<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MULTIMEDIA K.I.D., INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MULTIMEDIA K.I.D., INC.
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of Multimedia K.I.D., Inc. to be held on Monday, November 27, 2000 at 9:00 A.M.
Israel local time, at the offices of the Company.
The formal Notice of Meeting and the accompanying Proxy Statement set
forth proposals for your consideration this year. You are being asked to elect
directors, to approve the adoption of the Company's 2000 Stock Option Plan and
to ratify the appointment of BDO International as the independent certified
public accountants of the Company.
At the meeting, the Board of Directors will also report on the affairs
of the Company, and a discussion period will be provided for questions and
comments of general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you are able to be with us at
the meeting, it is important that your shares be represented. Accordingly, I
urge you to sign, date and promptly return, the enclosed proxy in the enclosed
postage-paid envelope. If you decide to attend the annual meeting, you will of
course be able to vote in person, even if you have already submitted your proxy.
Thank you for your cooperation.
Very truly yours,
/s/ Shaike Orbach
SHAIKE ORBACH
President and Chief Executive Officer
October 27, 2000
<PAGE>
MULTIMEDIA K.I.D., INC.
23 HALUTZAT HAPARDESANUT STREET
PETACH TIKVAH 49221 ISRAEL
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 27, 2000
----------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Multimedia K.I.D., Inc. (the "Company") will be held on Monday, November 27,
2000 at 9:00 A.M. Israel local time, at the offices of the Company, for the
following purposes:
(1) To elect five directors to serve for the ensuing year.
(2) To consider and act upon a proposal to approve the adoption of the
Company's 2000 Stock Option Plan.
(3) To consider and act upon a proposal to ratify the appointment of
BDO International as the Company's independent certified public
accountants for the fiscal year ending June 30, 2001.
(4) To transact such other business as may properly come before the
annual meeting or any adjournment thereof.
Only stockholders of record at the close of business on October 13,
2000 are entitled to notice of and to vote at the annual meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the annual meeting in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
EACH STOCKHOLDER IS URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. No postage is required if the
proxy is mailed in the United States. Stockholders who attend the annual meeting
may revoke their proxy and vote their shares in person.
By Order of the Board of Directors
/s/ CLIFF DEGROOT
-----------------
Cliff DeGroot
Secretary
Petach Tikvah, Israel
October 27, 2000
<PAGE>
MULTIMEDIA K.I.D., INC.
23 HALUTZAT HAPARDESANUT STREET
PETACH TIKVAH 49221 ISRAEL
-------------------------------
PROXY STATEMENT
-------------------------------
GENERAL INFORMATION
GENERAL
This Proxy Statement, first mailed to stockholders on or about October
27, 2000 is furnished to the holders of Common Stock (the "Common Stock"), of
Multimedia K.I.D., Inc. (the "Company") in connection with the solicitation by
the Board of Directors of the Company of proxies for use at the Annual Meeting
of Stockholders (the "annual meeting"), or at any adjournment thereof, pursuant
to the accompanying Notice of Annual Meeting of Stockholders. The annual meeting
will be held on Monday, November 27, 2000, at 9:00 A.M., Israel local time, at
the offices of the Company.
It is proposed that at the annual meeting: (i) five directors will be
elected, (ii) the adoption of the Multimedia K.I.D., Inc. 2000 Stock Option Plan
(the "2000 Plan") will be approved and (iii) the appointment of BDO
International as the independent certified public accountants of the Company for
the fiscal year ending June 30, 2001 will be ratified.
Management currently is not aware of any other matters that will come
before the annual meeting. If any other matters properly come before the annual
meeting, the persons designated as proxies intend to vote in accordance with
their best judgment on such matters.
Proxies for use at the annual meeting are being solicited by the Board
of Directors of the Company. Proxies will be solicited chiefly by mail; however,
certain officers, directors, employees and agents of the Company, none of whom
will receive additional compensation therefor, may solicit proxies by telephone,
telegram or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling, and will
reimburse the reasonable expenses of brokerage firms and others for forwarding
material to beneficial owners of shares of Common Stock.
<PAGE>
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the annual meeting and a return postage-paid
envelope for the proxy are enclosed. Unless otherwise indicated on the form of
proxy, shares of Common Stock represented by any proxy in the enclosed form,
assuming the proxy is properly executed and received by the Company prior to the
annual meeting, will be voted with respect to the following items on the agenda:
(i) the election of each of the nominees for director as shown on the form of
proxy, (ii) the approval of the Company's 2000 Plan and (iii) the appointment of
BDO International as the independent certified public accountants of the
Company.
Stockholders may revoke the authority granted by their execution of a
proxy at any time prior to the effective exercise of the powers conferred by
that proxy, by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the meeting. Shares of Common Stock represented by executed and unrevoked
proxies will be voted in accordance with the instructions specified in such
proxies. If no specifications are given, the proxies intend to vote the shares
represented thereby "for" the election of each of the nominees for director as
shown on the form of proxy, "for" the approval of the 2000 Plan and "for" the
ratification of the appointment of BDO International as the independent
certified public accountants of the Company, and in accordance with their best
judgment on any other matters which may properly come before the meeting.
RECORD DATE AND VOTING RIGHTS
On October 13, 2000, the Company had outstanding 34,209,722 shares of
its Common Stock. Each share is entitled to one vote upon each of the matters to
be presented at the annual meeting. Only stockholders of record at the close of
business on October 13, 2000 are entitled to notice of and to vote at the annual
meeting or any adjournment thereof. The holders of a majority of the outstanding
shares of Common Stock, present in person or by proxy and entitled to vote, will
constitute a quorum at the annual meeting. Abstentions and broker non-votes will
be counted for purposes of determining the presence or absence of a quorum, but
will not be counted with respect to the specific matter being voted upon.
"Broker non-votes" are shares held by brokers or nominees which are present in
person or represented by proxy, but which are not voted on a particular matter
because instructions have not been received from the beneficial owner.
The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock present in person or represented by proxy and entitled to
vote at the annual meeting is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy and entitled to vote at the annual
meeting is required for the approval of the 2000 Plan and for the ratification
of the appointment of BDO International.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
CERTAIN STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of September 1, 2000
(except as otherwise noted in the footnotes) regarding the beneficial ownership
of the Company's Common Stock of: (i) each person known by the Company to own
beneficially more than five percent of the outstanding Common Stock; (ii) each
director and nominee for director of the Company; (iii) each executive officer
named in the Summary Compensation Table (see "Executive Compensation" below);
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise specified, the named beneficial owner has the sole voting and
investment power over the shares listed. Except as otherwise specified, the
address of the beneficial owner is c/o the Company, 23 Halutzat Hapardesanut
Street, Petach Tikvah 49221 Israel.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK
------------------------------------ ------------------ -----
<S> <C> <C>
David Rubner (1) 6,818,701 19.9%
Zehava Rubner 6,818,701 19.9
Pessie Goldenberg 5,581,398 16.3
Laura Huberfeld 3,409,240 10.0
250 Longwood Crossing
Lawrence, NY 11559
Naomi Bodner 3,409,240 10.0
16 Grosser Lane
Monsey, NY 10952
Shaike Orbach -- --
E. Bruce Fredrikson -- --
School of Management
Syracuse University
Syracuse, New York 13244-2130
J.R. Kennedy -- --
3800 Bibb Lane
Orlando, Florida 32817-1634
David Edwards 521,296 1.5
10725 S.W. Avocet Court
Beaverton, Oregon 97008
All directors and executive officers 12,921,395 37.8%
as a group (5 persons)
</TABLE>
--------------
* Represents less than one percent of our common stock.
1. Represents shares held by Mrs. Zehava Rubner, wife of Mr. Rubner. Mr. Rubner
disclaims beneficial ownership of these shares.
3
<PAGE>
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Five directors (constituting the entire Board) are to be elected at the
annual meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below (all of whom are currently directors of the
Company) to serve until the next annual meeting of stockholders and until their
respective successors are duly elected and qualified. If any of these nominees
becomes unavailable for any reason, or if a vacancy should occur before the
election, the shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the nominee or to
fill the vacancy on the Board. All nominees have consented to be named and have
indicated their intent to serve if elected. The Board of Directors has no reason
to believe that any of the nominees will be unable to serve or that any vacancy
on the Board of Directors will occur.
The nominees, their respective ages, the year in which each first
became a director of the Company and their principal occupations or employment
during the past five years are as follows:
DAVID RUBNER, 60, has served as Chairman of the Board since September
2000. Mr. Rubner was employed with ECI Telecom Ltd., a telecommunications
company, from 1970 to February 2000 and was President and Chief Executive
Officer of ECI from 1991 to October 1999 and February 2000, respectively. In
November 1999, he was appointed Vice-Chairman of the Board of Directors of ECI.
Mr. Rubner is also Chairman and CEO of Rubner Technology Ventures Ltd. and
Chairman of Net2Wireless Inc. In addition to ECI Telecom Ltd., Mr. Rubner
currently is a director of ECtel Ltd., CheckPoint Software Technologies Ltd.,
Koor Industries Ltd. and I.I.S. Intelligent Information Systems, Ltd.
PESSIE GOLDENBERG, 47, is a founder of the Company and has served as
Executive Vice Chairman of the Board since September 2000. Mr. Goldenberg is the
sole director of the Company's Israeli subsidiary. Mr. Goldenberg oversees the
development of the Company's products and is responsible for the Company's
current Internet strategy. From July 2000 until September 2000, Mr. Goldenberg
served as acting Chief Executive Officer of the Company and was appointed as a
Director in December 1999. Prior to founding the Company in 1996, Mr. Goldenberg
founded P.M.D. Technological and Education Systems, Ltd. ("PMD"), the previous
owner of certain of the Company's assets. Since 1992, he has served as the
Managing Director of PMD.
YESHAYAHU ("SHAIKE") ORBACH, 49, has served as President, Chief
Executive Officer since September 2000 and a Director since July 2000. From
January 1996 to September 2000, Mr. Orbach served as President and Chief
Executive Officer of OPGAL Optronic Industries Ltd., an Israeli technology
company. From October 1994 to December 1995, Mr. Orbach served as General
Manager and Chief Operating Officer of Edusoft, Ltd., an Israeli educational
software company.
E. BRUCE FREDRIKSON, Ph.D., 62, has served as a Director since July
2000. Mr. Fredrikson is a Professor of Finance at Syracuse University where he
has been a member of the faculty since 1966 and was formerly chairman of the
finance department. Mr. Fredrikson currently serves as a director of Track Data
Corporation and Innodata Corporation and is an Independent General Partner of
Fiduciary Capital Partners, L.P. and Fiduciary Capital Pension Partners, L.P.
J.R. KENNEDY, 66, has served as a Director since July 2000. Mr. Kennedy
has served as a consultant to ECI Telecom Inc., the U.S. subsidiary of ECI
Telecom Ltd., since 1999. Prior to that, Mr. Kennedy held various executive
positions with ECI Telecom Inc. from 1985 to 1998.
The Board of Directors held nine meetings and acted by unanimous
consent twice during the fiscal year ended June 30, 2000. During the fiscal year
ended June 30, 2000, each director in office during such fiscal year attended
not less than 75% of the aggregate number of meetings of the Board of Directors
and of meetings of committees of the Board on which he served.
4
<PAGE>
The Board of Directors of the Company has an Audit Committee. The Audit
Committee is composed of E. Bruce Fredrikson and J.R. Kennedy. The current
makeup of the Audit Committee was established after the end of the fiscal year
ended June 30, 2000 and during such fiscal year, the previous Audit Committee
did not hold any meetings.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy and entitled to vote for
them shall be elected as directors. Only votes cast for a nominee will be
counted, except that the accompanying proxy will be voted for all nominees in
the absence of instructions to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy card to withhold authority to vote for
one or more nominees will not be counted as a vote for any such nominee.
THE BOARD OF DIRECTORS DEEMS THE ELECTION AS DIRECTORS OF THE FIVE
NOMINEES LISTED ABOVE TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" THEIR ELECTION.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and
non-cash compensation awarded to, earned by or paid to the Company's chief
executive officer and each of the other executive officers who had compensation
of at least $100,000 in the fiscal year ended June 30, 2000 for services in all
capacities to the Company and its subsidiaries.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER ANNUAL
SALARY BONUS COMPEN-
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION
--------------------------- ---- --- --- ------
<S> <C> <C> <C> <C>
Pessie Goldenberg 2000 $166,389 -- $1,768,040 (3)
President and Chief Executive Officer 1999 149,461 -- 19,855 (4)
(1) 1998 75,781 -- 10,535 (5)
David Edwards 2000 $209,332 -- $116,563 (6)
Chief Executive Officer(2) 1999 200,000 -- (7)
1998 165,000 -- (7)
</TABLE>
--------------
(1) Mr. Goldenberg served as President and Chief Executive Officer from July
2000 until September 2000. Commencing September 2000, he serves as Executive
Vice Chairman of the Company. Mr. Goldenberg is also the sole director of the
Company's Israeli subsidiary.
(2) Mr. Edwards resigned as President and Chief Executive Officer in July 2000.
(3) Consists of payments the following: (i) in December 1999, the Company issued
shares convertible into 1,217,759 shares of Common Stock to Pessie Goldenberg
and as a result, the Company's Israeli subsidiary recorded a non-cash
compensation expense of $1,748,508; and (ii) payments of $19,532 made by the
Company in connection with employee benefit plans and insurance payments.
(4) Consists of payments made by the Company in connection with employee benefit
plans and insurance payments.
(5) Consists of payments made by the Company in connection with employee benefit
plans and insurance payments.
(6) In December 1999, in connection with the reorganization of the Company, the
Company agreed to forgive a receivable due from David Edwards in the amount of
$116,563.
(7) Perquisites and other personal benefits with less than the lesser of $50,000
or 10% of the total annual salary and bonus reported in this table for any named
executive officer.
The named executive officers did not receive any option grants, nor did
they have any options outstanding, as of the fiscal year ended June 30, 2000.
6
<PAGE>
EMPLOYMENT AGREEMENT
Pessie Goldenberg has an employment agreement with the Company's
Israeli subsidiary. The agreement can be terminated by either party on 180 days
prior written notice. The agreement provides for a base monthly salary of NIS
45,000, equal to approximately $11,000 per month, and is linked to the Israeli
consumer price index. Pursuant to the agreement, the Company will contribute
7.5% of Mr. Goldenberg's gross salary per year to a study fund (an Israeli
employee benefit providing employees the opportunity to save money for certain
employer permitted purposes).
COMPENSATION OF DIRECTORS
Messrs. Fredrikson and Kennedy receive $12,000 per year as compensation
for service on the Board of Directors or any of its committees and $500 for each
Board meeting at which they are physically present. Directors are also
reimbursed for expenses in connection with attendance at Board and Committee
meetings. Mr. Rubner receives $24,000 per year as compensation for service on
the Board. Subject to stockholder approval of the 2000 Plan, each of E. Bruce
Fredrikson and J.R. Kennedy have been granted an option to purchase 75,000
shares of the Company's common stock at a price of $.50 per share. In addition,
Mr. Goldenberg has been granted an option to purchase 600,000 shares of the
Company's common stock at a purchase price of $.50 per share.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers and directors, and persons who beneficially own
more than ten percent of our common stock, to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than ten percent beneficial owners are
required by the SEC to furnish us with copies of all Section 16(a) forms they
file.
Based upon a review of the copies of such forms furnished to us and
written representations from our executive officers and directors, we believe
that during the fiscal year ended June 30, 2000 all Section 16(a) filing
requirements applicable to our executive officers, directors and greater than
ten percent beneficial owners were complied with, except for the Initial Form 3
which was filed by Cliff DeGroot subsequent to the required 10-day period
following the date he became the Company's Chief Financial Officer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 15, 2000, the Company entered into a Management Services
Agreement and on April 6, 2000 entered into a definitive Stock Purchase
Agreement with JIA, Inc., a company partly owned and operated by Robert Cavitt
and Daniel Jensen, former officers and/or directors of the Company, who were
also officers of Summit V, Inc. (previously a wholly owned subsidiary of the
Company), for the sale of all the outstanding stock of Summit V for a purchase
price of $1,175,000. Summit V was the Company's direct sales software operating
subsidiary. The sale was approved by the Company's stockholders at a Special
Meeting held on May 31, 2000 and completed on or about June 2, 2000.
In December 1999, in connection with the reorganization of the Company,
the Company agreed to forgive a receivable due from David Edwards in the amount
of $116,563.
In January 2000, the Company paid PMD, a Company owned and operated by
Pessie Goldenberg, $677,072 pursuant to a 1996 agreement whereby the Company
purchased all the rights to certain of PMD's products. In addition, the Company
paid PMD an aggregate of $205,096 during the year ended June 30, 2000 with
respect to various services primarily related to translation of products into
different languages.
7
<PAGE>
PROPOSAL NO. 2-APPROVAL OF THE ADOPTION OF THE 2000 STOCK OPTION PLAN
The Board of Directors has unanimously adopted the Company's 2000 Stock
Option Plan (the "2000 Plan"), subject to stockholder approval at the annual
meeting. The Board of Directors believes that approval of the 2000 Plan will
serve the best interests of the stockholders by permitting the Board to
establish a flexible vehicle through which it can grant options to purchase
shares of the Company's Common Stock to officers, directors, employees,
consultants and advisors who perform, or will perform, services for the Company
or its affiliates. There are currently 692,863 shares of Common Stock that
remain available for future option grants under our existing stock option plan.
Therefore, the Board of Directors believes that the approval of the adoption of
the 2000 Plan is important to allow the Company to continue to attract and
retain qualified employees, directors officers and consultants.
The primary features of the 2000 Plan are summarized below. The full
text of the 2000 Plan is set forth in Appendix A to this Proxy Statement and the
following discussion is qualified in its entirety by reference thereto.
DESCRIPTION OF THE 2000 PLAN
Available Shares. Subject to adjustment to reflect stock dividends and
other capital changes, 5,000,000 shares of our Common Stock may be issued under
the 2000 Plan. Shares subject to options granted under the 2000 Plan that are
canceled, expired or terminated will again be available for issuance under the
2000 Plan. Shares of Common Stock issued under the 2000 Plan may be either
authorized and unissued shares or shares held by us in our treasury. The Common
Stock issuable upon exercise of option granted under the 2000 Plan will be
registered pursuant to a registration statement on Form S-8 under the Securities
Act of 1933.
Administration. The 2000 Plan provides that it will be administered by
a committee of at least two directors appointed by our Board of Directors, or,
if no committee is appointed, the Board of Directors. Subject to the provisions
of the 2000 Plan, the Board will have the authority to designate participants in
the 2000 Plan, determine the terms and provisions of any option grants under the
2000 Plan, interpret the provisions and supervise the administration of the 2000
Plan and to take such other actions as may be necessary or desirable in order to
carry out the provisions of the 2000 Plan.
Eligibility. Options may be granted under the 2000 Plan to any
employees (including officers), directors, consultants and advisors of the
Company or its affiliates. While any eligible person may be granted a
nonstatutory stock option, only employees may be granted incentive stock
options. As of October 13, 2000, the Company had approximately 36 employees,
including 2 executive officers, and 4 directors who would be eligible under the
2000 Plan.
Term of Plan. The 2000 Plan became effective on October 25, 2000,
subject to the approval of our stockholders at the annual meeting. The 2000 Plan
will terminate, unless terminated earlier by our Board of Directors, on October
25, 2010.
Stock Option Grants. Options that are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and stock options which do not so qualify, i.e.,
non-qualified options, may be granted under the 2000 Plan. Incentive stock
options may only be granted to employees of the Company or any of its
"subsidiary" corporations (within the meaning of Section 424 of the Code).
The exercise price per share of an incentive stock option may not be
less than the fair market value of our Common Stock on the date of grant (or, in
the case of an incentive stock option granted to an employee who owns stock
possessing more than 10% of the combined voting power of all classes of our
stock or any subsidiary or parent corporation, 110% of the fair market value).
All options will, unless sooner terminated, expire not more than ten
years (or, in the case of an incentive stock option granted to a 10%
stockholder, five years) from the date of grant. The Board will have the
discretion to determine the vesting and other restrictions on the exercise of an
option.
8
<PAGE>
Unless the Board determines otherwise, upon the termination of an
optionee's employment or service with us and our affiliates, the optionee will
generally have ninety days to exercise all options that are exercisable on the
termination date. If, however, an optionee is terminated by us or our affiliates
for cause (or terminates at a time when cause exists), then all outstanding
options held by the optionee will immediately terminate and cease to be
exercisable.
Payment for shares acquired upon the exercise of an option may be in
cash, certified or bank check and/or such other form of payment as may be
permitted by the Board from time to time, including shares of the Company's
Common Stock owned or purchasable upon exercise of the option.
Transactions and Capital Changes. The 2000 Plan provides that in the
event of a "Transaction," each outstanding unexercised option will automatically
accelerate and become exercisable immediately prior to the transaction and
terminate upon the occurrence of the transaction, unless the Company's
stockholders receive capital stock of another company as part of the transaction
and the Board of Directors directs that such options shall be converted into
options to purchase shares of the exchange stock. In general, a "Transaction" is
defined as a merger or the sale of all or substantially all of the assets or
shares of the Company, as a result of which the stockholders of the Company
receive cash, stock or other property in exchange for or in connection with
their shares of Common Stock.
The number of shares available under the 2000 Plan, the maximum number
of shares with respect to stock options to be granted to any employee during any
calendar year and the number of shares subject to each outstanding option and
the exercise price thereof will be adjusted upon the occurrence of a stock split
or recapitalization of our Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as general guidance as to the
United States federal income tax consequences under current law of participation
in the 2000 Plan, and does not attempt to describe all potential tax
consequences. Tax consequences are complex and subject to change, and a
taxpayer's particular situation may be such that some variation from the
described rules is applicable. Participants should consult their own tax
advisors prior to the exercise of any options granted under the 2000 plan or the
disposition of any shares of Common Stock acquired pursuant to the 2000 Plan.
In general, the holder of a non-qualified option will recognize
ordinary income upon the exercise of the option in an amount equal to the excess
of the fair market value of the shares of Common Stock with respect to which the
option is exercised at such time over the aggregate exercise price of such
shares. The Company will generally receive a corresponding tax deduction at such
time. Upon a later sale of the Common Stock, the optionee will recognize capital
gain or loss equal to the difference between the sale price and the sum of the
exercise price plus the amount of ordinary income recognized on exercise.
The holder of an incentive stock option will not recognize taxable
income upon the grant or exercise of the option (although, upon exercise, the
option spread is includable as income for purposes of the alternative minimum
tax). If the Common Stock acquired upon exercise of an incentive stock option is
sold or otherwise disposed of within two years from the grant date or within one
year from the exercise date, then, in general, gain realized on the sale is
treated as ordinary income to the extent of the ordinary income that would have
been recognized upon exercise if the option had been a non-qualified option, and
we will generally receive a corresponding deduction. Any remaining gain is
treated as capital gain.
If the Common Stock acquired pursuant to the exercise of an incentive
stock option is held for at least two years from the grant date and one year
from the exercise date and the optionee is employed by the Company (or its
parents or subsidiaries) at all times beginning on the grant date and ending on
the date three months (or, in the case of disability, one year) prior to the
exercise date, then all gain or loss realized upon the sale will be capital gain
or loss and we will not be entitled to a deduction. A special basis adjustment
applies to reduce the gain for alternative minimum tax purposes.
9
<PAGE>
PLAN BENEFITS
The Board has approved grants under the 2000 Plan, subject to
stockholder approval, as follows: (i) Mr. Shaike Orbach, our President and Chief
Executive Officer was granted an option to purchase 200,000 shares at a price of
$1.00 per share and Pessie Goldenberg, our former President and Chief Executive
Officer and current Executive Vice Chairman, was granted an option to purchase
600,000 shares at a price of $.50 per share; (ii) all current executive officers
as a group were granted options to purchase an aggregate of 350,000 shares at
prices ranging from $1.00 to $1.33 per share and (iii) all current directors who
are not executive officers as a group were granted options to 150,000 shares at
a price of $.50 per share. Options to purchase an aggregate of 750,000 shares at
a purchase price of $.50 per share have been approved for grant to other
employees, including all current officers who are not executive officers, as a
group. The closing price of our Common Stock on October 25, 2000 as reported on
the Nasdaq SmallCap market was $.50.
VOTE REQUIRED
The affirmative vote of holders of a majority of the aggregate voting
power of Common Stock issued, outstanding and entitled to vote, present or
represented at the meeting, a quorum being present, is required for the adoption
of this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTEREST OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The stockholders will be asked to ratify the appointment of BDO
International as the independent certified public accountants of the Company for
the fiscal year ending June 30, 2001. BDO International audited the financial
statements of the Company for the fiscal year ended June 30, 2000. A
representative of BDO International is expected to be present at the annual
meeting, and will have an opportunity to make a statement if such person desires
to do so, and is expected to be available to respond to appropriate questions
from stockholders.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the
annual meeting of stockholders of the Company to be held in 2001 must be
received by the Company no later than June 28, 2001 for inclusion in the Board
of Directors' proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at
the annual meeting. However, if any other business properly comes before the
annual meeting, it is the intention of the persons named in the enclosed proxy
to vote on such matters in accordance with their best judgment.
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The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
annual meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Cliff DeGroot
Secretary
Dated: October 27, 2000
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED JUNE 30, 2000 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM:
MULTIMEDIA K.I.D., INC., 23 HALUTZAT HAPARDESANUT STREET, PETACH TIKVAH 49221
ISRAEL
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APPENDIX A
MULTIMEDIA, K.I.D., INC.
2000 STOCK OPTION PLAN
1. NAME
This Plan, as amended from time to time, shall be known as the Multimedia
K.I.D., Inc. 2000 Stock Option Plan (the "PLAN").
2. PURPOSE
2.1 The Plan is intended to provide an incentive to retain, in the employ
or service of the Company and its affiliates (including any
Subsidiary), persons of training, experience, and ability, to attract
new employees, directors or consultants whose services are considered
valuable, to encourage the sense of proprietorship of such persons, and
to stimulate the active interest of such persons in the development and
financial success of the Company by providing them with opportunities
to purchase shares in the Company. Options granted under the Plan may
contain such terms as will qualify such options as ISOs, Section 3(I)
Options or Section 102 Options. All options granted hereunder, whether
Section 3(I) Options, Section 102 Options, ISOs or NQSOs, shall be
hereinafter referred to as the "OPTIONS."
2.2 For the purposes of the Plan, the following terms shall have the
following meanings:
"BOARD" means the Board of Directors of the Company.
"COMPANY" means Multimedia K.I.D., Inc., a Delaware corporation, or any
successor thereto.
"FAIR MARKET VALUE" means, as of any date, the value of a Share
determined as follows:
(i) if the Shares are listed on an established stock exchange or a
national market system, including without limitation the NASDAQ
National Market system, or the NASDAQ SmallCap Market of the
NASDAQ Stock Market, the Fair Market Value shall be the closing
sales price for such Shares (or the closing bid, if no sales
were reported), as quoted on such exchange or system for the
last market trading day prior to time of determination, as
reported in the Wall Street Journal, or such other source as the
Committee deems reliable;
(ii) if the Shares are regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked
prices for the Shares on the last market trading day prior to
the day of determination; or
(iii) in the absence of an established market for the Shares, the Fair
Market Value shall be determined in good-faith by the Committee.
"ISO" means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "CODE").
"NQSO" means an Option that does not qualify as an ISO..
"SECTION 102 OPTION" means an Option containing such terms as will
qualify such Option for the special tax treatment under Section 102 of
the Tax Ordinance.
"SECTION 3(I) OPTION" means an Option granted under the terms of
Section 3(I) of the Tax Ordinance. Options granted to Israeli residents
that do not contain such terms as will qualify them
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for the special tax treatment under Section 102 of the Israeli Tax
Ordinance, shall be Section 3(I) Options.
"SHARES" means the common stock, par value $0.01, of the Company.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the
time of grant of an Option, each of the corporations (other than the
last corporation in the unbroken chain) owns shares possessing fifty
percent (50%) or more of the total combined voting power of all classes
of shares in one of the other corporations in such chain.
"TAX ORDINANCE" means the Israeli Tax Ordinance (New Version), 1961.
3. ADMINISTRATION
3.1 The Board or a committee appointed by the Board for such purpose (the
"COMMITTEE") shall have the power to administer the Plan.
3.2 The Committee shall consist of such number of members (not less than
two (2) in number) as may be fixed by the Board. Subject to the
provisions of the Company's Certificate of Incorporation, the Board
shall appoint the members of the Committee, may from time to time
remove members from, or add members to, the Committee and shall fill
vacancies on the Committee. The Committee shall select one of its
members as its chairman (the "CHAIRMAN") and shall hold its meetings at
such times and places as the Chairman shall determine. The Committee
shall keep records of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
Members of the Committee shall be eligible to receive Options under the
Plan while serving on the Committee, unless otherwise specified herein.
3.3 The Committee shall have full power and authority to: (i) designate
participants (the "OPTIONEES"); (ii) determine the terms and provisions
of any Option Agreements (which need not be identical) including, but
not limited to, the number of Shares to be covered by each Option,
provisions concerning the time or times when and the extent to which
the Options may be exercised and the nature and duration of
restrictions as to transferability or restrictions constituting a
substantial risk of forfeiture; (iii) accelerate the right of an
Optionee to exercise, in whole or in part, any previously granted
Option; (iv) interpret the provisions and supervise the administration
of the Plan; (v) determine the Fair Market Value of the Shares; (vi)
designate Options as Section 3(I) Options, Section 102 Options, ISOs or
NQSOs; (vii) amend the Plan from time to time in order to qualify for
tax benefits applicable under U.S., Israeli or other laws; and (viii)
determine any other matter which is necessary or desirable for, or
incidental to, the administration of the Plan.
3.4 All decisions and selections made by the Board or the Committee
pursuant to the provisions of the Plan shall be made by a majority of
its members except that no member of the Board or the Committee shall
vote on, or be counted for quorum purposes, with respect to any
proposed action of the Board or the Committee relating to any Option to
be granted to that member. Any decision reduced to writing and signed
by all of the members of the Board or the Committee shall be fully
effective as if it had been made at a meeting duly held. The
interpretation and construction by the Board or the Committee of any
provision of the Plan or of any Option shall be final and conclusive
unless otherwise determined by the Board.
3.5 Each member of the Board and the Committee shall, to the fullest extent
permitted by law, be indemnified and held harmless by the Company
against any cost or expense (including reasonable counsel fees)
incurred, or any liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan, unless arising out of such
member's own fraud or bad faith. Such indemnification shall be in
addition to
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any rights of indemnification the member may have as a director or
otherwise under the Company's Certificate of Incorporation, any
agreement, any vote of stockholders or disinterested directors,
insurance policy or otherwise.
4. DESIGNATION OF PARTICIPANTS
The persons eligible for participation in the Plan as recipients of Options
shall include any employees (including officers), directors, consultants and
advisors of the Company or of its affiliates (including any Subsidiary)
provided that such consultants or advisors are (i) natural persons, except
to the extent otherwise permitted by Rule 701 promulgated under the
Securities Act of 1933; and (ii) provide bona-fide services to the Company
or its affiliates, which services are not in connection with the offer or
sale of securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Company's securities.
Notwithstanding the foregoing, ISOs may only be granted to employees of the
Company or any Subsidiary.
5. TRUSTEE
5.1 Section 102 Options which shall be granted under the Plan and/or any
Shares issued upon exercise of such Options and/or other Shares
received subsequently following any realization of rights, shall be
issued to a Trustee nominated by the Committee, and approved in
accordance with the provisions of Section 102 (the "TRUSTEE") and held
for the benefit of the Optionees. Section 102 Options and any Shares
received subsequently following exercise of Section 102 Options, shall
be held by the Trustee for a period of not less than two years (24
months) from the date of grant.
5.2 Anything to the contrary notwithstanding, the Trustee shall not release
any Options which were not already exercised into Shares by the
Optionee or release any Shares issued upon exercise of Options prior to
the full payment of the Optionee's tax liabilities arising from Options
which were granted to him and/or any Shares issued upon exercise of
such Options.
5.3 Upon receipt of the Option, the Optionee will sign an undertaking to
release the Trustee from any liability in respect of any action or
decision duly taken and bona fide executed in relation with the Plan,
or any Option or Share granted to him thereunder.
6. SHARES AVAILABLE
6.1 Subject to adjustment as set forth in Section 8 below, 5,000,000 Shares
are available for issuance under the Plan. Such Shares may be
authorized and unissued or held by the Company in its treasury. Should
any Option for any reason expire or be canceled or terminated prior to
its exercise in full, the Shares subject to such Option may again be
subject to an Option under the Plan.
6.2 Each Option shall be evidenced by a written agreement between the
Company and the Optionee (the "OPTION AGREEMENT"), in such form as the
Committee shall from time to time approve. Each Option Agreement shall
state, inter alia, the number of Shares to which the Option relates,
the type of Option granted thereunder (whether Section 3(I) Option,
Section 102 Option, ISO or NQSO), the purchase price per Share and the
vesting schedule pursuant to which such Option shall become
exercisable.
6.3 All Shares issued upon exercise of an Option shall entitle the holder
thereof to receive dividends and other distributions thereon.
6.4 The maximum number of shares of Common Stock with respect to which
Options may be granted to any employee during any calendar year is
500,000, subject to adjustment in Section 8.5.
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7. PURCHASE PRICE; METHOD OF PAYMENT
7.1 The purchase price of each Share subject to an Option shall be
determined by the Committee in its sole and absolute discretion in
accordance with applicable law, subject to any guidelines as may be
determined by the Board from time to time (the "PURCHASE PRICE"), but
shall not be less than par value of the Common Stock. Notwithstanding
the foregoing, in the case of an ISO (i) granted to an employee of the
Company or any Subsidiary who, at the time of grant of such Option,
owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Subsidiary ("TEN PERCENT
STOCKHOLDER"), the Purchase Price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant,
and (ii) granted to any other employee of the Company or any Subsidiary
at the time of the grant of such Option, the Purchase Price shall be no
less than one hundred percent (100%) of the Fair Market Value per Share
on the date of grant.
7.2 The Purchase Price shall be payable upon the exercise of the Option in
a form satisfactory to the Committee and permitted by law, including
without limitation, by cash or cheque.
8. ADJUSTMENTS
Upon the occurrence of any of the following events, an Optionee's right
to purchase Shares under the Plan shall be adjusted as hereafter provided:
8.1 In the event of a merger of the Company with or into another
corporation, or the sale of all or substantially all of the assets or
Shares of the Company (a "TRANSACTION") while unexercised Options
remain outstanding under the Plan (the "UNEXERCISED OPTIONS"), each
Unexercised Option may be assumed or there may be substituted for the
Shares subject to the Unexercised Options an appropriate number of
shares of each class of shares or other securities of the successor
company (or a parent or subsidiary of the successor company) which were
distributed to the stockholders of the Company in respect of such
Shares, and appropriate adjustments shall be made in the Purchase Price
per Share to reflect such action, and all other terms and conditions of
the Option Agreements, such as the vesting dates, shall remain in
force, all as determined by the Board, whose determination shall be
final.
8.2 Notwithstanding the above and subject to any applicable law, unless the
Committee determines otherwise at the time of grant, if in a
Transaction as described in Section 8.1 above, the successor company
(or parent or subsidiary of the successor company) does not agree to
assume or substitute for the Options, as described above, the vesting
periods shall be accelerated so that any unvested Option shall be
immediately vested and exercisable in full as of the date ten (10) days
prior to the effective date of such Transaction (and each Optionee
shall be provided with written notice of such acceleration at least ten
(10) days prior to the effective date of such Transaction).
8.3 For the purposes of Section 8.1 above, the Option shall be considered
assumed or substituted if, following the Transaction, the Option
confers the right to purchase or receive, for each Share underlying
such Option immediately prior to the Transaction, the consideration
(whether shares, options, cash or other securities or property)
received in the Transaction by holders of Shares for each Share held on
the effective date of the Transaction (and if such holders were offered
a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or acquisition is not
solely common stock (or its equivalent) of the successor company or its
parent or subsidiary, the Board may provide that the consideration to
be received upon the exercise of the Option shall only be common stock
(or its equivalent) of the successor company or its parent or
subsidiary equal in Fair Market Value to the per Share consideration
received by holders of a majority of the outstanding Shares in the
Transaction.
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8.4 If the Company is liquidated or dissolved while unexercised Options
remain outstanding, then the Board, in its discretion, may determine
that all such outstanding Options may be exercised in full by the
Optionees as of the effective date of any such liquidation or
dissolution of the Company.
8.5 If the outstanding shares of the Company shall at any time be changed
or exchanged by declaration of a stock dividend, stock split,
combination or exchange of shares, recapitalization, or any other like
event by or of the Company, and as often as the same shall occur, then
the number, class and kind of Shares subject to the Plan or subject to
any outstanding Options, and the applicable Purchase Price, shall be
appropriately and equitably adjusted so as to maintain the
proportionate number of Shares without changing the aggregate Purchase
Price, provided, however, that no adjustment shall be made by reason of
the distribution of subscription rights (rights offering) on
outstanding stock. Upon the occurrence of any of the foregoing, the
class and aggregate number of Shares issuable pursuant to the Plan (as
set forth in Section 6 hereof), in respect of which Options have not
yet been exercised, or the maximum number issuable pursuant to Section
6.4, shall be appropriately adjusted as determined by the Board, whose
determination shall be final.
9. TERM AND EXERCISE OF OPTIONS
9.1 Options shall be exercised by the Optionee by giving written notice to
the Company, in such form and method as may be determined by the
Company and the Trustee where applicable, in accordance with the
requirements of Section 102 or Section 3(I), which exercise shall be
effective upon receipt of such notice by the Company at its principal
office. The notice shall specify the number of Shares with respect to
which the Option is being exercised. In addition to the written notice,
payment in full of the exercise price of such Option shall be deemed to
have occurred, as applicable, upon delivery of (i) cash or check for an
amount equal to the aggregate Option exercise price for the number of
shares being purchased, (ii) in the discretion of the Committee, upon
such terms as the Committee shall approve, a copy of instructions to a
broker directing such broker to sell the Common Stock for which such
Option is exercised, and to remit to the Company the aggregate exercise
price of such Option (a "cashless exercise") or (iii) in the discretion
of the Committee, upon such terms as the Committee shall approve,
shares of the Common Stock owned or purchasable upon exercise of the
Option by the Optionee, duly endorsed for transfer to the Company with
a Fair Market Value on the date of delivery equal to the aggregate
purchase price of the shares with respect to which such Option or
portion is thereby exercised (a "stock for stock exercise").
9.2 Each Option shall be exercisable following the applicable vesting
dates, subject to the provisions of the Plan and for a number of shares
up to the number of Shares as shall be provided in the Option
Agreement. Notwithstanding the foregoing, no Option shall be
exercisable after the earlier of: (i) the expiration of ten (10) years
from the date of grant; (ii) in the event of the grant of an ISO to a
Ten Percent Stockholders, the expiration of five (5) years from the
date of grant; or (iii) the expiration date of the Option (as defined
in the Option Agreement).
9.3 Except as otherwise provided by the Committee with respect to NQSOs, an
Option shall not be transferable by an Optionee other than by will or
the laws of descent and distribution, and during an Optionee's
lifetime, shall be exercisable only by that Optionee. The Optionee, by
delivering a written notice to the Company, in a form satisfactory to
the Company, shall be entitled to designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled to
exercise the Option in accordance with the Plan.
9.4 An Option may be exercised by the Optionee in whole at any time or in
part from time to time, to the extent that the Option has become vested
and exercisable, prior to the expiration date of the Option, provided
that, subject to the provisions of Section 9.6 below and except as
otherwise determined by the Committee, the Optionee is an employee of,
or is in the service of, the Company or its affiliates, at all times
during the period beginning with the granting of the Option and ending
upon the date of exercise.
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9.5 Subject to the provisions of Section 9.6 below and except as otherwise
determined by the Committee, in the event of the expiration or
termination of Optionee's employment or service with the Company and
its affiliates, all Options granted to the Optionee shall immediately
expire on the date of termination.
9.6 Notwithstanding anything to the contrary hereinabove, an Option may be
exercised after the date of termination of an Optionee's employment or
service with the Company and its affiliates during an additional period
of time beyond the date of such termination, but only to the extent
already vested and exercisable at the time of such termination if: (i)
the Optionee is terminated by the Company or its affiliates without
"Cause", in which event any Option, to the extent still in force and
unexpired, may be exercised within a period of ninety (90) days from
the date of such termination, (ii) termination is the result of death
or disability of the Optionee, in which event any Option, to the extent
still in force and unexpired, may be exercised within a period of three
months from the date of termination or (iii) prior to the date of such
termination, the Committee shall authorize an extension of the terms of
all or part of the Option beyond the date of such termination for a
period not to exceed the period during which the Option by its terms
would otherwise have remained exercisable if the Optionee had remained
in the employ or service of the Company. The term "CAUSE" shall mean,
unless otherwise determined by the Committee at grant or otherwise
provided in an employment or consulting agreement between the Optionee
and the Company or any Subsidiary in effect on the date of grant: (i)
conviction of or plea of nolo contendre or guilty to a crime involving
moral turpitude or a felony; (ii) any refusal to carry out a reasonable
directive of the Optionee's supervisor or manager which involves the
business of the Company or its affiliates and was capable of being
lawfully performed; (iii) embezzlement of funds of the Company or its
affiliates; (iv) any breach of the Optionee's fiduciary duties or
duties of care of the Company or its affiliates; including without
limitation disclosure of confidential information of the Company or its
affiliates; or (v) any conduct (other than performed in good-faith)
reasonably determined by the Committee to be materially detrimental to
the Company or its affiliates.
9.7 The holders of Options shall not have any of the rights or privileges
of stockholders of the Company in respect of any Shares purchasable
upon the exercise of any Options, nor shall they be deemed to be a
class of stockholders or creditors of the Company until such holders
become the owner of record of such Shares upon exercise of the Options
in accordance with the provisions of the Plan.
9.8 Subject to the terms of the Plan, any Option Agreement may contain such
other provisions as the Committee may, from time to time, deem
advisable. In addition to termination of an Option as provided in
Section 8.2 and without limiting the foregoing, the Committee may, with
the consent of the Optionee, cancel all or any portion of an Option,
and the Company's obligation in respect of such Option may be
discharged by (i) payment to the Optionee of an amount in cash equal to
the excess, if any, of the Fair Market Value of the Shares at the date
of such cancellation subject to the portion of the Option so canceled
over the aggregate Purchase Price of such Shares, (ii) the issuance or
transfer to the Optionee of Shares of the Company with a Fair Market
Value at the date of such transfer equal to any such excess, or (iii) a
combination of cash and shares with a combined value equal to any such
excess, all as determined by the Committee in its sole discretion.
10. VESTING OF OPTIONS
The total number of Shares subject to an Option may vest and the Option
shall become exercisable with respect thereto in periodic installments that
may, but need not, be equal. The Option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be
based on performance or other criteria) as the Committee may deem
appropriate. The vesting provisions of individual Options may vary. The
provisions of this Section are subject to any Option provisions governing
the minimum number of Shares as to which an Option may be exercised.
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11. PURCHASE FOR INVESTMENT
The Company's obligation to issue or allocate Shares upon exercise of an
Option granted under the Plan is expressly conditioned upon (a) the
Company's completion of any registration or other qualifications of such
Shares under any state and/or federal law, rulings or regulations or (b)
representations and undertakings by the Optionee (or his legal
representative, heir or legatee, in the event of the Optionee's death) to
assure that the sale of the Shares complies with any registration exemption
requirements which the Company in its sole discretion shall deem necessary
or advisable. Such required representations and undertakings may include
representations and agreements that such Optionee (or his legal
representative, heir, or legatee): (a) is purchasing such Shares for
investment and not with any present intention of selling or otherwise
disposing thereof; and (b) agrees to have placed upon the face and reverse
of any certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the
Company or a reference thereto and (ii) that, prior to effecting any sale or
other disposition of any such Shares, the Optionee must furnish to the
Company an opinion of counsel, satisfactory to the Company, that such sale
or disposition will not violate the applicable requirements of state and
federal laws and regulatory agencies.
12. EFFECTIVE DATE AND TERM
The Plan shall become effective as determined by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12)
months of the date the Plan is adopted by the Board. If the Plan is not
approved by the stockholders of the Company within twelve (12) months after
the date the Plan is adopted by the Board, the Plan and all Options granted
under the Plan shall become null and void.
13. AMENDMENTS; EXPIRATION OR TERMINATION
13.1 The Board may at any time, amend, alter, suspend or terminate the Plan.
Unless sooner terminated, the Plan shall expire on the tenth
anniversary of the date on which the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier.
13.2 No amendment, alteration, suspension or termination of the Plan shall
impair the rights of any Optionee with respect to an outstanding
Option, unless mutually agreed otherwise between the Optionee and the
Committee, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Committee's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
13.3 No Options may be granted under the Plan while the Plan is suspended or
after it is terminated.
14. GOVERNMENT REGULATIONS
The Plan, and the granting and exercise of Options, and the obligation of
the Company to sell and deliver Shares under such Options, shall be subject
to all applicable laws, rules, and regulations, of the State of Israel or
the United States or any state having jurisdiction over the Company and the
Optionee, including the registration of the Shares under the Securities Act
of 1933, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
15. CONTINUANCE OF EMPLOYMENT OR SERVICES
Neither the Plan nor the Option Agreement with the Optionee shall impose any
obligation on the Company or its affiliates, to continue any Optionee in its
employ or service and nothing in the Plan or in any Option shall confer upon
any Optionee any right to continue in the employ or service of the Company
or its affiliates or restrict the right of the Company or its affiliates to
terminate such employment or service at any time.
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16. GOVERNING LAW & JURISDICTION
The Plan shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware (without reference to its principles of
conflicts of law). Notwithstanding the above, with respect to the Plan
participant who are Israeli residents, the Plan and all instruments issued
thereunder or in connection therewith shall be governed by, and interpreted
in accordance with, the laws of the State of Israel.
17. TAX WITHHOLDING
17.1 To the extent permitted by applicable law, any tax consequences arising
from the grant or exercise of any Option, from the payment for Shares
covered thereby or from any other event or act (of the Company and/or
its affiliates, or the Trustee or the Optionee), hereunder, shall be
borne solely by the Optionee. The Company and/or its affiliates and/or
the Trustee shall withhold taxes according to the requirements under
the applicable laws, rules, and regulations, including withholding
taxes at source. The Committee and/or the Trustee shall not be required
to release any Share certificate to an Optionee until all required
payments have been fully made.
17.2 To the extent provided by the terms of an Option Agreement, the
Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise or acquisition of Shares under an
Option by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Optionee by the
Company) or by a combination of such means: (i) tendering a cash
payment; (ii) subject to Committee approval on the payment date,
authorizing the Company to withhold Shares from the Shares otherwise
issuable to the Optionee as a result of the exercise or acquisition of
Shares under the Option in an amount not to exceed the minimum amount
of tax required to be withheld by law; or (iii) subject to Committee
approval on the payment date, delivering to the Company Shares owned
and unencumbered; provided that Shares acquired on exercise of Options
have been held for at least six (6) months (free and clear of any liens
or encumbrances).
18. SPECIAL PROVISIONS FOR PLAN PARTICIPANTS WHO ARE ISRAELI RESIDENTS
18.1 This Section 18 shall apply only to Optionees who are residents of the
State of Israel or those who are deemed to be residents of the State of
Israel for the payment of tax.
18.2 Notwithstanding anything herein to the contrary, the Plan may also be
administered pursuant to certain provisions of Section 102 or Section
3(I) of the Tax Ordinance, the rules promulgated thereunder, and any
other applicable Israeli laws with respect to service providers or
employees who are Israeli residents.
18.3 Options granted under the Plan pursuant to the provisions of Section
102 of the Tax Ordinance may be deposited with the Trustee, in the
discretion of the Committee. All certificates representing Options or
Shares issued to the Optionee shall be deposited with the Trustee, and
shall be held by the Trustee until such time that such Shares are
released from the trust as herein provided. The Trustee shall hold the
same pursuant to the instructions of the Committee and the Board.
18.4 Options granted under the Plan pursuant to the provisions of Section
3(I) of the Tax Ordinance may be deposited with a Trustee, in the
discretion of the Committee. Upon sale by an Optionee of any Shares
held in trust, the Company shall (or shall cause the Trustee to)
withhold from the proceeds of such sale all applicable taxes, shall
remit the amount withheld to the appropriate Israeli tax authorities,
shall pay the balance thereof directly to such Optionee, and shall
report to such Optionee the amount so withheld and paid to said tax
authorities.
18.5 At the Committee's discretion, for purposes of simplicity and in order
to ensure compliance with Israel's tax regulations, the exercise of the
Options and the purchases and sales of Shares issued under the Plan
shall be executed by the Company or its Subsidiaries, as appropriate.
A-8
<PAGE>
19. NON-EXCLUSIVITY OF THE PLAN
The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangements or as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without
limitation, the granting of options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
A-9
<PAGE>
MULTIMEDIA K.I.D., INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 27, 2000
The undersigned, a stockholder of Multimedia K.I.D., Inc. (the
"Corporation"), hereby constitutes and appoints Shaike Orbach and Cliff DeGroot
and each of them, the true and lawful proxies and attorneys-in-fact of the
undersigned, with full power of substitution in each of them, to vote all
shares of Common Stock of the Corporation which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Corporation to be held on
Monday, November 27, 2000, and at any and all adjournments or postponements
thereof, as follows:
(1) ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLDING AUTHORITY
(except as marked to the to vote for all the nominees
contrary below) listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below.) Nominees: David Rubner,
Pessie Goldenberg, Shaike Orbach, E. Bruce Fredrikson and J.R. Kennedy
(2) PROPOSAL TO APPROVE THE ADOPTION OF THE MULTIMEDIA K.I.D., INC. 2000
STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF BDO INTERNATIONAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion upon such other business as may properly come
before the meeting and any and all adjournments and postponements thereof.
(CONTINUED ON REVERSE SIDE.)
<PAGE>
(CONTINUED)
Shares represented by this Proxy will be voted in accordance with the
instructions indicated in items 1, 2 and 3 above. IF NO INSTRUCTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR ALL LISTED NOMINEES FOR DIRECTORS AND
FOR PROPOSALS 2 AND 3.
Any and all proxies heretofore given by the undersigned are hereby
revoked.
Dated:
-----------------------------------
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Please sign exactly as your name(s)
appear hereon. If shares are held by two
or more persons each should sign.
Trustees, executors and other fiduciaries
should indicate their capacity. Shares
held by corporations, partnerships,
associations, etc. should be signed by an
authorized person, giving full title or
authority.
PLEASE DATE, SIGN AND MAIL IN THE ENCLOSED REPLY ENVELOPE
