SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for use of the Commission only as permitted by Rule 14a-6
(e)(2)
DCAP GROUP, INC.
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(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
not applicable
2) Aggregate number of securities to which transaction applies:
not applicable
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
filing fee is calculated and state how it was determined)
not applicable
4) Proposed maximum aggregate value of transaction:
$1,563,500
5) Total fee paid:
$312.70
[X] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
DCAP GROUP, INC.
1158 Broadway
Hewlett, New York 11557
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 27, 2001
To the Stockholders of DCAP Group, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DCAP
Group, Inc., a Delaware corporation, will be held on November 27, 2001 at The
Financial Center at Mitchel Field, 90 Merrick Avenue, 9th Floor, East Meadow,
New York 11554, at the hour of 10:00 a.m., for the following purposes:
1. To elect four directors for the coming year.
2. To approve and ratify the sale by us and our subsidiaries of assets that
may constitute, under Delaware law, substantially all of our assets.
3. To approve an increase in the number of common shares authorized to be
issued pursuant to our 1998 Stock Option Plan from 2,000,000 to 3,000,000.
4. To approve an amendment to our Certificate of Incorporation to increase
the number of authorized common shares from 25,000,000 to 40,000,000.
5. To approve an amendment to our Certificate of Incorporation to provide
for the authority to issue up to 1,000,000 preferred shares.
6. To approve an amendment to our Certificate of Incorporation to broaden
the corporate purposes to include any lawful act or activity for which
corporations may be organized under Delaware law.
7. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on October 15, 2001
are entitled to notice of and to vote at the meeting or at any adjournment
thereof.
Morton L. Certilman
Secretary
Hewlett, New York
October 25, 2001
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE AND SIGN THE
ENCLOSED PROXY, WHICH IS SOLICITED BY OUR BOARD OF DIRECTORS, AND RETURN IT IN
THE PRE-ADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY STOCKHOLDER MAY REVOKE
HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY
SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
================================================================================
TABLE OF CONTENTS
Page
Explanatory Note............................................................................................. 1
Summary Term Sheet .......................................................................................... 1
Soliciting, Voting and Revocability of Proxy................................................................. 4
Forward-Looking Statements.................................................................................. 6
Executive Compensation...................................................................................... 6
Security Ownership of Certain Beneficial Owners and Management.............................................. 8
Certain Relationships and Related Transactions............................................................... 10
Proposal 1: Election of Directors........................................................................... 16
Proposal 2: Sale of Assets.................................................................................. 20
Sales Transactions........................................................................................ 20
Background of and Reasons for the Sales Transactions..................................................... 22
Valuation Analysis....................................................................................... 23
Stockholder Approval..................................................................................... 25
Regulatory Requirements.................................................................................. 26
Pro Forma Financial Statements........................................................................... 26
Recommendation and Required Vote......................................................................... 34
Proposal 3: Amendment to 1998 Stock Option Plan to Increase Number
of Authorized Shares........................................................................................ 34
Proposal 4: Amendment to Certificate of Incorporation to Increase Number
of Authorized Common Shares................................................................................. 39
Proposal 5: Amendment to Certificate of Incorporation to Provide for Authority
to Issue Preferred Shares.................................................................................. 40
Proposal 6: Amendment to Certificate of Incorporation to Broaden Corporate Purposes......................... 41
Independent Public Accountants............................................................................... 41
Stockholder Proposals........................................................................................ 42
Other Business............................................................................................... 44
Incorporation of Certain Information by Reference............................................................ 44
Appendix A - Authority of Board with respect to Preferred Shares Proposed
to be Authorized
Appendix B - Proposed Revised Article THIRD of Certificate of Incorporation with
respect to Corporate Purposes
DCAP GROUP, INC.
1158 Broadway
Hewlett, New York 11557
----------------------------
PROXY STATEMENT
-----------------------------
EXPLANATORY NOTE
Throughout this proxy statement, the words "DCAP Group," "we," "our," and
"us" refer to DCAP Group, Inc. and the operations of DCAP Group, Inc. as a
whole. References to "DCAP Insurance" and the "DCAP Companies" in this proxy
statement mean our wholly-owned subsidiary, DCAP Insurance Agencies, Inc., and
affiliated companies, and the operations of our insurance-related subsidiaries.
SUMMARY TERM SHEET
The following is a brief summary of the material terms of the transactions
pursuant to which we or our subsidiaries have sold or have agreed to sell assets
that may constitute, under Delaware law, substantially all of our assets. The
summary, which also discusses the effect of stockholder approval of the
proposal, is not intended to be a complete description of the transactions and
is subject to and qualified in its entirety by reference to the more detailed
information contained later in this proxy statement under "Proposal 2: Sale of
Assets."
Sales Transactions
We or our subsidiaries have entered into the following sales transactions
since May 2000:
In May 2000, we sold to Morton L. Certilman, our then Chairman of the
Board, our 50% interest in four DCAP stores. The remaining 50%
interest in each store was held by Mr. Certilman's daughter. The total
purchase price for our interest was approximately $141,000, after
certain credits. The nature of the credits and the other terms of the
sale are described in this proxy statement under "Certain
Relationships and Related Transactions - Sale of Interests in Stores."
The obligation to pay the purchase price of $141,000 for our interest
was cancelled in March 2001 based upon Mr. Certilman's agreement to
terminate his employment agreement with us and forgo the compensation
otherwise due him for the balance of the term ($365,000). This is
described in "Certain Relationships and Related Transactions - March
2001 Transactions."
Between September 2000 and February 2001, we sold seven other DCAP
stores to persons who are not affiliated with us for a total purchase
price of approximately
$555,000 (exclusive of contingent amounts). The terms of the sales are
described in "Proposal 2: Sale of Assets - Sales Transactions."
In March 2001, we and our subsidiaries agreed to sell eight other
stores to Kevin Lang (three), Abraham Weinzimer (three) and an entity
owned by Mr. Certilman (two). At the time of the agreements, Messrs.
Lang and Weinzimer were our President and Executive Vice President,
respectively, and Mr. Certilman was our Chairman of the Board. Also,
each was a director of DCAP Group (Mr. Certilman remains a director).
The purchase prices for the sales are as follows:
Mr. Lang: $257,000;
Mr. Weinzimer: $285,000; and
Mr. Certilman: $225,000.
The terms of the sales are described in this proxy statement under
"Certain Relationships and Related Transactions - March 2001
Transactions."
Stockholder Approval
We are submitting the above May 2000 sale, September 2000 - February 2001
sales, and March 2001 agreements to sell to our stockholders for approval based
upon our belief that the assets sold and agreed to be sold may constitute, under
Delaware law, substantially all of our assets. Stockholder approval is being
sought for the transactions in their totality and not individually; however, as
discussed below, the obtaining of, or the failure to obtain, stockholder
approval will affect the sale transactions in different ways.
The sales to Messrs. Lang, Weinzimer and Certilman pursuant to the March
2001 Agreements are not yet final and are subject to the receipt of approval by
our stockholders of the sales (either individually, as a group or as part of a
sale of our assets that may constitute a sale of substantially all of our
assets).
At the time of execution of the March 2001 agreements with Messrs. Lang and
Weinzimer, each of them paid to us the entire purchase price for his stores. Mr.
Certilman paid $197,000 of his purchase price at the time of execution of his
agreement. In the event stockholder approval is not received by December 31,
2001, each of Messrs. Lang, Weinzimer and Certilman may demand a return of his
respective payment. As security for the return of the amounts paid to us, we
granted to each of Messrs. Lang, Weinzimer and Certilman a security interest in
the assets they agreed to acquire. In the event of a demand by Messrs. Lang,
Weinzimer and/or Certilman, we have the option to require that, instead of our
having to repay the sums, they foreclose upon their respective liens. In the
event of foreclosure, Messrs. Lang, Weinzimer and Certilman will have obtained
their respective stores without stockholder approval of the transaction.
In contrast with the March 2001 agreements, the sales that were completed
between May 2000 and February 2001 are final and binding and are not subject to
stockholder approval or
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ratification. No party to any of the sales agreementswas given any right to undo
any of the transactions in the event stockholder approval or ratification was
not obtained. Therefore, in the event stockholders do not approve Proposal 2,
there will be no effect upon the validity of these completed sales. Stockholder
approval of Proposal 2 would, however, serve to signify that the stockholders
have ratified these sales.
Effect
Following the sale of the eight stores to Messrs. Lang, Weinzimer and
Certilman, or in the event they foreclose their respective liens and obtain the
stores, the number of stores wholly or partially owned by us will be reduced to
three. Our business will consist primarily of our insurance franchise operations
and our related operations in the areas of income tax preparation, premium
financing and automobile club services. We currently have 55 franchise
locations, excluding the above eight stores that are to become DCAP franchsies
in the event of sale or foreclosure.
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SOLICITING, VOTING AND REVOCABILITY OF PROXY
This proxy statement is being mailed to all stockholders of record at the
close of business on October 15, 2001 in connection with the solicitation by the
Board of Directors of proxies to be voted at the Annual Meeting of Stockholders
to be held on November 27, 2001 at 10:00 a.m., local time, or any adjournment
thereof. The proxy and this proxy statement were mailed to stockholders on or
about October 25, 2001.
All shares represented by proxies duly executed and received will be voted
on the matters presented at the meeting in accordance with the instructions
specified in such proxies. Proxies so received without specified instructions
will be voted as follows:
(1) FOR the nominees named in the proxy to our Board of Directors;
(2) FOR the approval and ratification of the sale of assets;
(3) FOR the approval of an increase in the number of common shares
authorized to be issued pursuant to our 1998 Stock Option Plan from 2,000,000 to
3,000,000;
(4) FOR the approval of an amendment to our Certificate of Incorporation to
increase the number of authorized common shares from 25,000,000 to 40,000,000;
(5) FOR the approval of an amendment to our Certificate of Incorporation to
provide for the authority to issue up to 1,000,000 preferred shares; and
(6) FOR the approval of an amendment to our Certificate of Incorporation to
broaden the corporate purposes to include any lawful act or activity for which
corporations may be organized under Delaware law.
Our Board does not know of any other matters that may be brought before the
meeting nor does it foresee or have reason to believe that proxy holders will
have to vote for substitute or alternate nominees to the Board. In the event
that any other matter should come before the meeting or any nominee is not
available for election, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies not marked to the contrary with
respect to such matters in accordance with their best judgment.
The total number of common shares outstanding and entitled to vote as of
October 15, 2001 was 11,353,402. The common shares are the only class of
securities entitled to vote on matters presented to our stockholders, each share
being entitled to one vote.
Our Certificate of Incorporation provides for cumulative voting of shares
for the election of directors. This means that each stockholder has the right to
cumulate his votes and give to one or more nominees as many votes as equals the
number of directors to be elected (four) multiplied by the number of shares he
is entitled to vote. A stockholder may therefore cast his votes for
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one nominee or distribute them among two or more of the nominees. A majority of
the common shares outstanding and entitled to vote as of October 15, 2001, or
5,676,702 common shares, must be present at the meeting in person or by proxy in
order to constitute a quorum for the transaction of business. Only stockholders
of record as of the close of business on October 15, 2001 will be entitled to
vote. With regard to the election of directors, votes may be cast in favor or
withheld. The directors shall be elected by a plurality of the votes cast in
favor. Accordingly, based upon there being four nominees, each person who
receives one or more votes will be elected as a director. Votes withheld in
connection with the election of one or more of the nominees for director will
not be counted as votes cast for such individuals.
Stockholders may expressly abstain from voting on Proposals 2, 3, 4, 5 and
6 by so indicating on the proxy. Abstentions and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted as present in the tabulation of
votes on each of the proposals presented to stockholders. Broker non-votes are
not counted for the purpose of determining whether a particular proposal has
been approved. Since Proposals 2, 4, 5 and 6 require the approval of a majority
of our outstanding common shares, abstentions and broker non-votes will have the
effect of a negative vote. Since Proposal 3 requires the affirmative approval of
a majority of the common shares present in person or represented by proxy at the
meeting and entitled to vote (assuming a quorum is present at the meeting),
abstentions will have a negative vote while broker non-votes will have no
effect.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with us written notice of revocation or a fully executed proxy bearing
a later date. The proxy may also be revoked by affirmatively electing to vote in
person while in attendance at the meeting. However, a stockholder who attends
the meeting need not revoke a proxy given and vote in person unless the
stockholder wishes to do so. Written revocations or amended proxies should be
sent to us at 1158 Broadway, Hewlett, New York 11557, Attention: Corporate
Secretary.
The proxy is being solicited by our Board of Directors. We will bear the
cost of the solicitation of proxies, including the charges and expenses of
brokerage firms and other custodians, nominees and fiduciaries for forwarding
proxy materials to beneficial owners of our shares. Solicitations will be made
primarily by mail, but certain of our directors, officers or employees may
solicit proxies in person or by telephone, telecopier or telegram without
special compensation.
A list of stockholders entitled to vote at the meeting will be available
for examination by any stockholder for any purpose germane to the meeting,
during ordinary business hours, for ten days prior to the meeting, at our
offices, 1158 Broadway, Hewlett, New York 11557, and also during the whole time
of the meeting for inspection by any stockholder who is present. To contact us,
stockholders should call (516) 374-7600, extension 3.
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Stockholders do not have any appraisal rights under Delaware law in
connection with the sale of assets. Therefore, even if a stockholder votes
against the approval and ratification of the sale, he will not be entitled to
seek payment from us for his common shares.
FORWARD-LOOKING STATEMENTS
Certain information contained in this proxy statement and/or incorporated
by reference in this proxy statement includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, and
is subject to the safe harbor created by that act. We caution readers that
certain important factors may affect our actual results and could cause such
results to differ materially from any forward-looking statements which may be
deemed to have been made in this proxy statement or which are otherwise made by
or on behalf of us. For this purpose, any statements contained or incorporated
by reference in this proxy statement that are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative
variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors which may affect our results include, but
are not limited to, the risks and uncertainties associated with undertaking
different lines of business, the lack of experience in operating certain new
business lines, the decline in the number of insurance companies offering
insurance products in our markets, the volatility of insurance premium pricing,
government regulation, competition from larger, better financed and more
established companies, the possibility of tort reform and a resultant decrease
in the demand for insurance, the uncertainty of litigation with regard to our
hotel lease, the dependence on our executive management, and our ability to
raise additional capital which may be required in the near term. Any one or more
of these uncertainties, risks and other influences could materially affect our
results of operations and whether forward-looking statements made by us
ultimately prove to be accurate. Our actual results, performance and
achievements could differ materially from those expressed or implied in these
forward-looking statements. We undertake no obligation to publically update or
revise any forward-looking statements, whether from new information, future
events or otherwise.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information concerning the
compensation for the fiscal years ended December 31, 2000, 1999 and 1998 for
each of our executive officers as of December 31, 2000 who had a total salary
and bonus for that year in excess of $100,000:
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Long-Term Compensation
-------------------------
Annual Compensation Awards All Other
Name and ------------------- -------- ---------
Principal Position Year Salary Shares Underlying Options Compensation
------------------ ---- ------ ------------------------- ------------
Morton L. Certilman 2000 $125,000 - -0-*
Chairman of Board(1) 1999 129,167 225,000 -0-*
1998 150,000 - -0-*
Kevin Lang 2000 $250,000 - -
President(2) 1999 208,000(3) 200,000 -
1998 - - -
Abraham Weinzimer 2000 $250,000 - -
Executive Vice President(4) 1999 208,000(3) 200,000 -
1998 - - -
* Excludes fees payable during 1998, 1999 and 2000 by us to Certilman Balin
Adler & Hyman, LLP, a law firm of which Mr. Certilman is a member.
(1) Effective March 28, 2001, Mr. Certilman resigned his position as our
Chairman of the Board.
(2) Effective March 28, 2001, Mr. Lang resigned his position as our President
and a director, and he became President of DCAP Management Corp., our
wholly-owned subsidiary that operates our franchise business. He served in
that position until September 2001.
(3) Represents salary paid from February 25, 1999, the date of our acquisition
of the DCAP Companies. Messrs. Lang and Weinzimer were the principals of
these companies.
(4) Effective March 28, 2001, Mr. Weinzimer resigned his position as our
Executive Vice President and a director.
Options
No grants of stock options were made to any of Messrs. Certilman, Lang or
Weinzimer during the fiscal year ended December 31, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR
ENDED DECEMBER 31, 2000 AND FISCAL YEAR-END OPTION VALUES
---------------------------- --------------- ----------- ------------------------------ ------------------------------
Number of Shares
Number of Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired Value December 31, 2000 at December 31, 2000
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---------------------------- --------------- ----------- ------------------------------ ------------------------------
---------------------------- --------------- ----------- ------------------------------ ------------------------------
Morton L. Certilman - N/A 112,500/112,500 0/0
Kevin Lang - N/A 100,000/100,000 0/0
Abraham Weinzimer - N/A 100,000/100,000 0/0
---------------------------- --------------- ----------- ------------------------------ ------------------------------
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Long-Term Incentive Plan Awards
No awards were made to any of Messrs. Certilman, Lang or Weinzimer during
the fiscal year ended December 31, 2000 under any long-term incentive plan.
Compensation of Directors
Our directors are not entitled to receive any compensation for their
services as directors.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
Effective March 28, 2001, our subsidiary, DCAP Management, entered into a
six month employment agreement with Mr. Lang pursuant to which he was employed
as its President.
During the term of the employment agreement, Mr. Lang was required to
expend all of his working time for DCAP Management, except that he was permitted
to expend up to eight hours per week in connection with the operation of the
three DCAP stores he has agreed to purchase, as discussed under "Certain
Relationships and Related Transactions."
Pursuant to the employment agreement, Mr. Lang was entitled to receive a
salary of $125,000 per annum. In addition, in connection with each franchise
agreement approved by the DCAP Management Board of Directors and entered into
solely as a result of Mr. Lang's efforts, he was entitled to receive $2,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 30, 2001
regarding the beneficial ownership of our common shares by (i) each person who
we believe to be the beneficial owner of more than 5% of our outstanding common
shares, (ii) each present director, (iii) each person listed in the Summary
Compensation Table under "Executive Compensation," and (iv) all of our present
executive officers and directors as a group.
Name and Address Number of Shares Approximate
of Beneficial Owner Beneficially Owned Percent of Class
------------------- ------------------ ----------------
Jay M. Haft 1,788,893(1) (2) 15.5%
1001 Brickell Bay Drive
Miami, Florida
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Eagle Insurance Company 1,486,893(3) 13.1%
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
Robert M. Wallach 1,486,893(4) 13.1%(4)
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
Morton L. Certilman 1,336,005(1)(5) 11.5%
The Financial Center at
Mitchel Field
90 Merrick Avenue
East Meadow, New York
Kevin Lang 851,460(1)(6) 7.4%
3789 Merrick Road
Seaford, New York
Abraham Weinzimer 783,924(1) 6.9%
418 South Broadway
Hicksville, New York
Barry Goldstein 0 -
1158 Broadway
Hewlett, New York
All executive officers
and directors as a group 5,463,251(1)(2)(5) 45.5%
(5 persons) (6)(7)
(1) Based upon Schedule 13D filed under the Securities Exchange Act of 1934.
(2) Includes 225,000 shares issuable upon the exercise of currently exercisable
options and 15,380 shares held in a retirement trust for the benefit of Mr.
Haft.
(3) Eagle is a wholly-owned subsidiary of The Robert Plan Corporation.
(4) Represents shares owned by Eagle, of which Mr. Wallach, one of our
directors, is a Vice President. Eagle is a wholly-owned subsidiary of The
Robert Plan, of which Mr. Wallach is President, Chairman and Chief
Executive Officer.
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(5) Includes 225,000 shares issuable upon the exercise of currently exercisable
options and 902,452 shares held in a retirement trust for the benefit of
Mr. Certilman.
(6) Includes 200,000 shares issuable upon the exercise of currently exercisable
options.
(7) Includes shares owned by Eagle, of which Mr. Wallach is a Vice President.
Mr. Wallach is also President, Chairman and Chief Executive Officer of The
Robert Plan, Eagle's parent.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DCAP Agreement
On February 25, 1999, pursuant to the terms of an Agreement dated as of May
8, 1998 between Messrs. Lang, Weinzimer, Certilman and Haft and us, as amended,
we acquired DCAP Insurance. Prior to our acquisition of DCAP Insurance, Messrs.
Lang and Weinzimer were its principals. Messrs. Certilman and Haft were parties
to the agreement since they acquired shares of DCAP Group concurrently as
described below. The following is a summary of the material terms of the
agreement:
Acquisition of Common Shares
Pursuant to the agreement, we acquired DCAP Insurance. At the closing of
the acquisition, we issued the following common shares:
o 3,300,000 shares to Messrs. Lang and Weinzimer (1,650,000 shares to
each) in consideration for their transfer of the shares of DCAP
Insurance.
o 950,000 shares to Messrs. Lang and Weinzimer (475,000 shares to each)
at a purchase price of $.25 per share (an aggregate of $237,500), paid
as follows:
o an amount in cash equal to the par value of the 950,000 shares
(an aggregate of $9,500); and
o the balance by the delivery by each of Messrs. Lang and Weinzimer
of a promissory note in the principal amount of $114,000 (an
aggregate of $228,000). These notes provided for, among other
things, the following:
o interest at the rate of 6% per annum; and
o payment of principal and interest in six equal annual
installments commencing April 15, 2001 and continuing
through April 15, 2006, subject to acceleration to the
extent that Mr. Lang or Mr. Weinzimer received any proceeds
from the sale or other disposition of any common shares; and
10
o 452,000 shares to Messrs. Certilman and Haft or their designees
(208,500 shares to each of Messrs. Certilman and Haft or his
retirement trust and an aggregate of 35,000 shares to a designee of
Mr. Certilman) at a purchase price of $.25 per share (an aggregate of
$113,000), paid in cash.
At the closing of our acquisition of DCAP Insurance, each of Messrs. Haft,
Lang and Weinzimer and Mr. Certilman's retirement trust also purchased 450,000
of our common shares (1,800,000 shares in the aggregate) beneficially owned by
Sterling Foster Holding Corp. and held by Mr. Certilman as voting trustee
pursuant to a Voting Trust Agreement with Sterling Foster, at a purchase price
of $.25 per share. Mr. Certilman did not receive any portion of such purchase
price. Upon such purchase, the Voting Trust Agreement was terminated.
At the closing of the acquisition, we also loaned $112,500 to each of
Messrs. Lang and Weinzimer (an aggregate of $225,000). The proceeds of the loans
were used by Messrs. Lang and Weinzimer solely for the purpose of purchasing
their shares from Sterling Foster. Each of the loans was evidenced by a
promissory note that provided for, among other things, the following:
o interest at the rate of 6% per annum;
o payment of principal and interest in six equal annual installments
commencing April 15, 2001 and continuing through April 15, 2006,
subject to acceleration to the extent that Mr. Lang or Mr. Weinzimer
received any proceeds from the sale or other disposition of any common
shares;
o non-recourse against Messrs. Lang and Weinzimer, i.e., Messrs. Lang
and Weinzimer would not be personally liable for the payment of the
notes; instead, in the event of a default, our sole remedy would be
pursuant to a pledge by Messrs. Lang and Weinzimer of their Sterling
Foster shares, as discussed below; and
o the right of each of Messrs. Lang and Weinzimer to satisfy the amounts
due under his respective note by delivering our common shares valued
at the greater of (i) $.25 per share or (ii) the average market price
of our common shares for the 20 trading days immediately preceding the
date of delivery of the shares.
The payment of all amounts due under the $114,000 notes was secured by a
pledge by each of Messrs. Lang and Weinzimer to us of 570,000 common shares. The
payment of all amounts due under the $112,500 notes was secured by a pledge by
each of Messrs. Lang and Weinzimer to us of the shares acquired by him from
Sterling Foster.
The $.25 per share purchase price for the shares, as described above, was
based upon a share valuation performed by Margolin, Winer & Evans LLP, certified
public accountants.
11
See "March 2001 Transactions" for a discussion of our reacquisition of a
portion of the shares issued to Messrs. Lang and Weinzimer and the cancellation
of the notes discussed above.
Restrictive Covenant Agreements
At the closing of our acquisition of DCAP Insurance, Messrs. Lang and
Weinzimer executed and delivered to us a restrictive covenant agreement.
Pursuant to this agreement, each agreed that for five years he will not engage
or participate in a business that is similar to or competitive with our business
anywhere within five miles of the location of any of our offices (including
franchises).
The restrictive covenants contained in the restrictive covenant agreement
are separate and independent from the restrictive covenants contained in the
employment and franchise agreements entered into with them.
Sale of Company Shares
Pursuant to an employment agreement we entered into with Mr. Lang at the
time of our acquisition of the DCAP Companies, we have loaned him $36,000. While
such loan is outstanding, Mr. Lang will be obligated to sell, as soon as legally
permissible, the maximum number of our common shares that he is permitted by law
to sell, and to use the proceeds to satisfy his obligations under his notes.
Until the above loan has been satisfied in full, Mr. Lang may not sell or
otherwise dispose of any of his common shares for less than $.25 per share
(subject to adjustment for stock splits and the like) without our prior written
consent.
Eagle
Concurrently with our acquisition of the DCAP Companies, we issued and sold
to Eagle 1,486,893 of our common shares for an aggregate cash purchase price of
approximately $1,000,000, or $.67 per share.
Eagle is a New Jersey insurance company wholly-owned by The Robert Plan,
one of the largest insurers of assigned-risk drivers in the United States.
Pursuant to separate agency agreements between some of our DCAP stores and
certain insurance company subsidiaries of The Robert Plan, the DCAP stores have
been appointed agents of the insurance companies with regard to the offering of
automobile and other insurance products.
Pursuant to our agreement with Eagle, Robert M. Wallach, Eagle's Vice
President and the President, Chairman and Chief Executive Officer of The Robert
Plan, was appointed as a member of our Board of Directors. We agreed that,
during the five year period following the closing, provided that Eagle remains
the beneficial owner of at least 1,000,000 of our common shares (subject to
adjustment for stock splits and the like), we shall continue to nominate Mr.
Wallach as a director.
12
Sale of Interests in Stores
Prior to May 31, 2000, four of the DCAP stores were owned one-half by the
daughter of Mr. Certilman and one-half by us. Effective May 31, 2000 we sold our
50% interest in each of the stores to Mr. Certilman upon the following material
terms and conditions:
o The purchase price for our interest in the stores was approximately
$141,000, after certain credits. These credits, which totaled
$126,000, represented franchise fees received by us for three
franchises that were granted by us in violation of a territorial
exclusivity agreement with the four DCAP stores.
o The purchase price was payable as follows:
o $66,000 was payable at the rate of $6,000 per month, starting on
the first anniversary of the closing, and
o the balance of the purchase price was payable over five years,
together with 6% interest, in equal monthly installments
commencing on the second anniversary of the closing.
o We agreed to waive all indebtedness owing by the stores to us. As of
the closing, the approximate amount of such indebtedness, which
related to advances made by us on behalf of the stores for operating
expenses, was $210,000.
o As part of the transaction, the stores became conversion franchisees,
and the first annual franchise charge of $18,000 per store was paid in
full at the closing in consideration for a waiver of the annual
franchise charges during the second year.
o The stores entered into franchise agreements with us, which are
similar in most respects to our standard conversion franchise
agreement (including standard territorial rights), except that
o the stores have a right of first refusal with regard to franchise
locations to be offered in zip codes adjoining those in which the
stores are located, and
o in the event we sell another franchise to be located in the
territory with respect to which a store currently has certain
rights (which is more expansive than the rights granted pursuant
to the franchise agreements), the annual franchise fee for the
particular store will be waived for six months.
These rights were granted in consideration of the waiver of certain
other geographic rights not granted to other franchisees.
13
o Certain license fees totaling $40,000 previously prepaid by Mr.
Certilman will be retained by us, to be applied generally against
franchise fees for any new franchises granted to Mr. Certilman or
his designee.
See "March 2001 Transactions" for a discussion of the cancellation of the
above amount due by Mr. Certilman as well as of agreements to sell DCAP stores
to Messrs. Lang, Weinzimer and Certilman.
March 2001 Transactions
In March 2001, the following transactions occurred:
o We entered into agreements with Messrs. Lang, Weinzimer and Certilman
that provide for our sale to them of a total of eight of our DCAP
stores. Pursuant to the agreements, Mr. Lang is to acquire three of
the stores for a total purchase price of approximately $257,000, Mr.
Weinzimer is to acquire three of the stores for a total purchase price
of $285,000 and an entity owned by Mr. Certilman (we refer to the
entity as "Mr. Certilman") is to acquire two of the stores for a total
purchase price of approximately $225,000. At the time of execution of
the agreements with Messrs. Lang and Weinzimer, each of them paid to
us the total amount of his respective purchase price. At the time of
execution of the agreement with Mr. Certilman, we received
approximately $197,000 of the purchase price. The balance of $28,000
is payable at the closing of the acquisition through the assumption of
our obligation to an unaffiliated third party in that amount. The
obligation was incurred in May 2000 in connection with our acquisition
of the third party's interest in one of the stores being acquired by
Mr. Certilman. The closing of the sales is subject to the receipt of
approval by our stockholders of the sales (either individually, as a
group or as part of a sale of our assets that may constitute a sale of
substantially all of our assets). Pending the closing, each of Messrs.
Lang, Weinzimer and Certilman is managing his respective stores and
will be entitled to receive a management fee equal to the net profits
of the stores. Each of them will also be responsible for all losses
incurred during this interim period.
o As security for the return of the amounts paid to us at the time of
execution of the agreements, we granted to Messrs. Lang and Weinzimer
a lien in the outstanding shares of the respective stores they have
agreed to acquire and to Mr. Certilman a lien in the assets of the
stores he has agreed to acquire. In the event stockholder approval is
not received by December 31, 2001, each of Messrs. Lang, Weinzimer and
Certilman may demand a return of his respective payments. We have the
option to require that, instead of repaying the sums, they foreclose
upon their respective liens. The right to foreclose is not conditioned
upon the receipt of stockholder approval. In the event of foreclosure
by Mr. Certilman, he would have to assume the $28,000 liability
discussed above.
14
o We agreed with Messrs. Lang, Weinzimer and Certilman that, at the
closing of the store sales or in the event of the foreclosure of their
liens, we would enter into franchise agreements with them on terms
similar to those entered into by Mr. Certilman in May 2000 (as
described above under "Sale of Interests in Stores"), except that, in
general, none of the franchisees will be allowed to terminate their
respective franchise agreements prior to March 31, 2003. Messrs. Lang,
Weinzimer and Certilman have agreed that, pending the closing, they
would be responsible for charges as if the franchise agreements had
been executed.
o We reacquired a total of 3,714,616 of the shares issued to Messrs.
Lang and Weinzimer (see "DCAP Agreement - Acquisition of Common
Shares") in consideration of the cancellation of indebtedness owed to
us by them in the aggregate amount of $928,654.
o We agreed with Mr. Lang to terminate his employment agreement that was
scheduled to expire in February 2004, and DCAP Management, our wholly-
owned subsidiary that operates our franchise business, entered into a
new employment agreement with him as discussed under "Executive
Compensation - Employment Contracts; Termination of Employment and
Change-in-Control Arrangements." Based upon Mr. Lang's agreement to
forgo the compensation otherwise payable to him for the balance of the
original employment term ($667,000, net of the amount payable to him
pursuant to his new employment agreement), we granted to Mr. Lang a
price concession of approximately $85,000 in connection with his
purchase of his three stores. This price concession resulted in a
purchase price of $257,000 for Mr. Lang.
o We agreed with Mr. Weinzimer to terminate his employment agreement
that was scheduled to expire in February 2004. Based upon Mr.
Weinzimer's agreement to forgo the compensation otherwise payable to
him for the balance of the employment term ($729,000), we granted to
Mr. Weinzimer a price concession of approximately $85,000 in
connection with his purchase of his three stores. This price
concession resulted in a purchase price of $285,000 for Mr. Weinzimer.
o We agreed with Mr. Certilman to terminate his employment agreement
that was scheduled to expire in February 2004. Concurrently, based
upon Mr. Certilman's agreement to forgo the compensation otherwise
payable to him for the balance of the employment agreement term
($365,000), we agreed to cancel indebtedness of approximately $141,000
that Mr. Certilman owed to us pursuant to his purchase of our interest
in four DCAP stores as discussed above under "Sale of Interests in
Stores."
o We agreed with Mr. Haft to terminate his employment agreement that was
scheduled to expire in February 2004.
o Each of Messrs. Lang, Weinzimer, Certilman and Haft resigned as an
officer of DCAP Group. Messrs. Lang and Weinzimer also resigned as
directors.
15
Relationship
Certilman Balin Adler & Hyman, LLP, a law firm of which Mr. Certilman is a
member, serves as our counsel. It is presently anticipated that such firm will
continue to represent us and will receive fees for its services at rates and in
amounts not greater than would be paid to unrelated law firms performing similar
services. Certilman Balin has also served as counsel to DCAP Insurance and The
Robert Plan with respect to certain matters; however, it did not serve as
counsel to DCAP Insurance or Messrs. Lang and Weinzimer in connection with our
acquisition of DCAP Insurance, to Messrs. Lang or Weinzimer in connection with
the transactions with them discussed under "March 2001 Transactions" or to Eagle
in connection with the issuance of shares to Eagle. In addition, Certilman Balin
did not serve as counsel to either us or Mr. Certilman in connection with the
transactions with him discussed under "Sale of Interests in Stores" and "March
2001 Transactions" above.
PROPOSAL 1: ELECTION OF DIRECTORS
Four directors are to be elected at the meeting to serve until the next
annual meeting of stockholders and until their respective successors shall have
been elected and have qualified.
Our Certificate of Incorporation provides for cumulative voting of shares
for the election of directors. This means that each stockholder has the right to
cumulate his votes and give to one or more nominees as many votes as equals the
number of directors to be elected (four) multiplied by the number of shares he
is entitled to vote. A stockholder may therefore cast his votes for one nominee
or distribute them among two or more of the nominees.
Nominees for Directors
All four of the nominees are currently directors of DCAP Group. The
following table sets forth each nominee's age as of September 30, 2001, the
positions and offices presently held by him with us, and the year in which he
became a director. The Board recommends a vote FOR all nominees. The person
named as proxy intends to vote cumulatively all shares represented by proxies
equally among all nominees for election as directors, unless proxies are marked
to the contrary.
Director
Name Age Positions and Offices Held Since
---- --- -------------------------- --------
Barry Goldstein 48 President, Chairman of the Board, Chief 2001
Executive Officer, Chief Financial
Officer, Treasurer and Director
Morton L. Certilman 69 Secretary and Director 1989
Jay M. Haft 65 Director 1989
Robert M. Wallach 48 Director 1999
16
Barry Goldstein
Mr. Goldstein was elected our Chief Executive Officer and Chief Financial
Officer in February 2001, our Chairman of the Board and a director in March
2001, and our President and Treasurer in May 2001. Since April 1997, he has
served as President of AIA Acquisition Corp., which operates insurance agencies.
Since 1982, he has served as President of Stone Equities, a consulting firm.
Morton L. Certilman
Mr. Certilman served as our Chairman of the Board from February 1999
(concurrently with our acquisition of DCAP Insurance) until March 2001. From
October 1989 to February 1999, he served as our President. He has served as one
of our directors since 1989. He was elected our Secretary in May 2001. Mr.
Certilman has been engaged in the practice of law since 1956 and is a member of
the law firm of Certilman Balin Adler & Hyman, LLP. Mr. Certilman is Chairman of
the Long Island Regional Planning Board, the Nassau County Coliseum
Privatization Commission, and the Northrop/Grumman Master Planning Council. He
served as a director of the Long Island Association and the New Long Island
Partnership for a period of ten years and currently serves as a director of the
Long Island Sports Commission. Mr. Certilman has lectured extensively before bar
associations, builders' institutes, title companies, real estate institutes,
banking and law school seminars, The Practicing Law Institute, The Institute of
Real Estate Management and at annual conventions of such organizations as the
National Association of Home Builders, the Community Associations Institute and
the National Association of Corporate Real Estate Executives. He was a member of
the faculty of the American Law Institute/American Bar Association, as well as
the Institute on Condominium and Cluster Developments of the University of Miami
Law Center. Mr. Certilman has written various articles in the condominium field,
is the author of the New York State Bar Association Condominium Cassette and the
Condominium portion of the State Bar Association book on "Real Property Titles."
Mr. Certilman received an LL.B. degree, cum laude, from Brooklyn Law School.
Jay M. Haft
Mr. Haft served as our Vice Chairman of the Board from February 1999
(concurrently with our acquisition of DCAP Insurance) until March 2001. From
October 1989 to February 1999, he served as our Chairman of the Board. He has
served as one of our directors since 1989. Mr. Haft has been engaged in the
practice of law since 1959 and since 1994 has served as counsel to Parker Duryee
Rosoff & Haft. From 1989 to 1994, he was a senior corporate partner of that
firm. Mr. Haft is a strategic and financial consultant for growth stage
companies. He is active in international corporate finance and mergers and
acquisitions. Mr. Haft also represents emerging growth companies. He has
actively participated in strategic planning and fund raising for many high-tech
companies, leading edge medical technology companies and technical product,
service and marketing companies. Mr. Haft is also a director of many public and
private corporations, including Robotic Vision Systems, Inc., NCT Group, Inc.,
Encore Medical
17
Corporation, DUSA Pharmaceuticals, Inc., Oryx Technology Corp., and Thrift
Management, Inc, all of whose securities are traded in the over-the-counter
market. Mr. Haft is a past member of the Florida Commission for Government
Accountability to the People. He is also a trustee of Florida International
University and serves on the advisory board of the Wolfsonian Museum in Miami,
Florida. Mr. Haft received B.A. and LL.B. degrees from Yale University.
Robert M. Wallach
Mr. Wallach has served since 1993 as President, Chairman and Chief
Executive Officer of The Robert Plan Corporation, an insurance company holding
company that provides services to insurance companies. He has served as one of
our directors since 1999.
There are no family relationships among any of our executive officers and
directors.
Each director will hold office until the next annual meeting of
stockholders and until his successor is elected and qualified or until his
earlier resignation or removal. Each executive officer will hold office until
the initial meeting of the Board of Directors following the next annual meeting
of stockholders and until his successor is elected and qualified or until his
earlier resignation or removal.
Committees
The Audit Committee of the Board of Directors is responsible for (i)
recommending independent accountants to the Board, (ii) reviewing our financial
statements with management and the independent accountants, (iii) making an
appraisal of our audit effort and the effectiveness of our financial policies
and practices and (iv) consulting with management and our independent
accountants with regard to the adequacy of internal accounting controls. The
members of the Audit Committee currently are Messrs. Certilman and Haft. The
directors who serve on the Audit Committee are not "independent" directors based
on the definition of independence in the listing standards of the National
Association of Securities Dealers. To date, our Board of Directors has not
adopted a written charter for the Audit Committee.
The Finance Committee of the Board of Directors is responsible for (i)
developing and analyzing plans for corporate expansion, examining and adjusting
our capital structure and determining long-range financial requirements and (ii)
other matters relating to our financial affairs. The members of the Finance
Committee currently are Messrs. Certilman and Haft.
We do not have any standing nominating or compensation committees of the
Board of Directors or committees performing similar functions. These functions
are currently performed by our Board as a whole.
Report of the Audit Committee
In overseeing the preparation of DCAP's financial statements, the Audit
Committee met with management to review and discuss all financial statements
prior to their issuance and to discuss significant accounting issues. Management
advised the Committee that all financial
18
statements were prepared in accordance with generally accepted accounting
principles, and the Committee discussed the statements with management. The
Committee also discussed with Holtz Rubenstein LLP, DCAP's outside auditors, the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
The Committee received the written disclosures and letter from Holtz
Rubenstein LLP required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and the Committee discussed the
independence of Holtz Rubenstein LLP with that firm.
On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the audited financial statements be included in
DCAP's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000,
for filing with the Securities and Exchange Commission.
Members of the Audit Committee
Morton L. Certilman
Jay M. Haft
Meetings
Our Board of Directors held five meetings during the fiscal year ended
December 31, 2000. All of our then directors attended all such meetings with the
exception of Mr. Wallach, who attended three of the meetings. Neither the Audit
Committee nor the Finance Committee of the Board of Directors held any meetings
during the fiscal year ended December 31, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires that reports of beneficial
ownership of common shares and changes in such ownership be filed with the
Securities and Exchange Commission by Section 16 "reporting persons," including
directors, certain officers, holders of more than 10% of the outstanding common
shares and certain trusts of which reporting persons are trustees. We are
required to disclose in this proxy statement each reporting person whom we know
to have failed to file any required reports under Section 16 on a timely basis
during the fiscal year ended December 31, 2000. To our knowledge, based solely
on a review of written representations that no reports were required, during the
fiscal year ended December 31, 2000, our officers, directors and 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them.
19
PROPOSAL 2: SALE OF ASSETS
At the meeting, the stockholders of DCAP will consider and vote upon a
proposal to approve and ratify the sale by us and our subsidiaries of assets
that may constitute, under Delaware law, substantially all of our assets. A
summary of the sales is included in this proxy statement beginning on the cover
page hereof.
Sales Transactions
We or our subsidiaries have entered into the following sales transactions
since May 2000. The terms of the sales were as a result of arm's length
negotiations between the parties based upon then current market conditions. No
independent appraisal or valuation was received in connection with any of the
sales transactions.
o In May 2000, we sold to Morton L. Certilman, our then Chairman of the
Board, our 50% interest in four DCAP stores located in Queens and
Nassau Counties, New York. The remaining 50% interest in each store
was held by Mr. Certilman's daughter. The total purchase price for our
interest was approximately $141,000, net of certain credits applied,
and was arrived at following arm's length negotiations. The purchase
price (prior to the credits) was equal to approximately one-half of
the aggregate commissions for the stores for the year ended December
31, 1999. We believe that a purchase price for a 50% interest in a
store equal to one-half of the store's annual commissions represented
fair market value at that time. The other terms of the sale are
described in this proxy statement under "Certain Relationships and
Related Transactions - Sale of Interests in Stores." The obligation to
pay the purchase price of $141,000 for our interest was canceled in
March 2001 based upon Mr. Certilman's agreement to terminate his
employment agreement with us and forgo the compensation otherwise due
him for the balance of the term ($365,000). This is described in
"Certain Relationships and Related Transactions - March 2001
Transactions."
o Between September 2000 and February 2001, we sold seven other DCAP
stores to persons who are not affiliated with us for a total purchase
price of approximately $555,000 (exclusive of contingent amounts). The
aggregate purchase price for the stores, which was arrived at
following arm's length negotiations, was approximately 55% of the
aggregate annualized commissions for the stores for the nine months
ended September 30, 2000. We believe that a purchase price equal to
that percentage of a store's annual commissions represented fair
market value at that time. A summary of the sales is set forth below:
Became a
Store DCAP
Date Location(s) Purchaser Purchase Price Nature of Sale Payment Terms Franchise?
---- ----------- --------- -------------- -------------- ------------- ----------
September 2000 Staten Island, Hari Roth $128,000 (net of Sale of stock Payable in full at Yes
NY 2048 Victory Blvd. $10,000 credit) or shortly
Staten Island, NY following closing
20
September 2000 Brooklyn, NY Rio Brokerage, Inc. One times commissions Sale of book $15,000 at closing; No
4501 Fifth Avenue received during 12 of business balance monthly
Brooklyn, NY months following
closing from book of
business sold
October 2000 Manhattan, NY CIS Brokerage, Inc. $100,000 Sale of book $80,000 at closing; No
(2 stores) 790 11th Avenue of business balance on
New York, NY December 31, 2000
November 2000 Bronx, NY Harvey Grossman $115,000 Sale of stock Payable in full at Yes
57 Eastview Drive or shortly
Valhalla, NY following closing
December 2000 Yonkers, NY Allan Bellinger $112,500 Sale of stock Payable in full at Yes
21 Hewitt Avenue or shortly
Bronxville, NY following closing
February 2001 Woodhaven, NY Andrew Lerner $100,000 Sale of stock Payable in full at Yes
2194 Bellewood or shortly
Drive Merrick, NY following closing
o In March 2001, we and our subsidiaries agreed to sell eight other
stores to Kevin Lang (three), Abraham Weinzimer (three) and an entity
owned by Mr. Certilman (two). The locations of the stores are as
follows:
o Lang: Amityville, New York
Medford, New York
Seaford, New York
o Weinzimer: Hempstead, New York
Hicksville, New York
Jamaica, New York
o Certilman: East Meadow, New York
Flushing, New York
At the time of the agreements, Messrs. Lang and Weinzimer were our
President and Executive Vice President, respectively, and Mr.
Certilman was our Chairman of the Board. Also, each was a director of
DCAP Group (Mr. Certilman remains a director). The purchase prices
for the sales are as follows:
o Lang: $257,000;
o Weinzimer: $285,000; and
o Certilman: $225,000.
The terms of the sales are described in this proxy statement under
"Certain Relationships and Related Transactions - March 2001
Transactions." We did not
21
utilize a special independent committee of our Board of Directors to
perform an analysis of the fairness of the transactions or to
negotiate the terms of the sales on our behalf. We believe, however,
that the purchase prices were fair based upon the valuation analysis
we performed as discussed below under "Valuation Analysis" and the
concurrent termination of employment agreements with each of Messrs.
Lang, Weinzimer and Certilman as discussed under "Certain
Relationships and Related Transactions" and below under "Valuation
Analysis."
Background of and Reasons for the Sales Transactions
Prior to February 25, 1999, our sole business was the operation of the
International Airport Hotel in San Juan, Puerto Rico.
On February 25, 1999, we acquired DCAP Insurance. At the time of the
acquisition, there were 56 DCAP stores. Of these, one-half were either
wholly-owned by DCAP Insurance or were owned partially by DCAP Insurance and
partially by the operator of the location, and the other one-half were
franchises. We provide the administrative services and functions of a "central
office" to our wholly-owned and partially-owned offices. Franchises operate
without the assistance of our "central office" functions.
During the fiscal year ended December 31, 1999, our insurance operations
generated a net loss of $173,160. During the six months ended June 30, 2000,
these operations continued to generate a net loss. The losses were caused
primarily by the substantial administrative expenses incurred in operating the
insurance brokerage business.
As a result, in August 2000, our Board of Directors determined to commence
selling our interest in our wholly-owned and partially-owned stores and focus on
our franchise operations. This determination was made with a view toward raising
needed cash and eliminating the overhead expenses that are not incurred in
connection with franchise operations.
As a result of the store sales already made (as discussed above under
"Sales Transactions") and in the event ownership of the eight stores subject to
the sale agreements discussed above is transferred, we would have three
remaining wholly-owned or partially-owned stores. We intend to sell our interest
in those three stores.
We currently have 55 franchise locations. There are also three locations
subject to franchise agreements that have not yet opened for business. In
addition, the eight stores subject to the agreements of sale are to become
franchisees at the time ownership is transferred to the buyers. Therefore,
inclusive of the three stores wholly-owned or partially-owned by us, there are
69 DCAP store locations.
Following the sale of the eight stores to Messrs. Lang, Weinzimer and
Certilman, our business will consist primarily of our insurance franchise
operations and our related operations in the areas of income tax preparation,
premium financing, and automobile club services. We also still operate the
International Airport Hotel in San Juan, Puerto Rico. These operations are
discussed in Item 1 of our Form 10-KSB for the year ended December 31, 2000.
This proxy
22
statement is accompanied by a copy of our 2000 Form 10-KSB. The effect of the
sales of the stores on our operations is discussed in this proxy statement under
this Proposal 2 in "Pro Forma Financial Statements."
Valuation Analysis
In connection with the contemplated sale of the eight stores to Messrs.
Lang, Weinzimer and Certilman, an analysis was prepared that compared the terms
of the sales to the terms of other recent sales of our stores to nonaffiliates.
Terms of Comparable Sales
We reviewed the terms of sale with respect to five stores we had sold
between September and November 2000 (Staten Island, Brooklyn, Manhattan (2) and
Bronx, New York). We also reviewed the terms of sale with respect to two of our
stores we contemplated selling at the time (Yonkers and Brentwood, New York - we
did in fact sell our Yonkers store in December 2000). Based on each of the
store's historical level of commission income, there was derived a sales price
multiple of trailing twelve month commission income for the twelve months ended
(i) December 31, 1999; (ii) September 30, 2000; and (iii) December 31, 2000. The
sales price multiple was determined by dividing the sales price by the
historical commission income for the relevant period. We believe that, in
determining the sales price multiples for the various stores, we did not need to
consider the location of the particular store since the fair market value of an
insurance brokerage is generally based upon the store's historical commissions.
Fixed assets of a particular store are generally nominal.
The mean multiples for the closed sales of our five stores, the then
pending sales of the two other stores and the entire group of the seven stores
were calculated with respect to each of the time frames set forth in (i), (ii)
and (iii) above, and applied to the eight stores that are proposed to be sold to
Messrs. Lang, Weinzimer and Certilman. This yielded implied sales prices for
each of the eight stores in the proposed transactions, and in the aggregate.
The mean sales price multiple for the closed sales of the five stores was
as follows:
o .63 for the twelve months ended December 31, 1999; and
o .73 for the twelve months ended September 30, 2000.
The mean sales price multiple for the then pending sales of the two stores
was as follows:
o .54 for the twelve months ended December 31, 1999;
o .55 for the twelve months ended September 30, 2000; and
o .57 for the twelve months ended December 31, 2000.
The mean sales price multiple for all of the transactions involving the
sales of the seven stores in total was as follows:
23
o .60 for the twelve months ended December 31, 1999;
o .67 for the twelve months ended September 30, 2000; and
o .57 for the twelve months ended December 31, 2000.
Application of Multiples to Proposed Transactions
We then applied the mean sales multiples for the five closed and two then
pending store sales (seven in total) to the contemplated sales of the eight
stores and found the following:
Lang Stores
Aggregate Historical Commission Income
Twelve Months Ended
--------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
----------------- ------------------ -----------------
$555,625 $560,974 $537,621
Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income
Twelve Months Ended
-------------------------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
--------------------------- ---------------------------- ----------------------------
Closed Pending All Closed Pending All Closed Pending All
------ ------- --- ------ ------- --- ------ ------- ---
.63x .54x .60x .73x .55x .67x n/a .57x .57x
---- ---- ---- ---- ---- ---- --- ---- ----
$350,044 $300,038 $333,375 $409,511 $308,536 $375,853 - $306,444 $306,444
*** *** ***
Weinzimer Stores
Aggregate Historical Commission Income
Twelve Months Ended
-------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
----------------- ------------------ -----------------
$605,811 $608,373 $618,006
Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income
Twelve Months Ended
--------------------------------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
---------------------------- ---------------------------- ----------------------------
Closed Pending All Closed Pending All Closed Pending All
------ ------- --- ------ ------- --- ------ ------- ---
.63x .54x .60x .73x .55x .67x n/a .57x .57x
---- ---- ---- ---- ---- ---- --- ---- ----
$381,661 $327,138 $363,487 $444,112 $334,605 $407,610 - $352,263 $352,263
*** *** ***
24
Certilman Stores
Aggregate Historical Commission Income
Twelve Months Ended
--------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
----------------- ------------------ -----------------
$381,681 $390,629 $379,303
Implied Aggregate Sale Price for the Stores Using Mean Multiple of Commission Income
Twelve Months Ended
----------------------------------------------------------------------------------------------------------
December 31, 1999 September 30, 2000 December 31, 2000
--------------------------- ---------------------------- ----------------------------
Closed Pending All Closed Pending All Closed Pending All
------ ------- --- ------ ------- ---- ------ ------- ---
.63x .54x .60x .73x .55x .67x n/a .57x .57x
---- ---- ---- ---- ---- ---- --- ---- ----
$240,459 $206,108 $229,009 $285,159 $214,846 $261,721 - $216,203 $216,203
*** *** ***
It should be noted that, as discussed under "Certain Relationships and
Related Transactions - March 2001 Transactions," concurrently with the execution
of the agreements to sell the stores to Messrs. Lang, Weinzimer and Certilman,
each of them agreed to the termination of his employment agreement with DCAP. In
connection with the termination of Mr. Certilman's employment agreement,
indebtedness of approximately $141,000 owed by him to us was canceled. Since
neither Mr. Lang nor Mr. Weinzimer received any sums or debt forgiveness in
connection with the termination of his employment agreement, certain price
concessions (approximately $85,000 for each) were given to each of them in
connection with the sale of the stores. As a result of the termination of the
employment agreements with Messrs. Lang, Weinzimer and Certilman, we were
relieved of an obligation to pay minimum aggregate salaries of approximately
$1,760,000 through February 2004 (approximately $667,000 for Mr. Lang (net of
the $62,500 payable to him pursuant to his new employment agreement with our
subsidiary, DCAP Management); $729,000 for Mr. Weinzimer; and $365,000 for Mr.
Certilman) in addition to other amounts that may have been payable pursuant to
the employment agreements.
Stockholder Approval
We are submitting the transactions discussed above under "Sales
Transactions" (i.e., the May 2000 sale, the September 2000 - February 2001
sales, and the March 2001 agreements to sell) to our stockholders for approval
based upon our belief that the assets sold and agreed to be sold may constitute,
under Delaware law, substantially all of our assets. Stockholder approval is
being sought for the transactions in their totality and not individually;
however, as discussed below, the obtaining of, or the failure to obtain,
stockholder approval will affect the sales transactions in different ways.
25
The assets sold by us during 2000 and 2001 constituted approximately 9% of
our total assets as of December 31, 1999. The DCAP stores subject to the
completed sales generated approximately 28% and 24% of our total revenues during
the fiscal year ended December 31, 1999 and the three months ended March 31,
2000, respectively.
The assets agreed to be sold to Messrs. Lang, Weinzimer and Certilman
constituted approximately 12% of our total assets as of December 31, 2000. The
stores subject to these sales generated approximately 30% of our total revenues
for the year ended December 31, 2000.
The sales to Messrs. Lang, Weinzimer and Certilman pursuant to the March
2001 agreements are not yet final and are subject to the receipt of approval by
our stockholders of the sales (either individually, as a group or as part of a
sale of our assets that may constitute a sale of substantially all of our
assets).
At the time of execution of the March 2001 agreements with Messrs. Lang and
Weinzimer, each of them paid to us the entire purchase price for his stores. Mr.
Certilman paid $197,000 of his purchase price at the time of execution of his
agreement. In the event stockholder approval is not received by December 31,
2001, each of Messrs. Lang, Weinzimer and Certilman may demand a return of his
respective payment. As security for the return of the amounts paid to us, we
granted to each of Messrs. Lang, Weinzimer and Certilman a security interest in
the assets they agreed to acquire. In the event of a demand by Messrs. Lang,
Weinzimer and/or Certilman, we have the option to require that, instead of our
having to repay the sums, they foreclose upon their respective liens. In the
event of foreclosure, Messrs. Lang, Weinzimer and Certilman will have obtained
their respective stores without stockholder approval of the transaction.
In contrast with the March 2001 agreements, the sales that were completed
between May 2000 and February 2001 are final and binding and are not subject to
stockholder approval or ratification. No party to any of the sales agreements
was given any right to undo any of the transactions in the event stockholder
approval or ratification was not obtained. Therefore, in the event stockholders
do not approve Proposal 2, there will be no effect upon the validity of these
completed sales. Stockholder approval of Proposal 2 would, however, serve to
signify that the stockholders have ratified these sales.
Regulatory Requirements
No federal or state regulatory requirements must be complied with or
approval must be obtained (other than stockholder approval) in connection with
the sales of the stores.
Pro Forma Financial Statements
The following unaudited pro forma condensed consolidated financial
statements give effect to the sale of our interest in eleven DCAP stores in 2000
and 2001 and our contemplated sale of the eight DCAP stores to Messrs. Lang,
Weinzimer and Certilman, as described below. These pro forma financial
statements are presented for illustrative purposes only and therefore are not
necessarily indicative of the operating results that might have been achieved
had the sales
26
occurred as of an earlier date. They are also not necessarily indicative of the
operating results which may occur in the future.
A pro forma condensed consolidated balance sheet is provided as of June 30,
2001, giving effect to the consummation of our contemplated sales of the eight
DCAP stores to Messrs. Lang, Weinzimer and Certilman as though they had occurred
on that date. No pro forma adjustment is made for the completed sales of the
eleven stores since all were consummated prior to June 30, 2001. Pro forma
condensed consolidated statements of operations are provided for the six month
period ended June 30, 2001 and the year ended December 31, 2000, giving effect
to the consummation of all of the sales of the stores (both completed and
pending) as though they had occurred on January 1, 2000.
The pro forma financial statements are based on preliminary estimates of
values and transaction costs and preliminary appraisals. The actual recording of
the transactions will be based on final appraisals, values and transaction
costs. Accordingly, the actual recording of the transactions can be expected to
differ from these pro forma financial statements.
The pro forma financial data does not give effect to any of the other
transactions entered into concurrently with the agreements to sell the stores to
Messrs. Lang, Weinzimer and Certilman. These other transactions are discussed
under "Certain Relationships and Related Transactions - March 2001 Transactions"
and include the termination or amendment of employment agreements with Messrs.
Lang, Weinzimer and Certilman pursuant to which we were relieved of an
obligation to pay minimum aggregate salaries of approximately $1,760,000 through
February 2004 in addition to other amounts that may have been payable pursuant
to the employment agreements.
The historical consolidated statement of operations presented for the year
ended December 31, 2000 is derived from our separate historical consolidated
financial statements and should be read in conjunction with these financial
statements which are incorporated by reference in this proxy statement. The
historical condensed consolidated balance sheet as of June 30, 2001 and
condensed consolidated statement of operations for the six months ended June 30,
2001 are derived from our historical interim consolidated financial statements
incorporated by reference in this proxy statement. The historical six month
financial statements have been prepared in accordance with generally accepted
accounting principles applicable to interim financial information, and, in the
opinion of our management, include all adjustments necessary for a fair
presentation of the financial information for such interim period.
27
DCAP GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
ASSETS Pro Forma Adjustments
------ ---------------------
Historical Lang Weinzimer Certilman Pro Forma
---------- ---- --------- --------- ---------
Current assets:
Cash and cash equivalents $ 593,250 $ - $ - $ - $ 593,250
Accounts receivable, net 267,796 - - - 267,796
Notes and other receivables 131,997 - - - 131,997
Prepaid expenses and other current assets 57,607 - - - 57,607
---------- ------- ------- ------- ----------
Total current assets 1,050,650 - - - 1,050,650
PROPERTY AND EQUIPMENT, net 783,212 (5,000)(2) (23,000)(2) - 755,212
GOODWILL 751,682 (256,667)(1) (285,000)(1) (197,448)(1) 12,567
OTHER INTANGIBLES 268,036 - - - 268,036
OTHER 99,268 - - - 99,268
---------- ---------- --------- -------- -----------
$ 2,952,848 $ (261,667) $(308,000) $(197,448) $ 2,185,733
========== ========== ========= ========= ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and other accrued expenses $ 1,543,206 $ - $ - $ - $ 1,543,206
Current portion of long-term debt 5,420 - - - 5,420
Current portion of capital lease obligations 96,474 - (15,000)(2) - 81,474
Deferred revenue 188,523 - - - 188,523
Deposits on sale of stores 739,115 (256,667)(1) (285,000)(1) (197,448)(1) -
Debentures payable 154,200 - - - 154,200
---------- ---------- --------- --------- ----------
Total current liabilities 2,726,938 (256,667) (300,000) (197,448) 1,972,823
---------- ---------- --------- --------- ----------
LONG-TERM DEBT 193,790 - - - 193,790
CAPITAL LEASE OBLIGATIONS 162,907 - (15,000)(2) - 147,907
DEFERRED REVENUE 40,000 - - - 40,000
MINORITY INTEREST 24,948 - - - 24,948
Stockholders' equity:
Common stock, $.01 par value, authorized
25,000,000, issued, 15,068,018 shares 150,680 - - - 150,680
Capital in excess of par 9,752,409 - - - 9,752,409
Deficit (9,170,170) (5,000)(2) 7,000 (2) - (9,168,170)
----------- -------(3) -------- (3) ------- ----------
732,919 (5,000) 7,000 - 734,919
Treasury stock (928,654) - - - (928,654)
--------- ------- -------- ------- ----------
(195,735) (5,000) 7,000 - (193,735)
--------- ------- -------- ------- ----------
$ 2,952,848 $ (261,667) $(308,000) $ (197,448) $ 2,185,733
=========== ========== ======== ========== ===========
See accompanying notes to pro forma condensed consolidated financial statements
28
DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
1. To record cash received and related goodwill written off in connection with
the sale of eight DCAP stores.
2. To write off fixed assets and related capital lease obligations transferred
to buyers in connection with the sale of eight DCAP stores.
3. The adjustment reflected herein is not included in the pro forma statements
of operations because it will not have a continuing impact.
29
DCAP GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
Sale of Stores
Not Subject to Sale of Stores
Historical Shareholder Approval Subtotal to K. Lang to A. Weinzimer to M. Certilman Adjustments Pro Forma
---------- -------------------- -------- ---------- --------------- --------------- ----------- ---------
REVENUES:
Commissions
and fees $ 1,383,763 $ (22,572)(1) $1,361,191 $(159,376)(1) $(187,175)(1) $ (103,003)(1) $ - $ 911,637
Rooms 498,608 - 498,608 - - - - 498,608
Other
operating
departments 17,497 - 17,497 - - - - 17,497
----------- ----------- ---------- ----------- ----------- ----------- --------- ---------
Total
revenues 1,899,868 (22,572) 1,877,296 (159,376) (187,175) (103,003) - 1,427,742
OPERATING EXPENSES:
General and
administrative
expenses 2,495,583 (6,447)(2) 2,489,136 (205,900)(2) (217,649)(2) (111,984)(2) - 1,953,603
Departmental 139,631 - 139,631 - - - - 139,631
Depreciation
and
amortization 171,906 (1,700)(3) 170,206 (3,500)(3) (7,200)(3) (1,900)(3) (50,461)(3) 107,145
---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------
Total
operating
expenses 2,807,120 (8,147) 2,798,973 (209,400) (224,849) (113,884) (50,461) 2,200,379
OPERATING
(LOSS)INCOME (907,252) (14,425) (921,677) 50,024 37,674 10,881 50,461 (772,637)
OTHER(EXPENSE)
INCOME:
Interest income 9,402 - 9,402 - - - - 9,402
Interest expense (30,642) - (30,642) - 3,000(4) - - (27,642)
Gain on sale
of DCAP stores 56,043 (56,043)(5) - - - - - -
---------- ---------- ---------- ---------- --------- ---------- ----------- ---------
34,803 (56,043) (21,240) - 3,000 - - (18,240)
LOSS BEFORE
INCOME TAXES
AND MINORITY
INTEREST (872,449) (70,468) (942,917) 50,024 40,674 10,881 50,461 (790,877)
INCOME TAXES 20,304 - 20,304 - - - - 20,304
--------- ---------- --------- --------- -------- -------- --------- ---------
LOSS BEFORE
MINORITY
INTEREST (892,753) (70,468) (963,221) 50,024 40,674 10,881 50,461 (811,181)
MINORITY
INTEREST 5,148 - 5,148 - - - - 5,148
--------- ---------- -------- --------- -------- -------- --------- ---------
NET LOSS $(887,605) $ (70,468) $ (958,073) $ 50,024 $ 40,674 $ 10,881 $ 50,461 $ (806,033)
========== ========== =========== ========== ======== ======== ========= =========
NET LOSS PER
COMMON SHARE
Basic $ (0.06) $ (0.05)
========== =======
Diluted $ (0.06) $ (0.05)
========== =======
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
Basic 15,068,018 15,068,018
========== ===========
Diluted 15,068,018 15,068,018
========== ===========
30
DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
1. To eliminate commissions and fees earned by wholly-owned offices that were
sold and agreed to be sold.
2. To eliminate the general and administrative costs generated by wholly-owned
offices that were sold and agreed to be sold.
3. To eliminate the amortization of goodwill and depreciation on property and
equipment related to the wholly-owned offices that were sold and agreed to
be sold.
4. To eliminate the interest expense on capital leases assumed by the
purchasers of the wholly-owned offices.
5. The gain on the sale of the DCAP stores is not included in the pro forma
statement of operations because it will not have a continuing impact.
31
DCAP GROUP, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
Sale of Stores
Not Subject to
Shareholder Sale of Stores Sale of Stores Sale of Stores Adjust- Pro
Historical Approval Subtotal to K. Lang to A. Weinzimer to M.Certilman ments Forma
---------- -------------- -------- ------------- --------------- -------------- ------- -------
REVENUES:
Commissions
and fees $ 6,716,356 $ (1,124,802)(1) $ 5,591,554 $(829,119) $ (957,434)(1) $(529,239)(1) $ - $ 3,275,762
Rooms 970,195 - 970,195 - - - - 970,195
Other operating
departments 128,873 - 128,873 - - - - 128,873
---------- ----------- --------- --------- ---------- -------- ----- ---------
Total revenues 7,815,424 (1,124,802) 6,690,622 (829,119) (957,434) (529,239) - 4,374,830
OPERATING EXPENSES:
General and
administrative
expenses 7,858,726 (534,479)(2) 7,324,247 (661,570)(2) (804,846)(2) (413,499)(2) - 5,444,332
Impairment of
intangible asets 201,000 - 201,000 - - - - 201,000
Impairment of notes
receivabe 81,000 - 81,000 - - - - 81,000
Departmental 382,683 - 382,683 - - - - 382,683
Depreciation and
amortization 788,259 (11,000)(4) 777,259 (14,000)(4) (28,800)(4) (7,600)(4) (343,285)(4) 383,574
--------- ---------- --------- -------- --------- -------- -------- --------
Total operating
expenses 9,311,668 (545,479) 8,766,189 (675,570) (833,646) (421,099) (343,285) 6,492,589
OPERATING LOSS (1,496,244) (579,323) (2,075,567) (153,549) (123,788) (108,140) 343,285 (2,117,759)
OTHER (EXPENSE) INCOME:
Interest income 78,660 - 78,660 - - - - 78,660
Interest expense (144,173) - (144,173) - - - 37,543(5) (106,630)
Loss on sale of DCAP
stores (2,136,681) 2,136,681(3) - - (6) - (6) - (6) - -
----------- ----------- ----------- ---------- ---------- --------- ------------ -------
(2,202,194) 2,136,681 (65,513) - - - 37,543 (27,970)
LOSS BEFORE INCOME
TAXES AND MINORITY
INTEREST (3,698,438) (1,557,358) (2,141,080) (153,549) (123,788) (108,140) 380,828 (2,145,729)
INCOME TAXES 25,000 - 25,000 - - - - 25,000
----------- ---------- ----------- --------- --------- --------- ---------- ----------
LOSS BEFORE
MINORITY INTEREST (3,723,438) (1,557,358) (2,166,080) (153,549) (123,788) (108,140) 380,828 (2,170,729)
MINORITY INTEREST 5,141 - 5,141 - - - - 5,141
------------ ---------- ---------- --------- ---------- ---------- ---------- ----------
NET LOSS $ (3,718,297) $(1,557,358) $(2,160,939) $(153,549) $ (123,788) $ (108,140) $ 380,828 ($2,165,588)
============ ========== =========== ========= ========== ========== ========= ==========
NET LOSS PER COMMON SHARE
Basic $ (0.25) $ (0.15)
============ ===========
Diluted $ (0.25) $ (0.15)
============ ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Basic 14,751,832 14,751,832
========== ==========
Diluted 14,751,832 14,751,832
========== ==========
32
DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
1. To eliminate commissions and fees earned by wholly-owned and joint venture
offices that were sold and agreed to be sold.
2. To eliminate the general and administrative costs generated by wholly-owned
and joint venture offices that were sold and agreed to be sold.
3. The loss on the sale of the DCAP stores is not included in the pro forma
statement of operations because it will not have a continuing impact.
4. To eliminate the amortization of goodwill and depreciation of property and
equipment related to the wholly-owned and joint venture offices that were
sold and agreed to be sold.
5. To eliminate the interest expense on capital leases assumed by the
purchasers of the wholly-owned and joint venture offices.
6. No adjustment has been made to reflect the gain on the sale of the eight
DCAP stores as it will not have a continuing impact. Such gain has been
reflected in the pro forma balance sheet at June 30, 2001 as an adjustment
to retained earnings.
33
Recommendation and Required Vote
The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this proposal. Our Board of Directors
recommends a vote FOR approval of the sale of assets.
PROPOSAL 3: AMENDMENT TO 1998 STOCK OPTION PLAN
TO INCREASE NUMBER OF AUTHORIZED SHARES
The Board of Directors recommends that stockholders approve an amendment to
our 1998 Stock Option Plan to increase the number of common shares authorized to
be issued from 2,000,000 to 3,000,000. As of September 30, 2001, there were
1,750,000 common shares issuable pursuant to the exercise of outstanding options
granted under the plan. The plan plays an important role in our efforts to
attract and retain employees of outstanding ability and to align the interests
of employees with those of the stockholders through increased stock ownership.
In order to continue to provide appropriate equity incentives to employees in
the future, the Board has approved an increase in the number of reserved shares
subject to stockholder approval. As discussed below, the plan is also designed
to provide incentives to non-employee directors of, and consultants and advisors
to, us and our subsidiaries.
The following statements include summaries of certain provisions of the
plan. The statements do not purport to be complete and are qualified in their
entirety by reference to the provisions of the plan, a copy of which is
available at our offices.
Purpose
The purpose of the plan is to advance the interests of DCAP by inducing
persons or entities of outstanding ability and potential to join and remain
with, or provide consulting or advisory services to, us and our subsidiaries by
encouraging and enabling eligible employees, non-employee directors, consultants
and advisors to acquire proprietary interests, and by providing such employees,
non-employee directors, consultants and advisors with an additional incentive to
promote success of DCAP.
Administration
The plan provides for its administration by the Board or by a committee
consisting of at least one person chosen by the Board. The Board or the
committee has authority (subject to certain restrictions) to select from the
group of eligible employees, non-employee directors, consultants and advisors
the individuals or entities to whom options will be granted, and to determine
the times at which and the exercise price for which options will be granted. The
Board or the committee is authorized to interpret the plan and the
interpretation and construction by the Board or the committee of any provision
of the plan or of any option granted thereunder shall be final and conclusive.
The receipt of options by directors or any members of the committee shall not
preclude their vote on any matters in connection with the administration or
interpretation of the plan.
34
Nature of Options
The Board or committee may grant options under the plan which are intended
to either qualify as "incentive stock options" within the meaning of Section 422
of the Internal Revenue Code (we refer to this as the "Code") or not so qualify.
We refer to options that do not so qualify as "nonstatutory stock options." The
Federal income tax consequences relating to the grant and exercise of incentive
stock options and nonstatutory stock options are described below under "Federal
Income Tax Consequences."
Eligibility
Subject to certain limitations as set forth in the plan, options to
purchase shares may be granted thereunder to persons or entities who, in the
case of incentive stock options, are employees or, in the case of nonstatutory
stock options, are employees or non-employee directors of, or certain
consultants or advisors to, us or our subsidiaries. At September 30, 2001,
approximately 11 employees and three non-employee directors were eligible to
receive options under the plan.
Option Price
The option price of the shares subject to an incentive stock option may not
be less than the fair market value (as such term is defined in the plan) of the
common shares on the date upon which such option is granted. In addition, in the
case of a recipient of an incentive stock option who, at the time the option is
granted, owns more than 10% of the total combined voting power of all classes of
our stock or of a parent or of any of our subsidiaries, the option price of the
shares subject to such option must be at least 110% of the fair market value of
the common shares on the date upon which such option is granted.
The option price of shares subject to a nonstatutory stock option will be
determined by the Board of Directors or the committee at the time of grant and
need not be equal to or greater than the fair market value of our common shares.
On October 22, 2001, the closing bid price for our common shares, as
reported by the Bulletin Board, was $.25 per share.
Exercise of Options
An option granted under the plan shall be exercised by the delivery by the
holder to our Secretary at our principal office of a written notice of the
number of shares with respect to which the option is being exercised. The notice
must be accompanied, or followed within ten days, by payment of the full option
price of such shares which must be made by the holder's delivery of (i) a check
in such amount or (ii) previously acquired common shares, the fair market value
of which shall be determined as of the date of exercise, or a combination of (i)
and (ii).
35
Duration of Options
No incentive stock option granted under the plan shall be exercisable after
the expiration of ten years from the date of its grant. However, if an incentive
stock option is granted to a 10% stockholder, the option shall not be
exercisable after the expiration of five years from the date of its grant.
Nonstatutory stock options granted under the plan may be of such duration
as shall be determined by the Board or the committee.
Non-Transferability
Options granted under the plan are not transferable otherwise than by will
or the laws of descent and distribution and such options are exercisable, during
a holder's lifetime, only by the optionee.
Death, Disability or Termination of Employment
Subject to the terms of the stock option agreement pursuant to which
options are granted, if the employment of an employee or the services of a
non-employee director, consultant or advisor shall be terminated for cause, or
such employment or services shall be terminated voluntarily, any options held by
such persons or entities shall expire immediately. If such employment or
services shall terminate other than by reason of death or disability,
voluntarily by the employee, non-employee director, consultant or advisor or for
cause, then, subject to the terms of the stock option agreement pursuant to
which options are granted, such option may be exercised at any time within three
months after such termination, but in no event after the expiration of the
option. For purposes of the plan, the retirement of an individual either
pursuant to a pension or retirement plan adopted by us or at the normal
retirement date prescribed from time to time by us shall be deemed to be a
termination of such individual's employment other than voluntarily by the
employee or for cause.
Subject to the terms of the stock option agreement pursuant to which
options are granted, if an option holder under the plan (i) dies while employed
by us or any of our subsidiaries or while serving as a non-employee director of,
or consultant or advisor to, us or any of our subsidiaries, or (ii) dies within
three months after the termination of his employment or services other than
voluntarily or for cause, then such option may be exercised by the estate of the
employee, non-employee director, consultant or advisor, or by a person who
acquired such option by bequest or inheritance from the deceased option holder,
at any time within one year after his death. Subject to the terms of the stock
option agreement pursuant to which options are granted, if the holder of an
option under the plan ceases employment or services because of permanent and
total disability (within the meaning of Section 22(e)(3) of the Code) while
employed by, or while serving as a non-employee director of, or consultant or
advisor to, us or any of our subsidiaries, then such option may be exercised at
any time within one year after his termination of employment, termination of
directorship, or termination of consulting or advisory arrangement or agreement
due to the disability.
36
Amendment and Termination
The plan (but not options previously granted thereunder) shall terminate on
November 2, 2008, ten years from the date that it was adopted by the Board.
Subject to certain limitations, the plan may be amended or modified from time to
time or terminated at an earlier date by the Board or by the stockholders.
Plan Benefits
To date, we have granted options under the plan as follows:
Common Shares Average Weighted
Underlying Exercise Price
Name and Position Options Granted Per Share
----------------- --------------- ---------
Barry Goldstein, President, Chairman of the 1,000,000 $.25
Board, Chief Executive Officer, Chief Financial
Officer and Treasurer
Morton L. Certilman, formerly Chairman of the 225,000 $2.69
Board; currently Secretary
Jay M. Haft, formerly Vice Chairman of the 225,000 $2.69
Board
Kevin Lang, formerly President of DCAP Group 200,000 $2.69
and President of DCAP Management
Abraham Weinzimer, formerly Executive Vice 200,000(1) $2.69
President
Richard Maikis, Consultant 100,000(1) $1.00
All current executive officers as a group 1,000,000 $.25
(1 person)
All current directors who are not executive 450,000 $2.69
officers as a group (3 persons)
All employees, including all current officers - -
who are not executive officers, as a group
---------------
(1) Expired.
37
Federal Income Tax Consequences
Nonstatutory Stock Options
Under the Code and the Treasury Department Regulations, a nonstatutory
stock option does not ordinarily have a "readily ascertainable fair market
value" when it is granted. This rule will apply to our grant of nonstatutory
stock options. Consequently, the grant of a nonstatutory stock option to an
optionee will result in neither income to him nor a deduction to us. Instead,
the optionee will recognize compensation income at the time he exercises the
nonstatutory stock option in an amount equal to the excess, if any, of the then
fair market value of the shares transferred to him over the option price.
Subject to the applicable provisions of the Code and the Regulations regarding
withholding of tax, a deduction will be allowable to us in the year of exercise
in the same amount as is includable in the optionee's income.
For purposes of determining the optionee's gain or loss on the sale or
other disposition of the shares transferred to him upon exercise of a
nonstatutory stock option, the optionee's basis in such shares will be the sum
of his option price plus the amount of compensation income recognized by him on
exercise. Such gain or loss will be capital gain or loss and will be long- term
or short-term depending upon whether the optionee held the shares for more than
one year or one year or less. No part of any such gain will be an "item of tax
preference" for purposes of the "alternative minimum tax."
Incentive Stock Options
Options granted under the plan which qualify as incentive stock options
under Section 422 of the Code will be treated as follows:
Except to the extent that the alternative minimum tax rule described below
applies, no tax consequences will result to the optionee or us from the grant of
an incentive stock option to, or the exercise of an incentive stock option by,
the optionee. Instead, the optionee will recognize gain or loss when he sells or
disposes of the shares transferred to him upon exercise of the incentive stock
option. For purposes of determining such gain or loss, the optionee's basis in
such shares will be his option price. If the date of sale or disposition of such
shares is at least two years after the date of the grant of the incentive stock
option, and at least one year after the transfer of the shares to him upon
exercise of the incentive stock option, the optionee will realize long-term
capital gain treatment upon their sale or disposition.
Generally, we will not be allowed a deduction with respect to an incentive
stock option. However, if an optionee fails to meet the foregoing holding period
requirements (a so-called disqualifying disposition), any gain recognized by the
optionee upon the sale or disposition of the shares transferred to him upon
exercise of an incentive stock option will be treated in the year of such sale
or disposition as ordinary income, rather than capital gain, to the extent of
the excess, if any, of the fair market value of the shares at the time of
exercise (or, if less, in certain cases the amount realized on such sale or
disposition) over their option price, and in that case we will be allowed a
corresponding deduction.
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For purposes of the alternative minimum tax, the amount, if any, by which
the fair market value of the shares transferred to the optionee upon such
exercise exceeds the option price will be included in determining the optionee's
alternative minimum taxable income. In addition, for purposes of such tax, the
basis of such shares will include such excess.
To the extent that the aggregate fair market value (determined at the time
the option is granted) of the stock with respect to which incentive stock
options are exercisable for the first time by the optionee during any calendar
year exceeds $100,000, such options will not be incentive stock options. In this
regard, upon the exercise of an option which is deemed, under the rule described
in the preceding sentence, to be in part an incentive stock option and in part a
nonstatutory stock option, under existing Internal Revenue Service guidelines,
we may designate which shares issued upon exercise of such options are incentive
stock options and which shares are nonstatutory stock options. In the absence of
such designation, a pro rata portion of each share issued is to be treated as
issued pursuant to the exercise of an incentive stock option and the balance of
each share treated as issued pursuant to the exercise of a nonstatutory stock
option.
Recommendation and Required Vote
The affirmative vote of the holders of a majority of our outstanding common
shares present at the meeting, in person or by proxy, is required for approval
of this proposal. Our Board of Directors recommends a vote FOR this proposed
amendment to the 1998 Stock Option Plan.
PROPOSAL 4: AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED COMMON SHARES
Our Board of Directors has adopted resolutions approving and submitting to
a vote of the stockholders an amendment to Article FOURTH of our Certificate of
Incorporation to increase the number of authorized common shares from 25,000,000
to 40,000,000. Our Board believes that the increase in authorized shares is in
our best interest so as to make additional common shares available for
acquisitions, financings, present and future employee benefit programs and other
corporate purposes.
The additional common shares resulting from the stockholder approval of the
authorized share increase may be issued from time to time as our Board of
Directors may determine without further action of our stockholders. Although our
Board has no current plans to utilize such shares to entrench present
management, it may, in the future, be able to use the additional common shares
as a defensive tactic against hostile takeover attempts. The authorization of
such additional common shares will have no current anti-takeover effect. No
hostile takeover attempts are, to our management's knowledge, currently
threatened. There are no provisions in our Certificate of Incorporation or
By-Laws or other material agreements to which we are a party that would, in our
management's judgment, have an anti-takeover effect; however, pursuant to our
Certificate of Incorporation, if our stockholders wish to take action by written
consent in lieu of a meeting, then the unanimous written consent of our
stockholders is required to take the action
39
(rather than a majority as would otherwise be the case) if the action is not
supported by our Board of Directors.
The relative rights and limitations of the common shares would remain
unchanged under the amendment. Our stockholders do not currently possess, nor
upon the approval of the proposed authorized share increase will they acquire,
preemptive rights, that would entitle such persons, as a matter of right, to
subscribe for the purchase of any shares, rights, warrants or other securities
or obligations convertible into, or exchangeable for, our securities. Therefore,
the proposed increase in authorized shares could result in the dilution of the
ownership interest of existing stockholders.
Recommendation and Required Vote
The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this proposal. The Board of Directors
recommends a vote FOR approval of the proposed amendment to the Certificate of
Incorporation.
PROPOSAL 5: AMENDMENT TO CERTIFICATE OF INCORPORATION
TO PROVIDE FOR AUTHORITY TO ISSUE PREFERRED SHARES
Our Board of Directors has recommended an amendment to our Certificate of
Incorporation to provide for the authority to issue up to 1,000,000 preferred
shares, $.01 par value, in one or more classes or series, and to fix the
relative rights and preferences of the shares, including voting powers, dividend
rights, liquidation preferences, redemption rights and conversion privileges.
The preferred shares, if approved and authorized, would be utilized for
various corporate purposes including as consideration in connection with future
corporate acquisitions and to raise additional capital. Our Board believes it is
desirable to have our authorized capital sufficiently flexible so that future
business needs and corporate opportunities may be dealt with by our Board of
Directors without undue delay or the necessity of holding a special
stockholders' meeting.
The additional preferred shares resulting from the stockholder approval of
the proposal may be issued from time to time as our Board of Directors may
determine without further action of our stockholders. Although our Board has no
current plans to utilize such shares to entrench present management, it may, in
the future, be able to use the shares as a defensive tactic against hostile
takeover attempts. The authorization of such shares will have no current
anti-takeover effect. No hostile takeover attempts are, to our management's
knowledge, currently threatened. There are no provisions in our Certificate of
Incorporation or By-Laws or other material agreements to which we are a party
that would, in our management's judgment, have an anti-takeover effect; however,
pursuant to our Certificate of Incorporation, if our stockholders wish to take
action by written consent in lieu of a meeting, then the unanimous written
consent of our stockholders is required to take the action (rather than a
majority as would otherwise be the case) if the action is not supported by our
Board of Directors.
40
The proposed preferred shares could result in the dilution of the ownership
interest of existing stockholders. In addition, because of its broad discretion
with respect to the creation and issuance of preferred shares without
stockholder approval, our Board of Directors could adversely affect the voting
power of the holders of common shares by granting supervoting powers to the
holders of preferred shares. Also, our Board could issue preferred shares that
have a preferential right to the holders of common shares with respect to
dividends and upon liquidation. Further, conversion and redemption rights
granted to the holders of preferred shares could adversely affect the holders of
common shares.
The authority to be given to our Board of Directors pursuant to the
proposed amendment is attached as Appendix A to this proxy statement.
Recommendation and Required Vote
The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this proposal. The Board recommends a vote
FOR adoption of this proposed amendment to the Certificate of Incorporation.
PROPOSAL 6: AMENDMENT TO CERTIFICATE OF INCORPORATION
TO BROADEN CORPORATE PURPOSES
Our Board of Directors has recommended an amendment to Article THIRD of our
Certificate of Incorporation to broaden the corporate purposes to include any
lawful act or activity for which corporations may be organized under Delaware
Law.
The current purpose and powers clause of our Certificate of Incorporation,
which has not been amended since the original Certificate of Incorporation was
filed in 1961, contains thirteen subparagraphs. Since 1961, custom, usage and
the laws of the State of Delaware have changed. Under current Delaware law, this
specific enumeration of business functions is no longer necessary, and a brief
statement of business purposes suffices. The amendment would permit us to engage
in any kind of lawful corporate activity.
Article THIRD of our Certificate of Incorporation, as proposed to be
amended, is attached as Appendix B to this proxy statement.
Recommendation and Required Vote
The affirmative vote of the holders of a majority of our outstanding common
shares is required for approval of this proposal. The Board recommends a vote
FOR adoption of this proposed amendment to the Certificate of Incorporation.
INDEPENDENT PUBLIC ACCOUNTANTS
Holtz Rubenstein & Co., LLP has served as our auditors since 1990 and was
selected as our independent public accountants with respect to the fiscal year
ended December 31, 2000.
41
It is not expected that a representative of Holtz Rubenstein will attend
the meeting.
Audit Fees
The aggregate fees billed by Holtz Rubenstein for professional services
rendered for the audit of our annual financial statements for the 2000 fiscal
year and the review of the financial statements included in our Forms 10-QSB for
that fiscal year were approximately $71,000.
Financial Information Systems Design and Implementation Fees
During fiscal 2000, Holtz Rubenstein did not render to us any of the
professional services with regard to financial information systems design and
implementation described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.
All Other Fees
The aggregate fees billed for services rendered by Holtz Rubenstein for
fiscal 2000, other than the services described above under "Audit Fees", were
approximately $2,000.
The Audit Committee has determined that the provision of the services
covered in "All Other Fees" is compatible with maintaining Holtz Rubenstein's
independence.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at our next annual meeting
of stockholders pursuant to the provisions of Rule 14a-8 of the Securities and
Exchange Commission, promulgated under the Exchange Act, must be received at our
offices in Hewlett, New York by June 27, 2002 for inclusion in our proxy
statement and form of proxy relating to such meeting. We, however, intend to
hold our next annual meeting earlier in 2002 than in 2001. Accordingly, we
suggest that stockholder proposals intended to be presented at the next annual
meeting be submitted well in advance of April 15, 2002, the earliest date upon
which we anticipate the proxy statement and form of proxt relating to such
meeting will be released to stockholders.
The following requirements with respect to stockholder proposals and
stockholder nominees to our Board of Directors are included in our By-Laws.
1. Stockholder Proposals. In order for a stockholder to make a proposal at
an annual meeting of stockholders, under our By-Laws, timely notice must be
received by us in advance of the meeting. To be timely, the proposal must be
received by our Secretary at our principal executive offices (as provided below)
on a date which is not less than 60 days nor more than 90 days prior to the date
which is one year from the date of the mailing of the proxy statement for the
prior year's annual meeting of stockholders. If during the prior year we did not
hold an annual meeting, or if the date of the meeting for which a stockholder
intends to submit a proposal has changed more than 30 days from the date of the
meeting in the prior year, then the notice must be received a reasonable time
before we mail the proxy statement for the current year. A stockholder's notice
must set forth as to each matter the stockholder proposes to bring before the
annual meeting certain information regarding the proposal, including the
following:
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o a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at such meeting;
o the name and address of the stockholder proposing such business;
o the class and number of our shares of which are beneficially owned by
such stockholder; and
o any material interest of such stockholder in such business.
2. Stockholder Nominees. In order for a stockholder to nominate a candidate
for director, under our By-Laws, timely notice of the nomination must be
received by us in advance of the meeting. To be timely, the notice must be
received at our principal executive offices (as provided below) not less than 60
days nor more than 90 days prior to the meeting; however, if less than 70 days'
notice of the date of the meeting is given to stockholders and public disclosure
of the meeting date, pursuant to a press release, is either not made at all or
is made less than 70 days prior to the meeting date, notice by a stockholder to
be timely made must be so received no later than the close of business on the
tenth day following the earlier of the following:
o the day on which the notice of the date of the meeting was mailed to
stockholders, or
o the day on which such public disclosure of the meeting date was made.
The stockholder sending the notice of nomination must describe various
matters, including such information as:
o the name, age, business and residence addresses, occupation or
employment and shares held by the nominee;
o any other information relating to such nominee required to be
disclosed in a proxy statement; and
o the name, address and number of shares held by the stockholder.
These requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in our proxy statement.
Any notice given pursuant to the foregoing requirements must be sent to our
Secretary at 1158 Broadway, Hewlett, New York 11557. The foregoing is only a
summary of the provisions of our By-Laws that relate to stockholder proposals
and stockholder nominations for director. Any stockholder desiring a copy of our
By-Laws will be furnished one without charge upon receipt of a written request
therefor.
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OTHER BUSINESS
While the accompanying Notice of Annual Meeting of Stockholders provides
for the transaction of such other business as may properly come before the
meeting, we have no knowledge of any matters to be presented at the meeting
other than those listed as Proposals 1 through 6 in the notice. However, the
enclosed proxy gives discretionary authority in the event that any other matters
should be presented.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This proxy statement is accompanied by a copy of our 2000 Form 10-KSB and
our Form 10-QSB for the period ended June 30, 2001.
The following information from our 2000 Form 10-KSB (File No. 0-1665), as
filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, is
hereby incorporated by reference into this proxy statement:
o "Description of Business," included in Item 1 thereof;
o "Description of Property," included in Item 2 thereof;
o "Legal Proceedings," included in Item 3 thereof;
o "Management's Discussion and Analysis or Plan of Operation," included
in Item 6 thereof;
o our consolidated financial statements as of December 31, 2000 and for
the years ended December 31, 1999 and 2000, included in Item 7
thereof; and
o "Changes in and Disagreements with Accountants," included in Item 8
thereof.
The following information from our Form 10-QSB for the period ended June
30, 2001 (File No. 0-1665), as filed with the SEC pursuant to Section 13 or
15(d) of the Exchange Act, is hereby incorporated by reference into this proxy
statement:
o Our consolidated financial statements as of June 30, 2001 and for the
six months ended June 30, 2001 and 2000, included in Part I, Item 1
thereof; and
o "Management's Discussion and Analysis or Plan of Operation," included
in Part I, Item 2 thereof.
44
Any statement contained in a document incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this proxy
statement to the extent that a statement contained herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this proxy
statement.
Barry Goldstein
Chief Executive Officer
Hewlett, New York
October 25, 2001
45
Appendix A
The Board of Directors hereby is vested with the authority to provide for
the issuance of the Preferred Stock, at any time and from time to time, in one
or more series, each of such series to have such voting powers, designations,
preferences and relative participating, optional, conversion and other rights,
and such qualifications, limitations or restrictions thereon as expressly
provided in the resolution or resolutions duly adopted by the Board of Directors
providing for the issuance of such shares or series thereof. The authority which
hereby is vested in the Board of Directors shall include, but not be limited to,
the authority to provide for the following matters relating to each series of
the Preferred Stock:
(i) The designation of any series.
(ii) The number of shares initially constituting any such series.
(iii)The increase, and the decrease to a number not less than the
number of the outstanding shares of any such series, of the number of
shares constituting such series theretofore fixed.
(iv) The rate or rates and the times at which dividends on the shares
of Preferred Stock or any series thereof shall be paid, and whether or not
such dividends shall be cumulative, and, if such dividends shall be
cumulative, the date or dates from and after which they shall accumulate.
(v) Whether or not the shares of Preferred Stock or series thereof
shall be redeemable, and, if such shares shall be redeemable, the terms and
conditions of such redemption, including, but not limited to, the date or
dates upon or after which such shares shall be redeemable and the amount
per share which shall be payable upon such redemption, which amount may
vary under different conditions and at different redemption dates.
(vi) The amount payable on the shares of Preferred Stock or series
thereof in the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided, however, that the
holders of shares ranking senior to other shares shall be entitled to be
paid, or to have set apart for payment, not less than the liquidation value
of such shares before the holders of shares of the Common Stock or the
holders of any other series of Preferred Stock ranking junior to such
shares.
(vii) Whether or not the shares of Preferred Stock or series thereof
shall have voting rights, in addition to the voting rights provided by law,
and, if such shares shall have such voting rights, the terms and conditions
thereof, including but not limited to the right of the holders of such
shares to vote as a separate class either alone or with the holders of
shares of one or more other class or series of Preferred Stock and the
right to have more than one vote per share.
(viii) Whether or not a sinking fund shall be provided for the
redemption of the shares of Preferred Stock or series thereof, and, if such
a sinking fund shall be provided, the terms and conditions thereof.
(ix) Whether or not a purchase fund shall be provided for the shares
of Preferred Stock or series thereof, and, if such a purchase fund shall be
provided, the terms and conditions thereof.
(x) Whether or not the shares of Preferred Stock or series thereof
shall have conversion privileges, and, if such shares shall have conversion
privileges, the terms and conditions of conversion, including but not
limited to any provision for the adjustment of the conversion rate or the
conversion price.
(xi) Any other relative rights, preferences, qualifications,
limitations and restrictions.
Appendix B
"THIRD: The nature of the business of the Corporation, and the objects and
purposes proposed to be transacted, promoted and carried on by it, shall be to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware."
DCAP GROUP, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Barry Goldstein as proxy, with the power to
appoint his substitute, and hereby authorizes him to represent and vote, as
designated below, all the common shares of DCAP Group, Inc. (the "Company") held
of record by the undersigned at the close of business on October 15, 2001 at the
Annual Meeting of Stockholders to be held on November 27, 2001 or any
adjournment thereof.
1. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees listed below
(Instruction: To withhold authority to vote for any individual nominee, strike
such nominee's name from the list below.)
Barry Goldstein Morton L. Certilman Jay M. Haft Robert M. Wallach
2. Proposal to approve and ratify the sale by the Company and its subsidiaries
of assets that may constitute, under Delaware law, substantially all of its
assets.
FOR ____ AGAINST ____ ABSTAIN ____
3. Proposal to approve an increase in the number of common shares authorized
to be issued pursuant to the Company's 1998 Stock Option Plan from
2,000,000 to 3,000,000.
FOR ____ AGAINST ____ ABSTAIN ____
4. Proposal to approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized common shares from
25,000,000 to 40,000,000.
FOR ____ AGAINST ____ ABSTAIN ____
5. Proposal to approve an amendment to the Company's Certificate of
Incorporation to provide for the authority to issue up to 1,000,000
preferred shares.
FOR ____ AGAINST ____ ABSTAIN ____
6. Proposal to approve an amendment to the Company's Certificate of
Incorporation to broaden the corporate purposes to include any lawful act
or activity for which corporations may be organized under Delaware law.
FOR ____ AGAINST ____ ABSTAIN ____
7. In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR the election of the named nominees as directors and FOR Proposals 2, 3, 4,
5, and 6.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears below. When shares
are held by joint tenants,
both should sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sign
in full corporate name by
the President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
Dated:_______________, 2001
Signature
Signature if held jointly