<PAGE> 1
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
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 BY RULE
14a-6(e)2))
[X] DEFINITIVE PROXY STATEMENT
[ ] 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.
[ ] 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> 2
FIDELITY HOLDINGS, INC.
80-02 KEW GARDENS ROAD, SUITE 7000
KEW GARDENS, NEW YORK 11415
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 8, 2000
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of FIDELITY HOLDINGS, INC., a Nevada corporation ("Fidelity," the
"Company," "we," "our" or "us"), will be held at the Long Island Marriott, 101
James Doolittle Boulevard, Uniondale, NY 11553, on December 8, 2000, at 2:00
p.m., local time, for the following purposes:
1. To approve amendments to our Articles of Incorporation to provide for
the classification of the Board of Directors into three classes of
directors with staggered three-year terms of office;
2. To elect five (5) directors to the Board of Directors to serve for
terms of one to three years, respectively, or until their successors
are elected and qualified if Proposal No. 1 is approved, or to elect
the same persons as directors for a term of one year if Proposal No. 1
is not approved;
3. To approve an amendment to our Articles of Incorporation to increase
the number of authorized shares of our common stock from 50,000,000 to
100,000,000;
4. To ratify the appointment of BDO Seidman LLP as our independent
auditors for the year 2000; and
5. To transact such other business as may properly be brought before the
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. We are presently aware of no other business
to come before the Annual Meeting.
The Board of Directors has fixed the close of business on November 3, 2000
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting. Only shareholders of record on our stock transfer
books 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
/s/ ROBERT COTTRELL
--------------------------------------
Robert Cottrell
Secretary
Kew Gardens, New York
Dated: November 6, 2000
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> 3
FIDELITY HOLDINGS, INC.
80-02 KEW GARDENS ROAD, SUITE 7000
KEW GARDENS, NEW YORK 11415
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 8, 2000
INTRODUCTION
This Proxy Statement is being furnished to shareholders by the Board of
Directors of Fidelity Holdings, Inc., a Nevada corporation, in connection with
the solicitation of proxies for use at our 2000 Annual Meeting of Shareholders
(the "Meeting") to be held at held at the Long Island Marriott, 101 James
Doolittle Boulevard, Uniondale, NY 11553, on December 8, 2000, at 2:00 p.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 November 9, 2000.
RECORD DATE AND VOTING SECURITIES
Only shareholders of record at the close of business on November 3, 2000,
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 the record date there were outstanding 26,148,699 shares of our
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 500,000 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 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) to approve an amendment to our Articles
of Incorporation to provide for the classification of the Board of Directors
into three classes of directors with staggered three-year term office; (ii) to
elect five (5) directors to the Board of Directors to serve for terms of one to
three years, respectively, or until their successors are elected and qualified
if Proposal No. 1 is approved, or to elect the same persons as directors for a
term of one year if Proposal No. 1 is not approved; (iii) to amend our Articles
of Incorporation to increase the aggregate number of authorized shares of our
Common Stock; (iv) for the ratification of the appointment of BDO Seidman LLP as
our independent auditors for the year ending December 31, 2000; and (v) 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 our Secretary 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.
<PAGE> 4
The cost of solicitation of the Proxies being solicited on behalf of the
Board of Directors will be borne by us. In addition to the use of the mails,
proxy solicitation may be made personally or by telephone or telegraph by our
officers, directors and employees. We 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.
2
<PAGE> 5
PROPOSAL I -- APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS
Our Board of Directors has unanimously approved and recommended that our
shareholders approve amendments to our Articles of Incorporation, as amended
(the "Articles"), to provide for the classification of the Board of Directors
into three classes of directors with staggered terms of office. The text of the
proposed amendment to the Articles is set forth in full in EXHIBIT A to this
Proxy Statement.
Our Articles now provide that all directors are to be elected annually to
serve until their successors have been elected and qualified. The Nevada Revised
Statute ("NRS") permits provisions in a company's articles of incorporation,
approved by shareholders, that provide for a classified board of directors. The
proposed classified board amendment to the Articles would provide that directors
will be classified into three classes, as nearly equal in number as possible.
One class of directors, consisting of Bruce Bendell and Dennis Roth, would hold
office initially for a term expiring at the 2001 Annual Meeting; a second class
of directors, consisting of James Wallick, would hold office initially for a
term expiring at the 2002 Annual Meeting; and a third class of directors,
consisting of Jeffrey Weiner and David Edelstein, would hold office initially
for a term expiring at the 2003 Annual Meeting. At each Annual Meeting following
this initial classification and election, the successors to the class of
directors whose terms expire at that meeting would be elected for a term of
office to expire at the third succeeding Annual Meeting after their election and
until their successors have been duly elected and qualified. See "Proposal II:
Election of Directors" as to the composition of each class of directors if this
proposal is adopted.
The proposed classified board amendment will significantly extend the time
required to effect a change in control of the Board of Directors and may
discourage hostile takeover bids for us. Currently, a change in control of the
Board of Directors can be made by shareholders holding a majority of the votes
cast at a single Annual Meeting. If we implement a classified board of
directors, it will take at least two Annual Meetings for even a majority of
shareholders to effect a change in control of the Board of Directors, because
only a minority of the directors will be elected at each meeting.
Under the NRS, directors chosen to fill vacancies on a classified board
shall hold office until the next election of the class for which such directors
shall have been chosen, and until their successors are elected and qualified.
Presently, all of our directors are elected annually and all of the directors
may be removed by shareholders representing at least two-thirds of the
outstanding shares of the Common Stock. Cumulative voting is not authorized by
the Articles.
The classified board proposal is designed to assure continuity and
stability in the Board of Directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also believes
that the classified board proposal will assist the Board of Directors in
protecting the interests of our shareholders in the event of an unsolicited
offer for us.
Because of the additional time required to change control of the Board of
Directors, the classified board proposal will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of us. Because the classified board proposal will
increase the amount of time required for a takeover bidder to obtain control of
us without the cooperation of the Board of Directors, even if the takeover
bidder were to acquire a majority of our outstanding stock, it will tend to
discourage certain tender offers, perhaps including some tender offers that
shareholders may feel would be in their best interests. The classified board
proposal will also make it more difficult for the shareholders to change the
composition of the Board of Directors even if the shareholders believe such a
change would be desirable.
REQUIRED VOTE
Approval of the amendment to the Articles of Incorporation requires the
affirmative vote of a majority of shares of Common Stock eligible to vote at the
Annual Meeting in person or by proxy. Abstentions are considered present for
this proposal, so they will have the same effect as votes against the Amendment.
Broker non-votes are not considered present for this proposal.
3
<PAGE> 6
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO PROVIDE FOR CLASSIFICATION OF
THE BOARD OF DIRECTORS.
PROPOSAL II -- ELECTION OF DIRECTORS
The Board of Directors currently consists of five members. In the event
Proposal No. 1 is adopted at the Annual Meeting, our Directors will be divided
into three classes and, unless otherwise noted thereon, the shares represented
by the enclosed proxy will be voted for the election as directors of the five
nominees named below to serve for the terms indicated in the table below, or
until their successors have been duly elected and qualified. If Proposal No. 1
is not approved by the shareholders at the Annual Meeting, unless otherwise
noted thereon, the shares represented by the enclosed proxy will be voted for
the election as directors of the five nominees named below to serve until the
2001 Annual Meeting of shareholders or until their successors have been duly
elected and qualified. The five nominees receiving the highest number of votes
cast at the Annual Meeting will be elected. If any of the nominees becomes
unavailable for any reason or if a vacancy should occur before the election
(which events are not anticipated), the shares represented by the enclosed proxy
may be voted for such other person or persons as may be determined by the
holders of such proxy.
Information regarding the nominees is provided below and under "Security
Ownership," "Executive Compensation" and "Certain Relationships and Related
Transactions."
DIRECTOR NOMINEES
<TABLE>
<CAPTION>
NOMINEE AGE POSITION DIRECTOR SINCE
------- --- --------------------- --------------
<S> <C> <C> <C>
CLASS I -- TERM EXPIRES 2001
Bruce Bendell................................. 46 Director November 1995
Dennis Roth................................... 58 Director March 2000
CLASS II -- TERM EXPIRES 2002
James Wallick................................. 49 Director May 1998
CLASS III -- TERM EXPIRES 2003
Jeffrey Weiner................................ 43 Director May 1998
David Edelstein............................... 47 Director May 1998
</TABLE>
<TABLE>
<CAPTION>
NAME AGE POSITION A DIRECTOR SINCE
---- --- --------------------- ----------------
<S> <C> <C> <C>
Bruce Bendell................................. 46 Chairman of the Board 1995
Dennis Roth................................... 58 Director 2000
James Wallick................................. 49 Director 1998
Jeffrey Weiner................................ 43 Director 1998
David Edelstein............................... 47 Director 1998
</TABLE>
BRUCE BENDELL. Mr. Bendell has served as our Chairman of the Board since
our formation in November 1995, as our Chief Executive Officer from May 1998
until February 2000, as our President from May 14, 1998 to December 1998 and as
our Chief Executive Officer since July 2000. Mr. Bendell is also Chief Executive
Officer and Chairman of IG2, Inc., our technology division, and has served as
the President and a Director of Major Automotive and its affiliates since
December 1985. Mr. Bendell also serves on the board of E-Star Holdings, Inc., a
privately held company.
DENNIS ROTH. Mr. Roth has served as our Director since March 2000 and was
Chairman and Chief Executive Officer of our technology division from March 2000
to September 2000. Mr. Roth has over 25 years experience at AT&T, most recently
Vice-President and Managing Partner, AT&T Solutions (1999); Chief Executive
Officer, AT&T-Unisource Communications Services (1998); President & Managing
Director,
4
<PAGE> 7
AT&T Communications (United Kingdom) Ltd. (1996-1998) and Regional Managing
Director, AT&T Business Communications Services. Under Mr. Roth's direction,
AT&T Communications (UK) Ltd., a telecommunications start-up, grew to
approximately $300 million a year in revenues. Mr. Roth has served as President
and Chief Executive Officer of ViaGate Technologies, Inc. since October 2000.
JAMES WALLICK. Mr. Wallick has served as our Director since May 1998,
Executive Vice President and Chief Operating Officer since September 1999 and
President and Chief Operating Officer since July 2000. Mr. Wallick is also
President of IG2, Inc. Mr. Wallick has been in the automotive dealership and
financing business since 1971. He is currently president of MIC Leasing.
JEFFREY WEINER. Mr. Weiner has served as our Director 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.
DAVID EDELSTEIN. Mr. Edelstein has served as our Director 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.
REQUIRED VOTE
Approval of the election of each of the nominees requires the affirmative
vote of a majority of shares of Common Stock eligible to vote at the Annual
Meeting in person or by proxy. Abstentions are considered present for this
proposal, so they will have the same effect as votes against the election of the
nominees. Broker non-votes are not considered present for this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
PROPOSAL III -- APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Our Board of Directors has unanimously adopted an amendment to Article II
of our Articles of Incorporation to increase the number of authorized shares of
Common Stock from 50,000,000 to 100,000,000. The text of the first sentence of
Article II, as it is proposed to be amended, is as follows:
The aggregate number of shares which the corporation shall have authority
to issue is One Hundred and Two Million Shares (102,000,000) shares,
divided into: One Hundred Million (100,000,000) Common Shares, having a par
value of $0.01 per share, and Two Million (2,000,000) Preferred Shares,
having a par value of $0.01 per share.
PURPOSE AND EFFECT OF THE AMENDMENT
The proposed amendment will authorize sufficient additional shares of
Common Stock to provide us with the flexibility to make such issuances from time
to time for any proper purpose approved by the Board of Directors, including
issuances to effect acquisitions or raise capital and issuances in connection
with future stock splits or dividends, without the necessity of delaying such
activities for further stockholder approval except as may be required in a
particular case by our charter documents, applicable law or the rules of any
stock exchange or other system on which our securities may then be listed. There
are currently no arrangements, agreements or understandings for the issuance or
use of additional shares of authorized Common Stock (other than issuances
permitted or required under our stock option plans or awards made pursuant to
those plans) and other outstanding derivative securities.
The additional Common Stock to be authorized by adoption of the proposed
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed
5
<PAGE> 8
amendment and issuance of the Common Stock would not affect the rights of the
holders of currently outstanding Common Stock, except for effects incidental to
increasing the number of shares of the Common Stock outstanding, such as
dilution of earnings per share and voting rights of current holders of Common
Stock. The holders of Common Stock do not presently have preemptive rights to
subscribe for the additional Common Stock proposed to be authorized. If the
amendment is adopted, it will become effective upon filing of a Certificate of
Amendment of our Articles of Incorporation with the Secretary of State of
Nevada.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if we were the subject of a hostile takeover attempt, we
could impede the takeover by issuing shares of Common Stock, thereby diluting
the voting power of the other outstanding shares and increasing the potential
cost of the takeover. The availability of this defensive strategy to us could
discourage unsolicited takeover attempts, thereby limiting the opportunity for
our stockholders to realize a higher price for their shares than is generally
available in the public markets. The Board of Directors is not aware of any
attempt, or contemplated attempt, to acquire control of the Company, and this
proposal is not being presented with the intent that it be utilized as a type of
anti-takeover device.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
is required for approval of the amendment to our Articles of Incorporation
authorizing an increase from 50,000,000 to 100,000,000 shares of Common Stock.
Abstentions are considered present for this proposal, so they will have the same
effect as votes against the amendment. Broker non-votes are not considered
present for this proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK.
PROPOSAL IV -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed BDO Seidman LLP as our 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.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote
is required for ratification of the appointment of BDO Seidman LLP as our
independent auditors. 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 RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN LLP AS OUR INDEPENDENT AUDITORS.
6
<PAGE> 9
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
PRINCIPAL SHAREHOLDERS
The following tables sets forth information with respect to the beneficial
ownership of each class of our securities as of October 20, 2000 respectively,
by (i) each of our directors, (ii) each of our executive officers, (iii) all of
our directors and executive officers as a group and (iv) each person known to us
to own more than 5% of any class of our securities:
<TABLE>
<CAPTION>
1997 MAJOR SERIES
OF CONVERTIBLE
PREFERRED STOCK(2)
NUMBER OF -------------------
NAME AND ADDRESS SHARES PERCENT(1) NUMBER PERCENT
---------------- --------- ---------- --------- -------
<S> <C> <C> <C> <C>
Bruce Bendell................................ 8,579,244(3)(12) 29.67% 2,250,000 100.0%
Doron Cohen.................................. 3,164,012(4) 12.10%
David Edelstein.............................. 133,900(5)(6) *
Richard L. Feinstein......................... 140,500(7) *
James Wallick................................ 242,439(8) *
Jeffrey Weiner............................... 148,950(5)(9) *
Dennis Roth.................................. 15,000(10) *
Millennium III Trust......................... 2,292,500(11) 8.76%
All directors and executive officers as a
group...................................... 9,260,033(12)(13) 31.43%
</TABLE>
---------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Based on 26,148,699 shares of common stock outstanding on October 20, 2000.
(2) Based on 500,000 shares of the 1997-Major Series of Convertible Preferred
Stock outstanding on October 20, 2000, which converts into 2,250,000 shares
of common stock.
(3) Includes: (i) 23 shares of common stock owned by Mr. Bendell's wife and the
following shares of common stock which Mr. Bendell has the right to acquire
within 60 days: (a) 112,500 shares of common stock which Mr. Bendell has
the right to acquire upon the exercise of warrants; and (b) 2,250,000
shares of common stock, the minimum number of shares of common stock into
which the 500,000 shares of the 1997-Major Series of Convertible Preferred
Stock beneficially owned by Mr. Bendell are convertible into common stock;
and (ii) options for 400,000 shares of common stock which are immediately
exercisable.
(4) Pursuant to a Separation and Release Agreement dated August 8, 2000, the
shares will be voted in accordance with the recommendation of the majority
of the non-employee directors of the Company.
(5) Includes options for 124,000 shares of common stock which are immediately
exercisable.
(6) Includes 9,900 shares of common stock owned by Mr. Edelstein's children.
(7) Includes options for 82,500 shares of common stock which are immediately
exercisable.
(8) Includes options for 204,500 shares of common stock which are immediately
exercisable.
(9) Includes 14,500 shares of common stock owned by Mr. Weiner's wife.
(10) Includes options for 15,000 shares of common stock which are immediately
exercisable.
(11) Include shares owned by an irrevocable trust of which Mr. Bendell is a
beneficiary, but which Mr. Bendell disclaims any voting or dispositive
power.
(12) Includes (i) 24,423 shares of common stock owned by immediate family
members of directors and executive officers as a group, (ii) 2,362,500
shares of common stock that the directors and executive officers as a group
have the right to acquire within 60 days and (iii) options for 950,000 of
common stock which are immediately exercisable.
(13) The address for each beneficial owner is c/o Fidelity Holdings, Inc., 80-02
Kew Gardens Rd., Suite 7000, Kew Gardens, NY 11415.
7
<PAGE> 10
EXECUTIVE OFFICERS
The following table sets forth the names and ages of all executive
officers, the positions and offices with us held by each executive officer and
the period served:
<TABLE>
<CAPTION>
NAME AGE POSITION PERIOD SERVED
---- --- -------- --------------
<S> <C> <C> <C>
Bruce Bendell............. 46 Chairman of the Board, Chief Executive Officer 1995 - present
James Wallick............. 49 President, Chief Operating Officer and 1998 - present
Director
Richard L. Feinstein...... 57 Chief Financial Officer 1997 - present
</TABLE>
Information concerning Messrs. Bendell and Wallick is provided under
"Election of Directors."
RICHARD L. FEINSTEIN. Mr. Feinstein has served as our Senior Vice
President -- Finance and 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.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
We have the following standing committees: an Audit Committee and a
Compensation Committee. Since May 1998, the Audit Committee has been comprised
of Mr. Bendell, Mr. Edelstein and Mr. Weiner, and is charged with reviewing our
annual audit and meeting with our independent auditors to review our internal
controls and financial management practices. The Compensation Committee, which
is comprised of Mr. Edelstein and Mr. Weiner, recommends to the Board of
Directors compensation for our 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, 1999, the Audit Committee held
one meeting.
The Board of Directors held four meetings during the fiscal year ended
December 31, 1999. All of the Directors attended each meeting. From time to
time, the Board acted by unanimous written consent.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of our fiscal years
ended December 31, 1999 and 1998 concerning compensation of (i) all individuals
serving as our Chief Executive Officer during the fiscal year ended December 31,
1999 and (ii) each other of our executive officers whose total annual salary and
bonus equaled or exceeded $100,000 in the fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------------
OTHER ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ANNUAL($) COMPENSATION($)
--------------------------- ---- --------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Doron Cohen(1)....................... 1998 246,500 0 0 0
President, CEO and Treasurer 1999 244,580 0 0 0
Bruce Bendell(2)..................... 1998 248,530 127,437 0 0
Chairman and Chief Executive 1999 278,000 0 0 1,800,000
Officer
Richard Feinstein(3)................. 1998 125,000 0 3,166 0
Chief Financial Officer 1999 170,715 0 6,324 70,000
</TABLE>
---------------
(1) Salary in 1998 includes $150,000 from us (subsequently paid through the
issuance of 87,804 shares of our common stock).
(2) Salary in 1998 includes $150,000 from us (subsequently paid through the
issuance of our 87,804 shares of common stock). Mr. Bendell received $81,250
in salary and $127,437 in bonus from Major Dealer Group
8
<PAGE> 11
since its acquisition on May 14, 1998. In December 1999, we incurred a
liability for a one-time charge of $1.8 million to Mr. Bendell for
reimbursement of certain expenses and a bonus.
(3) Other Annual amount represents an automobile allowance of $527 per month
since July 1998. The amount reported under All Other Compensation reflects
the value of shares issued to Mr. Feinstein in January 1999.
STOCK OPTION GRANTS
The following table sets forth certain information regarding stock options
granted to the Named Executive Officers during 1999, as adjusted for 3 for 2
splits in each of June 1999 and January 2000. We have never granted any stock
appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE PER ---------------------
NAME GRANTED 1999(2) SHARE ($) EXPIRATION DATE 5% 10%
---- ---------- ------------ --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Feinstein... 112,500(4) 43.1% 1.71 January 4, 2009 $120,983 $306,596
</TABLE>
---------------
(1) Each option represents the right to purchase one share of common stock. The
options shown in this table were all granted under our 1999 Stock Option
Plan.
(2) In the year ended December 31, 1999, we granted options to employees to
purchase an aggregate of 261,000 shares of common stock.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
our estimate or projection of future common stock price growth. These
amounts represent certain assumed rates of appreciation in the value of our
common stock from the fair market value on the date of grant. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the common stock and overall stock market conditions. The amounts reflected
in the table may not necessarily be achieved.
(4) Vesting dates as follows: 45,000 shares on January 4, 1999, and 22,500
shares each on December 31, 1999, December 31, 2000, and December 31, 2001.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
No options were exercised by any of the Named Executive Officers during the
fiscal year ended December 31, 1999. The value of unexercised options held by
any such persons as of December 31, 1999 was as follows for Mr. Bendell (the
only such option holder):
<TABLE>
<S> <C>
Total number of shares underlying unexercised options....... 112,500
Exercisable options......................................... 112,500
Unexercisable options....................................... -0-
Value of in-the-money options............................... $1,195,337(1)
</TABLE>
---------------
(1) Represents warrants to acquire 112,500 shares of Common Stock issued to Mr.
Bendell on October 2, 1996 as a signing bonus under a management agreement
with us to manage the operations of Major Fleet.
EMPLOYMENT AND RELATED ARRANGEMENTS AND AGREEMENTS
As of November 7, 1995, our date of incorporation, we entered into a
Consulting Agreement with Mr. Bendell, our Chairman and Chief Executive Officer,
pursuant to which he serves as a business, management and financial consultant
to us for a period which ended on December 31, 1998, subject to successive
one-year extensions at our option. Mr. Bendell receives an annual consulting fee
as determined by
9
<PAGE> 12
our 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 our 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 our 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 our Board of Directors.
Mr. Bendell has agreed not to disclose confidential information relating to us
and has agreed not to compete with, or solicit employees or customers of, us
during specified periods following the breach or termination of his agreement to
serve as a consultant to us. Mr. Bendell has been serving at will since the
expiration of the agreement pursuant to the same terms.
As of November 7, 1995, we entered into an Employment Agreement with Doron
Cohen, pursuant to which he served as our President, Chief Executive Officer and
Treasurer for a period which ended on December 31, 1998, subject to successive
one-year extensions at our option. Mr. Cohen received an annual base salary as
determined by our Board of Directors from time to time, but not less than
$150,000. The annual salary was subject to a yearly cost-of-living adjustment
and was also retroactively increased based upon our 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 was also entitled
to a bonus in such amounts and at such times as determined by our Board of
Directors. In addition, the agreement provided that Mr. Cohen was entitled to
various fringe benefits under the agreement and was entitled to participate in
any incentive, stock option, deferred compensation or pension plans established
by our Board of Directors. Mr. Cohen has agreed not to disclose confidential
information relating to us and has agreed not to compete with, or solicit
employees or customers of, us during specified periods following discontinuance
of his employment for any reason other than a termination for cause. Mr. Cohen
served at will since the expiration of the agreement pursuant to the same terms.
Subsequently, in July 2000, Mr. Cohen resigned from all positions with the
Company and entered into a Separation and Release Agreement with the Company
dated August 8, 2000. See "Certain Relationships and Related Transactions."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the NRS, as amended, a director, officer, employee or agent of a
Nevada corporation may be entitled to indemnification by the corporation under
certain circumstances against expenses, judgments, fines and amounts paid in
settlement of claims brought against them by a third person or by or in right of
the corporation.
We are obligated under our Articles of Incorporation to indemnify any of
our present or former directors who served at our request as a director, officer
or member of another organization against expenses, judgments, fines and amounts
paid in settlement of claims brought against them by a third person or by or in
right of the corporation if such director acted in good faith or in a manner
such director reasonably believed to be in, or not opposed to, our best
interests and, with respect to any criminal action or proceeding, if such
director had no reason to believe his or her conduct was unlawful. However with
respect to any action by or in the right of the Company, the Articles of
Incorporation prohibit indemnification in respect of any claim, issue or matter
as to which such director is adjudged liable for negligence or misconduct in the
performance is his or her duties to us, unless otherwise ordered by the relevant
court. Our Articles of Incorporation also permit it to indemnify other persons
except against gross negligence or willful misconduct.
We are obligated under our bylaws to indemnify our directors, officers and
other persons who have acted as our representatives at our request to the
fullest extent permitted by applicable law as in effect from time to time,
except for costs, expenses or payments in relation to any matter as to which
such officer, director or representative is finally adjudged derelict in the
performance of his or her duties, unless we have received an opinion from
independent counsel that such person was not so derelict.
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<PAGE> 13
Our indemnification obligations are broad enough to permit indemnification
with respect to liabilities arising under the Securities Act. Insofar as we may
otherwise be permitted to indemnify our directors, officers and controlling
persons against liabilities arising under the Securities Act or otherwise, we
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The NRS, as amended, also permits a corporation to limit the personal
liability of its officers and directors for monetary damages resulting from a
breach of their fiduciary duty to the corporation and its stockholders. Our
Articles of Incorporation limit director liability to the maximum extent
permitted by the NRS, which presently permits limitation of director liability
except (i) for a director's acts or omissions that involve intentional
misconduct, fraud or a knowing violation of law and (ii) for a director's
willful or grossly negligent violation of a Nevada statutory provision that
imposes personal liability on directors for improper distributions to
stockholders. As a result of the inclusion in our Articles of Incorporation of
this provision, our stockholders may be unable to recover monetary damages
against directors as a result of their breach of their fiduciary duty to us and
our stockholders. This provision does not, however, affect the availability of
equitable remedies, such as injunctions or rescission based upon a breach of
fiduciary duty by a director.
We maintain a $5 million liability insurance policy for the benefit of our
officers and directors. We have subsequently added a $5 million extension as of
October 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Edelstein and Weiner, none of whom has been an officer or employee at any time
since our inception. None of our executive officers serve as a member of the
Board of Directors or Compensation Committee of any entity that has one or more
executive officers serving as a member of our Board of Directors or Compensation
Committee. Prior to the formation of the Compensation Committee, the Board of
Directors as a whole made decisions relating to the compensation of our
executive officers.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors is responsible for
establishing, monitoring, and implementing the policies of governing the
compensation of the Company's executives. The Compensation Committee believes
that the compensation programs for our executive officers should reflect our
performance and the value created for our stockholders. In addition, the
compensation programs should support our short-term and long-term strategic
goals and values and should reward individual contribution to our success. The
Compensation Committee, which is comprised entirely of independent, outside
members of our Board of Directors, has furnished the following report on
executive compensation.
GENERAL COMPENSATION POLICY. The Compensation Committee's policy is to
provide our executive officers with compensation opportunities that are based
upon their personal performance, our financial performance and their
contribution to that performance and which are competitive enough to attract and
retain highly skilled individuals. Each executive officer's compensation package
is comprised of a base salary, bonus and long-term incentive awards. We review
compensation levels of other companies in its industry to ensure that our
executive compensation is appropriate in light of industry practices.
BASE SALARY. Salaries for executive officers for 1999 were generally
determined by the Board of Directors on an individual basis, taking into account
individual experience and performance and our specific needs. For 2000, the
Compensation Committee will review the base salaries of the executive officers
by evaluating each executive's scope of responsibility, performance, prior
experience and salary history, as well as the salaries for similar positions at
comparable companies.
BONUS. We awards bonuses as a reward for performance based principally on
our overall financial results and or achievements of specified business
objectives. We believe that bonuses properly motivate the executive officers to
perform to the greatest extent of their abilities to generate the highest
attainable profits for us. There were no bonuses paid in 1999.
11
<PAGE> 14
LONG TERM INCENTIVE AWARDS. The Compensation Committee believes that
equity-based compensation in the form of stock options links the interests of
executives with the long-term interests of our stockholders and encourages
executives to remain in our employ. We grant stock options in accordance with
its various stock option plans. Grants are awarded based on a number of factors,
including the individual's level of responsibility, the amount and term of
options already held by the individual, the individual's contributions to the
achievement of our financial and strategic objectives, and industry practices
and norms.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Bendell, Chairman of the
Board of Directors and our Chief Executive Officer for 1999, was paid a base
salary of $278,000 for the year ended December 31, 1999. Additionally, in
December 1999, we incurred a liability for a one time charge of $1.8 million to
Mr. Bendell for reimbursement of certain expenses and a bonus.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held companies for compensation exceeding $1 million paid to certain
of the Company's executive officers. The limitation applies only to compensation
that is not considered to be performance-based. The non-performance based
compensation paid to our executive officers in 1999 did not exceed the $1
million limit per officer and the Compensation Committee does not anticipate
that the non-performance based compensation to be paid to our executive officers
in 2000, if any, will exceed that limit. Our Stock Option Plans are structured
so that any compensation deemed paid to an executive officer in connection with
the exercise of option grants made under that plan will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. The Compensation Committee currently intends to limit the dollar
amount of all other compensation payable to our executive officers to no more
than $1 million. The Compensation Committee is aware of the limitations imposed
by Section 162(m), and the exemptions available therefrom, and will address the
issue of deductibility when and if circumstances warrant.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.
COMPENSATION OF DIRECTORS
Non-employee Directors each received 4,500 shares of our Common Stock and
4,500 options to purchase shares of Common Stock in 1999 under our 1999
Directors Stock Plan. We reimburse directors for their expenses of attending
meetings of the Board of Directors.
ANTI-TAKEOVER PROVISIONS
There have been a number of cases in which public companies have been
subjected to hostile takeover attempts -- offers not determined to be in the
best interests of a targeted company by its Board of Directors -- through
purchases of control by means of tender offers or other purchases of outstanding
shares. Such purchases which result in the acquisition of less than all of the
targeted company's outstanding shares often have been followed by a
non-negotiated merger or other form of complete unilateral acquisition of the
remaining shares by the company. In some instances, a purchaser has used its
controlling interest either to effect other transactions having an adverse
impact on the company or to direct the company's business without purchasing the
remaining minority interest.
The Board believes that circumstances could exist where a hostile takeover
attempt would be detrimental to our stockholders and that, to fulfill its
fiduciary duty, it needs adequate time to evaluate the matter. The suddenness
and short time period inherent in hostile takeover attempts may not allow the
Board adequate time to: (i) consider fully the proposal; (ii) identify other
alternatives; (iii) compare the proposal to the possible alternatives; and (iv)
make a determination recommending acceptance or rejection of the proposal or
expressing no opinion and remaining neutral. An informed decision with respect
to a hostile takeover attempt requires careful assessment and consideration of
often complex issues regarding the proposal's "fairness and adequacy," including
but not limited to its tax implications for stockholders, all in comparison with
other alternatives which are or may become available.
12
<PAGE> 15
While the Board has no knowledge of any specific effort to accumulate our
Common Stock or to obtain control of the Company by other means, it believes
that it is prudent to be prepared in advance and, for that reason, it has
carefully considered what measures might be taken to protect against takeover
attempts which the Board is unable to recommend as being in our best interests
the in the best interests of our stockholders.
The principal purpose of Proposal I is to attempt to influence persons who
might wish to make a bona fide offer for the Company to negotiate in good faith
with the Board and to ensure that any offer is fair to us and to our
stockholders, and to emphasize that the directors have a significant degree of
authority with respect to our protection.
The overall effect of the adoption of Proposal I could be, under certain
circumstances, to deter or discourage hostile takeover attempts by making it
more difficult for a person who has gained a substantial equity interest in the
Company to effectively exercise control. If this Proposal is approved, the
opportunity for stockholders to dispose of their shares at the higher prices
generally available in takeover attempts may be limited. In addition, this
provision may result in the then incumbent directors of the Company retaining
their positions even though a person holding a majority of shares might desire a
change and also may make the accomplishment of certain corporate transactions
more difficult even if they are desired by a person holding a majority of the
shares.
The Board has concluded unanimously that the potential benefits of this
provision outweigh the possible disadvantages.
13
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
Our Common Stock commenced trading on the Nasdaq Small Cap Market on
October 7, 1998 and on the Nasdaq National Market under the symbol "FDHG" on
August 3, 1999.
The stock price performance graph below compares the cumulative total
stockholder return on our Common Stock with the Total Return Index for Nasdaq
Stock Market U.S. Companies and the Nasdaq Non-Financial Index for the period
commencing on May 2, 1996 and ending December 31, 1999. The graph assumes that
$100.00 was invested in the Common Stock and in each index on May 2, 1996. The
total return for the Common Stock and the indices used assumes the reinvestment
of dividends, even though dividends have not been declared on the Common Stock.
The information contained in the graph does not reflect present performance
of our stock.
The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be deemed incorporated by reference into
any future filing under the Securities Act or the Exchange Act, except to the
extent that we specifically incorporate it by reference into such filing.
COMPARISON OF 44 MONTH CUMULATIVE TOTAL RETURN*
AMONG FIDELITY HOLDINGS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE
NASDAQ NON-FINANCIAL INDEX
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ NON-
FIDELITY HLDGS INC MARKET (U.S.) FINANCIAL
------------------ ------------- -----------
<S> <C> <C> <C>
5/2/96 100.00 100.00 100.00
12/96 138.46 109.67 106.56
12/97 138.46 134.36 124.78
12/98 130.77 189.46 183.14
12/99 874.06 352.19 359.62
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1999, Mr. Cohen, our former President and Chief Executive
Officer, was granted piggyback registration rights with respect to 87,804 shares
of our Common Stock issued to him as compensation for fiscal 1998.
In January 1999, Mr. Bendell was granted piggyback registration rights with
respect to 87,804 shares our Common Stock issued to him as compensation for
fiscal 1998. In December 1999, our Board of Directors approved a one-time
payment of $1,800,000 to Mr. Bendell, as a reimbursement of certain expenses and
a bonus.
14
<PAGE> 17
In January 1999, Mr. Feinstein was granted piggyback registration rights
with respect to 45,000 shares of our Common Stock issued to him as employment
compensation.
Following our acquisition of Major Auto, Messrs. Bruce Bendell and Harold
Bendell continue to be responsible for senior-level management of the
dealerships. The Bendell brothers and we believe that this continuity of senior
management was important in obtaining the manufacturers' consents to the
transfer of the dealerships to us. The Bendell brothers' management control has
been accomplished through (i) their ownership of 100 shares of our 1997A-MAJOR
AUTOMOTIVE GROUP Series of Preferred Stock (of which shares Mr. 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 through (ii) a related
management agreement.
To further facilitate obtaining the required manufacturers' consents, we
and the Bendells 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 us in connection with the Major Auto Acquisition and any
additional automobile dealerships that we 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 us. If we continue 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 us (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 we disagree as to a particular course of action, Major Auto would
nonetheless be able to take the action in question, except that the management
agreement prohibits certain actions without the prior approval by our Board of
Directors. Those actions are (i) disposing of any of the Major Auto dealerships,
(ii) acquiring new dealerships, and (iii) our incurring liability for Major Auto
indebtedness. Any compensation that Mr. Bendell is entitled to receive under the
management agreement is in addition to any other compensation that he is
entitled to receive from us.
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.
We have made a loan to Mr. 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 and payable upon demand. We have
advanced amounts and incurred additional expenses on behalf of Mr. Cohen in the
aggregate amount of $908,067, including accrued interest.
On August 8, 2000, Mr. Cohen signed a Separation and Release Agreement (the
"Agreement") with the Company. The financially significant provisions of the
Agreement provide for periodic payments to begin on August 15, 2000. Such cash
payments consist of an initial payment of $250,000; monthly payments of $500
beginning July 1, 2000 and ending June 1, 2002, aggregating $12,000; plus
monthly payments of $20,833.33 beginning July 1, 2001 through June 1, 2002 and
$4,166.66 per month beginning July 1, 2002 and ending on June 1, 2005, the
aggregate amount of which is $650,000. The total of all cash payments to Mr.
Cohen is $662,000. In order to qualify for such future payments, Mr. Cohen must
remain in compliance with non-disparagement, non-solicitation, non-compete and
voting restriction provisions embodied in the Agreement. We have also agreed to
continue Mr. Cohen and his family on our health plan and to provide him with an
automobile for two years.
15
<PAGE> 18
Additionally, we have agreed to a potential forgiveness of Mr. Cohen's
indebtedness to us in the aggregate amount of $1,048,067 to begin, under certain
circumstances, on August 8, 2003 and continue on the next two anniversary dates,
with one-third lapsing at each date. The requirements for such forgiveness also
include Mr. Cohen's compliance with the restrictive provisions of the Agreement.
We are presently unable to estimate the value of the restrictive covenants
included in the Agreement and the remaining payments to Mr. Cohen and is in the
process of obtaining an independent appraisal to determine such value. As of
June 30, 2000, we have expensed $251,000 relating to the first payment made to
Mr. Cohen on August 15, 2000. To the extent that such appraisal reflects a value
that is less than the recorded amount of Mr. Cohen's loan the difference will be
expensed in the third quarter of 2000. The balance will be amortized over the
restrictive period.
Mr. Bendell and Major Chevrolet, Major Dodge and Major Chrysler Plymouth
Jeep Eagle, wholly-owned by Major Auto, have guaranteed the obligations of Major
Fleet under a $5,000,000 line of credit with Marine Midland Bank. In addition,
Mr. 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 we entered into a consulting agreement with Clemont
Investments Ltd., 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 us with certain business contacts, (iii) 54,000
shares of common stock in connection with compliance with certain restrictive
covenants contained in the Consulting Agreement (collectively, the "Clemont
Shares"). We have the right to repurchase the Clemont Shares under certain
circumstances at a price of up to $4.00 per share. In connection with the
Consulting Agreement, Clemont entered into a put agreement with Mr. Bendell, our
Chairman, 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 us.
We have retained the accounting firm of Marcum & Kliegman LLP to provide
certain accounting and tax services for us and our subsidiary Major Fleet. In
1999, we paid Marcum & Kliegman LLP $103,500 for its services. Mr. Weiner, one
of our directors, is Managing Partner of Marcum & Kliegman LLP.
Our Chief Executive Officer and Chairman, Mr. Bendell, has interests in
several non-affiliated auto dealerships, including Five Towns Nissan, for which
Major Auto purchases cars and provides other services. Major Auto charges a fee
to offset any expenses incurred in providing such services. The volume of such
transactions is immaterial to Major Auto's operations; however, at December 31,
1999, these affiliated dealerships were indebted to Major Auto in an amount of
approximately $1.3 million.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and beneficial owners of more than 10% of the
Common Stock to file with the Securities and Exchange Commission initial
statements of beneficial ownership and statements of changes in beneficial
ownership of the Common Stock and other equity securities of the Company held by
such persons. The Company believes, based solely upon a review of the copies of
such beneficial ownership statements furnished to it, that during the fiscal
year ended December 31, 1999, all Section 16(a) filing requirements applicable
to the Company's officers, directors and owners of more than 10% of the
Company's Common Stock were complied with.
16
<PAGE> 19
ANNUAL REPORT
All shareholders of record as of November 3, 2000 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, 1999. The Form 10-KSB contains
certified consolidated financial statements of the Company and its subsidiaries
for the fiscal year ended December 31, 1999.
By Order of the Company,
/s/ ROBERT COTTRELL
--------------------------------------
Robert Cottrell
Secretary
Dated: November 6, 2000
17
<PAGE> 20
EXHIBIT A
PROPOSAL I: Set forth below in full is the text of the proposed Amendment
to the Articles of Incorporation of the company as described in this Proxy
Statement. The first paragraph of Article V of the Company's Articles of
Incorporation will be removed entirely and the following will be inserted in
lieu thereof:
"So long as all the shares of this corporation are owned beneficially and
of record by only one or two shareholders, the business and property of the
corporation shall be managed by a Board of not fewer than the number of
shareholders. At such time as the shares are owned beneficially and of
record by more than three or more shareholders, the business and property
of the corporation shall be managed by a Board of not fewer than three (3)
nor more than twenty-one (21) directors, who shall be natural persons of
full age, and, effective with the 2000 Annual Meeting of Shareholders,
shall be divided into three (3) classes, as nearly equal in number as may
be, to serve in the first instance until the first, second and third annual
meetings of the shareholders of the corporation be held, respectively, and
until their successors shall be elected and qualified or until such
director's earlier resignation, removal from office, death or disability.
In the case of any vacancies, including vacancies resulting from an
increase in the number of directors of the corporation, the additional
directors shall be so classified so that all classes of directors shall be
increased equally as nearly as may be, and the additional directors may be
filled by the Board of Directors, though less than a quorum, for the
unexpired term. In case of any decrease in the number of directors of the
Corporation, all classes of directors shall be decreased equally, as nearly
as may be. Election of directors shall be conducted as provided in the
Articles of Incorporation or in the Bylaws. In the event of any delay in
holding, or adjournment of, or failure to hold an annual meeting, the terms
of the sitting directors shall be automatically continued indefinitely
until their successors shall be duly elected and qualified. Directors need
not be shareholders or residents of the State of Nevada. The Board of
Directors shall have full power, and it is hereby expressly authorized, to
increase or decrease the number of directors from time to time without
requiring a vote of the shareholders."
18
<PAGE> 21
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIDELITY
HOLDINGS, INC.
PROXY -- ANNUAL MEETING OF SHAREHOLDERS, DECEMBER 8, 2000
The undersigned, a shareholder of Fidelity Holdings, Inc., a Nevada
corporation (the "Company"), does hereby constitute and appoint Bruce Bendell,
James Wallick 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 2000 Annual Meeting of Shareholders of the Company to be held at held at
the Long Island Marriott, 101 James Doolittle Boulevard, Uniondale, NY 11553, on
December 8, 2000 at 2:00 p.m., local time, or at any adjournment or adjournments
thereof.
The undersigned hereby instructs said proxies or their substitutes as set
forth below.
1. APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS:
To approve amendments to our Articles of Incorporation to provide for the
classification of the Board of Directors into three classes of directors with
staggered three-year terms of office.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
2. ELECTION OF DIRECTORS:
To elect five (5) directors to the Board of Directors to serve for terms of
one to three years, respectively, or until their successors are elected and
qualified if Proposal No. 1 is approved, or to elect the same persons as
directors for a term of one year if Proposal No. 1 is not approved.
<TABLE>
<S> <C> <C> <C> <C> <C>
Nominees: Bruce Bendell Dennis Roth James Wallick Jeffrey Weiner David Edelstein
</TABLE>
<TABLE>
<S> <C>
[ [ ] TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
] FOR
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), PRINT NAMES(S)
BELOW:
--------------------------------------------------------------------------------
3. TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM 50,000,000 TO
100,000,000:
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
<PAGE> 22
4. 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, 2000.
<TABLE>
<S> <C> <C>
[ [ [
] FOR ] AGAINST ] ABSTAIN
</TABLE>
5. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect to
all other matters that may come before the 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 November 6, 2000, 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:
------------------------------------------------------------------------,
2000
(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.
