SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for use of
the Commission only
(per Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-ll(c) or Rule 14a-12
PICK Communications Corp.
(Name of Registrant as Specified In Its Charter)
PICK Communications Corp.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) & 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated, and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-ll(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: __________________
1
<PAGE>
PICK Communications Corp.
Wayne Interchange Plaza II
155 Route 46 West
Wayne, New Jersey 07470
(201) 812-7425
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 21, 1997
To The Stockholders of PICK Communications Corp.:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of PICK Communications Corp., a Nevada Company (the
"Company"), will be held at the Company's principal executive offices located at
Wayne Interchange Plaza II, 155 Route 46 West, Wayne, New Jersey 07470, at 10:00
a.m., Eastern Standard Time, on January 21, 1997, for the following purposes:
1. To elect six (6) Directors of the Company to serve for the
ensuing year and until their successors are elected and
qualify - Proposal 1.
2. To ratify the adoption of the Company's 1996 Employee Stock
Option Plan - Proposal 2.
3. To adopt amendments to Articles IV and VIII and delete Article
IX of the Company's Articles of Incorporation (i) increasing
the number of authorized shares of common stock of the Company
from 50,000,000 to 75,000,000, (ii) decreasing the par value
of each share of such common stock from $.002 per share to
$.001 per share, and (iii) eliminating the prohibition on
cumulative voting of the common stock - Proposal 3.
4. To adopt an amendment to Article IV of the Charter authorizing
up to 10,000,000 shares of "blank check" preferred stock of
the Company - Proposal 4.
5. To adopt an amendment to Article III, Section 14 of the
Company's By-Laws reducing the minimum number of Directors
required to serve on committees of the Board of Directors from
three to two - Proposal 5.
6. To ratify the appointment of Durland & Company, CPAs, P.A. as
the Company's auditors - Proposal 6.
7. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors of the Company has fixed the close of business on
December 5, 1996 as the record date for determining the Stockholders entitled to
notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
Raymond M. Brennan, Secretary
Wayne, New Jersey
December , 1996
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD, AND RETURN IT TO PICK COMMUNICATIONS
CORP. THE PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED, AND STOCKHOLDERS
EXECUTING PROXIES MAY ATTEND THE ANNUAL MEETING AND VOTE THERE IN PERSON SHOULD
THEY SO DESIRE.
2
<PAGE>
PICK Communications Corp.
Wayne Interchange Plaza II
155 Route 46 West
Wayne, New Jersey 07470
(201) 812-7425
Proxy Statement
Annual Meeting of Stockholders
January 21, 1997
This Proxy Statement is being furnished in connection with the solicitation
of proxies by PICK Communications Corp., a Nevada corporation (the "Company"),
to be voted at the Annual Meeting of Stockholders of the Company and at any and
all adjournments thereof (the "Annual Meeting"), to be held at the Company's
principal executive offices located at Wayne Interchange Plaza II, 155 Route 46
West, Wayne, New Jersey 07470, at 10:00 a.m., Eastern Standard Time, on January
21, 1997 for the purposes set forth in the Notice of Annual Meeting of
Stockholders (the "Notice of Meeting"). This Proxy Statement and accompanying
Notice of Meeting, form of Proxy, Annual Report to the Stockholders for the year
ended December 31, 1995, and Quarterly Report on Form 10-Q for the period ended
September 30, 1996 are expected to be mailed commencing on or about December 8,
1996 to the holders of record of the Company's common stock, par value $ .002
per share (the "Common Stock") as of the close of business on December 5, 1996
(the "Record Date"). On the Record Date, there were 42,162,516 shares of Common
Stock outstanding, the only outstanding voting securities of the Company. All
expenses of this solicitation will be borne by the Company.
Each share of Common Stock owned on the Record Date is entitled to one
vote for each matter which may properly come before the Annual Meeting. The
affirmative vote of a majority of the votes cast by holders of Common Stock on
the Record Date present in person or by proxy at the Annual Meeting and entitled
to vote is required to adopt each matter considered at the Meeting. You may use
the enclose Proxy to indicate your vote as to each of the proposals described in
this Proxy Statement (the "Proposals"). Each Proxy which is properly completed,
signed and returned to the Company prior to the Annual Meeting and which has not
been revoked will be voted at the Meeting and any adjournments thereof, as
specified in such Proxy. If no specifications are given, shares represented by
each properly completed Proxy will be voted "FOR" each Proposal. Shares
represented by Proxies which are marked "ABSTAIN" as to any Proposal, and
Proxies which are marked to deny discretionary authority on all other matters
will not be included in the vote totals and therefore will have no effect on the
voting. In addition, when brokers are prohibited from exercising discretionary
authority for beneficial owners of shares who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in the vote totals.
The Company does not anticipate that any of its nominees will be
unavailable for election and does not know of any matters other than those
proposed above that may be brought before the Annual Meeting. In the event that
any other matter comes before the Annual Meeting or any
1
<PAGE>
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 any such matter in accordance with their best judgment.
A Stockholder may revoke his or her Proxy at any time before it is
exercised by delivering to the Secretary of the Company at its executive offices
in Wayne, New Jersey, either a written notice of revocation or a duly executed
Proxy bearing a later date, or by attending the Annual Meeting and voting in
person.
A list of Stockholders entitled to vote at the Annual Meeting will be
open to examination by any Stockholders, for any purpose germane to the Annual
Meeting, at the Company's executive offices, at the address indicated on the
Notice of Annual Meeting, during ordinary business hours for ten (10) days prior
to the Annual Meeting. This list will also be available for review at the Annual
Meeting.
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
Proposal 1 - Election of Six (6) Nominees As Directors
The Board of Directors has nominated the five incumbent Directors for
reelection and one other individual listed below to fill the vacancy on the
Board of Directors created by the increase in the number of Directors comprising
the entire Board from five to six. Proxies not marked to the contrary will be
voted "FOR" the election of the persons listed below:
<TABLE>
<S> <C> <C> <C>
Positions with Year First
Name Age the Company & PICK * Became Director
Diego Leiva 45 Chairman, Chief Executive 1995
Officer, President, Director
Raymond M. Brennan 58 Vice President, Secretary,
Director 1995
Robert R. Sams 57 Director 1995
Ricardo Maranon 51 Director 1995
Greg Manning 49 Director 1995
Sergio Pino 40 Nominee for Director --
</TABLE>
*Public Info/Comm Kiosk, Inc., a wholly-owned subsidiary of the Company
("PICK ").
2
<PAGE>
Diego Leiva founded Public Info/Comm Kiosk, Inc., a New Jersey
corporation ("PICK"), which is currently a wholly-owned subsidiary of the
Company, in August 1992, and has served as PICK 's Chairman of the Board,
Chief Executive Officer and President since that time. He has held the same
positions with the Company since its reorganization pursuant to the
Reorganization Plan (as defined below) in September 1995. From 1989 through
July 1992, Mr. Leiva served as Director of Sales for Apertus Technologies,
Inc., a computer telecommunications sales firm. Prior thereto, he was Vice
President of Marketing and Sales for Market Makers, Inc., Chief Operating
Officer of Silo, Inc., and President of Astroglow Lamps Company.
See "Certain Relationships and Related Transactions."
Raymond M. Brennan has served as Vice President and Secretary of PICK
since May 1994 and Director since June 1994. He has held the same positions with
the Company since September 1995. From April 1990 to April 1994, Mr. Brennan
served as Executive Vice President and General Counsel of EOL, Inc., a full
service event production and marketing company. From January 1982 to March 1990,
Mr. Brennan served as Vice President of Business Affairs for Radio City Music
Hall Productions, Inc., where he administered both the Purchasing and Legal
Departments. See "Certain Relationships and Related Transactions."
Robert R. Sams has served as director of the Company since September
1995 and of PICK since November 1994. He has been engaged in merchant banking,
corporate finance, acquisitions and financial advisory services since founding
Saicol Limited in 1983.
Ricardo Maranon has served as director of the Company since September
1995 and of PICK since December 1994. He has served as President of the
Florida-based advertising agency Maranon & Associates Advertising since founding
that company in 1985. Mr. Maranon is also President of All Florida Advertising,
Inc.
Greg Manning has served as director of the Company since September
1995. He has been Chairman of Greg Manning Auctions, Inc. since its inception in
1981, its Chief Executive Officer since December 1992 and its President from
1981 to August 1993. Mr. Manning has also served as President and Chairman of
CRM, formerly known as Greg Manning Company, Inc., since its inception in 1961,
a company which has historically been engaged in the business of acquiring and
selling collectibles. Mr. Manning is currently a member of the Board of
Directors of the State Bank of South Orange, New Jersey.
Sergio Pino, a nominee for director, has been President of Century Duty
Free, Inc., a company with annual sales of approximately $65 million from its
duty-free shops at the Miami International Airport, since 1995. Mr. Pino has
also served as President of Century Concessions, Inc. ("Century"), a company in
the business of managing stores at Miami International Airport with average
annual sales in excess of $30 million since 1993. Since 1977 and 1987, Mr. Pino
has served as President of Century Plumbing Wholesale, Inc. and Century Homes,
Inc., respectively. Mr. Pino has also served as a Director of Ready State Bank
in Miami, Flordia since 1988.
Management has no reason to believe that any of the nominees will not
be a candidate or will be unable to serve. In the event that any nominee should
become unable or unwilling to
3
<PAGE>
serve as a Director, however, Proxies will be voted for the election of any
person substituted for such nominee designated by the incumbent Directors. All
Directors of the Company hold office until the next annual meeting of
Stockholders and until their successors are elected and qualify.
The Board of Directors recommends that Stockholders
vote for the election of all of its nominees as
Directors of the Company - Proposal 1.
Officers are elected annually by, and serve at the discretion of the
Board of Directors. The names and business backgrounds of Executive Officers of
the Company and of PICK who are not Directors of the Company are:
<TABLE>
<S> <C> <C> <C>
Positions with the Year first
Name Age Company & PICK became officer
Karl R. Petersson 50 Vice President and Chief 1995
Financial Officer
Karen M. Quinn 48 Vice President of 1995
Corporate Communications
and Operations
</TABLE>
Karl R. Petersson has been Vice President and Chief Financial Officer
of the Company since September 1995. From September 1994 to the present, Mr.
Petersson has served as Vice President and Chief Financial Officer of PICK. From
June 1994 to August 1995, Mr. Petersson was the Director of Internal Audit for
the United Jewish Appeal-Federation of Jewish Philanthropies of New York, a
charitable organization. From January 1991 to May 1994, Mr. Petersson served as
Vice President of Finance and Administration of the Telecommunications
Cooperative Network of New York, Inc. From August 1981 to October 1991, Mr.
Petersson served as Vice President of Finance and Controller of Radio City Music
Hall Productions, Inc., where he administered both the Accounting and Finance
Departments.
Karen M. Quinn has been Vice President of Corporate Communications and
Operations of the Company since September 1995. Ms. Quinn has also worked for
PICK since December 1992, having become its Vice President of Operations in May
1994. From September 1989 to April 1995, Ms. Quinn served as Business Manager
for George M. Glassman, M.D., P.C.
MEETINGS OF THE BOARD OF DIRECTORS AND
INFORMATION REGARDING COMMITTEES
Since January 1996, the Company has had two standing committees of the
Board of Directors, the Compensation Committee and the Audit Committee. There
were no committees of the Board of Directors in 1995. Messrs. Maranon, Sams and
Manning comprise the Compensation Committee. Among the duties of this Committee
are the making of
4
<PAGE>
recommendations to the Board of remuneration for officers and key sales persons
of the Company, the determination of the number and issuance of stock options
and the review of any compensation and incentive programs for executive
officers, consultants and others.
The members of the Audit Committee are Messrs. Leiva, Sams and Manning.
The duties of the Audit Committee include recommending the independent public
accountants to serve as the Company's auditors, reviewing and considering
actions of management in matters relating to audit functions, reviewing with
such accountants the scope and results of their audit engagement, reviewing the
financial statements and information included in the Company's filings with the
Securities and Exchange Commission, reviewing the Company's system of internal
controls and procedures and reviewing the effectiveness of procedures intended
to prevent violations of laws and regulations.
The Board of Directors held two meetings in 1995 which all Directors
attended.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 22, 1996, the number of
shares of the Company's outstanding Common Stock beneficially owned by (i) each
Director and nominee for Director of the Company, (ii) each Executive Officer
named under the heading "EXECUTIVE COMPENSATION" below, (iii) each beneficial
owner of more than 5% of the Company's Common Stock and (iv) all of the
Company's Executive Officers and Directors as a group:
<TABLE>
<S> <C> <C>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percentage (2)
Diego Leiva (3) 12,466,500 (4)(5) 29.2%
Robert R. Sams 665,000 (6) 1.6%
The Lodge - South Park
Penshurst, Tonbridge
Kent, TN11 8EA
England
Ricardo Maranon 821,000 (6)(7) 1.9%
1400 Stillwater Drive
Miami Beach, FL 33141
Greg Manning 4,612,298 (6)(8) 10.8%
775 Passaic Avenue
West Caldwell, New Jersey 07006
Raymond M. Brennan (3) 1,011,500 (9)(10) 2.4%
Karen M. Quinn (3) 871,250 (10) 2.0%
Karl R. Petersson (3) 870,000 (10)(11) 2.0%
Firenze, Ltd. 5,000,000 11.9%
230 Park Avenue, Suite 1000
New York, NY 10022
Sergio Pino 1,000,000 (12) 2.4%
901 SW 69th Avenue
Miami, FL 33144
All executive officers, directors and nominee
as a group (8 persons) 22,317,548 (1)(4)(5)(6)(7)(8)(9)(10)(11) 48.9%
</TABLE>
(1) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the person indicated.
(2) Based on 42,162,516 shares outstanding as of the Record Date. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person and which are
convertible or exercisable within sixty (60) days of such date pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange
Act") have been converted or exercised.
(3) The address of this person is c/o the Company, Wayne Interchange
Plaza II, 155 Route 46 West, Wayne, New Jersey 07470.
(4) Includes 4,290,000 shares beneficially owned by Mr. Leiva's wife,
792,000 shares beneficially owned by a trust for Mr. Leiva's son
for which Mr. Leiva serves as trustee and 792,000 shares beneficially
owned by a trust for Mr. Leiva's daughter for which Mr. Leiva
6
<PAGE>
serves as trustee. Also includes 400,000 shares which Mr. Leiva and the
Company agreed, on November 13, 1996, to exchange for $100,000 in
compensation for 1994 and 1995 accrued and unpaid to Mr. Leiva, at a
price per share of $.25. Also includes 1,500,000 restricted shares,
which Mr. Leiva acquired the right to purchase from a consultant to the
Company. See "EXECUTIVE COMPENSATION -- Summary Compensation Table"
and "BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION" below.
(5) Includes incentive stock options to purchase up to 103,896 shares of
the Company's Common Stock at $.9625, subject to stockholder approval
of the 1996 Stock Option Plan, and non-incentive stock options to
purchase up to 396,104 shares of the Company's Common Stock at $.875
per share.
(6) Includes non-qualified stock options to purchase up to 500,000 shares
of the Company's Common Stock at a price of $.875 per share,
pursuant to the 1996 Stock Option Plan. See the description of such
Plan below.
(7) Includes 32,250 shares of the Company's Common Stock beneficially owned
by Mr. Maranon's daughter.
(8) These shares are held by Greg Manning Auctions, Inc., a company
(9) Includes 250,000 shares beneficially owned by Mr. Brennan's wife.
(10) Includes incentive stock options to purchase up to 114,285 shares,
subject to stockholder approval of the 1996 Stock Option Plan, and
non-qualified stock options to purchase up to 385,715 shares pursuant
to such Plan, all at a price of $.875 per share.
(11) Includes 40,000 shares of the Company's Common Stock beneficially owned
by Mr. Petersson's wife and 10,000 shares of the Company's Common Stock
owned by each of Mr. Petersson's three children, or an aggregate of
30,000 shares of the Company's Common Stock.
12) Includes 400,000 shares of Common Stock purchased by Mr Pino, a nominee
for Director of the Company, at a price of $1.00 per share, and 600,000
shares which Mr Pino has the right to purchase, at a price of $1.00 per
share payable in part by promissory note pursuant to an agreement
between Mr. Pino and the Company, at a price of $1.00 per share payable
by a certain date, which has passed, but the Company is considering an
agreement with Mr. Pino that would still allow him to purchase the
600,000 shares, but at a lower price, given the recent trading price of
the Common Stock. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
below.
EXECUTIVE COMPENSATION
Directors currently receive no cash compensation for serving on the
Board of Directors or any Committee of the Board, other than reimbursement of
travel expenses incurred by them and their spouses in attending Board meetings
held outside the New York Metropolitan area. Two of the Directors are employees
of the Company. Each of the Directors has received restricted stock and stock
options from the Company. Entities affiliated with certain Directors have
received restricted stock and/or stock options and have entered into business
arrangements with the Company. See the notes to "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" above, and "SUMMARY COMPENSATION TABLE,"
"BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION" and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" below.
The following table sets forth all compensation awarded to, earned by,
or paid to the Executive Officer named therein for all services rendered to the
Company during the three fiscal years ending December 31, 1995. No other
Executive Officer of the Company received total compensation in excess of
$100,000 during any of the last three years:
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Other Restrict- Underlying
Annual ed Incentive All
Name and Compen- Stock Options/ Plan Other
Principal sation Award(s) SARs Payouts Com-
Positions Year Salary ($) Bonus ($) ($) ($) (#) ($) pensation
- --------- ---- ---------- --------- ------- --------- ----- -------------------
Diego Leiva 1995 $ 93,750 (1)(2) $ 0 0 0(4) 0 0 0
Chief Executive 1994 $ 76,523 (2) $ 0 0 0 0 0 0
Officer and 1993 $ 0 (3) $ 0 0 0 0 0 0
Chairman of the
Board of Directors
</TABLE>
(1) See "EXECUTIVE COMPENSATION" above.
(2) Mr. Leiva was entitled to compensation of $150,000. The amounts not paid
to Mr. Leiva -- $56,250 for 1995 and $73,477 for 1994, or an aggregate of
$129,697 have been accrued. On November 13, 1996, the Company and Mr.
Leiva agreed to an exchange of $100,000 of such accrued salary for 400,000
shares of Common Stock of the Company at a purchase price per share of
$.25, the closing asked price per share of such stock on that date,
leaving a balance of $29,697 in unpaid salary accrued to Mr. Leiva. See
"BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION" below.
(3) Mr. Leiva was entitled to compensation of $125,000 all of which he waived.
(4) In May 1995, PICK granted to a consultant the right to acquire 1,500,000
shares of restricted Common Stock for a purchase price of $0.055 per share
or an aggregate of $82,500. The consultant failed to pay for the shares
and the Company consented to the consultant's assignment of its right to
purchase these shares to Mr Leiva. When the consultant acquired the right
to purchase these shares, the Common Stock was not publicly traded. The
dollar value of these shares, based on the closing market price of the
same number of shares of unrestricted Common Stock was $5,917,500, net of
the $82,500 paid therefor by Mr. Leiva on November 3, 1995. See "BOARD OF
DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION" below. See also note 2 to
this Table.
In November 1995, the Company purchased term life insurance
policies in the amount of $100,000 for each of Raymond M. Brennan, Karen M.
Quinn and Karl R. Petersson, all of whom are executive officers of the Company.
The cost to the Company of all of the three policies was $1,573. In September
1996, the Company paid $1,186 for a $250,000 term life insurance policy for
Diego Leiva. The Company does not currently have, nor during the 1995 fiscal
year did it have, any other long-term incentive plans.
No stock options or stock appreciation rights were granted by the
Company in 1995.
BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION
In 1995, there was no Compensation Committee of the Company's Board
of Directors, and all members of the Board of Directors participated in the
deliberations concerning compensation of Executive Officers. The members of the
Company's Board of Directors in 1995 were Messrs. Lieva, Brennan, Sams, Maranon
and Manning. In January 1996, the Board of Directors nominated Messrs. Maranon,
Sams and Manning to serve as members of its Compensation Committee.
During the 1995 fiscal year, Mr. Leiva, the Chairman, Chief Executive Officer
and President of the Company and of PICK, and Mr. Brennan, the Vice President
and Secretary of
8
<PAGE>
the Company and of PICK, each also served as a Director of both the Company and
PICK, which has no compensation committee. No other Executive Officer of the
Company served on the compensation committee of any other entity, any of whose
executive officers served as a Director of the Company.
Each of the members of the Company's Board of Directors provided
services to and/or benefitted, directly or indirectly, by certain transactions
with the Company or between the Company and an entity of which such person was
an officer, director, or security holder during 1995 and 1996. Those
transactions are described below:
Certain Relationships and Related Transactions Involving Members of the
Compensation Committee and Other Directors
On September 12, 1995, Diego Leiva, the founder, Chairman,
President and Chief Executive Officer of PICK, and certain members of Mr.
Leiva's family, entered into an Agreement and Plan of Reorganization with the
Company (the "Reorganization Plan") pursuant to which Mr. Leiva and his family
members exchanged an aggregate of 701,000 shares of common stock of Public
Info/Comm Kiosk, Inc. ("PICK ") owned by them ("PICK Common") for 11,566,500
shares of the Company's Common Stock, or 16.5 shares of the Company's Common
Stock for each share of PICK Common. The Reorganization Plan further provided
for PICK to undertake to cause its remaining stockholders to exchange each of
their shares of PICK Common for shares of the Company's Common Stock in the same
ratio as Mr. Leiva's exchange (the "PICK Exchange"). The PICK Exchange commenced
in October 1995, and all former PICK stockholders have exchanged their shares.
On January 25, 1996, the Company's Board of Directors approved the
reservation of 5,000,000 shares of Common Stock for the granting of stock
options to the Company's directors, officers and employees and certain
consultants under the 1996 Stock Option Plan. The Company granted (i)
non-qualified stock options ("NQSO") to purchase 500,000 shares of Common Stock
to each of Messrs. Maranon, Sams and Manning, (ii) NQSOs to purchase 385,715
shares and incentive stock options ("ISOs") to purchase 114,285 shares of Common
Stock to each of Messrs. Brennan and Petersson and Ms. Quinn, and (iii) NQSOs to
purchase 396,104 shares and ISOs to purchase 103,896 shares of Common Stock to
Mr. Leiva, as described below under the heading "1996 STOCK OPTION PLAN - Awards
of Options." These options were regranted on September 30, 1996. Each grantee
currently has the right to purchase shares of the Company's Common Stock at an
exercise price of $.875 per share (10% over the market value on the date of
grant), excluding the incentive stock options granted to Mr. Leiva which have an
exercise price of $.9625. All of the stock options are exercisable as of the day
of grant and expire on September 29, 1999 . See "Proposal 2 - Ratification of
1996 Stock Option Plan Awards of Options" below. These options were regranted on
September 30, 1996.
In May 1995, PICK granted to a consultant the right to acquire 1,500,000
shares of Common Stock for a purchase price of $0.055 per share or an aggregate
of $82,500. The consultant failed to pay for the shares and the Company
consented to the consultant's assignment of its right to purchase these shares
to Mr. Leiva. When the consultant acquired the right to purchase these shares,
the Common Stock was not publicly traded. The dollar value of these shares,
based on the closing market price of the same number of shares of Common Stock
was $5,917,500, net of the $82,500 paid therefor by Mr. Leiva on November 3,
1995.
9
<PAGE>
During the years ended December 31, 1993 and December 31, 1994,
Diego Leiva, the Company's President and Chief Executive Officer, advanced
$52,035 and $114,500, respectively, to PICK . The Company repaid $9,500 in 1994
and $3,035 in 1995.
Mr. Leiva was entitled to receive a salary of $150,000 for 1995 and
$125,000 for each of 1994 and 1993, but he waived all of his salary for 1993. Of
the sums due to Mr. Leiva for 1995 and 1994, Mr. Leiva has received $93,750 and
$76,523, respectively. The aggregate balance of $129,727 ($56,250 for 1995 and
$73,477 for 1994) was accrued and owing. On November 13, 1996, the Company and
Mr. Leiva entered into an agreement to exchange $100,000 of Mr. Leiva's accrued
and unpaid compensation for 1994 and 1995 for 400,000 shares of the Company's
Common Stock, at a price per share of $.25, the closing asked price per share on
that date.
Pursuant to the terms of the PICK Exchange, in addition to the
shares received by Mr. Leiva and certain members of Mr. Leiva's immediate
family, as described above, Raymond M. Brennan, Vice President, Secretary and a
Director of PICK and the Company, received 511,500 shares of Common Stock of the
Company, including 250,000 shares beneficially owned by his wife, and Robert R.
Sams, a Director of the Company since September 1995 and of PICK since November
1994, received 165,000 shares of such Common Stock.
In 1994 and 1995, the Company purchased approximately $144,000 and
$10,500, respectively, in advertising services from a company owned and
controlled by Ricardo Maranon, who became a stockholder of the Company and a
member of its Board of Directors in 1995.
On September 12, 1995, pursuant to the terms of the Reorganization
Plan, Greg Manning Auctions, Inc. ("Auctions"), a company controlled by Greg
Manning, a Director of the Company, acquired 4,500,000 shares of Common Stock of
the Company for an aggregate of $250,000. The purchase price for these shares
was determined by arm's length negotiations between the Company and Auctions.
In January 1996, the Company issued 150,000 shares of the Company's
Common Stock to All Florida Advertising, Inc., a company of which Mr. Maranon is
the President, for the development and implementation of the advertising and
marketing programs to be instituted by the Company in order to utilize
$3,000,000 worth or prepaid advertising which the Company acquired from
International Executive Services, Inc.
Ricardo Maranon, a Director of the Company since 1995, received 288,750
shares of Common Stock on September 12, 1995 in connection with the PICK
Exchange.
10
<PAGE>
Robert R. Sams, a Director, stockholder and member of the Company's
Compensation Committee since 1995, received 165,000 shares of Common Stock on
September 12, 1995 in connection with the PICK Exchange.
Executive Compensation
It was the responsibility of the Board of Directors to review the
compensation levels and performance of management and to recommend compensation
changes during 1995. These functions are currently the responsibility of the
Compensation Committee of the Board which was established in January 1996. The
Report of the Board of Directors concerning compensation of the Company's Board
of Directors appears below:
Report of the Board of Directors on Compensation
Philosophy. The Board of Directors believes that maximizing
shareholder value is the most important measure of success, and achieving this
depends on the coordinated efforts of individual employees working as a team
toward defined common performance goals. The objectives of the Company's
compensation program are to align executive compensation with shareholder value,
to reward individual and team effort and performance furthering the Company's
business goals and to attract, retain and reward employees who will contribute
to the long-term success of the Company.
The total direct compensation package for the Company's executives,
including the Chief Executive Officer, is intended to be made up of three
elements: (i) a competitive base salary; (ii) attractive short-term incentives
to executives to earn additional bonus income based on operating results; and
(iii) the grant of stock options, from time to time, to executives in an effort
to provide a closer identification of the executives' interests with those of
the Company and its shareholders by giving the executives an opportunity to
acquire a proprietary interest in the Company by acquiring Common Stock.
Salaries; Chief Executive Officer. The salaries of the Company's
executive officers for 1995 were fixed by the Board of Directors. The Board
believes, however, that the basic philosophy to be followed regarding salaries
is to consider increases based upon a favorable evaluation of individual
performance relative to individual goals, the functioning of the executive's
team within the corporate structure, success in furthering the corporate
strategy and goals, and individual management skills, responsibilities and
anticipated workload. The Board has also considered demonstrated loyalty and
commitment to the Company and the competitive salaries offered by similar
companies to attract executives, including executives of high technology
companies and those in the telecommunications industry. Merit increases for
executives are to be subject to the same budgetary guidelines as apply to all
other employees of the Company. In addition, the Board has made grants of
restricted shares of Common Stock to its Chief Executive Officer, Mr. Leiva,
partly as a means of rewarding him for agreeing to the accrual of a portion of
his salary for 1995 and 1994 and partly as a short term means of compensating
Mr. Leiva for his services in a manner designed to maximize available cash flow
11
<PAGE>
of the Company. The amount of Mr. Leiva's stated annual salary was also
increased for 1995 and 1994 in light of the increase in his duties as Chief
Executive Officer, Chairman and President of the Company over that period of
time.
Bonuses. The Board believes that grants of cash bonus incentives
should be made as a significant percentage of each executive's base salary when
the Company achieves its target goals and when cash flow of the Company is
sufficient to support such grants. This policy is also designed to motivate
individuals to improve performance. No cash bonuses have been awarded to any
executives since January 1, 1995. The Board has authorized, however, grants of
restricted Common Stock and stock options. See "Stock Options" below.
Stock Options. Executives and other employees are eligible for
annual stock option grants under the 1996 Stock Option Plan of the Company. The
number of options granted to any individual depends on individual performance,
salary level and competitive data, and the impact that such employee's
productivity may make to shareholder value over time. In addition, in
determining the number of stock options granted to each executive, the Board
considers the unvested options of each executive to determine the future
benefits potentially available to the executive, each executive's salary in
relation to salaries paid in the industry to persons in positions of equal
responsibility, and the extent to which any executive has waived all or portions
of his salary altogether or waived timely payment, as in the case of Mr. Leiva,
the Company's Chief Executive Officer. The number of options granted to any
executive will depend in part on the total number of unvested options deemed
necessary to provide an incentive to that executive to make a long term
commitment to remain with the Company. By giving to executives an equity
interest in the Company, the value of which depends upon stock performance, the
policy seeks to further align management and shareholder interests.
Respectfully submitted,
The Board of Directors:
Diego Leiva, Chairman
Raymond M. Brennan
Robert R. Sams
Ricardo Maranon
Greg Manning
Stock Performance
The Company's Common Stock was not registered under Section 12 of the
Securities Exchange Act of 1934, as amended until March 22, 1996. No performance
graph, therefore, is being provided for 1995.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to those transactions disclosed above under the caption
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," the following
transactions were entered into between the Company and either certain members of
management or certain beneficial owners of the Company's Common Stock:
On January 25, 1996, the Company's Board of Directors approved the
reservation of 5,000,000 shares of Common Stock for the granting of stock
options to the Company's directors, officers and employees and certain
consultants under the 1996 Stock Option Plan. In addition to the grants
described above to members of the Board of Directors under the headings
"EXECUTIVE COMPENSATION" and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION" above, the Company granted NQSOs to purchase 385,715 shares and
ISOs to purchase 114,285 shares of Common Stock to each of Mr. Petersson, Vice
President and Chief Financial Officer of the Company and of Pick, and Ms. Quinn,
Vice President of Corporate Communications and Operations of the Company and
PICK . These options were regranted on September 30, 1996. Each of these
grantees currently has the right to purchase shares of the Company's Common
Stock at an exercise price of $.875 per share (10% over the market value on the
date of grant). These stock options are exercisable as of the day of grant and
expire on September 29, 1999 . See "Proposal 2 - Ratification of 1996 Stock
Option Plan - Awards of Options" below. These options were regranted on
September 30, 1996.
On November 21, 1995, the Company entered into a letter agreement with
Sergio Pino, a nominee for Director of the Company, granting Mr. Pino the right
to acquire up to 1,000,000 shares of the Company's Common Stock for $1.00 per
share, or an aggregate of $1,000,000, payable by $200,000 in cash, and a note
receivable for $800,000, to be paid during 1996. Of this amount, only $400,000
has been paid to date. Due to the decline in the market price of the Common
Stock since the date of the letter agreement, the Company is considering whether
to renegotiating the terms of this transaction so as to issue more than 400,000
shares of Common Stock for the payment of the balance of $400,000.
On October 24, 1995, the Company granted Firenze, Ltd. ("FRNZ") an
exclusive license for the distribution of certain cellular telephone technology
co-owned with The Phone Store, Inc. in Europe, Asia, Australia and Africa,
pursuant to an agreement which also provided for FRNZ and the Company to
exchange with one another of 5,000,000 restricted shares of their respective
common stock. The agreement also obligated FRNZ to purchase from the Company the
developed microchip, cellular telephone equipment and software at the Company's
cost plus 10% and to pay the Company a 5% royalty on FRNZ's gross revenues from
the technology.
Pursuant to the terms of the PICK Exchange, in addition to the shares received
by Mr. Leiva, certain members of Mr. Leiva's immediate family, and Mr. Brennan,
as described above under the heading "BOARD OF DIRECTOR INTERLOCKS AND INSIDER
PARTICIPATION," Karl R. Petersson, Vice President and Chief Financial Officer of
PICK and
13
<PAGE>
the Company, received 371,250 shares of Common Stock, and Karen M. Quinn, Vice
President of Corporate Communications and Operations of PICK and the Company
received 371,250 shares of Common Stock.
The Board of Directors recommends that
Stockholders vote "FOR" the election of the
nominees named above - Proposal 1.
1996 STOCK OPTION PLAN
Proposal 2 - Ratification of 1996 Stock Option Plan
On January 25, 1996, the Board of Directors of the Company adopted
the 1996 Stock Option Plan (the "1996 Option Plan"), subject, in certain
respects, to Stockholder approval. Pursuant to the 1996 Option Plan, the Company
reserved, and may issue, of up to 5,000,000 shares of its Common Stock, subject
to adjustment in the event of changes in the Company's capitalization. The 1996
Option Plan anticipates the issuance of Incentive Stock Options ("ISOs"), as
defined in Section 422(b) of the Code, Non-Qualified Stock Options, which are
not intended to qualify under Section 422(b) ("NQSOs") and Stock Appreciation
Rights ("SARs"). Options issued under the 1996 Option Plan ("Options") cannot
qualify as ISOs under Section 422(b) of the Code unless the Plan has been
approved by a majority of the Stockholders.
The Board of Directors deems it to be in the best interests of the
Company that it be given the authority to issue ISOs as well as NQSOs and SARs
under the 1996 Option Plan, so as to provide the Company and its subsidiaries
with the greatest flexibility in awarding their employees, officers, directors
and certain consultants the opportunity to acquire equity in the Company,
Management believes that by providing this means of rewarding employees and
others who contribute to the development and success of the Company's business,
the 1996 Option Plan will enhance their efforts on the Company's behalf,
encourage continuity of staffing and assist the Company in attracting other
qualified personnel.
Awards of Options
As of the Record Date, the Company has granted incentive stock
options ("ISOs") and non-qualified stock options ("NQSOs") to individual
employees and members of management, excluding Diego Leiva, to purchase the
Company's Common Stock at an exercise price of $.875 per share. The Company has
granted Mr. Leiva ISOs and NQSOs to purchase the Company's Common Stock at
exercise prices of $.9625 and $.875 per share, respectively, pursuant to the
1996 Stock Option Plan mandating Mr. Leiva, as a holder of more than 10% of the
Company's Common Stock, be granted ISOs having an exercise price equal to 110%
of the fair market value of the Common Stock on the date of grant.
14
<PAGE>
New Plan Benefits
1996 Option Plan
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AGGREGATE
DOLLAR VALUE ($) NUMBER
NAME POSITION ISOS/NQSOs ISOs/NQSOs
Diego Leiva President, Chief Executive
Officer and Chairman $100,000/$346,591 103,896/396,104
Raymond M. Brennan Vice President, Secretary
and Director 100,000/337,501 114,285/385,715
Robert R. Sams Director 0/437,500 0/500,000
Ricardo Maranon Director 0/437,500 0/500,000
Greg Manning Director 0/437,500 0/500,000
Karl R. Petersson Vice President, Chief
Financial Officer 100,000/337,501 114,285/385,715
Karen M. Quinn Vice President of Corporate
Communications and Operations 100,000/337,501 114,285/385,715
Totals: $400,000/$2,671,594 446,751/3,053,249
Executive Group (4 persons) 400,000/1,359,094 446,751/1,553,249
Non-Executive Director Group (3 persons) 0/1,312,500 0/1,500,000
Non-Executive Officer Employee Group (none) 0/0 0/0
</TABLE>
SUMMARY OF THE 1996 STOCK OPTION PLAN
The following discussion, which summarizes certain provisions of
the 1996 Option Plan, is qualified in its entirety by reference to the text of
the Plan. Copies of the 1996 Option Plan are available for examination at the
Securities and Exchange Commission and at the principal executive offices of the
Company at Wayne Interchange Plaza II, 155 Route 46 West, Wayne, New Jersey
07470.
Eligibility for Participation
Under the 1996 Option Plan, ISOs or ISOs in tandem with SARs which
are subject to the requirements set forth in Temp. Reg. Section 14a.422A-1, A-39
(a)-(e), may be granted, from time to time, to officers and other employees of
the Company. Options, other than ISOs, may also be granted under the 1996 Option
Plan to employees, officers and/or directors of the
15
<PAGE>
Company, as well as independent contractors, consultants and other individuals
who are not employees of, but are involved in the continuing development of the
Company's business ("Participants"). As of the date of this Proxy Statement, the
Company and its subsidiaries have 26 employees, two of whom are directors, three
outside directors and five consultants that are eligible for grants under the
1996 Option Plan.
Administration
The 1996 Option Plan is to be administered by the Board of
Directors of the Company or the Compensation Committee of the Board of Directors
(the "Committee"), which may not contain fewer than two non-employee directors
(as defined in Rule 16b-3 promulgated under Section 16 of the Exchange Act). The
Board of Directors or the Committee will have the authority, in its discretion,
to determine the persons to whom options shall be granted, the character of such
options, the manner of exercising and making payment for shares of Common Stock
and the number of shares of Common Stock to be subject to each option. The 1996
Option Plan is currently administered by the entire Board of Directors.
Terms of Options
The terms of Options granted are to be determined by the Board or
the Committee. Options must be granted within ten years from the date the 1996
Option Plan was adopted or the date the 1996 Option Plan is approved by the
Stockholders of the Company, whichever is earlier. Each Option is to be
evidenced by a stock option agreement between the Company and the Participant,
and is subject to the following additional terms and conditions:
(a) Exercise of the Option. The Board of Directors or the Committee
shall determine the time periods during which Options may be exercised. Options
will be exercisable in whole or in part at any time prior to expiration, but may
not expire later than ten years from the date of grant. If an ISO or an SAR
granted in tandem with an ISO is granted to an individual who, immediately
before the grant owns directly, or through attribution, more than 10% of the
total combined voting power of all classes of capital stock of the Company or a
subsidiary or parent of the Company, such ISO or SAR granted in tandem with an
ISO shall not be exercisable after the expiration of five years from the date of
grant. Unless otherwise provided in any option agreement issued under the 1996
Option Plan, any Option granted under the 1996 Option Plan may be exercisable in
whole or in part at any time during the exercise period and must become fully
exercisable within five years from the date of its grant. In addition, no less
than 20% of an Option may become exercisable in any of the first five years of
the Option. An Option is exercised by the Participant's giving written notice of
exercise to the Company specifying the number of full shares of Common Stock to
be purchased and tendering payment of the purchase price to the Company in cash
or certified check, or, at the discretion of the Board or the Committee, by
delivery of shares of Common Stock having a fair market value equal to the
option price.
16
<PAGE>
(b) Option Price. The option price of an NQSO or an SAR in tandem
with an NQSO granted pursuant to the 1996 Option Plan is determined by the Board
of Directors or the Committee in its sole discretion. In no event may the option
price of an ISO be less than the fair market value on the date of grant. Such
fair market value of an ISO shall be determined by the Board of Directors or the
Committee and, if the shares of Common Stock are listed on a national securities
exchange or traded in the over-the-counter market, the fair market value shall
be the closing price on such exchange, or the mean of the reported bid and asked
prices of the Common Stock in the over-the-counter market as reported by NASDAQ,
the OTC Bulletin Board or the National Quotation Bureau, Incorporated, as the
case may be, on such date. ISOs or SARs granted in tandem with ISOs to holders
of more than 10% of the Company's Common Stock are subject to the additional
restriction that the option price must be at least 110% of the fair market value
of the Company's Common Stock on the date of grant.
(c) Vesting. The Board of Directors or the Committee will determine
the time or times the Options become exercisable, The 1996 Option Plan provides,
however, that with respect to holders of more than 10% of the Common Stock, such
Options must become fully exercisable initially not later than five years from
the date of grant, and no less than 20% of the shares subject to an Option must
become exercisable in each of the first five years of the Option until fully
exercisable.
(d) Termination of Employment; Death. Except as provided in the
1996 Option Plan or as otherwise determined by the Board of Directors or the
Committee in its sole discretion, upon termination of employment with the
Company for any reason, a Participant may exercise any of its Options to the
extent it was exercisable as of the date of termination or at any time within
three months after the date of such termination, unless, however, the Board of
Directors or the Committee determines otherwise, in its sole discretion, any
Options granted under the 1996 Option Plan shall immediately terminate in the
event the Participant is convicted of a felony committed against the Company or
any of its subsidiaries.
If the holder of an Option dies while employed by the Company or a
subsidiary or parent corporation of the Company or within three (3) months after
the termination of such holder's employment, such Option may be exercised by a
legatee or legatees of such holder under such individual's last will or by such
individual's death, to the extent such Option was exercisable as of the date of
death or date of termination of employment, whichever date is earlier.
If the holder of an Option becomes disabled within the definition
of Section 22(e)(3) of the Code while employed by the Company or a subsidiary or
parent corporation of the Company, such Option may be exercised at any time
within six months after termination of such holder's employment due to the
disability.
Except as otherwise determined by the Board of Directors or the
Committee in its sole discretion, an Option may not be exercised except to the
extent that the holder was entitled to
17
<PAGE>
exercise the Option at the time of termination of employment or death, and in
any event it may not be exercised after the original expiration date of the
Option.
(e) Nontransferability of Options; No Liens. Options are
nontransferable and non-assignable except by will or the laws of intestacy, and
any ISO or SAR in tandem with an ISO is exercisable during the lifetime of the
Participant and only by the Participant, or in the event of his or her death, by
a person who acquires the right to exercise the Option by bequest or inheritance
or by reason of the death of the Participant.
(f) Maximum Number of ISOs or SARs in Tandem with ISOs Which May Be
Issued. A maximum aggregate fair market value of $100,000, determined as of the
time any ISO or SAR in tandem with an ISO is granted and in the manner provided
in the 1996 Option Plan, may not be exceeded as the maximum aggregate value of
(A) the Common Stock with respect to which ISOs and/or SARs in tandem with ISOs
granted under the 1996 Option Plan are exercisable for the first time during any
calendar year, together with (B) the Common Stock with respect to which ISOs
and/or SARs in tandem with ISOs granted under ISOs qualifying as such in
accordance with Section 422 of the Code were granted under any other incentive
stock option plan maintained by the Company or its parent or subsidiary
corporations.
An option agreement issued under the 1996 Option Plan may contain
such other terms, provisions and conditions not inconsistent therewith as may be
determined by the Board of Directors or the Committee.
Termination, Modification and Amendment
The 1996 Option Plan shall terminate ten years from the earlier of
the date of its adoption by the Board of Directors or the date of ratification
by the Stockholders of the Company. No Options will be granted after termination
of the 1996 Option Plan.
The Board of Directors of the Company may terminate the 1996 Option
Plan at any time prior to its expiration date, or such modifications or
amendments thereto from time to time as the Board may deem advisable. The Board
may not, however, without the approval of a majority of the then outstanding
shares of the Company entitled to vote thereon, except under conditions
described under "Adjustments Upon Changes in Capitalization," increase the
maximum number of shares as to which Options may be granted under the 1996
Option Plan or materially change the standards of eligibility thereunder.
No termination, modification or amendment to the 1996 Option Plan
may adversely affect the terms of any outstanding Options without the consent of
the holders thereof.
Adjustments Upon Changes in Capitalization
In the event that the number of outstanding shares of Common Stock
is changed by reason of recapitalization, reclassification, stock split, stock
dividend, combination, exchange
18
<PAGE>
of shares, or the like, the Board of Directors of the Company will make an
appropriate adjustment in the aggregate number of shares of Common Stock
available and reserved for issuance upon the exercise of then outstanding
Options and in the exercise prices of such Options. Any adjustment in the number
of shares will apply proportionately only to the unexercised portion of Options
granted under the 1996 Option Plan. Fractions of shares resulting from any such
adjustment shall be further adjusted to the next higher whole number of shares.
In the event of the proposed dissolution or liquidation of
substantially all of the assets of the Company, all outstanding Options will
automatically terminate, unless otherwise provided by the Board.
Federal Income Tax Consequences
The following discussion is only a summary of the principal Federal
income tax consequences of the grant and exercise of Options and is based on
existing Federal law, which is subject to change, in some cases retroactively.
This discussion is also qualified by the particular circumstances of each
Participant which may substantially alter or modify the Federal income tax
consequences herein discussed.
Generally, under current law, when an Option qualifies as an ISO
under Section 422 of the Code, (i) an employee will not realize taxable income
either upon the grant or the exercise of the Option, (ii) the amount by which
the fair market value of the shares acquired upon exercise of the Option at the
time of exercise exceeds the option price is included in determining a
Participant's alternative minimum tax, (iii) any gain or loss (the difference
between the net proceeds received upon the disposition of the shares and the
Option Price paid therefor), upon a qualifying disposition of the shares
acquired by exercise of an Option will be treated as a capital gain or loss if
the shares qualify as a capital asset in the hands of the Participant, and (iv)
no deduction will be allowed to the Company for Federal income tax purposes in
connection with the grant or exercise of an ISO or a qualifying disposition of
shares. A disposition by an employee of shares acquired upon exercise of an ISO
will constitute a qualifying disposition if the disposition occurs more than two
years after the grant of the Option and more than one year after the issuance of
the shares to the employee. If such shares are disposed of by the employee
before the expiration of those time limits, the transfer would be a
"disqualifying disposition" and the employee will typically recognize ordinary
income (and the Company will receive an equivalent deduction) equal to the
lesser of (i) the aggregate fair market value of the shares as of the date of
exercise less the Option Price, and (ii) the amount realized on the
disqualifying disposition less the Option Price. Ordinary income from a
disqualifying disposition will also constitute compensation for which
withholding may be required under Federal and state law. The maximum Federal tax
rate on ordinary income is greater than the Federal tax rate for long-term
capital gains. Proposals have been made to decrease the marginal tax rate
further on certain types of capital gains. In addition, holders of Options
granted after August 10, 1993 may be entitled to exclude up to 50% of the gain
on any such sale occurring five years after the date of exercise. The
availability of such exclusion is dependent upon whether the Company (i) does
19
<PAGE>
not have more than $50 million of aggregate gross assets at any time before the
exercise of the Options, (ii) is in the trade or business of operating hotels,
motels, restaurants or similar business; or (iii) is in a trade or business
where the principal asset is the reputation or skill of one or more of its
employees. It is unknown whether any capital gains recognized on a disposition
would be of a type entitled to the exclusion referred to in the preceding
sentence, and if not, whether the Federal tax rate on such gains would be
increased. To the extent that a portion of such gain would be is so excluded,
one-half of the excluded gain would be a tax preference for purposes of
computing the alternative minimum tax. No assurance can be given as to when, if
ever, new Federal tax legislation will be enacted into law, and the effective
date of any such legislation.
In the case of an NQSO granted under the Plan, generally no income
is recognized by the Participant at the time of the grant of the Option assuming
such NQSO does not have a readily ascertainable fair market value. The
Participant generally will recognize ordinary income upon exercise of an NQSO
equal to the aggregate fair market value of the shares acquired less the Option
Price. Withholding may be required, and the Company will receive an equivalent
deduction, subject to the provisions of Section 162(m) of the Code relating to
excessive employee remuneration. Section 162(m) disallows a deduction for an
employer with respect to remuneration paid in any taxable year to an executive
officer in excess of $1,000,000. For purposes of determining remuneration paid,
the excess of the fair market value of the Common Stock received upon exercise
of an NQSO over the exercise price is considered remuneration paid in the year
of exercise unless the income is considered performance-based compensation. For
such renumeration to qualify as performance-based compensation, the plan must
specify the maximum number of Shares which a Participant may be entitled to
receive upon exercise of Options. As the 1996 Option Plan does not specify such
a limitation, NQSOs granted under the Plan will not be considered
performance-based compensation.
Shares acquired upon exercise of an NQSO will have a tax basis
equal to their fair market value on the exercise date or other relevant date on
which ordinary income is recognized and the holding period for the shares
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the shares, a Participant will recognize capital gain
or loss if the shares constitute a capital asset in the Participant's hands.
Provided the shares are held by the Participant for more than one year prior to
disposition, such gain or loss will be realized as long-term capital gain or
loss. As set forth above, the maximum federal tax rate on ordinary income is
currently greater than the maximum federal tax rate on long-term capital gains.
To the extent a Participant recognizes a capital loss, such loss generally may
offset capital gains and up to $3,000 of ordinary income. Any excess capital
loss may be carried forward indefinitely.
The grant of an SAR is generally not a taxable event for an
Optionee. Upon the exercise of an SAR, however, the Optionee will recognize
ordinary income in an amount equal to the amount of cash and the fair market
value of any Common Stock received upon such exercise, and the Company will be
entitled to a deduction equal in amount.
20
<PAGE>
Notwithstanding the above, if the sale of any shares received upon
the exercise of an NQSO or an SAR in tandem with an NQSO would be subject to
Section 16(b) of the Exchange Act, recognition by the Optionee of ordinary
income attributable to such shares received will be deferred until the date such
sale can be made without application of Section 16(b). However, such shares will
be valued at the fair market value at such later time, unless within 30 days
after the date of exercise, such Optionee elects, under Section 83(b) of the
Code, to recognize ordinary income as of the date of exercise based on the fair
market value at such date.
The foregoing discussion is only a brief summary of the applicable
Federal income tax laws as in effect on this date and should not be relied upon
as being a complete treatment thereof. The Federal tax laws are complex, and
they are subject to legislative changes and new or revised judicial and
administrative interpretations at any time. In addition to the Federal income
tax consequences described herein, a Participant may also be subject to state
and/or local income tax consequences in the jurisdiction in which the
Participant works and/or resides.
The affirmative vote of the majority of shares entitled to vote at
the Annual Meeting is required to ratify the adoption of the Plan.
The Board of Directors recommends that
Stockholders vote "FOR" adoption of the
1996 Stock Option Plan - Proposal 2.
AMENDMENTS TO ARTICLES OF INCORPORATION
Proposal 3 - Ratification of Amendments to the Company's Articles of
Incorporation and deletion of Article IX thereby (i) increasing the authorized
shares of Common Stock from 50,000,000 to 75,000,000, (ii) decreasing the par
value per share of Common Stock from $.002 to $.001, and (iii) eliminating the
prohibition on cumulative voting of the Common Stock.
At the Annual Meeting, Stockholders will be asked to ratify an
amendment to the Company's Articles of Incorporation (the "Charter") proposed by
resolution of the Board of Directors which would (i) increase the number of
authorized shares of Common Stock from 50,000,000 to 75,000,000, (ii) decrease
the par value per share of Common Stock from $.002 to $.001, and (iii) eliminate
the provision of the Charter relating to voting of common stock which prohibit
cumulative voting of shares of Common Stock.
(i) Increase in Number of Authorized Shares of Common Stock
The Company's authorized capital stock currently consists of
50,000,000 shares of Common Stock. As of the Record Date, 42,162,516 shares of
Common Stock were outstanding, another 5,000,000 shares are issuable under the
1996 Stock Option Plan, up to 600,000 are issuable to Sergio Pino, a nominee for
Director, and 400,000 shares are issuable to Diego Leiva,
21
<PAGE>
Chairman of the Board and President of the Company, leaving only 1,837,484
available for issuance for others purposes. See "EXECUTIVE COMPENSATION," BOARD
OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION," "SECURITY OWNERSHIP OF
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS." The Common Stock has no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares.
The additional shares of Common Stock would be available for stock
dividends or splits should the Board decide that it would be desirable, in light
of market conditions then prevailing, to broaden the public ownership of, and to
enhance the market for, the Common Stock. Additional shares of Common Stock
would provide needed flexibility to meet future capital requirements and to take
advantage of propitious market conditions and acquisition opportunities.
Additional shares would also be available for issuance for these and other
purposes, which include employee benefit programs, at the discretion of the
Board of Directors of the Company without the delays and expenses ordinarily
attendant upon obtaining further stockholder approval. To the extent required by
Nevada law, stockholder approval will be solicited in the event shares of stock
are to be issued in connection with a merger. The Board of Directors has no
present plans to authorize a stock split or to enter into any acquisition
agreement or any other transaction involving the issuance of Common Stock. With
regard to the potential anti-takeover effects of this proposal, see "Certain
Effects of Adoption of Proposals 3 and 4 on Holders of Outstanding Common Stock"
below
(ii) Decrease in Par Value
As a general rule, corporations are allowed to issue common stock
either with or without par value. When a corporation is formed, its articles or
certificate of incorporation will state whether or not the corporation's common
stock will be issued with a par value. The par value of a share of common stock
is an amount designated at that time as the nominal value of the interest of the
holder of each share of stock. Historically, par value was intended to represent
the sum of money or value of property or services a person contributed to the
corporation as consideration for each share of stock given to such person and
the consideration for which such shares would initially be issued and sold.
Today, the significance of a stock's par value is related largely to
accounting matters and there is typically a significant difference between the
par value of a corporation's stock and the actual amount at which such stock may
be issued upon formation or the price at which such stock may be traded at a
later date. The discussion of the accounting effects of a decrease in the par
value of the Company's Common Stock below is based upon Generally Accepted
Accounting Principles ("GAAP").
In order to understand Proposal 3 for a change in the par value of the
Company's Common Stock, it is necessary to understand the terms "capital
account" and "surplus account." The term capital account represents the number
of shares of a corporation's common stock outstanding at any point in time,
multiplied by the amount of such stock's par value. For
22
<PAGE>
example forty-two million (42,162,516) shares of the Company's Common Stock
currently outstanding at the existing par value of $.002 per share, would
generate a capital account in the amount of $84,325.03. Surplus account
constitutes the amount paid to a corporation for its equity securities in excess
of par value, or "paid-in capital."
The following chart demonstrates the effect of a change in the par value of
the Company's Common Stock from $.002 to $.001:
<TABLE>
<S> <C> <C> <C> <C>
Amount in Par Proforma Amount
Amount on Value at in Par Value at
Company Account 9/30/96 $.002 per share $.001 per share How Derived
- --------------- ----------- --------------- ----------------- -----------
Capital Account $84,325 $84,325 $42,163 Number of shares outstanding
times par value per share
Surplus Account $5,689,580 $5,689,580 $5,731,742 Amount paid for equity securities
in excess of Capital Account
</TABLE>
23
<PAGE>
For example, if the par value of the Company's Common Stock had been
decreased from $.002 to $.001 per share as of September 30, 1996, the Company's
capital surplus account would be increased by $42,162.52, from $5,689,580 to
$5,731,743. There would be no change in the Company's retained earnings, nor
would there be any change in total stockholders' equity. A corporation's
retained earnings represent a corporation's net income or loss over its life as
a corporation less the value of dividends paid in cash, securities or other
assets.
The only possible effect of a decrease in the par value of the Company's
Common Stock relates to any payment of a stock dividend or declaration of a
stock split or cash dividend that may occur in the future. The payment of a
stock dividend or the declaration of a stock split would involve the issuance of
additional shares of Common Stock to each stockholder of the Company based on
such stockholder's then current ownership of the Company's Common Stock. When
equity securities are issued in connection with a stock split or dividend, from
a GAAP perspective, additional shares are issued without payment of additional
consideration. Because the capital account equals the total number of a
corporation's equity securities outstanding multiplied by their par value, upon
the declaration of a stock split or stock dividend, the amount in the
corporation's capital account is increased by the product of the par value of
the additional shares issued and the number of such shares. This sum is
transferred from a corporation's surplus account to its capital account in the
event of a stock split. In the event of a stock dividend, the same amount is
also transferred to the corporation's capital account, but instead of being
transferred from the corporation's surplus account it is transferred from the
corporation's retained earnings. An amount equal to the difference between the
product of the fair market value of the securities to be issued as a dividend
times the total number of such securities to be issued, less their aggregate par
value is transferred from the corporation's retained earnings to the
corporation's surplus account.
By decreasing the par value of an equity security, a corporation merely
increases the number of shares that it would be able to issue in a stock split,
without reducing its surplus account below zero, which is not permitted under
GAAP. On the other hand, in the event of a declaration of a stock dividend,
there is no limit to the number of equity securities that may be issued other
than the maximum number of authorized shares provided in a corporation's
articles or certificate of incorporation, because GAAP allows a reduction of
retained earnings below zero. The payment of a stock dividend, in either Common
Stock or Preferred Stock, or the declaration of a stock split of either the
Common Stock or the Preferred Stock would not increase or decrease a
stockholders' ownership percentage in the total issued and outstanding shares of
any of the Company's equity securities.
Payment of cash dividends, in contrast to the payment of stock dividends or
the declaration of a stock split, involves the payment of money to holders of
existing equity securities rather than payment of additional shares of such
securities. A decrease in the par value of the Company's Common Stock,
therefore, would have no effect on the Company's ability to pay cash dividends
in the future. Payment of a cash dividend on a corporation's equity security
would have the effect of reducing retained earnings and total stockholders'
equity by the aggregate dollar amount of the cash dividend, whether or not the
par value of any such equity security is reduced. The payment of a cash
dividend, and the resulting effect of a decrease in a corporation's total
stockholders' equity depends primarily on the general financial health of the
corporation.
The Company has not declared any stock splits or cash dividends or issued
stock dividends since the Reorganization Plan effected in September 1995.
Although the Company may in the future, consider the declaration of stock splits
and/or the declaration of stock or cash dividends on its equity securities at
some point in the future, the Company currently has no plans to do so.
24
<PAGE>
The following chart provides an example of the declaration of a stock
split cash dividend or stock dividend by the Company, using the current
Common Stock par value of $.002 per share and the proposed $.001 per share par
value. The examples are based on the financial statements of the Company as at
September 30, 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Effect on Corporation Total Shareholders' Equity
Declaration of
Issuance of Example @ .002 Par Value @ $.001 Par Value
- -------------- ----------- ----------------------------- ----------------------------
o Stock Split 1.5 for 1 Common Stock $126,488 Common Stock $63,244
----------- stock split
(i.e., Capital Surplus 5,647,417 Capital Surplus 5,710,661
21,081,258 new
shares issued) Retained Earnings 1,130,673 Retained Earnings 1,130,673
Total Shareholders $6,904,578 Total Shareholders $6,904,578
Equity ========== Equity ==========
o Cash $0.10 per Common Stock $84,325 Common Stock $42,163
Dividend share
- -------- $4,216,252 Capital Surplus 5,689,580 Capital Surplus 5,731,742
total cash
dividend Retained Earnings (3,085,579) Retained Earnings (3,085,579)
Total Shareholders $2,688,326 Total Shareholders $2,688,326
Equity ========== Equity ==========
o Stock 10% stock Common Stock $92,757 Common Stock $46,379
Dividend* dividend (i.e.,
- -------- 4,216,252 Capital Surplus 9,475,775 Capital Surplus 9,522,153
new shares
issued) Retained Earnings (2,663,954) Retained Earnings (2,663,954)
Total Shareholders $6,904,578 Total Shareholders $6,904,578
Equity ========== Equity =========
</TABLE>
*Change in retained earnings based on $0.90 per share closing price of the
Company's Common Stock as of September 30, 1996.
The Board of Directors is asking that stockholders ratify a decrease in the
par value of the Company's Common Stock from $.002 per share to $.001 per share
in order to give the Board of Directors greater flexibility in the declaration
of any stock splits. This change will provide the Company greater flexiblity in
meeting the needs of both the Company and its stockholders through the
occasional declaration of stock splits and the issuance of stock dividends. The
change in par value should also have no effect on the market value of each share
of the Company's Common Stock.
The Board of Directors recommends a vote in favor of a decrease in the
Company's Common Stock par value from $.002 per share to $.001 per share.
25
<PAGE>
The affirmative vote of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting is required for adoption of this amendment to the
Company's Charter.
(iii) Elimination of Prohibition Against Cumulative Voting
Article IX of the Company's Charter currently provides that stockholders
do not have the right to cumulative voting in the election of directors. This
prohibition against cumulative voting was contained in the Charter inherited by
the Company under the Reorganization Plan. Where there is no cumulative voting,
each stockholder has one vote for each share of voting stock held by that
stockholder, and may vote the total number of such shares for the election of
each person nominated to serve as a director. Where cumulative voting is used,
each stockholder has one vote per share for the election of directors, but may
multiply the number of votes times the number of directors to be voted on, and
the number resulting may voted for all, one, or any combination of nominees for
director. For example, if a stockholder has 100 shares and there are six
nominees for director to be voted on, without cumulative voting, the stockholder
must cast his 100 votes yes, no or abstain for each nominee. Under a system of
cumulative voting, the stockholder has a total of 600 votes which may all be
cast for a single nominee or distributed among two or more nominees.
Even if the proposed Charter Amendment eliminating the prohibition on
cumulative voting is approved by vote of the Stockholders, the Company has no
current plans to implement cumulative voting. The Board of Directors believes
that it would be beneficial to have the ability to under certain circumstances.
As cumulative voting permits all Stockholders to vote a larger number of shares
for one or more particular nominees for director, the greater number of shares a
Stockholder owns, the larger the block of votes such Stockholder would have to
vote in favor of certain nominees. Cumulative voting could therefore have the
effect of either (i) permitting stockholders with a significant minority
ownership from using such voting power to support management in warding off a
hostile takeover attempt or (ii) permitting the same Stockholders to support a
nominee for director seeking election in order to oppose the policies or
nominees of management.
The Board has made no determination with respect to the implementation of
cumulative voting, and has no plans, proposals, commitments, undertakings or
arrangements which would result in the implementation thereof in the event that
the stockholders approval the proposal to remove the prohibition on such voting.
The Board of Directors recommends a vote in favor of a eliminating the
prohibition on cumulative voting of the Company's securities.
The affirmative vote of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting is required for adoption of this Amendment to the
Company's Charter.
26
<PAGE>
Proposal 4 - Adoption of an amendment to the Company's Articles of Incorporation
Authorizing the Creation of "Blank Check" Preferred Stock.
At the Annual Meeting, Stockholders will be asked to approve an amendment
to Article IV of the Company's Articles of Incorporation (the "Charter")
authorizing the creation of 10,000,000 shares of "blank check" preferred stock
of the Company, par value $.001 per share (the "Preferred Stock"). The text of
the proposed Charter amendment is set forth Appendix A to this Proxy Statement
and should be read by stockholders in its entirety.
"Blank Check" Preferred Stock
The proposed Charter amendment would vest in the Board of Directors the
authority to designate one or more series of Preferred Stock. The provisions of
a certificate of incorporation authorizing preferred stock in this manner are
often referred to as "blank check" provisions, as they give the Board of
Directors the flexibility, at any time or from time to time, without further
stockholder approval (except as may be required by applicable laws, regulatory
authorities or the rules of any stock exchange on which the Company's securities
are then listed), to create one or more series of Preferred Stock and to
determine by resolution the designations, preferences, relative rights and
limitations of each such series, including, without limitation:
(a) the dividend rates, conditions and preferences, if any, in respect of
the Common Stock and among the series of the Preferred Stock; (b) whether
dividends would be cumulative and, if so, the date from which dividends on the
series would accumulate; (c) whether, and to what extent, the holders of the
series would have voting rights in addition to those prescribed by law; (d)
whether, and upon what terms, the series would be convertible into or
exchangeable for other securities of the Company; (e) whether, and upon what
terms, the series would be redeemable; (f) the preference, if any, to which the
series would be entitled in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company; and (g) whether a sinking fund would
be provided for the redemption of the series and if so, the terms, and
conditions thereof.
The Board of Directors believes that the creation of the Preferred Stock
in the manner proposed will provide the Company with greater flexibility in
meeting future capital requirements by creating series of Preferred Stock
customized to meet the needs of particular transactions and then prevailing
market conditions. Series of Preferred Stock would also be available for
issuance from time to time for any other proper corporate purposes, including,
without limitation, the implementation of joint ventures or acquisitions or
issuance in public or private offerings as a means of raising working capital.
Any series of Preferred Stock authorized by the Board of Directors could
be senior or junior to, or on a parity with, any other series of Preferred Stock
with respect to dividends or liquidation rights. The Preferred Stock will be
senior to the Common Stock with respect to dividends, redemption and/or
liquidation rights.
27
<PAGE>
The affirmative vote of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting is required for adoption of this Amendment to the
Company's Charter.
Certain Effects of Adoption of Proposals 3 and 4 on Holders of Outstanding
Common Stock
While the Board believes that the amendments to the Company's Charter
contained in Proposals 3 and 4 should be adopted for the reasons set forth
above, the Board is aware that certain of these amendments could serve as
measures designed to thwart change in control of the Company's management, which
are commonly known as "anti-takeover" measures. Eliminating the prohibition on
cumulative voting, for example, would allow a minority stockholder to support
management in opposition to any takeover attempt. The increase in the number of
shares of Common Stock and the creation of "blank check" Preferred Stock, as
discussed above, can also serve as anti-takeover measures. The Company is not
aware of any effort to accumulate its shares for purposes of opposing or
supporting the Board, and the Company has no present intention of implementing
cumulative voting or issuing additional shares of Common Stock or newly
authorized Preferred Stock except for the purposes described above. It should be
pointed out, however, that if cumulative voting were to be implemented, it could
serve the opposite function of thwarting anti-takeover attempts, by allowing a
dissenting stockholder with a significant, but minority ownership percentage of
the Company's voting securities to gain one or more positions on the Board of
Directors.
The general effect of the authorization and issuance of Preferred Stock,
to the extent that dividends may be paid thereon, would be to reduce the amount
otherwise available for payment of dividends on the Common Stock currently
issued and outstanding, although no dividends have been paid by the Company to
date and there is no present intention to do so in the near future. In the event
that any additional shares of Common Stock and/or newly issued Preferred Stock
having limited voting rights are issued, the voting power of the Common Stock
would be diluted. To the extent that a particular series of Preferred Stock is
convertible into Common Stock, and/or additional shares of Common Stock may be
issued, a dilution of the equity of the outstanding Common Stock could result.
Holders of shares of capital stock of the Company have no preemptive rights, and
accordingly have no preferential rights to purchase any Common Stock or
Preferred Stock in order to maintain their percentage ownership.
In addition, to the extent that holders of the Preferred Stock receive
preferences upon dissolution, liquidation or winding up of the Company, the
rights of holders of Common Stock to distribution of the Company's assets upon
dissolution will be diminished. When considering whether to issue shares of
Preferred Stock, the Board of Directors will consider various factors, including
the general effect thereof upon the holders of Common Stock. The Board of
Directors does not intend to issue any shares of Preferred Stock except on terms
which it deems to be in the best interests of the Company and its stockholders.
The Board has made no determination with respect to the issuance of any
shares of Preferred Stock and has no plans, proposals, commitments, undertakings
or arrangements which would result in the issuance of any shares of the
Preferred Stock.
28
<PAGE>
Although the proposed Charter Amendments (i) authorizing "blank check"
Preferred Stock, (ii) an increase in the number of authorized shares of Common
Stock and (iii) implementation of cumulative voting are not designed to deter or
prevent a change in control, under certain circumstances, the Company could,
nevertheless use the Preferred Stock, as well as unissued Common Stock, and
cumulative voting to create impediments or frustrate persons seeking to effect a
takeover or otherwise gain control of the Company and thereby protect the
continuity of the Company's management. In addition, the issuance of Preferred
Stock or additional shares of Common Stock at below market rates would dilute
the value of the Company's then outstanding securities. The Company could also
place such shares privately with purchasers who might support the Company's
existing Board of Directors in opposing a hostile takeover bid, although the
Company has no present intention to do so. The Company does not currently have
any plans, agreements, commitments or understandings with respect to the
implementation of cumulative voting, the issuance of either Preferred Stock,
additional shares of Common Stock, with the exception of outstanding Options
under the 1996 Option Plan and shares which are subject of agreements, described
above, with Messrs. Pino and Leiva. Neither management nor the Board is
considering the use of Preferred Stock or additional shares of Common Stock for
such purposes, and neither is aware of any present effort to accumulate the
Company's Common Stock for the purpose of gaining control of the Company or
articulating dissent. A copy of the proposed Charter Amendments is attached as
Appendix B to this Proxy Statement and should be read by stockholders in its
entirely.
The Board of Directors recommends that stockholders
vote "FOR" adoption of the Charter amendments increasing
the number of shares of Common Stock, changing its par
value, removing the prohibition on cumulative voting and
authorizing "blank check" Preferred Stock - Proposals 3 and 4.
Proposal 5 - Adoption of an amendment to Article III, Section 14 of the
Company's ByLaws (the "By-Laws") reducing the minimum number of Directors
required to serve on committees of the Board of Directors from three to two.
At the Annual Meeting, stockholders will be asked to adopt an amendment to
Article III, Section 14 of the Company's By-Laws reducing the minimum number of
Directors required to serve on the Company's authorized committees from three to
two.
Because the Company currently has only five directors and will have only
six if Proposal 1 is adopted by the stockholders, management believes it is in
the best interests of the Company to reduce the number of Directors required to
serve on each committee of the Board in order to create greater flexibility and
efficiency in management.
A copy of the proposed amendment to Article III, Section 14 of the By-Laws
is attached as Appendix C to this Proxy Statement.
29
<PAGE>
The affirmative vote of the majority of the shares entitled to vote at the
Annual Meeting is required to ratify the adoption of an amendment to Article
III, Section 14 of the By-Laws.
The Board of Directors recommends that
Stockholders vote "FOR" adoption of an
amendment to Article III, Section 14 of the By-Laws -
Proposal 5.
Proposal 6 - Ratification of Appointment of Auditors.
The Board of Directors has selected Durland & Company, CPAs, P.A. (Durland
& Company) of Florida to continue as the Company's principal accountants to
audit the Company's financial statements for the fiscal year ending December 31,
1996. The selection of Durland & Company to audit the Company's financial
statements for its 1995 fiscal year was also approved by the Board of Directors,
after deciding against the continued engagement of the Company's former auditors
for the Company's predecessor, Jones, Jensen, Orton & Company ("JJO") on January
1, 1995. The Board of Directors or the Board recommended and approved the
decision to change the Company's auditors.
JJO's reports of the Company's financial statements for the fiscal years
ended December 31, 1993 and December 31, 1994 did not contain any adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the 1993 and 1994
fiscal years and the interim period in fiscal 1995 preceding dismissal of JJO,
there were no disputes between the Company and JJO on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures; during such period, JJO did not advise the Company; that internal
controls necessary for developing reliable financial statements were lacking;
that information had come to JJO's attention that rendered JJO unable to rely on
management's representations or unwilling to be associated with financial
statements prepared by management; that there was a need for JJO to expand the
scope of its audit or that information had come to JJO's attention which, if
further investigated, could materially impact the fairness or reliability of any
previously issued audit report, the underlying financial statements or financial
statements for any subsequent periods; that JJO failed to expand the scope of
its audit or investigations because of its dismissal; that information had come
to JJO's attention that materially impacted either a previously issued audit
report or underlying financial statements or any subsequent financial
statements.
A representative of Durland & Company is expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. Such
representative will be given the opportunity to make a statement at the Annual
Meeting.
The Board of Directors recommends that Stockholders
vote "FOR" ratification of the appointment of
Durland & Company as the
Company's Auditors - Proposal 6.
30
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented at the
1996 Meeting except those matters described in this Proxy Statement. Unless
otherwise directed, all shares represented by Proxies will be voted in favor of
Proposals 1 through 5 described in this Proxy Statement and the Notice. If any
other matters come before the 1996 Meeting, the persons named in the
accompanying Proxies will vote on those matters according to their best
judgment.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 16(a)
Section 16(a) of the Exchange Act requires the Company's officers
and Directors and persons who own beneficially more than ten percent of a
registered class of the Company's equity securities (10% Stockholders) to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, Directors and 10% Stockholders are required by regulation
to furnish the Company with copies of all forms filed by them pursuant to
Section 16(a). The Company, however, was not a reporting company during the
fiscal year ended December 31, 1995, and its officers, directors and 10%
Stockholders were not subject to Section 16(a) compliance.
EXPENSES
The entire cost of preparing, assembling, printing and mailing
this Proxy Statement, the enclosed Notice, Proxy and Annual Report, materials,
and the cost of soliciting Proxies with respect to the Annual Meeting, will be
borne by the Company. The Company will request banks and brokers to solicit
their customers who beneficially own shares of Common Stock listed of record in
the names of such banks or brokers as nominees, and will reimburse those banks
and brokers for the reasonable out-of-pocket expenses of such solicitations. The
original solicitation of Proxies will be undertaken by mail, and may be
supplemented by officers and other employees of the Company, using telephone
calls and telegrams but no additional compensation will be paid to them.
STOCKHOLDER PROPOSALS
No person who intends to present a proposal for action at a forthcoming
Stockholders' meeting of the Company's Stockholders (a "Proponent") may seek to
have such Proponent's proposal included in the proxy statement or form of proxy
for such meeting unless the Proponent: (i) is a beneficial owner of record of at
least (A) 1% of the Company's outstanding voting shares at the Record Date or
(B) $1,000 in market value of the Company's voting shares, has held such shares
for at least one year at the time the proposal is submitted and continues to own
such shares through the date of the meeting, (ii) provides the Company in
writing with (A) his name, address, the number of shares held by such Proponent
and the dates upon which such shares were acquired, (B) documentary support of
the Proponent's beneficial ownership in the form of either (1) a written
statement by a record owner or an independent third party, or (2) a copy of (A)
a Schedule 13D, Schedule 13G, Form 13F, Form 3 and/or Form 4 or amendments
thereto, (B) a copy of all subsequent amendments to such documents, (C) the
Proponent's affidavit, declaration, affirmation or other similar document
provided for under state law attesting that the Proponent continued to be the
beneficial owner of the required percent or market value of the Company's
shares, as provided in clause (i) above; (iii) the Proponent's written statement
that he intends to continue ownership of such shares through the date of the
next annual meeting of stockholders of the Company; (iv) notifies the Company of
his intention to appear personally at the meeting or by a representative
qualified under Nevada law to present his proposal for action, and (v) submits
31
<PAGE>
his proposal and all supporting statements and documents in writing on a timely
basis. To be included in the proxy statement or proxy for the Company's next
annual meeting of Stockholders, a proposal must be received at the Company's
principal executive office no later than August 15, 1997. If the date of such
meeting is changed by more than 30 calendar days from the date such meeting is
scheduled to be held under the Company's By-Laws, or if the proposal is to be
presented at any meeting other than the next annual meeting of stockholders, the
proposal must be received at the Company's principal executive offices at a
reasonable time before proxies are solicited for such meeting.
A person may submit only one proposal of not more than 500 words,
along with a supporting statement if the proponent requests inclusion of such a
statement with the proxy materials, and under certain circumstances enumerated
in the rules of the Securities and Exchange Commission relating to the
solicitation of proxies, the Company may be entitled to omit the proposal and
any statement in support thereof from its proxy statement and form of proxy.
Request for Annual and Quarterly Reports
Copies of the Company's Annual Report for the fiscal year ended
December 31, 1995 and its Report on Form 10-Q for the period ended September 30,
1996, each as filed with the Securities and Exchange Commission and including
the financial statements, accompany these proxy materials.
By Order of the Board of Directors
Raymond M. Brennan
Secretary
Wayne, New Jersey
December _, 1996
32
<PAGE>
APPENDIX A
1996 STOCK OPTION PLAN
33
<PAGE>
APPENDIX A
PICK COMMUNICATIONS CORP.
1996 STOCK OPTION PLAN
1. Purposes.
The PICK Communications Corp. 1996 Stock Option Plan (the "Plan") is
intended to provide the employees, directors, independent contractors and
consultants of PICK Communications Corp., a Nevada corporation (the "Company"),
with an added incentive to commence employment with the Company, continue their
services to the Company and to induce them to exert their maximum efforts toward
the Company's success. By thus encouraging employees, directors, independent
contractors and consultants and promoting their continued association with the
Company, the Plan may be expected to benefit the Company and its stockholders.
The Plan allows the Company to grant Incentive Stock Options ("ISOs") (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code and Stock Appreciation Rights ("SARs") (collectively
the "Options").
2. Shares Subject to the Plan.
The total number of shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), that may be subject to Options granted
under the Plan shall be 5,000,000 in the aggregate, subject to adjustment as
provided in Paragraph 8 of the Plan; however, the grant of an ISO to an employee
together with a tandem SAR or any NQSO to an employee together with a tandem SAR
shall only require one share of Common Stock available subject to the Plan to
satisfy such joint Option. The Company shall at all times while the Plan is in
force reserve such number of shares of Common Stock as will be sufficient to
satisfy the requirement of outstanding Options granted under the Plan. In the
event any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto shall
again be available for granting of Options under the Plan.
3. Eligibility.
ISO's or ISO's in tandem with SAR's (provided the SAR meets the
requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a) through (e)
inclusive) may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within Section 424 of the Code. An Officer is an
employee for the above purposes. However, a director of the Company who is not
otherwise an employee is not deemed an employee for such purposes. Options,
other than ISO's, may be granted from time to time under the Plan to one or more
employees of the Company, Officers, members of the Board of Directors,
independent contractors, consultants and other individuals who are not employees
of, but are involved in the continuing development and success of the Company
and/or of a subsidiary of the Company, including persons who have previously
been granted Options under the Plan.
34
<PAGE>
4. Administration of the Plan.
The Plan shall be administered by the Board of Directors of the Company
as such Board of Directors may be composed from time to time and/or by a Stock
Option Committee (the "Committee") which shall be comprised of at least two
disinterested persons (the term "disinterested" having the meaning ascribed to
it by Rule 16b-3 of the Securities Exchange Act of 1934 (the "1934 Act))
appointed by such Board of Directors of the Company. As and to the extent
authorized by the Board of Directors of the Company, the Committee may exercise
the power and authority vested in the Board of Directors under the Plan. Within
the limits of the express provisions of the Plan, the Board of Directors or
Committee shall have the authority, in its discretion, to determine the
individuals to whom, and the time or times at which, Options shall be granted,
the character of such Options (whether ISO, NQSO, and/or SARs in tandem with
NQSOs, and/or SARs in tandem with ISOs) and the number of shares of Common Stock
to be subject to each Option, the manner and form in which the optionee can
tender payment upon the exercise of his Option, and to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of Option agreements that may be entered into
in connection with Options (which need not be identical), subject to the
limitation that agreements granting ISOs must be consistent with the
requirements for the ISOs being qualified as "incentive stock options" as
provided in Section 422 of the Code, and to make all other determinations and
take all other actions necessary or advisable for the administration of the
Plan. In making such determinations, the Board of Directors and/or the Committee
may take into account the nature of the services rendered by such individuals,
their present and potential contributions to the Company's success, and such
other factors as the Board of Directors and/or the Committee, in its discretion,
shall deem relevant. The Board of Directors' and/or the Committee's
determinations on the matters referred to in this Paragraph shall be conclusive.
5. Terms of Options.
Within the limits of the express provisions of the Plan, the Board of
Directors or the Committee may grant either ISOs or NQSOs and/or SARs in tandem
with NQSOs or SARs in tandem with ISOs. An ISO or an NQSO enables the optionee
to purchase from the Company, at any time during a specified exercise period, a
specified number of shares of Common Stock at a specified price (the "Option
Price"). The optionee, if granted a SAR in tandem with a NQSO or ISO, may
receive from the Company, in lieu of exercising his option to purchase shares
pursuant to his NQSO or ISO, at one of the certain specified times during the
exercise period of the NQSO or ISO as set by the Board of Directors or the
Committee, the excess of the fair market value upon such exercise (as determined
in accordance with subparagraph (b) of this Paragraph 5) of one share of Common
Stock over the Option Price per share specified upon grant of the NQSO or
ISO/SAR multiplied by the number of shares of Common Stock covered by the SAR so
exercised. The character and terms of each Option granted under the Plan shall
be determined by the Board of Directors and/or the Committee consistent with the
provisions of the Plan, including the following:
2
<PAGE>
(a) An Option granted under the Plan must be granted within 10 years
from the date the Plan is adopted, or the date the Plan is approved by the
stockholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each ISO
and each SAR issued in tandem with an ISO shall not be less than the fair market
value of such shares of Common Stock at the time such ISO is granted. Such fair
market value shall be determined by the Board of Directors and, if the shares of
Common Stock are listed on a national securities exchange or traded on the
over-the-counter market, the fair market value shall be the closing price on
such exchange, or the mean of the closing bid and asked prices of the shares of
Common Stock on the over-the-counter market, as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ), the
National Association of Securities Dealers OTC Bulletin Board or the National
Quotation Bureau, Inc., as the case may be, on the day on which the Option is
granted or, if there is no closing price or bid or asked price on that day, the
closing price or mean of the closing bid and asked prices on the most recent day
preceding the day on which the Option is granted for which such prices are
available. If an ISO or SAR in tandem with an ISO is granted to any individual
who, immediately before the ISO is to be granted, owns (directly or through
attribution) more than 10% of the total combined voting power of all classes of
capital stock of the Company or a subsidiary or parent of the Company, the
Option Price of the shares of Common Stock subject to such ISO shall not be less
than 110% of the fair market value per share of the shares of Common Stock at
the time such ISO is granted.
(c) The Option Price of the shares of Common Stock subject to an NQSO
or an SAR in tandem with a NQSO granted pursuant to the Plan shall be determined
by the Board of Directors or the Committee, in its sole discretion.
(d) In no event shall any Option granted under the Plan have an
expiration date later than 10 years from the date of its grant, and all Options
granted under the Plan shall be subject to earlier termination as expressly
provided in Paragraph 6 hereof. If an ISO or a SAR in tandem with an ISO is
granted to any individual who, immediately before the ISO is granted, owns
(directly or through attribution) more that 10% of the total combined voting
power of all classes of capital stock of the Company or of a subsidiary or
parent of the Company, such ISO shall by its terms expire and shall not be
exercisable after the expiration of five (5) years from the date of its grant.
(e) With respect to the grant of SAR's to Officers and Directors of the
Company, an SAR may be exercised at any time after six months of the date of the
grant thereof during the exercise period of the ISO or NQSO with which it is
granted in tandem and prior to the exercise of such ISO or NQSO, but only within
the specified 10 business day period referred to in subsection (e)(3) of Rule
16b-3 of the 1934 Act (generally, the 10 business days immediately following the
publication of the Company's quarterly financial information) if the Company's
Common Stock is registered pursuant to Section 12(g) of the 1934 Act.
Notwithstanding the foregoing, the Board of Directors and/or the Committee shall
in their discretion determine from
3
<PAGE>
time to time the terms and conditions of SAR's to be granted, which terms may
vary from the afore-described conditions, and which terms shall be set forth in
a written stock option agreement evidencing the SAR granted in tandem with the
ISO or NQSO. The exercise of an SAR granted in tandem with an ISO or NQSO shall
be deemed to cancel such number of shares subject to the unexercised Option as
were subject to the exercised SAR. The Board of Directors or the Committee also
has the discretion to alter the terms of the SARs if necessary to comply with
Federal or state securities law. Amounts to be paid by the Company in connection
with an SAR may, in the Board of Director's or the Committee's discretion, be
made in cash, Common Stock or a combination thereof.
(f) Unless otherwise provided in any Option agreement under the Plan,
an Option granted under the Plan shall become exercisable, in whole at any time
or in part from time to time, but in no case may an Option (i) be exercised as
to less than one hundred (100) shares of Common Stock at any one time, or the
remaining shares of Common Stock covered by the Option if less than one hundred
(100), and (ii) become fully exercisable more than five years from the date of
its grant nor shall less than 20% of the Option become exercisable in any of the
first five years of the Option. The Board of Directors or the Committee, in its
sole discretion, may at such time or times as it deems appropriate, if ever,
accelerate all or part of the vesting provisions with respect to one or more
outstanding options. The acceleration of one option shall not infer that any
option is or to be accelerated.
(g) An Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Company at its principal office (to the
attention of the Secretary) of written notice of the number of full shares of
Common Stock with respect to which the Option is being exercised, accompanied by
payment in full, which payment at the option of the optionee shall be in the
form of (i) cash or certified or bank check payable to the order of the Company,
of the Option Price of such shares of Common Stock, or, (ii) if permitted by the
Committee or the Board of Directors, as determined by the Committee or the Board
of Directors in its sole discretion at the time of the grant of the Option with
respect to an ISO and at or prior to the time of exercise with respect to a
NQSO, by the delivery of shares of Common Stock having a fair market value equal
to the Option Price or the delivery of an interest-bearing promissory note
having an original principal balance equal to the Option Price and an interest
rate not below the rate which would result in imputed interest under the Code
(provided, in order to qualify as an ISO, more than one year shall have passed
since the date of grant and one year from the date of exercise), or (iii) at the
option of the Committee or the Board of Directors, determined by the Committee
or the Board of Directors in its sole discretion at the time of the grant of the
Option with respect to an ISO and at or prior to the time of exercise with
respect to a NQSO, by a combination of cash, promissory note and/or such shares
of Common Stock (subject to the restriction above) held by the employee that
have a fair market value together with such cash and principal amount of any
promissory note that shall equal the Option Price, and, in the case of a NQSO,
at the discretion of the Committee or Board of Directors by having the Company
withhold from the shares of Common Stock to be issued upon exercise of the
Option that number of shares having a fair market value equal to the exercise
price and/or the tax withholding amount due, or otherwise provide for
withholding as set forth in Paragraph 9(c) hereof, or in
4
<PAGE>
the event an employee is granted an ISO or NQSO in tandem with an SAR and
desires to exercise such SAR, such written notice shall so state such intention.
The Option Price may also be paid in full by a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully endorsed Option,
or through any other medium of payment as the Board of Directors and/or the
Committee, in its discretion, shall authorize.
(h) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares of Common Stock covered by such holder's
Option until such shares of Common Stock shall be issued to such holder upon the
exercise of the Option.
(i) All Options granted under the Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and any ISO or
SAR in tandem with an ISO granted under the Plan may be exercised during the
lifetime of the holder thereof only by the holder. No Option granted under the
Plan shall be subject to execution, attachment or other process.
(j) The aggregate fair market value, determined as of the time any ISO
or SAR in tandem with an ISO is granted and in the manner provided for by
Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect
to which ISOs granted under the Plan are exercisable for the first time during
any calendar year and under incentive stock options qualifying as such in
accordance with Section 422 of the Code granted under any other incentive stock
option plan maintained by the Company or its parent or subsidiary corporations,
shall not exceed $100,000. Any grant of Options in excess of such amount shall
be deemed a grant of a NQSO.
(k) Notwithstanding anything contained herein to the contrary, a SAR
which was granted in tandem with an ISO shall (i) expire no later than the
expiration of the underlying ISO; (ii) be for no more than 100% of the spread at
the time the SAR is exercised; (iii) shall only be transferable when the
underlying ISO is transferable; (iv) only be exercised when the underlying ISO
is eligible to be exercised; and (v) only be exercisable when there is a
positive spread.
6. Death or Termination of Employment.
(a) Subject to the provisions of subparagraph (d) of this Paragraph 6
and except as otherwise determined by the Board of Directors or the Committee in
its sole discretion, if the employment of a holder of an ISO under the Plan
shall be terminated for any reason other than cause or the death or the
disability of the holder, such holder's ISO shall expire within three (3) months
after such termination. Except as otherwise determined by the Board of Directors
or the Committee, in its sole discretion, if the employment of a holder of an
ISO, NQSO, and/or SAR in tandem with a NQSO shall terminate for cause, then any
unexercised ISO, NQSO, and/or SAR in tandem with a NQSO granted to the holder
shall expire as at the time of termination. If the employment of a holder of an
Option (exclusive of his ISOs) shall be terminated for any reason other than
cause or the death or the disability of the holder, such holder's Options, other
than his ISOs, may be exercised during the earlier of (i) the respective terms
thereof, or (ii) the subsequent death or disability of the respective holder,
subject to the provisions of subparagraphs
5
<PAGE>
(b) and (d) of this Paragraph 6, unless the Board of Directors or the Committee
shall in its sole discretion set forth to the contrary in the holder's Option
Agreement.
(b) If the holder of an Option granted under the Plan dies (i) while
employed by the Company or a subsidiary or parent corporation or (ii) within
three (3) months after the termination of such holder's employment, such Options
may, subject to the provisions of subparagraph (d) of this Paragraph 6, be
exercised by a legatee or legatees of such Option under such individual's last
will or by such individual's personal representatives or distributees at any
time within such time as determined by the Board of Directors or the Committee
in its sole discretion, but in no event less than six months after the
individual's death, to the extent such Options were exercisable as of the date
of death or date of termination of employment, whichever date is earlier.
(c) If the holder of an Option under the Plan becomes disabled within
the definition of section 22(e)(3) of the Code while employed by the Company or
a subsidiary or parent corporation, such Option may, subject to the provisions
of subparagraph (d) of this Paragraph 6, be exercised at any time within six
months after such holder's termination of employment due to the disability.
(d) Except as otherwise determined by the Board of Directors or the
Committee in its sole discretion, an Option may not be exercised pursuant to
this Paragraph 6 except to the extent that the holder was entitled to exercise
the Option at the time of termination of employment or death, and in any event
may not be exercised after the original expiration date of the Option.
7. Leave of Absence.
For the purposes of the Plan, an individual who is on military or sick
leave or other bona fide leave of absence (such as temporary employment by the
Government) shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such individual's right to reemployment is guaranteed either by statute or by
contract.
8. Adjustment Upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Stock are
hereafter changed by reason of recapitalization, reclassification, stock
split-up, combination or exchange of shares of Common Stock or the like, or by
the issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors and/or the Committee, in the aggregate number of shares of Common
Stock available under the Plan, in the number of shares of Common Stock issuable
upon exercise of outstanding Options, and the Option Price per share. In the
event of any consolidation or merger of the Company with or into another
company, or the conveyance of all or substantially all of the assets of the
Company to another company, each then outstanding Option shall upon exercise
thereafter entitle the holder thereof to such number of shares of Common Stock
or other
6
<PAGE>
securities or property to which a holder of shares of Common Stock of the
Company would have been entitled to upon such consolidation, merger or
conveyance; and in any such case appropriate adjustment, as determined by the
Board of Directors of the Company (or successor entity) shall be made as set
forth above with respect to any future changes in the capitalization of the
Company or its successor entity. In the event of the proposed dissolution or
liquidation of the Company, all outstanding Options under the Plan will
automatically terminate, unless otherwise provided by the Board of Directors of
the Company or any authorized committee thereof.
(b) Any Option granted under the Plan, unless waived by the Board of
Directors or the Committee, may, at the discretion of the Board of Directors of
the Company and said other corporation, be exchanged for options to purchase
shares of capital stock of another corporation which the Company, and/or a
subsidiary thereof is merged into, consolidated with, or all or a substantial
portion of the property or stock of which is acquired by said other corporation
or separated or reorganized into. The terms, provisions and benefits to the
optionee of such substitute option(s) shall in all respects be identical to the
terms, provisions and benefits of optionee under his Option(s) prior to said
substitution. To the extent the above may be inconsistent with Sections
424(a)(1) and (2) of the Code, the above shall be deemed interpreted so as to
comply therewith.
(c) Any adjustment in the number of shares of Common Stock shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next higher whole number of
shares of Common Stock.
9. Further Conditions of Exercise.
(a) Unless the shares of Common Stock issuable upon the exercise of an
Option have been registered with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, prior to the exercise of the Option,
an optionee must represent in writing to the Company that such shares of Common
Stock are being acquired for investment purposes only and not with a view
towards the further resale or distribution thereof, and must supply to the
Company such other documentation as may be required by the Company, unless in
the opinion of counsel to the Company such representation, agreement or
documentation is not necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of Common
Stock until they have been listed on each securities exchange on which the
shares of Common Stock may then be listed or until there has been qualification
under or compliance with such state or federal laws, rules or regulations as the
Company may deem applicable.
(c) The Board of Directors or Committee may make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
any taxes that the Company is required by any law or regulation of any
governmental authority, whether federal, state or
7
<PAGE>
local, domestic or foreign, to withhold in connection with the exercise of any
Option, including, but not limited to, (i) the withholding of payment of all or
any portion of such Option and/or SAR until the holder reimburses the Company
for the amount the Company is required to withhold with respect to such taxes,
or (ii) the cancelling of any number of shares of Common Stock issuable upon
exercise of such Option and/or SAR and/or SDR in an amount sufficient to
reimburse the Company for the amount it is required to so withhold, (iii) the
selling of any property contingently credited by the Company for the purpose of
exercising such Option, in order to withhold or reimburse the Company for the
amount it is required to so withhold, or (iv) withholding the amount due from
such employee's wages if the employee is employed by the Company or any
subsidiary thereof.
10. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the stockholders of the
Company, or such date of termination, as hereinafter provided, and no Option
shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the outstanding shares
of capital stock of the Company entitled to vote thereon.
(c) The Board of Directors of the Company may at any time, prior to
ten (10) years from the earlier of the date of the adoption of the Plan by such
Board of Directors or the date the Plan is approved by the stockholders,
terminate the Plan or from time to time make such modifications or amendments of
the Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, increase (except as provided by Paragraph 8) the maximum number of
shares of Common Stock as to which Options or shares may be granted under the
Plan, materially change the standards of eligibility under the Plan or amend any
provision hereof which requires stockholder approval in order to preserve the
status of the Plan as a plan qualifying under Rule 16b-3 of the 1934 Act if the
Plan would otherwise qualify thereunder. Any amendment to the Plan which, in the
opinion of counsel to the Company, will be deemed to result in the adoption of a
new Plan, will not be effective until approved by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the Company
entitled to vote thereon.
(d) No termination, modification or amendment of the Plan may
adversely affect the rights under any outstanding Option without the consent of
the individual to whom such Option shall have been previously granted.
8
<PAGE>
11. Effective Date of the Plan.
The Plan shall become effective upon adoption by the Board of
Directors of the Company. The Plan shall be subject to approval by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon within one year before or
after adoption of the Plan by the Board of Directors.
12. Not a Contract of Employment.
Nothing contained in the Plan or in any option agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of the Company
or of a subsidiary or parent of the Company or in any way limit the right of the
Company, or of any parent or subsidiary thereof, to terminate the employment of
any employee.
13. Other Compensation Plans.
The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the Company, nor
shall the Plan preclude the Company from establishing any other form of stock
option plan, incentive plan or any other compensation plan.
9
<PAGE>
APPENDIX B
PROPOSED CHARTER AMENDMENTS
10
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PICK COMMUNICATIONS CORP.
Pursuant to the provisions of Nevada Revised Statutes, Title 7,
Chapter 78, the undersigned officers of PICK Communications Corp., a Nevada
corporation (the "Corporation") do hereby certify:
FIRST: The name of the Corporation is:
PICK Communications Corp.
SECOND: The Board of Directors of the Corporation duly adopted the
following resolutions on November 12, 1996:
RESOLVED, that is advisable, in the judgment of the
Board of Directors of the Corporation, for the Company to: (i)
increase the number of shares of common stock that the Board of
Directors of the Corporation is authorized to issue from fifty
million (50,000,000) to seventy-five million (75,000,000); (ii)
change the par value of shares of common stock from $.002 to $.001
per share; (iii) authorize the Board of Directors of the
Corporation to issue up to ten million (10,000,000) shares of
"blank check" preferred stock, $.001 par value per share; (iv) add
the denial of preemptive rights to the preferred stock as well as
the common stock; and (v) in order to accomplish the foregoing
changes and amend Articles IV and VIII thereof to read in their
entirety, respectively, as follows:
"ARTICLE IV. Capitalization.
"(a) The Corporation shall have authority to issue up
to eighty-five million (85,000,000) shares, consisting of seventy-
five million (75,000,000) shares of common stock, par value $.001
per share (the "Common Stock"), and ten million (10,000,000) shares
of preferred stock, par value $.001 per share (the "Preferred
Stock").
1
<PAGE>
"(b) The Preferred Stock shall be issued from time to
time in one or more series, with such distinctive serial
designations, preferences, limitations, and relative rights, as
shall be stated and expressed in the resolution or resolutions
providing for the issue of such shares from time to time adopted by
the Board of Directors; and in such resolution or resolutions
providing for the issue of shares of each particular series the
Board of Directors is expressly authorized to fix: the annual rate
or rates of dividends for the particular series; the dividend
payment date for the particular series and the date, if any, from
which dividends on all shares of such series issued prior to the
record date for the first dividend payment date shall be
cumulative; the redemption price or prices, if any, and the term
and the terms and conditions of redemption for the particular
series; sinking fund provisions, if any, for the particular series;
the voting rights, if any, for the particular series; the rights,
if any, of holders of the shares of the particular series to
convert or exchange the same into shares of any other series or
class or other securities of the Corporation or of any other
corporation, with any provisions for the subsequent adjustment of
such conversion rights; the preference for the particular series in
the event of voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, and to classify or reclassify any
unissued Preferred Stock by fixing or altering from time to time
any of the foregoing rights, privileges and qualifications.
"(c) All shares of Preferred Stock of any one series
shall be identical with all other shares in such series in all
respects, except that the shares of any one series issued at
different times may differ as to the dates from which dividends
thereon shall be cumulative. Except as to the particulars may be
fixed by the Board as hereinabove provided or as provided in the
description of any series of Preferred Stock, all Preferred Stock
shall otherwise be of equal rank, regardless of series, and shall
be identical in all respects."
"ARTICLE VIII. No Preemptive Rights. No holder of any of the shares
of any class of Common Stock or Preferred Stock of the Corporation
shall be entitled as of right to subscribe for, purchase, or other-
wise acquire any shares of any class of stock of the Corporation
which the Corporation proposes to issue or any rights or options
which the Corporation proposes to grant for the purchase of shares
of any class of the Corporation or for the purchase of any shares,
bonds, securities, or obligations of the Corporation which are con-
vertible into or exchangeable for, or which carry any rights, to
subscribe for, purchase, or otherwise acquire shares of any class
of the Corporation; and any and all of such shares, bonds, securit-
ies, or obligations of the Corporation, whether now or hereafter
authorized or created, may be issued, or may be reissued or
transferred if the same have been reacquired and have treasury
status, and any and all of such rights and options may be granted
by the Board of Directors to such persons, firms, corporations,
and associations, and for such lawful consideration, and on such
terms, as the Board of Directors in its discretion may determine,
without first offering the same, or any thereof, to any said
holder."
2
<PAGE>
FURTHER RESOLVED, that it is advisable, in the
judgment of the Board of Directors of the Corporation, that Article
IX of the Articles of Incorporation, relating to voting rights of
the Common Stock, be deleted in its entirety, and that the
subsequent Articles be renumbered accordingly, in order to
eliminate any confusion with the amended provisions of Article IV
of the Articles of Incorporation set forth hereinabove and to
eliminate the prohibition contained in said Article IX on
cumulative voting of shares.
FURTHER RESOLVED, that an annual meeting of
stockholders having voting power be and it is hereby called and
that notice be given in the manner prescribed by the By-laws of the
Corporation and by Nevada Revised Statutes, Title 7, Chapter 78,
unless the said stockholders shall waive the notice of meeting in
writing or unless all of said stockholders shall dispense with the
holding of a meeting and shall take action upon the proposed
amendments by a consent in writing signed by them; and
FURTHER RESOLVED, that, in the event that the said
stockholders shall adopt the aforesaid proposed amendments by a
vote in favor thereof by at least a majority of the shares present
and voting or by a written consent in favor thereof signed by all
of them without a meeting, the Corporation is hereby authorized to
make by the hands of its President or a Vice President and by its
Secretary or an Assistant Secretary a certificate setting forth
said amendment and to cause the same to be filed pursuant to the
provisions of Nevada Revised Statutes, Title 7, Chapter 78.
THIRD: The total number of outstanding shares having voting power
of the Corporation is 42,162,516 shares of Common Stock, and the total number of
votes entitled to be cast by the holders of all of said outstanding shares is
42,162,516 shares of Common Stock.
3
<PAGE>
The holders of a majority of the aforesaid total number of shares
having voting power, to wit, 42,162,516 shares, adopted the amendments herein
certified by holding and voting at a meeting of stockholders in accordance with
the provisions of Nevada Revised Statutes, Title 7, Section 78.320.
Signed on January __, 1997
PICK Communications Corp.
By:
Diego Leiva, President
Raymond M. Brennan, Secretary
4
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On January __, 1997, personally appeared before me, a Notary
Public, for the State and County aforesaid, Diego Leiva and Raymond M. Brennan,
as President and Secretary, respectively, of PICK Communications Corp. who
acknowledged that they executed the above instrument.
Notary Public
[Notarial Seal]
5
<PAGE>
APPENDIX C
PROPOSED BY-LAW AMENDMENT
11
<PAGE>
APPENDIX C
PROPOSED BY-LAW AMENDMENT
The proposed amendment to Article III, Section 14 of the By-Laws reads
as follows:
"SECTION 14. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors,
designate one or more committees, including any executive committee,
each committee to consist of two or more of the directors of the
Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee who may replace any
absent member at any meeting of the committee. Except to the extent
restricted by statute or the Articles of Incorporation, each such
committee, to the extent provided in the resolution creating it, shall
have and may exercise all of the authority of the Board of Directors.
Each such committee shall serve at the pleasure of the Board of
Directors and have such name as may be determined from time to time to
be affixed to all papers which require it. Each such committee shall
serve at the pleasure of the Board of Directors and have such name as
may be determined from time to time by resolution adopted by the Board
of Directors. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors."
12
<PAGE>
PROXY
PICK Communications Corp.
Wayne Interchange Plaza II
155 Route 46 West
Wayne, New Jersey 07470
(201) 812-7425
The undersigned, a holder of Common Stock of PICK Communications
Corp., a Nevada corporation (the "Company"), hereby appoints Karl Petersson and
Raymond M. Brennan, and each of them, the proxies of the undersigned (the
"Proxies"), each with full power of substitution, to attend, represent and vote
for the undersigned, all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote, at the Annual Meeting of Stockholders of
the Company to be held on January 21, 1997 and any adjournments thereof, as
follows:
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below. (Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS NAME
BELOW)
Diego Leiva, Raymond M. Brennan, Robert R. Sams, Ricardo Maranon, Greg
Manning, and Sergio Pino.
2. The ratification of the Company's 1996 EMPLOYEE STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Amending the Company's Articles of Incorporation to authorize (i) an INCREASE
IN THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK TO 75,000,000; (ii) a
DECREASE IN THE PAR VALUE OF EACH SHARE OF COMMON STOCK FROM $.002 TO $.001; and
(iii) ELIMINATION OF THE PROHIBITION ON CUMULATIVE VOTING OF COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Amendment of the Company's Articles of Incorporation to authorize BLANK CHECK
PREFERRED STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Amending the Company's By-Laws TO REDUCE THE NUMBER OF DIRECTORS REQUIRED TO
SERVE ON AUTHORIZED COMMITTEES FROM THREE TO TWO.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
13
<PAGE>
6. The ratification of the APPOINTMENT OF DURLAND & COMPANY, CPAs, P.A. as the
Company's auditors for the fiscal year ending December 31, 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
The undersigned hereby revokes any other proxy previously granted
to vote at such Annual Meeting, and hereby ratifies and confirms all that the
above-named Proxies, and each of them, may lawfully do by virtue hereof. With
respect to matters not known at the time of the solicitation hereof, said
Proxies are authorized to vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE INSTRUCTIONS ON THE REVERSE SIDE HEREOF. IF NO CONTRARY INSTRUCTIONS
ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE SIX DIRECTORS NAMED
IN PROPOSAL 1, FOR THE ADOPTION OF PROPOSALS 2, 3, 4, 5 AND 6 AND AS SAID
PROXIES SHALL DEEM ADVISABLE WITH RESPECT TO SUCH OTHER BUSINESS AS MAY COME
BEFORE THE MEETING.
The undersigned acknowledges receipt of copies of the Annual
Report, the Quarterly Report on Form 10-Q for the period ended September 30,
1996, the Notice of Annual Meeting, and the accompanying Proxy Statement of the
Company dated December __, 1996, relating to the Annual Meeting.
______________________________
Signature(s) of Stockholder(s)
The signature(s) hereon should correspond exactly to the name(s) of the
Stockholder(s) appearing on the Stock Certificate. If stock is jointly held, all
joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please indicate the full corporate name and indicate the title of signing
officer.
Date: , 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
PICK COMMUNICATIONS CORP.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
ii
<PAGE>
