SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
|X| Definitive Proxy Statement by Rule 14a-6(e)2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a)-12
FIDELITY HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
<PAGE>
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
FIDELITY HOLDINGS, INC.
80-02 KEW GARDENS ROAD, SUITE 5000
KEW GARDENS, NEW YORK 11415
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on August 20, 1999
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of FIDELITY HOLDINGS, INC., a Nevada corporation ("Fidelity" or the
"Company"), will be held at the offices of the Company located at 80-02 Kew
Gardens Road, Suite 5000, Kew Gardens, New York 11415, on August 20, 1999, at
9:00 a.m., local time, for the following purposes:
1. To elect five (5) members of the Board of Directors to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. To ratify and approve the Fidelity1999 Employee Stock Option Plan;
3. To ratify the appointment of BDO Seidman LLP as the Fidelity
independent auditors for the year 1999; and
4. To transact such other business as may properly be brought before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 23, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting. Only shareholders of record on the stock transfer books
of Fidelity at the close of business on that date are entitled to notice and to
vote at the Meeting.
By Order of the Board of Directors
ROBERT COTTRELL
Secretary
Dated: July 16, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE>
FIDELITY HOLDINGS, INC.
80-02 KEW GARDENS ROAD, SUITE 5000
KEW GARDENS, NEW YORK 11415
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
August 20, 1999
INTRODUCTION
This Proxy Statement is being furnished to shareholders by the Board of
Directors of Fidelity Holdings, Inc., a Nevada corporation ("Fidelity" or the
"Company"), in connection with the solicitation of proxies for use at the 1999
Annual Meeting of Shareholders of the Company (the "Meeting") to be held at the
offices of the Company located at 80-02 Kew Gardens Road, Suite 5000, Kew
Gardens, New York 11415, on August 20, 1999, at 9:00 a.m., local time, or at any
adjournments thereof.
The approximate date on which this Proxy Statement and the accompanying
Proxy will first be sent or given to shareholders is July 29, 1999.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on July 23, 1999, the
record date (the "Record Date") for the Meeting, will be entitled to notice of,
and to vote at, the Meeting and any adjournments thereof. As of the close of
business on July 9, 1999, there were outstanding 13,661,174 shares of Fidelity
Common Stock, $.01 par value (the "Common Stock"). Each outstanding share of
Common Stock is entitled to one vote. As of the close of business on the Record
Date, there were outstanding 900,000 shares of Fidelity 1997 Major Series of
Convertible Preferred Stock (the "1997 Preferred Stock"). Each outstanding share
of 1997 Preferred Stock is entitled to two votes. There was no other class of
voting securities of the Company outstanding on the Record Date. A majority of
the outstanding shares of Common Stock and 1997 Preferred Stock present in
person or by proxy is required for a quorum.
VOTING OF PROXIES
Shares of Common Stock and 1997 Preferred Stock represented by Proxies,
which are properly executed, duly returned and not revoked, will be voted in
accordance with the instructions contained therein. If no instruction is
indicated on the Proxy, the shares of Common Stock and 1997 Preferred Stock
represented thereby will be voted (i) For the election as Directors of the
persons who have been nominated by the Board of Directors; (ii) For ratification
and approval of the Fidelity 1999 Employee Stock Option Plan; (iii) For the
ratification of the appointment of BDO Seidman LLP as the Fidelity independent
auditors for the year ending December 31, 1999; and (iv) at the discretion of
the person or persons voting the Proxy with respect to any other matter that may
properly be brought before the Meeting. The execution of a Proxy will in no way
affect a shareholder's right to attend the Meeting and vote in person. Any Proxy
executed and returned by a shareholder may be revoked at any time thereafter if
written notice of revocation is given to the Secretary of the Company prior to
the vote to be taken at the Meeting, or by execution of a subsequent proxy which
is presented at the Meeting, or if the shareholder attends the Meeting and votes
by ballot, except as to any matter or matters upon which a vote shall have been
cast pursuant to the authority conferred by such Proxy prior to such revocation.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
The cost of solicitation of the Proxies being solicited on behalf of the
Board of Directors will be borne by the Company. In addition to the use of the
mails, proxy solicitation may be made personally or by telephone, or telegraph
by officers, directors and employees of the Company. The Company will, upon
request, reimburse banks, brokerage firms and other custodians for their
reasonable expenses in sending soliciting material to the beneficial owner of
the shares.
<PAGE>
SECURITY OWNERSHIP
Principal Shareholders
The following tables sets forth information with respect to the beneficial
ownership of each class of the Company's securities as of July 9, 1999,
respectively, by (i) each director of the Company, (ii) each executive officer
of the Company, (iii) all directors and executive officers of the Company as a
group and (iv) each person known to the Company to own more than 5% of any class
of it securities:
1997 Major Series of
Convertible Preferred
Common Stock(1) Stock(1)(2)
--------------- -----------
Name and Address(9) Number Percent Number Percent
------------------- ------ ------- ------ -------
Bruce Bendell 7,076,162(3) 41.80% 900,000(4) 100.0%
Doron Cohen 3,790,536(5) 27.75%
David Edelstein 3,600 *
Richard L. Feinstein 60,000(6) *
James Wallick 3,000 *
Jeffrey Weiner 6,300(7) *
All continuing directors
and executive officers
as a group (6 persons) 10,939,598(8) 64.51%
- ----------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for computing the percentage of the shares owned by any person
holding such options or warrants, but are not deemed outstanding for computing
the percentage of shares owned by any other person. The Company is not aware of
any 5% beneficial holders of its Common Stock other than the persons specified
in the table above.
(2) Based on 900,000 shares of the 1997-Major Series of Convertible Preferred
Stock outstanding on July 9, 1999.
(3) Includes (i) 15 shares of Common Stock owned by Bruce Bendell's wife and the
following shares of Common Stock which Bruce Bendell has the right to acquire
within 60 days: (a) 75,000 shares of Common Stock which Bruce Bendell has the
right to acquire upon the exercise of warrants and (b) 2,700,000 shares of
Common Stock, the minimum number of shares of Common Stock into which the
900,000 shares of the 1997-Major Series of Convertible Preferred Stock
beneficially owned by Bruce Bendell are convertible. Does not reflect Mr.
Cohen's agreement to give Bruce Bendell a proxy to vote 1,125,000 of Mr. Cohen's
shares during the two-year period which commenced on October 14, 1997.
(4) All of such shares of the 1997-Major Series of Convertible Preferred Stock
are held in a trust created under the law of Gibraltar. Bruce Bendell is the
principal beneficiary of such trust.
(5) Does not reflect Mr. Cohen's agreement to give Bruce Bendell a proxy to vote
1,125,000 of Mr. Cohen's shares during the two-year period which commenced on
October 14, 1997.
(6) Includes 30,000 shares of Common Stock which Mr. Feinstein has the right to
acquire pursuant to immediately exercisable options.
(7) Includes 3,000 shares owned by Mr. Weiner's wife.
(8) Includes (i) 3,015 shares of Common Stock owned by immediate family members
of directors and executive officers as a group and (ii) 2,805,000 shares of
Common Stock that the directors and executive officers as a group have the right
to acquire within 60 days.
(9) The address for each beneficial owner is c/o Fidelity Holdings, Inc., 80-02
Kew Gardens Rd., Suite 5000, Kew Gardens, NY 11415.
-2-
<PAGE>
Executive Officers
The following table sets forth the names and ages of all executive officers, the
positions and offices with the Company held by each executive officer and the
period served:
<TABLE>
<CAPTION>
Name Age Position Period Served
- ---- --- -------- --------------
<S> <C> <C> <C>
Bruce Bendell 44 Chairman of the Board and Chief Executive Officer 1995 - present
Doron Cohen 43 President and Treasurer 1995 - present
Richard L. Feinstein 56 Chief Financial Officer 1997 - present
</TABLE>
Information concerning Messrs. Bendell and Cohen is provided under "Election Of
Directors."
Richard L. Feinstein. Mr. Feinstein has served as the Company's Chief Financial
Officer since December 1997. From 1994 to December 1997, Mr. Feinstein
maintained his own financial and management consulting practice. From 1989 to
1994, Mr. Feinstein served as Managing Director and Chief Financial Officer of
Employee Benefit Services, Inc. From 1978 to 1989, Mr. Feinstein was a partner
in KPMG Peat Marwick and a predecessor firm.
Certain Relationships and Related Transactions
See "Employment and Related Agreements" for a description of (i) the
employment arrangement between the Company and Doron Cohen, its President,
Treasurer and one of its directors and (ii) the Employment Agreement between the
Company and Zvi Barak, its Director of Research and Development. In addition, in
January 1999, Mr. Cohen was granted piggyback registration rights with respect
to 58,536 shares of Common Stock issued to him as compensation for fiscal 1998.
See "Executive Compensation."
See "Employment and Related Agreements" for a description of the
consulting arrangement between the Company and Bruce Bendell, its Chairman and
Chief Executive Officer. In addition, in January 1999, Mr. Bendell was granted
piggyback registration rights with respect to 58,536 shares of Common Stock
issued to him as compensation for fiscal 1998. See "Executive Compensation."
In January 1999, Richard Feinstein, the Company's Chief Financial Officer,
was granted piggyback registration rights with respect to 30,000 shares of
Common Stock issued to him as a bonus for fiscal 1999.
Following the acquisition (the "Major Auto Acquisition") of Major
Automotive Group, Inc. ("Major Auto") by the Company in 1998, Bruce Bendell and
his brother Harold Bendell continue to be responsible for senior-level
management of the Major Auto dealerships. The Bendell brothers and the Company
believe that this continuity of senior management was important in obtaining the
manufacturers' consents to the transfer of the dealerships to the Company. The
Bendell brothers' management control has been accomplished through (i) their
ownership of 100 shares of the Company's 1997A-MAJOR AUTOMOTIVE GROUP Series of
Preferred Stock (of which shares Bruce Bendell has a proxy to vote the 50 shares
of the 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock owned by Harold
Bendell for a seven-year period which commenced on January 7, 1998) which
carries voting rights allowing them to elect a majority of the Board of
Directors of Major Auto and (ii) a related management agreement, discussed
immediately below.
To further facilitate obtaining the required manufacturers' consents, the
Bendells and the Company have entered into a management agreement pursuant to
which the Bendells will have the exclusive right and obligation to manage the
automobile dealerships acquired by the Company in connection with the Major Auto
Acquisition and any additional automobile dealerships that the Company may
acquire in the future. The management agreement is for a term ending on December
31, 2002 and may not be earlier terminated unilaterally by the Company. If the
Company continues to own automobile dealerships at the end of the term, the
management agreement may be unilaterally extended by the Bendell brothers in
order to maintain the level of management control that will avoid the need to
seek further manufacturer consents. Should either of the Bendell brothers cease
managing the dealerships, the management agreement provides that ownership of
his 1997A-MAJOR AUTOMOTIVE GROUP Series of Preferred Stock shares and his
management rights under the management agreement will be automatically
transferred to the other, and should both brothers cease managing the
dealerships for any reason, the shares and management rights will be
automatically transferred to a successor manager designated in a successor
addendum to each dealership agreement or, failing such designation, to a
successor manager designated by the Company (subject to approval by the
applicable manufacturers). As noted in the prior paragraph, Bruce and Harold
Bendell will retain the right to elect a majority of the directors of Major Auto
(and possibly other affiliates in the future) in order to facilitate obtaining
the required manufacturers' consents. Should the Boards of Directors of Major
Auto and the Company disagree as to a particular course of action, Major Auto
would nonetheless be able
-3-
<PAGE>
to take the action in question, except that the management agreement prohibits
certain actions without the prior approval by the Company's Board of Directors.
Those actions are (i) disposing of any of the Major Auto dealerships, (ii)
acquiring new dealerships, and (iii) the Company incurring liability for Major
Auto indebtedness. Any compensation that Bruce Bendell is entitled to receive
under the management agreement is in addition to any other compensation that he
is entitled to receive as Chairman and Chief Executive Officer of the Company.
As part of the Major Auto Acquisition, Major Auto acquired two related
real estate components from Bruce and Harold Bendell for a purchase price of $3
million.
The Company has made a loan to its President, Doron Cohen, in the
principal amount of $140,000, bearing interest at 5.77% per annum, uncompounded.
The loan is evidenced by a promissory note dated December 31, 1996. The
promissory note provides that the full principal amount of, and all accrued
interest on, the loan is due and payable in a single installment on December 31,
1999.
The Company has advanced $799,897 to its Chairman and Chief Executive
Officer, Bruce Bendell, including interest at 5.77% per annum, uncompounded. The
advance and interest are due on demand.
Bruce Bendell, Doron Cohen, the Company and Major Chevrolet, Major Dodge
and Major Chrysler Plymouth Jeep Eagle, all wholly-owned by Major Auto, have
guaranteed the obligations of Major Fleet and Leasing Corp. ("Major Fleet") and
the Company under two lines of credit with HSBC Corp. aggregating $1.5 million.
In addition, Bruce Bendell and Major Fleet have guaranteed the obligations of
Major Auto's subsidiaries under certain of their agreements with various
financial institutions pursuant to which such subsidiaries sell their vehicle
finance contracts and leases. Major Fleet has pledged its assets to such
financial institutions to secure its guarantee. In addition, such subsidiaries
have cross-guaranteed and cross-collateralized their respective agreements with
such financial institutions.
On October 1, 1998 the Company entered into a consulting agreement with
Clemont Investments Ltd. ("Clemont"), a consulting firm which provides business
advisory services regarding the establishment in Europe of branches or
operations of U.S. based companies. In consideration for its services, Clemont
will receive, over a three to five year period (i) 54,000 shares of Common Stock
in connection with the performance of certain consulting services, (ii) 79,500
shares of Common Stock in connection with providing the Company with certain
business contacts and (iii) 54,000 shares of Common Stock in connection with
compliance with certain restrictive covenants contained in the Consulting
Agreement (collectively, the "Clemont Shares"). The Company has the right to
repurchase the Clemont Shares under certain circumstances at a price of up to
$4.00 per share. Through July 9, 1999, the Company has repurchased 24,295 shares
of Common Stock under such agreement. In connection with the Consulting
Agreement, Clemont entered into a put agreement with Bruce Bendell, Chairman and
CEO of the Company on October 1, 1998 pursuant to which Mr. Bendell agreed,
under certain conditions, to purchase the Clemont Shares from Clemont during
such period, less any Clemont Shares repurchased by the Company.
The Company has retained the accounting firm of Marcum & Kliegman LLP to
provide certain accounting and tax services for the Company and its subsidiary
Major Fleet. In 1998, the Company paid Marcum & Kliegman LLP $48,000 for its
services. Mr. Weiner, a director of the Company, is Managing Partner of Marcum &
Kliegman LLP.
Committees
The Company has the following standing committees: an Audit Committee and
a Compensation Committee. Since May 1998, the Audit Committee has been comprised
of Bruce Bendell, David Edelstein and Jeffrey Weiner and is charged with
reviewing the Company's annual audit and meeting with the Company's independent
auditors to review the Company's internal controls and financial management
practices. The Compensation Committee, which is comprised of David Edelstein and
Jeffrey Weiner recommends to the Board of Directors compensation for the
Company's Chief Executive and other principal executive officers. Messrs.
Edelstein and Weiner were independent directors since their election in May of
1998.
During the fiscal year ended December 31, 1998, the Audit Committee held
one meeting.
The Board of Directors held two meetings during the fiscal year ended
December 31, 1998. All of the Directors attended each meeting. From time to
time, the Board acted by unanimous written consent.
-4-
<PAGE>
Compensation of Directors and Executive Officers
Summary Compensation Table
The following table sets forth information for each of the Company's
fiscal years ended December 31, 1998 and 1997 concerning compensation of (i) all
individuals serving as the Company's Chief Executive Officer during the fiscal
year ended December 31, 1998 and (ii) each other executive officer of the
Company whose total annual salary and bonus equaled or exceeded $100,000 in the
fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Other All
Annual Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
--------------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Doron Cohen(1) 1998 246,500 0 0 0
President and Treasurer 1997 206,500 0 0 0
Bruce Bendell(2) 1998 248,530 127,437 0 0
Chairman and Chief Executive 1997 178,080 0 0 0
Officer
Bruce Hall(3) 1998 135,000 0 6,000 0
Vice President-Operations 1997 11,250 0 500 0
Richard Feinstein(4) 1998 125,000 0 3,166 0
Chief Financial Officer 1997 35,000 0 0 0
Zvi Barak(5) 1998 150,000 0 23,000 0
Director of Research and Development 1997 150,000 0 23,000 0
</TABLE>
(1) Salary in 1998 includes $150,000 from the Company (subsequently paid through
the issuance of 58,536 shares of the Company's Common Stock). Mr. Cohen waived
his salary from the Company for the years ended December 31, 1997. This salary
did not accrue. Mr. Cohen was paid a salary in 1997 of $56,500 from Computer
Business Sciences.
(2) Salary in 1998 includes $150,000 from the Company (subsequently paid through
the issuance of 58,536 shares of the Company's Common Stock). Mr. Bendell
received $81,250 in salary and $127,437 in bonus from Major Auto since its
acquisition on May 14, 1998. Mr. Bendell waived his consultant's fee from the
Company for the years ended December 31, 1997 and 1996. This fee did not accrue.
Mr. Bendell received $17,280 and $28,080 as management fees from Major Fleet for
management services performed in 1998 and 1997, respectively.
(3) 1998 amounts represent a full year of salary and automobile allowance of
$500 per month for Mr. Hall who commenced employment in December 1997.
(4) Mr. Feinstein was a part-time consultant in 1997 and commenced full time
employment in January 1998. Other Annual Compensation amount represents an
automobile allowance of $527 per month since July 1998.
(5) Includes $5,000 for life and disability insurance premiums and $18,000
annual automobile allowance.
Stock Option Grants
No individual grants of stock options were made during the fiscal year ended
December 31, 1998 to any of the executive officers of the Company named in the
Summary Compensation Table.
-5-
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
No stock options were exercised during the fiscal year ended December 31,
1998 by any of the executive officers named in the Summary Compensation Table.
The value of unexercised options held by any such persons as of December 31,
1998 was as follows for Bruce Bendell (the only such option holder):
Total number of shares underlying unexercised options 75,000
Exercisable options 75,000
Unexercisable options - 0 -
Value of in-the-money options $162,500(1)
- ----------
(1) Represents warrants to acquire 75,000 shares of Common Stock issued to Mr.
Bendell on October 2, 1996 as a signing bonus under a management agreement with
the Company to manage the operations of Major Fleet.
Compensation of Directors
Directors of the Company were not compensated for their services in 1998.
The Company reimburses directors for their expenses of attending meetings of the
Board of Directors. On April 30, 1999 the Board adopted the 1999 Outside
Directors Stock Option Plan ("Directors Stock Option Plan") and the 1999 Outside
Directors Equity Participation Plan ("Directors Equity Plan").
The Directors Option Plan will provide a means whereby non-employee
Directors ("Outside Directors") may purchase shares of Common Stock pursuant to
options granted in accordance with the Directors Option Plan. Any Director of
the Company who is not a full or part-time employee thereof is eligible to
participate in the Directors Option Plan. Each Outside Director receives an
option to purchase 4,000 Shares on the date of the annual stockholders' meeting
of each year provided he or she is then an Outside Director, commencing with
this year's meeting. The exercise price of each option is the "fair market
value", i.e. the closing sales price on the date of grant of the Common Stock as
quoted on the NASDAQ SmallCap Market or any other exchange on which the Common
Stock is traded. The Directors Equity Plan will provide a means whereby Outside
Directors will be granted shares of Common Stock. Any Director of the Company
who is not a full or part-time employee thereof is eligible to participate in
the Directors Equity Plan. Each eligible Director receives a grant of 2,000
shares of Common Stock on April 30th of each year provided that he or she is
then an Outside Director and has been an Outside Director during the six month
period prior to April 30th of such year. Prior to the Company's 3 for 2 stock
split in June, 1999, the Company granted shares of Common Stock to the following
persons: David Edelstein, 2,000 shares; James Wallick, 2,000 shares; and Jeffrey
Weiner, 2,000 shares. After adjusting for the split, each of the foregoing
Outside Directors will receive 3,000 shares.
Employment and Related Arrangements and Agreements
As of November 7, 1995, the Company's date of incorporation, the Company
entered into a Consulting Agreement with Bruce Bendell, its Chairman, pursuant
to which he serves as a business, management and financial consultant to the
Company for a period which ended on December 31, 1998, subject to successive
one-year extensions at the option of the Company. Mr. Bendell receives an annual
consulting fee as determined by the Company's Board of Directors from time to
time, but not less than $150,000. The consulting fee is subject to a yearly
cost-of-living adjustment and may also be retroactively increased based upon the
Company's profits per outstanding share of Common Stock for the applicable year.
The available percentage increase in consulting fee as a result of profits
ranges from 5% for break-even results to 150% for earnings per share exceeding
$1.00 per share. Mr. Bendell is also entitled to a bonus in such amounts and at
such times as determined by the Company's Board of Directors. In addition, the
agreement provides that Mr. Bendell is entitled to various fringe benefits and
is entitled to participate in any incentive, stock option, deferred compensation
or pension plans established by the Company's Board of Directors. Mr. Bendell
has agreed not to disclose confidential information relating to the Company and
has agreed not to compete with, or solicit employees or customers of, the
Company during specified periods following the breach or termination of his
agreement to serve as a consultant to the Company. Mr. Bendell has been serving
at will since the expiration of the agreement pursuant to the same terms. Mr
Bendell's consulting fee in 1998 includes $150,000 subsequently paid through the
issuance of 58,536 shares of the Company's Common Stock. See "Executive
Compensation."
-6-
<PAGE>
As of November 7, 1995, the Company's date of incorporation, the Company
entered into an Employment Agreement with Doron Cohen, pursuant to which he
serves as the Company's President and Treasurer for a period which ended on
December 31, 1998, subject to successive one-year extensions at the option of
the Company. Mr. Cohen receives an annual base salary as determined by the
Company's Board of Directors from time to time, but not less than $150,000. The
annual salary is subject to a yearly cost-of-living adjustment and may also be
retroactively increased based upon the Company's profits per outstanding share
of Common Stock for the applicable year. The available percentage increase in
salary as a result of profits ranges from 5% for break-even results to 150% for
earnings per share in excess of $1.00 per share. Mr. Cohen is also entitled to a
bonus in such amounts and at such times as determined by the Company's Board of
Directors. In addition, the agreement provides that Mr. Cohen is entitled to
various fringe benefits under the agreement and is entitled to participate in
any incentive, stock option, deferred compensation or pension plans established
by the Company's Board of Directors. Mr. Cohen has agreed not to disclose
confidential information relating to the Company and has agreed not to compete
with, or solicit employees or customers of, the Company during specified periods
following discontinuance of his employment for any reason other than a
termination for cause. Mr. Cohen has been serving at will since the expiration
of the agreement pursuant to the same terms. Mr. Cohen's salary in 1998 includes
$150,000 subsequently paid through the issuance of 58,536 shares of the
Company's Common Stock. See "Executive Compensation."
As of April 18, 1996, the Company entered into an Employment Agreement
with Zvi Barak, pursuant to which he serves as the Company's Director of
Research & Development for a period ending on April 30, 2001, subject to a
one-year extension at the option of the Company. Mr. Barak receives an annual
base salary as determined by the Company's Board of Directors from time to time,
but not less than $150,000. The annual salary is subject to a yearly
cost-of-living adjustment and may also be retroactively increased based upon the
Company's profits per outstanding share of Common Stock for the applicable year.
The available percentage increase in salary as a result of profits ranges from
5% for break-even results to 150% for earnings per share in excess of $1.00 per
share. Mr. Barak is also entitled to a bonus in such amounts and at such times
as determined by the Company's Board of Directors and to an annual royalty
incentive in an amount equal to 2% of gross revenues received from sales of new
products developed under his direction. In addition, the agreement provides that
Mr. Barak is entitled to various fringe benefits under the agreement, including
an annual allowance of $5,000 for disability insurance and $18,000 for the
purchase or lease of an automobile, and is entitled to participate in any
incentive, stock option, deferred compensation or pension plans established by
the Company's Board of Directors. Pursuant to the agreement, the Company
established a research and development facility in Israel and, in the event that
Mr. Barak elects to establish residence outside of Israel, the Company has
agreed to establish another research and development facility in the location
where Mr. Barak establishes his residence. The Company spent approximately
$25,000 to open the research and development facility in Israel and spends
approximately $27,600 per month to operate such facility. Mr. Barak is obligated
to pay the expenses of relocating himself to Israel and to any subsequent
residence. Mr. Barak has agreed not to disclose confidential information
relating to the Company's business and has agreed not to compete with, or
solicit employees or customers of, the Company during specified periods if he
resigns, is terminated for cause or if his employment agreement expires without
being renewed.
-7-
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The persons listed below are nominees for election as directors at the
Annual Meeting. Unless otherwise specified, all Proxies received will be voted
in favor of the election of Bruce Bendell, Doron Cohen, David Edelstein, James
Wallick and Jeffrey Weiner. Directors shall be elected by a plurality of the
votes cast, in person or by proxy, at the Meeting. Management has no reason to
believe that any of the nominees will be unable or unwilling to serve as a
director, if elected. Should any of the nominees not remain a candidate for
election at the date of the Meeting, no substitute candidate will be selected
and the Proxies will be voted only in favor of those nominees still standing for
election. The following table sets forth the ages of the nominees for director
and the positions they hold in the Company:
<TABLE>
<CAPTION>
Name Age Position A Director Since
- ---- --- -------- ----------------
<S> <C> <C> <C>
Bruce Bendell 44 Chairman of the Board and Chief Executive Officer 1995
Doron Cohen 43 President, Treasurer and a Director 1995
David Edelstein 45 Director 1998
James Wallick 48 Director 1998
Jeffrey Weiner 42 Director 1998
</TABLE>
Bruce Bendell has served as the Company's Chairman of the Board since its
incorporation in November 1995, as its Chief Executive Officer since May 1998
and as President from May 14, 1998 to December 1998. Mr. Bendell has served as
the President and a director of Major Chevrolet and its affiliates since
December 1985.
Doron Cohen has served as the President, Treasurer and a director of the
Company since its incorporation in November 1995, except for the period May 14,
1998 through December 18, 1998 during which period Bruce Bendell served as
President of the Company. Mr. Cohen has also served as the President of the
Company's subsidiary, Computer Business Sciences, Inc. since 1995. From 1991 to
1995, Mr. Cohen served as President and Chief Executive Officer of Holtsman
Enterprises, a construction and interior design company.
David Edelstein has served as a director of the Company since May 1998.
Mr. Edelstein has been in the real estate development business since 1979.
Currently he is the Managing Member of Sutton East Associates LLC, a real estate
development limited liability company and is involved in several sizable real
estate projects in New York and Florida.
James Wallick has served as a director of the Company since May 1998. Mr.
Wallick has been in the automotive dealership and financing business since 1971.
He is currently president of MLC Leasing and Apple Chevrolet and vice president
and a director of TecFin Corp.
Jeffrey Weiner has served as a director of the Company since May 1998. Mr.
Weiner is a certified public accountant and has been with the accounting firm of
Marcum & Kliegman LLP, where he is currently Managing Partner, since 1981.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES
-8-
<PAGE>
PROPOSAL II - APPROVAL OF 1999 EMPLOYEE STOCK OPTION PLAN
Effective April 30, 1999 the Board of Directors of the Company adopted the
1999 Stock Option Plan (the "Plan"), which is set forth in Exhibit A to this
Proxy Statement. The Plan will not become effective unless it is approved by the
holders of record of a majority of the shares of Common Stock and 1997 Preferred
Stock present in person or represented by proxy at the Meeting.
The Plan is intended to encourage stock ownership by all eligible
employees of the Company and participating subsidiaries so that they may share
in the fortunes of the Company by acquiring or increasing their proprietary
interest in the Company. The Plan is designed to encourage employees to remain
in the employ of the Company.
The following discussion of the principal features and effects of the Plan
is qualified in its entirety by reference to the text of the Plan set forth in
Exhibit A hereto.
Administration of the Plan
Primary authority for administration of the Plan is held by the Board of
Directors (the "Board"). The Board may establish a committee composed of members
of the Board to administer the Plan, which committee shall have such of the
power and authority vested in the Board under the Plan as the Board may delegate
to it, including the power and authority to interpret any provision of the Plan
or any option under it.
Shares Subject to the Plan
The shares of Common Stock to be issued under the Plan, pursuant to the
exercise of options granted thereunder, may be either authorized but unissued
shares or reacquired shares. The aggregate number of shares of Common Stock
which may be issued pursuant to the Plan is 1,200,000, subject to increase or
decrease by reason of stock splits, reorganizations, mergers, reclassifications
and the like.
Persons Eligible to Participate
Any person who is in the employ of the Company or any of its participating
subsidiaries, as well as consultants and other independent contractors are
eligible to receive options under the Plan, and further provided , in the case
of Incentive Options (as described below): (i) that no employee who after the
grant of options owns shares (including all shares which may be purchased under
outstanding options granted under the Plan) possessing 10% or more of the total
combined voting power or value of all classes of shares of the Company or of its
parent or subsidiary corporations shall be eligible to participate and (ii) no
employee shall be granted an Incentive Option which permits his rights to
purchase Common Stock under the Plan to accrue at a rate which exceeds $100,000
of fair market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
Options
Both Incentive Options meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and Non-Statutory Options
which do not meet the requirements of Section 422 of the Code may be issued
pursuant to the Plan. In the case of Incentive Options, the exercise price shall
be the Fair Market Value of a share of Common Stock, and in the case of
Non-Statutory Options the exercise price shall be no less than 85% of the Fair
Market Value of a share of Common Stock. "Fair Market Value" means the closing
sales price of the Common Stock as quoted on the NASDAQ SmallCap Market or other
exchange on the date of grant of any option or on the preceding date on which
the Common Stock is traded if no shares were traded on the date of grant. If the
Common Stock is not quoted on the NASDAQ SmallCap Market or other exchange, Fair
Market Value shall be deemed to be the average of the high bid and asked prices
of the Common Stock in the over-the-counter market on the date of grant, or the
next preceding date on which the last prices were recorded by the National
Quotation Bureau.
-9-
<PAGE>
Termination and Transferability of Employee's Rights
An employee's rights under the Plan will terminate when he ceases to be an
employee provided that, if an employee's employment shall be terminated by
reason of death or disability prior to the exercise of one or more outstanding
options, then the period during which each such Option to the extent otherwise
exercisable is to remain exercisable shall be limited to the twelve month period
following the later of date of the optionee's cessation of service or death.
During the limited exercise period following the optionee's death, the Option
may be exercised by the personal representative of the optionee's estate or by
the person or persons to whom the Option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution.
During the lifetime of the optionee, the Option shall be exercisable only
by the optionee and shall not be assignable or transferable by the optionee
otherwise than by will or by the laws of descent and distribution following the
optionee's death.
Amendment or Discontinuance of the Plan
The Board shall have the right to amend, modify or terminate the Plan at
any time without notice; provided, however, that no employee's existing rights
under the Plan may be adversely affected thereby.
Vote Required
The affirmative vote of holders of a majority of the shares of Common
Stock and 1997 Preferred Stock present, in person or by proxy, is required for
approval of the Plan. Abstentions will be counted as a vote against the proposal
and broker non-votes will not be counted for purposes of determining whether
this proposal has been approved.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE PROPOSED
PLAN.
-10-
<PAGE>
PROPOSAL III - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed BDO Seidman LLP as the Company's
independent auditors. Although the selection of auditors does not require
ratification, the Board of Directors has directed that the appointment of BDO
Seidman LLP be submitted to shareholders for ratification due to the
significance of their appointment to the Company. If shareholders do not ratify
the appointment of BDO Seidman LLP, the Board of Directors will consider the
appointment of other certified public accountants. A representative of BDO
Seidman LLP will be present at the Meeting, will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
Broker non-votes and proxy cards marked "abstain" with respect to this
proposal will be counted towards a quorum. Abstentions will be counted as a vote
against this proposal and broker non-votes will not be counted for purposes of
determining whether this proposal has been approved.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN LLP AS THE COMPANY'S INDEPENDENT
AUDITORS.
ANNUAL REPORT
All shareholders of record as of July 23, 1999 have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998. The Form 10-KSB contains
certified consolidated financial statements of the Company and its subsidiaries
for the fiscal year ended December 31, 1998.
By Order of the Company,
Robert Cottrell
Secretary
Dated: July 16, 1999
-11-
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIDELITY HOLDINGS, INC.
PROXY - Annual Meeting of Shareholders, August 20, 1999
The undersigned, a shareholder of Fidelity Holdings, Inc., a Nevada
corporation (the "Company"), does hereby constitute and appoint Bruce Bendell,
Doron Cohen and Richard L. Feinstein and each of them, the true and lawful
attorneys and proxies with full power of substitution, for and in the name,
place and stead of the undersigned, to vote all of the shares of Common Stock of
the Company that the undersigned would be entitled to vote if personally present
at the 1999 Annual Meeting of Shareholders of the Company to be held at the
offices of the Company at 80-02 Kew Gardens Road, Kew Gardens, NY 11415, on
August 20, 1999 at 9:00 a.m., local time, or at any adjournment or adjournments
thereof.
The undersigned hereby instructs said proxies or their substitutes as set
forth below.
1. ELECTION OF DIRECTORS:
The election of the following directors: Bruce Bendell, Doron Cohen, David
Edelstein, James Wallick and Jeffrey Weiner, to the Board of Directors, to
serve until their successors are elected and shall qualify.
|_| FOR |_| TO WITHHOLD AUTHORITY TO VOTE FOR ALL
NOMINEES
|_| TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), PRINT NAMES(S) BELOW:
--------------------------------------------------------------------------
2. ADOPTION OF THE 1999 EMPLOYEE STOCK OPTION PLAN:
To approve the adoption of the Company's 1999 Employee Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
--------------------------------------------------------------------------
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS:
To ratify the appointment of BDO Seidman LLP as the Company's independent
auditors for the fiscal year ending December 31,1999.
|_| FOR |_| AGAINST |_| ABSTAIN
--------------------------------------------------------------------------
4. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect to
all other matters that may come before the Meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE
NOMINEES
<PAGE>
AS DIRECTORS, TO APPROVE THE ADOPTION OF THE COMPANY'S 1999 EMPLOYEE STOCK
OPTION PLAN, TO RATIFY THE APPOINTMENT OF BDO SEIDMAN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES OR
PROXY WITH RESPECT TO ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given and
ratifies and confirms all that the proxies appointed hereby, or any of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof. The
undersigned hereby acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement, both dated July 29, 1999, and a copy of the
Company's Annual Report.
Please mark, date, sign and mail this proxy in the
envelope provided for this purpose.
Dated:__________________, 1999
___________________________________ (L.S.)
___________________________________ (L.S.)
Signature(s)
NOTE: Please sign exactly as your name or names appear
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please indicate the
capacity in which signing. 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 with full corporate name by a duly authorized
officers.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY.
-2-
<PAGE>
Exhibit A
FIDELITY HOLDINGS, INC. 1999 EMPLOYEE STOCK OPTION PLAN
1. GENERAL PROVISIONS
(a) PURPOSE
This 1999 Employee Stock Option Plan ("Plan") is intended to promote
the interests of Fidelity Holdings, Inc., a Nevada corporation (the
"Corporation"), and its shareholders by providing individuals who
render valuable services to the Corporation (or any Parent or
Subsidiary, as defined below), on whose judgment, initiative, and
efforts the successful conduct of the business of the Corporation
depends, and who are responsible for the management, growth, and
protection of the business, with the opportunity to acquire
ownership interests, through the issuance of options to acquire
shares of the Common Stock (each, an "Option"), in the Corporation
so as to encourage them to continue in the employ of the Corporation
(or any Parent or Subsidiary) and to maximize their performance.
(b) TERMINOLOGY
For the purposes of this Plan, any capitalized term shall have the
meaning assigned under Section 3(h) hereof.
(c) ADMINISTRATION OF THE PLAN
(i) This Plan shall be administered either the Board or a
committee of two (2) or more Board members appointed by the
Board to which the Board has delegated administrative
functions under the Plan (the "Committee"). Members of any
committee to which the Board has delegated any administrative
functions shall serve for such terms as the Board shall
determine and subject to the Board's right of removal. All
delegations of authority to any committee shall be and remain
revocable by the Board.
(ii) The Committee shall have full power and authority to
implement, interpret and administer the Plan, to establish all
such rules and regulations as it deems appropriate, and to
make such determinations under the Plan and any outstanding
Option grants or share issuances as it deems necessary or
advisable. Decisions of the Committee shall be final and
binding on all parties who have an interest in the Plan or any
outstanding Option or share issuance.
(iii) The Committee shall have the absolute discretion and authority
to determine, subject to the provisions of this Plan, the
terms of any Option grant. In addition to any other matters
over which the Committee has discretion hereunder, the
Committee shall determine which, if any, eligible individuals
will be granted Options in accordance with the Plan. The
Committee will determine the number of shares to be covered by
each such grant, the status of the granted Option as either an
Incentive Option or a Non-Statutory Option, the time or times
at which each granted Option is to become exercisable, the
vesting schedule (if any) applicable to shares issued pursuant
to the granted Options, the performance goals to be attained
in order for Options to be granted and the maximum term for
which the Option may remain outstanding.
1
<PAGE>
(iv) The Committee may, in its absolute discretion, without
amendment to the Plan, (i) accelerate the date on which any
Option granted under the Plan becomes exercisable or otherwise
adjust any of the terms of such Option (except that no such
adjustment shall, without the consent of an optionee, reduce
the optionee's rights under any previously granted and
outstanding Option) and (ii) otherwise adjust or waive any
condition imposed on any Option grant made hereunder.
(v) In addition, the Committee may, in its absolute discretion and
without amendment to the Plan, grant Options on the condition
that the Optionee surrender to the Committee for cancellation
such other Options (including, without limitation, Options
with higher exercise prices) as the Committee specifies.
Notwithstanding Section 1 (e)(i) herein, prior to the
surrender of such other Options, Options granted pursuant to
the preceding sentence of this Section 1 (c)(v) shall not
count against the limit set forth in such Section 1(e)(i).
(vi) No member of the Committee shall be liable for any action,
omission or determination relating to the Plan, and the
Corporation (and any affiliate that may adopt the Plan),
jointly and severally, shall indemnify and hold harmless each
member of the Committee and each other director or employee of
the Corporation (or affiliate) to whom any duty or Power
relating to the administration or interpretation of the Plan
has been delegated against any cost or expense (including
counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee)
arising out of any action, omission or determination unless
such action, omission or determination was taken or made by
such member, director or employee in bad faith and without
reasonable belief that it was in the best interests of the
Corporation and its affiliates as the case may be.
(d) SELECTION OF OPTIONEES AND PARTICIPANTS
The persons eligible to receive issuances under the Plan are limited
to Employees, non-employee members of the Board of the Corporation
(or of any Parent or Subsidiary) and consultants and other
independent contractors who provide valuable services to the
Corporation (or of any Parent or Subsidiary).
(e) STOCK SUBJECT TO THE PLAN
(i) Common Stock of the Corporation will be issued under the Plan.
The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 800,000
shares, subject to adjustment from time to time in accordance
with the provisions of this Section 1.
(ii) Shares reserved for issuance under granted Options but not in
fact issued pursuant to Options granted under the Plan due to
the expiration or termination of the Option or the
cancellation of the Option in accordance with Section 2(h),
will again become available for issuance under the Plan.
(iii) In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without
receipt of consideration, then appropriate adjustments shall
be made to (i) the aggregate number and/or class of shares
issuable under the Plan and (ii) the aggregate number and/or
class of shares and the Option
-2-
<PAGE>
price per share in effect under each outstanding Option in
order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Committee shall
be final, binding and conclusive.
(f) AMENDMENT OF THE PLAN AND AWARDS
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever. However,
no such amendment or modification shall adversely affect the rights
and obligations of an optionee with respect to Options at the time
outstanding under the Plan, nor adversely affect the rights of any
issuee with respect to Common Stock issued under the Plan prior to
such action unless such issuee consents to such amendment. In
addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan so as to (i) increase the
maximum number of shares issuable under the Plan (except for
adjustments required under Section 1 (e)(iii)), (ii) materially
increase the benefits accruing to individuals who participate in the
Plan, or (iii) materially modify the eligibility requirements for
participation in the Plan. The Board may amend the Plan, subject to
the limitations cited above, in such manner as it deems necessary to
permit the granting of Options meeting the requirements of future
amendments or issued regulations, if any, to the Code or to the
Exchange Act.
(g) EFFECTIVE
(i) The Plan shall become effective when shareholder approval of
the Plan is obtained. Options may be granted, pursuant to the
terms of the Plan, from and after the effective date.
(ii) The Plan shall terminate upon the date on which all shares
available for issuance under the Plan have been issued
pursuant to the exercise of Options granted under Section 2.
The termination of the Plan shall have no effect on any
outstanding Options under or shares issued and outstanding
under the Plan, and such securities shall thereafter continue
to have force and effect in accordance with the provisions of
the agreements evidencing such Options and issuances.
(h) NO EMPLOYMENT OR SERVICE RIGHTS
(i) No Special Employment Rights. Nothing contained in the Plan
shall confer upon any person any right with respect to the
continuation of his or her employment by or service with the
Corporation, Parent or a Subsidiary or interfere in any way
with the right of the Corporation, subject to the terms of any
separate employment or consulting agreement to the contrary,
at any time to terminate such employment or service or to
increase or decrease the compensation of the person from the
rate in existence at the time of the grant of an Option.
Nothing in the Plan shall interfere with or otherwise restrict
in any way the rights of the Corporation (or any Parent or
Subsidiary) to engage in any Corporate Transaction.
(ii) No Rights to Option. No person shall have any claim or right
to receive an Option hereunder. The Committee's granting of an
Option to an optionee at any time shall neither require the
Committee to grant an Option to such optionee or any other
optionee or other person at any time nor preclude the
Committee from making subsequent grants to such optionee or
any other optionee or other person.
-3-
<PAGE>
2. OTHER GRANTS
(a) TERMS AND CONDITIONS OF OPTIONS
The Committee may grant Options pursuant to the Plan. Such Options
shall be evidenced by agreements in such form as the Committee shall
from time to time approve; provided, however, that each such
instrument shall comply with the terms and conditions of the
relevant parts of this Section 2. All Options granted under the Plan
shall be clearly identified in the agreement evidencing such Options
as either Incentive Options or as Non-Statutory Options or a
combination of both.
(b) OPTION EXERCISE PRICE.
The Option exercise price per share shall be fixed by the Committee,
subject to Section 2(g) in the case of Incentive Options. In the
case of Non-Statutory Options, such price per share shall not be
less than 85% of the Fair Market Value of a share of Common Stock.
(c) TERM AND EXERCISE OF OPTIONS.
Each Option granted under the Plan shall be exercisable at such time
or times, during such period, and for such number of shares as shall
be determined by the Committee and set forth in the stock Option
agreement evidencing such Option.
(d) OPTION EXERCISABLE IN WHOLE OR IN PART
Each Option shall be exercisable in whole or in part. The partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof
(e) NO ASSIGNMENT.
During the lifetime of the optionee, the Option shall be exercisable
only by the optionee and shall not be assignable or transferable by
the optionee otherwise than by will or by the laws of descent and
distribution following the optionee' s death.
(f) TERMINATION OF SERVICE.
The following provisions shall govern the exercise period applicable
to any Options held by the optionee at the time of cessation of
Service or death:
(i) Should the optionee cease to remain in Service for any reason
other than death or Permanent Disability, then the period
during which each outstanding Option held by such optionee, to
the extent otherwise exercisable, is to remain exercisable
shall be limited to the three (3) month period following the
date of such cessation of Service.
-4-
<PAGE>
(ii) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or
more outstanding Options, then the period during which each
such Option to the extent otherwise exercisable is to remain
exercisable shall be limited to the twelve (12) month period
following the later of date of the optionee's cessation of
Service or death. During the limited exercise period following
the optionee's death, the Option may be exercised by the
personal representative of the optionee's estate or by the
person or persons to whom the Option is transferred pursuant
to the optionee's will or in accordance with the laws of
descent and distribution.
(iii) The Committee shall have full power and authority to extend
(either at the time the Option is granted or at any time while
the Option remains outstanding) the period of time for which
the Option is to remain exercisable following the optionee's
cessation of Service, from the limited period otherwise
applicable under Section 2(f), to such greater period of time
as the Committee may deem appropriate under the circumstances.
(iv) Notwithstanding the above no Option shall be exercisable after
the specified expiration date of the Option term.
(v) Each such Option shall, during the applicable limited
exercise period, be exercisable only with respect to the
shares for which the Option was exercisable on the date
of the optionee's cessation of Service.
(g) INCENTIVE OPTIONS
(i) The terms and conditions specified in this Section 2
shall be applicable to Incentive Options granted under
the Plan, except to the extent such provisions are
inconsistent with the provisions this Section 2(g).
Options which are specifically designated as
Non-Statutory Options when issued under the Plan shall
not be subject to such terms and conditions set forth
herein.
(ii) The exercise price of an Incentive Option shall be the
Fair Market Value of a share of Common Stock, subject to
Section 2(g)(iii). The aggregate Fair Market Value of
shares of Corporation Stock with respect to which
Incentive Options granted hereunder are exercisable for
the first time by an optionee during any calendar year
under the Plan and any other stock Option plan of the
Corporation (or any "subsidiary corporation" of the
Corporation within the meaning of Section 424 of the
Code) shall not exceed $100,000. Such Fair Market Value
shall be determined as of the date on which each such
Incentive Option is granted. In the event that the
aggregate Fair Market Value of shares of Corporation
Stock with respect to such Incentive Options exceeds
$100,000, then Incentive Options granted hereunder to
such optionee shall, to the extent and in the order in
which they were granted, automatically be deemed to be
Non-Statutory Options, but all other terms and
-5-
<PAGE>
provisions of such Incentive Options shall remain
unchanged.
(iii) No Incentive Option may be granted to an individual if,
at the time of the proposed grant, such individual owns
stock possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation
or any of its "subsidiary corporations" (within the
meaning of Section 424 of the Code), unless (I) the
exercise price of such Incentive Option is at least 110%
of the Fair Market Value of a share of Corporation Stock
at the time such Incentive Option is granted and (II)
such Incentive Option is not exercisable after the
expiration of five years from the date such Incentive
Option is granted.
(iv) No Incentive Option may be granted to an individual if
at the time of the proposed grant, such individual is
not an employee of the Corporation.
(v) No Incentive Option may be granted after 10 years from
the date the Plan is adopted, or the date such plan is
approved by the shareholders, whichever is earlier.
(vi) No Incentive Option may be exercisable after the
expiration of 10 years from the date such Incentive
Option is granted.
(vii) An Incentive Option shall not be transferable by an
optionee otherwise than by will or the laws of descent
and distribution, and shall be exercisable during the
optionee's lifetime, only by such optionee.
(h) CANCELLATION AND NEW GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding Options under the Plan and
the grant in substitution therefor of new Options under the Plan
covering the same or a different numbers of shares of Common Stock
but having an Option price per share established at the time of such
cancellation and regrant in accordance with the provisions of this
Plan.
3. MISCELLANEOUS
(a) LOANS
(i) The Committee may assist any optionee in the exercise of one
or more Options granted to such optionee including the
satisfaction of any Federal and State income and employment
tax obligations arising therefrom, by (i) authorizing the
extension of a loan from the
-6-
<PAGE>
Corporation to such optionee, or (ii) permitting the optionee
to pay the Option price or purchase price for the purchased
Common Stock in installments over a period of years.
(ii) The terms of any loan or installment method of payment
(including the interest rate, at no less than the applicable
federal rate as in effect from time to time, and terms of
repayment) shall be established by the Committee in its sole
discretion. Loans or installment payments shall be secured by
the purchased shares of Common Stock but otherwise may be
authorized with or without security or collateral. However,
any loan made to a consultant or other non-employee advisor
must be secured in addition by property other than the
purchased shares of Common Stock. In all events the maximum
credit available to each optionee may not exceed the sum of
(i) the aggregate Option price payable for the purchased
shares plus (ii) any Federal and State income and employment
tax liability incurred by the optionee in connection with such
exercise or purchase.
(b) VESTING OF SHARES AND REPURCHASE RIGHTS
(i) The Committee, in its absolute discretion, may issue fully and
immediately vested shares of Common Stock, or the Committee
may impose such vesting requirements as it deems appropriate
with the Corporation retaining a right to repurchase any
unvested shares. The terms of the vesting schedule and of the
Corporation's repurchase rights shall be as determined by the
Committee and set forth in the agreement governing such
issuance.
(ii) Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash
dividend) which the holder of unvested Common Stock may have
the right to receive by reason of a stock dividend, stock
split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the
same vesting and repurchase limitations applicable to the
unvested Common Stock with respect to which it was paid or
arose, and (ii) such escrow arrangements as the Committee
shall deem appropriate.
(iii) No person to whom shares of Common Stock have been issued
pursuant to the Plan may transfer any such shares which have
not vested.
(c) MARKET STAND-OFF AGREEMENTS
The Committee may require each person to whom any shares are issued
under this Plan to enter into an agreement which restricts or
prohibits the sale of any stock of the Corporation by such person
for a reasonable period of time following a public offering of any
shares of stock by the Corporation.
(d) RIGHT OF FIRST REFUSAL
-7-
<PAGE>
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the Exchange Act,
the Committee may subject any shares issued pursuant to the Plan to
a right of first refusal with respect to any proposed disposition of
such shares other than a transfer permitted by Section 2(e). Such
right of first refusal shall be exercisable by the Corporation (or
its assignees) in accordance with the terms and conditions specified
in the instrument governing the issuance of such shares.
(e) SECURITIES LAWS: LEGEND
(i) Options or Shares of Common Stock shall not be issued or
delivered under this Plan unless and until the Corporation
shall have determined that there has been full and adequate
compliance with all applicable requirements of the Federal and
state securities laws and all other applicable legal and
regulatory requirements. Without limiting the generality of
the above, and notwithstanding any other provision of the
Plan, the Plan shall at all time comply with the provisions of
Rule 16b-3 (including, without limitation, its plan amendment
provisions) promulgated under the Exchange Act, or any
successor rule ("Rule 16b-3") in the event Options are granted
to such persons as are required to file reports under Section
16(a) of the Exchange Act. In such cases, the Plan shall be
administered by (i) the Committee if the Committee may
administer the Plan in compliance with Rule 16b-3 with respect
to a plan intended to qualify thereunder as a discretionary
plan, or (ii) a committee designated by the Committee to
administer the Plan, which Committee shall be constituted in
such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a
discretionary plan.
(ii) Shares issued under the Plan shall bear such legends as the
Committee deems necessary or appropriate, including such
restrictive legends as the Committee shall require to reflect
the terms of any agreement between the optionee and the
Corporation.
(f) SHAREHOLDER RIGHTS
(i) Subject to the rights of the Corporation set forth herein or
in any other agreement entered into between the Corporation
and an issuee of shares under the Plan, each person to whom
shares of Common Stock have been issued under the Plan shall
have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is
vested. Accordingly, the issuee shall have the right to vote
such shares and to receive any cash dividends or other
distributions paid or made with respect to such shares.
(ii) No person shall have any rights as a stockholder with respect
to any shares of Corporation Stock covered by or relating to
any Option granted pursuant to the Plan until the date the
person becomes the owner of record with respect to such
shares. Except as otherwise
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expressly provided in Section 1(e) hereof, no adjustment to
any Option shall be made for dividends or other rights for
which the record date occurs prior to the date such stock
certificate is issued.
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(g) ACCELERATION
The Committee may, in its discretion, provide for the automatic
acceleration upon a Change of Control and\or Corporate Transaction
at the time of which any Option will become exercisable or for the
lapse of any repurchase right tied to vesting by including a
provision to such effect in the documents evidencing the rights of
the optionee. Every optionee under the Plan shall be entitled to ten
(10) business days' prior notice to the occurrence of any Corporate
Transaction, to the extent that the occurrence of any such Corporate
Transaction is within the Corporation's knowledge.
(h) DEFINITIONS
The following definitions shall be in effect under this Plan:
(i) BOARD shall mean the Board of Directors of the Corporation.
(ii) CODE shall mean the Internal Revenue Code of 1986, as amended.
(iii) COMMON STOCK shall mean the common stock of the Corporation.
(iv) CORPORATE TRANSACTION shall mean either of the following
stockholder- approved transactions to which the Corporation is
a party:
(1) any transaction or series of related transactions
(including, without limitation, any reorganization,
merger or consolidation) in which more than fifty
percent (50%) of the Corporation's outstanding voting
stock is transferred to a person or persons different
from those who held the stock immediately prior to such
transaction, or
(2) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in
complete liquidation or dissolution of the Corporation.
(v) EMPLOYEE shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the
control and direction of the employer entity as to both the
work to be performed and the manner and method of performance.
(vi) EXCHANGE ACT shall mean the Securities Exchange Act of 1934,
as amended.
(vii) FAIR MARKET VALUE per share of Common Stock on any relevant
date under the Plan shall be the value determined in
accordance with the following provisions:
(1) If the Common Stock is not at the time listed or
admitted to trading on any Stock
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Exchange but is traded on the NASDAQ National or
SmallCap Market Systems, the Fair Market Value shall be
the closing selling price per share of Common Stock on
the date in question, as the price is reported by the
National Association of Securities Dealers through the
NASDAQ National or SmallCap Market Systems or any
successor system. If there is no closing selling price
for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(2) If the Common Stock is at the time listed or admitted to
trading on any Stock Exchange, then the Fair Market
Value shall be the closing selling price per share of
Common Stock on the date in question on he Stock
Exchange determined by the Committee to be the primary
market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(3) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on
the NASDAQ National nor SmallCap Market Systems, then
such Fair Market Value shall be determined by taking
into account such factors as the Committee shall deem
appropriate.
(viii) INCENTIVE OPTION shall mean a stock Option which satisfies
the requirements of Section 422 of the Code.
(ix) NON-STATUTORY OPTION shall mean a stock Option not intended to
meet the requirements of Section 422 of the Code.
(x) PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
(xi) PERMANENT DISABILITY shall have the meaning assigned to such
term in Section 22(e)(3) of the Code.
(xii) SERVICE shall mean the provision of services to the
Corporation or any Parent or Subsidiary by an individual in
the capacity of an Employee, a non-employee member of the
Board or a consultant or independent contractor.
(xiii) SUBSIDIARY shall mean each corporation (other than the
Corporation) in an unbroken chain of corporations beginning
with the Corporation, provided each such corporation (other
than the last corporation) in the unbroken chain owns, at the
time of the determination, stock
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possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
(i) USE OF PROCEEDS: EXPENSES
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general
corporate purposes. The expenses of the Plan shall be paid by the
Corporation.
(j) WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any Options granted under hereunder shall be subject to the
satisfaction of all applicable Federal, State and local income and
employment tax withholding requirements.
(k) REGULATORY APPROVALS
The implementation of the Plan, the granting of any Options and the
issuance of Common Stock upon the exercise of the Option grants made
hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Options granted under it, and the
Common Stock issued pursuant to it.
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