CAPRIUS, INC.
NOTICE OF MEETING OF STOCKHOLDERS
JUNE 26, 2002
To the Stockholders of CAPRIUS, INC.
A Special in lieu of Annual Meeting of Stockholders (the "Meeting") of
Caprius, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 26, 2002, at 2:00 p.m., local time, at the offices of Thelen
Reid & Priest LLP, 40 West 57th Street, Room 3030, New York, New York, for the
following purposes:
1. To elect George Aaron, Jonathan Joels, Shrikant Mehta, Sanjay Mody
and Sol Triebwasser, Ph.D. as Directors.
2. To ratify the adoption of the 2002 Stock Option Plan.
3. To transact such other business as may properly come before the
Meeting and any adjournment or adjournments thereof.
Only stockholders of record of the Company's Common Stock at the close
of business on May 22, 2002 are entitled to notice of and to vote at the Meeting
and any adjournment or adjournments thereof.
A Proxy Statement describing the matters to be considered at the
Meeting is attached to this Notice. The Company's Annual Report for the fiscal
year ended September 30, 2001 and Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 2002 accompany this Notice, but they are not deemed to
be part of the Proxy Statement.
By Order of the Board of Directors,
Jonathan Joels
Secretary
May 31, 2002
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, BUT WISH THEIR
STOCK TO BE VOTED ON MATTERS TO BE PRESENTED TO THE MEETING, ARE URGED TO REVIEW
THE ATTACHED PROXY STATEMENT PROMPTLY AND THEN COMPLETE AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING POSTAGE-PAID, ADDRESSED ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
CAPRIUS, INC.
ONE PARKER PLAZA
FORT LEE, NJ 07024
(201) 592-8838
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PROXY STATEMENT
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INTRODUCTION
This Proxy Statement is furnished with respect to the solicitation of
proxies by the Board of Directors of Caprius, Inc., a Delaware corporation (the
"Company"), for the Special in lieu of Annual Meeting of Stockholders (the
"Meeting") of the Company to be held at 2:00 p.m. local time, on June 26, 2002,
and at any adjournment or adjournments thereof, at the offices of Thelen Reid &
Priest LLP, 40 West 57th Street, New York, New York.
The approximate date on which the Proxy Statement and form of proxy are
intended to be sent or given to stockholders is May 31, 2002.
The expense of the solicitation of proxies for the Meeting, including
the cost of mailing, will be borne by the Company. In addition to mailing copies
of the enclosed proxy materials to stockholders, the Company may request
persons, and reimburse them for their expenses with respect thereto, who hold
stock in their names or custody or in the names of nominees for others to
forward copies of such materials to those persons for whom they hold the Common
Stock of the Company and to request authority for the execution of the proxies.
In addition to the solicitation of proxies by mail, it is expected that some of
the officers, directors and regular employees of the Company, without additional
compensation, may solicit proxies on behalf of the Board of Directors by
telephone, telefax and personal interview.
VOTING SECURITIES, VOTING AND PROXIES
RECORD DATE
Only stockholders of record as of the close of business on May 22, 2002
(the "Record Date"), are entitled to notice of and to vote at the Meeting and
any adjournment or adjournments thereof. On the Record Date, the Company had
issued and outstanding 17,098,862 shares common stock, $.01 par value (the
"Common Stock"), and 27,000 shares of Series B Preferred Stock. On all matters
to be voted on at the Meeting, the holders of the Common Stock are entitled to
one vote per share. The holder of the Series B Preferred Stock does not have any
voting rights on the matters to come before the Meeting. The presence at the
Meeting of a majority of the shares of Common Stock, in person or by proxy, are
required for a quorum. Any stockholder who submits a proxy, even though the
stockholder abstains as to one or more proposals, or who is present in person,
shall be counted for the purpose of determining if a quorum is present.
1
VOTING
Under Delaware law, a plurality of the votes cast at the Meeting is
necessary to elect directors and the affirmative vote of a majority of the votes
cast is required to ratify the adoption of the 2002 Stock Option Plan (the "2002
Option Plan").
Broker "non-votes" are included for the purposes of determining whether
a quorum of shares is present at the Meeting, but will not be counted for
purposes of determining the vote on any matter considered at the Meeting. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner. A beneficial owner who
is not also the registered stockholder cannot vote directly at the Meeting. Such
beneficial owner must provide voting instructions to his or her nominee holder,
such as the brokerage firm or bank that holds the shares of record. A beneficial
holder who wishes to vote in person at the Meeting must obtain from the record
holder a proxy issued in the name of the beneficial holder.
At the Meeting ballots will be distributed with respect to each
proposal to be voted upon to each stockholder (or the stockholder's proxy if not
the management proxy holders) who is present and did not deliver a proxy to the
management proxy holders or another person. The ballots shall then be tallied,
one vote for each share owned of record, the votes being in three categories:
FOR, AGAINST or ABSTAIN, except in the case of the proposal to elect directors,
the three categories will be, with respect to each director to be elected, FOR
the director nominee, WITHHOLD AUTHORITY from voting FOR the director nominee or
FOR another person to be elected as a director.
PROXIES
Shares represented by the proxy will be voted and, where the solicited
stockholder indicates a choice with respect to any matter to be acted upon, the
shares will be voted as specified. If no choice is given, a properly executed
proxy will be voted for the election of the nominated directors, for
ratification of the 2002 Option Plan and as to any other matters that may
properly come before the Meeting, at the discretion of the persons designated as
proxies.
REVOCABILITY
Stockholders who execute proxies retain the right to revoke them by
notifying the Company at any time before they are voted. Such revocation may be
effected by execution of a subsequently dated proxy, or by a written notice of
revocation, sent to the attention of the Secretary at the address of the
Company's principal office set forth in the heading to this Proxy Statement or
delivered to him at the Meeting. Unless so revoked, the shares represented by
proxies, if received in time, will be voted in accordance with the directions
given therein.
LIST OF STOCKHOLDERS
In accordance with Delaware law, a list of stockholders entitled to
vote at the Meeting will be available for inspection at the Meeting and for ten
days prior to the Meeting during business hours at the Company's offices by
contacting the Secretary of the Company.
2
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) persons
known to the Company to beneficially own more than 5% of the total of the
outstanding Common Stock, (ii) each director and nominee and (iii) all directors
and officers as a group:
Name and Address of Amount and Nature Percent of
Beneficial Owner(1) of Beneficial Ownership(2)(3) Common Stock
-------------------------- ----------------------------- ------------
Shrikant Metha 4,300,000 shares(4) 21.3%
George Aaron 3,448,589 shares(5) 19.9%
Jonathan Joels 3,350,739 shares(6) 19.4%
Sanjay Mody 500,000 shares(7) 2.8%
Elliott Koppel 185,900 shares(8) 1.1%
Sol Triebwasser, Ph.D. 35,175 shares(9) *
Directors and Officers 11,820,403 shares(10) 55.4%
as a group (6 persons)
-------------------
* Less than one percent (1%).
(1) Unless otherwise provided, the address is c/o Caprius, Inc., One Parker
Plaza, Fort Lee, New Jersey 07024.
(2) All persons named in the table have sole voting and investment power
with respect to all shares owned by them.
(3) The number of shares beneficially owned by each person includes shares
that are currently exercisable or exercisable within 60 days of the
Record Date pursuant to stock options, warrants and convertible
securities. For purposes of computing the percentage of outstanding
shares held by each person as of the Record Date, any shares which such
person has the right to acquire as set forth in the preceding sentence
are deemed to be outstanding, but are not deemed to be outstanding for
purposes of computing the percentage ownership of any other person.
(4) Includes (i) 2,600,000 shares subject to warrants and (ii) 500,000
shares subject to options.
(5) Includes (i) 7,050 shares in retirement accounts, (ii) 211,250 shares
subject to warrants, (iii) 100 shares jointly owned with his wife and
(iv) 50,000 shares subject to options, and excludes 50,000 shares
underlying options which are not exercisable within 60 days of the
Record Date.
(6) Includes (i) 960,000 shares as trustee for his children, (ii) 133,750
shares subject to warrants, (iii) 17,500 shares subject to warrants
owned by his wife for which he disclaims beneficial ownership, and (iv)
50,000 shares subject to options, and excludes 50,000 shares underlying
options which are not exercisable with 60 days of Record Date.
3
(7) Includes 500,000 shares subject to options.
(8) Includes (i) 26,000 shares subject to warrants and (ii) 125,000 shares
underlying options presently exercisable, and excludes 175,000 shares
underlying options which are not exercisable within 60 days of the
Record Date.
(9) Includes 35,175 shares subject to options and excludes 8,325 shares
underlying options granted which are not exercisable within 60 days of
the Record Date.
(10) Includes (i) 2,988,500 shares subject to warrants and (ii) 1,260,175
shares subject to options.
4
PROPOSAL 1
ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES
Five directors will be elected at the Meeting. The Company currently
has five directors, all of whom are management nominees. Robert Spira resigned
as a director as of March 4, 2002. The number of directors has been reduced to
five from six. Each nominee is a member of the current Board of Directors.
The enclosed proxy, unless otherwise specified, will be voted to elect
as directors the nominees named below. Each director elected at the Meeting will
serve until the next Annual Meeting of Stockholders and until his successor is
duly elected and qualified. All nominees have consented to serve as directors.
If a nominee should not be available for election as contemplated, the
management proxy holders will vote for a substitute designated by the current
Board of Directors.
The following table sets forth certain information, as of the Record
Date, concerning the nominees for election as directors of the Company. For
information as to the shares of the Common Stock held by each nominee, see the
section "Securities Ownership of Certain Beneficial Owners and Management"
elsewhere in this Proxy Statement.
Age as of Director Position(s)
Nominee Record Date Since With Company
------- ----------- ------ ------------
George Aaron 49 1999 Chairman of the Board,
Chief Executive Officer
and President
Jonathan Joels 45 1999 Chief Financial Officer,
Treasurer, Secretary and
Director
Shrikant Mehta 57 2000 Director
Sanjay Mody (1)(2) 42 2000 Director
Sol Triebwasser, Ph.D (1)(2) 79 1984 Director
-------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation/Option Committee.
The principal occupations and brief summary of the background of each
Director and executive officer of Caprius during the past five years is as
follows:
Mr. Aaron has been Chairman of the Board, President and CEO of the
Company since June 1999. From 1992 to 1998, Mr. Aaron was the co-founder and CEO
of a drug discovery company, Portman Pharmaceuticals, Inc., and currently serves
on the Board of Directors of Peptor Limited, the company that acquired Portman
Pharmaceuticals. Mr. Aaron was also a co-founder of the bioseparation/agtech
company, CBD Technologies, Inc., of which he remains a Director. From 1983 to
1988, Mr. Aaron was the founder and CEO of a diagnostic company, Technogenetics,
Inc., that he took public and which was later acquired. Prior to 1983, Mr. Aaron
was founder and is a Partner in the Portman Group, Inc. and headed international
5
business development at Schering-Plough Corporation. Mr. Aaron is a graduate of
the University of Maryland.
Mr. Joels has been CFO, Treasurer and Secretary of the Company since
June 1999. From 1992 to 1998, Mr. Joels was the co-founder and CFO of Portman
Pharmaceuticals, Inc. Mr. Joels was also a co-founder of CBD Technologies, Inc.
Mr. Joels' experience includes serving as a principal in Portman Group, Inc.;
CFO of London & Leeds Corp., a subsidiary of a large UK multinational public
company; and as a Chartered Accountant, holding positions with both Ernst &
Young and Hacker Young between 1977 and 1981. Mr. Joels qualified and was
admitted to the Institute of Chartered Accountant in England and Wales in 1981
and holds a BA Honors Degree in Accountancy (1977) from the City of London
School of Business Studies.
Mr. Mehta has been President and CEO of Combine International, Inc., a
wholesale manufacturer of fine jewelry since 1974. He has also served on the
Board of Directors of Distinctive Devices, Inc (OTCBB: DDEV) and of various
private corporations. He holds a BS in Electrical Engineering from Case
Institute of Technology and an MS in Electrical Engineering from Wayne State
University.
Mr. Mody serves as President, CEO and Treasurer of Distinctive Devices,
Inc. (OTCBB: DDEV) since May 2001 and a director thereof since March 2000. Since
March 2000, he has been an active investor in several technology companies. From
July 1996 to February 2000, he served as a Vice President of Investment Advisory
at Laidlaw Global Securities, Inc. From 1995 to 1996, Mr. Mody was a financial
Advisor at Morgan Stanley Dean Witter. He is a director of Real Time Access Inc.
which in April 2002 filed for reorganization under Chapter 11 of the Federal
Bankruptcy law.
Dr. Sol Triebwasser was Director of Technical Journals and Professional
Relations for the IBM Corporation in Yorktown Heights, New York until 1996. He
is currently a Research Staff member emeritus at IBM. Since receiving his Ph.D.
in physics from Columbia University in 1952, he had managed various projects in
device research and applications at IBM. Dr. Triebwasser is a fellow of the
Institute for Electrical and Electronic Engineers, the American Physical Society
and the American Association for the Advancement of Science.
Mr. Aaron and Mr. Joels are brothers-in-law, and Mr. Mehta is the uncle
of Mr. Mody.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive annual
compensation for their service as a director. They do not receive any additional
compensation for serving on any Board committee. The outside directors are
eligible to be granted stock options under the 1993 Stock Option Plan for
Non-Employee Directors and, after ratification, under the 2002 Stock Option
Plan, see Proposal 2 in this Proxy Statement.
COMMITTEES
The Board of Directors has standing Audit and Compensation/Option
Committees.
The Audit Committee reviews with the Company's independent public
accountants the scope and timing of the accountants' audit services and any
other services they are asked to perform, their report on the Company's
financial statements following completion of their audit and the Company's
policies and procedures with respect to internal accounting and financial
controls. In addition, the Audit Committee reviews the independence of the
independent public accountants and makes annual recommendations to the Board of
Directors for the appointment of independent public accountants for the ensuing
year. All members of the Audit Committee are "independent" directors (as defined
in Rule 4200(a)(14) of the National Association of Securities Dealers listing
standards). The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached to this Proxy Statement as Appendix A.
The Audit Committee met once during fiscal 2001.
6
The Compensation/Option Committee reviews and recommends to the Board
of Directors the compensation and benefits of all officers of the Company,
reviews general policy matters relating to compensation and benefits of
employees of the Company and administers the Company's Stock Option Plans.
During fiscal 2001, the Compensation/Option Committee held no meetings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process including the system of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed with management the audited financial statements contained in
the Company's Annual Report on Form 10-KSB for the fiscal year ended September
30, 2001, including a discussion of the quality, not just the acceptability, of
the accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditor, who is
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments on the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee discussed with the independent auditor their
independence from management and the Company, including the matters in the
written disclosures required by the Independence Standards Board.
The Audit Committee discussed with the Company's independent auditors
the overall scope and plans for the audit. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
The Audit Committee reviewed and discussed the audited financial
statements with management. The Audit Committee discussed with the independent
auditors the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU Section 380), as may be modified or
supplemented. The Audit Committee received the written disclosures and the
letter from the independent public accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as may be modified or
supplemented, and discussed with the independent auditors their independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board approved) that
the audited financial statements be included in the Annual Report on Form 10-KSB
for the year ended September 30, 2001 for filing with the Securities and
Exchange Commission.
Sol Triebwasser, Audit Committee Chair
Sanjay Mody, Audit Committee Member
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by
the Company to (i) its Chief Executive Officer and (ii) any other executive
officer whose cash compensation exceeded $100,000 for services performed during
the year ended September 30, 2001.
7
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
Awards Payouts
------ -------
Securities
Other Restricted Underlying
Name and Annual Stock Options LTIP All Other
Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
---------------- ---------- ---------- ---------- -------------- ----------- ------------ --------- ---------------
George 2001 160,000 -0- -0- -0- -0- -0- -0-
Aaron 2000 (1) 160,000 -0- -0- -0- 100,000 (3) -0- -0-
President/CEO
---------------- ---------- ---------- ---------- -------------- ----------- ------------ --------- ---------------
Jonathan Joels 2001 112,000 -0- -0- -0- -0- -0- -0-
CFO 2000 (2) 112,000 -0- -0- -0- 100,000 (3) -0- -0-
---------------- ---------- ---------- ---------- -------------- ----------- ------------ --------- ---------------
(1) Mr. Aaron became President and CEO on June 28, 1999.
(2) Mr. Joels became CFO, Treasurer and Secretary on June 28, 1999.
(3) Stock options to purchase 100,000 shares of Common Stock at $0.15 per
share through October 14, 2009.
The Company does not have any written employment agreements with any of
its executive officers. The Company leases automobiles for Messrs. Aaron and
Joels in amounts not to exceed $1,000 per month and $750 per month,
respectively, and also pays their automobile operating expenses. They are
reimbursed for other expenses incurred by them on behalf of the Company in
accordance with Company policies.
The Company does not have any annuity, retirement, pension or deferred
compensation plan or other arrangements under which any executive officers are
entitled to participate without similar participation by other employees. Under
the Company's 401(k) plan there is no matching contribution by the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Potential Realized
Value at Assumed
Annual Rates of
Individual Stock Price Appreciation Alternative to
Grants for Option Term Grant Date Value
-------------------------------------------------------------------------------------------------------------------------------
% of
Total
Number of Options/
Securities SARS
Underlying Granted to Exercise Grant
Options/ Employee(s) On Base Date
SARs In Fiscal Price Expiration Present
Name Granted(#) Year ($/Sh) Date 5%($) 10%(4) Value
George Aaron -0- -0- -0- -0- -0- -0- -0-
Jonathan Joels -0- -0- -0- -0- -0- -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
8
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
-------------------------------------------------
NAME NUMBER OF SECURITIES VALUE OF UNEXERCISED
---- UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT SEPT. 30, 2001 AT SEPT. 30, 2001
EXERCISABLE/UNEXERCISABLE EXERCISABLE ($)
------------------------- ---------------
George Aaron 25,000/75,000 $-0-
Jonathan Joels 25,000/75,000 $-0-
No options were exercised during the fiscal year ended September 30,
2001.
BOARD MEETINGS
During fiscal year 2001, the Board of Directors met once, and through
the first six months of fiscal year 2002, three meetings have been conducted
excluding written consents. All the Directors attended the meetings.
RELATED TRANSACTIONS
During February and March 2001, the Company completed a short-term
bridge loan aggregating $300,000 through loan notes due on February 28, 2002.
These loans have been extended to June 30, 2002. Included as part of this bridge
loan, Messrs. Mehta, Aaron, Koppel and the spouse of Mr. Joels contributed
$200,000, $17,500, $15,000 and $17,500, respectively. These funds were used
principally for working capital and to purchase raw materials previously owned
by Oxis Health Products, Inc., the previous manufacturer and owner of the Opus
TDM products. The loan notes bear interest at a rate of 11% per annum and are
secured by the assets of the Strax Institute. For each $1.00 principal amount
loaned, the lender received a warrant to purchase one share of Common Stock,
exercisable at $0.08 per share for a period of five years.
In April 2000, Messrs. Aaron and Joels participated in the placement
(the "April 2000 Placement") of units at a price of $3.00 per unit. Each unit
was comprised of three shares of Common Stock, four Series A Warrants
exercisable at $0.50 per share and three Series B Warrants exercisable at $0.75
per share, for a period of five years. Mr. Aaron purchased 30,000 units (90,000
shares, 120,000 Series A Warrants and 60,000 Series B Warrants) and Mr. Joels
purchased 20,000 Units (60,000 shares of Common Stock, 80,000 Series A Warrants
and 40,000 Series B Warrants).
Separately, and in consideration of their participation in the April
2000 Placement, the Company agreed to give the principal investors (including
Mr. Mehta who subsequently became a director) in the placement preemptive rights
for a period of three years with respect to their interest in the Company, such
that, to the extent of their current interest in the Company, these principal
investors each have the right to participate in any sale, for cash, by the
Company of Common Stock or shares of Preferred Stock or other securities that
are exercisable for, convertible into or exchangeable for shares of Common Stock
in a private placement transaction, subject to certain exceptions.
The Company also agreed to provide these principal investors with most
favorable investors rights, such that if any greater rights are received by the
holders of the next rounds of equity financing by the Company occurring within
one year after the date of purchase, subject to certain exceptions, the Company
would put the principal investors in the same position as the holders of any
subsequent investments. Furthermore, in the event that any subsequent investment
is at a price per share of less than the equivalent of $0.722 per share of
Common Stock (i.e., less than $0.722 per share of equity security, (including
exercise price, if any) exercisable for or convertible into one share of Common
Stock), then the Company would issue to Mr. Mehta, without additional
consideration, the number of shares of Common Stock that he would have received
9
if he had made his investment in the April Placement on the terms of any
subsequent investment within the year. There was no subsequent investment within
the year.
Additionally, in consideration for his participation in the April 2000
Placement, the Company separately granted Mr. Mehta options to purchase 500,000
shares of Common Stock, exercisable at $1.00 per share for a period of three
years. Mr. Mody, who subsequently became a director, received an option to
purchase 500,000 shares of Common Stock, exercisable at $1.00 per share for a
period of three years, in connection with his services in procuring investors
for the April 2000 Private Placement.
In March 2000, Messrs. Aaron, Joels and Koppel loaned $25,000, $25,000 and
$20,000 respectively to the Company on an unsecured basis in order to facilitate
shipment of sales products from Oxis Health Products, Inc. These loans were
repayable at the earlier of 90 days or upon the closing of a securities
placement, and bore interest at the rate of 12% per annum, payable on maturity.
In addition, for each $1.00 principal amount loaned, the Company granted
warrants to purchase 0.55 shares of Common Stock at an exercise price of $1.00
per share exercisable for five years. These loans were repaid in April 2000 from
the proceeds of the April 2000 Placement.
PROPOSAL 2
RATIFICATION OF 2002 STOCK OPTION PLAN
GENERAL
The Board of Directors of the Company has unanimously approved for
submission to a vote of the stockholders a proposal to ratify the adoption of
the 2002 Stock Option Plan (the "2002 Option Plan"). The 2002 Option Plan covers
1,500,000 shares of Common Stock reserved for issuance pursuant to the exercise
of options granted thereunder. A copy of the 2002 Option Plan is attached to
this Proxy Statement as Appendix B, and statements herein regarding the Plan are
qualified by reference to the complete Plan.
The Board of Directors believes that the 2002 Option Plan should be of
benefit in attracting and retaining key employees, directors, consultants and
advisors who contribute to the Company's success and in acquiring companies
whose employees are presently covered by stock options. As explained below, the
current Stock Option Plans expire in 2003. However, no options will be granted
under the 2002 Option Plan pending stockholder ratification.
PRESENT OPTION PLANS
The Company has a 1993 Employee Stock Option Plan (the "Employee Plan")
covering 1,000,000 shares of Common Stock and a 1993 Stock Option Plan for
Non-Employee Directors (the "Directors Plan") covering 200,000 shares of Common
Stock. Both these Plans expire on May 25, 2003, after which no options may be
granted thereunder, however, options granted prior to the expiration date may be
exercised according to their respective stated terms.
At March 31, 2002, under the Employee Plan, options to purchase
1,749,832 shares have been granted, of which 10,107 were exercised, 1,003,725
were terminated or cancelled, and 736,000 were outstanding at exercise prices
ranging from $0.15 to $0.84 per share, leaving 253,893 options subject to future
grant thereunder.
At March 31, 2002, under the Directors Plan, options to purchase
146,000 shares have been granted, of which none were exercised, 54,000 were
terminated or cancelled, and 92,000 were outstanding at exercise prices ranging
from $0.15 to $5.00 per share, leaving 108,000 options subject to future grant
thereunder.
10
In addition to the options granted under the Plans, at March 31, 2002,
there were outstanding options to purchase 1,088,861 shares of Common Stock
granted under agreements at prices ranging from $0.10 and $20.10 per share
exercisable through December 2009. Of the total outstanding, 1,000,000 options
were granted to directors prior to their directorships and 35,000 were granted
to former employees.
PURPOSES OF THE 2002 OPTION PLAN
The purposes of the 2002 Option Plan are to (i) provide incentives to
certain directors, officers, employees and other persons who perform services on
behalf of the Company and any subsidiaries of the Company by providing them with
opportunities to purchase Common Stock in the Company pursuant to options
granted thereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO") or
which do not qualify as ISOs ("Non-Qualified Option" or "NQSO") and (ii) to
individuals who are directors but not also employees of the Company and the
subsidiaries ("Non-Employee Directors"), and to individuals who are independent
contractors, or consultants or advisors to the Company or its subsidiaries, by
providing them with opportunities to purchase Common Stock pursuant to NQSOs.
ADMINISTRATION
The 2002 Option Plan will be administered by the Compensation/Option
Committee (the "Committee"), each member of which is a Non-Employee Director
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or by the whole Board of Directors. Subject to
specific provisions in the 2002 Option Plan, the Committee will have the
authority (i) to select the individuals (the "Optionees") who are to be granted
options from among those eligible to participate in the 2002 Option Plan, (ii)
to establish the number of shares which may be issued under each option, (iii)
to determine at what time options may be granted, (iv) to determine the exercise
price of shares subject to each option, (v) to determine the time at which each
option shall be come exercisable and the duration of the exercise period, (vi)
to determine whether restrictions are to be imposed on shares subject to options
and the nature of such restrictions, if any, and (vii) to interpret the Option
Plan and prescribe and rescind rules and regulations relating to it.
ELIGIBILITY
Options may be granted only to (i) individuals who are employees of the
Company and its subsidiaries, including officers and directors who are also
employees at the time the Option is granted, (ii) Non-Employee Directors, and
(iii) any other persons who perform services for or on behalf of the Company and
its subsidiaries, affiliates or any entity in which the Company has an interest,
or who are deemed by the Board of Directors to be in a position to perform such
services in the future. Options that constitute ISOs may only be granted to
employees described in clause (i) above, and Non-Employee Directors shall only
be granted NQSOs. No option shall be granted pursuant to the 2002 Plan after
May 15, 2012.
OPTION PRICE AND TERMS
Options granted under the 2002 Option Plan may be either ISOs or NQSOs.
The option price of each share of Common Stock subject to an option will be
fixed by the Committee but shall not be less than the fair market value of the
Common Stock on the date of grant of the option, defined as the average bid and
ask price over the prior five days' trading (or 110% of the fair market value
for ISOs granted to any person who holds more than 10% of the outstanding voting
stock). An option designated as an ISO is intended to qualify as such under
Section 422 of the Code. Thus, the aggregate fair market value, determined at
the time of grant, of the shares with respect to which ISO's are exercisable for
the first time by an individual during any calendar year may not exceed
$100,000. NQSOs are not subject to this requirement. Certain adjustments in the
option price may be made for extraordinary dividend distributions. The Committee
shall determine the option period, provided it is not longer than five years in
11
the case of ISOs granted to employees who hold 10% of the outstanding stock of
the Company, 10 years in the case of ISOs generally, or 10 years, in the case of
NQSOs, subject to earlier termination, and also the vesting period and the
payment terms.
In the event of termination of employment, the Optionee may exercise
his options at any time up to one year of the termination, but in no event later
than the expiration date of the option, as determined by the Committee; however,
if the employee is terminated "for cause," the option expires immediately. All
options would vest immediately upon a "change of control" of the Company. Upon
exercise of an option, payment for shares may be made in cash, or, if the option
agreement so provides, in shares of Common Stock calculated based upon their
fair market value as of the date of their delivery or, a combination of stock
and cash.
The exercise price and the number and kind of shares that may be
purchased upon exercise of options granted under the 2002 Option Plan, and the
number of shares which may be granted pursuant to the Plan, are subject to
adjustment in certain events, including stock splits, recapitalizations and
reorganizations.
TRANSFERABILITY
Options granted under the 2002 Option Plan will not be assignable or
transferable by the Optionee otherwise than (i) by will or the laws of descent
and distribution, (ii) pursuant to a qualified domestic relations order or (iii)
with respect to NQSOs, to a spouse or lineal descendant of the optionee. Options
are exercisable during the lifetime of the Optionee only by the Optionee or by
the Optionee's guardian or legal representative.
TERMINATION, SUSPENSION OR MODIFICATION OF THE 2002 OPTION PLAN
The Board of Directors may terminate, suspend, or modify the 2002
Option Plan at any time but may not, without authorization of the Company's
stockholders, effect any change which under Section 16(b) of the Exchange Act,
applicable state corporation law or tax law, or the rules of any national
securities exchange or national quotation system on which the Common Stock is
then listed or traded requires the prior approval of stockholders, or increase
the maximum number of shares of Common Stock for which options may be granted
thereunder or extend the term of the 2002 Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
A participant under the 2002 Option Plan does not realize income for
federal income tax purposes as a result of (i) the grant of an ISO under the
2001 Option Plan or (ii) the exercise of an ISO under the 2002 Option Plan. The
Company is not entitled to a federal income tax deduction upon the grant or
exercise of an ISO. Long-term capital gains tax rates will apply to the gain
(excess of the amount received for the shares over the amount paid for the
shares) at the time that the participant disposes of the shares provided that
certain holding requirements discussed below are met. The spread between the
exercise price and the fair market value of the transferred shares at the time
of the exercise of an ISO is included in alternative minimum taxable income
subject to the alternative minimum tax for the taxable year in which such
transfer occurs. If the shares are disposed of in the same taxable year and the
amount realized is less than that fair market value at the time of exercise, the
amount included in the alternative minimum taxable income will not exceed the
amount realized over the adjusted basis of the shares.
The availability of the income tax treatment discussed in the foregoing
paragraph is subject to two conditions. First, the participant must continue to
be an employee of the Company or a parent or subsidiary of the Company at all
times during the period beginning on the date that the ISO was granted and
ending (with exceptions for disability and death) on the date three months
before the option is exercised. Second, such income tax treatment is available
only if the participant does not dispose of the shares acquired pursuant to the
exercise of the ISO (i) within two years from the date of granting of the option
nor (ii) within one year after the shares were issued pursuant to the exercise
12
of the option. If the participant disposes of the shares prior to the expiration
of the required holding period, the participant realizes ordinary income in the
year of disposition and the same amount is then deductible by the Company.
A participant realizes no income as a result of the grant of a NQSO
under the 2002 Option Plan. However, a participant realizes ordinary income upon
the exercise of the NQSO (or at the later date described below) equal to the
excess of the fair market value of the shares at the time of exercise (or at
such later date) over the option exercise price. The Company is not entitled to
a federal income tax deduction upon the grant of the NQSO, but upon transfer of
the shares to such participant upon its exercise (or at the later date described
below) an amount corresponding to the participant's taxable income becomes
deductible by the Company. The amount of income recognized at the time of
exercise is added to the option price to determine the participant's basis in
the shares, and any further appreciation upon ultimate sale of the shares is
taxable as short- or long-term capital gains (with the holding period measured
from the date of exercise). If the shares received upon exercise are not
transferable and are subject to a substantial risk of forfeiture, the
realization of compensation income is postponed until the earlier of the lapse
of the forfeiture restrictions or the making of an "IRC 83(b) election." For
such purposes, potential liability by Company insiders under securities laws
with respect to short swing trading constitutes a substantial risk of
forfeiture. Where other shares of stock have been purchased within six months of
exercise of the option, recognition of the compensation attributable to such
exercise may be postponed for a period of six months from the date of purchase
of such other shares of stock due to such liability.
THE FOREGOING SUMMARY OF THE EFFECT OF UNITED STATES FEDERAL INCOME
TAXATION LAWS UPON THE OPTIONEE OR PURCHASER AND THE COMPANY IN CONNECTION WITH
THE 2002 OPTION PLAN DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE
MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES
NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" ratification
of the 2002 Stock Option Plan.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholders who desire to submit proposals for inclusion in the
Company's proxy statement for the 2003 Annual Meeting of Stockholders of the
Company must submit such proposals to the Secretary of the Company at the
Company's principal executive offices by November 30, 2002. Nothing in this
paragraph shall be deemed to require the Company to hold a 2003 Annual Meeting
upon the anniversary date of the 2002 Meeting or to include in its proxy
statement and proxy relating to any such 2003 Annual Meeting any stockholder
proposal that does not meet the requirements under Rule 14a-8 under the Exchange
Act for including in effect at such time.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of BDO Seidman, LLP, the Company's independent public
accountants for the two fiscal years ended September 30, 2001, may attend the
Meeting. If in attendance they will also be given an opportunity to make a
statement if they so desire. The Board of Directors has not yet selected the
Company's independent accountants for fiscal year ending September 30, 2002.
13
The aggregate fees billed by BDO Seidman LLP for services rendered to
the Company for the 2001 fiscal year was $50,000. These services consisted of
the audit of the Company's annual financial statements for the year ended
September 30, 2001, and for the reviews of the financial statements included in
the Company's quarterly reports on Form 10-QSB for that fiscal year.
OTHER BUSINESS
Management is not aware of any matters to be presented at the Meeting
other than those set forth in this Proxy Statement. However, should any other
business properly come before the Meeting, or any adjournment or adjournments
thereof, the enclosed proxy confers upon the persons entitled to vote the shares
represented by such proxies, discretionary authority to vote the same in respect
to any such other business in accordance with their best judgment in the
interest of the Company.
By Order of the Board of Directors
Jonathan Joels
Secretary
May 31, 2002
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
14
CAPRIUS, INC. STOCKHOLDERS MEETING
TO BE HELD ON JUNE 26, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CAPRIUS, INC., a Delaware corporation
(the "Company"), acknowledges receipt of the Notice of Meeting of Stockholders
and Proxy Statement, dated May 31, 2002, and hereby constitutes and appoints
George Aaron and Jonathan Joels, or either of them acting singly in the absence
of the other, with the power of substitution in either of them, the proxies of
the undersigned to vote with the same force and effect as the undersigned all
shares of Common Stock of the Company held by the undersigned at the
Stockholders Meeting to be held on June 26, 2002, and at any adjournment or
adjournments thereof, hereby revoking any proxy or proxies heretofore given and
ratifying and confirming all that said proxies may do or cause to be done by
virtue thereof with respect to the following matters:
The undersigned hereby instructs said proxies or their substitutes:
1. Election of five persons nominated by the Board of Directors to
serve as Directors as indicated below:
FOR all nominees listed below: [ ] (except as indicated)
WITHHOLD AUTHORITY to vote for all nominees listed below: [ ]
NOMINEES: George Aaron, Jonathan Joels, Shrikant Mehta, Sanjay Mody and
Sol Triebwasser, Ph.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee or
nominees, write such nominee's or nominees' name(s) in the space
provided below.)
2. Ratify the adoption of the 2002 Stock Option Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon such other matters as may properly come before the Meeting or
any adjournment or adjournments thereof
This Proxy when properly executed will be voted as directed. If no
direction is indicated, this Proxy will be voted FOR the election of the five
named individuals as directors, FOR the other proposal and in accordance with
the judgment of the persons named as proxies above on any other matter that may
come before the Meeting.
PLEASE SIGN, DATE AND MAIL THIS PROXY
IMMEDIATELY IN THE ENCLOSED ENVELOPE.
Name _________________________
Name (if joint)
--------------------------------
Date _____________, 2002
Please sign your name exactly as
it appears hereon. When signing
as attorney, executor,
administrator, trustee or
guardian, please give your full
title as it appears hereon. When
signing as joint tenants, all
parties in the joint tenancy
must sign. When a proxy is given
by a corporation, it should be
signed by an authorized officer
and the corporate seal affixed.
No postage is required if
returned in the enclosed
envelope.
APPENDIX A
CAPRIUS, INC.
2002 STOCK OPTION PLAN
1 Purpose. This 2002 Stock Option Plan (the "Plan") of Caprius, Inc.,
a Delaware corporation (the "Company"), is intended to provide incentives:
(i) to certain employees, officers, directors and consultants who perform
services for or on behalf of the Company and any subsidiaries of the Company
(collectively, the "Subsidiaries") by providing them with opportunities to
purchase capital stock in the Company pursuant to options granted hereunder
which qualify as "incentive stock options" under Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs") or which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); and (ii) to
individuals who are directors but not also employees of the Company and the
Subsidiaries ("Non-Employee Directors"), and to individuals who are members of
any advisory board or an independent consultant to the Company or its
Subsidiaries, by providing them with opportunities to purchase capital stock in
the Company pursuant to Non-Qualified Options. Both ISOs and Non-Qualified
Options are referred to hereinafter individually as an "Option" and collectively
as "Options," and persons to whom Options are granted are referred to
hereinafter individually as an "Optionee" and collectively as "Optionees." As
used herein, the term "Subsidiary" means "subsidiary corporation" as that term
is defined in Section 424(f) of the Code.
2 Administration of the Plan. The Plan shall be administered by the
Compensation/Option Committee of the Board of Directors of the Company or by the
Board of Directors of the Company (collectively, the "Committee"). The Committee
shall consist of two or more members, each member of which shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 or any successor
provision ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Subject to the terms of the Plan, the Committee shall have
the authority to (i) determine the employees of the Company and Subsidiaries
(from among the class of employees eligible under Section 4 hereof to receive
ISOs) to whom ISOs may be granted; (ii) determine the person and the number of
shares which may be issued under each Option; (iii) determine the time or times
at which Options may be granted; (iv) determine the exercise price of shares
subject to each Option, which price shall not be less than the fair market value
as specified in Section 6; (v) determine (subject to Sections 7 and 9) the time
or times when each Option shall become exercisable and the duration of the
exercise period; (vi) determine whether restrictions are to be imposed on shares
subject to Options and the nature of such restrictions, if any, and (vii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it shall be final. The Committee may
from time to time adopt such rules and regulations for carrying out the Plan as
1
it may deem best. No member of the Committee or of the Board of Directors of the
Company shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.
3 Stock. The stock delivered under this Plan shall be the Company's
Common Stock, par value $.01 per share (the "Common Stock"), either authorized
and unissued, treasury stock or shares purchased on the open market. The
aggregate number of shares which may be issued pursuant to the Plan is
1,500,000, subject to adjustment as provided in Section 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part, the unpurchased shares subject to such Option shall again be
available for grants of Options under the Plan.
4 Eligible Employees and Others. ISOs and Non-Qualified Options may be
granted to individuals who are employees of the Company and its Subsidiaries,
including officers and directors who are also employees at the time the Option
is granted. Non-Qualified Options may be granted to Non-Employee Directors and
independent contractors, advisors and consultants to the Company and its
Subsidiaries, affiliates or any entity in which the Company has an interest, or
who are deemed by the Committee to be in a position to perform such services in
the future. Granting of any Option to any person shall neither entitle that
person to, nor disqualify him from, participation in any other Option grant.
5 Term of Plan; Granting of Options. The term of the Plan will
commence on the date of adoption of the Plan by the Company's Board of
Directors, subject to approval by stockholders within one year of adoption, and
terminate on the day immediately preceding the tenth anniversary of said
adoption, except as to Options outstanding on that date and subject to earlier
termination as provided in Sections 9 and 10 hereof. Options may be granted
under the Plan at any time during the term of the Plan. The date of grant of an
Option under the Plan shall be the date specified by the Committee at the time
it grants the Option; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant. No Option shall be
granted pursuant to the Plan after May 15, 2012.
6 Minimum Exercise Price; ISO Limitations.
---------------------------------------
6.1 Price for Non-Qualified Options. The exercise price per share
for each Non-Qualified Option granted under the Plan shall not be less than the
fair market value of the Common Stock on the date of grant of the Option, and in
no event shall be less than the minimum legal consideration required therefor
under the laws of the State of Delaware or the laws of any jurisdiction in which
the Company or its successors in interest may be organized.
6.2 Price for ISOs. The exercise price per share for each ISO
granted under the Plan shall not be less than the fair market value per share of
Common Stock on the date of such grant. In the case of an ISO to be granted to
an employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Subsidiary
(a "10% Employee"), the price per share for such ISO shall not be less than
2
one hundred ten percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock ownership under
this Section, the rules of Section 424(d) of the Code shall apply.
6.3 $100,000 Annual Limitation on ISO Vesting. To the extent that,
in the aggregate under this Plan and all incentive stock option plans of the
Company and any Subsidiary, ISOs become exercisable for the first time by an
employee during any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of $100,000, such
excess amount of stock shall be deemed to have been granted as a Non-Qualified
Option, and not as an ISO.
6.4 Determination of Fair Market Value. If at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the last business day for which the
prices or quotes discussed in this sentence are available prior to the date such
Option is granted and shall be (i) the mean (on that date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; (ii) the average of the last reported sale prices
of the Common Stock on the NASDAQ National Market or Small Cap Market (or other
interdealer quotation system), for the five trading dates immediately preceding
the date of grant, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid prices (or average
of bid prices) last quoted (on that date) by the OTC Electronic Bulletin Board
or other established quotation service for over-the-counter securities for the
five trading dates immediately preceding the date of grant, if the Common Stock
is not reported on the NASDAQ National Market or Small Cap Market (or other
interdealer quotation system); but in no event shall the exercise price be less
than the closing prices on the date of grant. However, if the Common Stock is
not publicly traded at the time an Option is granted under the Plan, the "fair
market value" shall be deemed to be the fair value of the Common Stock as
determined by the Committee in good faith after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length.
7 Option Duration. Subject to earlier termination as provided in
Sections 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten (10) years from the date of grant in the
case of Non-Qualified Options, (ii) ten (10) years from the date of grant in the
case of ISOs generally, and (iii) five (5) years from the date of grant in the
case of ISOs granted to a 10% Employee, as determined under Section 6.02.
Subject to earlier termination as provided in Sections 9 and 10, the term of
each ISO shall be the term set forth in the original instrument granting such
ISO, except with respect to any part of such ISO that is converted into a
Non-Qualified Option pursuant to Section 16.
8 Exercise of Option. Subject to the provisions of Sections 9 through
12, each Option granted under the Plan shall be exercisable as follows:
3
8.1 Vesting. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify, provided that an Option granted to a director or
executive officer of the Company may not vest earlier than six (6) months from
the date of grant.
8.2 Full Vesting of Installments. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
8.3 Partial Exercise. Each Option or installment may be exercised
at any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
8.4 Acceleration of Vesting. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option, provided that
the Committee shall not, without the consent of an Optionee, accelerate the
exercise date of any installment of any Option granted to any employee as an ISO
if such acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code, as described in Section 6.03.
9 Termination of Employment or Service. If an Optionee ceases his
employment with, or service by, the Company and all Subsidiaries other than by
reason of death or disability as defined in Section 10 or by the Company or any
Subsidiary for cause, no further installments of his Options shall become
exercisable, and his Options shall terminate after the passage of one (1) year
from the date of termination of his employment or service (or three (3) months
as to ISOs), but in no event later than on their specified expiration dates,
during which period he shall have the right to exercise any Options exercisable
by him on the date of termination of employment, subject to exercise for such
other periods as determined by the Committee at the time of grant. Options held
by an Optionee whose termination of employment or service is for cause shall
terminate upon such termination. For purposes of this Section 9 only, employment
or service shall be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service). A bona fide leave of absence with the written approval of
the Committee shall not be considered an interruption of employment or service
under this Section 9, provided that such written approval contractually
obligates the Company or any Subsidiary to continue the employment or service of
the Optionee after the approved period of absence. Options granted under the
Plan shall not be affected by any change of employment or service within or
among the Company and Subsidiaries, so long as the Optionee continues to be an
employee or independent contractor or advisor of the Company or any Subsidiary.
Nothing in the Plan shall be deemed to give any Optionee the right to be
retained in employment or other service by the Company or any Subsidiary for any
period of time. The Committee may, in its sole discretion, change the
termination period for any Option from the period provided for in this Section 9
or in Section 10 to a period less than the respective periods specified herein.
4
10 Death; Disability.
10.1 Death. If an Optionee ceases his employment with or service
by the Company and all Subsidiaries by reason of his death, any Option may be
exercised, to the extent of the number of shares with respect to which he could
have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the Option by will or by the laws
of descent and distribution at any time within one (1) year from the date of the
Optionee's death or such later date as fixed by the Committee as to
Non-Qualified Options, but in no event later than on their specified expiration
dates.
10.2 Disability. If an Optionee ceases his employment with or
service by the Company and all Subsidiaries by reason of his disability, he
shall have the right to exercise any Option held by him on the date of
termination of employment, to the extent of the number of shares with respect to
which he could have exercised it on that date, at any time prior to one (1) year
from the date of the termination of the Optionee's employment or service or such
later date as fixed by the Committee as to Non-Qualified Options, but in no
event later than on their specified expiration dates. For the purposes of the
Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or successor statute.
11 Assignability. No Option shall be assignable or transferable by the
Optionee except (i) by will or by the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order as defined in Section 414(p) of
the Code or (iii) with respect to Non-Qualified Options, to a spouse or lineal
descendant or lineal ascendant of the Optionee.
12 Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve (the "Option Agreements"). The Option Agreements shall
conform to the terms and conditions set forth in Sections 6 through 11 hereof
and may contain such other provisions as the Committee deems advisable which are
not inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon the exercise of Options. The Committee may from time
to time confer authority and responsibility on one or more of its own members
and/or one or more officers of the Company to execute and deliver the Option
Agreements. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of the Option Agreements.
13 Adjustments. Upon the occurrence of any of the following events, an
Optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the Optionee and the Company relating to such Option:
13.1 Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a smaller or greater number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately decreased or increased
5
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
13.2 Consolidations or Mergers. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"), the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder (the "Successor Board"), shall, as to outstanding Options,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
the consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; (ii) upon written notice to the Optionees,
provide that all Options must be exercised, to the extent then exercisable,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of the
shares subject to such Options (to the extent then exercisable) over the
exercise price thereof.
13.3 Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Section 13.02) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an Optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would have received
if he had exercised his Option prior to such recapitalization or reorganization.
13.4 Change in Control. In the event of a change in control of the
Company, all Options under the Plan which are not fully vested shall vest 100%
and shall be immediately exercisable. For purposes of this Plan, a "change in
control" shall mean any of the following events: (a) the Company receives a
report on Schedule 13D filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Exchange Act disclosing that any person, group,
corporation or other entity is the beneficial owner, directly or indirectly, of
twenty percent (20%) or more of the outstanding Common Stock of the Company;
(b) any person (as such term is defined in Section 13(d) of the Exchange Act),
group, corporation or other entity other than the Company or any Subsidiary,
purchases shares pursuant to a tender offer or exchange offer to acquire any
Common Stock of the Company for cash, securities or any other consideration,
provided that after consummation of the offer, the person, group, corporation or
other entity in question is the beneficial owner (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of twenty percent
(20%) or more of the outstanding Common Stock of the Company (calculated as
provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the case of
rights to acquire common stock); (c) the stockholders of the Company approve
(i) any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other property, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; or
(d) there shall have been a change in a majority of the members of the Board of
Directors of the Company within a twenty-four (24) month period unless the
election or nomination for election by the Company's stockholders of each new
6
director was approved by the vote of two-thirds of the directors then still in
office who were in office at the beginning of the twenty-four (24) month period.
13.5 Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Section 13.01, 13.02, 13.03 or 13.04 with respect
to ISOs shall be made only after the Committee, after consulting with counsel
for the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the Code)
or would cause any adverse tax consequences for the holders of such ISOs. If the
Committee determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments.
13.6 Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
13.7 Issuances of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
13.8 Fractional Shares. No fractional shares shall be issued under
the Plan and the Optionee shall receive from the Company cash in lieu of such
fractional shares.
13.9 Adjustments. Upon the happening of any of the events
described in Section 13.01, 13.02, 13.03 or 13.04 above, the class and aggregate
number of shares set forth in Section 3 hereof that are subject to Options which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this Section 13 and, subject to Section 2 hereof, its
determination shall be conclusive.
14 Means of Exercising Options. An Option (or any installment or
portion of an installment thereof) shall be exercised by giving written notice
to the Company at its principal office address. The notice shall identify the
Option being exercised and specify the number of shares as to which such Option
is being exercised, accompanied by full payment of the purchase price therefor
either: (a) in United States dollars in cash or by check; (b) at the discretion
of the Committee, through delivery of shares of Common Stock having a fair
market value equal as of the date of the exercise to the cash exercise price of
the Option; or (c) at the discretion of the Committee, by any combination of (a)
and (b) above. If the Committee exercises its discretion to permit payment of
the exercise price of an ISO by means of the methods set forth in clauses (b) or
(c) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the Option in question. An Optionee shall not have the
rights of a stockholder with respect to the shares covered by his Option until
the date of issuance of a stock certificate to him for such shares. Except as
7
expressly provided above in Section 13 with respect to changes in capitalization
and stock dividends, no adjustment shall be made for dividends or similar rights
for which the record date is before the date such stock certificate is issued.
15 Termination or Amendment of Plan. The Board of Directors may
terminate or amend the Plan in any respect at any time; however, without the
approval of the Company's stockholders obtained within twelve (12) months before
or after the Board of Directors adopts a resolution authorizing any such
termination or amendment, the Board of Directors may not so terminate or amend
the Plan if prior stockholder approval is then required by Section 16(b) of the
Exchange Act, applicable Delaware law or tax law, or the rules of any applicable
national securities exchange or national stock quotation system on which the
Common Stock may then be listed or traded. Except as otherwise provided in this
Section 15, in no event may action of the Board of Directors or stockholders
alter or impair the rights of an Optionee, without his consent, under any Option
previously granted to him.
16 Notice to Company of Disqualifying Disposition. By accepting an ISO
granted under the Plan, each Optionee agrees to notify the Company in writing
immediately after making a Disqualifying Disposition, as described in
Sections 421, 422 and 424 of the Code and regulations thereunder, of any stock
acquired under the Plan (or stock received in a transaction described in
Section 424(b) or 424(c)(1)(B) of the Code, relating to distributions of stock
with respect to stock acquired under the Plan and certain tax-free exchanges of
stock acquired under the Plan for other stock or securities). A Disqualifying
Disposition (with certain exceptions) is generally any disposition within two
(2) years of the date the ISO was granted or within one (1) year of the date the
ISO was exercised, whichever period ends later. With respect to stock held
jointly with right of survivorship, a termination of such joint tenancy may
constitute a Disqualifying Disposition. This Section 16 shall be made binding
upon the Optionee and upon any transferee of stock described in this Section to
whom Section 424(c)(4)(B) of the Code applies.
17 Withholding of Taxes. Upon the exercise of an Option, the Company
may withhold federal, state and local taxes whenever the Company determines that
such withholding is required. The Committee in its discretion may condition the
exercise of an Option on the Optionee's making satisfactory arrangement for such
withholding. In addition to tax withholding, government regulations may impose
reporting or other obligations on the Company with respect to the Plan. For
example, the Company may be required to send tax information statements to
employees and former employees that exercise ISOs.
18 Governing Law, Construction. The validity and construction of the
Plan and the agreements evidencing Options shall be governed by the laws of the
State of Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized. In construing this Plan, the singular
shall include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
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APPENDIX B
CAPRIUS, INC.
BOARD OF DIRECTORS' AUDIT COMMITTEE
CHARTER
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I.
PURPOSE
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The Audit Committee assists the Board in fulfilling its oversight
responsibilities to the stockholders, and serves as a communication link among
the Board, management, the independent auditors, and the internal auditors.
II.
AUTHORITY
---------
The Audit Committee and the Board have the ultimate authority to select,
evaluate and, where, appropriate, replace the independent auditors (or nominate
the independent auditors to be proposed for stockholder approval in any proxy
statement).
The Audit Committee may conduct or authorize investigations into any
activities it deems necessary and appropriate. The Audit Committee may retain
independent counsel, auditors or others to conduct investigations or assist in
the accomplishment of its responsibilities.
III.
ACCOUNTABILITY OF INDEPENDENT AUDITORS
--------------------------------------
The independent auditors are ultimately accountable to the Board and the
Audit Committee, as representatives of stockholders.
IV.
RESPONSIBILITIES
----------------
The Audit Committee shall:
1. Share with the Board the ultimate responsibility to select,
evaluate, and, where appropriate, replace the independent
auditors (or nominate the independent auditors to be proposed for
stockholder approval in any proxy statement).
2. Review the fees and expenses of the independent auditors.
3. Review any nonauditing services performed or to be performed for
the Company by the independent auditors and the fees for such
services.
4. Review annually the overall audit plan as proposed by the
independent auditors and management, including the scope of the
examination to be performed, the assistance to be provided by the
internal auditors and any developments in accounting principles
and auditing standards that may affect either the financial
statements or the audit.
5. Prior to release of the annual report to the stockholders, review
and discuss the audited financial statements and the results of
the audit with the independent auditors and management, which
review and discussion shall include the following, as applicable:
(a) any major problems encountered by the independent auditors and
the resolution thereof,
(b) the effect on the audit of any developments referred to in clause
(4) above,
(c) any unresolved differences between the independent auditors and
management,
(d) discussion with the independent auditors of the matters required
to be discussed by Statement on Auditing Standards 61, as the
same may be modified or supplemented,
(e) receipt of the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, as the same may be modified or supplemented, and
discussion with the independent auditors the independent
auditors' independence, and
(f) any other significant comments or recommendations of the
independent auditors or management.
6. With the independent auditors, management and the internal
auditors, review and analyze periodically the Company's internal
accounting control systems and related corporate policies and
control systems, and assess management's attitude toward internal
controls and the process for establishing and monitoring internal
controls.
7. Review annually the scope and results of the internal audit
program and meet with the internal audit manager periodically
(out of the presence of management and the independent auditors,
as appropriate). Review with the internal audit manager
compliance with appropriate audit standards.
8. Review and concur with management in the appointment or
replacement of the internal audit manager.
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9. Meet with the independent auditors periodically (out of the
presence of management, as appropriate) with respect to any of
the foregoing.
10. Report to the Board on the scope and results of the annual audit,
including a report prepared in accordance with Item 306 of SEC
Regulation S-B, as the same may be amended or replaced, to be
included in the Company's proxy statement and, from time to time,
report on other activities of the Audit Committee and recommend
to the Board such changes, additions or variations in the
auditing, accounting and control functions as the Audit Committee
may deem desirable.
11. Review with management the unaudited quarterly financial
information to be included in the Company's Quarterly Report on
Form 10-QSB.
12. Recommend to the Board whether the audited financial statements
should be included in the Company's Annual Report on Form 10-KSB.
13. Require that the independent auditors submit to the Audit
Committee a formal written statement delineating all
relationships between the independent auditors and the Company,
consistent with Independence Standards Board Standard No. 1, as
the same may be modified or supplemented.
14. Actively engage in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent
auditors and for taking, or recommending that the full Board
take, appropriate action to oversee the independence of the
independent auditors.
15. Review with management and the independent auditor any
correspondence with regulators or governmental agencies and any
employee complaints or published reports which raise material
issues regarding the Company's financial statements or accounting
policies.
16. Review with the Company's General Counsel any legal matters that
may have a material impact on the financial statements, the
Company's compliance policies and any material reports or
inquiries received from regulators or governmental agencies.
17. Review and reassess annually the adequacy of the Audit Committee
Charter.
V.
ADMINISTRATIVE
--------------
General
The Audit Committee is a standing committee of the Board. Audit Committee
members are elected annually by the Board. The responsibilities of Audit
Committee members are in addition to those duties set out for a member of the
3
Board. Meetings will be held whenever deemed necessary by the Audit Committee
Chairman.
Audit Committee Composition and Expertise
The Audit Committee shall consist of at least three members, each of whom
shall be an independent director, as defined below, and each of whom shall be
able to read and understand fundamental financial statements, including a
company's balance sheet, income statement, and cash flow statement or will
become able to do so within a reasonable period of time after his or her
appointment to the Audit Committee. Additionally, at least one member of the
Audit Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Under exceptional and limited circumstances, the Board may
appoint one director to the Audit Committee who is not independent, as defined
below, and is not a current employee or an immediate family member of a current
employee, if the Board determines that membership on the committee by the
individual is required in the best interests of the corporation and its
stockholders, and the Board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination. Except that, so long as the Company files reports under
Regulation S-B of the Securities and Exchange Commission, the Audit Committee
need only consist of at least two members, a majority of the members of which
shall be independent directors, as defined below.
Definition of Independent Director
"Independent director" means a person other than an officer or employee of
the Company or its subsidiaries or any other individual having a relationship
which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. The
following persons shall not be considered independent:
(a) a director who is employed by the Company or any of its
affiliates for the current year or any of the past
three years;
(b) a director who accepts any compensation from the
Company or any of its affiliates in excess of $60,000
during the previous fiscal year, other than
compensation for Board service, benefits under a
tax-qualified retirement plan, or non-discretionary
compensation;
(c) a director who is a member of the immediate family of
an individual who is, or has been in any of the past
three years, employed by the Company or any of its
affiliates as an executive officer. Immediate family
includes a person's spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-law,
sister-in-law, son-in-law, daughter-in-law, and anyone
who resides in such person's home;
(d) a director who is a partner in, or a controlling
stockholder or an executive officer of, any for-profit
business organization to which the Company made, or
from which the Company received, payments (other than
4
those arising solely from investments in the Company's
securities) that exceed five percent of the Company's
or business organization's consolidated gross revenues
for that year, or $200,000, whichever is more, in any
of the past three years; or
(e) a director who is employed as an executive of another
entity where any of the Company's executives serve on
that entity's compensation committee.
VI.
APPROVAL AND ADOPTION
---------------------
This charter was approved and adopted by the Board of Directors and the
Audit Committee thereof as of May 16, 2002.