SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
APPONLINE.COM, INC.
-----------------------------
(Name of Registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement), if other than Registrant
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(l) or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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: (A)
-----------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
APPONLINE.COM, INC.
201 OLD COUNTRY ROAD
MELVILLE, NEW YORK 11747
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 14, 2000
TO THE STOCKHOLDERS OF APPONLINE.COM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AppOnline.com,
Inc. (the "Company") will be held at the Marriot Hotel, 3635 Express Drive
North, Hauppauge, New York 11788, July 14, 2000, at 11:00 a.m., local time for
the following purposes:
1. To elect the Board of Directors of AppOnline.com, Inc. for the
ensuing year;
2. To approve the adoption of the Company's 2000 Stock Option Plan;
3. To ratify the appointment of Citrin Cooperman & Company, LLP as
the Company's independent certified public accountants for the
ensuing year; and
4. To transact such other business as may properly come before the
meeting and any continuations and adjournments thereof.
Stockholders of record at the close of business on June 9, 2000 are entitled to
notice of and to vote at the meeting.
In order to ensure a quorum, it is important that Stockholders representing a
majority of the total number of shares issued and outstanding and entitled to
vote, be present in person or represented by their proxies. Therefore, whether
you expect to attend the meeting in person or not, please sign, fill out, date
and return the enclosed proxy in the self-addressed, postage-paid envelope also
enclosed. If you attend the meeting and prefer to vote in person, you can revoke
your proxy.
In addition, please note that abstentions and broker non-votes are each included
in the determination of the number of shares present and voting, for purposes of
determining the presence or absence of a quorum for the transaction of business.
Neither abstentions nor broker non-votes are counted as voted either for or
against a proposal.
June 12, 2000
By Order of the Board of Directors
/S/ EDWARD CAPUANO
------------------
Edward R. Capuano
Chairman of the Board of Directors
<PAGE>
APPONLINE.COM, INC.
201 OLD COUNTRY ROAD
MELVILLE, NEW YORK 11747
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 11:00 A.M., JULY 14, 2000
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of AppOnline.com, Inc. (the "Company")
for use at the Annual Meeting of Stockholders of the Company to be held at the
Marriot Hotel, 3635 Express Drive North, Hauppauge, New York 11788, at 11:00
a.m. local time on July 14, 2000, and at any continuation and adjournment
thereof. Anyone giving a proxy may revoke it at any time before it is exercised
by giving the Chairman of the Board of Directors of the Company written notice
of the revocation, by submitting a proxy bearing a later date or by attending
the meeting and voting. This statement, the accompanying Notice of Meeting and
form of proxy have been first sent to the Stockholders on or about June 20,
2000.
In addition, please note that abstentions and broker non-votes
are each included in the determination of the number of shares present and
voting, for purposes of determining the presence or absence of a quorum for the
transaction of business. Neither abstentions nor broker non- votes are counted
as voted either for or against a proposal.
All properly executed, unrevoked proxies on the enclosed form,
which are received in time will be voted in accordance with the shareholder's
directions, and unless contrary directions are given, will be voted for the
election of directors of the nominees described below.
OWNERSHIP OF SECURITIES
Only Stockholders of record at the close of business on June
9, 2000, the date fixed by the Board of Directors in accordance with the
Company's By-Laws, are entitled to vote at the meeting. As of June 12, 2000,
there were issued and outstanding 44,823,107 shares of Common Stock.
Each outstanding share is entitled to one vote on all matters
properly coming before the meeting. A majority of the shares of the outstanding
Common Stock is necessary to constitute a quorum for the meeting.
1
<PAGE>
The following table sets forth certain information, as of the date
hereof with respect to the beneficial ownership of the Common Stock by (i) each
person known to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each executive officer and director of the Company
and (iii) all executive officers and directors of the Company as a group.
Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
NAME AND ADDRESS OF
BENEFICIAL OWNER(1) NUMBER(2) PERCENTAGE
------------------- --------- ----------
Edward R. Capuano(3) 28,314,290 63.2%
Jeffrey Skulsky(4) 19,253,386 42.9
The Skulsky Trust 19,251,233 42.9
Cindy L. Eisle 2,164 *
James Richmond(5) 26,163 *
Pargie Raiola 0 0
Patrick Reilly(6) 25,000 *
Jerry Dugan(7) 19,538 *
Robert Knickman(8) 114,500 *
Stanley Hagendorf(9) 28,507 *
All Executive Officers and Directors as a 28,532,315 63.4%
Group (10 persons)(3)-(9)
*less than one percent
(1) Unless otherwise indicated, the address of each person listed below
is c/o AppOnline.com, Inc., 201 Old Country Road, Melville, New York
11747.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities and includes Shares of
Common Stock issuable upon conversion of outstanding preferred stock,
or subject to options, or warrants exercisable or convertible within 60
days.
(3) Includes 19,251,233 shares owned by the Skulsky Trust, over which Mr.
Capuano has the power to vote such shares of common stock.
(4) 19,251,233 of which are owned by the Skulsky Trust, of which Jeffrey
Skulsky is the Trustee.
(5) Includes options to acquire 25,000 shares of common stock which are
currently exercisable.
(6) Includes options to acquire 25,000 shares of common stock which are
currently exercisable.
(7) Includes options to acquire 16,667 shares of common stock which are
currently exercisable.
(8) Includes options to acquire 100,000 shares of common stock which are
currently exercisable.
(9) Includes options to acquire 16,667 shares of common stock which are
currently exercisable. The remaining 11,840 shares of common stock are
owned by Mr. Hagendorf's wife.
2
<PAGE>
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROXY STATEMENT.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the authorized number of
directors shall be as set by the Board of Directors, which has been set as five.
The Directors hold office until the next annual meeting of Stockholders and
until their successors have been elected and qualified.
Five Directors, constituting the entire Board of Directors of the
Company, are to be elected at the meeting to serve until the next Annual Meeting
of Stockholders and until their successors have been elected and qualified.
Unless such authority is withheld, proxies will be voted for election of the
three persons named below, each of whom are now serving as Directors, and each
of whom has been designated as a nominee.
STOCKHOLDER VOTE REQUIRED
The election of the directors will require the affirmative vote of the
majority of the shares present in person or represented by proxy at the Annual
Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ELECTION TO THE BOARD OF DIRECTORS
OF THE COMPANY OF EACH OF THE NOMINEES.
NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS
The members of the Board of Directors of the Company and their ages and
positions with the Company are as follows:
NAME AGE POSITION
Edward R. Capuano 55 Chairman of the Board and
Chief Executive Officer
Jeffrey Skulsky 50 President and Director
Jerry Dugan 62 Director
Robert Knickman 50 Director
Stanley Hagendorf 69 Director
Directors are elected to serve until the next meeting of stockholders
and until their successors are duly elected and qualified. Meetings of
stockholders of the Company will be held on an annual basis. However, if at any
time an annual meeting is not held for the election of Directors, the then
current Directors will continue to serve until their successors are elected and
qualified. Vacancies and newly created directorships resulting from any increase
in the number of directors may be filled by a majority vote of Directors then in
office. Officers are appointed by, and serve at the discretion of, the Board of
Directors.
4
<PAGE>
The following is a brief summary of the background of each Director of
the Company:
EDWARD R. CAPUANO. Mr. Capuano has served as our Chief Executive Officer and
Chairman of the Board since May 1997. From 1995 to present Mr. Capuano has
served as the President of Island Mortgage Network. From 1993 to 1995, Mr.
Capuano served as the Northeastern Regional Director of United Capital Mortgage
Corp. Mr. Capuano earned a B.A. in Business Administration from Manhattan
College in 1967.
JEFFREY SKULSKY. Mr. Skulsky has served as our President and a member of our
board of directors since November 1998. From 1995 to 1998, Mr. Skulsky was the
Director of Operations of Island Mortgage Network. From 1993 to 1995, Mr.
Skulsky served as a Branch Manager of United Capital Corp.
JERRY DUGAN. Mr. Dugan has served as a member of our board of directors since
July 1998. From 1986 to 1998, Mr. Dugan has served as President and Chief
Executive Officer of Advance Lamp Technologies Inc. Mr. Dugan received a B.B.A.
from the University of Houston in 1963.
ROBERT KNICKMAN. Mr. Knickman has served as a director of the Company since May
1998. From 1980 to the present, Mr. Knickman has served as the President of
Knickman Associates, Inc., a company that owns, develops and manages commercial
real estate. From 1994 to the present, he has been a partner of Lark Property
Management, Inc., a company that manages bank owned properties and real estate
in foreclosure and receivership. From 1996 to the present. Mr. Knickman has
served as the President of Know Lead, Inc. a lead and asbestos inspection and
consulting firm. From 1997 to the present, he has served as the Chief Operating
Officer of Network Title Agency Corp., a full-service title agency. Mr. Knickman
is a New York State licensed real estate broker and a registered mortgage broker
licensed by the New York State Banking Department.
STANLEY HAGENDORF. Mr. Hagendorf has served as a member of our board of
Directors since November 1998. Mr. Hagendorf is a practicing attorney with over
twenty-five years of experience and has been engaged in private practice for the
past twenty years. Mr. Hagendorf received his Juris Doctorate from Harvard Law
School in 1956.
Our directors are elected for one year terms or until their successors
are elected, and officers are appointed by the Board of Directors.
DIRECTOR COMPENSATION
We pay each of our directors a nominal amount for attending meetings of
our board of directors, and reimburse any reasonable expenses they incur in
attending those meetings. Otherwise, we do not compensate our directors for
acting as such. We have no plans to change this arrangement. On December 29,
1999, we issued a total of 400,000 options to the directors of the company at an
exercise price of $1.375. The options were granted to the following directors:
Stanley Hangendorf 50,000 options
Robert Knickman 300,000 options
Jerry Dugan 50,000 options
The options granted to the above-named directors vest as follows: (i) one-third
after six months, (ii) one-third after fifteen months, and (iii) one-third after
twenty-nine months, from December 29, 1999. The options expire on December 29,
2004.
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors is responsible for
making all compensation decisions with respect to our executive officers,
including salary, bonus and granting of stock options under our stock option
plan. The compensation committee consists of Edward Capuano, our Chief Executive
Officer, and Jerry Dugan and Stanley Hagendorf, each of whom are independent
outside directors.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid
by the Company during each of the last three fiscal years to the Company's Chief
Executive Officer and to each of the Company's executive officers who earned in
excess of $100,000 for the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY
Edward Capuano 1999 $173,310
CEO and Director 1998 170,170
1997 170,170
Jeffrey Skulsky 1999 $126,762
President and Director 1998 -0-
1997 -0-
James Richmond, Executive Vice 1999 $132,500
President 1998 123,410
1997 93,836
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted during 1999 to any of the executive
officers named in the Summary Compensation Table.
FISCAL YEAR-END OPTION VALUES
As of December 31, 1999, none of the executive officers named in the
Summary Compensation Table owned options to purchase shares of our common stock.
STOCK OPTION PLAN
In 1997, we established a non-statutory stock option plan providing for
the issuance of up to 4,000,000 shares of our common stock. To date, we have
granted directors, officers and key employees an aggregate of 2,200,000 options,
2,200,000 of which have been exercised to date. No other options have been
issued under the plan and the plan has expired.
6
<PAGE>
EMPLOYEE PENSION PLAN
We do not currently have an employee pension plan, although we do have
a 401(k) plan, to which employees may contribute.
DIRECTORS COMPENSATION AND COMMITTEES
The Company has three formal committees; the Audit Committee, which
consists of Stanley Hagendorf, Jerry Dugan and Robert Knickman, the Compensation
Committee, which consists of Edward Capuano, Stanley Hagendorf and Robert
Knickman the Stock Option Committee, which consists of Edward Capuano, Jeffrey
Skulsky and Stanley Hagendorf. The Company does not currently have a Nominating
Committee.
The functions of the Audit Committee include: (i) recommending for
approval by the Board of Directors a firm of certified public accountants whose
duty it will be to audit the financial statements of the Company for the fiscal
year in which they are appointed, and (ii) to monitor the effectiveness of the
audit effort, the Company's internal financial and accounting organization and
controls and financial reporting. The Audit Committee will also consider various
capital and investment matters.
The Compensation Committee is responsible for establishing compensation
arrangements for officers and directors of the Company, reviewing benefit plans
and administering each of the Company's stock option plans.
EXECUTIVE COMPENSATION POLICY
The Company's executive compensation policy is designed to attract,
motivate, reward and retain the key executive talent necessary to achieve the
Company's business objectives and contribute to the long-term success of the
Company. In order to meet these goals, the Company's compensation policy for its
executive officers focuses primarily on determining appropriate salary levels
and providing long-term stock-based incentives. To a lesser extent, the
Company's compensation policy also contemplates performance-based cash bonuses.
CASH COMPENSATION. In determining its recommendations for
adjustments to officers' base salaries the Company focuses primarily on the
scope of each officer's responsibilities, each officer's contributions to the
Company's success in moving toward its long-term goals during the fiscal year,
the accomplishment of goals set by the officer and approved by the Board for
that year, the Company's assessment of the quality of services rendered by the
officer, comparison with compensation for officers of comparable companies and
an appraisal of the Company's financial position. In certain situations,
relating primarily to the completion of important transactions or developments,
the Company may also pay cash bonuses, the amount of which will be determined
based on the contribution of the officer and the benefit to the Company of the
transaction or development.
EQUITY COMPENSATION. The grant of stock options to executive
officers constitutes an important element of long-term compensation for the
executive officers. The grant of stock options increases management's equity
ownership in the Company with the goal of ensuring that the interests of
management remain closely aligned with those of the Company's stockholders. The
Board believes that stock options in the Company provide a direct link between
executive compensation and stockholder value. By attaching vesting requirements,
stock options also create an incentive for executive officers to remain with the
Company for the long term. See "Stock Option Plan."
7
<PAGE>
CORPORATE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return from May 5, 1997 through December 31, 1999 for AppOnline, the Amex Market
Value Index and the S&P Consumer Finance Index.
Graphic Omitted
AMEX MARKET S&P CONSUMER
APPONLINE VALUE INDEX FINANCE INDEX
May 5, 1997 100.00 100.00 100.00
December 31, 1997 68.00 130.03 134.21
December 31, 1998 47.33 139.57 181.44
December 31, 1999 32.00 178.30 189.62
The graph assumes that the value of the investment in AppOnline's
Common Stock, the Amex Market Value Index and the S&P Consumer Finance Index was
$100 on May 5, 1997 and that all dividends were reinvested. No dividends have
been declared or paid on the Company's Common Stock.
8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to December 31, 1999, we owed $31,410,221 to the Skulsky Trust.
Jeffrey Skulsky, our President, is the trustee of the Skulsky Trust. This
indebtedness represents advances from the Skulsky Trust to us since 1997. The
debt owed to the Skulsky Trust is interest-free with no set repayment terms.
On December 31, 1999, in satisfaction of the debt owed to the Skulsky
Trust, we transferred ownership of the following assets:
Transferred Value
Mortgage receivable $ 2,216,087
Stock subscription receivable 5,916,100
Accrued interest and financing
fee on stock subscription 1,073,715
Investment in Wireless Mexicano, Inc. 500,000
--------------
Total assets tranferred $ 9,705,902
==============
After the transfer of the aforementioned assets, the outstanding debt
remaining to the Skulsky Trust was $21,704,319. This debt was completely
satisfied through the issuance of 18,191,534 shares of our common stock on
December 31, 1999.
On December 31, 1999, Edward Capuano, our CEO, donated 8,500,000 shares
of common stock back to the company for cancellation.
All current transactions between us and our officers, directors and
principal stockholders or any affiliates thereof are, and in the future such
transactions will be, on terms no less favorable to us than could be obtained
from unaffiliated third parties.
SECTION 16(A) REPORTING
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding ten percent or more
of the Company's Common Stock must report on their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission and to the American Stock Exchange. Specific due dates for these
reports have been established. During the year ended December 31, 1999, the
Company does not believe that all reports required to be filed by Section 16(a)
were filed on a timely basis, if at all.
9
<PAGE>
PROPOSAL NO. 2
ADOPTION OF THE COMPANY'S
2000 STOCK OPTION PLAN
The Company's 2000 Stock Option Plan (the "2000 Option Plan") was
adopted by the Board of Directors in May 2000. The purpose of the 2000 Option
Plan is to grant officers, employees and others who provide significant services
to the Company, including directors and consultants, a favorable opportunity to
acquire Common Stock so that they have an incentive to contribute to its success
and remain in its employ. Under the 2000 Option Plan, the Company is authorized
to issue options for a total of 5,000,000 shares of Common Stock.
DESCRIPTION OF 2000 STOCK OPTION PLAN
All officers and other employees of the Company and other persons who
perform significant services for or on behalf of the Company are eligible to
participate in the 2000 Option Plan. The Company currently has approximately
750 full-time employees.
The Company may grant under the 2000 Option Plan both incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and stock options that
do not qualify for incentive treatment under the Code ("Nonstatutory Options").
A copy of the 2000 Option Plan is attached hereto as Appendix A. The
following summary of the 2000 Option Plan does not purport to be complete and is
qualified in its entirety by reference to the complete text of the 2000 Option
Plan.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"), if each member is a "disinterested person" 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.
Subject to the provisions of the 2000 Option Plan, the Committee has
the authority to construe and interpret the 2000 Option Plan, to prescribe,
adopt, amend and rescind rules and regulations relating to the administration of
the 2000 Option Plan and to make all other determinations necessary or advisable
for its administration. Subject to the limitations of the 2000 Option Plan, the
Committee also selects from among the eligible persons those individuals who
will receive options, whether an optionee will receive Incentive Stock Options
or Nonstatutory Options, or both, and the amount, price, restrictions and all
other terms and provisions of such options (which need not be identical).
STOCK SUBJECT TO THE 2000 OPTION PLAN
Subject to adjustment as described below, the stock to be offered under
the 2000 Option Plan are shares of authorized but unissued Common Stock,
including any shares repurchased under the terms of the 2000 Option Plan or any
stock option agreement ("Stock Option Agreement") entered into pursuant to the
10
<PAGE>
2000 Option Plan. The cumulative aggregate number of shares of Common Stock to
be issued under the 2000 Option Plan will not exceed 5,000,000, subject to
adjustment as described below.
EXERCISE PRICE
The exercise price of each Incentive Stock Option granted under the
2000 Option Plan will be determined by the Committee, but will be not less than
100% of the "Fair Market Value" (as defined in the 2000 Option Plan) of Common
Stock on the date of grant (or 110% of Fair Market Value in the case of an
employee who at the time owns more than 10% of the total combined voting power
of all classes of capital stock of the Company). The exercise price of each
Nonstatutory Option will be determined by the Committee, but will not be less
than 85% of the Fair Market Value of Common Stock on the date of grant. Whether
an option granted under the 2000 Option Plan is intended to be an Incentive
Stock Option or a Nonstatutory Stock Option will be determined by the Committee
at the time the Committee acts to grant the option and set forth in the related
Stock Option Agreement.
"Fair Market Value" for purposes of the 2000 Option Plan means: (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 by the Committee to be the
fair value per share of Common Stock, based upon such evidence as it deems
necessary or advisable. On June 8, 2000, the Fair Market Value was $1.6875 per
share based on the closing sale price of the Common Stock as reported on the
American Stock Exchange.
In the discretion of the Committee exercised at the time the option is
exercised, the exercise price of any option granted under the 2000 Option Plan
will be payable 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. In the discretion of the Committee and
upon receipt of all regulatory approvals, an optionee may be permitted to
deliver as payment in whole or in part of the exercise price certificates for
Common Stock of the Company (valued for this purpose at its Fair Market Value on
the day of exercise) or other property deemed appropriate by the Committee.
So-called cashless exercises as permitted under applicable rules and regulations
of the Securities and Exchange Commission and the Federal Reserve Board also
will be permitted in the discretion of the Committee. The Committee also has
discretion to permit consecutive book entry stock-for-stock exercises of
options.
Irrespective of the manner of payment of the exercise price of an
option, the delivery of shares pursuant to the exercise will be conditioned upon
payment by the optionee to the Company of amounts sufficient to enable the
Company to pay all applicable federal, state and local withholding taxes.
EXERCISE PERIOD
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 subject thereto expires 30
days following a Termination of Employment for any reason other than death or
11
<PAGE>
disability or six months following a Termination of Employment for disability or
following an optionee's death; provided, however, that 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.
EXERCISE OF OPTIONS
Each option granted under the 2000 Option Plan will become exercisable
in a lump sum or in such installments, which need not be equal, as the Committee
determines, provided, however, that each option will 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. If in any given installment period the holder
of an option does not purchase all of the shares which the holder is entitled to
purchase in that installment period, the holder's right to purchase any shares
not purchased in that period will 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 time 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 the 2000 Option Plan as to the number of shares
as to which Incentive Stock Options may first become exercisable in any year.
TRANSFERABILITY OF OPTIONS
An option granted under the 2000 Option Plan will 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 in the Code), and
will be exercisable during the optionee's lifetime only by the optionee or by
his or her guardian or legal representative. More particularly, 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 will not
be subject to execution, attachment or similar process.
CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES; LEGENDS
In order to enforce any restrictions imposed upon Common Stock issued
upon exercise of any option granted under the 2000 Option 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.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; MERGER AND CONSOLIDATION
If the outstanding shares of Common Stock are changed into, or
exchanged for cash or 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 will be made by the Committee in
the number and kind of shares as to which options may be granted. In the event
of such change or exchange, other than for shares or securities of another
corporation or by reason of reorganization, the Committee will also make a
corresponding adjustment in the number or kind of shares, and the exercise price
per share allocated to unexercised options or portions thereof, of options which
have been granted prior to such change. Any such adjustment, however, will be
made without change in the total price applicable to the unexercised options or
portions thereof, of options which have been granted prior to such change. Any
such adjustment, however, will 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 Common Stock, the Committee will make such an
12
<PAGE>
adjustment to the exercise prices of options then outstanding under the 2000
Option Plan as it determines is appropriate and equitable to reflect such
diminution.
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 would materially alter the structure of the
Company or its ownership, the Committee, upon 30 days prior written notice to
the option holders, may 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 and option prices; or (iv) cancel options upon
payment to the option holders in cash, with respect 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.
No fractional shares of Common Stock will be issued on account of any
of the foregoing adjustments.
AMENDMENT AND TERMINATION
The Board or the Committee may at any time suspend, amend or terminate
the 2000 Option Plan and may, with the consent of an optionee, make such
modifications of the terms and conditions of such optionee's option as it deems
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. The amendment, suspension or termination of the 2000 Option Plan will not,
however, without the consent of the optionee to be affected, alter or impair any
rights or obligations under any option.
No option may be granted during any period of suspension nor after
termination of the 2000 Option Plan.
PRIVILEGES OF STOCK OWNERSHIP; REPORTS TO OPTION HOLDERS
A participant in the 2000 Option Plan will not be entitled to the
privilege of stock ownership as to any shares of Common Stock unless and until
they are actually issued to the participant.
The Company will furnish to each optionee under the 2000 Option Plan
the Company's annual report and such other periodic reports, if any, as are
disseminated by the Company in the ordinary course to its stockholders.
TERMINATION
Unless earlier terminated by the Board or the Committee, the 2000
Option Plan will terminate automatically as of the close of business on the day
preceding the tenth anniversary date of its adoption by
13
<PAGE>
the Board. The termination of the 2000 Option Plan will not affect the validity
of any Stock Option Agreement outstanding at the date of such termination.
FEDERAL INCOME TAX TREATMENT
Under the Code, neither the grant nor the exercise of Incentive Stock
Options is a taxable event to the optionee (except to the extent an optionee may
be subject to alternative minimum tax); rather, the optionee is subject to tax
only upon the sale of the common stock acquired upon exercise of the Incentive
Stock Option. Upon such a sale, the entire difference between the amount
realized upon the sale and the exercise price of the option will be taxable to
the optionee. Subject to certain holding period requirements, such difference
will be taxed as a capital gain rather than as ordinary income.
Optionees who receive Nonstatutory Options will be subject to taxation
upon exercise of such options on the spread between the Fair Market Value of the
Common Stock on the date of exercise and the exercise price of such options.
This spread is treated as ordinary income to the optionee, and the Company is
permitted to deduct as an employee expense a corresponding amount. Nonstatutory
Options do not give rise to a tax preference item subject to the alternative
minimum tax.
STOCKHOLDER VOTE REQUIRED
Approval of the Company's 2000 Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE COMPANY'S 2000 STOCK
OPTION PLAN.
14
<PAGE>
PROPOSAL 3
RATIFICATION OF CITRIN COOPERMAN & COMPANY, LLP AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
The Board of Directors has unanimously approved and unanimously
recommends that the Stockholders approve the appointment of Citrin Cooperman &
Company, LLP, as the Company's independent certified public accountants for the
ensuing year. Unless a stockholder signifies otherwise, the persons named in the
proxy will so vote.
STOCKHOLDER VOTE REQUIRED
Ratification of the appointment of Citrin Cooperman & Company, LLP, as
independent certified public accountants will require the affirmative vote of
the majority of the shares present in person or represented by proxy at the
Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF CITRIN COOPERMAN & COMPANY, LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
referred to in the Notice of Meeting which will be presented for consideration
at the meeting. However, it is possible that certain proposals may be raised at
the meeting by one or more Stockholders. In such case, or if any other matter
should properly come before the meeting, it is the intention of the person named
in the accompanying proxy to vote such proxy in accordance with his or her best
judgment.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and telegram
by directors, officers and employees of the Company. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy material to beneficial owners of
the Company's capital stock.
STOCKHOLDER PROPOSALS
In order to be included in the proxy materials for the Company's next
Annual Meeting of Stockholders, stockholder proposals must be received by the
Company on or before March 31, 2001.
15
<PAGE>
ANNUAL AND QUARTERLY REPORTS TO THE
SECURITIES AND EXCHANGE COMMISSION
The Annual Report on Form 10-K for the year ended December 31, 1999, as
filed with the Securities and Exchange Commission, will be made available to
Stockholders free of charge by writing to AppOnline.com, Inc., 201 Old Country
Road, Melville, New York 11747, Attention: Corporate Secretary.
By Order of the Board of Directors of AppOnline.com, Inc.
/S/ EDWARD CAPUANO
------------------
Edward R. Capuano
Chairman of the Board of Directors
June 12, 2000
16
<PAGE>
Appendix A
APPONLINE.COM, INC.
2000 STOCK OPTION PLAN
As adopted , 2000
----------------------
17
<PAGE>
1. PURPOSE OF PLAN; ADMINISTRATION
1.1 PURPOSE.
-------
The AppOnline.com, Inc. 2000 Stock Option Plan (hereinafter, the
"Plan") is hereby established to grant to officers and other employees of
AppOnline.com, Inc. (the "Company") 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 directors, consultants and advisors and other
persons who may perform significant services for or on behalf of the Company, a
favorable opportunity to acquire common stock, $.001 par value ("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.
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.
1.2 ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company
(the "Board"), if each member 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
Non-Employee Director. 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. Until such time that the Committee is properly appointed, the
Board shall administer the Plan in accordance with the terms of this Section
1.2.
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 vote 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 3.4) 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
18
<PAGE>
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
options, whether an optionee will receive Incentive Stock Options or
Nonstatutory Options, or both, and the amount, price, restrictions and all other
terms and provisions of such options (which need not be identical).
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 advice,
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 and other employees of the Company, non-employee directors,
consultants and advisors and other persons who may perform significant services
on behalf of the Company 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 option may, if otherwise eligible, be granted additional options if
the Committee shall so determine. 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 3.5, 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 5,000,000,
subject to adjustment as set forth in Section 3.5.
If any option 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.
19
<PAGE>
2. STOCK OPTIONS
2.1 EXERCISE PRICE; PAYMENT.
(a) 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. The exercise price of each
Nonstatutory Option also shall be determined by the Committee, but shall not be
less than 85% 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 Option shall be determined by the Committee at the time the
Committee acts to grant the option, 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 immediately
preceding the date of grant, or, if shares were not traded on the day preceding
such date of grant, 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 the date of grant 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 by the Committee to be the fair value per share of Common Stock, based
upon such evidence as it deems necessary or advisable.
(b) In the discretion of the Committee at the time the option is
exercised, the exercise price of any option 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 2.7, in the discretion of the Committee and upon receipt of all
regulatory approvals, the person exercising the option 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. Without limiting the Committee's discretion in this regard,
consecutive book entry stock-for-stock exercises of options (or "pyramiding")
also are permitted in the Committee's discretion.
20
<PAGE>
Irrespective of the form of payment, the delivery of shares issuable
upon 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 resulting, in the Company's judgment, from
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) payment by the optionee to the Company of
the aggregate withholding taxes in cash, (iii) withholding by the Company from
other amounts contemporaneously owed by the Company to the optionee, or (iv) any
combination of these three methods, as determined by the Committee in its
discretion.
2.2 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 subject thereto expires 30
days following a Termination of Employment (as defined in Section 3.2 hereof)
for any reason other than death or disability, or six months following a
Termination of Employment for disability or following an optionee's death.
(b) OUTSIDE DATE FOR EXERCISE. Notwithstanding any provision of this
Section 2.2, 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.
2.3 EXERCISE OF OPTIONS.
Each option granted under the Plan shall become exercisable and the
total number of shares subject thereto shall 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 time 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 2.5. At any 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 the option, require any partial
exercise to be with respect to a specified minimum number of shares.
21
<PAGE>
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.
2.4 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.
2.5 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS.
To the extent that the aggregate Fair Market Value (determined on the
date of grant as provided in Section 2.1 above) 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 by taking options into account in the order in which
they were granted.
2.6 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.
2.7 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 16 of the Securities
22
<PAGE>
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 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.
2.8 NO EFFECT 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 in one of the other corporations in such
chain.
3. OTHER PROVISIONS
3.1 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.
23
<PAGE>
3.2 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 the then-applicable regulations
and revenue rulings under said Section.
3.3 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 the foregoing, 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.
3.4 TERMS AND CONDITIONS OF OPTIONS.
Each option 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.
3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION;
MERGER AND CONSOLIDATION.
If the outstanding shares of Common Stock are changed into, or
exchanged 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 may be granted. In the event
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
24
<PAGE>
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 (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
a security of another entity, 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 and option prices, or (iv) cancel options upon payment to the option
holders in cash, with respect 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 3.5,
take 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 3.5.
25
<PAGE>
3.6 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.
3.7 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.
3.8 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 way 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.
3.9 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 exercise, payment
of the exercise price determined pursuant to Section 2.1 of the Plan and set
forth in the Stock Option Agreement, and all representations, indemnifications
and documents reasonably requested by the Committee.
26
<PAGE>
3.10 PRIVILEGES OF STOCK OWNERSHIP; NON-DISTRIBUTIVE INTENT;
REPORTS TO OPTION HOLDERS.
A participant in the Plan shall not 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 report and such other periodic reports, if any, as are disseminated by
the Company in the ordinary course to its stockholders.
3.11 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 sale of 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 certificate 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 upon which Common Stock is then traded.
3.12 USE OF PROCEEDS.
Proceeds realized pursuant to the exercise of options under the Plan
shall constitute general funds of the Company.
3.13 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 adjustments, recapitalizations, 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
27
<PAGE>
dissolution or liquidation of the Company's or any other corporation's assets or
business, or any other corporate act, whether similar to the events described
above or otherwise.
3.14 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.
3.15 TERMINATION.
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 3.8. 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.
3.16 NO EFFECT ON OTHER PLANS.
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 corporate 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.
* * *
28
<PAGE>
GENERAL PROXY - ANNUAL MEETING OF STOCKHOLDERS OF APPONLINE.COM, INC.
The undersigned hereby appoints Edward Capuano, with full power of
substitution, proxy to vote all of the shares of Common Stock of the undersigned
and with all of the powers the undersigned would possess if personally present,
at the Annual Meeting of Stockholders of AppOnline.com, Inc, to be held at the
Marriot Hotel, 3635 Express Drive North, Hauppauge, New York 11788, July 14,
2000, at 11:00 a.m., local time and at all adjournments thereof, upon the
matters specified below, all as more fully described in the Proxy Statement
dated June 12, 2000 and with the discretionary powers upon all other matters
which come before the meeting or any adjournment thereof.
This Proxy is solicited on behalf of AppOnline.com Inc.'s Board of
Directors.
1. To elect the following directors to hold office for the ensuing year:
- Edward Capuano - Jeffrey Skulsky - Jerry Dugan
- Robert L. Knickman - Stanley Hagendorf
[ ] FOR ALL NOMINEES [ ] WITHHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below:
2. To approve the adoption of the Company's 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Citrin Cooperman & Company, LLP, as the
Company's independent certified public accountants for the ensuing
year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, upon such other matter or matters that may
properly come before the meeting, or any adjournments thereof.
(Continued and to be signed on the other side)
<PAGE>
(Continued from other side)
Every properly signed proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2, 3 and 4.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: , 2000
---------------------------
(Print name of Stockholder)
(Print name of Stockholder)
Signature
Signature
Number of Shares Note: Please sign
exactly as name appears in the Company's
records. Joint owners should each sign.
When signing as attorney, executor or
trustee, please give title as such.
<PAGE>
