SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN FINANCIAL HOLDING, INC.
--------------------------------
(Name of Registrant as Specified in its Charter)
N/A
---
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
or the Form of Schedule and the date of its filing.
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AMERICAN FINANCIAL HOLDING, INC.
2500 WILCREST, SUITE 540
HOUSTON, TEXAS 77042
(713) 780-4754
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 2001
To the Stockholders of American Financial Holding, Inc.:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders of
American Financial Holding, Inc. (the "Company") will be held at the Company's
principal executive offices located at 2500 Wilcrest, Suite 540, Houston, Texas
77042, on Tuesday, November 13, 2001 at 10:00 a.m., Central Daylight Time, for
the following purposes, as described in the accompanying Proxy Statement:
1. To amend the Company's Certificate of Incorporation to change the
Company's name to Isolagen, Inc.
2. To consider and vote upon the American Financial Holding, Inc.
2001 Stock Option and Appreciation Rights Plan.
3. To amend Article II, Section 2.01 of the Company's Bylaws to
provide that the annual meeting of the stockholders of the Company
shall be held at such time as designated by the Board of
Directors.
4. To elect four directors to hold office until his or her successor
is duly elected and qualified.
5. To ratify the appointment of Pannell Kerr Forster of Texas, P.C.
as the Company's independent certified public accountants for the
fiscal year ending December 31, 2001.
6. To transact any other business which properly may be brought
before the Annual Meeting or any adjournment thereof.
Only stockholders of record of the Company at the close of business on
October 16, 2001 are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. A complete list of these stockholders will be open for
the examination of any stockholder of record at the Company's principal
executive offices located at 2500 Wilcrest, Suite 540, Houston, Texas 77042 for
a period of ten days prior to the Annual Meeting. The list will also be
available for the examination of any stockholder of record present at the Annual
Meeting. The Annual Meeting may be adjourned from time to time without notice
other than by announcement at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
Houston, Texas JEFFREY W. TOMZ
October 22, 2001 Chief Financial Officer and Secretary
AMERICAN FINANCIAL HOLDING, INC.
2500 WILCREST, SUITE 540
HOUSTON, TEXAS 77042
(713) 780-4754
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 2001
SOLICITATION AND REVOCABILITY OF PROXIES
The Board of Directors of American Financial Holding, Inc., a Delaware
corporation (the "Company"), is soliciting proxies to be voted at the Annual
Meeting of Stockholders of the Company to be held at the Company's principal
executive offices located at 2500 Wilcrest, Suite 540, Houston, Texas 77042, on
Tuesday, November 13, 2001 at 10:00 a.m., Central Daylight Time, and at any
adjournment thereof. This Proxy Statement and the enclosed proxy are first being
mailed to stockholders on or about October 22, 2001.
This proxy solicitation is intended to afford stockholders the
opportunity to vote on the matters set forth in the accompanying Notice of
Annual Meeting of Stockholders dated October 22, 2001. The proxy permits
stockholders to withhold voting for any or all nominees for election to the
Company's Board of Directors and to abstain from voting on any other proposal if
the stockholder chooses.
All holders of record of outstanding shares of the Company's capital
stock at the close of business on October 16, 2001 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting. On the Record Date, the
Company had outstanding 15,043,630 shares of common stock, par value $0.001 per
share ("Common Stock").
Each share of Common Stock is entitled to one vote on each matter
presented at the Annual Meeting. The holders of the Company's capital stock
having a majority of the voting power, represented in person or by proxy, shall
constitute a quorum for purposes of transacting business at the Annual Meeting.
A plurality of the votes of holders of the shares of Common Stock represented in
person or by proxy at the Annual Meeting, provided a quorum is constituted, is
required for the election of directors. All other actions require the approval
of a majority of the votes cast, provided a quorum is present.
With regard to the election of directors, votes may be cast in favor or
withheld and votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on other proposals. In
accordance with Delaware law, broker non-votes (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be treated as present for purposes of determining the presence of a
quorum for purposes of the item on which the abstention or broker non-vote is
noted. An abstention on these proposals will have the effect as a vote "against"
or a negative vote because these proposals require the approval of a majority of
the votes cast. Broker non-votes will be deemed not entitled to vote on the
subject matter as to which the non-vote is indicated and will, therefore, have
no legal effect on the vote on that particular matter.
Any stockholder has the unconditional right to revoke his proxy at any
time before it is voted. Any proxy given may be revoked either by a written
notice signed and delivered to the Secretary of the Company prior to the
exercise of the proxy, by execution of a subsequent proxy and delivery of the
subsequent proxy to the Secretary of the Company, or by voting in person at the
Annual Meeting (although attending the Annual Meeting without executing a ballot
or executing a subsequent proxy will not by itself revoke a proxy). Where a
stockholder's executed proxy specifies a choice with respect to a
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voting matter, the shares will be voted accordingly. If no specification is
made, the shares will be voted (i) FOR the amendment of the Company's
Certificate of Incorporation to change the Company's name to Isolagen, Inc.;
(ii) FOR the approval of the American Financial Holding, Inc. 2001 Stock Option
and Appreciation Rights Plan; (iii) FOR the amendment of the Company's bylaws;
(iv) FOR the nominees for director identified below; and (v) FOR the
ratification of the appointment of Pannell Kerr Forster of Texas, P.C. as the
Company's independent certified public accountants for the fiscal year ending
December 31, 2001.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO ISOLAGEN, INC.
The Board is seeking stockholder approval to amend Article I of the
Company's Certificate of Incorporation to change the Company's name from
"American Financial Holding, Inc." to "Isolagen, Inc." The Board unanimously
adopted and approved the change of the Company's name from "American Financial
Holding, Inc." to "Isolagen, Inc." at a special meeting of the Board held on
October 1, 2001. The Board of Directors believes that due to the recent
acquisition of Isolagen Technologies, Inc., the name "Isolagen, Inc." will
provide better recognition of the Company in the biotechnology industry. If the
amendment is approved, the Company will refer to itself officially as "Isolagen,
Inc."
To accomplish the name change, the Board of Directors proposes that
Article I of the Certificate of Incorporation be amended to read as follows:
"The name of the corporation (the "Corporation") shall be: Isolagen,
Inc."
If the amendment to the Company's Certificate of Incorporation is
approved, the corporate name change will become effective upon our filing of the
Certificate of Amendment with the Delaware Secretary of State, which filing will
be made promptly after the Annual Meeting.
It will not be necessary for stockholders to surrender their share
certificates upon approval of the proposed name change. Rather, when share
certificates are presented for transfer, new share certificates bearing the name
"Isolagen, Inc." will be issued.
The proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to "Isolagen, Inc." will be adopted if a majority
of the shares entitled to vote at the Annual Meeting vote in favor of the
amendment.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND
THE COMPANY'S ARTICLES OF INCORPORATION TO CHANGE THE COMPANY'S NAME TO
ISOLAGEN, INC.
PROPOSAL TO ADOPT THE AMERICAN FINANCIAL HOLDING, INC.
2001 STOCK OPTION AND APPRECIATION RIGHTS PLAN
GENERAL
On August 10, 2001, the Company's Board of Directors adopted, subject to
stockholder approval, the American Financial Holding, Inc. 2001 Stock Option and
Appreciation Rights Plan (the "Plan"). On September 1, 2001, the Board of
Directors amended the Plan to increase the amount of shares of Common Stock
authorized thereunder. The statements contained in this Proxy Statement
concerning the terms and provisions of the Plan are summaries only and are
qualified in their entirety by reference to the full text of the Plan, as
amended, a copy of which is attached hereto as Appendix I.
The Plan is not subject to the provisions of the Employment Retirement
Income Security Act and is not a "qualified plan" within the meaning of Section
401 of the Internal Revenue Code, as amended (the "Code").
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The primary objective of the Plan is to promote stockholder value by
providing appropriate incentives to key employees and certain other individuals
who perform services for the Company and its affiliates. The Plan is
administered by the Company's Board of Directors. The Company's Board of
Directors has exclusive discretion to select the participants who will receive
awards under the Plan (each a "Participant") and to determine the type, size and
terms of each award. The Board will also make all other determinations that it
decides are necessary or desirable in the interpretation and administration of
the Plan.
SHARES SUBJECT TO THE PLAN
Pursuant to the Plan, the Board may grant awards covering at any one
time up to 5,000,000 shares of Common Stock. The number of shares of Common
Stock available under the Plan are subject to adjustment to prevent the dilution
of rights of Plan participants resulting from stock dividends, stock splits,
recapitalizations or similar transactions.
AWARDS UNDER THE PLAN
Under the Plan, the Board may grant awards in the form of incentive
stock options ("Incentive Options"), as defined in Section 422 of the Code, as
well as options which do not so qualify ("Non-Qualified Options"), and stock
appreciation rights ("SARs"). Incentive Options and Non-Qualified Options
together are referred to herein as "Options."
Options. The duration of any Option shall be within the sole discretion
of the Board; provided, however, that any Incentive Option granted to a 10% or
less stockholder or any Non-Qualified Option shall, by its terms, be exercised
within ten years after the date the Option is granted and any Incentive Option
granted to a greater than 10% stockholder shall, by its terms, be exercised
within five years after the date the Option is granted. At least six months
shall elapse from the date on which an Option is granted to a director, officer
or beneficial owner of more than 10% of the outstanding Common Stock under the
Plan by the Board to the date on which any share of Common Stock underlying such
Option is sold or any SAR associated with such Option is exercised, unless the
Board otherwise consents in writing. The price at which each share of Common
Stock covered by an Option may be purchased shall be determined by the Board,
provided that the Option price for any Incentive Option shall not be less than
the fair market value of the Common Stock at the time of grant.
SARs. Upon the exercise of an SAR, the holder will receive cash or
Common Stock (or may receive a combination thereof), the aggregate value of
which equals the amount by which the fair market value per share of the Common
Stock on the exercise date exceeds the exercise price of the SAR, multiplied by
the number of shares underlying the exercised portion of the SAR. An SAR may be
granted in tandem with or independently of a Non-Qualified Option. SARs will be
subject to such conditions and will be exercisable at such times as determined
by the Board, but the exercise price per share must be at least the fair market
value of a share of Common Stock on the date of grant.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
If the employment or service of a Participant is terminated for cause,
the Options and SARs, if any, of such Participant, both accrued and future, then
outstanding shall terminate immediately. If the employment or service of the
Participant is terminated by either the Participant or the Company for any
reason other than for cause, death, or for disability, as defined in Section
22(e)(3) of the Code, the Options and SARs, if any, of such Participant then
outstanding shall be exercisable by such Participant at any time prior to the
expiration of the Options or within three months after the date of such
termination,
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whichever period of time is shorter, but only to the extent of the accrued right
to exercise the Options at the date of such termination. In the case of a
Participant who becomes disabled, as defined by Section 22(e)(3) of the Code,
the option rights of such Participant under any then outstanding Non-Qualified
or Incentive Option shall be exercisable by such Participant at any time prior
to the expiration of the Options or within one year after the date of
termination of employment or service due to disability, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Options
at the date of such termination. In the event of the death of a Participant, the
option rights of such Participant under any then outstanding Non-Qualified or
Incentive Option shall be exercisable by the person or persons to whom these
rights pass by will or by the laws of descent and distribution, at any time
prior to the expiration of the Options or within three years after the date of
death, whichever period of time is shorter, but only to the extent of the
accrued right to exercise the Options, and SARs, if any, at the date of death.
If a person or estate acquires the right to exercise a Non-Qualified or
Incentive Option by bequest or inheritance, the Board of Directors may require
reasonable evidence as to the ownership of such Options, and may require such
consents and releases of taxing authorities as the Board may deem advisable.
FEDERAL TAX CONSEQUENCES
The federal income tax discussion set forth below is intended for
general information only. State and local income tax consequences are not
discussed, and may vary from locality to locality.
Non-Qualified Options. Under present regulations, a Participant who is
granted a Non-Qualified Option will not realize taxable income at the time the
Option is granted. In general, a Participant will be subject to tax for the year
of exercise on an amount of ordinary income equal to the excess of the fair
market value of the shares on the date of exercise over the Option price, and
the Company will receive a corresponding deduction. Income tax withholding
requirements apply upon exercise. The Participant's basis in the shares so
acquired will be equal to the Option price plus the amount of ordinary income
upon which he is taxed. Upon subsequent disposition of the shares, the
Participant will realize capital gain or loss, long-term or short-term,
depending upon the length of time the shares are held after the Option is
exercised.
Incentive Options. A Participant is not taxed at the time an Incentive
Option is granted. The tax consequences upon exercise and later disposition
depend upon whether the Participant was an employee of the Company or its
subsidiary at all times from the date of grant until three months preceding
exercise (one year in the case of death or disability) and on whether the
Participant holds the shares for more than one year after exercise and two years
after the date of grant of the Option. If the Participant satisfies both the
employment rule and the holding rule, for regular tax purposes the Participant
will not realize income upon exercise of the Option and the Company will not be
allowed an income tax deduction at any time. The difference between the Option
price and the amount realized upon disposition of the shares by the Participant
will constitute a long-term capital gain or a long-term capital loss, as the
case may be. Neither the employment rule nor the holding rule will apply to the
exercise of an Option by the estate of a Participant, provided that the
Participant satisfied the employment rule as of the date of such Participant's
death. If the Participant meets the employment rule but fails to observe the
holding rule (a "disqualifying disposition"), the Participant generally
recognizes as ordinary income, in the year of the disqualifying disposition, the
excess of the fair market value of the shares at the date of exercise over the
Option price. Any excess of the sales price over the fair market value at the
date of exercise will be recognized by the Participant as capital gain
(long-term or short-term depending on the length of time the stock was held
after the Option was exercised). If, however, the sales price is less than the
fair market value at the date of exercise, then the ordinary income recognized
by the Participant is generally limited to the excess of the sales price over
the Option price. In both situations, the Company's tax deduction is
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limited to the amount of ordinary income recognized by the Participant.
Different consequences will apply for a Participant subject to the alternative
minimum tax.
Withholding. The Company shall have the right to reduce the number of
shares of Common Stock deliverable pursuant to the Plan by an amount which would
have a fair market value equal to the amount of all federal, state or local
taxes to be withheld, based on the tax rates then in effect or the tax rates
that the Company reasonably believes will be in effect for the applicable tax
year, or to deduct the amount of such taxes from any cash payment to be made to
a Participant, pursuant to the Plan or otherwise.
NEW PLAN BENEFITS
It is not possible to predict the individuals who will receive future
awards under the Plan or the number of shares of Common Stock covered by any
future award because such awards are wholly within the discretion of the Board
of Directors. The last reported trade price on October 4, 2001 was $2.00.
TERMINATION OR AMENDMENT OF THE PLAN
The Board of Directors may at any time terminate the Plan or make such
amendments thereto as it shall deem advisable and in the best interests of the
Company, without action on the part of the stockholders of the Company unless
such approval is required pursuant to applicable law; provided, however, that no
such termination or amendment shall, without the consent of the individual to
whom any Option shall theretofore have been granted, affect or impair the rights
of such individual under such Option. Pursuant to Section 422(b)(2) of the Code,
no Incentive Option may be granted pursuant to this Plan more than ten years
from the date the Plan is adopted or the date the Plan is approved by the
stockholders of the Company, whichever is earlier.
Approval of the Plan requires the affirmative vote of holders of a
majority of the votes cast, so long as the total votes cast on this proposal
exceeds 50% of the total votes entitled to be cast.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE
AMERICAN FINANCIAL HOLDING, INC.'S 2001 STOCK OPTION AND APPRECIATION RIGHTS
PLAN.
PROPOSAL TO AMEND ARTICLE II SECTION 2.01 OF THE COMPANY'S BYLAWS
The Board is seeking stockholder approval to amend Article II, Section
2.01 of the Company's Bylaws to provide that the annual meeting of the
stockholders of the Company shall be held at such time as is designated by the
Board of Directors. This amendment will give the Board necessary discretion when
calling the annual meetings of the stockholders.
The proposal to amend the Company's Bylaws to provide that the annual
meeting of the stockholders of the Company shall be held at such time as is
designated by the Board of Directors will be adopted if a majority of the shares
entitled to vote at the Annual Meeting vote in favor of the amendment.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND
ARTICLE II, SECTION 2.01 OF THE COMPANY'S BYLAWS.
ELECTION OF DIRECTORS
The Board of Directors currently consists of four members. The Company's
Bylaws provide that each director elected shall hold office until his or her
successor is duly elected and qualified.
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The Board of Directors has nominated the following four persons for
election as directors of the Company to serve until the 2002 Annual Meeting of
Stockholders or until his or her successor is duly elected and qualified:
o Frank DeLape
o William K. Boss, Jr.
o Michael Macaluso
o Michael Avignon
The persons named in the proxy will vote FOR these nominees, except where
authority has been withheld as to a particular nominee.
The nominees for director receiving a plurality of the votes
represented by the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote thereon will be elected as
directors. The nominees have consented to being named in this Proxy Statement
and to serve their terms if elected. If the nominees should for any reason
become unavailable for election, proxies may be voted with discretionary
authority by the persons appointed as proxies for any substitute designated by
the Board of Directors of the Company.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THESE NOMINEES FOR
ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY.
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
On August 22, 2001, the Company dismissed Robison, Hill & Co. ("Robison
Hill") as its independent accountants and auditors. The reports of Robison Hill
on the Company's balance sheets as of December 31, 2000 and 1999 and related
statements of operations, stockholders deficit and cash flows for the years then
ended did not contain an adverse opinion, disclaimer of opinion or qualification
or modification as to uncertainty, audit scope or accounting principles;
however, the accountant's report dated February 26, 2001 for the December 31,
2000 and 1999 financial statements did contain an explanatory paragraph that
indicates that there is doubt as the Company's ability to continue as a going
concern. The Company's Board of Directors approved the dismissal of Robison Hill
on August 22, 2001. During the fiscal years ended December 31, 2000 and 1999 and
during the subsequent interim period prior to the dismissal of Robison Hill,
there were no disagreements with Robison Hill on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures. During the fiscal years ended December 31, 2000 and 1999 and during
the subsequent interim period prior to the dismissal of Robison Hill, there were
no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).
The Board of Directors has selected Pannell Kerr Forster of Texas, P.C.
("Pannell Kerr") as independent certified public accountants to audit the
consolidated financial statements of the Company for its fiscal year ending
December 31, 2001. The stockholders of the Company are being asked to ratify
this appointment. The Company has been informed that neither Pannell Kerr nor
any of its partners have any direct financial interest or any material indirect
financial interest in the Company nor have had any connection during the past
three years with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. Representatives of Pannell Kerr are not
expected to be present at the Annual Meeting.
The affirmative vote of a majority of the votes cast at the Annual
Meeting, provided a quorum is present, is required for approval of this
proposal.
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Audit Fees
Aggregate fees, including out-of-pocket expenses, for professional
services rendered by the Company's auditors in connection with (i) the audit
of the Company's consolidated financial statements as of and for the year
ended December 31, 2000, and (ii) the limited reviews of the Company's
unaudited interim financial statements as of March 31, 2000, June 30, 2000,
and September 30, 2000 were $5,950
Financial Information Systems Design and Implementation Fees
In 2000, the Company paid no fees to the Company's auditors for directly
or indirectly operating, or supervising the operation of, the Company's
information system or managing the its local area network or designing or
implementing a hardware or software system that aggregates source data
underlying the financial statements or generates information that is significant
to the Company's financial statements taken as a whole.
All Other Fees
The Company paid no other fees to its auditors in 2000.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PANNELL KERR FORSTER OF TEXAS, P.C. AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and titles of the
directors and executive officers of the Company.
Name Age Title
---- --- -----
Frank DeLape 48 Chairman of the Board of Directors
William K. Boss, Jr 51 Vice Chairman of the Board of Directors
Michael Macaluso 50 Chief Executive Officer and Director
Michael Avignon 48 President and Director
Olga Marko 58 Senior Vice President and Director of Research
Jeffrey W. Tomz 30 Chief Financial Officer and Secretary
Jeff Mamaux 33 Controller
Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company and their principal occupations for the
past five years.
EXECUTIVE OFFICERS
Frank DeLape was appointed to the Board of Directors on June 18, 2001. He
was elected Vice President on August 10, 2001, and he was elected Chairman of
the Board on August 24, 2001. Mr. DeLape is also the Chief Executive Officer at
Benchmark Equity Group, Inc., a position he has held since
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1994. Benchmark is a boutique merchant banking firm that focuses as facilitators
and financial managers for emerging companies. Mr. DeLape is also the Managing
Partner of Sagemark Capital, LP. Sagemark Capital is a Small Business Investment
Company licensed by the United States government.
William K. Boss, Jr. was appointed to the Board of Directors on August
10, 2001. He was elected Vice Chairman of the Board of Directors on August 24,
2001. Dr. Boss has been the founder, Chief Executive Officer and Chairman of the
Board of Isolagen Technologies, Inc. since its inception in 1995. Dr. Boss is a
Board Certified Plastic Surgeon and serves the Hackensack Medical Center as Vice
Chairman of Plastic Surgery. Dr. Boss also serves as an Assistant Clinical
Professor at the University of Medicine and Dentistry in New Jersey.
Michael Macaluso was appointed to the Board of Directors on June 18,
2001. He was elected President of the Company on June 21, 2001, and he was
appointed Chief Executive Officer on August 24, 2001. Mr. Macaluso is the
founder and principal of International Printing and Publishing. For the last
twelve years, Mr. Macaluso has managed all phases of this large commercial
printing operation that serves domestic and international markets.
Michael Avignon was appointed to the Board of Directors on June 18, 2001.
He was elected Vice President of the Company on August 10, 2001, and he was
appointed President on August 24, 2001. Mr. Avignon is the founder, Chief
Executive Officer and Chairman of the Board of Axces, Inc., a position he has
held since 1994. Axces, Inc. is a telecommunications company. Mr. Avignon is
also Chairman and Chief Executive Officer of MTM Holdings, Corp. and Managing
Member of Capali, L.L.C.
Olga Marko was appointed Vice President of the Company on August 10,
2001. She assumed the role of Senior Vice President and Director of Research on
August 24, 2001. Ms. Marko has served as Vice President and Director of Research
at Isolagen Technologies, Inc. since its inception in 1995. Ms. Marko has over
thirty years in basic research uncovering numerous opportunities for the
development of cell lines for specific applications. Ms. Marko was the first to
successfully cultivate melanocytes in culture while she was at Memorial Sloan
Kettering research institution in New York.
Jeffrey W. Tomz was appointed Secretary and Treasurer of the Company on
June 21, 2001. He was appointed Chief Financial Officer and Secretary on August
24, 2001. Mr. Tomz is also a Principal at Benchmark Equity Group, Inc. Benchmark
is a boutique merchant banking firm that focuses as facilitators and financial
managers for emerging companies. Mr. Tomz has served and/or is currently serving
on corporate Boards of investee companies, as well as Trident III, L.L.C. and
Trident II, L.L.C. Mr. Tomz was a Director of InfoHighway Communication Corp., a
private company that was recently involved in a corporate restructuring with an
equity investment of $45 million, plus an additional $105 million equity
commitment. Prior to joining Benchmark in the fall of 1997, Mr. Tomz began his
career as a certified public accountant with Arthur Andersen Worldwide.
Jeff Mamaux was appointed Controller of the Company on August 24, 2001.
Mr. Mamaux is the Controller of Axces, Inc., a position he has held since 1996.
Axces, Inc. is a telecommunications company. Prior to joining Axces, Mr. Mamaux
was the inventory and cost supervisor for Strategic Materials, Inc.
No director is related to any other director or executive officer of the
Company or its subsidiaries, and except as described above, there are no
arrangements or understandings between a director and any other person pursuant
to which such person was elected as director.
Corporate officers are appointed by the Board and serve at the discretion
of the Board.
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MEETINGS OF DIRECTORS AND COMMITTEES
Members of the Board of Directors discussed various business matters
informally on numerous occasions throughout the year 2000. No formal actions
were taken by vote in board meetings that occurred throughout 2000 or by
unanimous consent during 2000. Directors who are also employees did not receive
compensation for services as directors.
The Board of Directors has no standing audit or compensation committees.
REMUNERATION OF DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and long-term
compensation with respect to the fiscal years ended December 31, 2000, 1999 and
1998, paid or accrued by the Company to or on behalf of those persons who were,
during the fiscal year ended December 31, 2000, the Company's Chief Executive
Officer. None of the Company's executive officers had total compensation in
excess of $100,000.
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION LONG-TERM COMPENSATION COMPENSATION
-------------------------------------------------- ------------------------- ------------
Other Restricted
Annual Securities Stock
Fiscal Compen- Underlying Awards
Year Salary Bonus sation(1) Options (4)(5) (2)
------ ------ ----- --------- ---------- ---------- --------
Kenton L. Stanger, CEO, 2000 -- -- $ 89,684 -- -- --
President, Director 1999 -- -- 82,675 -- -- $ 4,613
1998 -- -- 67,398 -- -- 6,934
(1) Consists of interest accrued during the year on the unpaid balance of
amounts previously outstanding on personal loans to such officer. Such amount is
treated as compensation for purposes of this table, but is considered an
obligation payable by such persons. Effective December 31, 2000, all amounts
payable by such officer to us were assigned to East Bay Trust.
(2) Consists of personal use of automobile and related insurance and other
expense.
No Options and SARs were granted or exercised during the last completed
fiscal year by any executive officer named in the Summary Compensation Table
above.
COMPENSATION OF DIRECTORS
No compensation was paid for director services during the fiscal year
ended December 31, 2000.
VOTING AND STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
At the Record Date, there were outstanding 15,043,630 shares of Common
Stock which were held of record by 404 stockholders, and the Company believes
that there were approximately 619 beneficial owners of Common Stock on that
date. Each share of Common Stock is entitled to one vote on each matter to come
before the Annual Meeting.
9
The following table sets forth certain information with regard to the
beneficial ownership as of October 16, 2001 of Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than five percent of
the outstanding Common Stock, (ii) each director and nominee for director of the
Company, (iii) each Named Executive Officer of the Company and (iv) all
executive officers and directors as a group (7 persons).
COMMON STOCK
------------------------------------------
Name of Beneficial Owner (1) Number of Shares (1) Percent of Class
---------------------------- -------------------- ----------------
Michael Macaluso 2,175,734(3) 14.5%
Michael Avignon 2,175,734(4) 14.5%
Frank DeLape 1,600,000(2) 10.6%
William K. Boss, Jr 1,597,333 10.6%
Olga Marko 1,066,000 7.1%
Lighthouse Capital Insurance Co. 1,000,000 6.6%
Jeffrey W. Tomz 227,200 1.5%
Jeff Mamaux 0 0%
All Executive Officers and Directors as a
group: 8,842,001 58.8%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. The table also includes shares of
Common Stock held by wives and minor children of such persons and
corporations and partnerships in which such persons hold a controlling
interest, but excludes any controlling interest which may be deemed solely
to exist by virtue of such person being a director of a corporation.
(2) Represents 1,600,000 shares of Common Stock beneficially owned by Benchmark
Equity Group, Inc., which is solely owned by Mr. DeLape.
(3) Includes 1,000,000 shares of Common Stock beneficially owned by Alyda
Macaluso, Mr. Macaluso's wife.
(4) Includes 1,000,000 shares of Common Stock beneficially owned by Laura
Avignon, Mr. Avignon's wife.
STOCKHOLDER PROPOSALS AT 2002 ANNUAL MEETING
The Board presently intends to hold the Company's next Annual Meeting of
Stockholders on or about November 13, 2002. A proxy statement and notice of this
meeting will be mailed to all stockholders approximately one month prior to that
date. In order to be eligible for inclusion in the Company's proxy statement for
the 2002 Annual Meeting of Stockholders, a proposal of a stockholder must be
received by the Company at its principal executive offices located in Houston,
Texas by June 24, 2002. All stockholder proposals received after June 24, 2002
will be considered untimely and will not be included in the proxy statement for
the 2002 Annual Meeting of Stockholders. All stockholder proposals of this
nature must comply with SEC Rule 14a-8 under the 1934 Act. Also, the notice must
meet the other requirements contained in the Company's bylaws. A copy of the
relevant bylaw provisions containing the requirements for making stockholder
proposals may be obtained by contacting the Company's Secretary at the executive
offices of the Company.
10
OTHER MATTERS
The Company will bear all costs of this proxy solicitation. The Company
anticipates that such costs are approximately $10,000.00. In addition to
soliciting proxies by mail, directors, executive officers and employees of the
Company, without receiving additional compensation, may solicit proxies by
telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of the Common Stock,
and the Company will reimburse these brokerage firms and other custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection with forwarding such materials.
The Board does not know of any business to be presented for consideration
at the Annual Meeting other than that stated in the accompanying Notice. It is
intended, however, that the persons authorized under the proxies may, in the
absence of instructions to the contrary, vote or act in accordance with their
judgment with respect to any other proposal properly presented for action at
such meeting.
Information contained in the Proxy Statement relating to the security
holdings of and related information concerning directors and officers of the
Company is based upon information received from the individual directors and
officers.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT
WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
Jeffrey W. Tomz
Chief Financial Officer and Secretary
Houston, Texas
October 22, 2001
11
APPENDIX I
COMPANY STOCK OPTION PLAN
AMERICAN FINANCIAL HOLDING, INC.
2001 STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1 American Financial Holding, Inc., a Delaware corporation
(the "Company"), hereby establishes a stock option plan to be named the 2001
Stock Option and Appreciation Rights Plan (the "2001 Plan").
Section 1.2 The purpose of the 2001 Plan is to induce persons who are
officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer such persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage such persons to continue to promote the best interests of the Company.
The 2001 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value U.S. $0.001 per share (the "Common Stock"),
which qualify as incentive stock options ("Incentive Options") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), to be issued to
such persons who are employees or officers, as well as options which do not so
qualify ("Non-Qualified Options") to be issued to officers, directors, employees
and consultants. The 2001 Plan also provides for grants of stock appreciation
rights ("Rights") in connection with the grant of options under the 2001 Plan.
Incentive Options and Non-Qualified Options may be collectively referred to
hereinafter as the "Options" as the context may require.
Section 1.3 All stock options granted by the Company on or after the
date that this 2001 Plan has been approved and adopted by the Company's
stockholders shall be governed by the terms and conditions of this 2001 Plan
unless the terms of such option specifically indicate that it is not to be
governed by this 2001 Plan.
ARTICLE II
ADMINISTRATION
Section 2.1 All determinations under the 2001 Plan concerning the
selection of persons eligible to receive awards under the 2001 Plan and with
respect to the timing, pricing and amount of a grant or award under this 2001
Plan shall be made by the administrator (the "Administrator") of the 2001 Plan.
The Administrator shall be the Company's Board of Directors (the "Board"). With
respect to persons subject to Section 16 of the Securities Exchange Act of 1934
("Exchange Act"), transactions under this 2001 Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the 2001 Plan or action by the Administrator
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Administrator.
Section 2.2 The provisions of this 2001 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code and
the regulations promulgated thereunder ("Section 422"). In the event any future
statute or regulation shall modify Section 422, this 2001 Plan shall be deemed
to incorporate by reference such modification. Any stock option agreement
relating to any Incentive Option granted pursuant to this 2001 Plan outstanding
and unexercised at the time that any
12
modifying statute or regulation becomes effective shall also be deemed to
incorporate by reference such modification, and no notice of such modification
need be given to the Optionee. Any stock option agreement relating to an
Incentive Option shall provide that the Optionee hold his stock received upon
exercise of such Incentive Option for a minimum of two years from the date of
grant of the Incentive Option and one year from the date of the exercise of such
Incentive Option absent the written approval, consent or waiver of the
Administrator.
Section 2.3 If any provision of this 2001 Plan is determined to
disqualify the shares of Common Stock purchasable pursuant to the Incentive
Options granted under this 2001 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify the shares of Common Stock for said tax
treatment.
Section 2.4 The Company shall grant Incentive Options and Non-Qualified
Options (collectively, "Options"), and Rights under the 2001 Plan in accordance
with determinations made by the Board pursuant to the provisions of the 2001
Plan. All Options granted pursuant to the 2001 Plan shall be clearly identified
as Incentive Options or Non-Qualified Options. The Administrator may from time
to time adopt (and thereafter amend or rescind) such rules and regulations for
carrying out the 2001 Plan and take such action in the administration of the
2001 Plan, not inconsistent with the provisions hereof, as it shall deem proper.
The Board shall have plenary discretion, subject to the express provisions of
this 2001 Plan, to determine which officers, directors, employees and
consultants shall be granted Options, the number of shares subject to each
Option, the time or times when an Option may be exercised (whether in whole or
in installments), whether stock appreciation rights under Section 7.6 hereof
shall be granted, the terms and provisions of the respective option agreements
(which need not be identical), including such terms and provisions which may be
amended from time to time as shall be required, in the judgment of the
Administrator, to conform to any change in any law or regulation applicable
hereto, and to make all other determinations deemed necessary or advisable for
the administration of the 2001 Plan. The interpretation and construction of any
provisions of the 2001 Plan by the Administrator (unless otherwise determined by
the Board of Directors) shall be final, conclusive and binding upon all persons.
Section 2.5 No member of the Administrator shall be liable for any
action or determination made in good faith with respect to the 2001 Plan or any
Option granted under it. A member of the Administrator shall be indemnified by
the Company, pursuant to the Company's By-Laws, for any expenses, judgments or
other costs incurred as a result of a lawsuit filed against such member claiming
any rights or remedies due to such member's participation in the administration
of the 2001 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1 There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 2001 Plan an
aggregate of 5,000,000 shares of Common Stock, US$0.001 par value per share, of
the Company (subject to adjustment as provided in Article VIII hereof). The
shares issued by the Company under the 2001 Plan may be either issued shares
reacquired by the Company at any time or authorized but unissued shares, as the
Board from time to time may determine.
Section 3.2 In the event that any outstanding Options under the 2001
Plan for any reason expire or are terminated without having been exercised in
full or shares of Common Stock subject to Options are surrendered in whole or in
part pursuant to stock appreciation rights granted under Section 7.6 hereof
(except to the extent that shares of Common Stock are paid to the holder of the
Option upon such surrender) the unpurchased shares of Common Stock subject to
such Option and any such surrendered shares may again be available for transfer
under the 2001 Plan.
13
Section 3.3 No Options shall be granted pursuant to this 2001 Plan to
any Optionee after the tenth anniversary of the earlier of the date that this
2001 Plan is adopted by the Board or the date that this 2001 Plan is approved by
the Company's stockholders.
ARTICLE IV
ELIGIBILITY
Section 4.1 Non-Qualified Options may be granted pursuant to this 2001
Plan only to officers, directors, employees and consultants who are not
employees of the Company or any of its subsidiaries at the discretion of the
Administrator. Incentive Options may be granted pursuant to this 2001 Plan only
to officers, directors (who are also employees), and employees of the Company or
any of its subsidiaries at the discretion of the Administrator. Persons granted
Options pursuant to this 2001 Plan are hereinafter referred to as "Optionees."
For purposes of determining who is an employee with respect to eligibility for
Incentive Options, Section 422 shall govern. The Administrator may determine in
its sole discretion that any person who would otherwise be eligible to be
granted Options shall, nonetheless, be ineligible to receive any award under
this 2001 Plan.
Section 4.2 The Administrator will, in its discretion, determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares subject to each Option, the terms of a vesting or
forfeiture schedule, if any, the type of Option issued, the period during which
they may be exercised, the manner in which Options may be exercised and all
other terms and conditions of the Options; provided, however, no Option will be
granted which has terms or conditions inconsistent with those stated in Articles
V and VI hereof. Relevant factors in making such determinations may include the
value of the services rendered by the respective Optionee, his present and
potential contributions to the Company, and such other factors which are deemed
relevant in accomplishing the purpose of the 2001 Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1 Each Option granted under the 2001 Plan shall be evidenced
by a Stock Option Certificate and Agreement in a form not inconsistent with the
2001 Plan, provided that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by
an Option may be purchased shall be set forth in the Stock Option
Certificate and Agreement and shall be determined by the Administrator,
provided that the Option price for any Incentive Option shall not be
less than the "fair market value" of the common stock at the time of
grant. Notwithstanding the foregoing, if an Incentive Option to
purchase shares is granted pursuant to this 2001 Plan to an Optionee
who, on the date of the grant, directly or indirectly owns more than
10% of the voting power of all classes of capital stock of the Company
or its parent or subsidiary, not including the stock obtainable under
the Option, the minimum exercise price of such Option shall be not less
than 110% of the "fair market value" of the shares of Common Stock on
the date of grant in accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the
Administrator, which determination shall be binding upon the Company
and its officers, directors, employees and consultants. The
determination of the fair market value shall be based upon the
following: (i) if the Common Stock is not listed and traded upon a
14
recognized securities exchange and there is no report of stock prices
with respect to the common stock published by a recognized stock
quotation service, on the basis of the recent purchases and sales of
the common stock in arms-length transactions; or (ii) if the Common
Stock is not then listed and traded upon a recognized securities
exchange or quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), and
there are reports of stock prices by a recognized quotation service,
upon the basis of the mean between the closing bid and asked quotations
for such stock on the date of grant as reported by a recognized stock
quotation service, or, if there are no bid or asked quotations on that
day, then upon the basis of the mean between the bid and asked
quotations for such stock on the date nearest preceding that day; or
(iii) if the Common Stock shall then be listed and traded upon a
recognized securities exchange or quoted on Nasdaq, upon the basis of
the mean between the highest and lowest selling prices at which shares
of the Common Stock were traded on such recognized securities exchange
on that date or, if the Common Stock was not traded on such date, upon
the basis of the mean of such prices on the date nearest preceding that
date. In the absence of any of the above-referenced evidence of fair
market value, the Administrator shall consider such other factors
relating to the fair market value of the Common Stock as it shall deem
appropriate.
(c) For the purpose of determining whether an Optionee owns
more than 10% of the voting power of all classes of stock of the
Company, an Optionee is considered to own those shares which are owned
directly or indirectly through brothers and sisters (including
half-blooded siblings), spouse, ancestors and lineal descendants; and
proportionately as a stockholder of a corporation, a partner of a
partnership, and/or a beneficiary of a trust or an estate that owns
shares of the Company.
(d) Notwithstanding any other provision of this 2001 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the
extent that the aggregate fair market value (determined at the time the
Option is granted) of the stock of the Company with respect to which
Incentive Options (without reference to this provision) are exercisable
for the first time by any individual in any calendar year under any and
all stock option plans of the Company, its subsidiary corporations and
its parent (if any) exceeds US$100,000, such Options shall be treated
as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be
granted more than one Incentive Option or Non-Qualified Option during
the duration of this 2001 Plan, and may be issued a combination of
Non-Qualified Options and Incentive Options; provided that
non-employees are not eligible to receive Incentive Options.
(f) The duration of any Option and any Right related thereto
shall be within the sole discretion of the Administrator; provided,
however, that any Incentive Option granted to a 10% or less stockholder
or any Non-Qualified Option shall, by its terms, be exercised within
ten years after the date the Option is granted and any Incentive Option
granted to a greater than 10% stockholder shall, by its terms, be
exercised within five years after the date the Option is granted.
(g) Any Option and any Right related thereto shall not be
transferable by the Optionee other than by will, or by the laws of
descent and distribution. An Option may be exercised during the
Optionee's lifetime only by the Optionee.
(h) At least six months shall elapse from the date on which an
Option is granted to a director, officer or beneficial owner of more
than 10% of the outstanding common stock under this 2001 Plan by the
Administrator to the date on which any share of common stock underlying
such Option is sold or any Right associated with such Option is
exercised, unless the Administrator otherwise consents in writing.
15
(i) In the event that stockholder approval of the 2001 Plan is
not obtained within one year of the adoption of the Plan by the Board or
within such other time period required under Section 422 and the regulations
thereunder, all Options issued and issuable hereunder shall automatically be
deemed to be Non-Qualified Options.
(j) The Administrator may impose such other conditions with
respect to the exercise of options, including without limitation, any
conditions relating to the application of federal or state securities
laws, as it may deem necessary or advisable.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1 If the employment or service of an Optionee is terminated
for cause, the Option and Rights, if any, of such Optionee, both accrued and
future, under any then outstanding Non-Qualified or Incentive Option shall
terminate immediately. Unless the Administrator determines to define "cause"
differently and such definition is set forth in the Stock Option Certificate,
"cause" shall mean incompetence in the performance of duties, disloyalty,
dishonesty, theft, embezzlement, unauthorized disclosure of customer lists,
product lines, processes or trade secrets of the Company, individually or as an
employee, partner, associate, officer or director of any organization. The
determination of the existence and the proof of "cause" shall be made by the
Administrator and, subject to the review of any determination made by the
Administrator, such determination shall be binding on the Optionee and the
Company.
Section 6.2 If the employment or service of the Optionee is terminated
by either the Optionee or the Company for any reason other than for cause,
death, or for disability, as defined in Section 22(e)(3) of the Code, the Option
and Rights, if any, of such Optionee under any then outstanding Non-Qualified or
Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option
or within three months after the date of such termination, whichever period of
time is shorter, but only to the extent of the accrued right to exercise the
Option at the date of such termination.
Section 6.3 In the case of an Optionee who becomes disabled, as defined
by Section 22(e)(3) of the Code, the Option rights of such Optionee under any
then outstanding Non-Qualified or Incentive Option shall, subject to the
provisions of Section 5.1(h) hereof, be exercisable by such Optionee at any time
prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of such termination.
Section 6.4 In the event of the death of an Optionee, the Option rights
of such Optionee under any then outstanding Non-Qualified or Incentive Option
shall be exercisable by the person or persons to whom these rights pass by will
or by the laws of descent and distribution, at any time prior to the expiration
of the Option or within three years after the date of death, whichever period of
time is shorter, but only to the extent of the accrued right to exercise the
Option, and Rights, if any, at the date of death. If a person or estate acquires
the right to exercise a Non-Qualified or Incentive Option by bequest or
inheritance, the Administrator may require reasonable evidence as to the
ownership of such Option, and may require such consents and releases of taxing
authorities as the Administrator may deem advisable.
Section 6.5 In addition to the requirements set forth in the 2001 Plan,
the Administrator may set such other targets, restrictions or other terms
relating to the employment or service of the Optionee, including but not limited
to a requirement that an employee must be continuously employed by the Company
for such period of time as the Administrator, in its discretion, deems advisable
before the right
16
to exercise any portion of an Option granted to such employee will accrue, which
targets, restrictions, or terms must be fulfilled or complied with, as the case
may be, prior to the exercise of any portion of an Option, and/or Rights, if
any, granted to any Optionee.
Section 6.6 Options and/or Rights, if any, granted under the 2001 Plan
shall not be affected by any change of duties or position, so long as the
Optionee continues in the service of the Company.
Section 6.7 Nothing contained in the 2001 Plan, or in any Option and/or
Rights, if any, granted pursuant to the 2001 Plan, shall confer upon any
Optionee any right with respect to continuance of employment or service by the
Company nor interfere in any way with the right of the Company to terminate the
Optionee's employment or service or change the Optionee's compensation at any
time.
ARTICLE VII
PURCHASE OF SHARES
Section 7.1 Except as provided in this Article VII, an Option shall be
exercised by tender to the Company of the total exercise price of the shares
with respect to which the Option is exercised and written notice of the
exercise. The right to purchase shares shall be cumulative so that, once the
right to purchase any shares has accrued, such shares or any part thereof may be
purchased at any time thereafter until the expiration or termination of the
Option. A partial exercise of an Option shall not affect the right of the
Optionee to exercise the Option from time to time, in accordance with the 2001
Plan, as to the remaining number of shares subject to the Option. The purchase
price of the shares shall be in United States dollars, payable in cash or by
certified bank check. Notwithstanding the foregoing, in lieu of cash, an
Optionee may, with the approval of the Administrator, exercise his Option by
tendering to the Company shares of the common stock of the Company or Options to
purchase shares of Common Stock of the Company owned by him and having an
aggregate fair market value at least equal to the total exercise price. The fair
market value of any shares of common stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof. The fair market
value of any Options tendered as consideration for an Option exercise shall be
determined by subtracting the Option exercise price per share from the fair
market value of a share of Common Stock and multiplying that difference by the
number of shares to which the surrendered Option relates.
Section 7.2 Except as provided in Article VI, an Option may not be
exercised unless the holder thereof is an officer, director, employee or
consultant of the Company at the time of exercise.
Section 7.3 No Optionee, or optionee's executor, administrator,
legatee, distributee or other permitted transferee, shall be deemed to be a
holder of any shares subject to an Option for any purpose whatsoever unless and
until a stock certificate or certificates for such are issued to such person(s)
under the terms of the 2001 Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Article VIII hereof.
Section 7.4 If (i) the listing, registration or qualification of the
Options issued hereunder, or of any securities that may be purchased upon
exercise of such Options (the "Subject Securities") upon any securities exchange
or quotation system, or under federal or state law is necessary as a condition
of or in connection with the issuance or exercise of the Options, or (ii) the
consent or approval of any governmental regulatory body is necessary as a
condition of or in connection with the issuance or exercise of the Options, the
Company shall not be obligated to deliver the certificates representing the
Subject Securities or to accept or to recognize an Option exercise unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained. The Company will take reasonable action to so list,
register, or qualify the Options and the Subject Securities, or effect or obtain
such consent or approval, so as to allow for their issuance.
17
Section 7.5 An Optionee may be required to represent to the Company as
a condition of his exercise of Options issued under this 2001 Plan: (i) that the
Subject Securities acquired upon Option exercise are being acquired by him for
investment and not with a view to distribution or resale, unless counsel for the
Company is then of the view that such a representation is not necessary and is
not required under the Securities Act of 1933, as amended, (the "Securities
Act") or any other applicable statute, law, regulation or rule; and (ii) that
the Optionee shall make no exercise or disposition of an Option or of the
Subject Securities in contravention of the Securities Act, the Exchange Act or
the rules and regulations thereunder. Optionees may also be required to provide
(as a condition precedent to exercise of an Option) such documentation as may be
reasonably requested by the Company to assure compliance with applicable law and
the terms and conditions of the 2001 Plan and the subject Option.
Section 7.6 The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the Right
to surrender all or part of the Option to the extent that such Option is
exercisable and receive in exchange an amount (payable in cash, shares of the
Company's stock valued at the then fair market value, or a combination thereof
as determined by the Board) equal to the difference between the then fair market
value of the shares issuable upon the exercise of the Option or portions thereof
surrendered and the Option price payable upon the exercise of the Option or
portions thereof surrendered (the "Spread"). Such Rights may be included in an
Option only under the following conditions: (a) the Rights will expire no later
than the expiration of the underlying Option; (b) the Rights may be for no more
than 100% of the Spread; (c) the Rights are transferable only when the
underlying Option is transferable, and under the same conditions; (d) the Rights
may be exercised only when the underlying Option is eligible to be exercised;
(e) the Rights may be exercised only when the Spread is positive, i.e., when the
market price of the stock subject to the Option exceeds the exercise price of
the Option; and (f) any Rights granted to an Optionee shall be subject to all
terms, conditions and provisions governing the Options, as expressed in the 2001
Plan and in the Option agreement issued to such Optionee pursuant to the 2001
Plan.
Section 7.7 An Option may also be exercised by tender to the Company of
a written notice of exercise together with advice of the delivery of an order to
a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advanced by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section 8.1 In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment may be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under the 2001 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator may make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, and, to the extent granted, Rights in connection therewith, or portions
thereof then unexercised, shall be exercisable, to the end that the Optionee's
proportionate interest shall be maintained as before the occurrence to the
unexercised portion of the Option, and to the extent granted, Rights in
connection therewith, and with a corresponding adjustment in the Option price
per share. Any such adjustment made by the Administrator shall be conclusive.
18
Section 8.2 The grant of an Option, and any Rights granted in
connection therewith, pursuant to the 2001 Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
Section 8.3 Upon the dissolution or liquidation of the Company, or upon
a reorganization, merger or consolidation of the Company as a result of which
the outstanding securities of the class then subject to Options, and any Rights
granted in connection therewith, hereunder are changed into or exchanged for
cash or property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company to an association, person, party,
corporation, partnership, or control group as that term is construed for
purposes of the Exchange Act, the 2001 Plan shall terminate, and all Options,
and any Rights granted in connection therewith, theretofore granted hereunder
shall terminate, unless provision be made in writing in connection with such
transaction for the continuance of the 2001 Plan and/or for the assumption of
Options, and/or any Rights granted in connection therewith, theretofore granted,
or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event the 2001 Plan and Options, and/or any Rights granted in connection
therewith, theretofore granted shall continue in the manner and under the terms
so provided. If the 2001 Plan and unexercised Options, and/or any Rights granted
in connection therewith, shall terminate pursuant to the foregoing sentence, all
persons owning any unexercised portions of Options then outstanding shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of their Options, including the portions thereof which would, but for
this Section 8.3 not yet be exercisable; except that the exercise of any Rights
after such termination shall be allowed solely at the discretion of the Board.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1 The Board of Directors may at any time terminate the 2001
Plan or make such amendments thereto as it shall deem advisable and in the best
interests of the Company, without action on the part of the stockholders of the
Company unless such approval is required pursuant to applicable law; provided,
however, that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, affect or
impair the rights of such individual under such Option. Pursuant to Section
422(b)(2) of the Code, no Incentive Option may be granted pursuant to this 2001
Plan more than ten years from the date the 2001 Plan is adopted or the date the
2001 Plan is approved by the stockholders of the Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section 10.1 Any Options and any shares of Common Stock issued pursuant
to the 2001 Plan shall be subject to such restrictions on transfer and
limitations as shall, in the opinion of the Board, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof or any other applicable law. In
addition, the Administrator may in any Stock Option Certificate and Agreement
impose such other restrictions upon the exercise of an Option or upon the sale
or other disposition of the shares of Common Stock deliverable upon exercise
thereof as the Administrator may, in its sole discretion, determine, including
but not limited to provisions which allow the Company to reacquire such shares
at their original purchase price if the Optionee's employment terminates within
a stated period after the acquisition of such shares. By accepting an award
pursuant to the 2001 Plan each Optionee shall thereby agree to any such
restrictions.
19
Section 10.2 Any certificate issued to evidence shares issued pursuant
to an Option shall bear such legends and statements as the Board of Directors or
counsel to the Company shall deem advisable to assure compliance with the laws,
rules and regulations of the United States government or any state or
jurisdiction thereof. No shares will be delivered under the 2001 Plan until the
Company has obtained such consents or approvals from such regulatory bodies of
the United States government or any state or jurisdiction thereof as the Board
of Directors or counsel to the Company deems necessary or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section 11.1 The Company is vested with authority under this 2001 Plan,
at the discretion of the Board, to assist any employee to whom an Option is
granted hereunder (including any director or officer of the Company or any of
its subsidiaries who is also an employee) in the payment of the purchase price
payable on exercise of that Option, by lending the amount of such purchase price
to such employee on such terms and at such rates of interest and upon such
security (or unsecured) as shall have been authorized by or under authority of
the Board. Any such assistance shall comply with the requirements of Regulation
G promulgated by the Board of the Federal Reserve System, as amended from time
to time, and any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section 12.1 The proceeds received by the Company from the sale of
stock pursuant to the 2001 Plan are to be added to the general funds of the
Company and used for its corporate purposes as determined by the Board.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section 13.1 This 2001 Plan shall become effective upon adoption by the
Board, and Options may be issued hereunder from and after that date subject to
the provisions of Section 3.3. This 2001 Plan must be approved by the Company's
stockholders in accordance with the applicable provisions (relating to the
issuance of stock or Options) of the Company's governing documents and state law
or, if no such approval is prescribed therein, by the affirmative vote of the
holders of a majority of the votes cast at a duly held stockholders meeting at
which a quorum representing a majority of all the Company's outstanding voting
stock is present and voting (in person or by proxy) or, without regard to any
required time period for approval, by any other method permitted by Section 422
and the regulations thereunder. If such stockholder approval is not obtained
within one year of the adoption of the 2001 Plan by the Board or within such
other time period required under Section 422 and the regulations thereunder,
this 2001 Plan shall remain in force, provided however, that all Options issued
and issuable hereunder shall automatically be deemed to be Non-Qualified
Options.
*****
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AMERICAN FINANCIAL HOLDING, INC.
PROXY THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
NOVEMBER 13, 2001
FOR
The undersigned stockholder acknowledges receipt of
the Notice of Annual Meeting of Stockholders and the
Proxy Statement, each dated November 13, 2001, and
ANNUAL hereby appoints Michael Macaluso and Michael Avignon, or
either of them, proxies for the undersigned, each with
full power of substitution, to vote all of the
undersigned's shares of common stock of American
Financial Holding, Inc. (the "Company") at the Annual
MEETING Meeting of Stockholders of the Company to be held at
the Company's principal executive offices located at
2500 Wilcrest, Suite 540, Houston, Texas 77042, on
Tuesday, November 13, 2001 at 10:00 a.m., Central
OF Daylight Time, and at any adjournments or postponements
thereof.
STOCKHOLDERS
NOVEMBER 13, 2001
1. [ ] For [ ] Against [ ] Abstain The proposal to amend the Company's Articles of Incorporation to
change the Company's name to Isolagen, Inc.
2. [ ] For [ ] Against [ ] Abstain The approval of the American Financial Holding, Inc. 2001 Stock Option
and Appreciation Rights Plan.
3. [ ] For [ ] Against [ ] Abstain The proposal to amend Article II, Section 2.01 of the Company's Bylaws.
4. [ ] For All [ ] Withhold All Election of Directors, Nominees: Frank DeLape,
[ ] For All Except William K. Boss, Jr., Michael Macaluso and Michael Avignon.
For all, except nominee(s) written in below:
--------------------------------------------
--------------------------------------------
5. [ ] For [ ] Against [ ] Abstain The ratification of the appointment of Pannell Kerr Forster of
Texas, P.C. as the Company's independent certified public accountants
for the fiscal year ending December 31, 2001.
6. [ ] For [ ] Against [ ] Abstain In their discretion, upon such other matters as may properly come
before the meeting.
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(PLEASE SIGN ON REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND
PROPOSALS ABOVE AND IF NO SPECIFICATION IS MADE, THE SHARES
WILL BE VOTED FOR SUCH NOMINEES AND PROPOSALS.
Dated , 2001
-------------------------------
-------------------------------
Stockholder's Signature
-------------------------------
Stockholder's Signature
Signature should agree with name
printed hereon. If stock is held in
the name of more than one person,
EACH joint owner should sign.
Executors, administrators, trustees,
guardians, and attorneys should
indicate the capacity in which they
sign. Attorneys should submit powers
of attorney.
PLEASE SIGN, DATE AND RETURN THE PROXY IN THE ENVELOPE ENCLOSED. THIS PROXY WILL
BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES IN
ITEM 4, FOR THE PROPOSALS SET FORTH IN ITEMS 1, 2, 3 AND 5, AND WILL GRANT
DISCRETIONARY AUTHORITY PURSUANT TO ITEM 6. THIS PROXY WILL REVOKE ALL PRIOR
PROXIES SIGNED BY YOU.