<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
|_| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASTBROKERS INTERNATIONAL INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRELIMINARY COPY
EASTBROKERS INTERNATIONAL INCORPORATED
Notice of Annual Meeting of Stockholders
to be held on November 5, 1999 and Proxy Statement
October 1, 1999
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
6000 FAIRVIEW ROAD
SUITE 1410
CHARLOTTE, NORTH CAROLINA 28210
October 1, 1999
Dear Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Eastbrokers International Incorporated. The meeting will be held
on Friday, November 5, 1999, at 10:00 a.m., at 6000 Fairview Road, Suite 1410,
Charlotte, North Carolina 28210.
In the following pages, you will find the formal notice of our annual
meeting and our proxy statement. After reading the proxy statement, please mark,
sign and promptly return the enclosed proxy card to ensure that your shares are
represented at the meeting.
We hope that many of you will be able to attend our annual meeting in
person. It is important that your shares be represented and voted at the Annual
Meeting regardless of the size of your holdings. If your shares are registered
in your name and you plan to attend the Annual Meeting, please mark the
appropriate box on the enclosed proxy card and you will be registered for the
meeting. We urge you to attend the meeting but if you cannot, you may instead
vote by proxy.
We appreciate the continuing interest of our stockholders in our
business, and we look forward to seeing you at the meeting.
Sincerely,
Martin A. Sumichrast
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
6000 FAIRVIEW ROAD
SUITE 1410
CHARLOTTE, NORTH CAROLINA 28210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1999
The annual meeting of stockholders of Eastbrokers International
Incorporated will be held at 10:00 a.m. on Friday, November 5, 1999 at 6000
Fairview Road, Suite 1410, Charlotte, North Carolina 28210, for the following
purposes:
1. To elect one (1) director for a term of three years;
2. To approve an amendment to Eastbrokers' 1996 Stock Option Plan to
increase the number of shares from 850,000 to 1,100,000;
3. To approve an amendment to Eastbrokers' Certificate of
Incorporation to increase the number of authorized shares of
common stock $.05 par value per share, to 25,000,000 and to
increase the total number of authorized shares of all classes
of capital stock to 35,000,000;
4. To ratify the appointment of Spicer, Jeffries & Co. as
Eastbrokers' independent public accountants for fiscal year
2000; and
5. To transact such other business as may properly come before the
meeting.
To ensure that your shares are represented at the meeting in the event
that you do not attend, please mark and sign the enclosed proxy card and return
it in the enclosed envelope.
By Order of the Board of Directors
/s/ Kevin D. McNeil
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
Date: October 1, 1999
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS FOR 1999
TABLE OF CONTENTS
PAGE
General Information for Stockholders............................ 1
Purpose of Proxy........................................... 1
How to Vote................................................ 1
Matters to be Submitted to a Vote.......................... 1
Revoking Proxies........................................... 1
Naming Other Proxies....................................... 1
Who May Vote............................................... 1
Item 1.
Election of Directors...................................... 2
Nominee for Election for a Three-Year Term Expiring at the
2002 Annual Meeting..................................... 2
General Information Regarding the Board of Directors............ 2
Directors Continuing in Office Until the 2001 Annual Meeting 2
Directors Continuing in Office Until the 2000 Annual Meeting 3
Meetings of the Board...................................... 3
Committees of the Board.................................... 3
Director Compensation...................................... 3
Executive Officer Compensation.................................. 4
Security Ownership of Management and Certain Beneficial Owners.. 7
Section 16(a) Beneficial Ownership Reporting Compliance......... 9
Certain Relationships and Related Transactions.................. 9
Item 2.
Approval of Amendment to the 1996 Stock Option Plan to Increase the
Number of Shares Authorized Under the Plan.............. 13
Item 3.
Approval of Amendment to the Certificate of Incorporation
to Increase the Number of Authorized Shares of
Common Stock............................................ 16
Item 4.
Ratification of Independent Public Accountants............. 17
Stockholder Proposals for the Annual Meeting of Stockholders for 2000 18
Other Information............................................... 18
i
<PAGE>
GENERAL INFORMATION FOR STOCKHOLDERS
PURPOSE OF PROXY. This proxy statement and the enclosed proxy card
relate to the annual meeting of stockholders of Eastbrokers International
Incorporated, a Delaware corporation ("Eastbrokers" and, together with our
subsidiaries, "we" or "us"), for 1999. Eastbrokers' Board of Directors is
soliciting proxies from stockholders in order to provide every stockholder an
opportunity to vote on all matters submitted to a vote of stockholders at the
meeting, whether or not he or she attends in person. This proxy statement and
the enclosed proxy card are being mailed to stockholders beginning on or about
October 1, 1999.
HOW TO VOTE. You may vote on each matter to be submitted to a vote of
stockholders at the meeting by marking the appropriate box on the proxy card,
signing it and returning it in the enclosed envelope. When the proxy card is
properly signed and returned by you, your shares will be voted at the meeting by
the proxyholders named on the proxy card in accordance with your directions. If
you return the proxy card without marking a box for a specified matter, your
shares will be voted on that matter as recommended by Eastbrokers' Board of
Directors.
MATTERS TO BE SUBMITTED TO A VOTE. The only matters known to management
to be submitted to a vote of stockholders at the meeting are (1) the election of
one (1) director, (2) the approval of an amendment to Eastbrokers' 1996 Stock
Option Plan to increase the number of shares from 850,000 to 1,100,000 (3) the
approval of an amendment to Eastbrokers' Certificate of Incorporation to
increase the number of authorized shares of common stock, $.05 par value, per
share ("Common Stock") to 25,000,000 and to the increase the total number of
authorized shares of all classes of capital stock to 35,000,000; and (4) the
ratification of Spicer, Jeffries & Co. as our independent public accountants for
fiscal year 2000. When you sign and return a proxy card, your proxy card gives
the proxyholders the discretionary authority to vote your shares in accordance
with their best judgment on any other business that may come before the meeting.
Unless you specify otherwise, your shares will be voted on any other business as
recommended by Eastbrokers' Board of Directors.
REVOKING PROXIES. If you sign and return a proxy card, you may revoke
it or submit a revised one at any time before the vote to which the proxy card
relates. You may also vote by ballot at the meeting. If you vote by ballot, you
will thereby cancel any proxy which you previously returned as to any matter on
which you vote by ballot.
NAMING OTHER PROXIES. You may designate as your proxy someone other
than those named on the enclosed proxy card by crossing out those names and
inserting the name(s) of the person(s) you wish to have act as your proxy. No
more than three persons should be so designated. In such a case, you must
deliver the proxy card to the person(s) you designated and they must be present
and vote at the meeting. Proxy cards on which other proxyholders have been
designated should not be mailed or delivered to us.
WHO MAY VOTE. Stockholders as of the close of business on September 10,
1999 are entitled to notice of and to vote at our annual meeting. Each share of
common stock, par value $.05 per share, of Eastbrokers is entitled to one vote.
<PAGE>
As of September 10, 1999, 5,206,750 shares of common stock were outstanding.
Those shares were held by 87 stockholders of record.
ITEM 1. ELECTION OF DIRECTORS
Eastbrokers' By-Laws provide for not less than one (1) director and not
more than nine (9) directors. The Board of Directors has established that the
number of directors which constitute the entire Board shall be five (5).
Eastbrokers' Certificate of Incorporation, as amended, provides for a staggered
Board of Directors, such that members of the Board of Directors are divided into
three classes, as nearly equal in number as the then total number of directors
constituting the entire Board permits, with the term of office of one class
expiring each year. Dr. Lawrence Chimerine has been nominated as a class one
director, Mr. Jay R. Schifferli and Dr. Michael Sumichrast have been elected as
class two directors to serve until the annual meeting of stockholders to be held
during the year 2000. Messrs. Martin A. Sumichrast and Wolfgang Kossner have
been elected as class three directors to serve until the annual meeting of
stockholders to be held during the year 2001. There are no family relationships
among any officers and directors of Eastbrokers, except that Michael Sumichrast,
Ph.D. and Martin A. Sumichrast are father and son, respectively. Biographical
information, including the age, position held with Eastbrokers, term of office
as director, employment during the past five years, and certain other
directorships of each nominee and each director not up for election is set forth
below.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002
ANNUAL MEETING.
DR. LAWRENCE CHIMERINE, 59, Director of Eastbrokers since February
1999, is a Managing Director and Chief Economist at the Economic Strategy
Institute, a position he has held since 1993. Since 1991, he also has served as
President of Radnor International Consulting, Inc., an international consulting
firm. Dr. Chimerine is also a director of Bank United Corp. and Bank United,
Outsource International, Inc. and Sanchez Computer Associates, Inc.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEE NAMED ABOVE.
GENERAL INFORMATION REGARDING THE BOARD OF DIRECTORS
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
MARTIN A. SUMICHRAST, 32, Chairman of the Board, Chief Executive
Officer and President of Eastbrokers since December 1998, and Vice Chairman of
Eastbrokers since March 1997; and a Director of Eastbrokers since its inception
in 1993. Mr. Sumichrast is a founder of Eastbrokers and was formerly Secretary
and Executive Vice President and Chief Financial Officer. Mr. Sumichrast is
also a Director of EBI Securities Corporation and Chairman of Eastbrokers
North America, Inc., a subsidiary of Eastbrokers.
WOLFGANG KOSSNER, 30, Vice Chairman of the Board since December 1998
and a Director of Eastbrokers since August 1996. Mr. Kossner was Executive
Vice President of Eastbrokers from August 1996 until November 1, 1996.
2
<PAGE>
Mr. Kossner is the co-founder of Eastbrokers Beteiligungs AG, a subsidiary
acquired by Eastbrokers in 1996. From 1993 through 1995, Mr. Kossner served
as the managing director of WMP Bank AG ("WMP"), a subsidiary acquired by
Eastbrokers in 1996. Prior to that, Mr. Kossner was the manager of securities
trading at WMP from 1991 to 1993. Mr. Kossner presently serves on the
Supervisory Boards of Eastbrokers' subsidiaries in Vienna, Ljubljana and Zagreb.
Mr. Kossner is also principal and founder of General Partners Beteiligungs
A.G., Eastbrokers's largest stockholder.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
MICHAEL SUMICHRAST, Ph.D., 78, Director of Eastbrokers since 1993, was
Chairman of the Board of Eastbrokers since its inception in 1993 until March
1997. From 1990 to 1994, Dr. Sumichrast served as Chairman of the Board of
Sumichrast Publications, Inc., a real estate publication located in Rockville,
Maryland. During this time, he also served as an economic adviser and
representative of various international American companies. From 1963 to 1990,
Dr. Sumichrast was the senior vice president and chief economist of the National
Association of Home Builders (NAHB), a home builders' professional association.
JAY R. SCHIFFERLI, 39, Director of Eastbrokers since January 1999, is a
Partner at the law firm of Kelley Drye & Warren LLP, an international law firm
with offices in the United States, Europe and Asia. Mr. Schifferli joined Kelley
Drye in 1986, and he concentrates his practice in securities and corporate law.
Kelley Drye & Warren LLP is counsel to Eastbrokers.
MEETINGS OF THE BOARD. During the fiscal year ended March 31, 1999, the
Board of Directors met 6 times in person or by telephonic conference meeting or
by written consent. Each director listed above who was then serving attended all
of the meetings of Eastbrokers' Board of Directors and the meetings of the
committees of Eastbrokers' Board of Directors of which he was a member.
COMMITTEES OF THE BOARD. Eastbrokers' Board of Directors has one
standing committee. The Audit Committee held one meeting during fiscal 1999.
Messrs. Jay R. Schifferli, Michael Sumichrast, Ph.D. and Dr. Lawrence Chimerine
are members of the Audit Committee. No member of the committee may be an
employee of Eastbrokers.
The committee is responsible for: policies, procedures and other
matters relating to accounting, internal financial controls and financial
reporting, including the engagement of independent auditors, the planning,
scope, timing and cost of any audit and any other services the independent
auditors may be asked to perform; reviewing with the independent auditors their
report on the financial statements following completion of each such audit;
policies, procedures and other matters relating to business integrity, ethics,
conflicts of interest, antitrust and insider trading; reviewing financial
objectives and financial condition; reviewing stock and debt issues and credit
facilities; and reviewing dividend and stock repurchase policies, foreign
exchange operations, hedging and derivatives operations, and compliance with
covenants under debt issues and credit facilities.
DIRECTOR COMPENSATION. In April 1999, the Board adopted a company
policy that eliminated all cash payments for services on the Board and
attendance at Board meetings. Instead, each non-officer director of Eastbrokers
3
<PAGE>
will be awarded 7,500 shares of restricted stock at the time they join the Board
and an annual award of 5,000 options pursuant to Eastbrokers' 1996 Stock Option
Plan, as amended. Provisions of the Plan are described under "Executive Officer
Compensation - 1996 Stock Option Plan." The restricted stock and options were
granted to each of Dr. Chimerine, Dr. Sumichrast and Mr. Schifferli at the time
the policy was adopted in April 1999.
During the fiscal year ended March 31, 1999, no fees were paid. All
current directors waived such fees for the fiscal year ended March 31, 1999.
EXECUTIVE OFFICER COMPENSATION
The following Summary Compensation Table sets forth the compensation
for the named executives for the years ended March 31, 1999, 1998 and 1997. No
other executive officer had total annual salary and bonus during any such period
equal to or greater than $100,000. Effective December 15, 1998, Peter Schmid
resigned as Chairman of the Board, President and Chief Executive Officer of
Eastbrokers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
NAME AND PRINCIPAL POSITION SECURITIES
- --------------------------- THER ANNUAL RESTRICTED STOCK UNDERLYING LTIP ALL OTHER
YEAR SALARY BONUS COMPENSATION AWARDS($) OPTIONS/SARS(#) PAYOUTS COMPENSATION
---- ------ ----- ------------ -------------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Martin A. Sumichrast(1) 1999 $ 175,000 $ -- -- -- 75,000 -- --
Chairman, President 1998 $ 120,000 $ 20,000 -- -- -- -- --
and Chief Executive 1997 $ 120,000 $ 11,000 -- -- -- -- --
Officer
Kevin D. McNeil(2) 1999 $ 75,000 $ 25,000 -- -- 50,000 -- --
Chief Financial 1998 $ 57,500 $ 17,250 -- -- -- -- --
Officer, Executive 1997 -- -- -- -- -- -- --
Vice President of
Finance, Treasurer, and
Secretary
Peter Schmid(3) 1999 -- -- -- -- -- -- --
Former Chairman, 1998 $ 138,305 $ 30,000 -- -- -- -- --
President 1997 $ 129,988 -- -- -- -- -- --
and Chief Executive
Officer
</TABLE>
- ------------------
(1) Martin A. Sumichrast became Chairman of the Board, President and Chief
Executive Officer of Eastbrokers in December 1998, and was Vice
Chairman of the Board since March 1997. Prior to that, he was Executive
Vice President and Chief Financial Officer.
(2) Kevin D. McNeil became Executive Vice President and Secretary of
Eastbrokers in December 1998. He continues to serve as Chief Financial
Officer and Treasurer.
4
<PAGE>
(3) Mr. Schmid was the Chairman of the Board and Chief Executive Officer
from March 1997 through December 15, 1998 and President of Eastbrokers
from August 1996 through December 1998.
EMPLOYMENT AGREEMENTS
Effective January 1995, Eastbrokers entered into an employment agreement with
Mr. Martin A. Sumichrast. Effective as of December 31, 1998, Mr. Sumichrast
entered into a new Employment Agreement which will expire in December 2004, and
will renew for a period of five years following the expiration date, unless
contrary notice is given by either party. Eastbrokers also entered into an
Employment Agreement, effective as of December 31, 1998 with Kevin D. McNeil,
which agreement will expire in December 2002, unless contrary notice is given by
either party. The annual salaries for Martin A. Sumichrast and Mr. McNeil have
been initially fixed at $240,000 and $120,000, respectively, with such
subsequent increases in salary during the term of the agreements as may be
determined by the Board of Directors. Messrs. Martin A. Sumichrast and McNeil
are each eligible to receive a quarterly performance bonus of up to 1 percent
and 1/4 of 1 percent, respectively, of total revenue of Eastbrokers in excess of
$6,000,000 per quarter. Mr. Sumichrast and Mr. McNeil have forgiven any bonuses
owed to them through the period ending March 31, 1999. As an inducement for
entering into each of their respective agreements, Eastbrokers has agreed to
sell 200,000 shares and 50,000 shares at $3.50 and $3.00 per share of Common
Stock, respectively, to Mr. Martin A. Sumichrast and Mr. McNeil, in exchange for
each of Messrs. Sumichrast and McNeil issuing to Eastbrokers a promissory note
in the amount of $700,000 and $150,000, respectively. On January 1, 1999, Martin
A. Sumichrast and Kevin D. McNeil purchased 70,000 Placement Agent Common Stock
Warrants and 32,583 Placement Agent Common Stock Warrants from Eastbrokers NA,
respectively, in each case for an amount equal to $0.25 per warrant. Each
warrant will entitle Mr. Sumichrast and Mr. McNeil, each, to purchase one (1)
share of Eastbrokers' common stock at a price of $7.00 per share. Payment for
the warrants will be in the form of unsecured promissory notes, with one-year
terms and interest accruing at 8 percent. The agreements provide, among other
things, for participation in an equitable manner in any profit-sharing or
retirement plan for employees or executives and for participation in employee
benefits applicable to employees and executives of Eastbrokers. The agreements
further provide for the use of an automobile and other fringe benefits
commensurate with their duties and responsibilities. The agreements also provide
for benefits in the event of disability.
Pursuant to the agreements, employment may be terminated by Eastbrokers with
cause or by the executive with or without good reason. Termination by
Eastbrokers without cause, or by the executive for good reason, would subject
Eastbrokers to liability for liquidated damages in an amount equal to the
terminated executive's current salary and a pro rata portion of their prior
year's bonus for the remaining term of the agreement, payable in equal monthly
installments, without any set-off for compensation received from any new
employment. In addition, the terminated executive would be entitled to continue
to participate in and accrue benefits under all employee benefit plans and to
receive supplemental retirement benefits to replace benefits under any qualified
plan for the remaining term of the agreement to the extent permitted by law.
Under the agreements, Eastbrokers is obligated to purchase insurance policies on
the lives of Messrs. Martin A. Sumichrast and McNeil. Eastbrokers will pay the
premiums on these policies and upon the death of the employee, the Company will
5
<PAGE>
receive an amount equal to the premiums it paid under the policy and the
remaining proceeds will go to the employee's designated beneficiary. Eastbrokers
has a one million dollar key man life insurance policy on Martin A. Sumichrast
and a $500,000 key man life insurance policy on Mr. McNeil, in each case with
the Company as the beneficiary.
Effective January 1, 1999, Wolfgang Kossner, Vice Chairman of the Board, entered
into a one-year Consulting Agreement with Eastbrokers. Mr. Kossner will receive
compensation for his services as a consultant to the Company of 200,000 Class C
Warrants, payable in equal installments on March 31, 1999, June 30, 1999,
September 30, 1999 and December 31, 1999. The value of the Class C Warrants will
be determined for compensation purposes using the Black Scholes method at the
time of grant. As additional compensation under the agreement, Mr. Kossner will
receive project success fees to be determined. The agreement may be terminated
by Eastbrokers for cause and in the event that Eastbrokers terminates the
agreement for any reason other than "for cause," Mr. Kossner shall be entitled
to the remaining payments that would have otherwise been payable had his
services not been terminated. The agreement also provides for full compensation
and reimbursement of expenses in the event of disability.
OPTION/SAR GRANTS
There were no grants to any of the named executive officers or Directors of
options, stock appreciation rights or similar instruments during the fiscal year
ended March 31, 1998. On December 23, 1998, the Board of Directors of
Eastbrokers granted stock options to Martin A. Sumichrast, Wolfgang Kossner and
Kevin D. McNeil. Pursuant to these grants, Martin A. Sumichrast and Wolfgang
Kossner are each entitled for 10 years to purchase 75,000 shares of Eastbrokers'
Common Stock at $4.00 per share and Kevin D. McNeil is entitled for 7 years to
purchase 50,000 shares of Eastbrokers' Common Stock at $4.00 per share.
OPTION/SAR EXERCISES
Options for 7,750 shares of Common Stock were exercised during the fiscal year
ended March 31, 1998. Options for 10,000 shares of Common Stock were exercised
during the fiscal year ending March 31, 1999.
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Value of
Number of Securities Unexercised In-The-
Underlying Money
Unexercised Options/SARs at
Shares Value Options/SARS at FY- FY-End($)
Acquired on Realized End(#) Exercisable/ Exercisable/
Name Exercise (#) $ Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Martin A. Sumichrast 0 - 0/75,000 -
Kevin D. McNeil 0 - 0/50,000 -
</TABLE>
6
<PAGE>
1996 STOCK OPTION PLAN
At the Annual Meeting held on December 10, 1996, the stockholders
approved the 1996 Stock Option Plan (the "Plan") pursuant to which officers,
employees, directors and consultants of the Company and its Affiliates are
eligible to be granted Awards. The Plan is administered by the Stock Award
Committee, or, in the absence of such a committee by the entire Board, which has
the plenary authority to grant Awards including Stock Options, Stock
Appreciation Rights, Restricted Stock, or any combination of the foregoing, and
to determine the terms and conditions of the Awards.
The total number of shares of Common Stock reserved and available for
distribution as Awards under the Plan was 400,000. In October 1997, the Plan was
initially amended to provide an additional 200,000 shares available for
distribution. In 1999, the Plan was amended to provide an additional 250,000
shares for distribution. Currently, the total number of shares of Common Stock
available under the Plan is 850,000.
In the fiscal year ended March 31, 1997, an aggregate of 25,000 shares
of Common Stock and options to purchase 35,000 shares were awarded pursuant to
the Plan.
During the fiscal year ended March 31, 1997, an additional 12,000
shares of Common Stock were issued outside of the Plan as compensation for
services to the Company. During the fiscal year ended March 31, 1998, an
additional 10,000 shares were issued outside of the Plan as compensation for
services to the Company.
During the year ended March 31, 1999, 220,000 options to purchase
shares of Common Stock were granted under this plan.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares of Eastbrokers'
Common Stock owned as of September 10, 1999 by (i) each person who is known by
Eastbrokers to own beneficially more than five percent of Eastbrokers' Common
Stock; (ii) each of Eastbrokers' officers and directors; and (iii) all officers
and directors as a group. Except as otherwise noted, the persons named in the
table below do not own any other capital stock of Eastbrokers and have sole
voting and investment power with respect to all shares as beneficially owned by
them.
<TABLE>
<CAPTION>
Percentage of
Name and Address (1) Position with Eastbrokers Number of Shares Shares
------------------------------- ------------------------------------- ---------------------- ----------------
<S> <C> <C> <C>
Martin A. Sumichrast (2) Chairman of the Board, President,
Chief Executive Officer and Director 390,000 7.28
Kevin D. McNeil (3) Executive Vice President,
Secretary, Treasurer and Chief
Financial Officer 110,078 2.09
Wolfgang Kossner (4) Vice Chairman 2,220,420 39.60
Dr. Lawrence Chimerine (5) Director 12,500 *
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Name and Address (1) Position with Eastbrokers Number of Shares Shares
------------------------------- ------------------------------------- ---------------------- ----------------
<S> <C> <C> <C>
Jay R. Schifferli (5) Director 12,500 *
Michael Sumichrast, Ph.D. (5) Director 12,500 *
Cherry Creek Investments, - 445,000 8.16
Ltd.(6)
General Partners AG (7) - 1,987,920 35.46
Punta Investors LLC (8) - 930,000 15.29
All Officers and Directors as 2,757,998 47.31
a Group (6 persons)
</TABLE>
- ----------------------
* Less than 1 percent
(1) Except as otherwise noted, c/o Eastbrokers International Incorporated,
6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210.
(2) 190,000 shares are owned directly by Martin A. Sumichrast, 50,000
shares are owned by Sumichrast Enterprises, Inc., a corporation of
which Martin A. Sumichrast is an officer and director and the owner.
Includes 150,000 shares issuable upon exercise of Placement Agent
Warrants to acquire Common Stock at $7.00 per share and which are
included, together with the Placement Agent Warrants, under this
registration statement. If all such included shares are sold, the total
percentage of shares owned will be 4.61%.
(3) Includes 57,583 shares issuable upon exercise of Placement Agent
Warrants to acquire Common Stock at $7.00 per share and which are
included, together with the Placement Agent Warrants, under this
registration statement. If all such included shares are sold, the total
percentage of shares owned will be 1.01%.
(4) 1,587,920 shares are owned indirectly through General Partners
Beteiligungs AG, formerly KHS Beteiligungs AG ("GP"), of which Mr.
Kossner is a principal stockholder. 200,000 shares were owned by
Karntner Landes und Hypothekenbank AG (the "Bank") as nominee for GP.
Mr. Kossner may be deemed to have shared voting and investment power
with respect to these shares. Also includes 32,500 shares held by the
Bank as nominee for Central and Eastern European Fund ("Fund"), of
which Mr. Kossner is a director. This inclusion of such Fund shares
shall not be construed as an admission that Mr. Kossner is the
beneficial owner of such shares. Includes 400,000 shares issuable upon
the exercise of warrants to acquire Common Stock at $7.00 per share
held by GP. The 400,000 shares issuable upon the exercise of warrants
held by GP and 400,000 of the shares of Common Stock owned indirectly
through GP are included under this registration statement by GP. If all
of such shares are sold by GP the total percentage of shares owned will
be 29.97%.
(5) Includes 7,500 shares of restricted Common Stock and 5,000 options to
acquire shares of Common Stock at $5.00 per share.
(6) Cherry Creek Investments, Ltd.'s address is c/o EBI Securities Corp.,
6300 South Syracuse Way, Suite 645, Englewood, Colorado 80111.
(7) Includes 400,000 shares issuable upon the exercise of warrants to
acquire Common Stock at $7.00 per share. GP is including under this
registration statement all such 400,000 Class C Purchase Warrants and
400,000 of its shares of Common Stock. If all such securities
registered hereunder are sold, GP will own 25.67% of Eastbrokers,
including 200,000 shares issuable upon exercise of options to acquire
Common Stock at $10.00 per share held by GP.
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(8) Punta Investors LLC's address is c/o West End Capital LLC, One World
Trade Center, Suite 4563, New York, New York 10048. Includes 890,000
shares of Common Stock underlying the 5 percent Debentures (of which
only 445,000 are currently issuable upon conversion of the 5 percent
Debentures) and 40,000 shares of Common Stock underlying 40,000 Class C
Common Stock Purchase Warrants. Under certain circumstances, pursuant
to an agreement between Eastbrokers and the holders of the 5 percent
Convertible Debentures due 2002, Eastbrokers is required to issue to
the holders the additional 445,000 shares of Common Stock underlying
the 5 percent Convertible Debentures due 2002.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Easbrokers' directors and
officers and holders of more than 10% of the outstanding shares of common stock
to file with the SEC initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of Eastbrokers.
Eastbrokers believes that, during fiscal 1998, its directors and officers and
holders of more than 10% of the outstanding shares of common stock complied with
all reporting requirements under Section 16(a), except General Partners
Beteiligungs AG which did not file on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with Mr. Randall F. Greene's resignation from the Board
of Directors of Eastbrokers, Eastbrokers entered into a six month consulting
agreement dated March 27, 1997 pursuant to which Mr. Greene was paid $24,000 and
granted options to purchase 7,750 shares of Eastbrokers' Common Stock at $6.50
per share. A related letter agreement was entered into with Mr. Green on March
27, 1997, as amended by a letter dated April 29, 1997. Under the related letter
agreement, Mr. Greene was paid $13,750 and granted 12,500 shares of Eastbrokers'
Common Stock in full satisfaction for consulting services rendered during the
period August 1, 1996 through March 31, 1997. Also pursuant to this agreement,
Eastbrokers agreed to indemnify Mr. Greene against certain liabilities, the
parties exchanged mutual releases and Mr. Greene agreed to sell his shares of
Eastbrokers' Common Stock to the Company's primary market maker subject to
certain conditions.
Eastbrokers entered into a one year consulting agreement dated March
31, 1997 with Dr. Sumichrast, a Director of Eastbrokers, pursuant to which Dr.
Sumichrast was granted 20,000 shares of Eastbrokers' Common Stock to vest
ratably over the term of the agreement. Dr. Sumichrast provided services to
Eastbrokers during the period April 1, 1997 through September 30, 1997 and
received 10,000 shares at an average price of $6.598 per share as compensation
for these services.
In December 1996, Eastbrokers Vienna loaned Dr. Muller-Tyl
approximately $72,000 USD. Interest on the outstanding balance of this
obligation is computed at 8 percent per annum until paid in full.
Dr. Muller-Tyl was the Chief Operating Officer of Eastbrokers until his
resignation in January 1998.
Eastbrokers leases office space from General Partners Immobilenz
("GPI")(formerly Residenz Realbesitz AG ("Residenz")) for its Vienna operations
pursuant to a month-to-month lease. Under the terms of the leases, the Company
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incurred occupancy costs of approximately 1,200,000 Austrian Schillings
(approximately $95,000 USD) in the fiscal years ended March 31, 1998 and 1999.
The terms of this lease were negotiated such that Eastbrokers is subject to
occupancy expenses no greater than the current market rates. GPI is a subsidiary
of General Partners, an Austrian holding company and the beneficial owner of
2,187,920 shares of Common Stock. Mr. Kossner, a Director of Eastbrokers and an
officer of Eastbrokers from August, 1996 until November, 1996, owns
approximately 30 percent of the outstanding shares of General Partners. He is a
member of General Partners' Supervisory Board, WMP's Supervisory Board, the
Eastbrokers AG Supervisory Board, and is a Director of Eastbrokers.
At December 31, 1998, Eastbrokers has a receivable related to
securities transactions from Mr. Kossner in the amount of 1,132,776 Austrian
Schillings (approximately $97,000 USD).
At December 31, 1998, Eastbrokers has a receivable related to share
transactions from Z.E. Beteiligungs AG ("ZE") in the amount of 7,745,600
Austrian Schillings (approximately $661,000 USD). ZE is a subsidiary of General
Partners.
WMP is an Austrian broker-dealer, market maker, and member of the
Vienna Stock Exchange. WMP's common stock is publicly traded on the Main Market
of the Vienna Stock Exchange. From time to time, WMP will make a market in stock
of companies that have a direct relationship to Eastbrokers through its
Directors or Shareholders. For the year ended March 31, 1999, Eastbrokers
generated profits of approximately $1,190,000 USD related to the trading of
shares of these companies.
In October 1997, WMP sold its interest in WMP Vermogensverwaltungs GmbH
("WMP GmbH"), primarily an inactive subsidiary to COR Industrieberatung GmbH,
for 2.5 million Austrian Schillings (approximately $200,000 USD). The sales
price approximated the cost basis of WMP GmbH at the date of disposition.
In December 1997, Eastbrokers Vienna sold its 51 percent interest in
Su(beta)warenindustrie Beteiligungs GmbH ("SWIB") to Mr. Schmid for 13 million
Austrian Schillings (approximately $1,025,000 USD). Eastbrokers acquired its
ownership interest in SWIB in mid-1997 for 510,000 Austrian Schillings
(approximately $40,000 USD). At the time of acquisition, the principal asset of
SWIB was an investment in a company which was entering bankruptcy proceedings
and there was considerable uncertainty regarding the future realizable value of
this asset. By December 1997, bankruptcy proceedings had progressed to a point
where an estimate could be made on the net realizable value of this asset. Based
on the information available at that time, SWIB's value at the date of
disposition was determined by the Board of Directors to be in the range of 12
million to 14 million Austrian Schillings (approximately $950,000 to $1,100,000
USD). The sale of SWIB resulted in a gain of approximately $1.0 million USD and
is included in the accompanying consolidated statement of operations.
As of December 31, 1998, ZE, a 26.27 percent owned subsidiary of
General Partners, owned approximately 25 percent of UCP Beteiligungs AG ("UCP
AG"), an Austrian holding company. UCP AG, in turn, owns 27.7 percent of a
Russian chemical company, UCP AOOT. Shares of UCP AOOT are listed
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over-the-counter on the Vienna Stock Exchange. WMP is a market maker in the
shares of UCP AOOT on the Vienna Stock Exchange.
Upon acquiring Eastbrokers Beteiligungs AG on August 1, 1996,
Eastbrokers assumed a receivable in the amount of 7,387,697 ATS (approximately
$704,000 USD, at the then current exchange rates) from Mr. Schmid. As of
December 31, 1997, the receivable increased due to cash advances to 8,046,177
ATS (approximately $635,000 USD, at the then current exchange rates). These cash
advances included the U.S. Dollar denominated amount fluctuates based on the
foreign currency exchange rate. On May 31, 1998, Mr. Schmid entered into a
Non-Negotiable Term Note in the amount of 8,046,177 Austrian Schillings. This
amount is reported in the Receivable from executive officer in the consolidated
statement of financial condition. This Note bears interest at 8 percent per
annum and matures May 31, 2000. It was collateralized by 150,000 shares of
Eastbrokers' Common Stock. On October 8, 1998, Mr. Schmid repaid 6,748,111
Austrian Schillings of the total amount due. As of March 31, 1999, Mr. Schmid
did not owe any remaining balance under these arrangements.
Periodically, Eastbrokers engages in securities transactions with URBI
S.A. ("URBI"), a Spanish investment company. Mr. Kossner was a member of URBI's
Supervisory Board from November 1996 through June 1998 and Mr. Schmid was a
member until May 1997. All transactions between URBI and Eastbrokers were
consummated at the then current market prices. At December 31, 1997, the amount
due from URBI was 7,023,576 Austrian Schillings or approximately $555,000,
arising exclusively from various securities transactions. This amount is
reported in the Receivable from affiliated companies in the consolidated
statement of financial condition. Prior to June 30, 1998, URBI had repaid all
amounts due with respect to the transactions open at December 31, 1997. As of
December 31, 1998, Eastbrokers had a receivable from URBI in the amount of
2,780,030 Austrian Schillings or approximately $236,000 related to transactions
occurring subsequent to December 31, 1997. In addition, Eastbrokers entered into
a repurchase agreement with URBI in June 1997. This repurchase agreement and the
related shares of Vodni Stavby a.s., a Czech construction company, were sold to
a non-affiliated Czech Republic company in October 1997.
During October 1997, WMP entered into a stock loan transaction with VCH
in the amount of 4,065,000 Austrian Schillings (approximately $325,000). In
August, 1998, VCH repaid Eastbrokers in full for this stock loan transaction.
WMP periodically engages in stock loan transactions as a portion of its normal
business operations.
In December 1997, WMP purchased 7,200,000 ATS (approximately $576,000)
of 8 percent bonds due April 1, 2000 of ZE. This amount is reported in the
Securities owned at value, corporate equities in the consolidated statement of
financial condition. The ZE bonds earn a comparatively higher interest rates
(350 basis point above comparable Austrian governmental rates).
Eastbrokers conducts various business transactions with General
Partners throughout the year. As of December 31, 1998, the Company was owed
$3,787,339 relating to these transactions.
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As of December 31, 1997, Eastbrokers had a receivable from C.R.F. a.s.,
a Slovak privatization company, related to a stock sale transaction and
consulting fees. The total amount due from these transactions was 7,078,500
Austrian Schillings (approximately $559,000). This amount is reported in the
Receivable from affiliated companies in the consolidated statement of financial
condition. Mr. Schmid was the Chairman of the Board of C.R.F. a.s. from
November 1995 through October 1997.
In September 1997, Martin A. Sumichrast acquired 50,000 shares of
Common Stock at a price of $6.00 per share in exchange for a note payable in the
amount of $300,000 to the Company. This amount is recorded in the Note
receivable-common stock in the consolidated statement of financial condition.
This note bears interest at 8 percent per annum and is due September 15, 1999.
This note was paid in full, with accrued interest in February 1999.
On December 23, 1998, the Board of Directors of the Company granted
stock options to Martin A. Sumichrast, Wolfgang Kossner and Kevin D. McNeil.
Pursuant to these grants, Martin A. Sumichrast and Wolfgang Kossner are each
entitled for 10 years to purchase 75,000 shares of Eastbrokers' Common Stock at
$4.00 per share and Kevin D. McNeil is entitled for 7 years to purchase 50,000
shares of Eastbrokers' Common Stock at $4.00 per share.
Effective as of December 31, 1998, Mr. Martin A. Sumichrast entered
into a new Employment Agreement which will expire in December 2004, and will
renew for a period of five years following the expiration date, unless contrary
notice is given by either party. Eastbrokers also entered into an Employment
Agreement, effective as of December 31, 1998, with Kevin D. McNeil, which
agreement will expire in December 2002, unless contrary notice is given by
either party. The annual salaries for Martin A. Sumichrast and Mr. McNeil have
been initially fixed at $240,000 and $120,000, respectively, with such
subsequent increases in salary during the term of the agreements as may be
determined by the Board of Directors. Messrs. Martin A. Sumichrast and McNeil
are each eligible to receive a quarterly performance bonus of up to 1 percent
and 1/4 of 1 percent, respectively, of total revenue of the Company in excess of
$6,000,000 per quarter, respectively. Mr. Sumichrast and Mr. McNeil have
forgiven any bonuses owed to them through the period ending March 31, 1999. See
"Executive Officer Compensation--Employment Agreements."
On January 1, 1999, Martin A. Sumichrast and Kevin D. McNeil purchased
70,000 Class C Warrants and 32,583 Class C Warrants from Eastbrokers N.A.,
respectively, in each case for an amount equal to $0.25 per warrant. Each
warrant will entitle Mr. Sumichrast and Mr. McNeil, each, to purchase one (1)
share of the Company's common stock at a price of $7.00 per share. Payment for
the warrants will be in the form of unsecured promissory notes, with one-year
terms and interest accruing at 8 percent. Eastbrokers sold 200,000 shares at
$3.50 per share and 50,000 shares at $3.00 per share of common stock to Mr.
Martin A. Sumichrast and Mr. McNeil, respectively, in exchange for each of
Messrs. Sumichrast and McNeil issuing to the Company a promissory note in the
amount of $700,000 and $150,000, respectively.
Effective January 1, 1999, Wolfgang Kossner, Vice Chairman of the
Board, entered into a one-year Consulting Agreement with Eastbrokers. Mr.
Kossner will receive compensation for his services as a consultant to
Eastbrokers of 200,000 Class C Warrants, payable in equal installments on March
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31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999. The value of
the Class C Warrants will be determined for compensation purposes using the
Black Scholes method at the time of grant. As additional compensation under the
agreement, Mr. Kossner will receive project success fees to be determined. See
"Executive Officer Compensation--Consulting Agreements."
Effective January 1, 1999, Jay R. Schifferli, a Partner at Kelley Drye
& Warren LLP, became a director of Eastbrokers. Kelley Drye & Warren LLP
received from Eastbrokers legal fees in the amount of $345,311.64 during the
fiscal year ended March 31, 1999. As of the date of this Prospectus, Mr.
Schifferli has received 7,500 shares of restricted Common Stock and 5,000
options to acquire shares of Common Stock at $5.00 per share as non-employee
director compensation.
ITEM 2. APPROVAL OF AMENDMENT TO THE 1996 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AUTHORIZED UNDER THE PLAN.
On December 10, 1996, the 1996 Stock Option Plan was approved by our
stockholders. The purpose of the Plan is to advance the interests of Eastbrokers
by enabling officers, employees, directors and consultants of Eastbrokers and
its Affiliates, as such term is defined by the Plan, to participate in
Eastbrokers' future and to enable us to attract and retain such persons by
offering them proprietary interests in our Company. The Board of Directors has
amended the 1996 Plan, subject to stockholder approval, in order to increase the
number of shares of common stock authorized for issuance under the Plan by
250,000 shares.
The number of shares previously authorized for issuance under the Plan
was 850,000. As of September 10, 1999, options to acquire 696,152 shares have
been awarded under the Plan, of which 322,000 have fully vested and 304,750 have
been exercised. Accordingly, in order to maximize the incentive effect of
enabling officers, employees, directors and consultants of Eastbrokers to
participate in the Plan, the Board of Directors has deemed it prudent to
increase the shares available for grant under the Plan so as to allow future
grants of stock options, stock appreciation rights or restricted stock under the
Plan.
ADMINISTRATION
The Plan is currently administered by the entire Board of Directors in
lieu of a Stock Award Committee; however, pursuant to the Plan, the Board may
appoint a Stock Award Committee (the "Committee"), which would be composed of
not less than two directors of Eastbrokers all of whom shall be Non-Employee
Directors, as that term is defined in the Plan.
The Committee, or the Board acting in place of the Committee, has the
authority to adopt, alter and repeal administrative rules, guidelines and
practices governing the Plan as it, from time to time, deems advisable to
supervise the administration of the Plan. However, no amendment to the Plan
shall be made without the approval of our stockholders to the extent such
approval is required by law or agreement, except that the Eastbrokers Board of
Directors of shall have the authority to amend the Plan to take into account
changes in law and tax and accounting rules, as well as other developments and
to grant Awards which qualify for beneficial treatment under such rules without
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shareholder approval. The Committee, or the full Board, acting in place of the
Committee, may act only by a majority of its members then in office.
ELIGIBILITY
Our officers, employees, directors and consultants and our Affiliates
who are responsible for or contribute to the management growth and profitability
of management, the business of Eastbrokers and its Affiliates are eligible to be
granted Awards under the Plan. We estimate the approximate number of officers
and directors, employees and consultants eligible to participate in the Plan to
be six (6), sixty (60), and five (5) respectively.
TYPES OF AWARDS
The Committee has the authority to grant Awards to our officers,
employees, directors and consultants or our Affiliates. Awards granted to
participants of the Plan include Stock Options, Stock Appreciation Rights,
Restricted Stock, or any combination of the foregoing, as these terms are
defined and regulated under the Plan. The Committee has the authority to grant
either Incentive Stock Options or Non-Qualified Stock Options under the Plan;
however, the former may be granted only to employees of Eastbrokers and its
subsidiaries. The Awards are subject to such terms and conditions as determined
by the Committee and which may differ from Award to Award. The prices,
expiration dates and other material conditions upon which the Stock Options and
Stock Appreciation Rights may be exercised and the consideration received or to
be received by us or our Affiliates for the granting or extension of the Awards
are to be determined by the Committee.
NUMBER OF SHARES
The total number of shares of Stock reserved and available for
distribution as Awards under the Plan, as amended by the Board subject to
stockholder approval, is 1,100,000 shares of our common stock. As of September
10, 1999, awards relating to 696,152 shares had been issued under the Plan.
CHANGE OF CONTROL
The Plan provides that, subject to such additional conditions and
restrictions as the Committee may determine at the time of the grant of an
Award, options granted under the Plan shall become immediately exercisable and
restrictions on restricted stock granted under the Plan shall lapse in the event
of a change of control. Under the Plan, a change in control will occur in the
event that a person acquires 20% or more of Eastbrokers' voting securities, our
stockholders have approved a merger or sale of assets including the Company, or
there occurs a significant change in the composition of the Board of Directors.
SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 STOCK
OPTION PLAN
This summary of certain federal income tax consequences of the Plan is
provided as general information, but does not purport to be a complete and
detailed description of all possible tax consequences to the recipient of an
Option and Eastbrokers. It describes the federal tax consequences in effect as
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of the date set forth in the notice. Each holder of an Option is advised to
consult his tax advisor because tax consequences may vary depending upon the
individual circumstances of the holder.
INCENTIVE STOCK OPTIONS ("ISO"). ISOs are designed to qualify as
incentive stock options under Section 422 of the Internal Revenue code of 1986,
as amended (the "Code"). In the case of ISOs, no taxable gain will be realized
by a recipient upon grant or exercise of the option, and Eastbrokers will not be
entitled to a tax deduction at the time any such option is granted or exercised.
However, the excess of the fair market value of any stock received over the
option price will constitute an adjustment in computing alternative minimum
taxable income at the time of the transfer of stock pursuant to the exercise of
the option, or if later, at the earlier of the time that the stock is
transferable or is not subject to a substantial risk of forfeiture. Alternative
minimum taxable income is the base for calculating an individual taxpayer's
liability for the alternative minimum tax, a tax which is payable if it exceeds
the amount of the individual's tax liability calculated under the regular
method. Additionally, the basis of the stock for alternative minimum tax
purposes would be increased by this adjustment.
If a recipient of an ISO does not dispose of stock acquired by him upon
the exercise of the option within one year after the date of transfer of such
stock or within two years after the date of grant of such an option, any gain
realized by him on a subsequent sale of such stock will be capital gain, which
will be long term capital gain if the stock was held for the appropriate holding
period (currently more than one year). In determining the amount of taxable gain
or loss on a subsequent sale or other disposition of stock obtained by exercise
of an ISO, the tax basis of such stock (for regular tax purposes) will be an
amount equal to the option price paid therefor.
On the other hand, if the recipient sells or otherwise disposes of the
stock obtained by exercise of an ISO within one year of the date of grant of the
option (other than certain permitted dispositions), he will at that time
recognize ordinary income to the extent that the fair market value of the stock
on the date that the option was exercised or the amount realized on sale or
disposition, whichever is less, exceeds the option price. If the amount realized
on sale or disposition is greater than the fair market value of the stock on the
date the option was exercised, such excess will be treated as capital gain,
which will be a long-term capital gain if the stock was held for the appropriate
holding period (currently more than one year).
In general, in any year in which a recipient recognizes ordinary income
because of the disposition of his shares within one year from the date of
exercise or two years from the date of grant of an ISO, Eastbrokers will receive
a corresponding deduction for federal income tax purposes. No deduction will be
allowed to Eastbrokers if the stock acquired upon exercise of an ISO is held for
more than one year after the date of transfer of such stock and more than two
years from the date of grant of the ISO.
NON-QUALIFIED STOCK OPTIONS ("NON-QUALIFIED OPTIONS"). Non-Qualified
Stock Options generally are options to which Section 421 of the Code does not
apply, sometime referred to as non-statutory options. The treatment of
Non-Qualified Options for federal income tax purposes depends on whether the
option has a readily ascertainable fair market value at the time it is granted.
If a Non-Qualified Option has a readily ascertainable fair market value at the
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time of grant, the excess of the fair market value of Non-Qualified Options
received by a recipient over the amount, if any, paid for the options must be
included in the recipient's gross income at the time the option is granted, or
if later, at the earlier of the time that the option is transferable or is not
subject to a substantial risk of forfeiture. If an option with a readily
ascertainable fair market value is not taxable at the time the option is granted
because the option is nontransferable and subject to a substantial risk of
forfeiture, the recipient may nevertheless elect to include such amount in gross
income in the year of grant of the option. Because the Non-Qualified Options are
not actively traded on an established market and because it is likely that the
Non-Qualified Options will be nontransferable by the recipient or will not be
immediately exercisable, it is not expected that the Non-Qualified Options will
have a readily ascertainable fair market value. If a Non-Qualified Options does
not have a readily ascertainable fair market value at the time of grant, there
is no taxable event at grant; rather, the excess of (i) the value of the stock
on the date it is acquired pursuant to exercise of the option over (ii) the
exercise price plus the amount, if any, paid for the option must be included in
the recipient's gross income at the time of the receipt of the stock pursuant to
the exercise of the option, or, if later, at the earlier of the time that the
stock is transferable or is not subject to a substantial risk of forfeiture. If
stock received pursuant to the exercise of a Non-Qualified Option is not taxable
at receipt because the stock is nontransferable and subject to a substantial
risk of forfeiture, the recipient may elect to include such amount in gross
income in the year the stock is received pursuant to exercise of the option.
The receipt of taxable income upon exercise of a Non-Qualified Option
may be ameliorated if the underlying stock is registered because the recipient
may sell a portion of his stock to pay the income tax liability; such is not the
case with the receipt of income upon grant of a Non-Qualified Option. The grant
or exercise of a Non-Qualified Option will not result in any adjustment for
alternative minimum tax purposes. In general, with respect to Non-Qualified
Options, a corresponding deduction is allowed to Eastbrokers for the amount and
at the time that the recipient recognizes income, and such income is subject to
withholding and employment taxes, if applicable.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE 1996 STOCK OPTION PLAN.
ITEM 3. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Stockholders are being asked to consider and approve an increase in the
number of authorized shares of our common stock, $.05 par value, per share.
Specifically, the Board has approved and recommends that the
stockholders adopt an amendment to the First Clause of Article "FOURTH" of our
Certificate of Incorporation which increases the number of authorized shares of
common stock from 10,000,000 to 25,000,000 and increases the total number of
shares of all classes of capital stock from 20,000,000 to 35,000,000. The
provisions of Article Fourth of our Certificate of Incorporation, as proposed to
be amended by this proposal, are set forth in EXHIBIT A.
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As of September 10, 1999, in addition to the 5,206,750 shares of Common
Stock issued and outstanding, we have 850,000 shares of Common Stock reserved
for issuance under the Company's existing benefit plans, of which options for
696,152 are outstanding. An additional 3,907,914 shares of Common Stock are
issuable upon conversion of outstanding convertible notes and debentures and
exercise of outstanding warrants. If the proposed amendment to the Plan is
adopted by stockholders at the annual meeting, an additional 250,000 shares of
common stock will be issuable thereunder. Unless the shares of authorized
capital stock is increased, we will not be able to grant any additional shares
of stock under our employee benefit plans, even if the amendment to the Plan is
adopted.
The Board believes that the increased number of authorized shares is
desirable to make additional unreserved shares of Common Stock available for
issuance or reservation without further shareholder authorization, except as may
be required by law or by the rules of the Nasdaq Stock Market. In particular, we
believe that we require the ability to issue additional equity incentive awards
to our employees and potential employees in order to attract and retain the high
caliber of employees we seek. We also believe that having additional shares
authorized and available for issuance will allow us to have greater flexibility
in considering potential future actions involving the issuance of stock.
Currently, however, we have no plans to effect such potential actions. We also
believe that authorizing the issue of more shares will not affect materially any
substantive rights, powers or privileges of holders of our common stock or
preferred stock. Other than with respect to the reservation of common shares in
connection with (1) our current employee benefit plans, (2) the amendment to the
Plan, if approved, and (3) the expectation that we will increase the emphasis on
stock options in compensating our employees and Directors, we have no other
plans or other existing or proposed agreements or understandings to issue, or
reserve for future issuance, any of the additional common shares or preferred
shares which would be authorized by the amendment to our Certificate of
Incorporation.
We do not view the proposed amendment of our Certificate of
Incorporation as part of an "anti-takeover" strategy. The amendment is not being
advanced as a result of any known effort by any party to accumulate common stock
or to obtain control of Eastbrokers.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION.
ITEM 4. SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Spicer, Jeffries & Co. has been recommended by the Audit Committee and
selected by Eastbrokers' Board of Directors to audit our books and accounts for
2000.
Representatives of Spicer, Jeffries & Co. are expected to be present at
the meeting, will be given the opportunity to make a statement if they desire to
do so and will respond to appropriate questions of stockholders.
Spicer, Jeffries & Co. has advised us that neither it nor any of its
members has any direct financial interest in Eastbrokers as a promoter,
underwriter, voting trustee, director, officer or employee.
We have changed our accountants from Deloitte & Touche LLP to Spicer,
Jeffries & Co. This change was reported in our Current Reports on Form 8-K,
dated February 22, 1999 and March 9, 1999. The decision to change was approved
by our Board of Directors. The report of Deloitte & Touche LLP on our financial
statements for the fiscal year ended March 31, 1998, contained no adverse
opinion or disclaimer of opinion and was not modified as to uncertainty, audit
scope or accounting principles. We have had no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Deloitte & Touche LLP, would have caused it to make
reference thereto in their report on our financial statements.
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THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF SPICER, JEFFRIES & CO. AS INDEPENDENT PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING OF STOCKHOLDERS FOR 2000
Proposals which stockholders wish to have considered for inclusion in
the proxy statement for the annual meeting of stockholders for 2000 must be
received at Eastbrokers' principal executive office, Eastbrokers International
Incorporated, 6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210,
on or before July 1, 2000.
OTHER INFORMATION
The presence, in person or by proxy, of stockholders holding a majority
of the outstanding shares of common stock entitled to vote at the meeting is
necessary to constitute a quorum for the transaction of business.
The nominees receiving a plurality of the votes cast will be elected as
directors. In case any nominee should become unavailable for election for any
reason not presently known nor contemplated, the persons named on the proxy
still have the discretionary authority to vote pursuant to the proxy for a
substitute. The affirmative vote of a majority of the outstanding shares of
common stock at the meeting in person or by proxy is required for amendment to
the Plan and ratification of the appointment by auditors.
Only those votes cast for or against a proposal are used in determining
the results of a vote.
Abstentions and broker nonvotes are each included for purposes of
determining the presence or absence of a sufficient number of shares to
constitute a quorum. With respect to the approval of any particular proposal,
abstentions are considered present at the meeting, but since they are not
affirmative votes for the proposal they will have the same effect as votes
against the proposal. Broker nonvotes, on the other hand, are not considered
present at the meeting for the particular proposal for which the broker withheld
authority to vote.
In addition to the solicitation of proxies by mail, officers or other
employees without extra remuneration may solicit proxies by telephone or
personal contact.
We will request brokerage houses, nominees, custodians and fiduciaries
to forward soliciting material to beneficial owners of shares of common stock
and will pay such persons for forwarding such material.
All costs for the solicitation of proxies by Eastbrokers' Board of
Directors, anticipated to be approximately $10,000, will be borne by us.
A list of stockholders entitled to vote at the meeting will be
available for examination by stockholders during ordinary business hours during
the 10 days prior to the meeting at Eastbrokers' principal executive offices at
6000 Fairview Road, Suite 1410, Charlotte, North Carolina 28210.
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<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EASTBROKERS INTERNATIONAL INCORPORATED
IT IS HEREBY CERTIFIED THAT:
1. The Certificate of Incorporation of Eastbrokers International Incorporated
(the "Corporation") is hereby amended by striking out the First Clause of
Article "FOURTH" thereof and by substituting in lieu of said Clause the
following:
1) "The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is thirty
five million (35,000,000) shares, of which twenty five million
(25,000,000) shares shall be Common Stock, par value $.05 per
share ("Common Stock"), and ten million (10,000,000) shares
shall be Preferred Stock, par value $.01 per share ("Preferred
Stock"). The Preferred Stock may be issued with full, multiple
or fractional voting rights with such designations,
qualifications, privileges, limitations, options, conversion
rights and other special relative rights that shall be fixed
from time to time by resolution of the Board of Directors".
2. That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of a majority of the stock entitled to vote
thereon at the annual meeting of the stockholders of the Corporation held on
November 5, 1999.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by
Martin A. Sumichrast, its Chairman, President and Chief Executive Officer, and
Kevin D. McNeil, its Secretary, this _____ day of November, 1999.
-----------------------------
Martin A. Sumichrast
Chairman, President and
Chief Executive Officer
Attest:
- --------------------------
Kevin D. McNeil
Secretary
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS
PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION,
THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
The undersigned hereby appoints Martin A. Sumichrast and Kevin D. McNeil as
Proxies, with the full power of substitution, and hereby authorizes them to
represent and vote, as designed on the reverse hereof, all shares of common
stock of Eastbrokers International Incorporated (the "Company") held of record
by the undersigned on September 10, 1999, at the Annual Meeting of Stockholders
to be held on November 5, 1999, or any adjournment thereof, upon all such
matters as may properly come before the Meeting.
|X| Please mark your votes as in If you plan to attend the Annual |_|
this example. Meeting, place an X in this box.
1. ELECTION OF DIRECTORS
FOR the nominee listed below |_| WITHHOLD AUTHORITY to be for the |_|
nominee listed below
Nominee: Dr. Lawrence Chimerine
FOR AGAINST ABSTAIN
|_| |_| |_|
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1996 STOCK OPTION PLAN to increase
the number of shares authorized under the Plan from 850,000 to 1,100,000.
FOR AGAINST ABSTAIN
|_| |_| |_|
(THE PROXY CONTINUED AND MUST BE SIGNED ON THE REVERSE SIDE.)
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION to
increase the number of authorized shares of common Stock, $0.05 par
<PAGE>
value, to 25,000,000 and to increase the total number of authorized
shares of all classes of capital stock to 35,000,000.
FOR AGAINST ABSTAIN
|_| |_| |_|
4. RATIFICATION OF APPOINTMENT OF SPICER, JEFFRIES & CO., to serve as
Eastbrokers's independent public accountants for fiscal year ending
March 31, 2000.
FOR AGAINST ABSTAIN
|_| |_| |_|
5. In their discretion upon such other business as may properly come
before the Annual Meeting or any postponement or adjournment thereof.
SIGNATURE:____________________________ DATE:____________________________
SIGNATURE:____________________________ DATE:____________________________
(SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as name or names appear on
stock certificate as indicated hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator or guardian, please give
full title as such.
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STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY STATEMENT
PROMPTLY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN
THE UNITED STATES.
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