Preliminary Prospectus
FINANCIAL INTRANET, INC.
116 RADIO CIRCLE
MT. KISCO, NEW YORK 10549
Notice of Annual Meeting of Stockholders
To our Stockholders:
The Annual Meeting of Stockholders of Financial Intranet, Inc., a Nevada
corporation (the "Corporation" or "Company"), will be held on Friday, June 2,
2000, at 9:00 a.m. local time, at the Holiday Inn, Holiday Drive, Mt. Kisco, New
York, to consider and act upon the following matters. A proxy card for your use
in voting on these matters is also enclosed.
1. Electing four (4) directors as recommended by the Board of Directors.
2. Approving the adoption of the Company's 2000 Stock Option Plan;
3. Approving an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock, $.001
par value, from 50,000,000 to 100,000,000;
4. Approving an amendment to the Company's Certificate of Incorporation to
authorize 10,000,000 shares of the Company's Preferred Stock, $0.001 par value;
and
5. Upon such other business as may properly come before the meeting or any
adjournment thereof.
All stockholders of record at the close of business on May 1, 2000, are
entitled to notice of and to vote at the meeting.
Dated: May 8, 2000
By Order of the Board of Directors
Michael Sheppard
President
- ----------------------------------------------------------
Your Proxy is important no matter how many shares you own. Please mark your
vote, fill in the date, sign and mail it today in the accompanying
self-addressed envelope which requires no postage if mailed in the United
States.
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ANNUAL MEETING OF STOCKHOLDERS
OF
FINANCIAL INTRANET, INC.
June 2, 2000
-----------------
PROXY STATEMENT
-----------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, $.001 par value per share ("Common Stock") of Financial Intranet, Inc.
("Company") in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual Meeting of Stockholders
("Annual Meeting") to be held on June 2, 2000, or at any continuation or
adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of
Stockholders. The purpose of the meeting and the matters to be acted upon are
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Board of Directors knows of no other business which will come before the
meeting.
Proxies for use at the meeting will be mailed to stockholders
on or about May 8, 2000 and will be solicited chiefly by mail, but additional
solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees of
the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing the
proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before their effective exercise by filing
with the Secretary of the Company a written revocation or duly executed proxy
bearing a later date or by voting in person at the meeting. Shares represented
by executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the nominees for director as described in Proposal
No. 1, "FOR" adoption of the Company's 2000 Stock Option Plan is described in
Proposal No. 2; "FOR" amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock, $.001
par value, from 50,000,000 to 100,000,000 as described in Proposal No. 3; and
"FOR" an amendment to the Company's Certificate of Incorporation to authorize
10,000,000 shares of the Company's Preferred Stock, $0.001 par value, as
described in Proposal No. 4. Proxies marked as abstaining will be treated as
present for purposes of determining a quorum for the Annual Meeting, but will
not be counted as voting in respect of any matter as to which abstinence is
indicated. If any other matters properly come before the meeting or any
continuation or adjournment thereof, the proxies intend to vote in accordance
with their best judgment.
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Record Date and Voting Rights
Only stockholders of record at the close of business on May 1,
2000 are entitled to notice of and to vote at the Annual Meeting or any
continuation or adjournment thereof. On that date there were 43,981,244 shares
of the Company's Common Stock outstanding. Each share of Common Stock is
entitled to one vote per share. Any share of Common Stock held of record on May
1, 2000 shall be assumed, by the Board of Directors, to be owned beneficially by
the record holder thereof for the period shown on the Company's stockholder
records. The affirmative vote of a majority of the stockholders present in
person or by proxy at the meeting is required for the election of the directors
and to approve the adoption of the 2000 Stock Option Plan,. The affirmative vote
of stockholders owning a majority of the outstanding shares of Common Stock is
required to approve an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common Stock, $.001
par value, from 50,000,000 to 100,000,000 and to approve an amendment to the
Company's Certificate of Incorporation to authorize 10,000,000 shares of the
Company's Preferred Stock, $0.001 par value.
Directors and officers of the Company and certain other Shareholders
holding approximately 9.5% of the outstanding Common Stock of the Company intend
to vote "FOR" the slate of directors, "FOR" the approval of the 2000 Stock
Option Plan and "FOR" approval of an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of the Company's
Common Stock, $.001 par value, from 50,000,000 to 100,000,000 and an amendment
to the Company's Certificate of Incorporation to authorize 10,000,000 shares of
the Company's Preferred Stock, $0.001 par value.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at
four (4) in accordance with the provisions of the Company's By-laws. At the 2000
Annual Meeting, four (4) directors will be elected to serve until the 2001
Annual Meeting of Stockholders and until their successors have been elected and
qualified. Any vacancy or vacancies which occur during the year may be filled by
the Board of Directors, and any directors so appointed must stand for election
at the next annual meeting of stockholders.
All nominees have consented to be named and have indicated
their intent to serve if elected. The Company has no reason to believe that any
of these nominees are unavailable for election. However, if any of the nominees
become unavailable for any reason, the persons named as proxies may vote for the
election of such person or persons for such office as the Board of Directors of
the Company may recommend in the place of such nominee or nominees. It is
intended that proxies, unless marked to the contrary, will be voted in favor of
the election of the nominees.
Election of the directors requires the affirmative vote of a majority
of the votes cast at the meeting by holders of the Company's Common Stock.
The Board of Directors recommends that the stockholders vote "FOR" the
election of the following four nominees (Item No. 1 on the proxy card).
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NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Age Position
Michael Sheppard 50 President, Chief Operating Officer and
Director
Joseph Engelberger 74 Director
Steven Weller 44 Director
Wilson He 26 Director
</TABLE>
The biographies of our directors are as follows:
Michael Sheppard--President, Chief Operating Officer and Director
Mr. Sheppard joined Financial Intranet as a consultant in February 1997 and
became President, Chief Operating Officer and Director in April 1997. Mr.
Sheppard has been involved in setting up the corporate infrastructure of several
early stage development companies and undertaking their day-to- day operations
as chief executive and chief operating officer. From January 1996 through
January 1997, Mr. Sheppard was Chief Operating Officer of Freelinq
Communications, formerly Televideo Corporation, based in New York City. Freelinq
offers real time video-on-demand via ATM/XDSL technology with high-speed
Internet transmission and advertiser supported free theatrical films delivered
through twisted pair telephone lines. From 1995 to 1996 he was chief operating
officer for Lee Communications Ltd., which is a laser development and
transmission company. From 1993 to 1995, he was Chief Executive Officer for MLS
Lighting Ltd. In 1980 he founded Belden Communications and served as its
President and Chief Executive Officer until it was acquired in 1985. It was
engaged in the sale and distribution of proprietary products used in the motion
picture and television markets, and was merged in 1985 into Lee America Ltd.,
which was bought by Lee Lighting Ltd., a United Kingdom company, in 1986.
Joseph F. Engelberger - Director
Mr. Engelberger became a Director of Financial Intranet in August 1998.
Joseph Engelberger founded Helpmate Robotics, Inc. Since 1984, he has been
Chairman and Chief Executive Officer of Helpmate Robotics, Inc. He received B.S.
and M.S. degrees from Columbia University in 1946 and 1949, respectively, and he
has authored numerous articles in the instrumentation and robotics fields.
His honors include the Progress Award of the Society of Manufacturing Engineers,
the Leonardo da Vinci Award of the American Society of Mechanical Engineers and
the 1982 American Machinist Award. The University of Liverpool bestowed the
first McKechnie Award on him in 1983. In 1984, he was elected to the National
Academy of Engineering. He was the recipient of the Egleston Medal for
distinguished engineering achievement from Columbia University. The University
of Bridgeport, Spring Garden College, Briarwood College, Trinity College and
Carnegie-Mellon University granted him honorary doctorates. In January 1997, he
received the Beckman Award for pioneering and original research in the general
field of automation. Mr. Engelberger serves on the Board of directors of EDO
Corporation (NYSE:EDO).
Steven Weller - Director
Mr. Weller became a director of Financial Intranet in November 1998. Since
1989, Mr. Weller has been the Vice President of Siemens Information and
Communication Products LLC. He is the Vice President of Sales for the Computer
Systems division. He is responsible for all sales and technical
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support personnel. He was previously the Vice President of Sales for the
North American Key Accounts.
Wilson He - Director
Mr. He became a Director of Financial Intranet in April 2000. Since October
1996, he has been the founder and Chief Executive Officer of Longyin Network
Technology Co., Ltd. a Chinese internet service provider. From August 1993
through September 1996, he was the operations manager of Pacific Link
International Forex & Commodities. He received his B.A. in International Finance
from California State University in Los Angeles in 1993.
The Company has an audit committee and a compensation
committee consisting of Michael Sheppard, Steven Weller and Joseph Engelberger.
There were no meetings of these committees in 1999.
PROPOSAL NO. 2
ADOPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN
The Board of Directors has unanimously approved and
unanimously recommends that the stockholders adopt the Company's 2000 Stock
Option Plan (the "Plan"). Unless a stockholder signifies otherwise, the persons
named in the proxy will so vote. Approval of this proposal will require the
affirmative vote of a majority of the shares present in person or represented by
proxy at the Annual Meeting of Stockholders. The Plan would provide a means
whereby employees, officers, directors, consultants and independent contractors
("Qualified Grantees") may acquire the Common Stock of the Company pursuant to
grants of Incentive Stock Options and whereby Qualified Grantees may purchase
shares of Common Stock pursuant to "nonqualified stock options" and Qualified
Grantees could acquire stock awards or stock appreciation rights. A summary of
the significant provisions of the Plan, as amended, is set forth below. A copy
of the full Plan is annexed as Exhibit A to this Proxy Statement. The following
description of the Plan is qualified in its entirety by reference to the Plan
itself.
The Plan shall be administered by the Board of Directors or by
the Company's compensation committee (the "Committee") all of whose members are
"disinterested persons" as that term is defined in Rule 16b-3(d)(3) of the
General Rules and Regulations under the Securities Exchange Act of 1934,
consisting of two or more directors appointed by, and who serve at the pleasure
of, the Board of Directors. The Committee currently administers the Company's
2000 Stock Option Plan. Subject to the express terms of the Plan, the Committee
has the sole discretion to determine to whom among those eligible, and the time
or times at which, options or stock appreciation rights may be exercised or
stock may be awarded. In making such determinations, the Committee may take into
account the nature and period of service of eligible employees, their level of
compensation, their past, present and potential contributions to the Company and
such other factors as the Committee in its discretion deems relevant.
The Committee may amend, suspend, or terminate the Plan at any
time, except that no amendment may be adopted without the approval of
shareholders which would (i) increase the maximum number of shares which may be
issued pursuant to the exercise of options or stock appreciation rights granted
under the Plan; (ii) change the eligibility requirements for participation in
the Plan; (iii) permit the grant of any incentive stock option under the Plan
with an option price of less than 100% of the fair market value of the shares at
the time such option or stock appreciation right is granted; (iv) extend the
term of any option or stock appreciation right or the period during which any
options may be granted under the Plan, but in no event later than ten (10) years
from the date on which the option on stock appreciation right is granted; or (v)
decrease an option exercise
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price (provided that the foregoing does not preclude the cancellation of as
option and a new grant at a lower exercise price without stockholder approval).
Unless the Plan is terminated earlier by the Board of
Directors, the Plan will terminate on July 2, 2010.
Subject to adjustments resulting from changes in
capitalization and assuming approval of this Proposal by stockholders, no more
than 10,000,000 shares of Common Stock may be issued pursuant to the exercise of
options or stock appreciation rights granted under the Plan.
Under certain circumstances involving a change in the number
of shares of Common Stock without the receipt by the Company of any
consideration therefor, such as a stock split, stock consolidation or payment of
a stock dividend, the class and aggregate number of shares of Common Stock in
respect of which options may be granted under the Plan, the class and number of
shares subject to each outstanding option and the option price per share will be
proportionately adjusted. In addition, if the Company is involved in a merger,
consolidation, dissolution or liquidation, the options granted under the Plan
will be adjusted or, under certain conditions, will terminate, subject to the
right of the option holder to exercise his option or a comparable option
substituted at the discretion of the Company prior to such event. An option may
not be transferred other than by will or by laws of descent and distribution,
and during the lifetime of the option holder may be exercised only by such
holder. If any option expires or terminates for any reason, without having been
exercised in full, the unpurchased shares subject to such option will be
available again for purposes of the Plan.
The Committee is authorized to grant ISOs from time to time to
all regular salaries employees of the Company or its subsidiaries, as the
Committee, in its sole discretion, may determine. Directors of the Company or
any subsidiary corporation are not eligible to receive ISOs except that
Directors who are also regular salaried employees of the Company are eligible to
receive ISOs. Such Directors may receive non-qualified stock options under the
Plan.
The exercise price of each option is determined by the Board
of Directors or the Committee, but for ISO's may not be less than 100% and for
non-qualified options may not be less than 80% of the fair market value of the
shares of Common Stock covered by the option on the date the option is granted.
An ISO holder who meets the eligibility requirements of
Section 422 of the Code will not realize income for Federal income tax purposes,
and the Company will not be entitled to a deduction, on either the grant or the
exercise of ISO. If the ISO holder does not dispose of the shares acquired
within two years after the date the ISO was granted to him or within one year
after the transfer of the shares to him, (i) any proceeds realized on a sale of
such shares in excess of the option price will be treated as long-term capital
gain and (ii) the Company will not be entitled to any deduction for Federal
income tax purposes with respect to such shares.
If an ISO holder disposes of shares during the two-year or
one-year periods referred to above (a "Disqualifying Disposition"), the ISO
holder will not be entitled to the favorable tax treatment afforded to incentive
stock options under the Code. Instead, the ISO holder will realize ordinary
income for Federal income tax purposes in the year the Disqualifying Disposition
is made, in an amount equal to the lesser of (1) the fair market value of the
stock on the date of exercise over the option price of the stock or (2) the
amount realized on disposition over the adjusted basis of the stock. The Company
is allowed to deduct a corresponding amount as a business deduction at the same
time the employee is required to recognize the ordinary income arising from the
early disposition.
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Notwithstanding the foregoing, if the Disqualifying
Disposition is made in a transaction with respect to which a loss (if sustained)
would be recognized to the ISO holder, then the amount of ordinary income
required to be recognized upon the Disqualifying Disposition will not exceed the
amount by which the amount realized from the disposition exceeds the exercise
price. Generally, a loss may be recognized if the transaction is not a "wash"
sale, a gift or a sale between certain persons or entities classified under the
Code as "related persons."
For purposes of computing the alternative minimum tax with
respect to shares acquired pursuant to the exercise of ISOs, the difference
between the fair market value of the shares on the date of exercise over the
exercise price will be an item of tax preference in the year of exercise. The
basis of the shares for alternative minimum tax purposes, generally, will be an
amount equal to the price, increased by the amount of the preference taken into
account in computing the alternative minimum taxable income.
The affirmative vote of holders of a majority of the votes
cast at the meeting by holders of the Company's Common Stock.
The Board of Directors recommends that the stockholders vote "FOR" approval
of this Proposal No. 2.
PROPOSAL NO. 3
TO AMEND ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution to amend Article FOURTH of the Company's
Certificate of Incorporation to increase the number of authorized shares of the
Company's Common Stock, $.001 par value, from 50,000,000 to 100,000,000.
The resolution approved by the Board of Directors amending the second
sentence of Article FOURTH as follows:
"The total shares of stock which the Corporation shall be authorized to
issue shall include 100,000,000 shares of Common Stock with a par value
per share of $.00l ("Common Stock").
While the Board of Directors has not made any other specific
arrangements which contemplate the issuance of additional shares of Common
Stock, the Board deems it advisable to authorize for issuance a sufficient
number of shares of Common Stock for proper corporate purposes and to enable the
Company to take advantage of favorable opportunities which may arise in the
future. At such time as the Company determines to issue additional shares of
Common Stock, the purpose of such issuance and the nature of any consideration
that may be received therefor will be determined without further authorization
or action by stockholders. The issuance of any additional shares of Common Stock
may result in a dilution of the voting power of the holders of outstanding
shares of Common Stock and their equity interest in the Company. Holders of
Common Stock do not have pre-emptive rights. Although not intended as an
anti-takeover device, issueing additional shares of Common Stick could impede a
non-negotiated acquisition of the Company by diluting the ownership interests of
a substantial shareholder, increasing the total amount of oncisderation
necessary for a person to obtain control of the Company or increasing the voting
power of friendly third parties
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Approval of the amendment to Articles FOURTH of the Company's
Certificate of Incorporation requires the affirmative vote of holders of a
majority of the Company's outstanding Common Stock.
The Board of Directors recommends that the stockholders vote "FOR" approval
of this Proposal No. 3.
PROPOSAL NO. 4
TO AMEND ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE SHARES OF PREFERRED STOCK
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution to amend Article FOURTH of the Company's
Certificate of Incorporation to add the following provision to authorize
10,000,000 shares of the Company's Preferred Stock, $0.001 par value..
"The total number of shares of stock which the Corporation
shall be authorized to issue shall include 10,000,000 shares
of Preferred Stock with a par value per share of $.001
("Preferred Stock"). The following is a statement of the
designations and the powers, privileges, rights,
qualifications, limitations or restrictions in respect of each
class of capital stock of the Corporation:
(a) The voting, dividend, liquidation and other rights and
privileges of the holders of the Common Stock are subject to
and qualified by any and all rights and privileges of the
holders of Preferred Stock of any series as may be designated
by the Board of Directors upon any issuance of the Preferred
Stock of any series. The holders of Common Stock are entitled
to one vote for each share of Common Stock held at all
meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting of shares of
the Common Stock. Dividends shall be declared and paid on the
Common Stock from funds legally available therefor when, as
and if declared by the Board of Directors of the Corporation.
Upon the dissolution or liquidation of the Corporation, all
assets of the Company available for distribution to the
holders of Common Stock shall be distributed ratably among the
holders of the Preferred Stock, if any, and the holders of the
Common Stock, subject to any preferential rights of any then
outstanding Preferred Stock.
(b) Preferred Stock may be issued at any time from time to
time in one or more series, each of such series to have such
powers, designations, preferences, rights, qualifications,
limitations or restrictions as provided in this Certificate of
Incorporation or by law or in the resolution or resolutions
providing for the issuance of such series adopted by the Board
of Directors of the Corporation as hereinafter provided.
Authority is hereby granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more
series, and in connection with the creation of any such
series, by resolution or resolutions providing for the
issuance of' the shares thereof, to determine and fix such
voting powers, full or limited, or no voting powers, and such
designations, preferences, powers and relative participating,
optional or other special rights and qualifications,
limitations or restrictions thereof, including, without
limitation, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be stated and
expressed in such resolution or resolutions, all to the full
extent now or hereafter permitted by law. Without limiting the
generality of the foregoing, the resolutions providing for
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issuance of any series of Preferred Stock may provide that
such series shall be superior or rank equally or be junior to
the Preferred Stock of any other series to the extent
permitted by law. The resolutions providing for issuance of
any series of Preferred Stock may provide that such
resolutions may be amended by subsequent resolutions adopted
in the same manner as the preceding resolutions. All shares of
Preferred Stock of the same series shall be identical with
each other in all respects."
While the Board of Directors has not made any other specific
arrangements which contemplate the issuance of additional shares of Preferred
Stock, the Board deems it advisable to authorize for issuance a sufficient
number of shares of Preferred Stock for proper corporate purposes and to enable
the Company to take advantage of favorable opportunities which may arise in the
future. In particular, the ability to issue Preferred Stock may afford the
Company additional opportunities to obtain equity financings by having the
ability to issue Preferred Stock with rights and preferences that may be
requested by an investor. At such time as the Company determines to issue
additional shares of Preferred Stock, the purpose of such issuance and the
nature of any consideration that may be received therefor will be determined
without further authorization or action by stockholders. The issuance of any
additional shares of Preferred Stock may result in a dilution of the voting
power of the holders of outstanding shares of Common Stock and their equity
interest in the Company. Holders of Preferred Stock do not have pre-emptive
rights.
In addition to such corporate purposes, issuance of Preferred
Stock can be used to make more difficult a change in control of the Company.
Under certain circumstances the Board of Directors could create impediments to,
or frustrate persons seeking to effect, a takeover or transfer of control of the
Company by causing such shares to be issued to a holder or holders who might
side with the Board in opposing a takeover bid that the Board of Directors
determines is not in the best interest of the Company and its stockholders. In
this connection, the Board could issue shares of Preferred Stock with full
voting rights to a holder that would thereby have sufficient voting power to
insure that certain types of proposals -- including any proposal to remove
directors, to accomplish certain business combinations opposed by the Board, or
to alter, amend or repeal provisions in the Certificate or By-laws of the
Company relating to any such action -- would not receive the requisite
stockholder vote. The Board of Directors could also issue shares of Preferred
Stock with other rights and preferences superior to the rights and preferences
of the Common Stock, as to liquidation, dividends, voting or otherwise.
Furthermore, the existence of such shares might have the effect of discouraging
any attempt by a person or entity to acquire control of the Company since the
issuance of such shares could dilute the ownership of such person or entity.
Approval of the amendment to Articles FOURTH of the Company's
Certificate of Incorporation requires the affirmative vote of holders of a
majority of the Company's outstanding Common Stock.
The Board of Directors recommends that the stockholders vote "FOR" approval
of this Proposal No. 4.
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following tabulation shows the security ownership as of May 1, 2000
of (i) each person known to us to be the beneficial owner of more than 5% of our
outstanding common stock; (ii) each of our directors and executive officers and
(iii) all of our directors and executive officers as a group. As of May 1, 2000,
we had 43,981,244 shares of Common Stock issued and outstanding.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name & Address Number of Shares Owned Percent of Class
Ben B. Stein (1) 4,100,815 9.0%
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
Michael Sheppard (2) 2,732,177 5.9%
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
Maura Marx (3) 1,817,346 4.0%
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
Joseph Engelberger (4) 10,000 *
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
Steven Weller (5) 10,000 *
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
Wilson He (6) 675,000 1.5%
7246 Lotus Avenue #7
San Gabriel, California 91775
Corey Rinker (7) None 0
c/o Financial Intranet
116 Radio Circle
Mt. Kisco, NY 10549
All Officers and Directors
as a Group (6 Persons) 5,244,523 11.0%
* Represents an amount less than one (1%) percent.
</TABLE>
(1) Includes 1,000,000 shares owned by Financial Intranet Holdings Inc., a
company wholly owned by Mr. Stein and shares and options to purchase 1,620,315
shares at an exercise price of $ .19 per share.
(2) Includes options to purchase 2,231,352 shares at an exercise price of $
.19 per share
(3) Includes options to purchase 1,350,491 shares at an exercise price of $
.19 per share.
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(4) Includes options to purchase 10,000 shares at an exercise price of $
.725 per share.
(5) Includes options to purchase 10,000 shares at an exercise price of $
.60 per share.
(6) Includes 675,000 shares issued to Longyin Network Technology Co., Ltd.,
of which Mr. He is Chief Executive Officer. Does not include an additional
675,000 shares being held in escrow which may be issued to Longyin pursuant to
the terms of an Asset Purchase Agreement.
(7) Does not include options to purchase 1,750,000 shares at an exercise price
of $ .10 per share, which options vest over three years commencing August 2000.
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 certain officers, directors, and beneficial owners of more than ten
percent of our common stock to file reports of ownership and changes in their
ownership of our equity securities with the Securities and Exchange Commission.
Based solely on a review of the reports and representations furnished to us
during the last fiscal year, we believe that each of these persons is in
compliance with all applicable filing requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth the aggregate cash compensation paid for
services rendered to our company during each of the Company's last three fiscal
years by all individuals who served as our company's Chief Executive Officer
during the last fiscal year and the company's most highly compensated executive
officers who served as such during the last fiscal year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long-Term Compensation
Annual Compensation
Restricted
Name and principal position Year Salary Bonus Other(2) Stock Awards Stock Options
- --------------------------- ---- ------ ----- -------- ------------ -------------
Ben B. Stein(1) 1999 $0 $0 $719,099 $0 0
Consultant 1998 150,000 0 0 0 1,242,955
1997 150,000 60 10,500 54,000 2,397,307
Michael Sheppard 1999 143,739 0 154,369 0 0
Chief Executive Officer 1998 150,000 0 0 0 720,914
Maura Marx 1999 97,098 0 156,306 0 0
Executive Vice President 1998 100,000 0 0 0 447,464
1997 48,750 0 0 18,000 903,031
</TABLE>
(1) On February 27, 1997, Mr. Stein received 1,500,000 shares of common stock in
lieu of cash compensation for 1997 and an additional 1,500,000 shares of common
stock as an inducement to execution of the consulting agreement.
(2) These amounts reflect the fair market value of shares granted for payment in
lieu of cash for services rendered.
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Employee Compensation
Michael Sheppard receives a salary of $150,000 per year under his
employment agreement dated September 12, 1997. The employment agreement expires
on December 31, 2002. Mr. Sheppard received an incentive bonus of 750,000 shares
of common stock upon execution of a consulting agreement on February 27, 1997.
Mr. Sheppard received an option under the employment agreement to purchase
2,231,352 shares of common stock at a price of $0.19 per share. The option
expires upon the earlier to occur of December 31, 2002 or 90 days after the
termination of Mr. Sheppard's employment without cause or immediately after
termination with cause. The option is personal to Mr. Sheppard and is not
assignable. Mr. Sheppard has not purchased any shares of common stock under his
option. In January 1999, he was granted an additional 205,825 shares of stock
for replacement shares for those shares he sold in 1998 to fund the Company.
Ms. Marx receives a salary of $140,000 per year under her employment
agreement dated September 12, 1997. The employment agreement expires on December
31, 2002. Ms. Marx received an incentive bonus of 500,000 shares of common stock
upon execution of the employment agreement. She received an option under her
employment agreement to purchase 1,279,379 shares of common stock at a price of
$0.19 per share. The option expires upon the earlier to occur of December 31,
2002 or 90 days after the termination of Ms. Marx's employment without cause or
immediately after termination with cause. The option is personal to Ms. Marx and
is not assignable. Ms. Marx has not purchased any shares of common stock under
her option. In January 1999, she was granted an additional 208,409 shares of
stock for replacement shares for those shares she sold in 1998 to fund the
Company
Mr. Rinker receives a salary of $135,000 per year under his employment
agreement dated in November 1999. The employment agreement expires on December
31, 2002. He received an option under his employment agreement to purchase
1,750,000 shares of common stock at a price of $0.10 per share. One-third of the
options vest each year commencing August 2000. The option expires upon the
earlier to occur of December 31, 2002 or 90 days after the termination of Mr.
Rinker's employment without cause or immediately after termination with cause.
The option is personal to Mr. Rinker and is not assignable. Mr. Rinker has not
purchased any shares of common stock under his option.
By agreement with the Company, Mr. Sheppard, Ms. Marx and Mr. Rinker
have agreed not to exercise any options that they may be entitled to under any
agreement with the Company until such time as the shareholders of Financial
Intranet increase the amount of authorized shares under the Company's Articles
of Incorporation.
Stock option plans
Financial Intranet has established the 1998 Stock Option Plan which
provides for the granting of options which are intended to qualify either as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code or as options which are not intended to meet the requirements of
such section. The total number of shares of Common stock reserved for issuance
under the plan is 1,500,000. Options to purchase shares may be granted under the
plan to persons who, in the case of incentive stock options, are key employees
(including officers) or, in the case of non-statutory stock options, are key
employees (including officers) or non-employee directors or non-employee
consultants.
The plan is administered by the compensation committee of the board of
directors, which has some discretionary authority to determine the number of
shares to be issued under incentive stock options and nonstatutory stock options
and the recipients, and when and at what exercise price the options will be
granted. On November 13, 1998, Financial Intranet appointed Steven S. Weller,
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Michael Sheppard and Joseph F. Engelberger to constitute the compensation
committee to administer the plan.
The exercise price of all incentive stock options granted under the
plan must be at least equal to the fair market value of such shares on the date
of the grant or, in the case of incentive stock options granted to the holder of
more than 10% of Financial Intranet's common stock, at least 110% of the fair
market value of such shares on the date of the grant. The maximum exercise
period for which incentive stock options may be granted is ten years from the
date of grant (five years in the case of an individual owning more than 10% of
Financial Intranet's common stock). The aggregate fair market value (determined
at the date of the option grant) of shares with respect to which incentive stock
options are exercisable for the first time by the holder of the option during
any calendar year shall not exceed $100,000.
The exercise price of all non-statutory stock options granted under the
plan must be at least equal to the 80% of the fair market value of such shares
on the date of the grant
As of today, no options have been granted under the plan, and none may
be until such time as the shareholders of Financial Intranet increase the amount
of authorized shares under the Company's Articles of Incorporation.
Option/SAR Grant Table
The table below sets forth the following information with respect to
options granted to the named executive officers during fiscal year 1999 and the
potential realizable value of such option grants (1) the number of shares of
common stock underlying options granted during the year, (2) the percentage that
such options represent of all options granted to employees during the year, (3)
the exercise price, and (4) the expiration date.
OPTION GRANTS IN LAST FISCAL YEAR--INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percent of Total
Number of Options Granted
Securities to Employees In
Underlying Fiscal Year Ended Exercise or Base Expiration
Name Options Granted December 31, 1999 Price Per ($/Share) Date
- ---- --------------- ----------------- ------------------- ----
Ben B. Stein........................ None N/A N/A N/A
Michael Sheppard.................... None N/A N/A N/A
Maura Marx.......................... None N/A N/A N/A
</TABLE>
Option Exercises and Values for 1999
The table below sets forth the following information with respect to
option exercises during fiscal 1999 by each of the named executive officers and
the status of their options at December 31, 1999 (1) the number of shares of
common stock acquired upon exercise of options during fiscal 1999, (2) the
aggregate dollar value realized upon the exercise of such options, (3) the total
number of exercisable and non exercisable stock options held at December 31,
1999, and (4) the aggregate dollar value of in-the-money exercisable options at
December 31, 1999.
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<PAGE>
AGGREGATED
OPTION VALUES ON DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Optio at 12/31/99 at 12/31/99(1)
----- ------------ --------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Ben B. Stein 1,620,315 0 91,007 0
Michael Sheppard 2,231,352 0 55,784 0
Maura Marx 1,350,495 0 33,762 0
Corey Rinker 0 1,750,000 0 0
</TABLE>
(1) Values are calculated by subtracting the exercise price from the fair market
value of the underlying common stock. For purposes of this table, fair market
value is deemed to be $0.215, the average of the high and low bids for our
common stock price on the OTC Bulletin Board on December 31, 1999.
CERTAIN TRANSACTIONS
On February 8, 1999, Financial Intranet issued a 7% convertible
promissory note in the principal amount of $600,000. The principal amount of
$240,000 was payable on demand on March 10, 1999 and the principal amount of
$360,000 was payable on demand on May 9, 1999. Mr. Ben Stein personally
guaranteed Financial Intranet's obligations under the convertible promissory
note in the principal amount of $600,000 issued in February 1999 and pledged
1,500,000 restricted shares of common stock as collateral security for such
obligations. The lender received 600,000 of the pledged shares in March 1999 in
satisfaction of payment of the principal amount of $240,000 and 900,000 of the
pledged shares in May 1999 in satisfaction of payment of the principal amount of
$360,000 based on a conversion price of $.40 per share. Financial Intranet
issued 1,500,000 shares of common stock to Mr. Stein in May 1999 to replace the
pledged shares.
On March 3, 1999, Mr. Stein applied $167,140 owed to him by Financial
Intranet in lieu of cash payment to purchase 879,685 shares of common stock
under options with an exercise price of $.19 per share. The $167,140 owed to Mr.
Stein consisted of $109,500 in accrued compensation from 1998 and two promissory
notes in the principal amount of $56,889 and all accrued interest.
Messrs. Stein and Sheppard and Ms. Marx personally guaranteed Financial
Intranet's obligations under the convertible promissory note in the principal
amount of $500,000 issued in July 1999. Mr. Stein pledged 924,517 restricted
shares of common stock, Mr. Sheppard pledged 96,151 restricted shares of common
stock and Ms. Marx pledged 101,844 restricted shares of common stock as
collateral security for such obligations. The pledged stock was released upon
conversion of the principal amount of the note and all accrued interest in
January 2000.
On March 23, 2000, pursuant to an Asset Purchase Agreement between the
Company and LongYin Network Technology Co., Ltd. d/b/a Cyber Information Systems
Co., Ltd. ("Seller"), the Company purchased assets of Seller. Mr. He, a Director
of the Company, is Chief Executive Officer of Ling Yin. The assets included (i)
the domain names and registration thereof, the goodwill of the business
connected with and symbolized by such domain names, and any intellectual
property rights relating thereto; (ii) all information and intellectual property
related to or available through the domain names and/or resident on the host
servers operated by or on behalf of Long Yin; and (iii) an e-mail magazine and
all information and intellectual property related to, contained in or accessible
through the e-mail magazine.
The purchase price of the assets was as follows:
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<PAGE>
(i) 675,000 shares of common stock; (ii) cash totaling $200,000; (iii) in the
event that not less than nine existing Internet content providers of Seller
enter into written agreements with the Company to provide content and other
services on or before June 30, 2000, 175,000 shares of common stock; and (iv) in
the event that the People's Republic of China ("PRC") approves the Company's
organization and ownership of a foreign owned utility for the purpose of the
Company's ownership, operation, use and maintenance of the acquired assets and
the Company's receipt of all consents, approvals, orders, authorizations,
registrations or qualifications from the PRC necessary for such foreign owned
enterprise to own, operate, maintain and uses a server located in the PRC and
download and upload electronic files, materials and other data therefrom or
thereto on or before September 30, 2000, cash totaling $200,000 and 500,000
shares of common stock.
The loans, made by the Company for the purposes of Mr. Sheppard and Ms.
Marx paying taxes due on the sale of certain securities in the Company which
were sold 1) in lieu of Mr. Sheppard's and Ms. Marx' taking cash salary from the
Company for a period of time, and 2) for the purpose of Mr. Sheppard's raising
funds to lend to the Company, are payable upon demand by the Company.
The transactions described above involve actual or potential conflicts
of interest between the Company and its officers or directors. In order to
reduce the potential for conflicts of interest between the Company and its
officers and directors, prior to entering into any transaction in which a
potential material conflict of interest might exist, the Company's policy has
been and will continue to be, that the Company does not enter into transactions
with officers, directors or other affiliates unless the terms of the transaction
are at least as favorable to the Company as those which would have been
obtainable from an unaffiliated source. As of the date hereof, the Company has
no plans to enter into any additional transactions which involve actual or
potential conflicts of interest between the Company and its officers or
directors. Should the Company enter into any such transaction in the future, it
will not do so without first obtaining at least one fairness opinion from,
depending on the nature of the transaction, either its own independent directors
or from an independent investment banking firm.
LEGAL PROCEEDINGS
On or about July 23, 1998, H & H Acquisition Corporation, individually and
purportedly on behalf of Financial Intranet, commenced an action in United
States District Court, Southern District of New York entitled H & H Acquisition
Corp., individually and on behalf of Financial Intranet, Inc. v. Financial
Intranet Holdings, Financial Intranet, Inc., Ben Stein, Interwest Transfer Co.,
Steven A. Sanders, Michael Sheppard, Maura Marx, Henry A. Schwartz, Leonard
Gotshalk, Gotshalk Enterprises, Law Office of Steven A. Sanders, P.C. and
Beckman, Millman & Sanders, LLP, 98 Civ. 5269. The action's principal basis
appears to be plaintiff's claim that Ben Stein wrongfully claims ownership of
shares of common stock that Stein agreed to purchase from plaintiff. According
to plaintiff, these shares belong to plaintiff. The plaintiff asserts sixteen
causes of action. Only some make allegations against Financial Intranet, Michael
Sheppard and Maura Marx. The plaintiff alleges:
o Mr. Sheppard and Ms. Marx assisted defendants Stein and
Financial Internet Holdings (a company owned by Stein)
in converting stock which plaintiff allegedly owns.
Plaintiff seeks damages allegedly sustained because of
the alleged conversion.
o Mr. Sheppard and Ms. Marx assisted in defrauding plaintiff with respect
to the stock plaintiff claims. Plaintiff seeks damages allegedly sustained
because of the alleged fraud.
o Plaintiff alleges in a derivative claim, purportedly on behalf of
Financial Intranet: that Mr. Sheppard and Ms. Marx permitted issuance of shares
to defendant Gotshalk without proper consideration and at a price lower than
that offered to a company introduced by Plaintiff; that they refused to allow
plaintiff to
15
<PAGE>
purchase additional shares; that Mr. Sheppard and Ms.
Marx permitted Financial Intranet to pay defendant
Schwartz monies which should not have been paid, and
authorized issuance of stock to Schwartz without proper
authority; and that Mr. Sheppard and Ms. Marx caused the
issuance of stock to themselves without proper
authority. Plaintiff seeks damages allegedly sustained
for these alleged wrongful acts.
o A derivative claim purportedly on behalf of Financial
Intranet seeking an order directing the holding of a
shareholders meeting and rescission of actions
determined to be improper by the Court or its designee.
A shareholders meeting was held in December 1998.
o Financial Intranet and its former transfer agent
wrongfully transferred shares belonging to plaintiff to
a third party. The transfer agent has asserted a claim
against Financial Intranet seeking indemnification for
any liabilities incurred by the transfer agent in this
action.
o Plaintiff is entitled to $2,500, plus interest, from
Financial Intranet for alleged breach of contract.
Financial Intranet settled this cause of action.
Plaintiff also seeks an accounting from Mr. Sheppard and Ms. Marx, among
other defendants, for damages Financial Intranet allegedly suffered.
Financial Intranet, Mr. Sheppard and Ms. Marx believe that the claims
against it, Mr. Sheppard and Ms. Marx are without merit and are vigorously
defending the action. Financial Intranet, Mr. Sheppard and Ms. Marx have filed
responses to the claims against them. The responses deny all material
allegations of the complaint and the claim asserted by the transfer agent, and
assert a variety of defenses. Discovery is in its early stages. We cannot make
any assurances about the litigation's outcome.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report on Form 10-KSB for the year ended December 31, 1999,
is being mailed to Stockholders with this Proxy Statement.
STOCKHOLDER PROPOSAL - 2001 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 2001 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by April 30, 2001.
16
<PAGE>
The prompt return of your proxy is appreciated and will be helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF
THE BOARD OF DIRECTORS
MICHAEL SHEPPARD, President
Mt. Kisco, New York
May 8, 2000
17
<PAGE>
EXHIBIT A
FINANCIAL INTRANET INC.
2000 STOCK OPTION PLAN
1. PURPOSE OF PLAN; ADMINISTRATION
1.1 Purpose.
-------
The Financial Intranet Inc. 2000 Stock Option Plan (hereinafter, the
"Plan") is hereby established to grant to officers, directors and other
employees of Financial Intranet Inc. or of its parents or subsidiaries (as
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code"), if any (individually and collectively, the
"Company"), and to non-employee consultants and advisors and other persons who
may perform significant services for on or behalf of the Company, a favorable
opportunity to acquire common stock ("Shares" or "Common Stock"), of the Company
and, thereby, to create an incentive for such persons to remain in the employ of
or provide services to the Company and to contribute to its success.
1.2 Administration.
--------------
The Plan shall be administered by members of the Board of Directors of
the Company (the "Board"), if each such member administering the Plan is a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3), or a committee (the "Committee")
of two or more directors, each of whom is a disinterested person. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may be filled by the Board.
A majority of the members of the Committee shall constitute a quorum
for the purposes of the Plan. Provided a quorum is present, the Committee may
take action by affirmative role or consent of a majority of its members present
at a meeting. Meetings may be held telephonically as long as all members are
able to hear one another, and a member of the Committee shall be deemed to be
present for this purpose if he or she is in simultaneous communication by
telephone with the other members who are able to hear one another. In lieu of
action at a meeting, the Committee may act by written consent of a majority of
its members.
Subject to the express provisions of the Plan, the Committee shall have
the authority to construe and interpret the Plan and all Stock Option Agreements
(as defined in Section 4.4) entered into pursuant hereto and to define the terms
used therein, to prescribe, adopt, amend, and rescind rules and regulations
relating to the administration of the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Committee may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper; and provided, further, in its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan. Subject to the
express limitations of the Plan, the Committee shall designate the individuals
from among the class of persons eligible to participate as provided in Section
1.3 who shall receive Awards (as described in Section 3), whether an optionee
will receive Incentive Stock Options or Nonstatutory Options, or both, or
another type of Award, and the amount, price, restrictions and all other terms
and provisions of such Awards (which need not be identical).
A-1
<PAGE>
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and directors shall be entitled to rely upon the advise,
opinions or valuations of any such persons. No members of the Committee or Board
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan, and all members of the Committee shall
be fully protected by the Company in respect of any such action, determination
or interpretation.
1.3 Participation.
-------------
Officers, Directors, employees of the Company and consultants shall be
eligible for selection to participate in the Plan upon approval by the
Committee; provided, however that only "employees" (within the meaning of
Section 3401(c) of the Code) of the Company shall be eligible for the grant of
Incentive Stock Options. An individual who has been granted an options may, if
otherwise eligible, be granted additional options if the Committee shall so
determine, provided that no recipient may be granted options to purchase more
than 20% of the shares of Common Stock initially reserved for issuance under the
Plan. No person is eligible to participate in the Plan by matter of right; only
those eligible persons who are selected by the Committee in its discretion shall
participate in the Plan.
1.4 Stock Subject to the Plan.
-------------------------
Subject to adjustment as provided in Section 4.5, the stock to be
offered under the Plan shall be shares of authorized but unissued Common Stock,
including any shares repurchased under the terms of the Plan or any Stock Option
Agreement entered into pursuant hereto. the cumulative aggregate number of
shares of Common Stock to be issued under the Plan shall not exceed 10,000,000,
subject to adjustment as set forth in Section 4.5.
If any options granted hereunder shall expire or terminate for any
reason without having been fully exercised, the unpurchased shares subject
thereto shall again be available for the purposes of the Plan. For purposes of
this Section 1.4, where the exercise price of options is paid by means of the
grantee's surrender of previously owned shares of Common Stock, only the net
number of additional shares issued and which remain outstanding in connection
with such exercise shall be deemed "issued" for purposes of the Plan.
2. TYPES OF AWARDS
2.1 General. An award may be granted singularly, in combination with
another award(s) or in tandem whereby exercise or vesting of one award held by a
participant cancels another award held by the participant. Subject to the
limitations of the Plan, an award may be granted as an alternative to or
replacement of an existing award under the Plan or under any other compensation
plans or arrangements of the Company, including the plan of any entity acquired
by the Company. The types of Awards that may be granted under the Plan include:
a) Stock Option. A stock option represents a right to purchase
a specified number of Shares during a specified period at a price per Share. The
Company may grant under the Plan both incentive stock options within the meaning
of Section 422 of the Code ("Incentive Stock Options") and stock options that do
not qualify for treatment as Incentive Stock Options ("Nonstatutory Options").
Unless expressly provided to the contrary herein, all references herein to
"options," shall include both incentive Stock Options and Nonstatutory Options.
b) Stock Appreciation Right. A stock appreciation right ("SAR") is a right
to receive ------------------------ a payment in cash, Shares or a combination,
equal to the excess of the aggregate market price at time
A-2
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of exercise of a specified number of Shares over the aggregate exercise price of
the stock appreciation right being exercised. The longest term a stock
appreciation right may be outstanding shall be ten years. Such exercise price
shall be based on one hundred percent (100%) of the Fair Market Value stipulated
by Section 3.1.
c) Stock Award. A stock award is a grant of Shares or of a
right to receive Shares (or their cash equivalent or a combination of both) in
the future. Except in cases of certain terminations of employment or an
extraordinary event, each stock award shall be earned and vest over at least
three years and shall be governed by such conditions, restrictions and
contingencies as the Committee shall determine. These may include continuous
service and/or the achievement of performance goals. The performance goals that
may be used by the Committee for such Awards shall consist of: operating profits
(including EBITDA), net profits, earnings per Share, profit returns and margins,
revenues, shareholder return and/or value, stock price and working capital.
Performance goals may be measured solely on a corporate, subsidiary or business
unit basis, or a combination thereof. Further, performance criteria may reflect
absolute entity performance or a relative comparison of entity performance to
the performance of a peer group of entities or other external measure of the
selected performance criteria. Profit, earnings and revenues used for any
performance goal measurement shall exclude: gains or looses on operating asset
sales or dispositions; asset write-downs; litigation or claim judgments or
settlements; effect of changes in tax law or rate on deferred tax liabilities;
accruals for reorganization and restructuring programs; uninsured catastrophic
property losses; the cumulative effect of changes in accounting principles; and
any extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management's discussion and analysis of financial
performance appearing in the Company's annual report to shareholders for the
applicable year.
3. STOCK OPTIONS
3.1 Option Price.
------------
The exercise price of each Incentive Stock option granted under the
Plan shall be determined by the Committee, but shall not be less than 100% of
the "Fair Market Value" (as defined below) of Common Stock on the date of grant.
If an Incentive Stock Option is granted to an employee who at the time such
option is granted owns (within the meaning of section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of capital stock of
the Company, the option exercise price shall be at least 110% of the Fair Market
Value of Common Stock on the date of grant and the option by its terms shall not
be exercisable after the expiration of 5 years from the date such option is
granted. The exercise price of each Nonstatutory Option also shall be determined
by the committee, but shall not be less than 80% of the Fair Market Value of
Common Stock on the date of grant. The status of each option granted under the
Plan as either an Incentive Stock Option or a Nonstatutory Stock Option shall be
determined by the Committee at the time the Committee acts to grant the options,
and shall be clearly identified as such in the Stock Option Agreement relating
thereto.
"Fair Market Value" for purposes of the Plan shall mean: (i) the
closing price of a share of Common Stock on the principal exchange on which
shares of Common Stock are then trading, if any, on the day previous to such
date, or, if shares were not traded on the day previous to such date, then on
the next preceding trading day during which a sale occurred; or (ii) if Common
Stock is not traded on an exchange but is quoted on Nasdaq or a successor
quotation system, (1) the last sales price (if Common Stock is then listed on
the Nasdaq Stock Market) or (2) the mean between the closing representative bid
and asked price (in all other cases) for Common Stock on the day prior to such
date as reported by Nasdaq or such successor quotation system; or (iii) if there
is no listing or trading of Common Stock either on a national exchange or
over-the-counter, that price determined in good faith
A-3
<PAGE>
by the Committee to be the fair value per share of Common Stock, based upon such
evidence as it deems necessary or advisable.
In the discretion of the Committee exercised at the time the option is
exercised, the exercise price of any options granted under the Plan shall be
paid in full in cash, by check or by the optionee's interest-bearing promissory
note (subject to any limitations of applicable state corporations law) delivered
at the time of exercise; provided, however, that subject to the timing
requirements of Section 3.7, in the discretion of the Committee and upon receipt
of all regulatory approvals, the person exercising the options may deliver as
payment in whole or in part of such exercise price certificates for Common Stock
of the Company (duly endorsed or with duly executed stock powers attached),
which shall be valued at its Fair Market Value on the day of exercise of the
option, or other property deemed appropriate by the Committee; and, provided
further, that subject to Section 422 of the Code so-called cashless exercises as
permitted under applicable rules and regulations of the Securities and Exchange
Commission and the Federal Reserve Board shall be permitted in the discretion of
the Committee or the Board..
Irrespective of the form of payment, the delivery of shares pursuant to
the exercise of an option shall be conditioned upon payment by the optionee to
the Company of amounts sufficient to enable the Company to pay all federal,
state, and local withholding taxes applicable, in the Company's judgment, to the
exercise. In the discretion of the Committee, such payment to the Company may be
effected through (i) the Company's withholding from the number of shares of
Common Stock that would otherwise be delivered to the optionee by the Company on
exercise of the option a number of shares of Common Stock equal in value (as
determined by the Fair Market Value of Common Stock on the date of exercise) to
the aggregate withholding taxes, (ii) withholding by the Company from other
amounts contemporaneously owned by the Company to the optionee, or (iv) any
combination of these three methods, as determined by the Committee in its
discretion.
3.2 Option Period.
-------------
(a) The Committee shall provide, in the terms of each Stock Option
Agreement, when the option subject to such agreement expires and becomes
unexercisable, but in no event will an Incentive Stock Option granted under the
Plan be exercisable after the expiration of ten years from the date it is
granted. Without limiting the generality of the foregoing, the Committee may
provide in the Stock Option Agreement that the option thereto expires 30 days
following a Termination of Employment for any reason other than the death or
disability or sic months following a Termination of Employment for disability or
following an optionee's death.
(b) Notwithstanding any provision of this Section 3.2, in no event
shall any option granted under the Plan be exercised after the expiration date
of such option set forth in the applicable Stock Option Agreement.
3.3 Exercise of Options.
-------------------
Each option granted under the Plan shall become exercisable and the
total number of shares subject thereto be purchasable, in a lump sum or in such
installments, which need not be equal, as the Committee shall determine;
provided, however, that each option shall become exercisable in full no later
than ten years after such option is granted, and each option shall become
exercisable as to at least 10% of the shares of Common Stock covered thereby on
each anniversary of the date such option is granted; and provided, further, that
if the holder of an option shall not in any given installment period purchase
all of the shares which such holder is entitled to purchase in such installment
period, such holder's right to purchase any shares not purchased in such
installment period shall continue until the expiration or sooner termination of
such holder's option. The Committee may, at any time after grant of the option
and from to time, increase the number of shares purchasable in any installment,
subject to the total number of shares subject to the option and the limitations
set forth in Section 3.5. At any
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time and from time to time prior to the time when any exercisable option or
exercisable portion thereof becomes unexercisable under the Plan or the
applicable Stock Option Agreement, such option or portion thereof may be
exercised in whole or in part; provided, however, that the Committee may, by the
terms of option, require any partial exercise to be with respect to a specified
minimum number of shares. No option or installment thereof shall be exercisable
except with respect to whole shares. Fractional share interests shall be
disregarded, except that they may be accumulated as provided above and except
that if such a fractional share interest constitutes the total shares of Common
Stock remaining available for purchase under an option at the time of exercise,
the optionee shall be entitled to receive on exercise a certified or bank
cashier's check in an amount equal to the Fair Market Value of such fractional
share of stock.
3.4 Transferability of Options.
--------------------------
Except as the Committee may determine as aforesaid, an option granted
under the Plan shall, by its terms, be nontransferable by the optionee other
than by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined by the Code), and shall be exercisable
during the optionee's lifetime only by the optionee or by his or her guardian or
legal representative. More particularly, but without limiting the generality of
the immediately preceding sentence, an option may not be assigned, transferred
(except as provided in the preceding sentence), pledged or hypothecated (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any option contrary to the provisions of
the Plan and the applicable Stock Option Agreement, and any levy of any
attachment or similar process upon an option, shall be null and void, and
otherwise without effect, and the Committee may, in its sole discretion, upon
the happening of any such event, terminate such option forthwith.
3.5 Limitation on Exercise of Incentive Stock Options.
-------------------------------------------------
To the extent that the aggregate Fair Market Value (determined on the
date of grant) of the Common Stock with respect to which Incentive Stock Options
granted hereunder (together with all other Incentive Stock Option plans of the
Company) are exercisable for the first time by an optionee in any calendar year
under the Plan exceeds $100,000, such options granted hereunder shall be treated
as Nonstatutory Options to the extent required by Section 422 of the Code. The
rule set forth in the preceding sentence shall be applied taking options into
account in the order in which they were granted.
3.6 Disqualifying Dispositions of Incentive Stock Options.
-----------------------------------------------------
If Common Stock acquired upon exercise of any Incentive Stock Option is
disposed of in a disposition that, under Section 422 of the Code, disqualifies
the option holder from the application of Section 421(a) of the code, the holder
of the Common Stock immediately before the disposition shall comply with any
requirements imposed by the Company in order to enable the Company to secure the
related income tax deduction to which it is entitled in such event.
3.7 Certain Timing Requirements.
---------------------------
At the discretion of the Committee, shares of Common Stock issuable to
the optionee upon exercise of an option may be used to satisfy the option
exercise price or the tax withholding consequences of such exercise, in the case
of persons subject to Section 6 of the Securities Exchange Act of 1934, as
amended, only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written election by the
optionee to use shares of Common Stock issuable to the optionee upon exercise of
the
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option to pay all or part of the option price or the withholding taxes made at
least six months prior to the payment of such option price or withholding taxes.
3.8 No Affect on Employment.
-----------------------
Nothing in the Plan or in any Stock Option Agreement hereunder shall
confer upon any optionee any right to continue in the employ of the Company, any
Parent Corporation or any subsidiary or shall interfere with or restrict in any
way the rights of the Company, its Parent Corporation and its Subsidiaries,
which are hereby expressly reserved, to discharge any optionee at any time for
any reason whatsoever, with or without cause.
For purposes of the Plan, "Parent corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if each
of the corporations other than the Company then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. For purposes of the Plan, "Subsidiary" shall
mean any corporation in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock on one of the other corporations in such
chain.
4. OTHER PROVISIONS
4.1 Sick Leave and Leaves of Absence.
--------------------------------
Unless otherwise provided in the Stock Option Agreement, and to the
extent permitted by Section 422 of the Code, an optionee's employment shall not
be deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Company if the period of any such leave does not exceed
a period approved by the Company, or, if longer, if the optionee's right to
reemployment by the Company is guaranteed either contractually or by statute. A
Stock Option Agreement may contain such additional or different provisions with
respect to leave of absence as the Committee may approve, either at the time of
grant of an option or at a later time.
4.2 Termination of Employment.
-------------------------
For purposes of the Plan "Termination of Employment," shall mean the
time when the employee-employer relationship between the optionee and the
Company, any Subsidiary or any Parent Corporation is terminated for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an optionee by
the Company, any Subsidiary or any Parent corporation, (ii) at the discretion of
the Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company, a Subsidiary or any Parent Corporation
with the former employee. Subject to Section 3.1, the Committee, in its absolute
discretion, shall determine the affect of all matters and questions relating to
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that such leave of absence or other change interrupts employment for the
purposes of Section 422(a)(2) of the code and then-applicable regulations and
revenue rulings under said Section.
4.3 Issuance of Stock Certificates.
------------------------------
Upon exercise of an option, the Company shall deliver to the person
exercising such option a stock certificate evidencing the shares of Common Stock
acquired upon exercise. Notwithstanding
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the forgoing, the Committee in its discretion may require the Company to retain
possession of any certificate evidencing stock acquired upon exercise of an
option which remains subject to repurchase under the provisions of the Stock
Option Agreement or any other agreement signed by the optionee in order to
facilitate such repurchase provisions.
4.4 Terms and Conditions of Options.
-------------------------------
Each option or SAR granted under the Plan shall be evidenced by a
written Stock Option Agreement ("Stock Option Agreement" ) between the option
holder and the Company providing that the option is subject to the terms and
conditions of the Plan and to such other terms and conditions not inconsistent
therewith as the Committee may deem appropriate in each case.
4.5 Adjustments Upon Changes in Capitalization; Merger and Consolidation.
- --------------------------------------------------------------------
If the outstanding shares of Common Stock are changed into, or exchange
for cash or a different number or kind of shares or securities of the Company or
of another corporation through reorganization, merger, recapitalization,
reclassification, stock split-up, reverse stock split, stock dividend, stock
consolidation, stock combination, stock reclassification or similar transaction,
an appropriate adjustment shall be made by the Committee in the number and kind
of shares as to which options and restricted stock may be granted. In the vent
of such a change or exchange, other than for shares or securities of another
corporation or by reason of reorganization, the Committee shall also make a
corresponding adjustment changing the number or kind of shares and the exercise
price per share allocated to unexercised options or portions thereof, which
shall have been granted prior to any such change, shall likewise be made. Any
such adjustment, however, shall be made without change in the total price
applicable to the unexercised portion of the option but with a corresponding
adjustment in the price for each share (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices).
In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Common Stock, the Committee in its discretion shall make an
appropriate and equitable adjustment to the exercise prices of options then
outstanding under the Plan.
Where an adjustment under this Section 3.5 of the type described above
is made to an Incentive Stock Option, the adjustment will be made in a manner
which will not be considered a "modification" under the provisions of subsection
424(b)(3) of the Code.
In connection with the dissolution or liquidation of the Company or a
partial liquidation involving 50% or more of the assets of The Company, a
reorganization of The Company in which another entity is the survivor, a merger
or reorganization of The Company under which more than 50% of the Common Stock
outstanding prior to the merger or reorganization is converted into cash or into
another security, a sale of more than 50% of the Company's assets, or a similar
event that the Committee determines, in its discretion, would materially alter
the structure of The Company, or its ownership, the Committee, upon 30 days
prior written notice to the option holders, may, in its discretion, do one or
more of the following: (i) shorten the period during which options are
exercisable (provided they remain exercisable for at least 30 days after the
date the notice is given); (ii) accelerate any vesting schedule to which an
option is subject; (iii) arrange to have the surviving or successor entity grant
replacement options with appropriate adjustments in the number and kind of
securities to each option to the extent then exercisable (including any options
as to which the exercise has been accelerated as contemplated in clause (ii)
above), of any amount that is the equivalent of the Fair Market Value of the
Common Stock (at the effective time of the dissolution, liquidation, merger,
reorganization, sale or other event) or the fair market value of the option. In
the case of a change in corporate control, the Committee may, in considering the
advisability or the terms and conditions of any acceleration of the
exercisability of any option pursuant to this Section 4.5, take
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into account the penalties that may result directly or indirectly from such
acceleration to either the Company or the option holder, or both, under Section
280G of the Code, and may decide to limit such acceleration to the extent
necessary to avoid or mitigate such penalties or their effects.
No fractional share of Common Stock shall be issued under the Plan on
account of any adjustment under this Section 4.5.
4.6 Rights of Participants and Beneficiaries.
----------------------------------------
The Company shall pay all amounts payable hereunder only to the option
holder or beneficiaries entitled thereto pursuant to the Plan. The Company shall
not be liable for the debts, contracts or engagements of any optionee or his or
her beneficiaries, and rights to cash payments under the Plan may not be taken
in execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company.
4.7 Government Regulations.
----------------------
The Plan, and the grant and exercise of options and the issuance and
delivery of shares of Common Stock under options granted hereunder, shall be
subject to compliance with all applicable federal and state laws, rules and
regulations including but not limited to state and federal securities law) and
federal margin requirements and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
4.8 Amendment and Termination.
-------------------------
The Board or the Committee may at any time suspend, amend or terminate
the Plan and may, with the consent of the option holder, make such modifications
of the terms and conditions of such option holder's option as it shall deem
advisable, provided, however, that, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, (A) materially
increase the benefits accruing to participants under the Plan; (B) materially
increase the number of securities which may be issued under the Plan; or (C)
materially modify the requirements as to eligibility for participation in the
Plan. No option may be granted during any suspension of the Plan or after such
termination. The amendment, suspension or termination of the Plan shall not,
without the consent of the option holder affected thereby, alter or impair any
rights or obligations under any option theretofore granted under the Plan. No
option may be granted during any period of suspension nor after termination of
the Plan, and in no event may any option be granted under the Plan after the
expiration of ten years from the date the Plan is adopted by the Board.
4.9 Time of Grant and Exercise of Option.
------------------------------------
An option shall be deemed to be exercised when the Secretary of the
Company receives written notice from an option holder of such exercised, payment
of the purchase price determined pursuant to Section 3.1 of the Plan and set
forth in the Stock Option Agreement, and all representations, indemnifications
and documents reasonably requested by the Committee.
4.10 Privileges of Stock Ownership; Non-Distributive Intent; Reports to
Option Holders.
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A participant in the Plan shall be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually issued to the optionee.
Upon exercise of an option at a time when there is not in effect under the
Securities Act of 1933, as amended, a Registration Statement relating to the
Common Stock issuable upon exercise or payment therefor and available for
delivery a Prospectus meeting the requirements of Section 10(a)(3) of said Act,
the optionee shall represent and warrant in writing to the Company that the
shares purchased are being acquired for investment and not with a view to the
distribution thereof.
The Company shall furnish to each optionee under the Plan the Company's
annual repot and such other periodic reports, if any, as are disseminated by the
Company in the ordinary course to its stockholders.
4.11 Legending Share Certificates.
----------------------------
In order to enforce any restrictions imposed upon Common Stock issued
upon exercise of an option granted under the Plan or to which such Common Stock
may be subject, the Committee may cause a legend or legends to be placed on any
share certificates representing such Common Stock, which legend or legends shall
make appropriate reference to such restrictions, including, but not limited to,
a restriction against all or such Common Stock for any period of time as may be
required by applicable laws or regulations. If any restriction with respect to
which a legend was placed on any certificate ceases to apply to Common Stock
represented by such certificate, the owner of the Common Stock represented by
such certificates may require the Company to cause the issuance of a new
certificate not bearing the legend.
Additionally, and not by way of limitation, the Committee may impose
such restrictions on any Common Stock issued pursuant to the Plan as it may deem
advisable, including, without limitation, restrictions under the requirements of
any stock exchange or market upon which Common Stock is then traded.
4.12 Use of Proceeds.
---------------
Proceeds realized pursuant to the exercise of options under the Plan
shall constitute general funds of the Company.
4.13 Changes in Capital Structure; No Impediment to Corporate Transactions.
- ---------------------------------------------------------------------
The existence of outstanding options under the Plan shall not affect
the Company's right to effect adjustment, recapitalization, reorganizations or
other changes in its or any other corporation's capital structure or business,
any merger or consolidation, any issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company's or any other corporations assets or business, or
any other corporate act, whether similar to the events described above or
otherwise.
4.14 Effective Date of the Plan.
--------------------------
The Plan shall be effective as of the date of its approval by the
stockholders of The Company within twelve months after the date of the Board's
initial adoption of the Plan. Options may be granted but not exercised prior to
stockholder approval of the Plan. If any options are so granted and stockholder
approval shall not have been obtained within twelve months of the date of
adoption of this Plan by the Board of Directors, such options shall terminate
retroactively as of the date they were granted.
4.15 Termination.
-----------
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The Plan shall terminate automatically as of the close of business on
the day preceding the tenth anniversary date of its adoption by the Board or
earlier as provided in Section 4.8. Unless otherwise provided herein, the
termination of the Plan shall not affect the validity of any option agreement
outstanding at the date of such termination.
4.16 Other Compensation.
------------------
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company, any subsidiary or any Parent
Corporation. Nothing in the Plan shall be construed to limit the right of the
Company (i) to establish any other forms of incentives or compensation for
employees of the company, any Subsidiary or any Parent Corporation or (ii) to
grant or assume options or other rights otherwise than under the Plan in
connection with any proper corporation purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.
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FINANCIAL INTRANET, INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Michael Sheppard and Maura Marx as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of the common
and preferred stock of Financial Intranet, Inc. held of record by the
undersigned on May 1, 2000, at the Annual Meeting of Stockholders to be held on
June 2, 2000, or any adjournment thereof.
1. ELECTION OF DIRECTORS
Michael Sheppard, Michael Weller, Joseph Engelberger and Wilson He.
To withhold authority to vote for any nominee, a line must be drawn
through the nominee's name.
2. ADOPTION OF 2000 OPTION PLAN
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY'S COMMON STOCK, $.OO1 PAR VALUE, FROM 50,000,000 TO
100,000,000
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE 10,000,000 SHARES OF THE COMPANY'S
PREFERRED STOCK, $0.001 PAR VALUE.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
<PAGE>
Please sign name exactly as appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2000
----------------
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
If you have had a change of address, please print or type your new address(s) on
the line below.
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