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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AMERICAN INTERNATIONAL INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
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and 0-11.
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previously. Identify the previous filing by registration statement number,
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AMERICAN INTERNATIONAL INDUSTRIES, INC.
601 HANSON ROAD
KEMAH, TEXAS 77565
PHONE (281) 334-4764 FACSIMILE (281) 334-5090
May 14, 1999
Dear Stockholder:
You are cordially invited to attend our 1999 Annual Meeting of Stockholders
of American International Industries, Inc. to be held on Wednesday, June 2, 1999
at 10:00 a.m. at South Shore Harbor Resort and Conference Center, 2500 South
Shore Blvd., League City, Texas 77573.
We hope you will attend the meeting in person. Whether you expect to be
present and regardless of the number of shares you own, please mark, sign and
mail the enclosed proxy in the envelope provided. Matters on which action will
be taken at the meeting are explained in detail in the notice and proxy
statement following this letter.
Sincerely,
Daniel Dror
Chief Executive Officer
AMERICAN INTERNATIONAL INDUSTRIES, INC.
601 HANSON ROAD
KEMAH, TEXAS 77565
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
Notice is hereby given that the Annual Meeting of Stockholders of American
International Industries, Inc., (the "Company") will be held at South Shore
Harbor Resort and Conference Center, 2500 South Shore Blvd., League City, Texas
77573, at 10:00 a.m. on Wednesday, June 2, 1999 for the following purposes:
1. ELECT FIVE DIRECTORS. The Board has nominated for re-election Daniel
Dror, William Dartmouth, Jordan Friedberg, Erick Friedman, and Jack
Talan, all current directors.
2. RATIFY THE BOARD'S APPOINTMENT OF BDO SEIDMAN, L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 1999. BDO Seidman served in this
capacity for fiscal year 1998.
3. ADOPTION OF 1999 STOCK OPTION PLAN. The Board seeks approval of the 1999
Stock Option Plan.
4. To transact such other business as may properly come before the meeting.
Common stockholders of record at the close of business on April 21, 1999
will be entitled to notice of and to vote at the meeting.
Stockholders unable to attend the Annual Meeting in person are requested to
read the enclosed Proxy Statement and then complete and deposit the proxy
together with the power of attorney or other authority, if any, under which it
was signed, or a notarized certified copy, to the Company at least 48 hours
(excluding Saturdays and Sundays) before the time of the Annual Meeting or with
the chairman of the Annual Meeting prior to the commencement of the Annual
Meeting. Unregistered stockholders who received the proxy through an
intermediary must deliver the proxy in accordance with the instructions given by
such intermediary.
By Order of the Board of Directors
Daniel Dror, Chief Executive Officer
May 14, 1999
AMERICAN INTERNATIONAL INDUSTRIES, INC.
601 HANSON ROAD
KEMAH, TEXAS 77565
(PRINCIPAL EXECUTIVE OFFICE)
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
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INTRODUCTION
This proxy statement is being furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors of American International
Industries, Inc. for use at the Annual Meeting of Stockholders ("Meeting") to be
held at South Shore Harbor Resort and Conference Center, 2500 South Shore Blvd.,
League City, Texas 77573, at 10:00 a.m. on Wednesday, June 2, 1999, for the
purpose of considering and voting upon the matters set forth in the accompanying
Notice of Annual Meeting of Stockholders. This proxy statement and the
accompanying form of proxy are first being mailed to stockholders on or about
May 14, 1999.
The close of business on April 21, 1999, has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Meeting. As of March 31, 1998, there were 118,059,522 shares of the Company's
common stock, par value $.001 per share ("Common Stock"), issued and
outstanding. The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock on the record date is necessary to constitute
a quorum at the Meeting. Abstentions and broker non-votes will be counted
towards a quorum. Abstentions will have the same effect as a vote against a
proposal.
Brokers who hold shares in street name for customers are required to vote
those shares in accordance with instructions received from the beneficial
owners. Broker non-votes will have no effect on any of the proposals.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meeting in accordance with
the directions on the proxies.
If no direction is indicated, the shares will be voted:
1. FOR election of all the nominated directors;
2. FOR ratification of BDO Seidman as the Company's auditors; and
3. FOR adoption of the 1999 Stock Option Plan.
The enclosed proxy, even though executed and returned, may be revoked at any
time prior to the voting of the proxy by any one of the following methods:
(a) execution and submission of a revised proxy,
(b) written notice to the Secretary of the Company, or
(c) voting in person at the Meeting.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report on Form 10-KSB is being mailed
with this proxy statement. The Annual Report does not form any part of the
material for solicitation of proxies.
The Company will provide, without charge, a copy of any exhibits to the
Company's Form 10-KSB, upon written request to Rebekah Laird-Ruthstrom, at 601
Hanson Road, Kemah, Texas 77565.
ITEM 1
ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation and its By-Laws, the
members of the Board of Directors serve for one-year terms. The number of
directors constituting the whole Board is currently seven and the selected
nominees are listed below. Each of the nominees is currently a director of the
Company. Unless authority to vote for any nominee is withheld in the proxy, the
persons named in the accompanying proxy intend to vote FOR the election of the
five nominees for director listed below.
All nominees have indicated a willingness to serve as directors, but if any
of them should decline or be unable to act as a director, the persons named in
the proxy will vote for the election of such nominee or nominees as may be
recommended by the Board of Directors. Under Nevada Corporation Law, each of the
nominees must receive a plurality of the votes of shares of Common Stock present
in person or by proxy at the meeting to be elected as a director. A plurality
means receiving the largest number of votes, regardless of whether that is a
majority. Abstentions will be counted as shares present at the meeting.
The following biographical information is furnished with respect to each of
the nominees. The information includes the individual's present position with
the Company, period served as a director, and other business experience during
the past five years.
DIRECTORS NOMINATED FOR ELECTION
DANIEL DROR has served as chairman of the board and chief executive officer
of the Company since September 1997. Since September 1993, Mr. Dror has served
as chairman of the board and chief executive officer of Daniel Dror and Company,
Inc. an investment and business management company. From April 1994 to November
1996, Mr. Dror served as chairman of the board and chief executive officer of
Microtel International, Inc., a public company in the telecommunication
business. From 1982 until 1993, Mr. Dror served as chairman of the board and
chief executive officer of Kleer-Vu Industries, Inc., a public company.
WILLIAM DARTMOUTH has served as director of the Company since September 1997
and as a director of Brenham Oil & Gas, Inc. since January 1998. From 1985 until
1990, Mr. Dartmouth was a director of Carricke Communications, a distributor of
satellite dishes. In 1989 he was a founder of Kirklees Cable, a cable franchise
company which was acquired by International Cable Tel in 1993. In 1990 he was a
founder of White Rose Television Ltd., a regional television franchisee. Mr.
Dartmouth served as a director of Kleer-Vu Industries, Inc. from 1983 until
1993. Since 1994, Mr. Dartmouth has been a director of Microtel International,
Inc., a public company in the telecommunication business.
JORDAN FRIEDBERG has served as director of the Company since November 1998.
Mr. Friedberg has served as chief executive officer and president of Modern Film
Effects, Inc. since May 1998. From September 1997 until May 1998, Mr. Friedberg
served as consultant to Modern Film Effects, Inc. From May 1994 until September
1997, Mr. Friedberg served as the chief financial officer and associate producer
of FilmRoos, Inc. Mr. Friedberg earned a Masters of Business Administration from
Pepperdine University and a Bachelors of Science from California State
University at Northridge.
ERICK FRIEDMAN has served as director of the Company since May 1998. Since
1989, Mr. Friedman has been employed by Yale University School of Music as a
professor of music. Since 1968, Mr. Friedman has invested in various companies.
JACK TALAN has served as director of the Company since September 1997. Since
1995, Mr. Talan has been a director of Microtel International, Inc., a public
company, and was the interim chairman and chief executive officer of Microtel
International, Inc. from November 1996 until March 1997. Since March 1993, Mr.
Talan has been a director of World Wide Collectibles, a public company which
markets a system designed to assure and protect the integrity of limited edition
collectibles, and was the president of that
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company until December 1996. Since 1990, Mr. Talan has been the principal and
president of Jack Talan, Inc., a sales and marketing consulting company.
Additionally, Mr. Talan was the co-founder, major shareholder, director and
senior vice president of Arista Corporation., a publisher and distributor of
educational materials until it was sold in 1985.
The directors of the Company hold office until the next annual meeting of
stockholders of the Company and until their successors in office are elected and
qualified. The Company has not established and does not maintain any audit,
compensation, executive or nominating committees. All officers serve at the
discretion of the Board of Directors.
The Board of Directors held two meetings in 1998, and each director of the
Company attended all Board meetings. Messrs. Hartis and Whitworth, current
directors of the Company have determined not to stand for re-election. The
decision not to stand for re-election was not the result of any disagreements
with the Company on any matter relating to the Company's operations, policies,
or practices.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own beneficially more than ten
percent of the common stock of the Company, to file reports of ownership and
changes of ownership with the Securities and Exchange Commission. Based solely
on the reports received by the Company and on written representations from
certain reporting persons, the Company believes that the directors, executive
officers, and greater than ten percent beneficial owners have complied with all
applicable filing requirements.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTORS FOR
ELECTION BY THE STOCKHOLDERS AND RECOMMENDS A VOTE FOR SUCH ELECTION. THE
ELECTION OF THE DIRECTORS REQUIRES A PLURALITY OF THE VOTES OF THE SHARES OF
COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE MEETING.
ITEM 2
RATIFY THE ELECTION OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS
The Board of Directors has approved the engagement of BDO Seidman, LLP as
independent auditors for the Company. The Board of Directors wishes to obtain
from the stockholders a ratification of the Board's action in appointing BDO
Seidman, LLP as independent auditors of the Company.
In the event the appointment of BDO Seidman, LLP as independent auditors is
not ratified by the stockholders, the adverse vote will be considered as a
direction to the Board of Directors to select other auditors for the following
year.
Representatives of BDO Seidman, LLP are expected to be present at the
meeting, with the opportunity to make a statement if desired to do so. Such
representatives are also expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS HAS RECOMMENDED THE RATIFICATION OF BDO SEIDMAN, LLP
AS INDEPENDENT AUDITORS. SUCH RATIFICATION REQUIRES THE AFFIRMATIVE VOTE OF THE
MAJORITY OF OUTSTANDING SHARES OF COMMON STOCK PRESENT AT THE MEETING OR
REPRESENTED BY PROXY.
ITEM 3
ADOPTION OF THE 1999 STOCK OPTION PLAN
The 1999 Stock Option Plan ("Plan") was approved by the Board of Directors
in May 1999 pending shareholder approval. The Plan will allow the grant of
qualified and non-qualified stock option grants as determined by a committee
created by the Board of Directors. The Board of Directors has reserved
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10,000,000 shares of common stock for issuance pursuant to the Plan. The purpose
of the Plan is to foster and promote the financial success of the Company and
increase stockholder value by enabling eligible key employees and others to
participate in the long-term growth and financial success of the Company. A
summary of the Plan is set forth below.
ELIGIBILITY. The Plan is open to key employees (including officers and
directors) and consultants of the Company and its affiliates ("Eligible
Persons").
TRANSFERABILITY. The grants are not transferrable.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Plan will not effect the
right of the Company to authorize adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure. In the
event of an adjustment, recapitalization or reorganization the award shall be
adjusted accordingly. In the event of a merger, consolidation, or liquidation,
the Eligible Person will be eligible to receive a like number of shares of stock
in the new entity he would have been entitled to if immediately prior to the
merger he had exercised his option. The committee may waive any limitations
imposed under the Plan so that all options are immediately exercisable.
OPTIONS. The Company may grant incentive or nonqualified stock options.
OPTION PRICE. Incentive options shall be not less than the greater of (i)
100% of fair market value on the date of grant, or (ii) the aggregate par value
of the shares of stock on the date of grant. The compensation committee, at its
option, may provide for a price greater than 100% of fair market value. The
price for 10% or more stockholders shall be not less than 110% of fair market
value. As of April 21, 1999, the closing bid price of the Company's common stock
was $0.28.
DURATION. No option or SAR may be exercisable after the period of 10 years.
In the case of a 10% or more stockholder no incentive option may be exercisable
after the expiration of five years.
AMOUNT EXERCISABLE-INCENTIVE OPTIONS. In the event an Eligible Person
exercises incentive options during the calendar year whose aggregate fair market
value exceeds $100,000, the exercise of options over $100,000 will be considered
non qualified stock options.
EXERCISE OF OPTIONS. Options may be exercised by written notice to the
committee with:
- cash, certified check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option
price of the shares;
- stock at its fair market value on the date of exercise (if approved by the
committee);
- an election to make a cashless exercise through a registered broker-dealer
(if approved in advance by the committee);
- an election to have shares of stock, which otherwise would be issued on
exercise, withheld in payment of the exercise price (if approved in
advance by the committee); and/or
- any other form of payment which is acceptable to the committee, including
without limitation, payment in the form of a promissory note, and
specifying the address to which the certificates for the shares are to be
mailed.
TERMINATION OF OPTIONS. Unless expressly provided in the option, option
shall terminate one day less than three months after an employees severance of
employee with the Company other than death, disability or retirement.
DEATH. Unless the option expires sooner, the option will expire one day
less than one year after the death of the Eligible Person.
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DISABILITY. Unless the option expires sooner, the option will expire one
day less than one year after the disability of the Eligible Person.
AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may amend,
terminate or suspend the Plan at any time, in its sole and absolute discretion;
provided, however, that no amendment that would (a) materially increase the
number of shares of stock that may be issued under the Plan, (b) materially
modify the requirements as to eligibility for participation in the Plan, or (c)
otherwise materially increase the benefits accruing to participants under the
Plan, shall be made without the approval of the Company's Stockholders. Subject
to the preceding sentence, the Board of Directors shall have the power to make
any changes in the Plan and in the regulations and administrative provisions
under it or in any outstanding incentive option as in the opinion of counsel for
the Company may be necessary or appropriate from time to time to enable any
incentive option granted under this Plan to continue to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential federal income tax treatment.
FEDERAL INCOME TAX CONSEQUENCES. Under present federal income tax laws,
awards under the Plan will have the following consequences:
- The grant of an award will not, by itself, result in the recognition of
taxable income to the participant nor entitle the Company to a deduction
at the time of such grant.
- The exercise of a stock option which is an incentive option within the
meaning of Section 422 of the Code will generally not, by itself, result
in the recognition of taxable income to the participant nor entitle the
Company to a deduction at the time of such exercise. However, a
participant must generally include in alternative minimum taxable income
the amount by which the fair market value on the date of exercise exceeds
the exercise price. The basis of the stock for alternative minimum tax
purposes is adjusted to reflect the gain realized so that the participant
will receive a corresponding deduction for alternative minimum tax
purposes in the year the stock is sold. No alternative minimum tax
consequences result for the Company.
- If the shares acquired upon exercise of an incentive option are not held
for at least one year after transfer of such shares to the participant or
two years after the grant of the incentive option, whichever is later
(disqualifying disposition), the participant will recognize ordinary
income upon the disposition of the shares in an amount equal to excess of
fair market value on the date of exercise over the exercise price.
However, the amount reportable as compensation is limited to the actual
gain realized on the sale in cases where the sales prices is less than the
fair market value of the stock on the date of exercise. In addition, where
a loss is realized on the sale, no income is reported as compensation.
Where the sales price is in excess of the exercise price, the participant
will also recognize capital gain or loss in an amount equal to the
difference between the sales price and the basis in the stock increased by
any income reported as compensation. In cases where the exercise price is
in excess of the sales price, the participant will recognize capital loss
in an amount equal to the difference between the sales price and the
exercise price. Capital gains or losses will be characterized as
short-term if the shares were not held for more than one year after the
exercise date of the incentive option and as long-term if the shares were
held for more than one year after the exercise date of the incentive
option.
- Where a disqualifying disposition occurs and the participant recognizes
income, the Company will generally be entitled to a corresponding
deduction. The Company will not be entitled to a corresponding deduction
for any capital gain or loss recognized by the participant.
- If the shares acquired upon exercise of an incentive option are held by
the participant for one year after the incentive option is exercised and
two years after the incentive option was granted, the participant will
recognize a capital gain or loss upon disposition of the shares in an
amount equal to the difference between the sale price and the exercise
price; such capital gain or loss will be
5
characterized as short-term if the shares were not held for more than one
year after the exercise of the incentive option and long-term if the
shares were held for more than one year after the exercise of the
incentive option. The Company will not be entitled to a corresponding
deduction for such capital gain or loss.
- The exercise of a non-qualified stock option will result in the
recognition of ordinary income by the participant on the date of exercise
in an amount equal to the difference between the exercise price and the
fair market value on the date of exercise of the option shares acquired
pursuant to the stock option.
- The Company will be allowed a deduction at the time, and in the amount of
any ordinary income recognized by the participant upon the exercise of a
non-qualified stock option, provided the Company meets its federal
withholding tax obligations.
- Upon sale of the shares acquired upon exercise of a non-qualified stock
option, any appreciation or depreciation in the value of such shares from
the time of exercise will result in the recognition of a capital gain or
loss by the participant. Such capital gain or loss will be short-term if
the shares were not held by the participant for more than one year after
the exercise of the non-qualified stock option and long-term if the
participant held the shares for more than one year following exercise of
the non-qualified stock option.
AWARDS UNDER THE STOCK OPTION PLAN. At the present time, the Company has
not determined if any options under the 1999 Stock Option Plan will be issued to
the chief executive officer, any executives, any directors, or any employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1999 STOCK
OPTION PLAN. SUCH ADOPTION REQUIRES THE AFFIRMATIVE VOTE OF THE MAJORITY OF
OUTSTANDING SHARES OF COMMON STOCK PRESENT AT THE MEETING OR REPRESENTED BY
PROXY.
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EXECUTIVE OFFICERS
The Company's directors and executive officers are:
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
Daniel Dror, Senior............................. 57 Chairman of the Board, Chief Executive Officer, and
President
William Dartmouth............................... 49 Director
Raymond C. Hartis, Jr. ......................... 49 Director
Jordan Friedberg................................ 44 Director
Erick Friedman.................................. 59 Director
Jack R. Talan................................... 73 Director
D. Wayne Whitworth.............................. 59 Director
John W. Stump III............................... 54 Chief Financial Officer
Rebekah Laird-Ruthstrom......................... 44 Secretary and Treasurer
Please refer to page 2 of this proxy statement for biographies on Messrs.
Dror, Dartmouth, Friedberg, Friedman, and Talan.
RAYMOND HARTIS has served as director of the Company since December 1996.
Mr. Hartis has served as vice president of Har-Whit since September 1998. Mr.
Hartis served as director of Har-Whit since April 1998. From June 1997 to April
1998, Mr. Hartis served as director, secretary, and treasurer of Har-Whit, Inc.
From June 1997 to April 1998, Mr. Hartis served as director and president of
Pitt's & Spitt's, Inc. From October 1996 until June 1997, Mr. Hartis served as a
director of both Pitt's & Spitt's, Inc. and Har-Whit, Inc. Mr. Hartis was one of
the founders of Pitt's & Spitt's, Inc. and Har-Whit, Inc. and has served both
companies in multiple capacities from inception in 1984 until October 1996. Mr.
Hartis has decided not to run for re-election to the Board of Directors.
D. WAYNE WHITWORTH has served as director of the Company since December
1996. Mr. Whitworth has served as president and director of Har-Whit since
September 1998. Mr. Whitworth served as director, president, and chief executive
officer of Har-Whit from June 1997 until September 1998. From October 1996 until
June 1997, Mr. Whitworth served as a director of both Pitt's & Spitt's, Inc. and
Har-Whit, Inc. Mr. Whitworth was one of the founders of Pitt's & Spitt's, Inc.
and Har-Whit, Inc. and has served both companies in multiple capacities from
inception in 1984 until October 1996. Mr. Whitworth has decided not to run for
re-election to the Board of Directors.
JOHN W. STUMP III has served as chief financial officer of the Company since
August 1998. From December 1996 to October 1997, Mr. Stump served as chief
executive officer of Changes International. From April 1996 to December 1996,
Mr. Stump served as chief operating officer and chief financial officer of
Nutrition Resources, Inc. From February 1993 to April 1996, Mr. Stump served as
Acquisitions Analyst for Movie Gallery, Inc. Mr. Stump is a Certified Public
Accountant and has over twenty years of financial and accounting management
experience including public reporting and investor relations.
REBEKAH LAIRD-RUTHSTROM has served as secretary, treasurer, and executive
assistant secretary of the Company since February 1998. Since September 1993,
Ms. Laird-Ruthstrom has served as assistant secretary, treasurer, and executive
assistant of Daniel Dror and Company, Inc. From July 1994 to April 1997, Ms.
Laird-Ruthstrom served as executive assistant of Microtel International, Inc.
7
EXECUTIVE COMPENSATION
The following tables contain compensation data for the Chief Executive
Officer and other named executive officers of the Company for the fiscal year
ended December 31, 1998; with respect to this information for Mr. Fields,
compensation is reported for the Company's fiscal year (NPI's fiscal year end is
June 30):
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------- ----------------------------
BONUS/ SECURITIES
OTHER UNDERLYING
FISCAL ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION AWARD(1) SARS COMPENSATION
- -------------------------------------- ----------- ---------- -------------- ------------ -------------- -----------------
Daniel Dror, Sr.(2), CEO.............. 1998 $ 3,000 $ 5,750(3) $ 23,640(4) 2,000,000(5) (6)
1997 -- -- -- -- --
Marc Fields, President NPI............ 1998 $ 124,000 -- -- -- --
1997 $ 127,483 -- -- -- --
1996 $ 117,616 -- -- -- --
- ------------------------
(1) The issuance of Common Stock was awarded for services rendered.
(2) Mr. Dror began serving as CEO of the Company in September 1997.
(3) Represents total payments made by the Company for automobile owned by the
Company which Mr. Dror utilizes for the fiscal year.
(4) Consists of: (a) 100,000 shares of Common Stock granted in January 1998, and
(b) 100,000 shares of Common Stock granted in May 1998, pursuant to an
employment agreement.
(5) In May 1998, Mr. Dror was granted an option to purchase 2,000,000 shares of
Common Stock at an exercise price of $0.12 per share expiring in May 2001.
(6) In fiscal 1998, the Company made advances to Mr. Dror in the amount of
$91,294. In November 1998, Mr. Dror executed a promissory note payable to
the Company for $91,294, payable on demand at prime interest rate.
EMPLOYMENT AGREEMENTS
In May 1998, Mr. Dror entered into a three-year employment agreement with
the Company which provided for compensation of 100,000 shares of Common Stock
and options to purchase 2,000,000 shares of Common Stock at $0.12 per share
expiring in May 2001. In October 1998, Mr. Dror terminated the employment
agreement dated May 1998, and entered into a new three-year employment agreement
with the Company, which provides for a monthly salary of $1,000. The employment
agreement provides for a bonus to be determined by the Board of Directors. The
employment agreement may be terminated by the Company, upon death or disability
of Mr. Dror, or with cause, which includes, without limitation, gross
negligence, the failure to perform essential duties, and the willful engaging in
misconduct injurious to the Company.
In September 1994, Mr. Fields entered into an employment agreement with NPI
to serve as president and chief operating officer of NPI on an at-will basis,
which provided for an annual salary of $110,000, which was raised to $124,000 in
1998. The employment agreement provides for a bonus of 10% of the amount equal
to NPI's operating income, less rent and interest expense, which exceeds
$500,000. The employment agreement grants Mr. Fields an option to purchase NPI
common stock equal to 5% of NPI's equity at an exercise price of 5% of the total
shareholder's equity, if NPI conducts an initial public offering of its common
stock during Mr. Field's employment. The employment agreement provides for a
disability insurance policy as well as a life insurance policy in the name of
Mr. Fields' spouse in the amount of approximately three times Mr. Fields salary.
The employment agreement provides that upon termination NPI has the option to
have Mr. Fields sign a one-year non-compete agreement in exchange for one year's
base salary.
8
In September 1998, Mr. Jordan Friedberg entered into a five-year employment
agreement with Modern Film Effects and Digital Research Corporation
collectively, which provides that Mr. Friedberg serve as chief executive officer
and president to the companies at an annual salary of $65,000 for the initial
year to be increased annually thereafter at a rate of 10% per annum. The
agreement provides for reimbursement for an automobile lease with lease payments
not to exceed $1,000 per month. The employment agreement may be terminated only
upon the permanent disability of Mr. Friedberg or with cause.
In April 1999, Mr. Stump entered into a three-year employment agreement with
the Company, which provides for a monthly salary of $8,500. The employment
agreement provides for a bonus to be determined by the Board of Directors. The
employment agreement may be terminated by the Company, upon death or disability
of Mr. Stump, or with cause, which includes, without limitation, gross
negligence, the failure to perform essential duties, and the willful engaging in
misconduct injurious to the Company.
In November 1998, Mr. Hartis entered into an employment agreement with
Har-Whit to serve as vice president of Har-Whit expiring December 31, 2000,
which provides for a monthly salary of $5,000. The employment agreement provides
for a bonus to be determined by the Board of Directors. The employment agreement
may be terminated by the Company, upon death or disability of Mr. Hartis, or
with cause, which includes, without limitation gross negligence, the failure to
perform essential duties, and the willful engaging in misconduct injurious to
the Company.
In November 1998, Mr. Whitworth entered into an employment agreement with
Har-Whit to serve as president of Har-Whit expiring December 31, 2000, which
provides for a monthly salary of $5,000. The employment agreement provides for a
bonus to be determined by the Board of Directors. The employment agreement may
be terminated by the Company, upon death or disability of Mr. Whitworth, or with
cause, which includes, without limitation gross negligence, the failure to
perform essential duties, and the willful engaging in misconduct injurious to
the Company.
In September 1998, David R. Miller entered into a six-year employment
agreement with Modern Film Effects, Inc. and Digital Research Corporation
collectively, which provides that Mr. Miller serve as a consultant to the
companies for the initial year at a monthly salary of $6,000 and subsequently to
serve as an employee for the remaining five years at a to be determined salary.
The employment agreement provides for reimbursement for an automobile lease with
lease payments not to exceed $1,200 per month. The employment agreement may be
terminated only upon the permanent disability of Mr. Miller or with cause.
The Company or its subsidiaries do not maintain life insurance on any of its
directors or employees. The directors serve without cash compensation, but can
be granted stock as discussed in "Certain Relationships and Transactions."
9
STOCK OPTIONS AND WARRANTS
The following table provides information on the warrants and options granted
to the indicated officer and director during the fiscal year ended December 31,
1998:
INDIVIDUAL GRANTS
SHARES UNDERLYING PERCENT OF TOTAL GRANTS EXERCISE EXPIRATION
NAME OPTIONS GRANTED TO EMPLOYEES PRICE DATE
- ---------------------------------------------------- ----------------- -------------------------- ----------- -----------
Daniel Dror, Sr.(1)................................. 2,000,000(1) 99% $ 0.12 5/14/01
Marc Fields(1)...................................... -- -- -- --
- ------------------------
(1) As of December 31, 1998, options to purchase 7,720,000 additional shares of
Common Stock were outstanding at prices between $0.02 and $0.34 per share,
which expire no later than December 2002.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS OPTIONS(1)
ON VALUE --------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- ------------- ---------- --------------- ----------- -----------------
Daniel Dror, Sr........................... -- -- 2,000,000 -- $ 260,000 $ --
Marc Fields............................... -- -- -- -- -- --
- ------------------------
(1) Computed based on the differences between the fair market value on December
31, 1998 and aggregate exercise prices.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the number and
percentage of outstanding shares of Company Common Stock owned by (i) each
person known to the Company to beneficially own more than 5% of its outstanding
Common Stock, (ii) each director, (iii) each named executive officer, and (iv)
all executive officers and directors as a group.
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES OF COMMON STOCK PERCENTAGE OF
OWNER(1) BENEFICIALLY OWNED OWNERSHIP
- ------------------------------------- ----------------------------------- ---------------------
Daniel Dror Sr....................... 12,598,000(3) 10.7%
Elk International Corporation, 32,197,000(2)
Ltd................................ 27.3%
Raymond C. Hartis, Jr................ 1,559,925(5) 1.3%
William Dartmouth.................... 410,000 *
Marc Fields.......................... -- --
Jordan Friedberg..................... 1,866,000(4) 1.6%
Erick Friedman....................... 2,200,000 1.9%
D. Wayne Whitworth................... 1,559,925(5) 1.3%
Jack R. Talan........................ 755,500 *
John W. Stump III.................... 220,000(6) *
Rebekah Laird-Ruthstrom.............. 100,000(7) *
All executive officers and directors 21,269,350
as a group (9 persons)............. 18.0%
- ------------------------
(*) Indicates ownership of less than one percent.
(1) The business address of each principal stockholder is the same as the
address of the Company's principal executive offices except Mr. Fields whose
business address is 11601 Highway 32 in Nicholls, Georgia 31554.
(2) Controlled by Mr. Dror's brother. Mr. Dror has no interest nor has he ever
been an officer or director of Elk International Corporation, Ltd. The
principal of Elk International Corporation, Ltd. is Elkana Faiwuszewicz.
(3) Includes (a) an option to purchase 2,000,000 shares of Common Stock at an
exercise price of $0.12 per share, (b) 3,272,000 shares of Common Stock
owned by Daniel Dror & Company of which Mr. Dror is chief executive officer,
and (c) 7,326,000 shares of Common Stock owned by Daniel Dror II 1976 Trust
of which Mr. Dror is trustee.
(4) Includes a five year option, which is exercisable immediately, to purchase
400,000 shares of Common Stock at an exercise price of $0.20 per share.
(5) Includes an option to purchase 500,000 shares of Common Stock at an exercise
price of $0.02 per share.
(6) Consists of (a) an option to purchase 20,000 shares of Common Stock at an
exercise price of $0.34 per share; (b) an option to purchase 100,000 shares
of Common Stock at an exercise price of $0.02 per share, and (c) an option
to purchase 100,000 shares of Common Stock at an exercise price of $0.19 per
share.
(7) Includes an option to purchase 45,000 shares of Common Stock at an exercise
price of $0.02 per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1998, Mr. Dror was issued 100,000 shares of Common Stock in
exchange for services rendered. In May 1998, Mr. Dror was granted 100,000 shares
of Common Stock, pursuant to an employment agreement. In May 1998, Mr. Dror was
issued an option to purchase 2,000,000 shares of Common Stock at an exercise
price of $0.12 per share, which expires in May 2001, pursuant to an
11
employment agreement. During fiscal year 1998, the Company advanced Mr. Dror a
total of $91,294, and in November 1998 Mr. Dror executed a promissory note
payable to the Company in the amount of $91,294 payable on demand at prime
interest rate. In September 1997, Elk International Corporation, Ltd., which is
controlled by Mr. Dror's brother, was issued an option to purchase 2,000,000
shares of Common Stock at a purchase price of $0.02 per share, which was
exercised in June 1998. In September 1997, Elk International Corporation, Ltd.,
which is controlled by Mr. Dror's brother, was issued 5,000,000 shares of Common
Stock at a purchase price of $0.03 per share. In May 1998, Elk International
Corporation, Ltd., which is controlled by Mr. Dror's brother, was issued
3,500,000 shares of Common Stock for an aggregate purchase price of $300,000. In
October 1998, the Company loaned an entity affiliated with Mr. Dror $21,000 in
the form of a promissory note, at an annual interest rate of 10% payable June
1999. In December 1998, the Company loaned an entity affiliated with Mr. Dror
$11,000 in the form of a promissory note, at an annual interest rate of 10%
which was paid March 1999. In December 1998, Daniel Dror II was employed by the
Company at a monthly salary of $750. In November 1998, Mr. Dror purchased GCA,
Inc., a Texas corporation from the Company for $100. GCA, Inc. was purchased by
the Company in December 1997 from a former director of the Company for 6,000,000
shares of Common Stock. Prior to Mr. Dror's acquisition of GCA, Inc., and as of
November 1998, all assets of GCA, Inc. had been transferred to TRE and GCA, Inc.
was not in good standing with the State of Texas.
In September 1998, Mr. Friedberg was issued an option to purchase 400,000
shares of Common Stock at an exercise price of $0.20 per share, which expires in
September 2003.
In September 1997, Mr. Hartis was issued an option to purchase 500,000
shares of Common Stock at an exercise price of $0.02 per share, which expires in
December 2002. In January 1998, Mr. Hartis was issued 100,000 shares of Common
Stock in exchange for management services rendered. Based upon the market value
of the restricted Common Stock ($.05 per share), $5,000 of compensation expense
was recorded. In May 1998, Mr. Hartis was issued 250,000 shares of Common Stock
at an aggregate purchase price of $25,000. As of November 9, 1998, the Company
had not received payment.
In September 1997, Mr. Whitworth was issued an option to purchase 500,000
shares of Common Stock at an exercise price of $0.02 per share, which expires in
December 2002. In January 1998, Mr. Whitworth was issued 100,000 shares of
Common Stock in exchange for management services rendered. Based upon the market
value of the restricted Common Stock ($.05 per share), $5,000 of compensation
expense was recorded. In May 1998, Mr. Whitworth was issued 250,000 shares of
Common Stock at an aggregate purchase price of $25,000. As of November 9, 1998,
the Company had not received payment.
In January 1998, Mr. Talan was issued 100,000 shares of Common Stock in
exchange for services rendered.
In January 1998, Mr. Dartmouth was issued 100,000 shares of Common Stock in
exchange for services rendered.
In May 1998, Ms. Laird-Ruthstrom was issued 50,000 shares of Common Stock in
exchange for services rendered. In January 1999, Ms. Laird-Ruthstrom was issued
an option to purchase 45,000 shares of Common Stock at an exercise price of
$0.02 per share for services rendered.
In January 1999, the Company issued Mr. Stump an option to purchase 100,000
shares of Common Stock at an exercise price of $0.02 per share and an option to
purchase 100,000 shares of Common Stock at an exercise price of $0.19 per share
for services rendered.
In May 1998, the Company entered into a one-year renewable lease agreement
with a corporation affiliated with Mr. Dror, for the Company's office in Kemah,
Texas at a monthly rental rate of $750.
12
In May 1998, the Company entered into a one-year renewable lease agreement
with Elk International Corporation, Ltd., which is controlled by Mr. Dror's
brother, for Mr. Dror's home office in Houston, Texas at a monthly rental rate
of $800.
In March 1999, the Company purchased Marald, Inc. in exchange for 3,500,000
shares of Common Stock, and a finders fee of $45,000 paid in part to a party
related to Mr. Dror. In addition, under the terms of the acquisition agreement,
the Company has agreed to provide chemicals at a discount to Toro Spray-On
Liners, Inc. an entity partially owned by the above related party.
The Company obtains approval from its entire Board of Directors prior to any
acquisitions. If any transactions are executed or contemplated with a related
party or affiliate of the Company, such relationship is disclosed prior to a
vote of the Board of Directors. Prior to entering into any real estate
transaction with affiliated parties, the Company obtains appraisals from MAI
Appraisers for Board of Director consideration. The Company believes that the
terms of each transaction made with related parties or affiliates are as fair as
those obtainable from independent third parties. As of April 1999, any advances
or loans made by the Company to any related parties or affiliates will be made
at an interest rate no lower than the current prime rate plus 2%.
COST OF SOLICITATION
The Company will bear the cost of the solicitation of proxies from its
stockholders. In addition to the use of mail, proxies may be solicited by
directors, officers, and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers, and
employees of the Company will not be compensated additionally for the
solicitation, but may be reimbursed for out-of-pocket expenses in connection
with this solicitation. Arrangements are also being made with brokerage houses
and any other custodians, nominees, and fiduciaries for the forwarding of
solicitation material to the beneficial owners of the Common Stock, and the
Company will reimburse such brokers, custodians, nominees, and fiduciaries for
their reasonable out-of-pocket expenses.
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Meeting. If a shareholder proposal that was
excluded from this Proxy Statement in accordance with Rule 14a-8 of the Exchange
Act is properly brought before the Meeting, it is intended that the proxy
holders will use their discretionary authority to vote the proxies against such
proposal. If any other matters should arise at the Meeting, shares represented
by proxies will be voted at the discretion of the proxy holders.
13
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the 2000 Annual Meeting must be received by the Company
no later than November 24, 1999 in order to have them included in the proxy
statement, or by March 10, 1999, for possible consideration at the meeting,
which is expected to take place on May 24, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
Daniel Dror, Chief Executive Officer
May 14, 1999
14
APPENDIX A
AMERICAN INTERNATIONAL INDUSTRIES, INC.
1999 STOCK OPTION PLAN
1. ADOPTION AND PURPOSE
American International Industries, Inc., a Nevada corporation (the
"Company"), adopted its 1999 Incentive Stock Option Plan ("Plan") effective
April 1, 1999, pending shareholder approval. The purpose of the Plan is to
foster and promote the financial success of the Company and materially
increase stockholder value by enabling eligible key employees and others to
participate in the long-term growth and financial success of the Company.
The Plan is intended to provide "incentive stock options" within the meaning
of that term under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as non-qualified stock options. Any proceeds
of cash or property received by the Company for the sale of American
International Industries, Inc. common stock, $.001 par value (the "Common
Stock") pursuant to Options granted under this Plan will be used for general
corporate purposes.
2. ADMINISTRATION
2.1 The Plan shall be administered by a committee (the "Compensation
Committee") appointed by the Board of Directors of the Company (the
"Board") and composed of at least two Board members. The Compensation
Committee shall meet the plan administration requirements described under
Rule 16b-3(c) promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), or any similar rule which may subsequently be
in effect. Any vacancy on the Compensation Committee shall be filled by
the Board.
2.2 Subject to the express provisions of the Plan, the Compensation
Committee shall have the sole and complete authority to (i) determine key
employees and others to whom awards hereunder shall be granted, (ii) make
awards in such form and amounts as it shall determine, (iii) impose such
limitations and conditions upon such awards as it shall deem appropriate,
(iv) interpret the Plan, prescribe, amend and rescind rules and
regulations relating to it, (v) determine the terms and provisions of the
respective participants' agreements (which need not be identical), and
(vi) make such other determinations as it deems necessary or advisable
for the administration of the Plan. The decisions of the Compensation
Committee on matters within their jurisdiction under the Plan shall be
conclusive and binding on the Company and all other persons. No members
of the Board or the Compensation Committee shall be liable for any action
taken or determination made in good faith.
2.3 All expenses associated with the Plan shall be paid by the Company or
its Subsidiaries.
3. DEFINITIONS
3.1 "CAUSE" when used in connection with the termination of a Participant's
employment with the Company, shall mean the termination of the
Participant's employment by the Company by reason of (i) the conviction
of the Participant of a crime involving moral turpitude by a court of
competent jurisdiction as to which no further appeal can be taken; (ii)
the proven commission by the Participant of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any funds or
property of the Company by the Participant; (iv) the willful, continued
and unreasonable failure by the Participant to perform duties assigned to
him and agreed to by him; (v) the knowing engagement by the Participant
in any direct, material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if any, then
in effect; (vi) the knowing engagement by the Participant, without the
written approval of the Board of Directors of the Company, in any
activity which competes with the business of the Company or
A-1
which would result in a material injury to the Company; or (vii) the
knowing engagement in any activity which would constitute a material
violation of the provisions of the Company's insider trading policy or
business ethics policy, if any, then in effect.
3.2 "CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) any Person becomes, after the effective date of this Plan, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities, unless the Board (as constituted immediately
prior to such Change in Control) determines in its sole absolute
discretion that no Change in Control has occurred;
(ii) Individuals who constitute the Board on the effective date of the Plan
cease, for any reason, to constitute at least a majority of the Board of
Directors; PROVIDED, HOWEVER, that any person becoming a director
subsequent to the effective date of the Plan who was nominated for
election by at least 66 2/3% of the Board as constituted on the effective
date of the Plan (other than the nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Board of
Directors, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this Plan,
considered a member of the Board as constituted on the effective date of
the Plan; or
(iii) the Board of Directors determines in its sole and absolute discretion
that there has been a Change in Control of the Company.
3.3 "CONSULTANT" shall mean any person who is engaged by the Company or any
parent or Subsidiary of the Company to render consulting services and is
compensated for such consulting services.
3.4 "CONTINUOUS SERVICE" shall mean the absence of any interruption or
termination of employment with or service to the Company or any parent or
Subsidiary of the Company that now exists or hereinafter is organized or
acquires the Company for a period of 12 months. Continuous Service shall
not be considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Company provided that such
interruption shall not be longer than 90 consecutive days.
3.5 "ELIGIBLE EMPLOYEE" shall mean an Employee that has provided continuous
service to the Company or to any parent or Subsidiary of the Company that
now exists or hereafter is organized or acquires the Company.
3.6 "EMPLOYEE" shall mean any person employed on an hourly or salaried basis
by the Company or any parent or Subsidiary of the Company that now exists
or hereafter is organized or acquires the Company.
3.7 The "FAIR MARKET VALUE" of a share of Common Stock on any date shall be
(i) the closing sales price on the immediately preceding business day of
a share of Common Stock as reported on the principal securities exchange
on which shares of Common Stock are then listed or admitted to trading or
(ii) if not so reported, the average of the closing bid and asked prices
for a share of Common Stock on the immediately preceding business day as
quoted on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") or (iii) if not quoted on Nasdaq, the average
of the closing bid and asked prices for a share of Common Stock as quoted
by the National Quotation Bureau's "Pink Sheets" or the National
Association of Securities Dealers' OTC Bulletin Board System. If the
price of a share of Common Stock shall not be so reported, the Fair
Market Value of a share of Common Stock shall be determined by the
Compensation Committee in its absolute discretion. In no event shall the
Fair Market Value of any share of Common Stock be less than its par
value.
A-2
3.8 "INCENTIVE STOCK OPTION" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and which is
identified as an Incentive Stock Option in the agreement by which it is
evidenced.
3.9 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option or which is identified as a Non-Qualified Stock
Option in the agreement by which it is evidenced.
3.10 "OPTION" shall mean an Option to purchase shares of Common Stock of the
Company granted pursuant to this Plan. Each Option shall be identified
either as an Incentive Stock Option or a Non-Qualified Stock Option in
the agreement by which it is evidenced.
3.11 "SUBSIDIARY" shall mean a corporation (other than the Company) in which
the Company directly or indirectly controls 50% or more of the combined
voting power of all stock of that corporation.
4. ELIGIBILITY
The Compensation Committee may grant Options to purchase Common Stock under
this Plan to Eligible Employees of the Company or its Subsidiaries, as well
as to non-employee directors and Consultants. Employees of the Company, as
well as non-employee directors and Consultants who are granted Options
pursuant to this Plan shall be referred to as "Participants." The
Compensation Committee shall determine, within the provisions of the Plan,
those persons to whom, and the times at which, Options shall be granted. In
making such determinations, the Compensation Committee may take into account
the nature of the services rendered by such person, his or her present and
potential contributions to the Company's success, and such other factors as
the Compensation Committee in its discretion shall deem relevant. Grants may
be made to the same individual on more than one occasion.
5. GRANTING OF OPTIONS
5.1 POWERS OF THE COMPENSATION COMMITTEE. The Compensation Committee shall
determine, in accordance with the provisions of the Plan, the duration of
each Option, the exercise price of each Option, the time or times within
which (during the term of the Option) all or portions of each Option may
be exercised, and whether cash, Common Stock, or other property may be
accepted in full or partial payment upon exercise of an Option.
5.2 NUMBER OF OPTIONS. As soon as practicable after the date an individual
is determined to be eligible under Section 4 hereof, the Compensation
Committee may, in its discretion, grant to such person a number of
Options determined by the Compensation Committee.
6. COMMON STOCK
Each Option granted under the Plan shall be convertible into one share of
Common Stock, unless adjusted in accordance with the provisions of Section 8
hereof. Options may be granted for a number of shares not to exceed, in the
aggregate, 10,000,000 shares of Common Stock, subject to adjustment pursuant
to Section 8 hereof. For purposes of calculating the maximum number of
shares of Common Stock that may be issued under the Plan, (i) all the shares
issued (including the shares, if any, withheld for tax withholding
requirements) shall be counted when cash is used as full payment for shares
issued upon the exercise of an Option, and (ii) shares tendered by a
Participant as payment for shares issued upon exercise of an Option shall be
available for issuance under the Plan. Upon the exercise of an Option, the
Company may deliver either authorized but unissued shares, treasury shares,
or any combination thereof. In the event that any Option granted under the
Plan expires unexercised, or is surrendered by a Participant for
cancellation, or is terminated or ceases to be exercisable for any other
reason without having been fully exercised, the Common Stock subject to such
Option shall again become available for new Options to be granted under the
Plan to any eligible person (including the holder of such former Option) at
an exercise price determined in accordance with Section 7.2 hereof, which
price may then be greater or less than the exercise price of such former
Option. No fractional
A-3
shares of Common Stock shall be issued, and the Compensation Committee shall
determine the manner in which fractional share value shall be treated.
7. REQUIRED TERMS AND CONDITIONS OF OPTIONS
7.1 AWARD OF OPTIONS. The Compensation Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions
as the Compensation Committee may prescribe, grant to any Participant in
the Plan one or more Incentive Stock Options or Non-Qualified Stock
Options to purchase for cash or shares the number of shares of Common
Stock allotted by the Compensation Committee. However, subject to the
provisions of Sections 7.4 and 7.5, Incentive Stock Options may be
granted only to Eligible Employees. The date an Option is granted shall
mean the date selected by the Compensation Committee as of which the
Compensation Committee allots a specific number of shares to a
Participant pursuant to the Plan.
7.2 EXERCISE PRICE. The exercise price of any Non-Qualified Stock Option
granted under the Plan shall be such price as the Compensation Committee
shall determine on the date on which such Non-Qualified Stock Option is
granted. Except as provided in Section 7.4 hereof, the exercise price of
any Incentive Stock Option granted under the Plan shall be not less than
100% of the Fair Market Value of a share of Common Stock on the date on
which such Incentive Stock Option is granted.
7.3 TERM AND EXERCISE. Each Option shall be exercisable on such date or
dates, during such period and for such number of shares of Common Stock
as shall be determined by the Compensation Committee on the day on which
such Option is granted and set forth in the agreement evidencing the
Option; PROVIDED, HOWEVER, that (A) no Option shall be exercisable after
the expiration of 10 years from the date such Option was granted, and (B)
no Incentive Stock Option granted to a 10% shareholder as set forth in
Section 7.4 hereof shall be exercisable after the expiration of five
years from the date such Incentive Stock Option was granted, and,
PROVIDED, FURTHER, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan. Each
Option shall be exercisable in whole or in part with respect to whole
shares of Common Stock. The partial exercise of an Option shall not cause
the expiration, termination or cancellation of the remaining portion
thereof. On the partial exercise of an Option, the agreement evidencing
such Option shall be returned to the Participant exercising such Option
together with the delivery of the certificates described in Section 7.7
hereof.
7.4 TEN PERCENT SHAREHOLDER. Notwithstanding anything to the contrary in
this Plan, Incentive Stock Options may not be granted to any owner of 10%
or more of the total combined voting power of the Company and its
Subsidiaries unless (i) the exercise price is at least 110% of the Fair
Market Value of a share of Common Stock on the date the Option is
granted, and (ii) the Option by its terms is not exercisable after the
expiration of five years from the date such Incentive Stock Option is
granted.
7.5 MAXIMUM AMOUNT OF OPTION GRANT. To the extent that the aggregate Fair
Market Value (determined on the date the Option is granted) of Common
Stock subject to Incentive Stock Options exercisable for the first time
by a Participant during any calendar year exceeds $100,000, such Options
shall be treated as Non-Qualified Stock Options.
7.6 METHOD OF EXERCISE. An Option shall be exercised by delivering notice to
the Company's principal office, to the attention of its Secretary, no
fewer than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the agreement
evidencing the Option, shall specify the number of shares of Common 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.
The Participant may withdraw such notice at any time prior to the close
of business on the business day immediately preceding the effective date
of the proposed exercise, in
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which case such agreement shall be returned to the Participant. Payment
for shares of Common Stock purchased upon the exercise of an Option shall
be made on the effective date of such exercise either (i) in cash, by
certified check, bank cashier's check or wire transfer or (ii) subject to
the approval of the Compensation Committee, in shares of Common Stock
owned by the Participant and valued at their Fair Market Value on the
effective date of such exercise, or partly in shares of Common Stock with
the balance in cash, by certified check, bank cashier's check or wire
transfer, or (iii) in any other manner approved by the Compensation
Committee. Any payment in shares of Common 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 from time to time.
7.7 DELIVERY OF STOCK CERTIFICATES. Certificates for shares of Common Stock
purchased on the exercise of an Option shall be issued in the name of the
Participant and delivered to the Participant as soon as practicable
following the effective date on which the Option is exercised; PROVIDED,
HOWEVER, that such delivery shall be effected for all purposes when the
stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the Participant.
8. ADJUSTMENTS
8.1 The aggregate number or type of shares of Common Stock with respect to
which Options may be granted hereunder, the number or type of shares of
Common Stock subject to each outstanding Option, and the exercise price
per share for each such Option may all be appropriately adjusted, as the
Compensation Committee may determine, for any increase or decrease in the
number of shares of issued Common Stock resulting from a subdivision or
consolidation of shares whether through reorganization, recapitalization,
consolidation, payment of a share dividend, or other similar increase or
decrease.
8.2 Subject to any required action by the stockholders, if the Company shall
be a party to a transaction involving a sale of substantially all its
assets, a merger, or a consolidation, any Option granted hereunder shall
pertain to and apply to the securities to which a holder of Common Stock
would be entitled to receive as a result of such transaction; PROVIDED,
HOWEVER, that all unexercised Options under the Plan may be canceled by
the Company as of the effective date of any such transaction by giving
notice to the holders of such Options of its intention to do so, and by
permitting the exercise of such Options during the 30-day period
immediately after the date such notice is given.
8.3 In the case of dissolution of the Company, every Option outstanding
hereunder shall terminate; PROVIDED, HOWEVER, that each Option holder
shall have 30 days' prior written notice of such event, during which time
he shall have a right to exercise his partly or wholly unexercised
Options.
8.4 On the basis of information known to the Company, the Compensation
Committee shall make all determinations under this Section 8, including
whether a transaction involves a sale of substantially all the Company's
assets; and all such determinations shall be conclusive and binding on
the Company and all other persons.
8.5 Upon the occurrence of a Change in Control, the Compensation Committee
(as constituted immediately prior to the Change in Control) shall
determine, in its absolute discretion, whether 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 pursuant to the terms of the Plan or whether
each such Option shall continue to vest according to its terms.
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9. OPTION AGREEMENTS
Each award of Options shall be evidenced by a written agreement, executed by
the Participant and the Company, which shall contain such restrictions,
terms and conditions as the Compensation Committee may require in accordance
with the provisions of this Plan. Option agreements need not be identical.
The certificates evidencing the shares of Common Stock acquired upon
exercise of an Option may bear a legend referring to the terms and
conditions contained in the respective Option agreement and the Plan, and
the Company may place a stop transfer order with its transfer agent against
the transfer of such shares. If requested to do so by the Compensation
Committee at the time of exercise of an Option, each Participant shall
execute a certificate indicating that he is purchasing the Common Stock
under such Option for investment and not with any present intention to sell
the same.
10. LEGAL AND OTHER REQUIREMENTS
10.1 The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933, as amended, of any shares of
Common 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 obligated to cause to be issued or delivered any
certificates evidencing shares of Common 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 compliance with all applicable
laws, regulations of governmental authority and the requirements of any
securities exchange on which shares of Common Stock are traded. The
Compensation Committee may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock pursuant to
the terms hereof, that the recipient of such shares make such covenants,
agreements and representations, and that such certificates bear such
legends, as the Compensation Committee, in its sole discretion, deems
necessary or desirable. The exercise of any Option granted hereunder
shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common Stock
pursuant to such exercise is in compliance with all applicable laws,
regulations of governmental authorities and the requirements of any
securities exchange on which shares of Common Stock are traded. The
Company may, in its sole discretion, defer the effectiveness of any
exercise of an Option granted hereunder in order to allow the issuance of
shares of Common Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The Company
shall inform the Participant in writing of its decision to defer the
effectiveness of the exercise of an Option granted hereunder. During the
period that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such exercise
and obtain the refund of any amount paid with respect thereto.
10.2 With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), transactions under
this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any
provisions of the Plan or action by the Compensation Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Compensation Committee. Moreover, in the
event the Plan does not include a provision required by Rule 16b-3 to be
stated therein, such provision (other than one relating to eligibility
requirements, or the price and amount of Options) shall be deemed
automatically to be incorporated by reference into the Plan insofar as
Participants subject to Section 16 are concerned. The Compensation
Committee may at any time impose any limitations upon the exercise,
delivery and payment of any Option which, in the Compensation Committee's
discretion, are necessary in order to comply with Section 16(b) and the
rules and regulations thereunder.
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10.3 A Participant shall have no rights as a stockholder with respect to any
shares covered by an Option, or exercised by him, until the date of
delivery of a stock certificate to him for such shares. No adjustment,
other than pursuant to Section 8 hereof, shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is delivered.
11. NON-TRANSFERABILITY
During the lifetime of a Participant, any Option granted to him shall be
exercisable only by him or by his guardian or legal representative. No
Option shall be assignable or transferable, except by will, by the laws of
descent and distribution, or pursuant to certain domestic relations orders.
The granting of an Option shall impose no obligation upon the holder thereof
to exercise such Option or right.
12. NO CONTRACT OF EMPLOYMENT
The adoption of this Plan or the grant of any Option shall not be construed
as giving a Participant the right to continued employment with the Company
or any Subsidiary of the Company. Furthermore, the Company or any Subsidiary
of the Company may at any time dismiss a Participant from employment, free
from any liability or claim under the Plan, unless otherwise expressly
provided in the Plan or any Option agreement.
13. EFFECT OF TERMINATION OF EMPLOYMENT
13.1 If the employment or consulting, service or similar relationship of a
Participant with the Company shall terminate for any reason other than
Cause, "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) or the death of the Participant unless otherwise
stated in the agreement by which it is evidenced (a) Options granted to
such Participant, to the extent that they were exercisable at the time of
such termination, shall remain exercisable until the expiration of one
day less three months after 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.
13.2 If the employment or consulting, service or similar relationship of a
Participant with the Company shall terminate on account of the "permanent
and total disability" (within the meaning of Section 22(e)(3) of the
Code) or the death of the Participant (a) Options granted to such
Participant, to the extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of one day
less one year after 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.
13.3 In the event of the termination of a Participant's employment or other
relationship for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of
such termination.
14. INDEMNIFICATION OF COMPENSATION COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board or the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding
(or in connection with any appeal therein), to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel
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selected by the Company) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Compensation Committee member is liable for gross negligence or misconduct
in the performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding a Compensation Committee
member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
15. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan, the Company shall have the right to require the
Participant to remit to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. Alternatively,
the Company may issue or transfer such shares of Common Stock net of the
number of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Common Stock shall be valued on the
date the withholding obligation is incurred.
16. NEWLY ELIGIBLE EMPLOYEES
Except as otherwise provided herein, the Compensation Committee shall be
entitled to make such rules, regulations, determinations and awards as it
deems appropriate in respect of any employee who becomes eligible to
participate in the Plan.
17. TERMINATION AND AMENDMENT OF PLAN
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, PROVIDED, HOWEVER, that
without approval of the holders of a majority of the outstanding shares of
Common Stock present in person or by proxy at an annual or special meeting
of stockholders, no revision or amendments shall (i) increase the number of
shares of Common Stock that may be issued under the Plan, except as provided
in Section 8 hereof, (ii) materially increase the benefits accruing to
individuals holding Options granted pursuant to the Plan or (iii) materially
modify the requirements as to eligibility for participation in the Plan.
18. GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender and vice
versa, and the singular shall include the plural and the plural shall
include the singular.
19. GOVERNING LAW
The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Texas.
20. EFFECTIVE DATE OF PLAN
The effective date of the Plan is April 1, 1999. The Plan, each amendment to
the Plan, and each Option granted under the Plan is conditioned on and shall
be of no force or effect until approval of the Plan and each amendment of
the Plan by the holders of a majority of the shares of Common Stock of the
Company.
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AMERICAN INTERNATIONAL INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMERICAN
INTERNATIONAL INDUSTRIES, INC. THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BELOW.
The undersigned stockholder of AMERICAN INTERNATIONAL INDUSTRIES, INC. (the
"Company") hereby appoints Rebekah Laird-Ruthstrom and John W. Stump, III, the
true and lawful attorneys, agents and proxies of the undersigned with full power
of substitution for and in the name of the undersigned, to vote all the shares
of Common Stock or Common Stock Equivalents of the Company which the undersigned
may be entitled to vote at the Annual Meeting of Stockholders of the Company to
be held at South Shore Harbor Resort and Conference Center, 2500 South Shore
Blvd., League City, Texas 77573, on Wednesday, June 2, 1999 at 10:00 a.m., and
any and all adjournments thereof, with all of the powers which the undersigned
would possess if personally present, for the following purposes:
FOR
-- AGAINST
-------------
1. To elect Daniel Dror as director. / / / /
2. To elect William Dartmouth as director. / / / /
3. To elect Erick Friedman as director. / / / /
4. To elect Jordan Friedberg as director. / / / /
5. To elect Jack Talan as director. / / / /
6. To ratify the appointment of BDO Seidman as the Company's independent public / / / /
accountants.
7. To approve the 1999 Stock Option Plan. / / / /
ABSTAIN
-------------
1. / /
2. / /
3. / /
4. / /
5. / /
6. / /
7. / /
The proxies are authorized to vote as they determine in their discretion
upon such other matters as may properly come before the meeting.
THIS PROXY WILL BE VOTED FOR THE CHOICE SPECIFIED. IF NO CHOICE IS SPECIFIED
FOR EACH ITEM, THIS PROXY WILL BE VOTED FOR THAT ITEM.
The undersigned hereby acknowledges receipt of the Notice of Meeting and
Proxy Statement.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
Dated: ________________________________
(Signature)
_______________________________________
(Signature if jointly held)
_______________________________________
(Printed Name)
Please sign exactly as name appears on
stock certificate(s). Joint owners
should each sign. Trustees and others
acting in a representative capacity
should indicate the capacity in which
they sign.