<PAGE>
DEF 14A
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SECTION 14(A) 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
PROFIT FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $500 per each party to the controversy pursuant to the 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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(1) Set Forth the amount on which the filing fee is calculated and state
how it was determined.
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- ------------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PROFIT FINANCIAL CORPORATION
14675 INTERURBAN AVENUE SOUTH
SEATTLE, WASHINGTON 98168-4664
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Profit Financial Corporation (the
"Company") will be held on December 10, 1997 at 2:00 p.m., local time, at the
Company's main office at 14675 Interurban Avenue South, Seattle, Washington, for
the following purposes:
(1) To elect all of the directors each to serve a one, two, or three year
term, depending on the director's classification as a director;
(2) To ratify the change of the name of the corporation to Wade Cook
Financial Corporation;
(3) To authorize the reincorporation of the Company in the state of Nevada;
(4) To authorize an increase in the total authorized common stock of the
Company by 80,000,000 shares to 140,000,000 shares of Common Stock (par
value $.01);
(5) To adopt the Wade Cook Financial Corporation 1997 Stock Incentive Plan;
and,
(6) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on September 1, 1997
are entitled to notice of, and to vote at, the Meeting.
All shareholders are cordially invited to attend the Meeting in person.
By order of the Board of Directors
/s/ Laura M. Cook
Laura M. Cook
SECRETARY
Seattle, Washington
November 20, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ATTACHED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES. ANY SHAREHOLDER GIVING A PROXY MAY REVOKE IT
PRIOR TO THE TIME IT IS VOTED BY FILING WITH THE SECRETARY, LAURA M. COOK, A
NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY VOTING
IN PERSON AT THE MEETING.
<PAGE>
PROFIT FINANCIAL CORPORATION
14675 INTERURBAN AVENUE SOUTH
SEATTLE, WASHINGTON 98168-4664
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed form of proxy is solicited by the Board of Directors of Profit
Financial Corporation, a Utah corporation (the "Company"), in connection with
its Annual Meeting of Shareholders to be held at the Company's main office at
14675 Interurban Avenue South, Washington, on December 10, 1997 at 2:00 p.m.
(the "Meeting"). Copies of these proxy solicitation materials were first mailed
to shareholders on or about November 20, 1997. A copy of the Company's 1996
Annual Report was first mailed to shareholders on or about October 3, 1997.
RECORD DATE; OUTSTANDING SHARES; QUORUM
Only holders of record of shares of the Company's Class A common stock, par
value $.01 (the "Common Stock"), at the close of business on September 1, 1997
(the "Record Date") are entitled to notice of, and to vote at, the Meeting. On
that date 6,715,032 shares of Common Stock were issued and outstanding. There
are no other voting securities of the Company outstanding. The presence in
person or by proxy of holders of record of a majority of the issued and
outstanding shares of the Common Stock is required to constitute a quorum for
the transaction of business at the Meeting.
REVOCABILITY OF PROXY
Any shareholder giving a proxy has the power to revoke it at any time before
it is voted by submitting a form of proxy bearing a later date or by giving
written notice to the Company (Attention: Secretary of the Corporation). If a
shareholder attends the Meeting and elects to vote in person, such shareholder's
previously executed proxy is thereby revoked.
VOTING AND SOLICITATION
When the enclosed form of proxy is properly executed and returned, the
shares of the Common Stock it represents will be voted in accordance with the
directions indicated thereon, OR, if no direction is indicated thereon, it will
be voted IN FAVOR of (i) electing the ten nominees for director identified
below, (ii) ratifying the change of the name of the Company to Wade Cook
Financial Corporation, (iii) authorizing the reincorporation of the Company in
the state of Nevada, (iv) authorizing an increase in the total authorized common
stock of the Company to 140,000,000 shares, and (v) adopting the Wade Cook
Financial Corporation 1997 Stock Incentive Plan. Shareholders will be entitled
to one vote for each share of Common Stock held on the Record Date.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the ownership
of shares of the Common Stock as of September 1, 1997 (except as otherwise
noted) by (i) each person known by the Company to beneficially own more than 5%
of the outstanding shares of Common Stock, (ii) each director and nominee of the
Company, (iii) each executive officer of the Company, and (iv) all directors and
executive officers of the Company as a group. Except as noted below each person
named in the table has sole voting and dispositive power with respect to all
shares of Common Stock shown as beneficially owned.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
BENEFICIAL OWNER(1) OWNED(2) CLASS(3)
- ----------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Officers and Directors:
Wade B. Cook(4).................................................................. 4,038,540 60.1%
Andrew T. Rice...................................................................
Laura M. Cook(5)................................................................. 4,038,540 60.1%
Cheryle Hamilton................................................................. 140 *
Robert T. Hondel................................................................. 20,140 *
Dr. Warren H. Chaney(6).......................................................... 20,000 *
John V. Childers................................................................. 20,140 *
Nicholas Dettman................................................................. 20,000 *
Eric W. Marler................................................................... 140 *
Pamela S. Anderson............................................................... 140 *
Robin Anderson................................................................... 2,140 *
All executive officers and directors of the Company as a group (11 persons)...... 4,121,380 61.4%
Non-management 5% Shareholders:
Yeaman Enterprises, Inc.
3098 S. Highland Drive, Suite 460
Salt Lake City, Utah 84106..................................................... 541,813 8.0%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
the Common Stock
(1) Unless otherwise indicated, the address of the beneficial owner is c/o
Profit Financial Corporation, 14675 Interurban Avenue South, Seattle,
Washington 98168-4664.
(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. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within 60
days are deemed to be outstanding for calculating the percentage ownership
of the person holding such options and the percentage ownership of any group
of which the holder is a member, but are not deemed outstanding for
calculating the percentage of any other person. Except as indicated by
footnote, and except for voting or investment power held jointly with a
person's spouse, the persons named in the table have sole voting and
investment power with respect to all shares of capital stock shown
beneficially owned by them.
(3) Percentage is calculated based upon 6,715,032 shares of Common Stock
outstanding on September 1, 1997 and does not take into account a 3-1 stock
split approved by the Board of Directors effective September 15, 1997.
(4) Includes (a) 938,540 shares of Common Stock owned of record by Mr. Cook, (b)
200,000 shares owned by the Wade Cook Family Trust, a trust established for
the benefit of Mr. and Mrs. Cook's family, (c) 100,000 shares of Common
Stock held by Money Chef, Inc., and (d) shared voting and investment power
over 2,800,000 shares of Common Stock owned by the Wade B. Cook and Laura M.
Cook Family Trust, a trust established for the benefit of Mr. & Mrs. Cook's
family. Wade B. Cook and
3
<PAGE>
Laura M. Cook are husband and wife. All shares held by Mr. Cook are held as
community property. Mr. Cook is the trustee of the named trusts.
(5) Includes shared voting and investment power over 2,800,000 shares of Common
Stock owned by the Wade B. Cook and Laura M. Cook Family Trust. Wade B. Cook
and Laura M. Cook are husband and wife. Also includes 1,238,540 shares owned
by Mr. Cook or by the Wade Cook Family Trust, as to which Mrs. Cook
disclaims beneficial ownership. All shares held by Mrs. Cook are held as
community property.
(6) Includes immediately exercisable options to acquire 20,000 shares of Common
Stock.
ELECTION OF DIRECTORS
The Company's amended Articles of Incorporation and Bylaws, as ratified,
provide that directors shall be divided into three groups with each group
containing as nearly as possible equal numbers of directors. Initially, all
directors have been nominated to be elected at the Meeting and four (4)
directors will be elected to terms expiring at the next annual meeting of
shareholders to be held in 1998. A second group of three (3) directors will be
elected to serve until the next annual meeting of shareholders to be held in
1999, and a third group of three (3) directors will be elected to serve until
the annual meeting of shareholders to be held in 2000. After these initial terms
expire, newly elected directors will each serve for a term of three years and
until the election and qualification of their successors, and it is intended
that properly executed proxies will be voted FOR the nominees named below. If
any nominee is unable or declines to serve as a director at the time of the
Meeting, the individuals named in the enclosed form of proxy may exercise their
discretion to vote for any substitute proposed by the Board of Directors. It is
not anticipated that any nominee listed below will be unable or will decline to
serve as a director.
NOMINEES FOR DIRECTOR
The names of the nominees, their ages, the dates they first became
directors, information regarding their service on committees of the Board of
Directors and certain biographical information is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---------------------------------------------------------- --- -------------------------------- ---------------
<S> <C> <C> <C>
Wade B. Cook.............................................. 47 Chairman of the Board* 6/95
Laura M. Cook............................................. 44 Secretary and Director* 6/95
Cheryle Hamilton.......................................... 45 Director* 6/97
Robert T. Hondel.......................................... 54 Director* 6/97
Dr. Warren H. Chaney...................................... 54 Director 6/97
John V. Childers.......................................... 52 Director 8/95
Nicholas Dettman.......................................... 49 Director 5/95
Eric W. Marler............................................ 39 Director 12/96
Pamela S. Anderson........................................ 46 Director* 6/97
Robin Anderson............................................ 33 Director* 6/97
</TABLE>
- ------------------------
* Indicates members who are executive officers or management of the Company.
WADE B. COOK is the Chairman of the Board and President. Mr. Cook also
served as Treasurer and President of WCSI since 1989. Mr. Cook is an
internationally recognized author of numerous books on finance, real estate,
asset protection and the stock market, a trainer and speaker on these topics,
and the developer of educational products on investing and personal wealth
management. Mr. Cook is the husband of Laura M. Cook.
4
<PAGE>
LAURA M. COOK is the Secretary and a member of the Board of Directors of the
Company. Mrs. Cook has also served as an officer and operational manager in
several subsidiaries of the Company. Mrs. Cook has also managed accounting
systems for various corporations for 15 years.
CHERYLE HAMILTON is the Director of Lighthouse Publishing since October,
1996. From March, 1996 to February, 1997, Ms. Hamilton served as Human Resources
Director for the Company. Prior to her involvement with the Company, Ms.
Hamilton was Executive Assistant of Sunsportswear, Inc., a clothing manufacturer
located in Seattle, Washington. She also provided intellectual property and
marketing consulting on a contract basis from 1991 to 1994.
ROBERT T. HONDEL is a Director of the Company and is the Director of Quantum
Marketing, Inc., a to be formed subsidiary of the Company, and was the General
Sales Manager of WCSI. Mr. Hondel left retirement to join the Company. Prior to
joining the Company, Mr. Hondel spent 18 years as the Director and President of
the Knapp College of Business in Tacoma, Washington. Mr. Hondel is the uncle of
Robin Anderson.
DR. WARREN H. CHANEY is a Director of the Company. Since 1980, Dr. Chaney
has been involved in the motion picture and television industry as a writer,
director and producer for projects originating from Paige-Brace Cinema, Ltd.,
Lorimar Films, TMS, Inc., Skorris Films Inc., Sandpiper Productions, Inc.,
Leading Edge Entertainment, Inc., Warren Chaney Productions, Inc.,
Intercontinental Releasing Corporation, and Millennial Entertainment.
JOHN V. CHILDERS is a Director of the Company. In addition to his duties as
Director, Mr. Childers acts as a speaker trainer of the Company. Mr. Childers is
a director and the former President of Ideal Travel Concepts, a travel company
with locations in Tennessee and Florida.
NICHOLAS DETTMAN is a Director of the Company. He is a captain for Delta
Airlines, located in Atlanta, Georgia, and has been with that company for over
30 years. He is the owner and operator of Kalowai Plantation, an orchid ranch in
Kauai, Hawaii.
ERIC W. MARLER is a Director of the Company and has been a speaker for the
Company since September, 1996. Mr. Marler also served as Chief Financial Officer
of the Company from December, 1996 to June, 1997. Mr. Marler is Vice President
of Cascade Management Associates, L.P., a firm that provides tax consulting.
Prior to his involvement with the Company, Mr. Marler practiced as a Certified
Public Accountant giving advice on income tax and profitability planning with
Martin/Grambush, P.C., an accounting firm located in Kirkland, Washington.
PAMELA S. ANDERSON is a Director of the Company. Ms. Anderson joined WCSI in
October, 1994, as a director of Left Coast Advertising, Inc., a subsidiary of
the Company. She currently serves as Director of Real Estate Investments for the
Company. Prior to her association with the Company, Ms. Anderson worked with
Bromar, Inc., Harris/3M and NEC, and has extensive experience in the fields of
sales and real estate.
ROBIN ANDERSON is a Director of the Company. Ms. Anderson is the Sales
Manager for the Company and has been with the Company since 1994.
VOTE REQUIRED
The candidates elected will be those receiving the largest number of votes
cast by the shares of Common Stock entitled to vote in the election, up to the
number of directors to be elected by such shares. Shares of Common Stock held by
persons who abstain from voting and broker "non-votes" will not be counted in
the election.
5
<PAGE>
BOARD MEETINGS AND COMMITTEES
During 1996, the Board of Directors held two meetings. Each current member
attended at least 100% of the meetings of the Board of Directors for which they
were eligible to attend.
There were no committee meetings of the Board for 1996. In June, 1997 the
Board of Directors eliminated the Employee Committee. The Board of Directors
does not have a Nominating Committee.
The amended By-laws being ratified by the shareholders contain provisions
creating an Executive Committee, an Audit Committee, and a Compensation
Committee. A description of the duties of each of these committees and the
identification of the members of the Board of Directors who will serve on each
committee is as follows:
The Executive Committee has the authority to approve the acquisition,
financing and disposition of investments for the Company and execute certain
contracts and agreements, including those related to borrowing money by the
Company, and generally will exercise all other powers of the Board of Directors
except for those which require action by the Board of Directors under the
Articles of Incorporation, By-Laws or applicable law. The proposed members of
the Executive Committee are Wade B. Cook, Laura M. Cook and Pamela S. Anderson.
The Audit Committee consists of directors who are not employees and who are,
in the opinion of the Board of Directors, free from any relationship that would
interfere with their exercise of independent judgment as Audit Committee
members. The Audit Committee has been established to make recommendations
concerning the engagement of independent public accountants, review with the
independent public accountants the plans and results of the audit engagement,
approve professional services provided by the independent accountants, review
the independence of the independent public accountants, consider the range of
audit and non-audit fees and review the adequacy of the Company's internal
accounting controls The proposed members of the Audit Committee are Nicholas
Dettman, Dr. Warren H. Chaney and Eric W. Marler.
The Compensation Committee consists of directors who are not employees of
the Company and has been established to review the Company's general
compensation strategy, establish the salaries of, and review the benefit
programs for, the Chairman and Chief Executive Officer and set the salaries of,
and review the benefit programs for, those persons who report directly to the
Chief Executive Officer, and to approve certain employment contracts. The
proposed members of the Compensation Committee are Eric W. Marler, John V.
Childers and Dr. Warren H. Chaney.
COMPENSATION OF DIRECTORS
The Company pays each director a fee of $3,000, payable quarterly, in
advance. In addition, the Company reimburses non-employee directors for
reasonable travel and out-of-pocket expenses incurred in connection with their
activities on behalf of the Company. Directors of the Company are eligible for
participation in the Wade Cook Financial Corporation 1997 Stock Incentive Plan.
See "1997 Stock Incentive Plan". The 1997 Stock Incentive Plan is administered
by the Board of Directors.
[This Space Intentionally Left Blank]
6
<PAGE>
OTHER INFORMATION
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for each of
the last three fiscal years for the Chief Executive Officer and each of the next
four most highly compensated executive officers whose compensation exceeded
$100,000 and two additional persons for whom disclosure would have been required
had such persons been executive officers of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------- ------------------------ -----------
OTHER RESTRICTED SECURITIES LTIP
ANNUAL STOCK UNDERLYING PAYOUT ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS ($) COMPENSATION
- ---------------------- --------- --------- --------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wade B. Cook,......... 1996 $ 90,628 (2) $ 4,366,183(1)
Chairman, President 1995 $ 755,550
and CEO 1994 $ 16,000 $ 82,923
Robert T. Hondel,..... 1996 $ 179,532
General Sales 1995 $ 62,500
Manager 1994
Christopher Carde,
(3)................. 1996 $ 223,521
Former General 1995 $ 51,055
Counsel, CEO and 1994
Director
Margaret Huss,........ 1996 $ 223,396
Sales Representative 1995
1994
Barry Collett,........ 1996 $ 135,193
Sales Representative 1995
1994
</TABLE>
Certain of the Company's executive officers received personal benefits in
addition to salary and cash bonuses, including car allowances or the use of a
car owned by the Company. The aggregate amount of such personal benefits
however, does not exceed the lesser of $50,000 or 10% of the total of the annual
salary and bonus reported for the named executive officers.
- ------------------------
(1) Amounts for Mr. Cook in this column represent primarily royalties paid by
WCSI indirectly to Mr. Cook pursuant to a Product Agreement. See "Certain
Relationships and Related Transactions."
(2) All employees of the Company have received a small number of shares from
time to time as a bonus in exceeding certain sales expectations.
(3) Mr. Carde's employment was terminated on May 7, 1997.
EMPLOYMENT AND TERMINATION AGREEMENTS
Pursuant to an Employment Agreement, dated as of June 25, 1997 and effective
as of July 1, 1997, Mr. Cook will be employed as Chief Executive Officer and
President of the Company. The Employment Agreement provides for a three-year
term in which Mr. Cook will receive an annual base salary of $240,000 in Year 1,
$265,000 in Year 2 and $290,000 in Year 3. According to the Employment
Agreement, Mr. Cook may receive additional bonuses for work as approved by the
Board of Directors of the Company. To date, no such bonuses have been requested
or approved. In addition, Mr. Cook is entitled to reimbursement for
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<PAGE>
reasonable travel and business entertainment expenses authorized by the Company,
as well as certain fringe benefits.
Christopher Carde was terminated by the Company pursuant to a confidential
termination agreement dated August 21, 1997. Mr. Carde did not receive any
additional severance compensation and agreed to continue to uphold his
non-compete agreement.
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options during fiscal year 1996 to each of the Named Officers. No stock
appreciation rights ("SARs") have been granted by the Company.
OPTION GRANTS IN THE LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
SECURITIES % OF SECURITIES STOCK PRICE
UNDERLYING UNDERLYING APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE FOR OPTION TERM(1)
GRANTED TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME (#)(2) FISCAL YEAR ($/SHARE) DATE(S) 5%($) 10%($)
- ---------------------------------- --------------- --------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Wade B. Cook, Chairman
Laura M. Cook, Secretary
</TABLE>
- ------------------------
(1) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
calculated based on the requirements of the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
performance.
(2) No options were granted during 1996.
The number of shares acquired upon exercise of options and the value
realized from any such exercise, during fiscal year 1996, and the number of
shares subject to exercisable and unexercisable options held and their values at
December 31, 1996 for each of the Named Officers are set forth in the following
table.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END (#) FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#)(1) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ------------------------------------------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Wade B. Cook, Chairman
Laura M. Cook, Secretary
</TABLE>
- ------------------------
(1) No options were exercised during 1996.
(2) No options were in-the-money at the time of grant or at fiscal year end.
"In-the-money" means that the market price of the underlying shares is
higher than the price at which shares can be purchased by exercise of an
option.
8
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission ("SEC"). Executive Officers, directors and beneficial
owners of more than 10% of the Common Stock are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms received by the Company and on
written representations from certain reporting persons that they have complied
with the relevant filing requirements, the Company believes that all filing
requirements applicable to its executive officers and directors were complied
with during the most recent fiscal year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had a Product Agreement on January 3, 1993 with Money Chef
setting forth certain terms for the right to use the name and products. The
royalty payments paid to Money Chef under the Product Agreement ranged from 10%
to 50% of gross sales (as defined in the Product Agreement). In fiscal 1995 and
1996, the Company was generally required to pay Money Chef 10% to 30% of gross
sales, with Money Chef having the right to specify the percentage within the 10%
to 50% range that the Company must pay. Money Chef has opted to receive the
minimum amount of royalties of 10% in each of fiscal 1996 and 1995. The Company
paid royalties of $4,366,183 in 1996 and $755,550 in 1995 and $82,923 in 1994.
On June 26, 1997, Wade Cook Seminars, Inc. renegotiated the Product
Agreement for an additional period through June 30, 2002 for a flat royalty of
10% of gross sales. Mr. Cook does not have an "outputs contract" (i.e., a
contract giving the Company the first right to license or otherwise obtain the
rights in and to all of the products Mr. Cook writes and creates) with the
Company and so the Management of the Company can not guarantee that all future
products created by Mr. Cook will be licensed by the Company under the terms of
the Product Agreement.
The Company has licensed the rights to Mr. Cook's books, Real Estate Money
Machine, Wall Street Money Machine, Stock Market Miracles, Bear Market Baloney,
and Business Buy the Bible under individual Publishing Agreements with
Lighthouse Publishing Group, Inc., (a subsidiary). Under the terms of each of
the book licenses, Mr. Cook is paid a royalty of ten percent (10%) of the retail
price of each book sold. The amount of royalties paid to Mr. Cook and his
affiliates under the Publishing Agreements in 1996, 1995 and 1994 is included in
the amounts stated above as paid to him pursuant to the Product Agreement.
Evergreen Lodging, L.P., a Nevada limited partnership ("Evergreen") which is
an indirect subsidiary of the Company, has loaned approximately $275,000 to
Cross Roads, L.P., a limited partnership of which Mr. Cook serves as the
president of the general partner of the partnership. The indebtedness is
evidenced by a Secured Demand Note dated February 7, 1996 in the original
principal amount of $25,000 and a Secured Demand Note dated August 30, 1996 in
the original principal amount of $250,000, each payable to Evergreen and
executed by Cross Roads, L.P.
WCSI has loaned approximately $875,000 to Newstart Centre, Inc., a Utah
corporation related to the Company by virtue of a 30% ownership interest therein
owned or controlled by Wade B. Cook or his affiliate. Newstart Centre, Inc. is
in the business of buying, leasing and selling motor vehicles to the general
public. The indebtedness is evidenced by seven (7) Promissory Notes (Secured)
dated February 4, April 4, May 23, June 20, July 25 (2) and October 9, all in
1997 and each in the original principal amount of $125,000 payable to WCSI and
executed by Newstart Centre, Inc. and a Secured Loan Agreement dated February 4,
1997 by and between WCSI and Newstart Centre, Inc. The Promissory Notes each
provide for the repayment of the loan evidenced thereby in forty-eight (48)
equal monthly installments of $3,606.88. Interest on the amount represented by
each note accrues on the unpaid principal balance at the simple interest rate of
seventeen per cent (17%) per annum. The Secured Loan Agreement provides that the
9
<PAGE>
loans evidenced by the Promissory Notes is secured by a lien in the motor
vehicles owned by Newstart Centre, Inc.
Paul Cook, Mr. Cook's brother, contracts with WCSI to provide speaking
services. Paul Cook executed a loan from WCSI on June 18th, 1997 for a total of
seventy-five thousand dollars ($75,000) for a two-year period at the interest
rate of 11 percent (11%). The loan is secured by a second position on Mr. Cook's
home in Salt Lake City, Utah. The Company has paid Paul Cook $77, 156 so far in
1997. The Company has paid to Paul Cook $11,746 and $3,500 in 1996 and 1995,
respectively. The Company has no records of payments to Paul Cook in 1994.
Additionally, the Company believes that "Grand Teton" is an entity owned or
controlled by Paul Cook to which the Company has paid $133,382 and $34,902 in
1997 to date and 1996, respectively.
Scott Scheuerman, who is the brother-in-law of Mr. Cook, is president of USA
Corporate Services, Inc. ("USA"), BOSS, Inc. and Acorn Corporate Services, Inc.
which are Nevada corporations operating out of Nevada. Acorn acts as resident
agent for Nevada corporations and BOSS provides corporate business office suite
services for Nevada corporations operating in Nevada. USA generally sells Nevada
corporations. The Company markets these services and sells the processing of
Nevada corporations. Clients of USA that purchased either/or both Acorn resident
agent services or BOSS services increased from 600 in 1994 to 1,120 in 1995 and
1,360 in 1996. In 1997 to date the Company has paid $550.00 to either Acorn
Corporate Services, Inc. or Boss, Inc. The Company paid no fees to Acorn and
Boss and paid $398,338 to USA in 1996. The Company paid $117,866 and $123,242 to
either or all of these entities in 1995 and 1994, respectively.
Eric W. Marler, the former Chief Financial Officer of the Company and a
current Director and a speaker in its educational seminars, is the owner of 50%
of the issued shares of Cascade Management Associates, L.P. ("Cascade"). Cascade
has provided to WCSI the seminar speaking services of Mr. Marler for a fee of
$10,000 per month. since September 1996. The Company has paid $62,515 to Cascade
so far in 1997. The Company has paid $35,555 in 1996 and has no record of
payments to Cascade in prior years.
John V. Childers, a director of the Company, contracts with WCSI through
Speaker Services, Inc., a private corporation, to train all speakers for all
events produced by WCSI. The agreement sets forth a compensation plan of one
percent (1%) of the gross of all Financial Clinic seminars, and one-half percent
(0.5%) of the gross of all Wall Street Workshops. The Company has paid Speaker
Services $231,990 so far in 1997. The Company paid $22,710 and $3,080 in 1996
and 1995, respectively. The Company has no records of payments to this entity in
1994.
Additionally, Mr. Childers is the former president and a director of Ideal
Travel Corporation ("Ideal"), and WCSI utilizes Ideal as well as other travel
agencies in the planning of its corporate travel. As a result of the corporate
working relationship between Ideal and WCSI, Mr. Cook receives fifty percent of
the commissions paid to Ideal by its suppliers for the Company's corporate
travel, which commissions are generally 10% of the cost of travel subject to
airline caps on airfare commissions. This arrangement is a carry-over from a
time when Mr. Cook was enrolled as a travel agent for Ideal Travel Corporation.
Mr. Cook or his wife Laura Cook, who is also an enrolled travel agent and
Director and Secretary of the Company, received approximately $11,732, $5,293
and $149 in the years 1996, 1995 and 1994, respectively. Amounts paid to them so
far in 1997 are immaterial. Mr. Cook has been an enrolled travel agent since
November 16, 1993. The Company has paid $415,209 to Ideal so far in 1997. The
Company paid $37,044, $162,783, and $15,563 to Ideal in the years 1996, 1995,
and 1994, respectively.
Robert Hondel, a Director of the Company, executed a promissory note in the
principal amount of $300,000 in favor of WCSI on July 31, 1997. The note is
secured by a lien on Mr. Hondel's real property located in Graham, Washington
and bears interest at a rate of 10% per year payable in monthly installments of
$2,500 plus 50% of all monthly income received by Quantum Marketing and its
affiliates in excess of $8,000 per month beginning September 5, 1997 until paid
in full.
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Crossroads Northwest, LP, a limited partnership controlled by the Wade B.
Cook Family Trust owes the Company $637,401 under the terms of various oral and
written agreements to repay such amounts which have been borrowed for the
purpose of purchasing real estate used, in some instances, by the Cook Family.
The Company's management believes that the terms and conditions of each of
the related party transactions set forth above are at least as favorable as
might be obtained from an independent third party.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
In the future, the Board of Directors will be responsible for establishing
compensation policy and administering the compensation programs of the Company's
executive officers. See "Election of Directors--Board Meetings and Committees."
The purpose of this report is to inform shareholders of the Company's
compensation policies for executive officers and rationale for the compensation
paid to executive officers in fiscal year 1996.
The amount of compensation paid by the Company to each of its directors and
officers and the terms of employment were determined solely by Wade B. Cook
except as otherwise noted below. The Company believes that the compensation paid
to its directors and officers, including Wade B. Cook, is competitive with that
paid by similar companies.
The compensations and benefits for 1996 of the Chief Executive Officer and
the other executive officers of the Company are determined by oral employment
agreements (except as otherwise noted below). The terms of such agreements were
negotiated with Wade B. Cook, generally, at arms length. Mr. Cook's employment
agreement for 1997 to 2000 was negotiated through the Company's General Counsel
and was based on a general consideration of the compensation of similarly
situated chief executive officers in the Pacific Northwest region of the United
States.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Wade B. Cook's minimum base salary for 1996 was set by him and approved by
the Board of Directors. Mr. Cook's base salary was set at an annual level below
that comparable to executives similarly situated at companies in the financial
education and seminar industry. Also considered were Mr. Cook's value to the
Company on a going forward basis and the levels of income Mr. Cook could earn if
he were not employed by the Company.
COMPENSATION OF ALL EXECUTIVE OFFICERS
All executive officers of the Company are compensated based on a performance
based system of generating sales and opportunities to and for the Company in
exchange for salaries and bonuses. Generally, Mr. Cook negotiates all salaries.
The Company believes that the levels of compensation and benefits set for
executive officers is comparable to those set in similar companies for persons
performing the same or similar functions.
In two (2) instances in 1996 employees, including executive officers, were
granted small direct awards of the Company's Common Stock. In each instance, the
employee receiving the grant was a dedicated employee of the Company. The Board
of Directors believes that the use of direct stock awards is appropriate for
employees and in the future intends to use direct stock awards to reward
outstanding service to the Company or to attract and retain individuals with
exceptional talent and credentials. The use of incentives such as stock options
or awards is intended to further align the interests of executive officers and
other key employees with those of the Company's shareholders.
The Omnibus Budget Reconciliation Act of 1993 as codified in the Internal
Revenue Code established certain criteria for the tax deductibility of
compensation in excess of $1 million paid to any one of the
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Company's executive officers. The effect of Section 162(m) of the Internal
Revenue Code is that starting with tax years beginning after January 1, 1994, a
publicly held corporation may not deduct compensation paid to its chief
executive officer and its four other most-highly compensated officers in excess
of $1 million per officer during a corporate taxable year except to the extent
such amounts in excess of $1 million qualify for an exception to this
limitation. To qualify for this exception, such amounts must be determined on
the basis of preestablished, objective, nondiscretionary formulae that meet
certain shareholder and outside director approval requirements.
Submitted by the Board of Directors
Wade B. Cook
RATIFICATION OF NAME CHANGE
In connection with the reincorporation of the Company as a Nevada
corporation, the Board of Directors changed the name of the Company from Profit
Financial Corporation to Wade Cook Financial Corporation. The reasons for the
name change include to align the identity of the Company with that of its
founder Wade B. Cook to take advantage of his increasing notoriety as a creator
and producer of investment education products.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
CHANGE OF THE NAME OF THE COMPANY TO "WADE COOK FINANCIAL CORPORATION."
APPROVAL OF REINCORPORATION OF COMPANY
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the Company's state of incorporation from Utah to Nevada (the
"Reincorporation"). The Board of Directors has approved the Reincorporation,
which is accomplished by merging the Company with and into its newly formed
Nevada subsidiary, Wade Cook Financial Corporation ("WADE").
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
The Company was originally incorporated as a Utah corporation in 1979 by a
person or persons other than Wade B. Cook. The reasons for the selection of Utah
as opposed to any other state of incorporation are not now known.
Because the Utah corporation was created several years ago, provisions of
the Articles of Incorporation relating to, among other things, limitations on
director liabilities and indemnification of directors and officers are dated.
These issues are viewed by the Board of Directors and management as extremely
important to recruiting and retaining directors and officers of the highest
caliber who are essential to the continuing successful operation of the Company.
Although the Company has not incurred any recent problem in recruiting or
retaining directors and officers, the cost and availability of adequate director
and officer insurance and the uncertainties relating to indemnification have
been reviewed.
Under Nevada law, the ability of a corporation to indemnify directors and
officers in certain actions brought on behalf of the corporation is broad and
relatively clear as a legal matter. Another important reason to reincorporate in
the state of Nevada is the lack of a Nevada state tax on corporations. Further,
management believes that since the Company regularly, and as a matter of
philosophy, advocates the creation of a Nevada corporation for certain asset
planning and other business purposes, it is considered desirable by the Board of
Directors to incorporate under the laws of the state of Nevada to maintain a
consistent message to the Company's customers.
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PLAN OF MERGER
The Company will be merged with and into WADE pursuant to the terms of the
proposed Plan and Agreement of Merger (the "Merger Agreement," a copy of which
may be obtained from the Secretary of the Company). Upon the completion of the
merger, the owner of each outstanding common share of the Company will
automatically own one WADE common share. Each outstanding certificate
representing a Company common share or shares will continue to represent the
same number of shares in WADE (i.e., a certificate representing one Profit
Financial Corporation common share will then represent one WADE common share).
Thus, it will NOT be necessary for shareholders of the Company to exchange their
existing share certificates. The Common Stock of the Company will continue to be
traded on the OTC BB market under the same symbol subsequent to the merger.
EFFECT OF REINCORPORATION AND MERGER
The Reincorporation and the merger will effect a change in the legal
domicile of the Company and other changes of a legal nature, the most
significant of which are described in this Proxy Statement. However, the
Reincorporation and merger will not result in any change in the name, business,
management, location of the Company's principal executive offices, assets,
liabilities, or net worth or accounting practices. Moreover, as noted above, the
Company's common shares will continue to be traded on the OTC BB Market under
the symbol "WADE". The merger will not give rise to any appraisal or dissenters'
rights.
PRINCIPAL DIFFERENCES IN CORPORATE CHARTERS
WADE's Articles of Incorporation and By-Laws will be the Articles of
Incorporation and By-Laws of the surviving corporation. A copy of the Articles
of Incorporation of WADE may be obtained from the Secretary of the Company.
The new Articles increase the number of authorized shares of Common Stock of
the Company from 20,000,000 to 60,000,000, to effectuate the three-for-one split
for shareholders of record as of September 1, 1997. The new Articles also
establish an initial Board of Directors of eight (8) members, subject to
increase or decrease from time to time as set forth in the Bylaws to a maximum
of twelve (12) and a minimum of three (3), and with a maximum increase of two
directors in any calendar year, and provide for staggered three (3) year terms.
The initial directors set forth in the new Articles and their respective terms
are those set forth as nominees in this Proxy. See "ELECTION OF
DIRECTORS--Nominees for Director."
The new Articles also provide that the provisions regarding the number and
term of directors (Article V of the new Articles) may not be amended or repealed
or otherwise contradicted without the affirmative vote of the holders of at
least two-thirds of the Company's Common Stock. The new Articles also provide
for elimination of the personal liability of directors of the Company to the
fullest extent provided by applicable state law, and do not provide for
preemptive rights.
The Company's current Articles of Incorporation differs from WADE's Articles
of Incorporation primarily as to indemnification of officers and directors and
limitations on director liability. Other differences primarily concern technical
differences between the Nevada Corporate Code and the Utah Corporate Code.
TAX CONSEQUENCES
In connection with the Reincorporation, the Company has not requested an
opinion that the Reincorporation will constitute a tax free reorganization under
the Internal Revenue Code. The Company believes that the facts are clear that
under the circumstances the Reincorporation will qualify as a tax free
reorganization. Accordingly, it is anticipated that no gain or loss will be
recognized for federal income tax purposes by the Company, WADE, or their
shareholders as a result of the merger, and the tax basis and
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holding period for the shares of WADE deemed received by the shareholders of the
Company in exchange for the Company's shares will be the same as the tax basis
and holding period of the shares of the Company deemed to be exchanged therefor.
In addition, WADE generally will succeed to the tax attributes of the Company.
VOTE REQUIRED AND BOARD RECOMMENDATION
Utah law requires the favorable vote of at least a majority of all of the
outstanding voting shares of the Company to approve the Reincorporation.
As discussed above, one of the reasons for proposing the Reincorporation is
that Nevada law has clearer and broader provisions relating to the limitation of
director liability and indemnification of officers and directors. Accordingly,
the Board has a personal interest in the approval of the Reincorporation. The
indemnification requirements might have a significant adverse effect on the
Company and its shareholders in the event of a substantial judgment or
settlement, not otherwise covered by insurance, with respect to a director or
officer entitled to indemnification. In documents filed with the Securities and
Exchange Commission the Company has disclosed that it is involved in proceedings
in the nature of investigations by the Securites and Exchange Commission and the
Washington State Securities Administrator. This pending or threatened litigation
or proceeding may result in a claim for indemnification by a director or officer
under the Company's Articles, By-Laws, and Nevada corporate law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
REINCORPORATION OF THE COMPANY IN NEVADA.
APPROVAL OF INCREASE OF AUTHORIZED COMMON STOCK
The shareholders of the Company are being asked to approve the increase of
the number of shares of the Company's Common Stock which is authorized to be
issued from 60,000,000 to 140,000,000 shares. This increase in authorized common
stock will be given effect by an amendment to the amended Articles of
Incorporation of the Company. The increase in common stock available for
issuance will not affect the number of shares of Common Stock issued and
outstanding at the effective date of the increase. Rather, the availability of
additional shares is intended by the Board of Directors to allow management
considerable freedom, subject to Board approval, to acquire other companies and
products and services by the issuance of Common Stock as consideration for such
acquisitions. Additionally, the Company intends to continue its policy of
rewarding employees, executive officers, consultants and other service providers
with grants of options and common stock as a reward for service, as an incentive
to perform at the highest levels of service in the future, and as a way of
aligning the interests of management and employees with the interests of the
Company's shareholders.
If the proposed amendment is adopted, the additional shares of Common Stock
authorized would thereafter be subject to issuance from time to time by the
Board of Directors without shareholder approval and without preemptive purchase
rights by the shareholders. The issuance of such authorized shares of Common
Stock may result in the dilution of the equity interests of the Company's then
existing shareholders. This would be true in the event the Company issued shares
of Common Stock in return for consideration having a fair value of less than the
book value per share of the Common Stock on the date of issuance.
The overall effect of an issuance of additional shares of Common Stock and
the existence of certain provisions contained in the Company's Articles of
Incorporation and By-Laws may be to render more difficult the accomplishment of
any attempted merger, takeover or other change in control affecting the Company
and the removal of the Company's incumbent Board of Directors and management.
However, the Board of Directors does not view the increase in authorized Common
Stock as an anti-takeover measure.
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The Company's Board of Directors intends to use part of the newly increased
authorized shares of Common Stock to effect a 3 for 1 split of the shares of
Common Stock currently issued and outstanding. The Board of Directors at a
meeting held on October 15, 1997 voted to split the Company's Common Stock as
soon as practicable after the additional shares of Common Stock are approved by
the shareholders of the Company. After the split of the Common Stock, there
would be approximately 60,435,288 shares of Common Stock issued and outstanding.
Additionally, the Company's management is in various stages of negotiation
for the acquisition of products, assets and the shares of common stock of other
public and privately held companies, and intends to use shares of the Company's
Common Stock as consideration, in whole or in part, for such acquisitions. At
the time of this Proxy Statement, however, no such product, asset or common
stock purchase was sufficiently advanced or certain of finality to require or
lead the Company to otherwise deem it advisable to disclose the details of the
proposed transactions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
INCREASE IN AUTHORIZED COMMON STOCK.
RATIFICATION OF 1997 STOCK INCENTIVE PLAN
The Board of Directors adopted the Wade Cook Financial Corporation 1997
Stock Incentive Plan (the "Plan") and reserved for issuance pursuant to the Plan
1,000,000 shares of the Company's Common Stock. The Plan is intended to promote
the interests of the Company and its shareholders by providing directors,
officers, consultants and other employees of the Company with appropriate
incentives and rewards to encourage them to enter into and continue in the
employ of the Company and to acquire a proprietary interest in the long-term
success of the Company; and to reward the performance of individual directors,
officers, consultants and other employees in fulfilling their personal
responsibilities for long-range achievements. A copy of the Plan is attached as
Appendix A.
1997 STOCK INCENTIVE PLAN
The Board of Directors requests that the shareholders approve the Wade Cook
Financial Corporation 1997 Stock Incentive Plan (the "Incentive Plan") and to
approve the reservation of 1,000,000 shares of Common Stock of the Company to be
issued thereunder.
The Board adopted the Incentive Plan and recommends its approval by the
shareholders in order to allow the Company to offer stock options to key
employees as a part of its overall compensation package. The Board believes that
this Incentive Plan is essential to attract and retain the best available
personnel for positions of substantial responsibility, to encourage ownership of
the Common Stock by key employees, directors and consultants of the Company, and
to promote the Company's success.
The Company's 1997 Stock Incentive Plan provides that the Board of Directors
be charged with administering the Incentive Plan, on behalf of the Company. The
Board of Directors may grant restricted stock, stock options, stock appreciation
rights or other stock based awards (individually or collectively, an "Award") to
eligible employees, directors or consultants. Common Stock purchased under the
Incentive Plan will be purchased from the Company; therefore the Company will
receive the purchase price paid for the Common Stock, if any. The Board, subject
to approval by the shareholders, has reserved for issuance under the Incentive
Plan a total of 1,000,000 shares of the Company's Common Stock, subject to
adjustment in the event of a stock dividend, stock split or similar change in
outstanding shares of Common Stock. If approved, the Incentive Plan shall be
deemed effective immediately. No Award under the Plan shall extend for a period
greater than ten years from the date of grant. The Incentive Plan is included as
Appendix A to this Proxy Statement. No Awards have been granted under the
Incentive Plan to date. The type or number of future Awards that will be granted
under the Incentive Plan to the above-named individuals and groups in the future
is not determinable at this time.
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The Board of Directors recommends a vote "FOR" the ratification of the Wade
Cook Financial Corporation 1997 Stock Incentive Plan.
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return since the Common Stock became registered under Section 12 of the
Securites Exchange Act of 1934 on June 30, 1997 with the Russell 2000 Index and
an index of certain companies having the same Standard Industrial Classification
Code. The graph assumes that the value of an investment in the Company's Common
Stock at June 30, 1997 at the closing price of $1.68 per share and each index
was $100.00 on June 30, 1997.
[GRAPH]
1 The Industry Index chosen was: Sic Code 2741--Miscellaneous Publishing
The Current compositon of the industry index is as follows:
American Education PRD
Global One Distrib&Merch
Harte Hanks Communicatns
Pacific Chemical Inc
Publishing Co N America
Topps Co Inc
Tro Learning Inc
Visual Data Corp
2 The Broad Market Index chosen was: Russell 2000 Index
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OTHER MATTERS
COST OF SOLICITING PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of the proxies by mail, employees and directors of the Company,
without extra remuneration, may solicit proxies personally or by telephone. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their out-of-pocket expenses for forwarding proxy materials to
beneficial owners and seeking instruction with respect thereto.
SHAREHOLDER PROPOSALS
Shareholders having proposals that they desire to present at next year's
annual meeting of shareholders should, if they desire that such proposals be
included in the Board of Directors' Proxy and Proxy Statement relating to such
meeting, submit such proposals in time to be received by the Company at its
principal executive office in Seattle, Washington, not later than December 1,
1997. Proposals may be mailed to: 14675 Interurban Avenue South, Seattle,
Washington 98168-4664, Attention: General Counsel.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Meeting, but it is intended that, as to any such other business, the shares of
Common Stock will be voted pursuant to the proxy in accordance with the best
judgment of the person or persons acting thereunder.
By Order of the Board of Directors
/s/ Laura M. Cook
Laura M. Cook,
SECRETARY
Seattle, Washington
November 20, 1997
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APPENDIX A
WADE COOK FINANCIAL CORPORATION
1997 STOCK INCENTIVE PLAN
1. ESTABLISHMENT AND PURPOSE.
There is hereby adopted the Wade Cook Financial Corporation 1997 Stock
Incentive Plan (the "Plan"). This Plan is intended to promote the interests of
the Company (as defined below) and the stockholders of the Company by providing
directors, officers, consultants and other employees of the Company with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company; and to reward the performance of individual
directors, officers, consultants and other employees in fulfilling their
personal responsibilities for long-range achievements.
2. DEFINITIONS.
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Agreement" shall mean the written agreement between the Company and
a Participant evidencing an Incentive Award.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean (1) the willful and continued failure by the
Participant substantially to perform his or her duties and
obligations to the Company (other than any such failure resulting
from his or her incapacity due to physical or mental illness); (2)
the willful engaging by the Participant in misconduct which is
materially injurious to the Company; (3) the commission by the
Participant of a felony; or (4) the commission by the Participant of
a crime against the Company which is materially injurious to the
Company. For purposes of this Section 2(c), no act, or failure to
act, on a Participant's part shall be considered "willful" unless
done, or omitted to be done, by the Participant in bad faith and
without reasonable belief that his or her action or omission was in
the best interest of the Company. Determination of Cause shall be
made by the Board in its sole discretion.
(d) A "Change in Control" shall be deemed to have occurred in the event
set forth in any one of the following paragraphs shall have occurred:
(1) any Person is or becomes the "Beneficial Owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company) representing 25% or more of the
Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (3) below; or
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving; individuals
who, on the Effective Date, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds ( 2/3) of the directors then still in
office who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously
so approved or recommended; or
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(3) there is consummated a merger or consolidation of the Company
with any other corporation other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 75% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially Owned
by such Person any securities acquired directly from the Company)
representing 25% or more of the combined voting power of the
Company's then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity at least 75% of the combined voting
power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of the
Company immediately prior to such sale.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(f) "Company" shall mean Wade Cook Financial Corporation and, where
appropriate, each of its Subsidiaries now held or hereinafter
acquired.
(g) "Company Stock" shall mean the common stock of the Company, $.01 par
value.
(h) "Disability" shall mean: (1) any physical or mental condition that
would qualify a Participant for a disability benefit under the
long-term disability plan maintained by the Company and applicable to
him or her; (2) when used in connection with the exercise of an
Incentive Stock Option following termination of employment,
disability within the meaning of Section 22(e)(3) of the Code; or (3)
such other condition as may be determined in the sole discretion of
the Board to constitute Disability.
(i) "Effective Date" shall mean the date upon which this Plan is adopted
by the Board.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) The "Fair Market Value" of a share of Company Stock, as of a date of
determination, shall mean (1) the closing, sales price per share of
Company Stock on the national securities exchange on which such stock
is principally traded for the last preceding date on which there was
a sale of such stock on such exchange, or (2) if the shares of
Company Stock are not listed or admitted to trading on any such
exchange, the closing price as reported by the NASDAQ Stock Market
for the last preceding day on which there was a sale of such stock on
such exchange, or (3) if the shares of Company Stock are then listed
on the NASDAQ Stock Market, the average of the highest reported bid
and lowest reported asked price for the shares of Company Stock as
reported by the National Association of Securities Dealers. Inc.
Automated Quotations System for the last preceding day on which there
was a sale of such stock in such market, or (4) if the shares of
Company Stock are not then listed on a national securities exchange
or traded in an over-the-counter market or the value of such shares
is not otherwise readily ascertainable, such value as determined by
the Board in good faith.
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(l) "Incentive Award" shall mean any Option, Tandem SAR, Stand-Alone SAR,
Restricted Stock. Phantom Stock, Stock Bonus or Other Award granted
pursuant to the terms of the Plan.
(m) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code, or any
successor provision, and that is designated by the Board as an
Incentive Stock Option.
(n) "Issue Date" shall mean the date established by the Company on which
certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 10(e).
(o) "Non-Qualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(p) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 7.
(q) "Other Award" shall mean an award granted pursuant to Section 13
hereof.
(r) "Partial Exercise" shall mean an exercise of an Incentive Award for
less than the full extent permitted at the time of such exercise.
(s) "Participant" shall mean (1) a director, officer, consultant or other
employee to whom an Incentive Award is granted pursuant to the Plan
and (2) upon the death of an individual described in clause (1), his
or her successors, heirs, executors and administrators, as the case
may be. "Person' shall have the meaning set forth in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2)
a bank or other fiduciary holding securities under an employee
benefit plan of the Company, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities or (4) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company.
(t) "Person" shall have the meaning set forth in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2)
a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities or (4) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company.
(u) "Phantom Stock" shall mean the right, granted pursuant to Section II,
to receive in cash or shares the Fair Market Value of a shares of
Company Stock.
(v) "Reload Option" shall mean a Non-Qualified Stock Option granted
pursuant to Section 7(c)(5).
(w) "Restricted Stock" shall mean a share of Company Stock which is
granted pursuant to the terms of Section 10 hereof and which is
subject to the restrictions set forth in Section 10(c).
(x) "Rule 16b-3" shall mean the Rule 16b-3 promulgated the Exchange Act,
as amended from time to time.
(aa) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(bb) "Stand-Alone SAR" shall a stock appreciation right which is granted
pursuant to Section 9 and which is not related to any Option.
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(cc) "Stock Bonus" shall mean a bonus payable in shares of Company Stock
granted pursuant to Section 12.
(dd) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
(ee) "Tandem SAR" shall mean a stock appreciation right which is granted
pursuant to Section 8 and which is related to an Option.
(ff) "Vesting Date" shall mean the date established by the Board on which
a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN.
(a) Shares Available for Awards.
The maximum number of shares of Company Stock reserved for issuance
under the Plan shall be 1,000,000 shares (subject to adjustment as
provided herein). Such shares may be authorized but unissued Company
Stock or authorized and issued Company Stock held in the Company's
treasury. The Board may direct that any stock certificate evidencing
shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares
pursuant to the Plan.
The grant of a Tandem SAR shall not reduce the number of shares of
Company Stock with respect to which Incentive Awards may be granted
pursuant to the Plan.
(b) Adjustment for Change in Capitalization.
In the event that the Board shall determine that any dividend or other
distribution (whether in the form of cash, Company Stock. or other
property), recapitalization. Company Stock split, reverse Company
Stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar
corporate function or event, affects the Company Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement
of the rights of Participants under the Plan, then the Board shall
make such equitable changes or adjustments as it deems necessary or
appropriate to any or all of (1) the number and kind of shares of
Company Stock which may then be issued in connection with Incentive
Awards, (2) the number and kind of shares of Company Stock issued or
issuable in respect of outstanding Incentive Awards, (3) the exercise
price, grant price or purchase price relating to any Incentive Award,
and (4) the maximum number of shares subject to Incentive Awards
which may be awarded to any employee during any tax year of the
Company; provided that, with respect to Incentive Stock Options, such
adjustment shall be made in accordance with Section 424 of the Code.
(c) Re-use of Sharer.
The following shares of Company Stock shall again become available for
Incentive Awards: except as provided below, any shares subject to an
Incentive Award that remain unissued upon the cancellation,
surrender, exchange or termination of such award for any reason
whatsoever; and any shares of Restricted Stock forfeited.
Notwithstanding the foregoing, upon the exercise of any Incentive
Award granted in tandem with any other Incentive Awards, such related
Awards shall be canceled to the extent of the number of shares of
Company Stock- as to which the Incentive Award is exercised and such
number of shares shall no longer be available for Incentive Awards
under the Plan.
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4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board. The Board shall have the
authority in its sole discretion subject to and not inconsistent with the
express provisions of the plan, to administer the Plan and to exercise the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the persons to
whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Stock to which Incentive Awards may relate and the terms and
conditions, restrictions and performance criteria relating to any Incentive
Award and whether, to what extent, and under what circumstances an Incentive
Award may be settled, canceled, forfeited, exchanged or surrendered; to make
adjustments in the performance goals in recognition of unusual or non-recurring
events affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Incentive Award; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Board may, in its absolute discretion, without amendment to the Plan,
(a) accelerate the date on which any Option or Stand-Alone SAR granted under the
Plan becomes exercisable, waive or amend the operation of Plan provisions
respecting exercise after termination of employment or otherwise adjust any of
the terms of such Option or Stand-Alone SAR, and (b) accelerate the Vesting Date
or Issue Date, or waive any condition imposed hereunder, with respect to any
share of Restricted Stock, Phantom Stock or other Incentive Award or otherwise
adjust any of the terms applicable to any such Incentive Award.
No member of the Board shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Nevada law and the bylaws of the Company) and hold
harmless each member of the Board and each other employee of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
has been delegated against any cost or expense (including counsel fees) or
liability (includes any sum paid in settlement of a claim with the approval of
the Board) arising out of any action, omission or determination relating to the
plan, unless, in either case, such action, omission or determination was taken
or made by such director or employee in bad faith and without reasonable belief
that it was in the best interests of the Company.
5. ELIGIBILITY. The persons who shall be eligible to receive Incentive
Awards pursuant to the Plan shall be such directors, officers, consultants and
other employees of the Company as the Board shall select from time to time.
6. AWARDS UNDER THE PLAN; AGREEMENT.
The Board may grant Options, Tandem SARS, Stand-Alone SARS shares of
Restricted Stock, shares of Phantom Stock, Stock Bonuses and Other Awards in
such amounts and with such terms and conditions as the Board shall determine,
subject to the provisions of the Plan. Each Incentive Award granted under the
Plan (except an unconditional Stock Bonus) shall be evidenced by an Agreement
which shall contain such provisions as the Board may in its sole discretion deem
necessary or desirable. By accepting an Incentive Award, a Participant thereby
agrees that the award shall be subject to all of the terms and provisions of the
Plan and the applicable Agreement.
7. OPTIONS.
(a) Identification of Options.
Each Option shall be clearly identified in the applicable Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option.
(b) Exercise Price.
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Each Agreement with respect to an Option shall set forth the amount
(the "option exercise price") payable by the grantee to the Company
upon exercise of the Option. The option exercise price per share
shall be determined by the Board; provided, however, that in the case
of an Incentive Stock Option, the option exercise price shall in no
event be less than the Fair Market Value of a share of Company Stock
on the date the Option is granted.
(c) Term and Exercise of Options.
(1) Unless the applicable Agreement provides otherwise, an Option
shall be exercisable as to one-third ( 1/3) of the shares covered
thereby on the date of grant, with an additional one-third ( 1/3)
of such Option becoming cumulatively exercisable on each of the
first and second anniversaries of the date of grant. The Board
shall determine the expiration date of each Option; provided,
however, that no Incentive Stock Option shall be exercisable more
than 10 years after the due of grant.
(2) Notwithstanding the provisions of subsection (1) above, the
exercisability of Options granted pursuant to this Section 7 may
be subject to the attainment by the Company of performance goals
pre-established by the Board, based on one or more of the
following criteria: (A) return on total stockholder equity; (B)
earnings per share of Company Stock; (C) net income (before or
after taxes); (D) earnings before interest, taxes, depreciation
and amortization; (E) revenues; (F) return on assets; (G) market
share; (H) cost reduction goals; (I) any combination of, or a
specified increase in, any of the foregoing; and (J) such other
criteria as the Board may approve; in each case, as determined in
accordance with generally accepted accounting principles. The
exercisability of Options (or portions thereof) under this
subsection (2) shall not be effective unless the attainment of
such performance measures has been certified by the Board.
(3) An Option may be exercised for all or any portion of the shares
as to which it is exercisable, provided that no Partial Exercise
of an Option shall be for less than 100 shares of Company Stock.
The Partial Exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
(4) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary.
Such notice shall be accompanied by the applicable Agreement,
shall specify the number of shares of Company Stock with respect
to which the Option is being exercised and the effective date of
the proposed exercise and shall be signed by the Participant or
other person then having the right to exercise the Option.
Payment for shares of Company Stock purchased upon the exercise
of an Option shall be made on the effective date of such exercise
by one or a combination of the following means; (A) in cash or by
personal check, certified check, bank cashier's check or wire
transfer; (B) in shares of Company Stock owned by the Participant
prior to the date of-exercise and valued at their Fair Market
Value on the effective date of such exercise; (C) by authorizing
the Company to withhold whole shares of Company Stock which would
otherwise be delivered upon exercise of the option having a Fair
Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise; (D)
in cash by a broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise; or (E)
by such other provision as the Board may from time to time
authorize. The Board shall have sole discretion to disapprove of
an election pursuant to any of clauses (B) - (E) and in the case
of an optionee who is subject to Section 16 of the Exchange Act,
the Company may require that the method of making such payment be
in compliance with
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Section 16 and the rules and regulations thereunder. Any payment
in shares of Company Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in
blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the Secretary
of the Company shall require.
(5) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the
Participant or other person entitled to receive such shares, and
delivered to the Participant or such other person as soon as
practicable following the effective date on which the Option is
exercised.
(6) The Board shall have the authority to specify, at the time of
grant or, with respect to Non-Qualified Stock Options, at or
after the time of grant, that a Participant shall be granted a
new Non-Qualified Stock IP Option (a "Reload Option") for a
number of shares equal to the number of shares surrendered by the
Participant upon exercise of all or a part of an Option in the
manner described in Section 7(c)(3)(ii) above, subject to the
availability of shares of Company Stock under the Plan at the
time of such exercise. Reload Options shall be subject to such
conditions as may be specified by the Board in its discretion,
subject to the terms of the Plan.
(d) Limitations on Incentive Stock Options.
(1) To the extent that the aggregate Fair Market Value of shares of
Company Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under the Plan and any other stock option plan of
the Company shall exceed $ 100,000, such Options shall be treated
as Non-Qualified Stock Options. Such Fair Market Value shall be
determined as of the date on which such Incentive Stock Option is
granted.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns (or is
deemed to own under the Code) stock possessing more than ten
percent of the total combined voting power of all classes of
stock of the Company unless (i) the exercise price of such
Incentive Stock Option is at least 110 percent (110%) of the Fair
Market Value of a share of Company Stock at the time such
Incentive Stock Option is granted and (ii) such Incentive Stock
Option is not exercisable after the expiration of five years from
the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment.
(1) Unless the applicable Agreement provides otherwise, in the event
that the employment of a Participant with the Company shall
terminate for any reason other than Cause, Disability or death,
(A) Options granted to such Participant, to the extent that they
are exercisable at the time of such termination, shall remain
exercisable until the date that is three months after such
termination, on which date they shall expire at the close, and
(B) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination.
The three-month period described in this Section 7(e)(1) shall be
extended to one year from the date of such termination in the
event of the Participant's death during such three-month period.
Notwithstanding the foregoing, no Option shall be exercisable
after the expiration of its term.
(2) Unless the applicable Agreement provides otherwise, in the event
the employment of a Participant with the Company shall terminate
as of the Disability or death of the Participant, (A) Options
granted to such Participant to the extent that they were
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exercisable at the time of such termination, shall remain
exercisable until the first anniversary of such termination, on
which date they shall expire, and (B) Options granted to such
Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business
on the date of such termination; provided, however, that no
Option shall be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's employment for
Cause, all outstanding Options to such Participant shall expire
at the commencement of business on the date of such termination.
(f) Acceleration of Exercise Date Upon Change in Control.
Upon the occurrence of a Change in Control, each Option granted under the
Plan and outstanding at such time shall become fully and immediately exercisable
and shall remain exercisable until its expiration, termination or cancellation.
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8. TANDEM SARS.
The Board may grant in connection with any Option granted hereunder one or
more SARs relating to a number of shares of Company Stock less than or equal to
the number of shares of Company Stock subject to the related Option. A Tandem
SAR may be granted in connection with an Option only at the same time that such
Option is granted: provided, however a Tandem SAR granted in connection with a
Non-Qualified Stock Option may be granted subsequent to the time that such
Non-Qualified Stock Option is granted.
(a) Benefit Upon Exercise.
The exercise of a Tandem SAR with respect to any number of shares of
Company Stock shall entitle the Participant to a cash payment, for
each such share, equal to the excess of (1) the Fair Market Value of
a share of Company Stock on the exercise date over (2) the option
exercise price of the related Option. Such payment shall be made as
soon as practicable after the effective date of such exercise.
(b) Term and Exercise of Tandem SAR.
(1) A Tandem SAR shall be exercisable only if and to the extent that
its related Option is exercisable.
(2) The exercise of a Tandem SAR with respect to a number of shares
of Company Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal
number of shares. The exercise of an Option, or the cancellation,
termination or expiration of an Option (other than pursuant to
this Section 8(b)(2)), with respect to a number of shares of
Company Stock shall cause the automatic and immediate
cancellation of any related Tandem Shares to the extent of the
number of shares of Company Stock subject to such Option which is
so exercised, canceled, terminated or expired.
(3) A Tandem SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no Partial
Exercise of a Tandem SAR shall be with respect to less than 100
shares of Company Stock.
(4) No Tandem SAR shall be assignable or transferable otherwise than
together with its related Option.
(5) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary.
Such notice shall be accompanied by the applicable Agreement,
shall specify the number of shares of Company Stock with respect
to which the Tandem SAR is being exercised and the effective date
of the proposed exercise and shall be signed by the Participant
or other person then having the right to exercise the Option to
which the Tandem SAR is related.
9. STAND-ALONE SARS.
(a) Exercise Price.
The exercise price per share of a Stand-Alone SAR shall be determined
by the Board at the time of grant.
(b) Benefit Upon Exercise.
The exercise of a Stand-Alone SAR with respect to any number of shares
of Company Stock shall entitle the Participant to a payment, for each
such share, equal to the excess of (1) the Fair Market Value of a
share of Company Stock on the exercise date over (2) the exercise
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price of the Stand-Alone SAR. Such payments shall be made as soon as
practicable after such exercise, in cash and/or shares of Company
Stock, as determined by the Board.
(c) Term and Exercise of Stand-Alone SARs.
(1) Unless the applicable Agreement provides otherwise, a Stand-Alone
SAR shall become cumulatively exercisable as to one-third ( 1/3)
of shares covered thereby on the date of grant, with an
additional one-third ( 1/3) of such Stand-Alone SAR to become
cumulatively exercisable on each of the first and second
anniversaries of the date of grant. The Board shall determine the
expiration date of each Stand-Alone SAR.
(2) A Stand-Alone SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no Partial
Exercise of a Stand-Alone SAR shall be with respect to less than
100 shares of Company Stock.
(3) A Stand-Alone SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary.
Such notice shall be accompanied by the applicable Agreement,
shall specify the number of shares of Company Stock with respect
to which the Stand-Alone SAR is being exercised, and the
effective date of the proposed exercise, and shall be signed by
the Participant.
(d) Effect of Termination of Employment.
The provisions set forth in Section 7(c) with respect to the exercise
of Options following termination of employment shall apply as well to
such exercise of Stand-Alone SARS.
(e) Acceleration of Exercise Date Upon Change in Control.
Upon the occurrence of a Change in Control, any Stand-Alone SAR
outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration,
termination or cancellation.
10. RESTRICTED STOCK.
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the Board
shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Board may divide such
shares into classes and assign a different Issue Date and/or Vesting
Date for each class. If the grantee is employed by the Company on an
Issue Date (which may be the date of grant), the specified number of
shares of Restricted Stock shall be issued in accordance with the
provisions of Section 10(c), provided that all conditions to the
vesting of a share of Restricted Stock imposed pursuant to Section
10(b) are satisfied, and except as provided in Section 10(g), upon
the occurrence of the Vesting Date with respect to a share of
Restricted Stock, such shares shall vest and the restrictions of
Section 10(c) shall lapse.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the Board may
impose such restrictions or conditions to the vesting of such as it,
in its absolute discretion. deems appropriate.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, such share, and
all of the rights related thereto, shall be forfeited by the
Participant.
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(d) Dividends on Restricted Stock.
The Board in its discretion may require that any dividends paid on
shares of Restricted Stock be held in escrow until all restrictions
on such shares have lapsed.
(e) Issuance of Certificates.
(1) Reasonably promptly after the Issue Date with respect to shares
of Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom
such shares were granted, evidencing such shares; provided that
the Company shall not cause such a stock certificate to be issued
unless it has received a stock power duly endorsed in blank with
respect to such shares. Each such stock certificate shall bear
the following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS
(INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST
TRANSFER) CONTAINED IN THE WADE COOK FINANCIAL CORPORATION 1997
STOCK INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER OF SUCH SHARES AND THE COMPANY. A COPY OF THE
PLAN AND AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF
THE COMPANY.
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Such legend shall not be removed until such shares vest pursuant
to the terms hereof.
(2) Each certificate issued pursuant to this Section 10(e), together
with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be held by the Company
unless the Board determines otherwise.
(f) Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 10(c) shall lapse with respect to
such share. Reasonably promptly after a share of Restricted Stock
vests, the Company shall cause to be delivered to the Participant to
whom such shares were granted, a certificate evidencing such share,
free of the legend set forth in Section 10(c).
(g) Effect of Termination of Employment.
(1) Subject to such other provision as the Board may set forth in the
applicable Agreement, and to the Board's amendment authority
pursuant to a Participant's employment for any reason other than
Cause, any and all shares to which restrictions on
transferability apply shall be immediately forfeited by the
Participant and transferred to, and reacquired by, the Company;
provided that if the Board, in its sole discretion, shall within
thirty (30) days after such termination of employment notify the
participant in writing of its decision not to transfer the
Participant's rights in such shares, then the Participant shall
continue to be the owner of such shares subject to such
continuing restrictions as the Board may prescribe in such
notice. In the event of a forfeiture of shares pursuant to this
section, the Company shall repay to the Participant (or the
Participant's estate) any amount paid by the Participant for such
shares. In the event that the Company requires a return of
shares, it shall also have the right to require the return of all
dividends paid on such shares, whether by termination of any
escrow arrangement under which such dividends are held, or
otherwise.
(2) In the event of the termination of a Participant's employment for
Cause all shares of Restricted Stock granted to such participant
which have not vested as of the date of such termination shall
immediately be returned to the Company, together with any
dividend
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paid on such shares, in return for which the Company shall repay
to the Participant any amount Paid by the Participant for such
shares.
(h) Effect of Change in Control.
Upon the occurrence of a Change in Control, all outstanding shares of
Restricted Stock which have not theretofore vested shall immediately
vest and all restrictions on such shares shall immediately lapse.
(i) Special Provisions Regarding Restricted Stock.
Notwithstanding anything to the contrary contained herein, Restricted
Stock granted pursuant to this Section 10 may be based on the
attainment by the Company, of performance goals pre-established by
the Board, based on one or more of the following criteria: (l) return
on total stockholder equity; (2) earnings per share of Company Stock;
(3) net income (before or after taxes); (4) earnings before interest,
taxes, depreciation and amortization; (5) revenues; (6) return on
assets; (7) market share; (8) cost reduction goals; (9) any
combination of, or a specified increase in, any of the foregoing; and
(10) such other criteria as the Board may approve; in each case, as
determined in accordance with generally accepted accounting
principles. Such shares of Restricted Stock shall be released from
restrictions only after the attainment of such performance criteria
has been certified by the Board.
11. PHANTOM STOCK.
(a) Vesting Date.
At the time of the grant of shares of Phantom Stock, the Board shall
establish a Vesting Date or Vesting Dates with respect to such
shares. The Board may divide such shares into classes and assign a
different Vesting Date for each class provided that all conditions to
the vesting of a share of Phantom Stock imposed pursuant to Section
11(c) are satisfied, and except as provided in Section 11(d) upon the
occurrence of the Vesting Date with respect to a share of Phantom
Stock, such share shall vest.
(b) Benefit Upon Vesting.
Upon the vesting of a share of Phantom Stock, the Participant shall
be entitled to receive, within 30 days of the date on which such
share vests, an amount in cash and/or of Company Stock, as determined
by the Board, equal to the sum of (1) the Fair Market Value of a
share of Company Stock on the date on which such share of Phantom
Stock vests, and (2) the aggregate amount of cash dividends paid with
respect to a share of Company Stock during the period commencing on
the date on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
(c) Conditions of Vesting.
At the time of the grant of shares of Phantom Stock, the Board may
impose such restrictions or conditions to the vesting of such share
as it, in its absolute discretion, deems appropriate.
(d) Effect of Termination of Employment.
Subject to such other provision as the Board may set forth in the
applicable Agreement, and to the Board's amendment authority pursuant
to Section 4, shares of Phantom Stock that have not vested, together
with any dividends credited on such Shares, shall be forfeited upon
the Participant's termination of employment for any reason.
(e) Effect Of Change in Control.
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Upon the occurrence of a Change in Control, all outstanding shares of
Phantom Stock which have not theretofore vested shall immediately
vest and payment in respect of such shares shall be made in
accordance with the term of this Plan.
(f) Special Provisions Regarding Awards.
Notwithstanding anything to the contrary contained herein, the vesting
of Phantom Stock granted pursuant to this Section 11 may be based on
the attainment by the Company of one or more of the performance
criteria set forth in Section 10(i) hereof, in each case, as
determined in accordance with generally accepted accounting
principles. No payment in respect of any such Phantom Stock award
will be paid until the attainment of the respective performance
criteria have been certified by the Board.
12. STOCK BONUSES.
In the event that the Board grants a Stock Bonus, a certificate for the
shares of Company Stock comprising such Stock Bonus shall be issued in the name
of the Participant to whom such grant was made and delivered to such Participant
as soon as practicable after the date on which such Stock Bonus is payable.
13. OTHER AWARDS.
Other forms of Incentive Awards ("Other Awards") valued in whole or in part
by reference to, or otherwise based on Company Stock may be granted either alone
or in addition to other Incentive Awards under the Plan. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which such Other Awards
shall be granted, the number of shares of Company Stock to be granted pursuant
to such Other Awards and all other conditions of such Other Awards.
14. RIGHTS AS A STOCKHOLDER.
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award until the date of
issuance of a stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 3(c), no adjustment to any Incentive Award shall
be made for dividends or other rights for which the record date occurs prior to
the date such stock certificate is issued.
15. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD.
Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate employment or to increase or decrease the compensation of the
Participant.
No person shall have any or right to receive an Incentive Award hereunder.
The Board's granting of an Incentive Award to a participant at any time shall
neither require the Board to grant any other Incentive Award to such Participant
or any other person at any time, or preclude the Board from making subsequent
grants to such Participant or any other person.
16. SECURITIES MATTERS.
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any
shares of Company Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein to
the contrary, the Company shall not be obliged to cause to be issued
or delivered any certificates evidencing shares of Company Stock
pursuant to the Plan unless and until the Company is advised by its
counsel that the issuance and delivery of such certificates is in
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compliance with all applicable laws, regulations of governmental
authority and the requirements of any securities exchange on which
shares of Company Stock are traded. The Board may require, as a
condition of the issuance and delivery of certificates evidencing
shares of Company Stock pursuant to the terms hereof, that the
recipient of such certificates make such agreements and
representations, and that such certificates bear such legends, as the
Board, in its sole discretion, deems necessary or desirable.
(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to the Company shall have
determined that the issuance and delivery of such shares is in
compliance with all applicable laws, regulations of governmental
authority and the requirements of any securities exchange on which
shares of Company Stock are traded. The Board may, in its sole
discretion, defer the effectiveness of any transfer of shares of
Company Stock hereunder in order to allow the issuance of such shares
to be made pursuant to registration or an exemption from registration
or other methods for compliance available under federal or state
securities laws. The Board shall inform the Participant in writing of
its decision to defer the effectiveness of a transfer. During the
period of such deferral in connection with the exercise of an Option,
the Participant may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.
17. WITHHOLDING TAXES.
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Board, a Participant may satisfy the foregoing requirement by electing to have
the Company withhold from delivery shares of Company Stock having a value equal
to the amount of tax to be withheld. Such shares shall be valued at their Fair
Market Value on the date of which the amount of tax to be withheld is determined
(the "Tax Date"). Fractional share amounts shall be settled in cash. Such a
withholding election may be made with respect to all or any portion of the
shares of Company Stock to be delivered pursuant to an Incentive Award.
18. NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE.
If any Participant shall, in connection with the acquisition of shares of
Company Stock under the Plan, make the election permitted under Section 83(b) of
the Code, such Participant shall notify the Company of such election within 10
days of filing notice of election with the Internal Revenue Service.
19. NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(b) OF THE
CODE.
Each Agreement with respect to an Incentive Stock Option shall require the
Participant to notify the Company of any disposition of shares of Company Stock
issued pursuant to the exercise of such Option under the circumstances described
in Section 421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition.
20. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may, at any time, suspend or terminate the Plan or revise or amend
it in any respect whatsoever, provided, however, that stockholder approval shall
be required if and to the extent the Board determines that such approval is
appropriate for purposes of satisfying Section 422 of the Code or Rule 16b-3.
Incentive Awards may be granted under the Plan prior to the receipt of such
stockholder approval but each such grant shall be subject in its entirety to
such approval and no award may be exercised, vested or otherwise satisfied prior
to the receipt of such approval. Nothing herein shall restrict
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<PAGE>
the Board's ability to exercise its discretionary authority pursuant to Section
4, which discretion may be exercised without amendment to the Plan. No action
hereunder may, without the consent of a Participant, reduce the Participant's
rights under, any outstanding Incentive Award.
21. TRANSFERS OF INCENTIVE AWARDS.
Options granted under the Plan shall not be transferable except (a) by will
or the laws of descent and distribution; (b) pursuant to a "qualified domestic
relations order" as such term is defined in the Employee Retirement Income
Security Act of 1974, as amended; or (c) as specifically provided below. Any
Participant may transfer Non-Qualified Stock Options to members of his or her
Immediate Family (as defined below) if (1) the Agreement pursuant to which the
Option was granted so provides, (2) such agreement was approved by the Board,
and (3) the Participant does not receive any consideration for the transfer.
"Immediate Family" means children, grandchildren, and spouse of the Participant
or one or more trusts for the benefit of such family members or partnerships in
which such family members are the only partners. Any Non-Qualified Stock Option
agreement may be amended to provide for the transferability feature as outlined
above, provided that such amendment is approved by the Board. Any Option not
granted pursuant to an Agreement expressly permitting its transfer shall not be
transferable. During the lifetime of the Participant, options may be exercised
only by the Participant, the guardian or legal representative of the
Participant, or the transferee as permitted under this Section 21(c).
22. EXPENSES AND RECEIPTS.
The expenses of the Plan shall be paid by the Company. Any proceeds received
by the Company in connection with any Incentive Award will be used for general
corporate purposes.
23. FAILURE TO COMPLY.
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the applicable Agreement, unless such failure is
remedied by such Participant (or beneficiary) within ten days after notice of
such failure to the Board, shall be grounds for the cancellation and forfeiture
of such Incentive Award, in whole or in part, as the Board, in its absolute
discretion, may determine.
24. EFFECTIVE DATE AND TERM OF PLAN.
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to shareholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of the Company. In the
absence of such approval, such Incentive Awards shall be null and void. Unless
earlier terminated by the Board, the right to grant Incentive Awards under the
Plan will terminate on the tenth anniversary of the Effective Date. Incentive
Awards outstanding at Plan termination will remain in effect according to their
terms and the provisions of the Plan.
25. APPLICABLE LAW.
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of
Nevada, without reference to its principles of conflicts of law.
26. PARTICIPANT RIGHTS.
No Participant shall have any claim to be granted any award under the Plan,
and there is no obligation for uniformity of treatment for Participants. Except
as provided specifically herein, a Participant or a transferee of an Incentive
Award shall have no rights as a stockholder with respect to any shares covered
by any award until the date of the issuance of a Company Stock certificate to
him or her for such shares.
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<PAGE>
27. UNFUNDED STATUS OF AWARDS.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant pursuant to an Incentive Award, nothing contained in the Plan or any
Agreement shall give any such Participant any rights that are greater than those
of a general creditor of the Company.
28. NO FRACTIONAL SHARES.
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan. The Board shall determine whether cash, other Incentive Awards, or
other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
29. BENEFICIARY.
A Participant may file with the Board a written designation of a beneficiary
on such form as may be prescribed by the Board and may, from time to time, amend
or revoke such designation, if no designated beneficiary survives the
Participant, the executor or administrator of the Participant's estate shall be
deemed to be the grantee's beneficiary.
30. INTERPRETATION.
The Plan is designed and intended to comply with Rule 16b-3 and, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply
31. SEVERABILITY.
If any provision of the Plan is held to be invalid or unenforceable, the
other provisions of the Plan shall not be affected but shall be applied as if
the invalid or unenforceable provision had not been included in the Plan.
[This Space Intentionally Left Blank]
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PROFIT FINANCIAL CORPORATION
The undersigned hereby appoints Wade B. Cook, President and Director of
Profit Financial Corporation, the Proxy of the undersigned, with full power of
substitution, to represent and vote all shares of the Common Stock of Profit
Financial Corporation which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on December 10, 1997 and any adjournment
thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ATTACHED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES. ANY SHAREHOLDER GIVING A PROXY MAY REVOKE IT
PRIOR TO THE TIME IT IS VOTED BY FILING WITH THE SECRETARY, LAURA M. COOK, A
NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY VOTING
IN PERSON AT THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTIONS ARE GIVEN, IT WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS AS STATED BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
1. To elect all of the directors each to serve a one, two, or three year
term, depending on the director's classification as a director.
/ / FOR all nominees listed below (except those whose names are written
on the line below)
/ / WITHHOLD AUTHORITY (to vote for all nominees listed below)
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
- -------------------- ---------------------- --------------------
<S> <C> <C>
Wade B. Cook Nicholas Dettman Cheryle Hamilton
John V. Childers,
Sr. Dr. Warren H. Chaney Pamela S. Anderson
Laura M. Cook Eric W. Marler Robert T. Hondel
Robin Anderson
- --------------------------------------------
</TABLE>
<PAGE>
2. To ratify the change of the name of the corporation to Wade Cook
Financial Corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. To authorize the reincorporation of the Company in the state of Nevada.
/ / FOR / / AGAINST / / ABSTAIN
4. To authorize an increase in the total authorized common stock of the
Company by 80,000,000 shares to 140,000,000 shares of Common Stock (par
value $.01).
/ / FOR / / AGAINST / / ABSTAIN
5. To adopt the Wade Cook Financial Corporation 1997 Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
Dated:
- --------------------------------------,
1997. --------------------------------------
Signatures
Print shareholder Name(s)
exactly as it/they appear(s)
on your certificate or
brokerage account where they
are held: Complete if known:
Certificate No.:
- ------------------------------ ------------------------------
No. of Shares:
- ------------------------------ ------------------------------
- ------------------------------
