
over aggregate exercise price of the unexercised stock options.
3. The Option Agreements
The Option Agreements provide in Section 5.3 of each Option
Agreement that if an Executive becomes liable for the payment of any excise tax
under Section 4999 of the Code because of any payments or property transfers
under the Option Agreements or otherwise (the "Basic Excise Tax"), the Company
will pay to the Executive an amount (the "Special Reimbursement") which, after
payment to the Executive of any federal, state and local taxes, including any
further excise tax under Section 4999, with respect to or resulting from the
Special Reimbursement, equals the net amount of the Basic Excise Tax. Thus, the
Executive will be entitled to a gross-up or indemnification payment such that
the Executive will not suffer any economic loss because of the Basic Excise Tax.
III. PARACHUTE TAX INFORMATION
Under Code Sections 280G (and the Proposed Treasury Regulations
promulgated thereunder) and 4999, corporations, and certain officers,
shareholders or "highly compensated" persons (a "DISQUALIFIED INDIVIDUAL"), who
receive significant compensatory payments or property transfers that are
contingent on a "change in the ownership or effective control" of such
corporation (or on a significant asset sale), may be subject to the adverse tax
consequences of the so-called "Golden Parachute" provisions of the Code. In this
regard, recipients of the Payments are likely to be considered by the IRS to be
Disqualified Individuals under Code Section 280G(c) and Proposed Treasury
Regulation Section 1.280G-1, Q&A 15, 16, 17, 18, 19 and 20.
In general, a compensatory payment or property transfer from an
employer to a Disqualified Individual is treated as contingent on a "change in
the ownership or effective control" of a corporation if such payment or transfer
would not in fact have been made had no such change occurred. Proposed Treasury
Regulation Section 1.280G-1, Q&A 22.
4
In addition, any compensatory payments or property transfers made
pursuant to any agreement or arrangement entered into within one year prior to
the occurrence of a "change in the ownership or effective control" of the
Corporation is presumed to be contingent on such ownership change. This
presumption may be rebutted only by "clear and convincing" evidence to the
contrary. Proposed Treasury Regulation Section 1.280G-1, Q&A 25 and 26.
Any such compensatory payments or transfers to any Disqualified
Individual determined to be contingent on a Code Section 280G ownership change
will be deemed "parachute payments" if the aggregate present value of all such
payments and transfers equals or exceeds three times the Disqualified
Individual's average annual compensation during the five (or actual, if shorter)
most recent taxable years (with the corporation undergoing the change or its
predecessor-in-interest) ending before the year in which the "change in the
ownership or effective control" of the corporation occurs (the "BASE AMOUNT").
Code Section 280G(b)(2) and (b)(3); Proposed Treasury Regulation Section
1.280G-1 Q&A 2. See also Code Section 280G(d)(1). A parachute payment is
considered to be an "excess parachute payment" to the extent the parachute
payment exceeds the portion of the Base Amount allocable to it. Code Section
280G(b)(I).
Because, for example, some or all of the Payments under the Agreements
are expressly contingent on the occurrence of the Trigger Event (which Trigger
Event would be considered by the IRS to be a "change in the ownership or
effective control" of the Company), the IRS might assert, if the then present
value ascribed to the Payments is substantial, that the Payments result in
"excess parachute payments" (and, thus, the adverse "Golden Parachute" tax
consequences apply).
The effect of the adverse "Golden Parachute" tax consequences can be
severe. Significantly, a corporation that makes an "excess parachute payment"
may not deduct the amount of such "excess parachute payments" for federal income
tax purposes. Code Section 280G(a); Proposed Treasury Regulation Section
1.280G-1, Q&A 1. Any such tax deduction disallowance may result in lower
corporate after-tax net income (reducing retained earnings and total shareholder
equity). In addition, the recipient of an "excess parachute payment" must pay,
in addition to income taxes on such payments, a 20% excise tax on the amount of
the "excess parachute payment". Code Section 4999; Proposed Treasury Regulation
Section 1.280G-1, Q&A 1.
5
Code Section 280G, however, excludes from "parachute payment" status
any compensatory payment or property transfer made to a Disqualified Individual
by a corporation if (1) immediately before the "change in ownership or effective
control", no stock of such corporation or any affiliate was readily tradable on
an established securities market or otherwise, (2) such payment is approved of
by a separate vote (taken in accordance with local law) of those who own,
immediately before the "change in ownership or effective control", more than 75%
of the voting power of all outstanding stock of the corporation (other than
those shares not counted as outstanding stock for purposes of Proposed Treasury
Regulation Section 1.280G-1, Q&A 7(c)), and (3) there is adequate information
disclosure (to all the shareholders entitled to vote) of all material facts
concerning all payments or property transfers which (but for this special
shareholder approval provision of Code Section 280G) would be "parachute
payments" with respect to the recipient and payor corporation. Code Section
280G(b)(5)(B); Proposed Treasury Regulation Section 1.280G-1, Q&A 5, 6 and 7.
IV. SHAREHOLDER CONSENT TO AND APPROVAL OF THE PAYMENTS
The management of the Company has concluded that it is advisable, and
in the best interests of the Company (and their respective direct and indirect
shareholders), to eliminate any possible adverse tax treatment resulting from
the Payments proposed to be payable or provided under or as a result of the
Agreements by satisfying the shareholder consent and approval criteria necessary
to exempt the Payments from "parachute payment" status.
Therefore, the shareholders of the Company are each hereby being
requested to vote (pursuant to a separate vote taken in accordance with
applicable law) in favor of, and to approve of and consent to, the Payments (as
defined above) proposed to be payable or provided under the Agreements. Some or
all of the Payments (as defined above), but for such consent and approval of
such shareholders, might be viewed by the IRS as "parachute payments", possibly
resulting in significant non-deductible, excise-taxable "excess parachute
payments". As noted above, the affirmative approval of the holders of more than
75% of the voting power of the Company Stock outstanding immediately prior to
the occurrence of a "change in the ownership or effective control" of the
Company will be required to exempt the Payments (as defined above) from being
treated as "parachute payments" pursuant to Section 280G under the Code.
6
EDG CAPITAL, INC.
FORM OF PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 14, 2001
The undersigned hereby appoints Jack Schwartzberg and Shraga David
Aranoff, and each of them, as agents and proxies, each with the power to appoint
his substitute, to represent and to vote, as designated below, all of the shares
of Common Stock, $.001 par value, of EDG CAPITAL, INC. (the "Company"), held of
record by the undersigned at the close of business on October 18, 2001 at the
Special Meeting of Shareholders (the "Meeting") of EDG CAPITAL, INC. on November
14, 2001, at 10:00 a.m. local time, or at any adjournments or postponements
thereof.
1. AMENDMENT AND RESTATEMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION.
For ______ Against ______ Abstain ______
2. APPROVAL OF AMENDMENT TO THE 2000 LONG TERM INCENTIVE PLAN.
For ______ Against ______ Abstain ______
3. APPROVAL OF AND CONSENT TO CERTAIN PROPOSED PAYMENTS AND/OR PROPERTY
TRANSFERS TO BE MADE PURSUANT TO THE EMPLOYMENT AGREEMENTS WE HAVE
ENTERED INTO WITH EACH OF JACK SCHWARTZBERG, OUR CHAIRMAN, CHIEF
EXECUTIVE OFFICER AND PRESIDENT, AND SHRAGA DAVID ARANOFF, OUR VICE
PRESIDENT, CHIEF OPERATING OFFICER AND TREASURER, THE REIMBURSEMENT AND
TERMINATION PROVISIONS OF THE OPTION AGREEMENTS WE HAVE ENTERED INTO
WITH MR. SCHWARTZBERG AND MR. ARANOFF, AND THE VESTING PROVISIONS OF
THE 2000 LONG-TERM INCENTIVE PLAN FOR PURPOSES OF EXCLUDING SUCH
PAYMENTS FROM THE "PARACHUTE PAYMENT" PROVISIONS OF SECTIONS 280G AND
4999 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
For ______ Against ______ Abstain ______
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
THEREOF.
For ______ Against ______ Abstain ______
(To be signed below)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE
Please sign exactly as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please indicate the capacity in which
signing. When a ballot is given by a corporation, please give your full
corporation name and have the ballot signed by the president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED: ________________, 2001
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Shareholder Name
-----------------------------------
Shareholder Signature
-----------------------------------
Signature if held jointly
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE