SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by thee registrant [x]
Filed by a party other than the registrant [_]
Check the appropriate box:
|X| Preliminary proxy statement
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11 or Rule 14a-12
InnovaCom, Inc.
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
|X| No fee required
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(I)(1), or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(I)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
|_| Fee paid previously by written preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
INNOVACOM, INC.
3400 Garrett Drive
Santa Clara, California 95054
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 8, 1999
To Our Stockholders:
You are invited to attend a Special Meeting of Stockholders of INNOVACOM, INC.,
a Nevada corporation (the "Company"), to be held on Thursday, April 8, 1999, at
10:00 a.m., local time, at 3400 Garrett Drive, Santa Clara, California 95054, to
consider and act upon the following matters:
1. To approve an amendment to the Company's Articles of
Incorporation to increase the authorized number of shares of
Common Stock available for issuance from Fifty Million
(50,000,000) to One Hundred Fifty Million (150,000,000);
2. To approve an amendment to the Company's Articles of
Incorporation to authorize and create Ten Million (10,000,000)
shares of Preferred Stock whose terms will be designated, and
which may be issued from time to time, as determined by the Board
of Directors;
3. To adopt the Company's 1999 Stock Option Plan (the "1999 Plan");
and
4. To consider and act upon such other matters as may properly come
before the Special Meeting.
The above matters are more fully described in the accompanying Proxy Statement.
Only stockholders of record at the close of business on February 22, 1999, are
entitled to notice of and to vote at the Special Meeting and any adjournment
thereof.
In order that your shares may be represented at this Special Meeting, please
sign and return the enclosed proxy promptly. A return envelope, which requires
no postage, is enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
FRANK ALIOTO,
President and Chief Executive Officer
Santa Clara, California
February 26, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE. IF YOU WISH
TO ATTEND THE SPECIAL MEETING AND VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO BY
FIRST REVOKING YOUR PROXY AND THEN VOTING.
<PAGE>1
INNOVACOM, INC.
3400 Garrett Drive
Santa Clara, California 95054
(408) 727-2447
PROXY STATEMENT
General
This Proxy Statement is furnished to holders of Common Stock of InnovaCom, Inc.,
a Nevada corporation (the "Company"), in connection with the solicitation by the
Company's Board of Directors of proxies to be voted at a Special Meeting of
Stockholders to be held on Thursday, April 8, 1999, or at any adjournment or
postponement thereof, for the following purposes:
1. To approve an amendment to the Company's Articles of
Incorporation to increase the authorized number of shares of
Common Stock available for issuance from Fifty Million
(50,000,000) to One Hundred Fifty Million (150,000,000);
2. To approve an amendment to the Company's Articles of
Incorporation to authorize and create Ten Million (10,000,000)
shares of Preferred Stock whose terms will be designated, and
which may be issued from time to time, as determined by the Board
of Directors;
3. To adopt the Company's 1999 Stock Option Plan (the "1999 Plan");
and
4. To consider and act upon such other matters as may properly come
before the Special Meeting.
The Special Meeting will be held at 10:00 a.m. local time, at the Company's
principal executive office located at 3400 Garrett Drive, Santa Clara,
California 95054. The Company's Proxy Statement and proxy are being mailed or
delivered to stockholders of the Company on approximately February 26, 1999.
Record Date and Voting Rights
Only stockholders of record on the books of the Company at the close of business
on February 22, 1999, will be entitled to vote at the Special Meeting. At the
close of business on that date, there were outstanding 25,587,815 shares of
Common Stock of the Company. Each share of Common Stock is entitled to one vote
upon each of the matters to be presented at the Special Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to provide a
quorum at the Special Meeting. Abstentions and broker non-votes are counted as
present in determining whether the quorum requirement is satisfied. Absent
contrary instructions, each proxy signed and received will be voted "FOR" the
proposed amendment to the Company's Articles of Incorporation to increase the
authorized number of shares of Common Stock available for issuance, "FOR" the
proposed amendment to the Company's Articles of Incorporation to authorize and
create shares of Preferred Stock, and "FOR" the adoption of the Company's 1999
Stock Option Plan. Additionally, each proxy received will be voted (at the proxy
holders' discretion) on such other matters, if any, that may properly come
before the Special Meeting (including any proposal to adjourn the Special
Meeting).
<PAGE>2
Revocability of Proxies
Shares represented by a duly executed proxy in the accompanying form received by
the Board of Directors prior to the Special Meeting will be voted at the Special
Meeting. Any such proxy may be revoked at any time prior to exercise by a
written request delivered to the Secretary of the Company at InnovaCom, Inc.,
3400 Garrett Drive, Santa Clara, California 95054, stating that the proxy is
revoked.
Solicitation of Proxies
The expense of soliciting proxies will be borne by the Company. The principal
solicitation of proxies is being made by mail and personal delivery. However,
additional solicitations may be made by telephone, telegram, or other means by
directors, officers, employees, or agents of the Company. No additional
compensation will be paid to these individuals for any such services. In the
case of employee stockholders located at the Company's principal office in Santa
Clara, California, this Proxy Statement and related materials may be
hand-delivered.
This Proxy Statement and proxy were first mailed to stockholders on or about
February 26, 1999.
PROPOSAL NO. 1
APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK AVAILABLE FOR ISSUANCE
Increase in Authorized Number of Shares of Common Stock
Article IV of InnovaCom's Articles of Incorporation currently authorizes the
Company to issue up to 50 million shares of Common Stock, $0.001 par value (the
"Common Stock"). As of February 22, 1999, 25,587,815 shares of Common Stock were
issued and outstanding. In order to provide for general working capital, in
December of 1997, and in each of June, August, October, November, and December
of 1998, the Company issued $9 million in aggregate principal amount of
Convertible Debentures (the "Debentures"). The Company issued another $750,000
in principal amount of Convertible Debentures in January 1999. All of the
Debentures accrue interest at the rate of 7% per annum, and are convertible into
shares of the Company's Common Stock at various discounted conversion rates
depending upon the date of issuance and the current share price. As of January
15, 1999, the weighted average conversion rate was approximately $0.10 per
share. If the Debenture holders converted their Debentures into shares of Common
Stock, they would receive 100,874,467 shares of Common Stock, which number of
shares, when combined with the Debenture holders' current share holdings, would
represent approximately 81% of the Company's total shares. All of the Debentures
have a term of five (5) years from the date of issuance, and are secured by all
of the assets of the Company. In connection with each of the issuances of
Debentures, the Company also issued certain Warrants exercisable for shares of
the Company's Common Stock.
Under the terms of the Debentures and Warrants, the Company is obligated to have
in reserve an adequate number of shares of Common Stock to allow for full
conversion of all Debentures and the exercise of the Warrants. Due to the drop
in share price of the Company's Common Stock, if the holders of the Debentures
or Warrants exercised their conversion rights in full, the Company would not
have sufficient authorized shares of Common Stock available to issue to them.
<PAGE>3
Thus, additional shares of Common Stock must be authorized for issuance in order
for the Company to be in compliance with its covenants under the Debenture and
Warrant transaction documents. Therefore, stockholder approval is being sought
for an amendment to the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock from Fifty Million (50,000,000) to
One Hundred Fifty Million (150,000,000).
The Board of Directors of the Company has approved and proposed for submission
to the stockholders an amendment to Article IV of the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock
available for issuance from Fifty Million (50,000,000) to One Hundred Fifty
Million (150,000,000). Such increase in the Company's authorized shares of
Common Stock will allow the Company to comply with its obligations under the
terms of the Debentures and Warrants and thereby avoid the enforcement by the
Debenture holder of its various rights and remedies upon default. The Debenture
holder has tentatively waived the enforcement of its rights and remedies under
the Debenture and Warrant transaction documents contingent upon the Company's
increasing its authorized shares of Common Stock as proposed herein.
In the event the Company does not receive the required number of votes to amend
its Articles of Incorporation to increase the number of shares of Common Stock
available for issuance, the Company will once again seek stockholder approval of
such amendment as well as seek a further waiver from Debenture holder. However,
no assurance can be given that the Company will be able to obtain such a further
waiver from the Debenture holder.
Vote Required
The affirmative vote of the majority of the outstanding shares of Common Stock
of the Company is required to approve Proposal No. 1.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK AVAILABLE FOR ISSUANCE FROM FIFTY MILLION (50,000,000) TO ONE
HUNDRED FIFTY MILLION (150,000,000).
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
AUTHORIZE AND CREATE TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK
WHOSE TERMS WILL BE DESIGNATED AND WHICH MAY BE ISSUED FROM TIME TO TIME
BY THE BOARD OF DIRECTORS
Authorization of Preferred Stock
The Board of Directors of the Company has approved and proposed for submission
to the stockholders an amendment to Article IV of the Company's Articles of
Incorporation to authorize the issuance of Ten Million (10,000,000) shares of
Preferred Stock, the specific terms of which the Board of Directors may from
time to time designate. The proposed amendment to the Articles of Incorporation
will allow for the issuance of Preferred Stock that will give the Company
<PAGE>4
significant flexibility to develop and structure transactions designed to raise
working capital in the future.
The authorization of the Preferred Stock will allow the Company to issue
securities with rights, preferences, and privileges that may be greater than
those of holders of the Company's Common Stock. However, the authorization of
the Preferred Stock may create a voting impediment or frustrate persons seeking
to effect a merger or to otherwise gain control of the Company. At the present
time, however the Company has no intent to issue Preferred Stock.
If Proposal No. 1 and Proposal No. 2 are both approved by the holders of a
majority of the outstanding shares of Common Stock, Article IV of the Articles
of Incorporation will read as follows:
"The Corporation is authorized to issue a total of One Hundred Sixty
Million Shares (160,000,000) of stock consisting of two classes of
shares to be designated "Common Stock" and Preferred Stock",
respectively. The number of shares of Common Stock authorized to be
issued is One Hundred Fifty Million (150,000,000), each with a par value
of $0.001, and the number of shares of Preferred Stock authorized to be
issued is Ten Million (10,000,000), each with a par value of $0.001. The
Preferred Stock may be issued in any number of series, as determined by
the Board of Directors. The Board may, by resolution, fix the
designation and number of shares of any such series, and may determine,
alter, or revoke the rights, including voting rights, preferences,
privileges, and restrictions, pertaining to any wholly unissued series.
The Board may thereafter in the same manner increase or decrease the
number of shares of any such series (but not below the number of shares
of that series then outstanding).
Vote Required
The affirmative vote of the majority of the outstanding shares of Common Stock
of the Company is required to approve Proposal No. 2.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF AN AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO AUTHORIZE AND CREATE TEN MILLION
(10,000,000) SHARES OF PREFERRED STOCK TO BE DESIGNATED AND ISSUED FROM TIME TO
TIME AS MAY BE DETERMINED BY THE BOARD OF DIRECTORS.
PROPOSAL NO. 3
ADOPTION OF THE COMPANY'S 1999 STOCK OPTION PLAN
Effective January 12, 1999, and subject to stockholder approval, the Board of
Directors approved adoption of the Company's 1999 Stock Option Plan (the "1999
Plan") to serve as a vehicle to attract and retain the services of employees,
officers, directors, and consultants. As discussed below, the 1999 Plan is a
"dual plan" which provides for the grant of both Incentive Stock Options and
Non-qualified Stock Options.
<PAGE>5
Description of the 1999 Plan
The 1999 Plan covers 5,000,000 shares of the Company's Common Stock, which
shares will be reserved upon confirmation of the 1999 Plan. The following is a
summary of the provisions of the 1999 Plan.
Eligibility. The 1999 Plan provides for the grant of options to employees,
officers, directors, and consultants of the Company or its subsidiaries, if any.
Administration. The 1999 Plan will be administered by a Compensation Committee
consisting of two or more disinterested non-employee board members (the
"Administrator"). The Administrator is responsible for the operation of the 1999
Plan and, subject to the terms thereof, makes all determinations regarding (i)
which eligible persons shall be granted options ("participants"), and (ii) the
nature and extent of participation. The interpretation and construction of any
provisions of the 1999 Plan by the Administrator shall be final.
Terms of Options. Each option will be evidenced by a stock option agreement
between the Company and a participant. The Administrator shall determine the
term of an option, provided that an option may not have a term longer than 10
years, and in the case of an Incentive Stock Option, an optionee who holds more
than 10% voting control of all shares of the Company shall not have more than a
five-year term.
Limitation on Incentive Stock Options. The Administrator shall determine the
number of shares subject to an option grant. However, the aggregate fair market
value of the Common Stock for which any Incentive Stock Option may first become
exercisable by any optionee during any calendar year under the Plan, together
with that of stock subject to Incentive Stock Options first exercisable by such
optionee under any other plan of the Company, shall not exceed $100,000.
Exercise of the Option. Options shall become exercisable during a period or
during such periods as the Administrator shall determine.
Option Price. The option price will be determined by the Administrator and shall
be the fair market value of the Company's common stock on the date of grant,
based upon the closing price of the common stock on that date. In the case of an
Incentive Stock Option granted to an employee who owns more than 10% voting
control of all shares of the Company, or its parent or subsidiary, the exercise
price will be 110% of the fair market value.
Employment Agreement. The Administrator may include in an option agreement a
condition that the participant shall agree to remain in the employ of the
Company for a specified period of time following the date of grant.
Termination of Status as an Employee, Officer, Director or Consultant. If for
any reason other than permanent and total disability or death an optionee ceases
to be employed by the Company, Incentive Stock Options held at the date of such
termination (to the extent then exercisable) may be exercised at any time within
three months after the date of termination or such lesser period specified in
the option agreement. Non-qualified Stock Options are not limited to such
three-month exercise period. If an optionee granted an Incentive Stock Option
continues as a consultant, advisor or in a similar capacity to the Company the
optionee need not exercise the option with three months of termination of
employment but shall be entitled to exercise the option within three months of
termination of services to the Company (or one year in the event of permanent
<PAGE>6
disability or death); however, the option will not qualify as an Incentive Stock
Option if not exercised within three months of termination of employment.
Death or Permanent Disability. If a holder of an Incentive Stock Option should
die or become permanently disabled (or if the optionee dies within the period
that the option remains exercisable after termination of employment), the
Incentive Stock Option may be exercised by the participant's estate, or the
participant or his representative, at any time within one year after the death
or permanent disability or any lesser period specified in the option agreement,
but in no event after the earlier of (i) the expiration date of the option as
set forth in the option agreement, and (ii) ten years from the date of grant
(five years in the event of a more than 10% stockholder). Non-qualified Stock
Options shall not be limited to such one-year exercise period upon permanent
disability or death and such options may be exercised within the time specified
in the option agreement.
Suspension or Termination of Options. No option shall be exercisable by any
person after its expiration date. If the Board or Administrator reasonably
believes that a participant has committed an act of misconduct, the
Administrator may suspend the participant's right to exercise any option pending
a final determination by the Administrator. If the Board or Administrator
determines a participant has committed an act of embezzlement, fraud,
dishonesty, breach of fiduciary duty, or deliberate disregard of the Company's
rules, or if a participant makes an unauthorized disclosure of any Company trade
secret or confidential information, engages in any conduct constituting unfair
competition, induces any Company customers or contracting parties to breach a
contract with the Company, or induces any principal for whom the Company acts as
an agent to terminate such agency relationship, neither the participant nor his
or her estate shall be entitled to exercise any option thereunder. In making
such determination, the Board or Administrator shall give the participant an
opportunity to appear and present evidence on the participant's behalf. The
determination of the Board or Administrator shall be final and conclusive.
Non-transferability of Options. An option is nontransferable, other than by will
or the laws of descent and distribution, and is exercisable only by the
participant during his or her lifetime or, in the event of death, by the
executors, administrators, legatees, or heirs of his or her estate during the
time period described above.
Adjustment upon Changes in Capitalization. In the event of a recapitalization,
reclassification, stock split, combination of shares, stock dividend, or other
event, an appropriate adjustment shall be made in the option price and in the
number of shares subject to the option.
Dissolution, Liquidation, Merger. In the event of a dissolution or liquidation
of the Company, a merger, consolidation, combination, or reorganization in which
the Company is not the surviving corporation, or a sale of substantially all of
the assets of the Company, the Administrator, in its absolute discretion, may
(i) cancel each outstanding option upon payment in cash to the optionee of the
amount by which any cash and the fair market value of any other property which
the optionee would have received as consideration for the shares of Common Stock
covered by the option if the option had been exercised immediately prior to such
liquidation, dissolution, merger, consolidation, combination, reorganization, or
sale exceeds the exercise price of the option, or (ii) negotiate to have such
option assumed by the surviving corporation. In addition, the Administrator in
its absolute discretion may accelerate the time within which each outstanding
option may be exercised. If the Company is the survivor, the Board of Directors
shall determine the appropriate adjustment of the number and kind of securities
and the exercise price with respect to which outstanding options may be
exercised.
<PAGE>7
Amendment and Termination. The Board of Directors may amend the 1999 Plan at any
time or from time to time or may terminate it without approval of the
stockholders; provided, however, that stockholder approval is required for any
amendment which increases the number of shares for which options may be granted,
changes the designation of the class of persons eligible to be granted options,
or materially increases the benefits which may accrue to participants under the
1999 Plan. Notwithstanding the foregoing, no action by the Board of Directors or
stockholders may impair any option previously granted under the 1999 Plan
without the consent of the participant.
Other Provisions. The option agreement may contain such other terms, provisions,
and conditions not inconsistent with the 1999 Plan as may be determined by the
Administrator.
Federal Tax Aspects
The 1999 Plan is a "dual plan" in that it provides for the grant of both
Non-qualified Stock Options and Incentive Stock Options.
Non-qualified Stock Options. In general, the grant of an option under the 1999
Plan that is designated as a Non-qualified Stock Option will not result in
taxable income to the recipient at the time of grant.
The Company will be entitled to tax deductions in the same amounts and at the
same times as the participant takes amounts into income. The participant's cost
basis in the acquired shares will be the same as the fair market value of the
shares on the date they are valued to determine taxable income.
Incentive Stock Options. The grant of an option under the 1999 Plan that is
designated as an Incentive Stock Option under Section 422 of the Internal
Revenue Code will not result in taxable income to the recipient at the time of
the grant. The participant will, however, recognize taxable income in the year
in which the shares purchased under the Incentive Stock Option are sold or
otherwise made the subject of disposition.
For federal income tax purposes, dispositions are divided into two categories:
qualifying and disqualifying. The participant will make a qualifying disposition
of a purchased share if no disposition of such share is made by participant
within two years from the date of the granting of the option nor within one year
after the transfer of such share to the participant. If the participant fails to
satisfy either of these two holding periods prior to the sale or other
disposition of the purchased shares, then a disqualifying disposition will
result.
Upon a qualifying disposition, the participant will recognize capital gain in an
amount equal to the excess of (i) the amount realized upon the sale or other
disposition of the purchased shares over (ii) the option price paid for the
shares. If there is a disqualifying disposition of the shares, then the fair
market value of the shares on the date of exercise less the option price paid
for such shares will be taxable as ordinary income.
Any additional gain recognized upon the disposition will be capital gain.
If the participant makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs, equal to the amount by which the fair
market value of such shares on the date the option was exercised exceeded the
option price. In no other instance will the Company be allowed a deduction with
respect to the optionee's disposition of the purchased shares.
Withholding Taxes. The Company is entitled to take appropriate measures to
withhold from the shares of common stock, or to otherwise obtain from the
recipients, sufficient sums the Company deems necessary to satisfy any
<PAGE>8
applicable federal, state and local withholding taxes, including FICA taxes,
before the delivery of the common stock to the recipient.
Pursuant to the 1999 Plan and subject to stockholder approval, Messrs. Alioto,
Creasey, Levine and Kaliczak will receive options to acquire 1,000,000, 500,000,
150,000, and 150,000 shares of Common Stock, respectively.
Vote Required
The affirmative vote of the majority of shares of Common Stock of InnovaCom
represented in person or by proxy at the Special Meeting and entitled to vote is
required to approve Proposal No. 3.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPANY'S 1999
STOCK OPTION PLAN.
Executive Compensation.
The following table sets forth the compensation of Mr. Alioto, the Company's
President, and each other officer of the Company who earned more than $100,000
in annual compensation during 1998. In addition, the table shows the
compensation of Messrs. Mark Koz and Thomas E. Burke who each served as the
Company's President during 1998, but resigned during such year. No other
officers received annual compensation in excess of $100,000 during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------ --------------------------- -----------
Other Restricted Securities
Annual Stock Underlying LTIP
Compensation Award(s) Options Payouts All Other
Name and Principal Position Year Salary ($) ($) (#) ($) Compensation
- --------------------------- ---- ------ ------------ ---------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank Alioto 1998 $ 67,600 $ 51,171(1) - 1,300,000 - -
President and CEO
Stanton Creasey 1998 $ 136,250 - 200,000
Chief Financial Officer 1997 $ 85,923 $ 12,000(2) 300,000
Janek Kaliczak 1998 $ 122,000 - - 150,000 - -
Vice President Marketing
Steven Levine 1998 $ 107,292 $ 15,000(2) - 150,000
Vice President Research
and Marketing
Thomas Burke 1998 $ 260,624 $ 135,000(3) - 1,000,000 - -
Former President and CEO
<PAGE>9
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------ --------------------------- -----------
Other Restricted Securities
Annual Stock Underlying LTIP
Compensation Award(s) Options Payouts All Other
Name and Principal Position Year Salary ($) ($) (#) ($) Compensation
- --------------------------- ---- ------ ------------ ---------- ----------- ------- -------------
Mark C. Koz 1998 $ 198,604 $ 55,269(4) - - -
Former President and CEO 1997 $ 241,500 $ 10,500(5) - 300,000
1996 $ 120,000 - 2,000,000
F. James Anderson 1998 $ 82,000 $ 27,500(6)
Former Executive Director, 1997 $ 112,500 $ 37,500(7) 300,000
Corporate Strat. and Fin.
</TABLE>
(1) Effective June 23, 1998, Mr. Alioto was elected president of the
Company. Prior to this date, Mr. Alioto served as a consultant to the
Company. The $51,171 represents consulting fees paid to Mr. Alioto.
(2) Represents a bonus.
(3) Compensation relates to $40,000 of moving expenses and $85,000 in legal
expenses.
(4) Represents $8,250 in auto expenses and $47,019 in expenses paid on
behalf of Mr. Koz.
(5) Represents $10,500 in auto expenses.
(6) Represents $19,250 in housing expenses and $8,250 in auto expenses.
(7) Represents $26,250 in housing expenses and $11,250 in auto expenses.
Employment Contracts
On June 23, 1998, the Company hired Mr. Frank Alioto as President. Pursuant to
his employment contract, Mr. Alioto shall receive a salary of $135,000 per year
along with other benefits granted to employees of the Company. Additionally,
subject to stockholder approval, Mr. Alioto shall also receive options to
acquire, during a five (5) year term, up to 1,000,000 shares of Common Stock of
the Company at an exercise price equal to $0.26 per share. On June 26, 1998,
options to acquire 166,667 shares of Common Stock vested and became immediately
exercisable. Options to acquire 166,667 shares of Common Stock shall vest on
June 26, 1999, and options to acquire 166,666 shares of Common Stock shall vest
on June 26, 2000. Options to acquire the remaining 500,000 shares of Common
Stock shall vest on June 26, 2003 or earlier as determined by the Compensation
Committee based on performance goals. These options shall remain exercisable
until and shall not expire earlier than two (2) years from the date of any
change of control. Finally, pursuant to his employment contract, Mr. Alioto
shall be indemnified and held harmless by the Company in connection with his
serving as President and Chief Executive Officer of the Company.
Mr. Alioto's employment is on an "at-will" basis. Either the Company or Mr.
Alioto may terminate the employment at any time for any reason. However, in the
event of termination without "cause," the Company shall pay Mr. Alioto a minimum
severance salary which is equal to three months pay at Mr. Alioto's
then-existing salary as well as twelve (12) additional months of medical and
dental insurance coverage for Mr. Alioto and his dependents. In general, the
<PAGE>10
term "cause" means a willful breach of the duties Mr. Alioto is required to
perform under the terms of the employment contract, or the commission of such
acts of dishonesty, fraud, or other acts of moral turpitude as would prevent the
effective performance of Mr. Alioto's duties. Mr. Alioto was elected to the
Board of Directors on June 13, 1998, and became Chairman of the Board on
December 15, 1998.
On March 23, 1998, the Company hired Thomas E. Burke to begin employment
effective May 1, 1998. Pursuant to his employment contract, Mr. Burke received a
salary of $250,000 per year, a signing bonus equal to $200,000 net of taxes, a
car allowance equal to $1,000 per month net of taxes, a housing allowance equal
to $7,500 per month net of taxes, a life insurance policy equal to $1,500,000,
and other benefits granted to employees of the Company. Mr. Burke's employment
was for an agreed term of five years and, upon each anniversary date, was to be
automatically extended by an additional one year term unless either party gave
prior notice not to extend. Mr. Burke was eligible to receive an annual bonus of
up to two times Mr. Burke's annual salary based on achieving certain targets as
mutually agreed upon by Mr. Burke and the Board of Directors. Mr. Burke also
received options to acquire during a ten year term up to 1,000,000 shares of
Common Stock of the Company at an exercise price equal to $1.75 per share. The
options vested in one-third increments with one increment vesting immediately
and the remaining two increments to vest on each anniversary date thereafter. In
the event of a change of control, all the options vested immediately.
On June 5, 1998, Mr. Burke resigned. On July 21, 1998, he filed a statement of
claim with the American Arbitration Association, San Francisco, California. Mr.
Burke claimed the Company breached his employment contract by failing to pay him
a lump-sum cash payment of $1 million, salary, bonuses, expenses and other
termination payments under his employment contract. The Company responded by
claiming Mr. Burke made certain misrepresentations. On December 14, 1998, the
Company and Mr. Burke mutually settled their claims with each other. Under the
terms of the settlement, each party paid the other a sum of money which had no
significant financial impact on the Company.
On May 15, 1997, the Company and Mr. Koz entered into a five-year employment
contract. Under the terms of Mr. Koz's employment contract, Mr. Koz received a
salary of $240,000 per annum subject to a 7% cost of living increase and other
increases as determined by the Board of Directors. On June 16, 1998, Mr. Koz and
the Company mutually agreed to amend his employment contract to provide for,
among other things, no severance upon termination. Mr. Koz resigned as President
and Chief Executive Officer on May 1, 1998, but remained as Chief Technology
Officer of the Company and Chairman of the Board. Effective December 10, 1998,
Mr. Koz is no longer an employee of the Company. On December 15, 1998, Mr. Koz
was replaced as Chairman of the Board but remained as a director.
On May 15, 1997, the Company and Mr. Anderson entered into a five-year
employment contract, under the terms of which Mr. Anderson served as Director of
Strategic Planning and President of the Company's Entertainment Division. Mr.
Anderson's initial salary was $180,000 per annum, subject to a 7% cost of living
increase and increases as determined by the Board of Directors. Effective as of
June 30, 1998, Mr. Anderson and the Company agreed to terminate his employment
contract with the Company without severance pay, but with health care coverage
through June 30, 1999. Mr. Anderson still remains as a director of the Company.
Options Granted in Last Fiscal Year
The following table sets forth options granted by InnovaCom during the last
fiscal year to the executives listed in the summary compensation table.
<PAGE>11
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Percentage of Total
Options/SARs
Options/SARs Granted to Employees
Name Granted in Fiscal Year Exercise Price $/sh Expiration Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank Alioto 1,000,000 0.26 06/26/03
300,000 39.20% 0.16 10/13/03
Stanton Creasey 200,000 6.03% 0.26 03/30/03
Janek Kaliczak 40,000 0.26 02/13/03
110,000 4.52% 0.26 06/26/03
Steven Levine 150,000 4.52% 0.26 06/26/03
Thomas Burke 1,000,000 30.15% 1.75 03/30/08
</TABLE>
Aggregate Option Exercise in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth the value of exercised and unexercised options
and SARs held by the executives listed in the summary compensation table at
fiscal year end.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of Unexercised
in-the Money
Options/SARs at Options/ SARs at
Fiscal Year-End Fiscal Year-End
Exercisable (E)/ Exercisable (E)/
Shares Acquired on Subject to Repurchase Subject to Repurchase
Name Exercise Value Realized ($) (U) (U)(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank Alioto None None 416,667 / 833,333 None
Stanton Creasey None None 500,000 / 0 None
Janek Kaliczak None None 0 / 150,000 None
Steven Levine None None 0 / 150,000 None
Thomas Burke None None 500,000 / 0 None
Mark C. Koz None None 300,000 / 666,666 None
</TABLE>
(1) As of December 31, 1998, all of the Options held were out of the money.
During calendar year 1998, the Board of Directors repriced the exercise
price for stock options to acquire 2,467,233 shares of Common Stock held by
directors, officers, and employees of the Company. The following table sets
forth the ten year option repricing information for the executives named in the
compensation table and directors.
<PAGE>12
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Exercise Original
Securities Market Price Price at Optional Term
Underlying of Stock at Time of New Remaining at
Effective Date Options Time of Repricing Exercise Date of
Name of Reprice Repriced (#) Repricing ($) ($) Price ($) Repricing
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stanton Creasey March 30, 1998 300,000 $ 2.28 $3.38 $1.75 4 years
Chief Financial Officer June 26, 1998 500,000 $ .26 $1.75 $ .26 3 to 4 years
Mark Koz June 26, 1998 300,000 $ .26 $2.59 $ .26 4 years
F. James Anderson June 26, 1998 300,000 $ .26 $2.59 $ .26 4 years
Janek Kaliczak June 26, 1998 40,000 $ .26 $2.50 $ .26 4 years
</TABLE>
Report on Repricing of Stock Options
During the first and second quarter of calendar 1998 there was a substantial
decrease in the market price of the Company's Common Stock due, in part, to the
Company's management reorganization and concern about the Company's ability to
raise capital to pay it prior obligations and to fund its future business
operations. As a result, the Board of Directors repriced stock options in June
of 1998. The repricing was done in an effort to retain the Company's quality
employees, officers, and directors who had lost a significant portion of their
financial interest in the Company because their stock options were "out of the
money." In both March and June 1998, the Company completed the Company's stock
option repricing program for directors, officers, and employees of the Company
pursuant to which stock options for 2,467,233 shares of Common Stock, originally
issued with exercise prices ranging from $3.06 to $.50 per share, were reissued
with an exercise price of $0.26 per share, which exercise price approximated the
fair market value of the Company's shares on the date of repricing.
Stock options are intended to provide incentives to the Company's directors,
officers, and employees. The Board of Directors believes that such equity
incentives are a significant factor in the Company's ability to attract, retain,
and motivate directors, officers, and employees who are critical to the
Company's long-term success. In repricing the stock options, the Board of
Directors considered the fact that directors are not compensated for their
services other than through stock options. Further, many of the Company's
officers and employees have had either to defer their salary or were delayed in
receiving their salary at times during the current and prior calendar year due
to the poor financial condition of the Company. The Board of Directors believes
that the repricing of the options is a form of incentive to the directors,
officers, and employees of the Company to remain with the Company during its
period of financial restructuring, and believes that such repricing is in the
best interests of the Company and its stockholders.
<PAGE>13
Board of Directors
The seven (7) current directors of the Company are:
Frank Alioto John Champlin, MD Robert Sibthorpe
Tony Low Mark C. Koz F. James Anderson
Stanton Creasey
Directors' Compensation
Each director receives, on the date of appointment as a director, options to
acquire shares of Common Stock of the Company. The exercise price of the option
is equal to the trading price of a share of Common Stock as of the date of
grant. A director who also serves as an officer of the Company shall be entitled
to options to purchase 300,000 shares of Common Stock. All other directors
receive options to purchase 200,000 shares of Common Stock.
Other Stock Plans
1996 Incentive and Nonstatutory Stock Option Plan. The Company has established a
1996 Incentive and Nonstatutory Stock Option Plan (the "1996 Plan"). The purpose
of the 1996 Plan is to encourage stock ownership by employees and officers of
the Company to give them a greater personal interest in the success of the
business and to provide an added incentive to continue to advance in their
employment by or service to the Company. A total of 1,500,000 shares of Common
Stock are authorized to be issued under the 1996 Plan. The exercise price of any
Incentive Stock Option granted under the 1996 Plan may not be less than 100% of
the fair market value of the Common Stock of the Company on the date of grant.
The fair market value for which an optionee may be granted Incentive Stock
Options in any calendar year may not exceed $100,000. Shares subject to options
under the 1996 Plan may be purchased for cash. The 1996 Plan is administered by
the Compensation Committee which has discretion to determine optionees, the
number of shares to be covered by each option, the exercise schedule, and other
terms of the options. The 1996 Plan may be amended, suspended, or terminated by
the Board, but no such action may impair rights under a previously granted
option. Each option is exercisable, during the lifetime of the optionee, only so
long as the optionee remains employed by the Company. No option is transferrable
by the optionee other than by will or the laws of descent and distribution.
Principal Stockholders
The following table sets forth, as of January 15, 1999, certain information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) each officer named in the compensation table
and director of the Company, and (iii) directors and executive officers of the
Company as a group. As of January 15, 1999, there were 25,587,815 shares of
Common Stock outstanding.
<PAGE>14
<TABLE>
<CAPTION>
Percentage
Number of Beneficially
Name and Address Shares(1) Owned
---------------- ---------- -------------
<S> <C> <C>
JNC 103,718,506(2) 81.6%
c/o Olympia Capital (Bermuda) Ltd.
Williams House, 20 Reid Street
Hamilton HM 11, Bermuda
Microtechnology S.A. 2,962,970 11.9%
P. O. Box 556
Charlestown, Nevis
507784 BC Ltd. 5,748,000(3) 22.9%
10th Fl., Four Bentall Centre
P.O. Box 49333
1055 Dunsmuir Street
Vancouver BC V7X 1L4
Canada
Frank Alioto 466,667(4) 1.9%
InnovaCom, Inc.
3400 Garrett Drive
Santa Clara, CA 95053
Stanton Creasey 800,000(4) 3.1%
InnovaCom, Inc.
3400 Garrett Drive
Santa Clara, CA 95054
John Champlin, MD 300,000(4) 1.2%
4373 Meadow Circle
Rescue, CA 95672
Robert Sibthorpe 200,000(4) *
6311 E. Naumann Dr.
Paradise Valley, AZ 85253
Tony Low 200,000(4) *
The Saatchi Entertainment Group
37 26th Avenue
Venice, CA 90291
Mark C. Koz 5,748,000(3) 22.9%
InnovaCom, Inc.
3400 Garrett Drive
Santa Clara, CA 95054
Janek Kaliczak 12,000(4) *
InnovaCom, Inc.
3400 Garrett Drive
Santa Clara, CA 95054
<PAGE>15
Percentage
Number of Beneficially
Name and Address Shares(1) Owned
---------------- ---------- -------------
Steven Levine -0- -0-
InnovaCom, Inc.
3400 Garrett Drive
Santa Clara, CA 95054
F. James Anderson 600,000(5) 2.4%
All officers and directors as a group (7 persons) 8,314,667(6) 30.0%
</TABLE>
- ---------------------
*Less than one percent
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed above, based on information furnished by
such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to
options or warrants currently exercisable, or exercisable within 60
days, are deemed outstanding for purposes of computing the percentage
ownership of the person holding such options or warrants, but are not
deemed outstanding for purposes of computing the percentage ownership of
any other person.
(2) Includes 100,874,467 shares of Common Stock that may be acquired upon
the conversion of outstanding Debentures, and 1,387,500 shares of Common
Stock that may be acquired upon the exercise of outstanding Warrants.
(3) Includes 1,000,000 shares of Common Stock owned by 507784 BC Ltd. and
4,448,000 shares beneficially owned by Mark C. Koz, all of which are
subject to a voting agreement by and between 507784 BC Ltd. and Mark C.
Koz, wherein Mr. Koz has the right to nominate three (3) members of the
six (6) member board of directors of the Company and 507784 BC Ltd. has
the right to nominate the remaining three (3) members of the six (6)
member board of directors of the Company, and all the shares subject to
the voting agreement shall vote in favor of the six (6) nominees. The
voting agreement is for a period of five years, and terminates on
February 26, 2002. However, the voting agreement may be extended by
agreement of the parties for an additional five years. The owners of
507784 BC Ltd. are not affiliated with either the Company or Mr. Koz.
The above-listed number also includes options to purchase 300,000 shares
of Common Stock.
(4) Represents shares of Common Stock that may be acquired within sixty days
upon the exercise of options.
(5) Includes options to acquire 300,000 shares of Common Stock exercisable
within 60 days and options to acquire 300,000 shares of Common Stock
attributable to Mr. Anderson's spouse. Mr. Anderson disclaims beneficial
ownership to the options held by his spouse.
(6) Includes 2,866,667 options to acquire shares of Common Stock and
1,000,000 share subject to a voting agreement discussed in footnotes(2)
through (5).
<PAGE>16
OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters which the
Board of Directors intends to present or has reason to believe others will
present at the Special Meeting of Stockholders. If other matters properly come
before the Special Meeting, those persons named in the accompanying proxy will
vote in accordance with their judgment.
Stockholder proposals to be included in the Company's Proxy Statement and Proxy
for its 1999 Annual Meeting tentatively scheduled to be held in November 1999
must meet the requirements of Rule 14a-8 promulgated by the Securities and
Exchange Commission and must be received by the Company no later than August 3,
1999.
BY ORDER OF THE BOARD OF DIRECTORS
FRANK ALIOTO,
President and Chief Executive Officer
Santa Clara, California
February 26, 1999
<PAGE>
INNOVACOM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Special Meeting of Stockholders -- April 8, 1999
The undersigned stockholder of INNOVACOM, INC. (the "Company"), revoking
all previous proxies, hereby appoints FRANK ALIOTO and STANTON CREASEY, or
either of them, as proxies of the undersigned, and authorizes either or both of
them to vote all shares of the Company's Common Stock held of record by the
undersigned as of the close of business on February 22, 1999, at the Special
Meeting of Stockholders of the Company to be held on Thursday, April 18, 1999,
at 10:00 a.m., local time, at 3400 Garrett Drive, Santa Clara, California 95054,
and at any adjournment(s) or postponement(s) thereof (the "Special Meeting"),
according to the votes the undersigned would be entitled to cast if then
personally present.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1, "FOR" PROPOSAL 2, AND "FOR" PROPOSAL NO. 3 BELOW:
1. A proposal to approve an amendment to Article IV of the Company's Articles of
Incorporation to increase the authorized number shares of Common Stock available
for issuance from Fifty Million (50,000,000) to One Hundred Fifty Million
(150,000,000).
[_] [_] [_]
FOR AGAINST ABSTAIN
2. A proposal to approve amendments to Article IV of the Company's Articles of
Incorporation to authorize and create a new class of 10,000,000 shares of
Preferred Stock to be designated and issued from time to time as may be
determined by the Board of Directors.
[_] [_] [_]
FOR AGAINST ABSTAIN
3. A proposal to approve the Company's 1999 Stock Option Plan.
[_] [_] [_]
FOR AGAINST ABSTAIN
4. The authority of the proxy, in his discretion, to vote on such other business
as may properly come before the Special Meeting, or any adjournment(s) or
postponement(s) thereof.
<PAGE>
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE SPECIAL
MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The
undersigned also hereby ratifies all that the said proxy may do by virtue hereof
and hereby confirms that this proxy shall be valid and may be voted regardless
of whether the stockholder's name is signed as set forth below or a seal affixed
or the descriptions, authority, or capacity of the person signing is given or
any other defect of signature exits.
DATED: _____________________, 1999
_________________________________
(Stockholder's Signature)
_________________________________
Print Name
_________________________________
(Stockholder's Signature)
_________________________________
Print Name
NOTE: PLEASE MARK, DATE, AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. Please sign this Proxy exactly as the name appears in the address
below. If shares are registered in more than one name, all owners should sign.
If signing in a fiduciary or representative capacity, such as attorney-in- fact,
executor, administrator, trustee or guardian, please give full title and attach
evidence of authority. If signer is a corporation, please sign the full
corporate name and an authorized officer should sign his name and title and
affix the corporate seal.
STOCKHOLDER'S ADDRESS:
_________________________________
_________________________________
_________________________________
Please complete, sign, and date this Proxy and return it promptly in the
enclosed envelope regardless of whether or not you plan to attend the Special
Meeting.
