April 30, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of JB Oxford Holdings, Inc. (the "Company"), to be held
at 10:00 A.M. local time on Friday, June 4, 1999, at the Loews Miami Beach
Hotel, 1601 Collins Avenue, Miami, Florida 33139.
As more fully described in the attached Notice of Annual Meeting and the
accompanying Proxy Statement, the principal business to be addressed at the
Annual Meeting is the election of directors, approval of the Company's 1998
Stock Option and Award Plan and ratification of the appointment of Arthur
Andersen LLP as the Company's independent accountants for 1999.
In addition to the specific matters to be acted upon, management will report
on the progress of the Company and will be available to respond to questions of
general interest to shareholders.
Your vote is important to the Company. Whether or not you plan to attend the
Annual Meeting, please submit your proxy to ensure your representation. This
year most of our shareholders will be able to vote in any of the following ways:
(1) on the Internet at www.proxyvote.com by following the instructions listed on
the accompanying voting instruction form, (2) by telephone by calling the
toll-free number shown on your proxy card and following the instructions listed
on the accompanying voting instruction form, or (3) by signing and dating the
enclosed proxy card and returning it in the enclosed envelope.
The Board of Directors recommends that you vote FOR the director nominees and
each of the matters described in the Proxy Statement to be presented at the
Annual Meeting. You may attend the Annual Meeting and vote in person even if you
have submitted your proxy.
On behalf of the Directors and management of JB Oxford, we would like to
thank you for your support and confidence in the Company and look forward to
seeing you at the Annual Meeting.
Sincerely,
C.L. JARRATT
Chairman of the Board and
Chief Executive Officer
JB OXFORD HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1999
TO THE SHAREHOLDERS OF JB OXFORD HOLDINGS, INC.:
The 1999 Annual Meeting of Shareholders (the "Annual Meeting") of JB Oxford
Holdings, Inc. (the "Company"), will be held at 10:00 A.M. local time on Friday,
June 4, 1999, at the Loews Miami Beach Hotel, 1601 Collins Avenue, Miami,
Florida 33139, for the following purposes:
1.To elect directors to serve a term of one year or until a successor of each
has been duly elected and qualified (Proposal 1);
2.To consider and approve the Company's 1998 Stock Option and Award Plan
(Proposal 2);
3.To ratify the appointment of Arthur Andersen LLP as the Company's independent
accountants for 1999 (Proposal 3); and
4.To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only shareholders of record at the close of business on April 22, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors,
SCOTT G. MONSON
Secretary
IMPORTANT
TO INSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SUBMIT
YOUR PROXY AS SOON A POSSIBLE. THIS YEAR MOST OF OUR SHAREHOLDERS
WILL BE ABLE TO VOTE IN ANY OF THE FOLLOWING WAYS: (1) ON THE INTERNET
AT WWW.PROXYVOTE.COM BY FOLLOWING THE INSTRUCTIONS LISTED ON THE
ACCOMPANYING VOTING INSTRUCTION FORM, (2) BY TELEPHONE BY CALLING THE
TOLL-FREE NUMBER SHOWN ON YOUR PROXY CARD AND FOLLOWING THE
INSTRUCTIONS LISTED ON THE ACCOMPANYING VOTING INSTRUCTION FORM, OR
(3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN
THE ENCLOSED ENVELOPE. YOU MAY ATTEND THE ANNUAL MEETING AND VOTE IN
PERSON EVEN IF YOU HAVE SUBMITTED YOUR PROXY.
JB OXFORD HOLDINGS, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of JB Oxford Holdings, Inc., a Utah
corporation (the "Company"), to be voted at the 1999 Annual Meeting of
Shareholders (the "Annual Meeting") of the Company, or any postponements or
adjournment thereof. The Annual Meeting will be held at 10:00 A.M. local time
on Friday, June 4, 1999, at the Loews Miami Beach Hotel, 1601 Collins Avenue,
Miami, Florida 33139. As more fully described below, the principal business to
be addressed at the Annual Meeting is the election of directors, approval of the
Company's 1998 Stock Option and Award Plan and the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for 1999.
This Proxy Statement, the Notice of Annual Meeting and proxy card, together
with the Company's annual report to shareholders on Form 10-K for the fiscal
year ended December 31, 1998, are being sent to shareholders beginning on or
about April 30, 1999.
SHARES OUTSTANDING AND VOTING RIGHTS
Holders of record of shares of the Company's common stock, $0.01 par value
per share (the "Common Stock"), at the close of business on April 22, 1999 are
entitled to notice of and to vote at the Annual Meeting. On April 22, 1999,
there were 14,679,726 shares of the Company's Common Stock outstanding. Each
share is entitled to one vote in each of the matters properly presented at the
Annual Meeting.
PROXY PROCEDURE
Each validly executed, unrevoked proxy received by the Board of Directors of
the Company pursuant to this solicitation will be voted at the Annual Meeting as
specified by the shareholder. If no choice is indicated, the proxy will be
voted FOR the election of the director nominees and FOR the proposals described
in the Notice of Annual Meeting. Any shareholder giving a proxy pursuant to
this solicitation may revoke it at any time before it is voted by delivering to
the Secretary of the Company at its principal office a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself revoke a proxy.
A majority of the outstanding shares of Common Stock entitled to vote
constitutes a quorum at the Annual Meeting. Shares of Common Stock represented
in person or by proxy at the Annual Meeting, including abstentions and "broker
non-votes," will be tabulated by the inspectors of election appointed for the
Annual Meeting and will determine whether or not a quorum is present. A broker
non-vote occurs when a broker holding stock in "street name" indicates on the
proxy that it does not have discretionary authority to vote on a particular
matter.
VOTING REQUIREMENTS
A plurality of the votes cast by the holders of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is required for
the election of directors. A majority of the votes cast on the proposal at the
Annual Meeting is required for approval of the Company's 1998 Stock Option and
Award Plan and the ratification of Arthur Andersen LLP as the Company's
independent accountants for 1999.
With respect to the election of directors, votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals (other than
the election of directors) and will be counted as shares that are present and
entitled to vote for a proposal, but will not be counted in the total number of
votes cast in favor of or against the proposal, and thus will have no effect on
the outcome of voting. Broker non-votes are not shares entitled to vote, will
not be counted in the total number of votes cast, and thus will have no effect
on the outcome of voting.
HOW TO VOTE
You may submit a proxy with voting instructions by the Internet or the
telephone, or if those options are not available to you, by mailing the
enclosed proxy card. You may attend the Annual Meeting and vote in person even
if you have submitted your proxy.
Vote by the Internet. If you hold your shares through a broker, nominee,
fiduciary or other custodian, you may be able to vote your shares by the
Internet. A large number of banks and brokerage firms are participating in the
ADP Investor Communications Service online program. This program allows
eligible shareholders to vote by the Internet. If your bank or brokerage firm
is participating in ADP's online voting program, you will be provided with
instructions for voting by the Internet. If you vote by the Internet you do not
need to return your proxy card by mail. If your bank or brokerage firm does not
provide for voting by the Internet or telephone, please mark your proxy card,
date and sign it, and return it in the enclosed envelope.
Vote by Telephone. If you hold your shares through a broker, nominee,
fiduciary or other custodian, you may be able to vote your shares by telephone.
A large number of banks and brokerage firms are participating in the ADP
Investor Communications Service telephone program. This program allows eligible
shareholders to vote by telephone. If your bank or brokerage firm is
participating in ADP's telephone voting program, you will be provided with
instructions for voting by telephone. If you vote by telephone you do not need
to return your proxy card by mail. If your bank or brokerage firm does not
provide for voting by telephone or the Internet, please mark your proxy card,
date and sign it, and return it in the enclosed envelope.
Vote by Mail. If you vote by mail, simply mark your proxy card, date and
sign it, and return it in the enclosed envelope.
COSTS OF SOLICITATION
The expense of soliciting proxies, including the cost of preparing, printing
and mailing the proxy materials, will be borne by the Company. In addition to
solicitation of proxies by mail, solicitation may be made personally, by
telephone, facsimile and the Internet, and the Company may pay persons holding
shares of Common Stock for others their expenses for sending proxy materials to
their principals. The Company has retained Beacon Hill Partners, Inc., 90 Broad
Street, New York, New York, 10004, to assist in the solicitation of proxies.
The Company has agreed to pay Beacon Hill a fee of approximately $7,500 and to
reimburse it for its reasonable out-of-pocket expenses.
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTOR NOMINEES
The Board of Directors currently consists of four members. At the Annual
Meeting, four directors are to be elected to the Board of Directors each to
serve a one year term or until their successors are duly elected and qualified.
The Board has nominated CHRISTOPHER L. JARRATT, JAMES G. LEWIS, MARK D. GROSSI
and DAVID A. MAHOOD for election as directors of the Company. All nominees are
currently directors of the Company.
Biographical information relating to each of the director nominees appears
below under the heading "Board of Directors."
REQUIRED VOTE
The Board of Directors recommends that shareholders vote FOR the director
nominees. A plurality of the votes cast at the Annual Meeting is required for
the election of directors. The enclosed proxy will be voted FOR the director
nominees unless the proxy holders are otherwise instructed. If any of the
director nominees are unavailable or decline to serve as a director for any
reason, the proxy holders will vote the proxies for a substitute director
nominee designated by the Board of Directors. The Board of Directors does not
expect that any of the director nominees will be unable to serve as director of
the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES.
BOARD OF DIRECTORS
The Board of Directors develops the Company's business strategy and oversees
its operations. It establishes the overall policies and standards for the
Company and reviews the performance of management in executing the business
strategy. The directors are kept informed of the Company's operations at
meetings of the Board of Directors and its established committees, through
reports and analyses presented to the Board of Directors, and by discussions
with management.
Set forth below is biographical information for each member of the Company's
Board of Directors, each of whom is a nominee for election as a director at the
Annual Meeting.
NAME AGE POSITIONS WITH THE COMPANY
Christopher L. Jarratt 37 Director, Chairman of the Board and
Chief Executive Officer
James G. Lewis 33 Director, President and Chief
Operating Officer
Mark D. Grossi 45 Director
David A. Mahood 37 Director
Christopher L. Jarratt has served as a director, Chairman of the Board and
Chief Executive Officer of the Company since June 1998. Since May 1997, Mr.
Jarratt has been a director of Pacific Gateway Properties, Inc., a
publicly-traded real estate company. Since 1992, Mr. Jarratt has also served as
President of Jarratt Associates, Inc., a company engaged in various investment
activities. Mr. Jarratt has been Chief Manager of Third Capital, LLC, a company
engaged in various investment and advisory activities, since September 1996 and
Chief Manager and Chief Executive Officer of Third Capital Partners, LLP, a
company engaged in various investment and advisory activities, since 1998.
James G. Lewis has served as a director, President and Chief Operating
Officer of the Company since June 1998. From May 1994 through August 1996, Mr.
Lewis was employed as an attorney with the law firm Shumaker, Loop & Kendrick
LLP, Tampa, Florida. Prior to that time, Mr. Lewis was employed as an attorney
with the law firm of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.,
Clearwater, Florida. Since September 1996, Mr. Lewis has been Chief Operating
Officer and General Counsel of Third Capital, LLC, a company engaged in various
investment and advisory activities.
Mark D. Grossi has served as director of the Company since June 1998. Since
1992, Mr. Grossi has served as a director and Executive Vice President of
Charter One Financial, Inc., a publicly-traded savings and loan holding company.
Mr. Grossi also serves as Executive Vice President and Chief Retail Banking
Officer of Charter One Bank, a subsidiary of Charter One Financial. Mr. Grossi
has been a director of Pacific Gateway Properties, Inc., a publicly-traded real
estate company, since June 1997. Mr. Grossi has also been a director of
Meridian Point Realty Trust '83, a publicly-traded real estate investment trust,
since September 1998.
David A. Mahood has served as a director of the Company since November 1998.
Since June 1997, Mr. Mahood has served as a director and Chief Executive Officer
of MGC, Inc., a specialty contractor for laboratory and institutional equipment
and furnishings, and as Sales and Operation Manager prior to that time.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The current Board of Directors held four meetings in 1998. All incumbent
members of the Board of Directors participated in these meetings.
The former Board of Directors held five meetings and took one action by
unanimous written consent in 1998. All former members of the Board of Directors
participated in these meetings.
The Board of Directors established an Audit Committee in November 1998. The
Audit Committee is composed of Messrs. Grossi, Lewis and Mahood. The purpose of
the Audit Committee is to oversee the retention, performance and compensation of
the independent public accountants for the Company, and the establishment and
oversight of the Company's systems of internal accounting and auditing control.
The Audit Committee did not hold any meetings in 1998.
The Board of Directors established a Compensation Committee in April 1999.
The Compensation Committee reviews the Company's compensation philosophy and
programs, exercises authority with respect to the payment of salaries and
incentive compensation to directors and executive officers and administers the
Company's stock option plans. The Compensation Committee is composed of Messrs.
Grossi and Mahood.
DIRECTOR COMPENSATION
Non-employee directors are compensated $2,500 for each quarterly meeting
attended.
The Non-Employee Directors' Stock Option Plan, as amended (the "Directors'
Stock Plan"), provides for the grant of non-qualified stock options to purchase
25,000 shares of the Company's Common Stock to each non-employee director upon
his or her initial election to the Board of Directors. In addition, the
Directors' Stock Plan provides for an annual grant of 5,000 non-qualified stock
options to each non-employee director. See "Executive Compensation and Other
Information - Stock Option Plans."
PROPOSAL 2 -- APPROVAL OF STOCK PLAN
The 1998 Stock Option and Award Plan (the "1998 Stock Plan") was adopted by
the Board of Directors of the Company effective as of June 8, 1998, subject to
shareholder approval. The 1998 Stock Plan provides for the grant of options to
purchase an aggregate of 3,500,000 shares of Common Stock to employees,
officers, directors and consultants, upon whose efforts and judgment the success
of the Company is largely dependent. The Board of Directors believes that stock
options are important to attract and retain officers and other key employees of
the Company, by facilitating their acquisition of an equity interest in the
Company, which aligns their interests with those of the Company's shareholders.
The principal provisions of the 1998 Stock Plan are summarized below.
However, this summary is not complete and is qualified in its entirety by the
terms of the 1998 Stock Plan. A copy of the 1998 Stock Plan is attached as
Appendix A and is incorporated into this Proxy Statement by reference.
DESCRIPTION OF THE 1998 STOCK PLAN
The 1998 Stock Plan provides for the grant to eligible employees, officers,
directors and consultants of incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), for the grant of nonstatutory stock options
("Non-Statutory Stock Options") to eligible employees, officers, directors and
consultants for the grant of restricted share awards ("Restricted Share
Awards"). Incentive Stock Options may be exercisable for up to ten years at an
option price of not less than the fair market value of the Company's Common
Stock on the date the option is granted, or for up to five years at an option
price of not less than 110% of the fair market value of the Company's Common
Stock in the case of an officer or other key employee who owns, at the time the
option is granted, more than 10% of the Company's Common Stock. Holders of
Incentive Stock Options qualify for certain favorable tax treatment. See
"Summary of Federal Income Tax Consequences." Non-Statutory Stock Options may
be exercisable for up to ten years at such exercise price and upon such terms
and conditions as the Compensation Committee of the Board of Directors may
determine.
The 1998 Stock Plan will be administered by the Compensation Committee of the
Board of Directors, which will be charged with designating those persons to whom
options or Restricted Share Awards are to be granted and determining the terms
of such awards, including the exercise price of options, the number of shares
subject to an option, the time of the exercise of an option and the number of
shares of, and the restrictions placed on, a Restricted Share Award. In
granting awards, the Compensation Committee will take into consideration the
past performance and anticipated future contribution of the potential grant
recipient and such other considerations the Committee deems relevant.
Options granted under the 1998 Stock Plan are subject to the following
restrictions, among others: (a) the per share exercise price for Incentive Stock
Options must be equal to or greater than 100% of the fair market value of a
share of the Company's Common Stock on the date of grant of the option; (b) no
option may be exercisable after the expiration of ten years from the date of its
grant; and (c) options granted under the 1998 Stock Plan are subject to transfer
restrictions as follows:
1.No Incentive Stock Option shall be transferable by the optionee other than by
will, or the laws of descent and distribution, and each Incentive Stock
Option shall be exercisable during the optionee's lifetime only by the
optionee; and
2.No Non-Statutory Stock Options may be sold, exchanged, pledged, transferred,
assigned or otherwise encumbered or disposed of, except as follows: (a) to
the spouse or any children or grandchildren of the holder; (b) as a
charitable contribution or gift to or for the use of any person or entity
described in Section 170(c) of the Code; (c) to any controlled entity (as
such term is defined in the Code); or (d) by will or the laws of intestate
succession.
If the optionee ceases to be employed by the Company because he or she is
terminated for cause (as defined in the 1998 Stock Plan), the unexercised
portion of any option held by the terminated employee will automatically expire.
If an optionee's employment by the Company is terminated by reason of a mental
or physical disability or death, then his or her options will expire one year
after the date of termination. If an optionee's employment is terminated for
any other reason, then his or her options will terminate three months from the
date of termination. Options become immediately exercisable in the event of a
change in control of the Company or other similar event.
The 1998 Stock Plan authorizes the Company to make loans to optionees to
enable them to exercise their options. Such loans must (a) provide for recourse
to the optionee, (b) bear interest at a rate no less than the prime rate of
interest of the Company's principal lender and (c) be secured by the shares of
Common Stock purchased.
An award of restricted shares constitutes an immediate transfer of ownership
to the recipient in consideration of the performance of services. Awards of
restricted shares may be made for no additional consideration or for
consideration of a payment by the participant that is less than the current fair
market value of the Common Stock. The participant has immediate dividend and
voting rights on the shares but the shares will be subject to a "substantial
risk of forfeiture," within the meaning of Section 83 of the Code, for a period
of at least one year, as determined by the Compensation Committee. In order to
enforce these forfeiture provisions, the transferability of restricted shares
granted under the 1998 Stock Plan will be prohibited or restricted in the manner
prescribed by the Compensation Committee on the date of the grant. The
Compensation Committee may provide for the earlier termination of the forfeiture
provisions in the event of a change in control of the Company, retirement, death
or disability of the recipient, or other similar event.
The Board of Directors has the authority to amend or terminate the 1998 Stock
Plan, provided that no such action impairs the rights of the holder of any
outstanding option or restrictive shares without the written consent of such
holder, and provided further that certain amendments of the 1998 Stock Plan are
subject to shareholder approval. Unless terminated sooner, the 1998 Stock Plan
will terminate ten years from its effective date.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
Non-Statutory Stock Options
Generally. An optionee generally will not recognize income upon the grant of
a Non-Statutory Stock Option. If an optionee receives unrestricted shares of
Common Stock upon the exercise of a Non-Statutory Stock Option, he will normally
recognize ordinary income at the time of exercise equal to the excess of the
fair market value, at the time of exercise, of the optioned Common Stock
received over the exercise price. If the optionee disposes of the shares,
capital gain will be recognized, either long or short term depending on the
holding period beginning on the date the shares are acquired.
Special Rules Applicable to Optionees Subject to Section 16(b) of the
Securities Exchange Act of 1934, as Amended. The tax consequences to optionees
who are Company insiders subject to Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") may differ from the tax consequences
described above. In the case of such an optionee, ordinary income will
generally be recognized upon exercise only if six months have elapsed since the
date of the grant.
Tax Consequences to the Company. To the extent that an optionee recognizes
ordinary income, the Company or subsidiary for which the optionee performs
services will generally be entitled to a corresponding deduction. The deduction
is allowed in the tax year in which the optionee is required to include the
amount in income.
Incentive Stock Options
Generally. An optionee will not recognize income upon the grant of an
incentive stock option. In addition, an optionee will not recognize income upon
the exercise of an Incentive Stock Option if he or she satisfies certain
employment and holding period requirements. To satisfy the employment
requirement, an optionee generally must exercise the option not later than three
months after he ceases to be an employee of the Company or a subsidiary of the
Company (one year if he ceases to be an employee due to disability). To satisfy
the holding period requirement, an optionee must hold the optioned Common Stock
for more than two years from the grant of the option and more than one year
after the Common Stock is transferred to him. If these requirements are
satisfied, upon the sale of the Common Stock, the optionee will be taxed at
long-term capital gains rates on any gain, measured by the difference between
his or her cost to exercise the option and the net proceeds of the sale.
Disqualifying Disposition. If shares of Common Stock acquired upon the
timely exercise of an incentive stock option are sold, exchanged or otherwise
disposed of without satisfying the holding period requirement (a "Disqualifying
Disposition"), the optionee will usually recognize ordinary income at the time
of disposition equal to the amount of the excess of the fair market value of the
optioned Common Stock on the date of exercise over the exercise price.
Alternative Minimum Tax. An optionee generally must include in alternative
minimum taxable income the amount by which the amount paid for the option is
exceeded by the stock's fair market value at the time the rights to the stock
are freely transferable or not subject to a substantial risk of forfeiture.
Tax Consequences to the Company. The granting of an Incentive Stock Option,
or the exercise thereof, will generally not result in a deduction for the
Company. However, to the extent that an optionee recognizes ordinary income as
the result of a Disqualifying Disposition, the Company will generally be
entitled to a corresponding deduction.
Restricted Share Awards
The recipient of Restricted Share Awards generally will be subject to tax at
ordinary income rates on the fair market value of the restricted share reduced
by any amount paid by the participant at the time the shares are no longer
subject to forfeiture or restrictions on transfer for purposes of Section 83 of
the Code ("Restrictions"). However, a recipient who makes the election under
Section 83(b) of the Code, within thirty days of the date of transfer of the
shares with Restrictions will have taxable ordinary income on the date of
transfer of the shares equal to the excess of the fair market value of such
shares (determined without regard to the Restrictions) over the purchase price,
if any, of such restricted stock. Thereafter, the lapse of the Restriction will
not cause a taxable event. If the recipient sells the shares at a later date,
the recipient will be taxed at capital gains rates, to the extent the sale
proceeds exceed the fair market value of the shares at the time of the Section
83(b) election. If a recipient has not made an election under Section 83(b),
any dividends received with respect to restricted stock subject to Restrictions
generally will be treated as compensation that is taxable as ordinary income to
the recipient.
OPTIONS GRANTED UNDER THE 1998 STOCK PLAN
The following table provides certain information with respect to grants under
the 1998 Stock Plan. As of the date of this Proxy Statement, the Company has
granted options to purchase an aggregate of 1,550,000 shares of Common Stock to
Messrs. Jarratt and Lewis under the 1998 Stock Plan, which grants are contingent
upon approval of the 1998 Stock Plan by the Company's shareholders. If approval
of the options is not granted by the shareholders at the Annual Meeting, the
Company has agreed to grant Messrs. Jarratt and Lewis comparable compensation.
See "Executive Compensation and Other Information -- Employment Agreements and
Compensation Arrangements."
NUMBER OF SHARES EXERCISE PRICE EXPIRATION
NAME UNDERLYING OPTIONS PER SHARE DATE
Christopher L. Jarratt 800,000 $1.3125 June 8, 2008
James G. Lewis 750,000 $1.3125 June 8, 2008
REQUIRED VOTE
The Board of Directors recommends that shareholders vote FOR the approval of
the 1998 Stock Plan. Approval of the 1998 Stock Plan requires a majority of the
votes cast on the proposal at the Annual Meeting. If the proposed 1998 Stock
Plan is approved, it will be effective as of the date of its adoption by the
Board of Directors. The enclosed proxy will be voted FOR the approval of the
1998 Stock Plan unless the proxy holders are otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1998 STOCK PLAN.
PROPOSAL 3 -- RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has approved and recommends the
appointment of Arthur Andersen LLP as independent accountants of the Company for
the fiscal year ending December 31, 1999. Although the Bylaws of the Company do
not require the selection of independent accountants to be submitted to
shareholders for approval, this selection is being presented to shareholders for
ratification or rejection at the Annual Meeting. The Board of Directors
recommends that the shareholders vote FOR the ratification of such selection.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, and will have an opportunity to make a statement if he or she so
desires and will be available to respond to appropriate questions.
VOTE REQUIRED
Ratification of the Board of Directors' selection of Arthur Andersen LLP
requires a majority of the votes cast on the proposal at the Annual Meeting. If
the ratification of Arthur Andersen LLP is rejected, or if Arthur Andersen LLP
declines to act or becomes incapable of acting as the independent accountants to
the Company, or if Arthur Anderson LLP's employment by the Company is
discontinued, the Board of Directors will appoint other independent accountants
whose continued employment after the following Annual Meeting of Shareholders
will be subject to ratification by shareholders. The enclosed Proxy will be
voted FOR ratification of Arthur Andersen LLP as independent accountants to the
Company unless the proxy holders are otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 1999.
EXECUTIVE OFFICERS
Set forth below is biographical information for each of the Company's
executive officers who is not a director. For biographical information
regarding Messrs. Jarratt and Lewis, See "Board of Directors."
NAME AGE POSITION WITH THE COMPANY
Christopher L. Jarratt 37 Chairman of the Board and Chief
Executive Officer
James G. Lewis 33 President and Chief Operating
Officer
Michael J. Chiodo 41 Chief Financial Officer and
Treasurer
Scott G. Monson 39 General Counsel and Secretary
Michael J. Chiodo has served as Chief Financial Officer and Treasurer of the
Company since September 1997. From August 1994 to September 1997, Mr. Chiodo
served as Acting Chief Financial Officer. Prior to 1994, Mr. Chiodo served as
Chief Financial Officer of Reynolds Kendrick Stratton, Inc., a broker dealer
previously operated by the Company. Mr. Chiodo is also a former partner of the
accounting firm of Sorensen, Chiodo & May.
Scott G. Monson has served as General Counsel to the Company since September
1997 and Secretary of the Company since June 1998. From August 1994 to
September 1997, Mr. Monson served as Associate General Counsel to the Company
and as Legal Counsel to the Company from March 1989 to August 1994. Mr. Monson
is admitted to practice law in the States of California (1997), Texas (1995),
District of Columbia (1993) and Utah (1985).
EXECUTIVE COMPENSATION AND OTHER INFORMATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Company's Board of Directors (the "Board") as a whole establishes the
compensation and approves individual bonus programs for the Company's executive
officers. Stock options and restricted stock awards granted to the Company's
executive officers are also determined by the entire Board of Directors. The
following is a summary of the compensation policies of the Board of Directors.
In April 1999, the Board of Directors established a compensation committee (the
"Compensation Committee"). The Compensation Committee will be responsible for
making recommendations to the Board regarding compensation, bonus programs and
equity-based awards for the Company's executive officers. The Compensation
Committee consists of Messrs. Grossi and Mahood.
The Board subscribes to a total compensation program for the Company's
executive officers. The compensation program is composed of three elements:
base salary, annual incentives and long-term equity based compensation. The
Board's overall policy is to offer the Company's executive officers competitive
cash and long-term equity based compensation opportunities based upon their
personal performances, the financial performance of the Company and their
personal contribution to the financial performance of the Company. The Board
strives for fairness in the administration of executive compensation.
The principal factors taken into account in establishing each executive
officer's compensation package are summarized below. Additional factors may be
taken into account to a lesser degree, and the relative weight given to each
factor varies with each individual in the discretion of the Board. The Board
may in its discretion apply entirely different factors.
Cash-Based Compensation. The Board sets base salary for executive officers
on the basis of personal performance, growth of the earnings of the Company and
the salary levels in effect for comparable positions with other companies in the
industry. This comparison group is not the same as the one included in the peer
group index in the performance graph. The Company selects the companies for
comparison based on numerous factors, such as the industries in which they
operate, their size and complexity and the availability of compensation
information.
The cash based compensation has also been structured to include annual
incentive compensation for each executive officer. The annual incentive
compensation is based on the financial performance of the Company and the
individual's personal contributions to the financial performance of the Company.
The Board believes that the performance-based incentive compensation is crucial
in attracting high caliber executives necessary for the successful conduct of
the Company's business.
The Company also maintains a Internal Revenue Code Section 401(k) defined
benefit plan (the "401(k) Plan") under which all eligible employees of the
Company, including executive employees, may elect to defer compensation up to
the limits imposed by the Code. The 401(k) Plan provides for Company
contributions to the 401(k) Plan of an amount equal to 25% of the amount
contributed by the employee, up to 6% of their compensation.
Long-Term Equity Based Compensation. The Board intends to make stock option
grants and restricted stock awards on an annual basis. Each stock option grant
or restricted stock award is designed to attract and retain executive officers
by facilitating their acquisition of an equity interest in the Company, which
aligns their interest with those of the Company's shareholders. Each stock
option grant allows the executive officer to acquire shares of the Company's
Common Stock at a fixed price per share (the market price on the date of the
grant) over a specified period of time (up to ten years), thus providing a
return to the executive officer only if he or she remains in full employment of
the Company and the market price of the shares appreciates over the option term.
The size of the option grant is usually set a level that is intended to create a
meaningful opportunity for stock ownership based upon the individual's current
position with the Company. The size of option grants to similar individuals in
comparable companies, the individual's potential for future responsibility and
promotion within the Company, the individual's personal performance and the
financial performance of the Company are also taken into account in determining
the size of the stock option grant or restricted stock award.
Chief Executive Officer Compensation. Mr. Jarratt, the Company's Chief
Executive Officer, does not receive any cash compensation from the Company. The
Company has retained Third Capital, LLC ("Third Capital") to furnish certain
professional and advisory services for the Company, including the services of
Mr. Jarratt. The Company pays Third Capital $30,000 per month and reimburses
Third Capital's out-of-pocket expenses for its services. Mr. Jarratt is
eligible to participate in the Company's stock option plans. See "Employment
Agreements and Compensation Arrangements."
During 1998, the Board reviewed the status of Mr. Jarratt's stock option
holdings. Based on a review of stock option holdings of individuals in
comparable positions in comparable companies, and based on a desire to maximize
shareholder value by directly linking Mr. Jarratt's stock ownership to the
achievement of a higher share price per for the Company's Common Stock, the
Board granted Mr. Jarratt options to purchase 800,000 shares of the Company's
Common Stock, subject to shareholder approval. The options have an exercise
price per share of $1.3125, the fair market value of the shares on the grant
date. If Mr. Jarratt's stock option grant is not approved by the shareholders,
the Board has agreed to provide Mr. Jarratt comparable compensation if the form
of stock appreciation right equivalent to 800,000 shares at an initial value of
$1.3125 per share. See "Employment Agreements and Compensation Arrangements."
Submitted by the Board of Directors of the Company:
CHRISTOPHER L. JARRATT
JAMES G. LEWIS
MARK D. GROSSI
DAVID A. MAHOOD
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company, in the
last three years, to the Company's Chairman of the Board and Chief Executive
Officer, President and Chief Operating Officer, Chief Financial Officer and
General Counsel, the only executives who earned more than $100,000 annually in
total compensation at any time during that period (the "Named Executive
Officers").
Mr. Jarratt, the Company's Chairman of the Board and Chief Executive Officer,
and Mr. Lewis, the Company's President and Chief Operating Officer, received no
direct compensation from the Company in 1998. The Company has retained Third
Capital to provide certain professional and advisory services to the Company,
including the services of Messrs. Jarratt and Lewis. See "Employment Agreements
and Compensation Arrangements."
<TABLE>
NAME AND POSITION
WITH THE COMPANY ANNUAL COMPENSATION LONG TERM COMPENSATION
RESTRICTED SHARES OF
STOCK STOCK UNDER- OTHER
YEAR SALARY BONUS AWARD(S) (1) LYING OPTIONS COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Christopher L. 1998 -- -- -- 800,000 (2) $271,000 (3)
Jarratt,
Chairman of the
Board and Chief
Executive
Officer
Stephen M. 1998 $308,750 $25,000 5 -- $83,150 (5)
Rubenstein, 1997 287,500 25,000 66 100,000 2,440 (6)
former Chief 1996 253,605 100,000 84 50,000 2,440 (6)
Executive
Officer (4)
James G. Lewis, 1998 -- -- -- 750,000 (2) $271,000 (3)
President and
Chief Operating
Officer
Michael J. 1998 $112,521 $5,000 4 -- $1,752 (7)
Chiodo, 1997 110,000 5,000 47 -- 1,739 (7)
Chief Financial 1996 100,000 15,000 64 -- 1,664 (7)
Officer and
Treasurer
Scott G. Monson, 1998 $102,292 $10,000 5 -- $1,980 (8)
General Counsel 1997 100,000 5,000 66 -- 608 (9)
and Secretary 1996 90,000 9,000 84 -- 613 (9)
</TABLE>
(1) Shares of Common Stock issued under the Company's Employee Stock Ownership
Plan. See " Long-Term Incentive and Pension Plans."
(2) Messrs. Jarratt's and Lewis' options to purchase Common Stock are
contingent upon the approval of the 1998 Stock Plan by the Company's
shareholders. If the 1998 Stock Plan is not approved by the shareholders
at the Annual Meeting, the options will terminate. The Company has agreed
to grant Messrs. Jarratt and Lewis comparable compensation if the 1998
Stock Plan is not approved. See "Employment Agreements and Compensation
Arrangements."
(3) The amount of $271,000 was paid to Third Capital for professional and
advisory services provided to the Company, including the services of
Messrs. Jarratt and Lewis. Mr. Jarratt is Chief Manager and Chief
Executive Officer of Third Capital. Mr. Lewis is Chief Operating Officer
and General Counsel of Third Capital. See "Employment Agreements and
Compensation Arrangements."
(4) Mr. Rubenstein resigned as Chief Executive Officer of the Company in June
1998. In addition, Mr. Rubenstein resigned as President of JB Oxford &
Company, a wholly-owned subsidiary of the Company ("JBOC"), as of October
12, 1998. Upon Mr. Rubenstein's resignation from JBOC, and in
consideration of a severance payment, he relinquished all of his rights to
the ownership or exercise of any unexercised stock options. See
"Employment Agreements and Compensation Arrangements."
(5) Includes $1,650 for life insurance premiums paid by the Company and $81,500
paid by the Company in 1998 under Mr. Rubenstein's severance agreement.
See "Employment Agreements and Compensation Arrangements."
(6) Represents life insurance premiums paid by the Company.
(7) Includes $1,165 for life insurance premiums paid by the Company and
contributions by the Company to the Company's 401(k) savings plan as a
matching contribution in the amounts of $587 in 1998, $574 in 1997 and $499
in 1996.
(8) Includes $1,480 for life insurance premiums paid by the Company and $500
contributed by the Company to the Company's 401(k) savings plan as a
matching contribution.
(9) Represents contributions by the Company to the Company's 401(k) savings
plan as a matching contribution.
OPTION GRANTS IN 1998
The following table summarizes information concerning options granted in 1998
to each of the Named Executive Officers.
NUMBER
OF PERCENT
SHARES OF TOTAL
OF OPTIONS POTENTIAL REALIZABLE
COMMON GRANTED VALUE AT ASSUMED
STOCK TO EXERCISE ANNUAL RATES OF
UNDERLY EMPLOYEES PRICE STOCK PRICE
ING IN PER EXPIRATION APPRECIATION
NAME OPTIONS 1998 SHARE DATE FOR OPTION TERM
5% 10%
Christopher L. 800,000 51% $1.3125 June 8, $660,339 $1,673,430
Jarratt* 2008
James G. Lewis* 750,000 48% $1.3125 June 8, $619,068 $1,568,840
2008
* Messrs. Jarratt's and Lewis' options to purchase shares of Common Stock are
contingent upon the approval of the 1998 Stock Plan by the Company's
shareholders. If the 1998 Stock Plan is not approved by the shareholders at
the Annual Meeting, the options will terminate. The Company has agreed to
grant Messrs. Jarratt and Lewis comparable compensation if the 1998 Stock
Plan is not approved. See "Employment Agreements and Compensation
Arrangements."
OPTION VALUES AT DECEMBER 31, 1998
The following table summarizes information concerning the number of
unexercised options held by Named Executive Officers as of December 31, 1998.
Also reported are values of "in-the-money" options, that is, the amount by which
the exercise price of the option is exceeded by the last sale price of the
Common Stock on December 31, 1998. No Named Executive Officer exercised any
options in 1998.
VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Christopher L. 0 800,000 0 $400,000
Jarratt *
James G. Lewis * 0 750,000 0 $375,000
* Messrs. Jarratt's and Lewis' options to purchase shares of Common Stock are
contingent upon the approval of the 1998 Stock Plan by the Company's
shareholders. If the 1998 Stock Plan is not approved by the shareholders at
the Annual Meeting, the options will terminate. The Company has agreed to
grant Messrs. Jarratt and Lewis comparable compensation if the 1998 Stock
Plan is not approved. See " Employment Agreements and Compensation
Arrangements."
STOCK OPTION PLANS
The Company currently maintains two stock plans to attract and retain key
employees and outside directors of the Company. In June 1998, the Board of
Directors adopted the 1998 Stock Plan, subject to shareholder approval. The
following is a brief discussion of each of the stock plans.
1994 Stock Option Plan. The Company's 1994 Stock Option Plan (the "1994
Stock Plan") provides for the grant of options to purchase an aggregate of
1,000,000 shares of the Company's Common Stock. Each option has an exercise
price equal to the fair market value of the Common Stock on the date of grant,
except for incentive stock options to beneficial owners of 10% or more of the
Common Stock, which must have an exercise price of 110% of fair market value on
the date of grant. As of December 31, 1998, 367,500 options had been granted
under the 1994 Stock Plan, of which 120,000 option were previously exercised.
Non-Employee Directors' Stock Option Plan. The Directors' Stock Plan
provides for the grant of options to purchase an aggregate of 1,000,000 shares
of the Company's Common Stock. Under the terms of the Directors' Stock Plan,
each non-employee director is granted non-qualified stock options to purchase
25,000 shares of the Company's Common Stock upon his or her election as a
director. In addition, the Directors' Stock Plan provides for an annual grant
to non-employee directors of non-qualified stock options to purchase 5,000
shares of the Company's Common Stock. Each option has an exercise price equal
to the fair market value of the Common Stock on the date of the grant, and vests
over a period of three years with one-third vesting on each anniversary date of
the grant. In November 1998, the Board of Directors amended the Directors'
Stock Plan to reduce the number of options granted to non-employee directors
upon his or her election as a director from 50,000 to 25,000. As of December
31, 1998, 350,000 options had been granted under the Directors' Stock Plan.
1998 Stock Option and Award Plan. The 1998 Stock Plan provides for the grant
of options to purchase an aggregate of 3,500,000 shares of Common Stock. As of
December 31, 1998, 1,550,000 options had been granted under the 1998 Stock Plan.
See "Proposal 2 - Approval of Stock Plan."
LONG-TERM INCENTIVE AND PENSION PLANS
The Company maintains a 401(k) savings plan for its employees. The Company
matches 25% of the total contributions made by eligible employees up to 6% of
their annual salary.
The Company also maintains an Employee Stock Ownership Plan ("ESOP"). The
ESOP provides for a formula grant of Common Stock to all eligible employees of
the Company. The formula is based upon the ratio that each participant's annual
compensation bears to the total annual compensation for all participants. All
shares of Common Stock granted to eligible employees under the ESOP vest over a
period of seven years. The Company's contribution to the ESOP is to be
determined by the Board of Directors annually. No contributions by the Company
have been made to the ESOP since December 31, 1992.
Other than the 401(k) plan and the ESOP, the Company does not have any long-
term incentive, pension or similar plans.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
Mr. Jarratt, the Company's Chairman of the Board and Chief Executive Officer,
and Mr. Lewis, the Company's President and Chief Operating Officer, receive no
direct compensation from the Company. Instead, the Company has retained Third
Capital to furnish certain professional and advisory services to the Company,
including the services of Messrs. Jarratt and Lewis. The Company pays Third
Capital $30,000 per month and reimburses Third Capital's out-of-pocket expenses
for its services. In addition, upon retaining Third Capital, the Company paid
Third Capital a one time fee of $75,000. During 1998, the Company paid Third
Capital a total of $271,000 (including the $75,000 fee) for professional and
advisory services, and reimbursed Third Capital $121,378 for its expenses. Mr.
Jarratt is the Chief Manager and Chief Executive Officer, and Mr. Lewis is the
Chief Operating Officer and General Counsel of Third Capital.
In June 1998, the Board of Directors adopted the 1998 Stock Plan and granted
options under it to purchase 800,000 shares of Common Stock to Mr. Jarratt and
750,000 shares of Common Stock to Mr. Lewis, subject to shareholder approval.
If the 1998 Stock Plan is not approved by the shareholders at the Annual
Meeting, the Company has agreed to grant Messrs. Jarratt and Lewis comparable
compensation in the form of stock appreciation rights. Under the terms of an
agreement between the Company and each of Messrs. Jarratt and Lewis, if the
shareholders do not approved the 1998 Stock Plan, the Company will grant to Mr.
Jarratt stock appreciation rights equivalent to 800,000 shares of Common Stock
at an initial value of $1.3125 per share, and to Mr. Lewis, stock appreciation
rights equivalent to 750,000 shares of Common Stock at an initial value of
$1.3125 per share.
Mr. Monson executed an employment agreement with the Company in June 1994,
which presently continues on a month-to-month basis. Under the terms of the
employment agreement, the Company is required to provide Mr. Monson with four
months written notice of termination and the payment of a severance package
equal to three months salary.
In June 1998, Mr. Rubenstein resigned as Chief Executive Officer of the
Company. Mr. Rubenstein also resigned as President of JBOC on October 12, 1998.
Pursuant to the terms of a Separation Agreement, dated October 12, 1998, among
Mr. Rubenstein, the Company and JBOC, Mr. Rubenstein is entitled to severance
pay of $261,500 payable over 15 months. In consideration of the severance
payment, Mr. Rubenstein relinquished all of his rights to the ownership or
exercise of any unexercised stock options.
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
Prior to the establishment of the Compensation Committee in April 1999, the
Board of Directors acting as a whole, including Messrs. Jarratt and Lewis, made
decisions regarding executive compensation.
PERFORMANCE TABLE
The following table compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the companies in the NASDAQ US
Index and the NASDAQ Financial Index. Cumulative total return for each of the
periods shown in the performance table is calculated from the last sale price of
the Company's Common Stock at the end of the period and assumes an initial
investment of $100 on December 31, 1994, and the reinvestment of any dividends.
YEAR JBOH NASDAQ US NASDAQ FINANCIAL
12/31/1994 100 100 100
12/31/1995 281 141 146
12/31/1996 138 174 187
12/31/1997 84 213 285
12/31/1998 181 301 277
2/26/1999 1,006 313 271
STOCK OWNERSHIP
OF CERTAIN SHAREHOLDERS AND MANAGEMENT
The following table includes, as of April 22, 1999, stock ownership for each
shareholder known by the Company to be the owner of more than 5% of the
outstanding shares of Common Stock, each director, director nominee and Named
Executive Officer and all directors and executive officers of the Company as a
group. Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
CONVERTIBLE
NAME AND ADDRESS (1) DEBT OPTIONS SHARES PERCENTAGE (2)
Christopher J. Jarratt 7,740,992 (3) 800,000 (4) 975,790 (5) 41.0%
James G. Lewis -- 750,000 (6) 42,800 5.1%
Mark D. Grossi -- 50,000 (7) -- *
David A. Mahood -- 25,000 (8) -- *
Stephen M. Rubenstein
9358 Hanna Avenue
Chatsworth, CA 91311 -- -- 505 *
Michael J. Chiodo -- -- 5,821 *
Scott G. Monson -- -- 19,215 *
Third Capital Partners,
LLC
314 Church Street, 9th
Floor
Nashville, TN 37201 7,740,992 (3) -- 569,540 (9) 37.1%
All Named Executive
Officers and Directors
as a group 7,740,992 1,625,000 1,044,131 43.3%
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners is
c/o JB Oxford Holdings, Inc., 9665 Wilshire Boulevard, Suite 300, Beverly
Hills, California 90212.
(2) Assumes the exercise of all options held by the shareholder, whether or not
presently exercisable, and the conversion of all convertible debt into
shares of Common Stock.
(3) Includes 4,883,850 shares of Common Stock issuable to Third Capital
Partners upon the conversion of $3.4 million of the Company's 9% Senior
Secured Convertible Notes and 2,857,142 shares of Common Stock issuable to
Third Capital Partners upon the conversion of $2.0 million of the Company's
newly issued 9% Secured Convertible Notes. Mr. Jarratt, as Chief Manager
and Chief Executive Officer of Third Capital Partners, has the sole right
to vote, or direct the voting of, and the sole power to dispose or to
direct the disposal of, of the shares of Common Stock owned by Third
Capital Partners. See "Certain Relationships and Related Transactions."
(4) Represents options granted under the 1998 Stock Plan, of which options to
purchase 266,000 shares of Common Stock will be exercisable within 60 days
of April 22, 1999.
(5) Includes: 40,000 shares of Common Stock owned by Mr. Jarratt's wife;
318,750 shares of Common Stock subject to an irrevocable proxy granted to
Mr. Jarratt by Oeri Finance, Inc. and Felix A. Oeri; 469,540 shares of
Common Stock owned by JB Oxford Revocable Government Trust of which Third
Capital Partners is the trustee with the right to vote the shares of Common
Stock held by the Trust; and 100,000 shares of Common Stock owned by Third
Capital Partners. See "Certain Relationships and Related Transactions."
(6) Represents options granted under the 1998 Stock Plan, of which options to
purchase 250,000 shares of Common Stock will be exercisable within 60 days
of April 22, 1999.
(7) Represents options granted under the Directors' Stock Plan, of which
options to purchase 25,000 shares of Common Stock are presently
exercisable, and options to purchase 25,000 shares of Common Stock will be
exercisable within 60 days of April 22, 1999.
(8) Represents options granted under the Directors' Stock Plan, of which
options to purchase 12,500 shares of Common Stock are presently
exercisable.
(9) Includes 469,540 shares owned by JB Oxford Revocable Government Trust of
which Third Capital Partners is the Trustee with the right to vote the
shares of Common Stock held by the trust. See "Certain Relationships and
Related Transactions."
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% percent of the Company's
Common Stock, to file with the Securities and Exchange Commission ("SEC") and
the NASDAQ System initial reports of ownership and reports of changes in
ownership of the Company's Common Stock. Officers, directors and shareholders
holding more than 10% of the outstanding shares of the Company's common stock
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Mr. Chiodo, Chief Financial Officer and Treasurer of the Company,
inadvertently failed to file a required form on a timely basis upon his
appointment as an executive officer of the Company in 1997. The required form
has been filed. Based solely on its review of copies of these reports furnished
to the Company or written representation that no reports were required, the
Company believes that all other Section 16(a) filing requirements were met in
1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has retained Third Capital to provide certain professional and
advisory services to the Company, including the services of Mr. Jarratt as
Chairman of the Board and Chief Executive Officer, and Mr. Lewis as President
and Chief Operating Officer. The Company agreed to pay Third Capital $30,000
per month and reimburses Third Capital's out-of-pocket expenses for its
services. In addition, upon retaining Third Capital, the Company paid Third
Capital a one time fee of $75,000. During 1998, the Company paid Third Capital
a total of $271,000 for professional and advisory services, and reimbursed Third
Capital $121,378 for its expenses. Mr. Jarratt is the Chief Manager and Chief
Executive Officer, and Mr. Lewis is the Chief Operating Officer and General
Counsel of Third Capital. See "Executive Compensation and Other Information --
Employment Agreements and Compensation Arrangements."
As of May 21, 1998, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement"), with Third Capital Partners, 3421643 Canada Inc.
("3421643 Canada"), a corporation owned and controlled by Elliot L. Bier, a
director of the Company from June 1998 to December 1998, Felix A. Oeri and Oeri
Finance, Inc. As a result of the Purchase Agreement, the following transactions
were completed on June 8, 1998:
1.Third Capital Partners and 3421643 Canada purchased approximately $3.9
million in outstanding principal amount of the Company's 9% Senior Secured
Convertible Notes (the "Convertible Notes") from Oeri Finance, with the
Company agreeing to reduce the conversion ration from $1.00 to $0.70 per
share of the Company's Common Stock, and Third Capital Partners and 3421643
Canada agreeing to extend the maturity date of the Convertible Notes to
December 31, 1999.
2.Third Capital Partners purchased from the Company $2.0 million in newly
issued 9% Secured Convertible Notes (the "New Notes") having substantially
the same terms as the Convertible Notes, as modified in the proceeding
paragraph, except the New Notes are subordinated to certain other outstanding
notes of the Company, and that the New Notes are convertible into a new issue
of voting preferred stock of the Company, if that issue of preferred stock of
the Company is approved by the Company's shareholders. The preferred stock
will be convertible into Common Stock on the same terms as the Convertible
Notes and the New Notes.
In December 1998, the Company repurchased $500,000 in Convertible Notes
issued to 3421643 Canada for their face value. Upon consummation of the
repurchase, Mr. Bier resigned as a director of the Company.
On February 18, 1999, the Company established the JB Oxford Revocable
Government Trust (the "Trust") to purchase Common Stock of the Company. Third
Capital Partners serves as trustee of the Trust, without compensation. Mr.
Jarratt is the Chief Manager and Chief Executive Officer, and Mr. Grossi is a
member, of Third Capital Partners. The Company loaned the Trust $586,915, which
the Trust used to purchase 469,540 shares of the Company's Common Stock for an
average price of $1.25 per share. Pursuant to the terms of the Trust, Third
Capital Partners has the right to vote the shares held by the Trust, but has no
right to dispose of them except upon termination of the Trust. The Trust will
terminate on February 18, 2001, or, if sooner, the completion of the
investigation relating to the Company being conducted by the U.S. Attorney's
Office, the Federal Bureau of Investigation and the Securities and Exchange
Commission.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A shareholder intending to present a proposal to be included in the Company's
Proxy Statement for the Company's 2000 Annual Meeting of Shareholders must
deliver a proposal, in accordance with the requirements of the Company's Amended
and Restated By-laws and Rule 14a-8 of the Exchange Act, to the Secretary of the
Company at the Company's principal executive office no earlier than January 31,
2000 and no later than March 1, 2000. A shareholder's notice to the Secretary
must set forth as to each matter the shareholder proposes to bring before the
meeting (a) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (b) the
name and record address of the shareholder proposing such business, (c) the
class and number of shares of Common Stock that are beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
A shareholder desiring to nominate a director for election at the Company's
2000 Annual Meeting of Shareholders must deliver a notice, in accordance with
the requirements of the Company's Amended and Restated By-laws, to the Secretary
of the Company at the Company's principal executive office no earlier than
January 31, 2000 and no later than March 1, 2000. Such notice must include (a)
as to each person whom the stockholder proposes to nominate for election or
re-election as a director, (1) the name, age, business address and residence
address of the person, (2) the principal occupation or employment of the person,
(3) the class and number of shares of capital stock of the Company beneficially
owned by the person, and (4) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to Rule 14a under the Exchange Act; and (b) as to the
shareholder giving the notice, (1) the name and record address of the
shareholder, and (2) the class and number of shares of capital stock of the
Company beneficially owned by the shareholder. The Company may require any
proposed nominee to furnish additional information reasonably required by the
Company to determine the eligibility of the proposed nominee to serve as a
director of the Company. No shareholder proposals were received for inclusion
in this Proxy Statement.
OTHER MATTERS
Management does not intend to present any other items of business and knows
of no other matters that will be brought before the Annual Meeting. However, if
any additional matters are properly brought before the Annual Meeting, the
persons named in the enclosed proxy shall vote the proxies in their discretion
in the manner they believe to be in the best interest of the Company.
Whether or not you plan to attend the Annual Meeting, please submit your
proxy to ensure your representation at the Annual Meeting. Please submit your
proxy with voting instructions by the Internet or telephone, or if those options
are not available to you, sign and date the proxy card and return it in the
enclosed envelope.
By Order of the Board of Directors,
SCOTT G. MONSON
Secretary
April 30, 1999
JB OXFORD HOLDINGS, INC.
1998 STOCK OPTION AND AWARD PLAN
1. PURPOSE. The purpose of this Plan is to advance the interests of JB
OXFORD HOLDINGS, INC., a Utah corporation (the "Company"), by providing
additional incentive to attract and retain qualified and competent persons who
are key to the Company, including key employees, Officers and Directors, and
upon whose efforts and judgment the success of the Company is largely dependent,
by encouraging such persons to own stock in the Company.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change of Control" shall mean the occurrence of any of the
following:
(i) any transaction (which shall include a series of
transactions occurring within sixty days or occurring pursuant to a plan) that
has the result that shareholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of the Company or of
any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) the shareholders of the Company approving a plan
of merger, consolidation, reorganization, liquidation or dissolution in which
the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) the shareholders of the Company approving a plan
for the sale, lease, exchange, transfer, assignment or other disposition of all
or substantially all the property and assets of the Company (unless such plan is
subsequently abandoned).
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the compensation committee appointed by
the Board pursuant to Section 15 hereof or, if not appointed, the full Board.
(e) "Common Stock" shall mean the Company's Common Stock, par
value $0.01 per share.
(f) "Controlled Entity" shall mean any trust, partnership, limited
liability company or other entity in which such person that receives Options or
Restricted Shares under this Plan acts as trustee, managing partner, managing
member or otherwise controls; provided that, to the extent any such Option or
Restricted Shares received under this Plan is awarded to a spouse pursuant to
any divorce proceeding, such interest shall be deemed to be terminated and
forfeited notwithstanding any vesting provisions or other terms herein or in the
agreement evidencing such Option.
(g) "Director" shall mean a member of the Board.
(h) "Effective Date" shall mean June 8, 1998.
(i) "Fair Market Value" of a Share on any date of reference shall
be the "Closing Price" (as defined below) of the Common Stock on the business
day immediately preceding such date, unless the Committee, exercising reasonable
discretion, shall determine otherwise in a fair and consistent manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be the average of the average bid and ask prices
of the Common Stock on the National Association of Securities Dealers National
Market System, or such other national securities exchange or association on
which the Common Stock is then listed, for the five business days preceding such
day.
(j) "Incentive Stock Option" shall mean an incentive stock option
as defined in Section 422 of the Code.
(k) "Non-Employee Director" shall mean a Director who: (i) is not
an Officer or employee of the Company or any Subsidiary; (ii) does not (A)
receive compensation, directly or indirectly, from the Company or any Subsidiary
for services rendered as a consultant or in any other capacity other than as a
Director, except for an amount that does not exceed the dollar amount for which
disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R.
Section 229.404(a), as amended from time to time, or (B) possess an interest in
any transaction for which disclosure would be required under Item 404(a) of
Regulation S-K, 17 C.F.R. Section 229.404(a), as amended from time to time; and
(iii) is not engaged in a business relationship for which disclosure would be
required under Item 404(b) of Regulation S-K, 17 C.F.R. Section 229.404(b), as
amended from time to time.
(l) "Non-Statutory Stock Option" shall mean an Option which is not
an Incentive Stock Option.
(m) "Officer" shall mean the Company's Chairman, Chief Financial
Officer, principal accounting officer (or, if there is no such accounting
officer, the controller), any vice president of the Company in charge of a
principal business unit, division or function (such as sales, administration or
finance), any other officer who performs a policy-making function, or any other
person who performs similar policy-making functions for the Company. Officers
of Subsidiaries shall be deemed Officers of the Company if they perform such
policy-making functions for the Company. As used in this paragraph, the phrase
"policy-making function" does not include policy-making functions that are not
significant.
(n) "Option" (when capitalized) shall mean any option granted
under this Plan.
(o) "Optionee" shall mean a person to whom an Option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of a transfer made pursuant to Section 13 hereof.
(p) "Participant" shall mean either a person to whom Restricted
Shares are granted under this Plan, an Optionee or any person who succeeds to
the rights of either such person under this Plan by reason of the death of such
person.
(q) "Plan" shall mean this 1998 Stock Option and Award Plan of the
Company.
(r) "Restricted Shares" shall mean Shares granted or sold pursuant
to Section 11 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 11 has
expired.
(s) "Restricted Share Agreement" shall mean the agreement entered
into between the Company and the Participant who is to receive Restricted Shares
at the time of any Restricted Share grant.
(t) "Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(u) "Share(s)" shall mean a share or shares of the Common Stock.
(v) "Subsidiary" shall mean a "subsidiary corporation" as defined
in Section 424(f) of the Code.
3. AVAILABLE SHARES. The Company may grant to Participants from time
to time an aggregate of up to 3,500,000 Restricted Shares or Options from Shares
held in the Company's treasury or from authorized and unissued Shares. If any
Option granted under this Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, or if any Restricted Shares are forfeited by the
holder thereof, new Options or Restricted Shares may thereafter be granted
covering such Shares.
4. OPTION GRANTS. An Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or a Non-Statutory Stock Option. All Incentive
Stock Options shall be granted within ten years from the date this Plan is
adopted by the Board or the date this Plan is approved by the shareholders of
the Company, whichever is earlier.
5. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Code Section 422(b) are exercisable for the first time by any individual
during any calendar year (under all plans of the Company and any Subsidiary),
exceeds $100,000.
6. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by a written agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all
Directors, Officers and regular employees of the Company or its Subsidiaries.
Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
(b) In granting Options to Directors, Officers and employees of
the Company or its Subsidiaries, the Committee shall take into consideration the
contribution the person has made to the success of the Company or its
Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options to Directors, Officers and employees of the Company or its
Subsidiaries under this Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) prescribing the date or dates on which the Option becomes exercisable, (ii)
providing that the Option rights accrue or become exercisable in installments
over a period of years, or upon the attainment of stated goals or both, or (iii)
relating an Option to the continued employment of the Optionee for a specified
period of time, provided that such terms and conditions are not more favorable
to an Optionee than those expressly permitted herein.
(c) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither this Plan nor
any Option granted under this Plan shall confer upon any person any right to
employment or continuance of employment by the Company or its Subsidiaries.
7. OPTION PRICE. The Committee shall establish, at the time any Option
is granted, the price per Share for which the Shares covered by the option may
be purchased; provided, however, that if the option is an Incentive Option, such
price shall not be less than 100% of the Fair Market Value of the Shares on the
date on which the option is granted; provided, further, that with respect to an
Incentive Option granted to a Participant who at the time of the grant owns
(after applying the attribution rules of Section 424(d) of the Code) more than
10% of the total combined voting stock of the Corporation or of any parent
corporation (as defined in Section 424(e) of the Code) or Subsidiary, the option
price shall not be less than 110% of the fair market value of the Shares subject
to the Incentive Option on the date such Option is granted.
8. EXERCISE OF OPTIONS. An Option shall be deemed exercised when
(i) the Company has received written notice of such exercise in accordance with
the terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of an amount that is sufficient to satisfy
all applicable federal or state tax withholding requirements relating to
exercise of the Option, if any. Unless further limited by the Committee in any
Option, the option price of any Shares purchased shall be paid in cash, by
certified or official bank check, by money order, with Shares or by a
combination of the above; provided, however, that the Committee in its sole
discretion may accept a personal check in full or partial payment of any Shares;
provided further, however, that if set forth in the written agreement with the
Optionee an Option may be exercised without payment of any cash or other
consideration provided the Option is surrendered and the Optionee receives a net
amount of Shares equal to OS x (CP-EP)/CP, where "OS" is the gross number of
Option Shares as to which the Option is to be exercised; "CP" is the Closing
Price of the Common Stock on the last trading day preceding the date of the
request to exercise the Option; and "EP" means the then applicable Exercise
Price. If the exercise price is paid in whole or in part with Shares, the value
of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established in connection with this Plan,
lend money to an Optionee, guarantee a loan to an Optionee, or otherwise assist
an Optionee to obtain the cash necessary to exercise all or a portion of an
Option granted hereunder or to pay any tax liability of the Optionee
attributable to such exercise. If the exercise price is paid in whole or in
part with an Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
base lending rate of the Company's principal lender, and (iv) contain such other
terms as the Committee in its sole discretion shall reasonably require. No
Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of this Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 12 hereof.
9. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 9.
(a) The expiration date of an Option shall be determined by the
Committee at the time of grant, but in no event shall (i) an Option be
exercisable after the expiration of ten years from the date of grant of the
Option or (ii) an Incentive Option granted to a Participant, who at the time of
the grant owns (after applying the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting stock of the Corporation or of
any parent corporation (as defined in Section 424(e) of the Code) or
Subsidiary, be exercisable after the expiration of five years from the date of
grant of the Incentive Option.
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable upon any Change in Control.
(c) The Committee may in its sole discretion accelerate the date
on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
10. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following:
(i) three months after the date on which the Optionee's
employment is terminated for any reason other than by reason of (A) Cause,
which, solely for purposes of this Plan, shall mean the termination of the
Optionee's employment by reason of the Optionee's willful misconduct, (B) a
mental or physical disability (within the meaning of Section 22(e) of the
Code) as determined by a medical doctor satisfactory to the Committee, or (C)
death;
(ii) immediately upon the termination of the Optionee's
employment for Cause;
(iii) one year after the date on which the Optionee's
employment is terminated by reason of a mental or physical disability (within
the meaning of Section 22(e) of the Code) as determined by a medical doctor
satisfactory to the Committee; or
(iv) (A) one year after the date of termination of the
Optionee's employment by reason of death of the Optionee, or (B) three months
after the date on which the Optionee dies if the Optionee dies during the one
year period specified in Section 9(a)(iii) hereof.
(b) The Committee in its sole discretion may, by giving written
notice (a "cancellation notice"), cancel, effective upon the date of the
consummation of any corporate transaction described in Sections 2(b)(ii) or
(iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
11. RESTRICTED SHARES. The Committee may also authorize the grant or
sale to Directors, Officers and employees of the Company or its subsidiaries of
Restricted Shares. Each such grant or sale may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer
of the ownership of Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer referred to in the Restricted Share Agreement.
(b) In granting Restricted Share awards to Directors, Officers and
employees of the Company or its Subsidiaries, the Committee shall take into
consideration the contribution the person has made to the success of the Company
or its Subsidiaries and such other factors as the Committee shall determine.
The Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Restricted Share awards to Directors, Officers and employees of the
Company or its Subsidiaries under this Plan prescribe such other terms and
conditions concerning such grants as it deems appropriate.
(c) Each Restricted Share grant or sale may be made without
additional consideration or in consideration of a payment by the Participant
that is less than Fair Market Value per Share at the date of grant.
(d) Each such grant or sale shall be subject to a Restricted Share
Agreement, which shall provide that the Restricted Shares covered by such grant
or sale shall be subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code for a period of not less than one (1) year to
be determined by the Committee at the date of grant, and any grant or sale may
provide for the earlier termination of such period in the event of a Change in
Control, retirement, or death or disability of the Participant or other similar
transaction or event as approved by the Committee.
(e) Each Restricted Share Agreement shall provide that during the
period for which such substantial risk of forfeiture is to continue, and any
other period prescribed by law, the transferability of the Restricted Shares
shall be prohibited or restricted in the manner and to the extent prescribed by
the Committee or law, as the case may be, at the date of grant (which
restrictions may include, without limitation, prohibitions on transfer, rights
of repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the hands of
any transferee).
(f) Any grant or sale of Restricted Shares may require that any or
all dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional Restricted
Shares, which may be subject to the same restrictions as the underlying award.
12. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or Restricted
Shares or unexercised Options are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the declaration
of a stock dividend or through any recapitalization resulting in a stock split-
up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares available for grant to Participants under this Plan, so that
the same percentage of the Company's issued and outstanding Shares shall
continue to be subject to being so granted; and
(ii) appropriate adjustment shall be made in the number
of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(b) Subject to the specific terms of any Option or Restricted
Share, the Committee may change the terms of Options or Restricted Shares
outstanding under this Plan, with respect to the option price or the number of
Shares subject to the Options, or both, when, in the Committee's sole
discretion, such adjustments become appropriate by reason of any corporate
transaction described in Sections 2(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options or Restricted Shares granted under this
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options or Restricted Shares granted under this Plan
shall not affect in any manner the right or power of the Company to make,
authorize or consummate (i) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business; (ii) any merger or consolidation of the Company; (iii) any issue by
the Company of debt securities, or preferred or preference stock that would rank
above the Shares subject to outstanding Options; (iv) the dissolution or
liquidation of the Company; (v) any sale, lease, exchange, transfer, assignment
or other disposition of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
13. TRANSFERABILITY OF OPTIONS AND RESTRICTED SHARES.
(a) No Incentive Stock Option shall be transferable by the
Optionee other than by will, the laws of descent and distribution, and each
Incentive Stock Option shall be exercisable during the Optionee's lifetime only
by the Optionee.
(b) A person that receives Non-Statutory Stock Options under this
Plan or such person's beneficiary shall have the power or right to sell,
exchange, pledge, transfer, assign or otherwise encumber or dispose of such
person's or beneficiary's Non-Statutory Stock Options received under this Plan
only as follows: (i) to the spouse or any children or grandchildren of such
person that receives Non-Statutory Stock Options under this Plan; (ii) as a
charitable contribution or gift to or for the use of any person or entity
described in Section 170(c) of the Code; (iii) to any Controlled Entity; or
(iv) by will or the laws of intestate succession.
(c) Restricted Shares may be transferred only as set forth in the
applicable Restricted Share Agreement.
14. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option or Restricted Share award grant, the
Committee may require such agreements or undertakings (in an Option Agreement or
Restricted Share Agreement), if any, as the Committee may deem necessary or
advisable to assure compliance with any such federal or state securities or
other law or regulation including, but not limited to, the following:
(i) a representation and warranty by the Participant to the
Company, at the time any Option is exercised or Restricted Share granted, that
he is acquiring the Shares to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such Shares;
and
(ii) a representation, warranty and/or agreement by the
Participant to the Company to be bound by any legends that are, in the opinion
of the Committee or counsel to the Company, necessary or appropriate to comply
with the provisions of any securities law deemed by the Committee or counsel to
the Company to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
15. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by the Committee, which shall
consist of not less than two Directors. The Committee shall have all of the
powers of the Board with respect to this Plan; provided that if any member of
the Committee is not a Non-Employee Director, then the Board shall approve any
Option or Restricted Share that the Committee proposes to grant hereunder. The
Board may change the membership of the Committee at any time and fill any
vacancy occurring in the membership of the Committee by appointment.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written consent of the
members of the Committee.
16. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof, but
instead this Plan shall be construed and enforced as if such provision had never
been included in this Plan.
(b) This Plan shall be governed by the laws of the State of
California.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
17. AMENDMENT AND DISCONTINUATION OF THE PLAN.
(a) Either the Board or the Committee may from time to time amend
this Plan or any Option; provided, however, that, except to the extent provided
in Section 12, no such amendment may, without approval by the shareholders of
the Company, (i) materially increase the benefits accruing to participants under
this Plan, (ii) materially increase the number of securities which may be issued
under this Plan, or (iii) materially modify the requirements as to eligibility
for participation in this Plan; and provided further, that except to the extent
provided in Section 10, no amendment or suspension of this Plan or any Option
issued hereunder shall substantially impair any Option previously granted to any
Optionee without the consent of such Optionee.
(b) Notwithstanding anything herein to the contrary, the
provisions of this Plan which govern the exercise price per Share under each
such Option, when and under what circumstances such Option will be granted and
the period within which each such Option may be exercised, shall not be amended
more than once every six months (even with stockholder approval) other than to
conform to changes to (i) the Code or the rules promulgated thereunder, (ii) the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder, or (iii) rules promulgated by the Securities and
Exchange Commission.
18. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be effective
upon the Effective Date and shall terminate on the tenth anniversary of the
Effective Date.
