<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHOICETEL COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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) and 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 0-11(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:
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4) Date Filed:
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<PAGE>
CHOICETEL COMMUNICATIONS, INC.
9724 10th Avenue North
Plymouth, Minnesota 55441
(612) 544-4876
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 26, 2000
TO THE SHAREHOLDERS OF
CHOICETEL COMMUNICATIONS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Choicetel Communications, Inc., a Minnesota corporation (the "Company"), will be
held on Wednesday, July 26, 2000, at 3:00 p.m. (Minneapolis time), at the Hilton
Hotel located at 1001 Marquette Avenue, Minneapolis, Minnesota 55402, for the
following purposes:
1. To elect four directors of the Company for the coming year.
2. To consider and act upon a proposal to amend the Company's
1997 Long-Term Incentive and Stock Option Plan to increase the
number of shares reserved for issuance under the plan.
3. To consider and act upon a proposal to allow Michael Wigley to
convert the Convertible Promissory Note, dated April 18, 2000,
into (i) shares of the Company's common stock and (ii)
warrants to purchase shares of the Company's common stock.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Holders of record of the Company's Common Stock at the close of
business on June 26, 2000 are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
Each of you is invited to attend the Annual Meeting in person if possible.
Whether or not you plan to attend in person, please mark, date and sign the
enclosed proxy, and mail it promptly. A return envelope is enclosed for your
convenience.
By Order of the Board of Directors
July 11, 2000 Melvin Graf, SECRETARY
--------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN THE PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
<PAGE>
CHOICETEL COMMUNICATIONS, INC.
9724 10th Avenue North
Plymouth, Minnesota 55441
(612) 544-4876
-------------------------------------------
PROXY STATEMENT
-------------------------------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Choicetel Communications, Inc., a Minnesota corporation (the "Company"), for
use at the Annual Meeting of Shareholders ("Annual Meeting") to be held on July
26, 2000, and any adjournment thereof. This Proxy Statement and the accompanying
form of proxy are being mailed to shareholders on or about July 11, 2000.
The expense of the solicitation of proxies for the Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals, and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally.
VOTING AND REVOCATION OF PROXY
Only shareholders of record at the close of business on June 26, 2000 (the
"Record Date") will be entitled to vote at the Annual Meeting. On the Record
Date, there were 3,545,699 shares of Common Stock outstanding. Holders of record
of the Company's Common Stock on the Record Date are entitled to notice of and
to vote at the Annual Meeting. Each share of Common Stock entitles the holder
thereof to one vote upon each matter to be presented at the Annual Meeting.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. IF NO INSTRUCTIONS ARE INDICATED, THE SHARES
WILL BE VOTED (i) FOR THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS
NAMED IN THIS PROXY STATEMENT, (ii) FOR THE PROPOSAL TO AMEND THE COMPANY'S 1997
LONG-TERM INCENTIVE AND STOCK OPTION PLAN, AND (iii) FOR THE PROPOSAL TO ALLOW A
DIRECTOR AND NOMINEE FOR REELECTION, MICHAEL WIGLEY, TO CONVERT THE COMPANY'S
CONVERTIBLE PROMISSORY NOTE, PURCHASED BY HIM ON APRIL 18, 2000, INTO SHARES OF
THE COMPANY'S COMMON STOCK AND WARRANTS TO PURCHASE SHARES OF THE COMPANY'S
COMMON STOCK. While the Board of Directors knows of no other matters to be
presented at the Annual Meeting or any adjournment thereof, all proxies returned
to the Company will be voted on any such matter in accordance with the judgment
of the proxy holders.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (a) giving
written notice of such revocation to the Secretary of the Company, (b) giving
another written proxy bearing a later date, or (c) attending the
<PAGE>
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not in and of itself constitute a revocation of a proxy).
A quorum, consisting of a majority of the issued and outstanding shares
of Common Stock entitled to vote at the Annual Meeting, must be present in
person or by proxy before action may be taken at the Annual Meeting. If an
executed proxy is returned and the shareholder has abstained from voting on
any matter, the shares represented by such proxy will be considered present
at the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but will not be considered to have been voted in favor
of such matter. If an executed proxy is returned by a broker holding shares
in "street name" which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares
will be considered present at the meeting for purposes of determining a
quorum, but will not be considered to be represented at the meeting for
purposes of calculating the vote with respect to such matter.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The business and affairs of the Company are managed under the direction of
its Board of Directors. Each director is elected for a term of one year or until
his or her successor is elected.
Shareholders will be asked at the Annual Meeting to elect four directors.
The Board has nominated the four individuals named below to serve as directors
of the Company. Unless authority is withheld, all proxies received in response
to this solicitation will be voted FOR the election of the nominees named below.
Each of the nominees named below is currently a director of the Company and has
served continuously as a director since the year indicated. Each of the nominees
was elected by the shareholders at the Shareholders' Annual Meeting in 1999. All
nominees have indicated a willingness to serve if elected. If any nominee
becomes unable to serve prior to the Annual Meeting, the proxies received in
response to this solicitation will be voted for a replacement nominee selected
in accordance with the best judgment of the proxy holders named in the proxies.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITIONS WITH COMPANY AGE SINCE
---- ---------------------- --- -----
<S> <C> <C> <C>
Gary S. Kohler Chairman of the Board of Directors 43 1989
Jeffrey R. Paletz President and Director 44 1989
Robert A. Hegstrom Director 57 1997
Michael Wigley Director 46 1998
</TABLE>
SHAREHOLDER APPROVAL
The affirmative vote of a plurality of the shares of Common Stock
represented at the Annual Meeting either in person or by proxy, assuming a
quorum is present, is required for the election of directors.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS AS SET FORTH IN PROPOSAL 1.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
DIRECTORS AND NOMINEES
All of the nominees for election to the Company's Board of Directors are
presently serving as directors of the Company. The following discussion sets
forth certain information concerning the directors and nominees of the Company.
GARY S. KOHLER is a founder of the Company and since its inception has
served as the Chairman of the Board of Directors. Mr. Kohler is a partner and
portfolio manager for Whitebox Advisors, LLC, which he joined in October 1999.
Prior to that he served as a managing director of Second Avenue Capital
Management, a money management company, from December 1998 through September
1999. Prior to that he served as President of Kohler Capital Management from
October 1997 through November 1998. From July to October 1997, Mr. Kohler was a
partner in Tarmachan Holdings, Inc. From 1984 through June 1997, Mr. Kohler was
Vice President and Portfolio Manager at Okabena Company. Mr. Kohler serves on
the boards of Destron Fearing, Inc., a publicly traded identification products
company, and Printware, Inc., a publicly traded printing company. Mr. Kohler
also serves on the boards of a number of private companies, including Emerald
First Financial, Northwest Mortgage Services, Made in the Shades, Inc., and
Health EZ, Inc. Mr. Kohler has an M.B.A. degree from Cornell University and a
B.A. degree from the University of Minnesota. Mr. Kohler is the brother of Jack
S. Kohler, the Company's Vice President and Chief Financial Officer.
JEFFREY R. PALETZ is a founder of the Company, has been a director since
its inception and has been President since 1992, overseeing all operations of
the Company. Prior to founding the Company in 1989, Mr. Paletz was employed for
13 years at Sportsman's Guide, a mail order retailer, where he oversaw the
computer data operations. Mr. Paletz has a B.S. degree in Business from the
University of Minnesota.
ROBERT A. HEGSTROM became a director of the Company in June 1997. Mr.
Hegstrom served as Chairman, President and Chief Executive Officer of Northwest
Services, Inc. from January 1997 until the sale of the company in March, 2000.
Prior to that, he was a private investor for two years and, from October 1979 to
January 1995, he was Executive Vice President of Green Tree Financial
Corporation. Mr. Hegstrom is also a director of Beacon Bank.
MICHAEL WIGLEY became a director of the Company in January 1998. Since
1989 Mr. Wigley has been President and Chief Executive Officer of Great Plains
Companies, Inc., a diversified holding company. Mr. Wigley has an M.B.A. from
Harvard Business School, a M.S. from Stanford University and a B.S. degree from
the University of Minnesota. Mr. Wigley serves on the boards of directors of
Intelefilm, Inc., Creative Carton, Standard Iron, and is a regent of Luther
College.
<PAGE>
BOARD COMMITTEES AND ACTIONS
During calendar year 1999, the Board of Directors met four times and each
director attended all meetings. The Board of Directors has two standing
committees, a Compensation Committee and an Audit Committee which were appointed
in January of 1998. Each committee met once during 1999.
The Compensation Committee reviews and makes recommendations to the Board
of Directors regarding salaries, compensation and benefits of executive officers
of the Company and administers the Company's 1997 Long-Term Incentive and Stock
Option Plan. The Committee members are Robert A. Hegstrom, Gary S. Kohler and
Jeffrey R. Paletz.
The Audit Committee is responsible for recommending the appointment of a
firm of independent public accountants to audit the books and records of the
Company and its subsidiaries and reviews the internal and external financial
reporting of the Company and the scope of the independent audit. The Committee
members are Michael Wigley, Robert A. Hegstrom and Gary S. Kohler.
The Board of Directors acts as the nominating committee. See "Information
Concerning directors and Nominees - Nomination of Directors"
DIRECTOR COMPENSATION
No cash compensation is paid to the Company's directors. Independent,
non-employee directors (Mr. Hegstrom and Mr. Wigley) will receive an option to
purchase $75,000 of Common Stock, valued as of the date of grant if re-elected
by the shareholders. The options will be granted pursuant to the Company's 1997
Long-Term Incentive and Stock Option Plan, be exercisable upon grant and have
five-year term and an exercise price equal to the fair market value of the
Common Stock as of the date of grant. No options will be issued to employee
directors for their service as directors.
NOMINATION OF DIRECTORS
The Board of Directors acts as the nominating committee for selecting the
Board's nominees for election as directors. The Board does not intend to
consider nominees recommended by shareholders. Directors of the Company are
elected annually to serve until the next annual meeting of shareholders or until
their successors are duly elected. The Company knows of no arrangements or
understandings between a director or nominee and any other person pursuant to
which he has been selected as a director or nominee. The only family
relationship between any of the nominees, directors or executive officers of the
Company is between Gary S. Kohler and Jack S. Kohler, who are brothers.
EXECUTIVE OFFICERS
The following discussion sets forth information about the executive
officers of the Company who are not directors.
<TABLE>
<CAPTION>
OFFICER
NAME POSITIONS WITH COMPANY AGE SINCE
---- ---------------------- --- -----
<S> <C> <C> <C>
Jack S. Kohler Vice President and Chief Financial Officer 45 1993
Greg Johnson President and Chief Executive Officer of Advants, Inc. 44 1999
</TABLE>
<PAGE>
JACK S. KOHLER has been Vice President and Chief Financial Officer of the
Company since 1993. Prior to joining the Company, Mr. Kohler was employed for 13
years in various management and accounting positions at Cargill, Inc. Mr. Kohler
has a B.S. degree in Accounting from the University of Minnesota. Mr. Kohler is
the brother of Gary S. Kohler.
GREG JOHNSON has been the President and Chief Executive Officer of
Advants, Inc., the Company's majority-owned subsidiary. From 1990 until 1999,
Mr. Johnson worked for Global Corporation and became its President in 1997.
Prior to that, Mr. Johnson was President and Chief Financial Officer of Simitar
Entertainment, Inc. Mr. Johnson has a B.A. degree from the University of Saint
Thomas. In March of 1999, Mr. Johnson was nominated to become a director of the
Company. He served in such capacity until March 2000.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and accompanying footnotes set forth certain summary
information, relating to the three years ended December 31, 1999 with respect to
the Company's Chief Executive Officer and the President and Chief Executive
Officer of Advants, Inc., a majority owned subsidiary of the Company.
<TABLE>
<CAPTION> LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
---------------------------------------------- ---------------
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#) COMPENSATIONS
------------------ ---- --------- -------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey R. Paletz, 1999 108,375 0 ------ ------ ------
President 1998 86,398 0 ------ ------ ------
1997 77,350 15,476 ------ ------ ------
Greg Johnson, 1999 60,800 0 ------ ------ ------
President and CEO of 1998 ------ ------ ------ ------ ------
Advants, Inc. 1997 ------ ------ ------ ------ ------
</TABLE>
AGREEMENTS WITH EXECUTIVES
At December 31, 1999 the Company had employment agreements with Jeffrey R.
Paletz, Melvin Graf and Jack S. Kohler. The agreements provided for an annual
base salary and the right to receive additional compensation in the form of
salary, bonus and other benefits as the Board of Directors determined in its
sole discretion. The agreements prohibited each officer from competing against
the Company for a period of one year after employment ceases and from
communicating with a Site Provider (as defined in each agreement) until six
months following expiration of the Site Agreement (as defined in each
agreement). In the event of termination of the officer's employment, except
termination for cause, the terminated officer would be entitled to receive full
compensation and benefits for a six-month period.
<PAGE>
In light of the Company's efforts to dispose of its payphone assets,
the Company has not renewed its employment agreements. Mr. Graf is no longer
employed as Executive Vice President of the Company, effective April 15,
2000. Mr. Paletz and Mr. Kohler continue to be employed by the Company.
BONUS PROGRAM
In 1997, the Company implemented its Incentive Compensation Plan to
provide an opportunity for executive officers and other Company employees to
receive a bonus based on individual and Company performance. The maximum bonus
that may be received by any executive officer is 40% of annual salary. Bonus (if
any) will be given at the discretion of the Board of Directors.
STOCK OPTION PLAN
Under the terms of the Company's 1997 Long-Term Incentive and Stock Option
Plan (the "Plan"), all of the directors, officers, other employees and
consultants of the Company are eligible to receive options to purchase shares of
the Company's Common Stock.
The Board of Directors adopted the Plan on April 17, 1997, and the
shareholders approved it on April 18, 1997. The Plan provides for the grant of
both of incentive stock options intended to qualify for preferential tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended,
and nonqualified stock options that do not qualify for such treatment. The
exercise price of incentive stock options must equal or exceed the fair market
value of the Common Stock at the time of grant. The exercise price of
non-qualified stock options must equal or exceed 85% of the fair market value of
the Common Stock at the time of grant. The Plan also provides for grants of
stock appreciation rights, restricted stock awards and performance awards and
allows for the grant of restoration options.
The Compensation Committee of the Board of Directors administers the Plan,
subject to approval of the Board. A total of 350,000 shares of Common Stock are
reserved for issuance under the Plan, assuming the shareholders approve the
proposed amendment to the Plan at the Annual Meeting (See APPROVAL OF AMENDMENT
TO 1997 LONG-TERM INCENTIVE AND STOCK OPTOIN PLAN (Proposal 2)). Incentive stock
options may be granted under the Plan only to full and part-time employees.
Directors who are not employees, and consultants and independent contractors to
the Company are eligible to receive options which do not qualify as incentive
stock options, as well as other awards. In determining the persons to whom
options and awards shall be granted, and the number of shares subject to each,
the Board of Directors may take into account the nature of services rendered to
the Company, and such other factors as the Board of Directors in its discretion
shall deem relevant.
The Board of Directors may amend or discontinue the Plan at any time but
may not, without shareholder approval, make any revisions or amendments to the
Plan that increase the number of shares subject to the Plan, decrease the
minimum exercise price, extend the maximum exercise term, or modify eligibility
requirements. The Board of Directors may not alter or impair any award granted
under the Plan without the consent of the holder of the award. The Plan will
expire April 10, 2007.
Pursuant to the terms of the Plan, appropriate adjustments to the Plan and
outstanding options will be made in the event of changes in the Common Stock
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, or other change in corporate structure.
<PAGE>
The following table sets forth certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table during
the Company's 1999 fiscal year which ended on December 31, 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
VALUE AT ASSUMED ANNUAL
PERCENT OF TOTAL RATES OF STOCK PRICE
OPTIONS OPTIONS GRANTED TO APPRECIATION FOR OPTION
GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION TERM (1)
NAME (#) 1999 ($/SHARE) DATE 5% ($) 10% ($)
---- ------- ------------------ -------------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey R. Paletz 0 0 0 N/A 0 0
Greg Johnson 0 0 0 N/A 0 0
</TABLE>
(1) Represents the potential net realizable value of each grant of options
assuming that the market price of the underlying Common Stock appreciates
in value from fair market value on date of grant to the end of the option
period at the indicated rates.
The following table sets forth certain information regarding the number
and value of unexercised stock options held by the executive officers named in
the Summary Compensation Table as of the end of the Company's 1999 fiscal year,
which ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END (#) AT YEAR-END ($)(1)
SHARES ----------------------- ------------------
ACQUIRED ON VALUE EXERCISABLE / EXERCISABLE /
NAME EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Jeffrey R. Paletz 0 0 0 0
Greg Johnson 0 0 0 0
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In January 1998 a Compensation Committee was appointed consisting of
Robert Hegstrom and Gary Kohler, each of whom is a non-employee director of the
Company, and Jeffrey R. Paletz, President of the Company. Decisions and
recommendations regarding compensation paid to the Company's executive officers
in 1999 were made by the Board of Directors, with employee directors abstaining
from voting on their own compensation.
The Committee is responsible for assuring that compensation for executives
is consistent with the Company's compensation philosophy. The Committee also
administers and makes grants under the Company's stock option plans with respect
to the Company's executive officers.
The Company's executive compensation program is based on a
pay-for-performance philosophy. Under the Company's program, an executive's
compensation consists of three components: base salary, an annual incentive
(bonus) payment, and long-term incentives (principally stock options). Base
salaries generally are set at levels competitive with base salaries for
comparable positions in the marketplace. In addition, base salaries reflect the
executive's individual job responsibilities, his or her sustained performance in
fulfilling those responsibilities and the impact of such performance on the
business results of the Company.
The Company's long-term incentives are in the form of stock options to be
granted under the terms of the Stock Option Plan discussed under "Summary
Compensation Table" above. The objectives of these awards is to advance the
longer term interests of the Company and its shareholders, complement incentives
tied to annual performance, and align the interests of executives more closely
with those of shareholders. The Company also believes that the entrepreneurial
character of its executives makes the long-term incentives provided by its stock
option program especially significant in the motivation and retention of its
executives.
The Committee believes that the Company's executives are focused on the
attainment of a sustained high rate of growth and profitability for the benefit
of the Company and its shareholders, and that the Company's compensation
program, with its emphasis on performance-based and long-term incentive
compensation, serves to reinforce this focus.
CERTAIN TRANSACTIONS
The Company has an arrangement with Gary S. Kohler, the Company's Chairman
of the Board, pursuant to which Mr. Kohler advises the Company's management on
an as-needed basis. The consulting fees paid to Mr. Kohler for rendering this
service for the year ended December 31, 1999, totaled $28,800.
On April 18, 2000, Mr. Michael Wigley, a director and nominee for
reelection, purchased from the Company a Convertible Promissory Note in the
original principal amount of Two Hundred Fifty-two Thousand Seven Hundred
Fifty-six Dollars ($252,756). The Convertible Promissory Note is convertible
upon authorization by the shareholders into shares of the Company's Common Stock
and warrants to purchase shares of the Company's Common Stock as described in
greater detail in this Proxy Statement (see CONSENT TO ALLOW MICHAEL WIGLEY TO
CONVERT THE CONVERTIBLE PROMISSORY NOTE INTO SHARES OF THE COMPANY'S COMMON
STOCK AND WARRANTS TO PURCHASE SHARES OF THE COMPANY'S COMMON STOCK (Proposal
3)).
<PAGE>
It is the Company's policy that it not engage in any material transactions
with officers, directors or beneficial holders of 5% or more of the Company's
Common Stock, or affiliates of such persons, unless the terms of any such
transaction are no less favorable to the Company than those that could be
obtained from unaffiliated third parties and are approved by a majority of the
Company's independent directors who do not have an interest in the transaction
and who have had access, at the Company's expense, to the Company's or
independent legal counsel. Further, the Company will not make loans to officers
and directors, or their affiliates, for the purpose of purchasing securities
from the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of June 15, 2000, regarding
the beneficial ownership of shares of Common Stock of the Company by each
director and executive officer of the Company, by all directors and executive
officers of the Company as a group, and by each shareholder known by the Company
to own beneficially more than five percent (5%) of the outstanding shares of the
Company's Common Stock. Unless otherwise noted, each person or group identified
possesses sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OUTSTANDING SHARES (2)
------------------------------------ ------------------------- -------------------------
<S> <C> <C>
Perkins Capital Management, Inc. (3) 450,372 12.7%
730 East Lake Street
Wayzata, MN 55391-1769
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS:
Gary S. Kohler (4)(6)................................ 1,032,784 29.1%
Jeffrey R. Paletz................................... 347,358 9.8%
Melvin Graf (5).................................... 213,334 6.0%
Jack S. Kohler (6)(7)................................ 347,500 9.6%
Robert A. Hegstrom(8)................................ 60,294 1.7%
Michael Wigley(8)(9)................................. 185,294 5.0%
Greg Johnson......................................... 0 0%
All directors, nominees and executive officers as a 1,986,564 51.5%
group (7 persons)
</TABLE>
(1) Each person has sole voting power and sole dispositive power with respect
to all outstanding shares, except as otherwise noted or disclosed by the
beneficial owners in the Schedule 13G filing described at footnote 3
below.
(2) Based on 3,545,699 shares outstanding on June 15, 2000. Such amount does
not include 256,588 shares of common stock issuable upon exercise of stock
options or 1,579,457 shares of common issuable upon exercise of
outstanding warrants. Each figure showing the percentage of outstanding
shares owned beneficially has been calculated by treating as outstanding
and owned the shares which could be purchased by the indicated person(s)
within 60 days upon the exercise of existing stock options or warrants.
(3) Reflects information included on Schedule 13G dated June 8, 2000 filed
with the Securities and Exchange Commission.
<PAGE>
(4) Includes 40,000 shares held by Gary S. Kohler as custodian for the benefit
of his children. Mr. Kohler disclaims beneficial ownership of such shares.
(5) Includes 13,334 shares held by Mr. Graf's spouse. Mr. Graf disclaims
beneficial ownership of such shares. Mr. Graf is no longer employed as
Executive Vice President as of April 15, 2000.
(6) Includes 200,000 shares currently owned by Gary S. Kohler, which can be
purchased by Jack S. Kohler within sixty (60) days of exercising stock
options granted by Gary S. Kohler.
(7) Includes options to acquire 70,000 shares which could be purchased from
the Company within sixty (60) days upon exercise of the stock options.
(8) Includes options to acquire 55,294 shares which could be purchased from
the Company within sixty (60) days upon exercise of the stock options.
(9) Includes 60,000 shares issuable upon conversion of a Convertible
Promissory Note and 60,000 additional shares issuable upon exercise of
warrants issuable upon conversion of a Convertible Promissory Note, which
Convertible Promissory Note could be converted within sixty (60) days if
authorized by the shareholders at the Annual Meeting.
The following table sets forth information as of May 1, 2000,
regarding the beneficial ownership of shares of Common Stock of Advants,
Inc., a majority owned subsidiary of ChoiceTel Communications, Inc., by each
director, nominee and executive officer of the Company and by all directors,
nominees and executive officers of the Company as a group. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES (1)
------------------------------------ ------------------ ----------------------
<S> <C> <C>
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS:
Gary S. Kohler .................................... 104,000 3.16%
Jeffrey R. Paletz ................................. 0 0%
Melvin Graf ....................................... 0 0%
Jack S. Kohler .................................... 0 0%
Robert A. Hegstrom ................................ 5,000 0.15%
Michael Wigley .................................... 5,000 0.15%
Greg Johnson ...................................... 203,000 6.17%
(All directors, nominees and executive officers as
a group (7 persons) ............................... 317,000 9.64%
</TABLE>
(1) Based on 3,288,000 shares outstanding as of May 1, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, executive officers and any persons holding
more than 10% of the outstanding Common Stock of the Company are required to
file with the Securities and Exchange Commission reports concerning their
initial ownership of Common Stock and any subsequent changes in such ownership.
The Company believes that during 1999 the filing requirements were satisfied on
a timely basis by all such persons. In making this disclosure, the Company has
relied solely on written representations of its directors, officers and
beneficial owners of more than 10% of the Common Stock and copies of the reports
they have filed with the Securities and Exchange Commission and furnished to the
Company.
APPROVAL OF AMENDMENT TO 1997 LONG-TERM INCENTIVE
AND STOCK OPTION PLAN
(PROPOSAL 2)
On April 17, 1997, the Company's Board of Directors adopted the
Company's 1997 Long-Term Incentive and Stock Option Plan (the "Plan"). The Plan
was ratified and approved by the Company's shareholders on April 18, 1997. The
purpose the Plan is to aid in maintaining and developing personnel capable of
assuring the Company's future success, to offer such personnel additional
incentives to put forth maximum efforts for the success of the business, and to
afford them an opportunity to acquire a proprietary interest in the Company
through stock options and other long-term incentive awards.
The Plan originally reserved 100,000 shares of Common Stock for
issuance under the Plan. On May 1, 2000 there were options outstanding to
purchase an aggregate of 50,000 shares under the Plan. The Board of Directors
has authorized the issuance of additional options to purchase 140,588 additional
shares, which remain subject to approval by the Shareholders of the amendment to
the Plan increasing the number of shares reserved thereunder for issuance. On
June 1, 2000, the Board of Directors approved an amendment to the Plan,
increasing the number of shares reserved for issuance under the Plan to 350,000.
The shareholders are being asked to approve the amendment at the Annual Meeting.
All proxies received in response to this solicitation will be voted in favor of
approving the amendment.
<PAGE>
The principal features of the Plan are discussed below.
ELIGIBILITY
Awards may be granted under the Plan to full or part-time employees,
directors, consultants or independent contractors of the Company or any
subsidiary of the Company. Incentive stock options, however, may only be granted
to full or part-time employees of the Company or any subsidiary of the Company.
Approximately 22 employees, 5 directors, 0 consultants and independent
contractors are currently eligible to receive awards under the Plan. No option
or award is transferable by an optionee, except by will or the laws of descent
or distribution.
STOCK OPTIONS
Under the Plan, the Committee may grant incentive stock options (within
the meaning of Section 422 of the Internal Revenue Code), as well as stock
options which do not qualify as incentive stock options. The Committee may also
grant restoration options (options to purchase the Company's Common Stock,
pursuant to which an optionee is granted the option to purchase shares of the
Company's Common Stock upon payment of the exercise price with respect to other
stock options to which the restoration options relate, so long as the exercise
price is paid by tendering to the Company shares of the Company's common stock).
Restoration options may only be granted in accordance with applicable
requirements of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended, or any other applicable law. Restoration options may be
granted with respect to stock options previously granted under the Plan or
different plan, or with respect to stock options granted at the same time as the
restoration stock options are granted.
The Committee may grant stock appreciation rights (entitling the holder
to realize the difference between the fair market value of the Company's common
stock and the exercise price determined on the date the stock appreciation right
was granted).
RESTRICTED STOCK AWARDS
The Plan authorizes the Committee to award restricted stock. The
Committee will determine the terms, including vesting schedule, of any
restricted stock award. The recipient of a restricted stock award will have all
of the rights of a shareholder with respect to the shares of restricted stock
granted, including the right to receive dividends and to vote such shares,
except that (i) the recipient will not be entitled to delivery of the stock
certificates representing the shares of restricted stock until the restrictions
have lapsed, (ii) the recipient may not sell or transfer the shares until the
restrictions have lapsed, (iii) except as otherwise determined by the Committee,
the recipient will forfeit all restricted shares and any rights of a shareholder
with respect to the restricted shares if the recipient ceases to remain employed
by the Company or any subsidiary of the Company before the restrictions have
lapsed or fails to comply with any other restriction.
PERFORMANCE AWARDS
The Committee may grant performance awards, payable in cash, shares of
the Company's
<PAGE>
Common Stock or other property or awards upon the achievement of such
performance goals as the Committee may establish.
NUMBER OF SHARES
Before the amendment to the Plan which the shareholders are being asked
to approve, a maximum of 100,000 shares of Common Stock are reserved for
issuance under the Plan. After accounting for the amendment by the Board on
June 1, 2000, and subject to shareholder approval of the amendment, 350,000
shares of Common Stock will be reserved for issuance under the Plan. Shares of
Common Stock covered by expired or terminated stock options may be used for
subsequent awards.
ADMINISTRATION
The Plan is administered directly by the Compensation Committee,
appointed by the Board of Directors.
PRICE
The exercise price for incentive stock options must be at least
equal to one-hundred percent (100%) (one-hundred ten percent (110%) for
individuals who may exercise certain control over the Company) of the fair
market value of shares of the Company's Common Stock at the date of the
grant. The exercise price for stock options which are not incentive stock
options must be at least equal to eighty-five percent (85%) of the fair
market value of shares of the Company's Common Stock. The exercise price for
other awards granted under the Plan will be determined by the Committee. On
June 23, 2000, the closing sale price for the Company's Common Stock as
reported on The Nasdaq SmallCap Market was $2.75 per share.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the Plan at any time,
except that shareholder approval is required to: (i) increase the maximum number
of shares reserved for issuance under the Plan, (ii) decrease the minimum
exercise or purchase price of any option or award, (iii) extend the maximum term
of any option or award, or (iv) modify eligibility requirements. The Board of
Directors may not alter or impair any option or award previously granted without
the consent of the holder of the option or award. Unless the Plan has otherwise
been discontinued the Plan shall terminate on April 10, 2007.
FEDERAL INCOME TAX CONSEQUENCES
The following description is a general summary of the current
federal income tax provisions relating to the grant and exercise of stock
options under the Plan and the sale of shares of Common Stock acquired upon
exercise of options. The provisions summarized below are subject to changes
in federal income tax laws and regulations, and the effects of such
provisions may vary with individual circumstances.
<PAGE>
INCENTIVE STOCK OPTIONS
Under present law, the recipient of an incentive stock option, as
defined by Section 422 of the Internal Revenue Code (an "ISO"), will not realize
taxable income upon the grant or the exercise of an ISO, and the Company will
not receive an income tax deduction at either such time. Generally, if an
optionee exercises an ISO at any time prior to three months after termination of
the optionee's employment and does not sell the shares acquired upon exercise of
an ISO within either (i) two years after the grant of the ISO or (ii) one year
after the date of exercise of the ISO, the gain upon a subsequent sale of the
shares will be taxed as capital gain. If the optionee does not satisfy these
requirements, the optionee generally will recognize ordinary income in an amount
equal to the difference between the exercise price paid in connection with
exercise of the ISO and the fair market value of the shares acquired as of the
date of exercise of the ISO, and will recognize capital gain on the difference
between the sale price of the shares and the fair market value of the shares as
of the date of exercise. In such event, the Company would be entitled to a
corresponding income tax deduction equal to the amount recognized as ordinary
income by the optionee.
Upon the exercise of an ISO, the excess of the stock's fair market
value on the date of exercise over the exercise price will be included in the
optionee's alternative minimum taxable income ("AMTI") and may result in the
imposition of a tax on such AMTI. Liability for the alternative minimum tax is
complex and depends upon an individual's overall tax situation.
NON-STATUTORY STOCK OPTIONS
Generally, upon the grant of a stock option that does not qualify as an
ISO under Section 422 of the Internal Revenue Code (a "NQO"), neither the
Company nor the optionee will experience any tax consequences. Upon exercise of
an NQO granted under the Plan, or upon the exercise of an option initially
intended to be an ISO that does not qualify for the tax treatment described
above, the optionee will realize ordinary income in an amount equal to the
excess of the fair market value of the shares of Common Stock received over the
exercise price paid by the optionee with respect to such shares. The amount
recognized as ordinary income by the optionee will increase the optionee's basis
in the stock acquired pursuant to the exercise of the NQO. The Company will be
allowed a federal income tax deduction for the amount recognized as ordinary
income by the optionee upon the optionee's exercise of the NQO. Upon a
subsequent sale of the stock, the optionee will recognize short-term or
long-term gain or loss depending upon the holding period for the stock and upon
the stock's subsequent appreciation or depreciation in value.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting either in person or by proxy and voting on the
proposal, assuming a quorum is present, is required to approve the amendment to
the Stock Option Plan increasing the number of shares reserved for issuance
thereunder.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT TO THE STOCK OPTION PLAN INCREASING THE
<PAGE>
NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER AS SET FORTH IN PROPOSAL 2.
CONSENT TO ALLOW MICHAEL WIGLEY TO CONVERT
THE CONVERTIBLE PROMISSORY NOTE INTO
SHARES OF THE COMPANY'S COMMON STOCK AND
WARRANTS TO PURCHASE SHARES OF
THE COMPANY'S COMMON STOCK
(PROPOSAL 3)
In April, 2000 the Company raised $2,158,417.37 (in net proceeds)
through a private placement of units, each unit consisting of one share of
the Company's Common Stock and one warrant to purchase one additional share
of the Company's Common Stock. In a separate transaction, Mr. Michael Wigley
purchased from the Company a Convertible Promissory Note (the "Note"),
convertible into units substantially similar to the units sold through the
private placement. The proceeds of these transactions are to be used in part
to further support the operations of the Company's majority-owned subsidiary,
Advants, Inc.
Nasdaq rules require that, because Mr. Wigley was a director at the
time of the transaction, his right to convert the Note can only be exercised
if a majority of the shareholders approve the conversion. The shareholders
are being asked to approve conversion of the Note at the Annual Meeting.
The Note was purchased on April 18, 2000, in the original principal
amount of Two Hundred Fifty-Two Thousand Seven Hundred Fifty-Six Dollars
($252,756) and Mr. Wigley paid the same amount as consideration for the Note.
The Note is convertible into sixty thousand (60,000) units, each unit
consisting of one share of the Company's Common Stock and one warrant to
purchase one additional share of the Company's Common Stock, upon approval by
the Company's shareholders. Interest on the unpaid principal balance of the
Note accrues at a rate of five percent (5%) per annum and is calculated on
the basis of the actual number of days elapsed in a 365-day year.
The Note is convertible by Mr. Wigley on or after July 27, 2000,
provided that the shareholders approve such conversion at the Annual Meeting.
Upon conversion, the Note will be exchanged for sixty thousand (60,000) units,
each unit consisting of one share of the Company's Common Stock and one warrant
to purchase one additional share of the Company's Common Stock, exercisable
within 54 months of the date of issuance, at an exercise price equal to $4.96
per share. Upon conversion the Company will also pay to Mr. Wigley any accrued
but unpaid interest.
The Company is obligated to register the shares issued upon conversion
(including shares issuable upon exercise of the warrants issued upon conversion)
with the U.S. Securities and Exchange Commission for resale by Mr. Wigley.
Whether or not the shareholders approve conversion, the Note is due and
payable at Mr. Wigley's request at any time after July 27, 2000 and may be
repaid at the Company's option (if not previously converted) at any time after
August 25, 2000.
All proxies received in response to this solicitation will be voted in
favor of allowing Mr. Wigley to convert the Note into shares of Common Stock and
warrants to purchase shares of
<PAGE>
Common Stock, unless other instructions are indicated thereon.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting either in person or by proxy, assuming a
quorum is present, is required to approve the transaction whereby Wigley
would be allowed to convert the Note into shares of Common Stock and warrants
to purchase shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE TRANSACTION WHEREBY MR. WIGLEY WOULD BE ALLOWED TO CONVERT
THE NOTE INTO SHARES OF COMMON STOCK AND WARRANTS TO PURCHASE SHARES OF
COMMON STOCK AS SET FORTH IN PROPOSAL 3.
PROPOSALS OF SHAREHOLDERS
Any shareholder wishing to have a proposal considered for inclusion in
the Company's proxy solicitation materials for the Annual Meeting of
Shareholders to be held in 2001 must set forth such proposal in writing and file
it with the Secretary of the Company no later than December 31, 2000. A
shareholder proposal submitted to the Company after December 31, 2000 will be
considered untimely unless it is received by the Company's Secretary at 45 days
before the date the Company first mails its proxy materials to its shareholders
for the 2001 Annual Meeting.
OTHER BUSINESS
At the date of this Proxy Statement, management knows of no other
business that may properly come before the Annual Meeting. However, if any other
matters properly come before the meeting, the persons named in the enclosed form
of proxy will vote the proxies received in response to this solicitation in
accordance with their best judgment on such matters.
FINANCIAL INFORMATION
The Company's 1999 Annual Report to Shareholders for the year ended
December 31, 1999, including consolidated financial statements accompanies this
Proxy Statement. The Annual Report is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation is to be made.
Upon the written request of any shareholder solicited hereby, the Company will
provide, without charge, a copy of its 1999 Annual Report on Form 10-KSB, filed
with the Securities and Exchange Commission (not including exhibits). Requests
should be directed to: Chief Financial Officer, ChoiceTel Communications, Inc. ,
9724 10th Avenue North, Plymouth, Minnesota 55441.
<PAGE>
By Order of the Board of Directors
Melvin Graf,
SECRETARY
July 11, 2000
<PAGE>
CHOICETEL COMMUNICATIONS, INC.
1997 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN SECTION
SECTION 1. PURPOSE OF PLAN. This Plan shall be known as the
"INTELLIPHONE, INC. 1997 LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and upon
approval of the pending name change of the corporation to "ChoiceTel
Communications, Inc.," the Plan shall be known as the "CHOICETEL COMMUNICATIONS,
INC. 1997 LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and is hereinafter referred
to as the "Plan". The purpose of the Plan is to aid in maintaining and
developing personnel capable of assuring the future success of Intelliphone,
Inc., a Minnesota corporation (the "Company"), to offer such personnel
additional incentives to put forth maximum efforts for the success of the
business, and to afford them an opportunity to acquire a proprietary interest in
the Company through stock options and other long-term incentive awards as
provided herein. Options granted under this Plan may be either incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code"), or options that do not qualify as
Incentive Stock Options. Awards granted under this Plan shall be SARs,
restricted stock or performance awards as hereinafter described.
SECTION 2. STOCK SUBJECT TO PLAN. Subject to the provisions of Section
16 hereof, the stock to be subject to options or other awards under the Plan
shall be the Company's authorized common shares, no par value(the "Common
Shares"). Such Common Shares may be either authorized but unissued shares, or
issued shares which have been reacquired by the Company. Subject to adjustment
as provided in Section 16 hereof, the maximum number of shares on which options
may be exercised or other awards issued under this Plan shall be 100,000 shares.
If an option or award under the Plan expires, or for any reason is terminated or
unexercised with respect to any shares, such shares shall again be available for
options or awards thereafter granted during the term of the Plan.
SECTION 3. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by the Board of Directors of the
Company or a committee thereof. The members of any such committee shall be
appointed by and serve at the pleasure of the Board of Directors. (The group
administering the Plan shall hereinafter be referred to as the "Committee".)
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option or award, (ii) to determine the
employees to whom and the time or times at which such options and awards shall
be granted and the number of shares to be subject to each, (iii) to determine
the form of payment to be made upon the exercise of an SAR or in connection with
performance awards, either cash, Common Shares of the Company or a combination
thereof, (iv) to determine the terms of exercise of each option and award, (v)
to accelerate the time at which
<PAGE>
all or any part of an option or award may be exercised, (vi) to amend or modify
the terms of any option or award with the consent of the optionee, (vii) to
interpret the Plan, (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, (ix) to determine the terms and provisions of each option
and award agreement under the Plan (which agreements need not be identical),
including the designation of those options intended to be Incentive Stock
Options, and (x) to make all other determinations necessary or advisable for the
administration of the Plan, subject to the exclusive authority of the Board of
Directors under Section 17 herein to amend or terminate the Plan. The
Committee's determinations on the foregoing matters, unless otherwise
disapproved by the Board of Directors of the Company, shall be final and
conclusive.
(c) The Committee shall select one of its members as its Chair and
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.
SECTION 4. ELIGIBILITY AND GRANT.
(a) ELIGIBILITY. Incentive Stock Options may only be granted under this
Plan to any full or part-time employee (which term as used herein includes, but
is not limited to, officers and directors who are also employees) of the Company
and of its present and future subsidiary corporations within the meaning of
Section 424(f) of the Code (herein called "subsidiaries"). Full or part-time
employees, directors who are not employees, consultants or independent
contractors to the Company or one of its subsidiaries or affiliates shall be
eligible to receive options which do not qualify as Incentive Stock Options and
awards. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant.
(b) GRANT OF ADDITIONAL OPTIONS. A person who has been granted an
option or award under this Plan may be granted additional options or awards
under the Plan if the Committee shall so determine; provided, however, that to
the extent the aggregate fair market value (determined at the time the Incentive
Stock Option is granted) of the Common Shares with respect to which all
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year (under all plans described in subsection (d) of Section 422 of
the Code of his or her employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as options that do
not qualify as Incentive Stock Options. Nothing in the Plan or in any agreement
thereunder shall confer on any employee any right to continue in the employ of
the Company or any of its subsidiaries or affect, in any way, the right of the
Company or any of its subsidiaries to terminate his or her employment at any
time.
<PAGE>
SECTION 5. PRICE. The option price for all Incentive Stock Options
granted under the Plan shall be determined by the Committee but shall not be
less than 100% of the fair market value of the Common Shares at the date of
grant of such option. The option price for options granted under the Plan that
do not qualify as Incentive Stock Options and, if applicable, the price for all
awards shall also be determined by the Committee. For purposes of the preceding
sentence and for all other valuation purposes under the Plan, the fair market
value of the Common Shares shall be as reasonably determined by the Committee.
If on the date of grant of any option or award hereunder the Common Shares are
not traded on an established securities market, the Committee shall make a good
faith attempt to satisfy the requirements of this Section 5 and in connection
therewith shall take such action as it deems necessary or advisable.
SECTION 6. TERM. Each option and award and all rights and obligations
thereunder shall expire on the date determined by the Committee and specified in
the option or award agreement. The Committee shall be under no duty to provide
terms of like duration for options or awards granted under the Plan, but the
term of an Incentive Stock Option may not extend more than ten (10)years from
the date of grant of such option and the term of options granted under the Plan
which do not qualify as Incentive Stock Options may not extend more than fifteen
(15) years from the date of granting of such option.
SECTION 7. EXERCISE OF OPTION OR AWARD.
(a) EXERCISABILITY. The Committee shall have full and complete authority to
determine whether an option or award will be exercisable in full at any time or
from time to time during the term thereof, or to provide for the exercise
thereof in such installments, upon the occurrence of such events (such as
termination of employment for any reason) and at such times during the term of
the option as the Committee may determine and specify in the option or award
agreement.
(b) NO VIOLATION OF STATE OR FEDERAL LAWS. The exercise of any option or
award granted hereunder shall only be effective at such time that the sale of
Common Shares pursuant to such exercise will not violate any state or federal
securities or other laws.
(c) METHOD OF EXERCISE. An optionee or grantee electing to exercise an
option or award shall give written notice to the Company of such election and of
the number of shares subject to such exercise. The full purchase price of such
shares shall be tendered with such notice of exercise. Payment shall be made to
the Company in cash (including bank check, certified check, personal check, or
money order), or, at the discretion of the Committee and as specified by the
Committee, (i) by delivering certificates for the Company's Common Shares
already owned by the optionee or grantee having a fair market value as of the
date of grant equal to the full purchase price of the shares, or (ii)
relinquishing the right to acquire by exercise of any option, such number of the
Company's Common Shares otherwise issuable to the optionee which in the
aggregate have a fair market value equal to the amount of the full purchase
price ("cashless exercise") or (iii) by delivering the optionee's or grantee's
promissory note, which shall provide for interest at a rate not less than the
minimum rate required to avoid the imputation of income, original issue discount
or
<PAGE>
a below- market-rate loan pursuant to Sections 483, 1274 or 7872 of the Code or
any successor provisions thereto, or (iv) a combination of cash, the optionee's
or grantee promissory note, a cashless exercise and such owned shares. The fair
market value of such tendered shares shall be determined as provided in Section
5 herein. The optionee's or grantee's promissory note shall be a full recourse
liability of the optionee and may, at the discretion of the Committee, be
secured by a pledge of the shares being purchased. Until such person has been
issued the shares subject to such exercise, he or she shall possess no rights as
a shareholder with respect to such shares.
SECTION 8. RESTORATION OPTIONS. The Committee may grant
"restoration" options, separately or together with another option, pursuant
to which, subject to the terms and conditions established by the Committee
and any applicable requirements of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any other
applicable law, the optionee would be granted a new option when the payment
of the exercise price of the option to which such "restoration" option
relates is made by the delivery of shares of the Company's Common Shares
owned by the optionee, as described in this Section 8, which new option would
be an option to purchase the number of shares not exceeding the sum of (a)
the number of shares of the Company's Common Shares tendered as payment upon
the exercise of the option to which such "restoration" option relates and (b)
the number of shares of the Company's Common Shares, if any, tendered as
payment of the amount to be withheld under applicable income tax laws in
connection with the exercise of the option to which such "restoration" option
relates, as described in Section 12 hereof. "Restoration" options may be
granted with respect to options previously granted under this Plan or any
prior stock option plan of the Company, and may be granted in connection with
any option granted under this Plan at the time of such grant. The purchase
price of the Common Shares under each such new option, and the other terms
and conditions of such option, shall be determined by the Committee,
consistent with the provisions of the Plan.
SECTION 9. STOCK APPRECIATION RIGHTS.
(a) GRANT. At the time of grant of an option or award under the Plan (or at
any other time), the Committee, in its discretion, may grant a Stock
Appreciation Right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
(b) EXERCISE. An SAR shall be exercised by the delivery to the Company of a
written notice which shall state that the holder thereof elects to exercise his
or her SAR as to the number of shares specified in the notice and which shall
further state what portion, if any, of the SAR exercise amount (hereinafter
defined) the holder thereof requests is to be paid in cash and what portion, if
any, is to be paid in Common Shares of the Company. The Committee promptly shall
cause to be paid to such holder the SAR exercise amount either in cash, in
Common Shares of the Company, or any combination of cash and shares as the
Committee may determine. Such determination may be either in accordance with the
request made by the holder of the SAR or in
<PAGE>
the sole and absolute discretion of the Committee. The SAR exercise amount is
the excess of the fair market value of one share of the Company's Common Shares
on the date of exercise over the per share exercise price in respect of which
the SAR was granted, multiplied by the number of shares as to which the SAR is
exercised. For the purposes hereof, the fair market value of the Company's
shares shall be determined as provided in Section 5 herein.
SECTION 10. RESTRICTED STOCK AWARDS. Awards of Common Shares subject to
forfeiture and transfer restrictions may be granted by the Committee. Any
restricted stock award shall be evidenced by an agreement in such form as the
Committee shall from time to time approve, which agreement shall comply with and
be subject to the following terms and conditions and any additional terms and
conditions established by the Committee that are consistent with the terms of
the Plan:
(a) GRANT OF RESTRICTED STOCK AWARDS. Each restricted stock award made
under the Plan shall be for such number of Common Shares as shall be determined
by the Committee and set forth in the agreement containing the terms of such
restricted stock award. Such agreement shall set forth a period of time during
which the grantee must remain in the continuous employment of the Company in
order for the forfeiture and transfer restrictions to lapse. If the Committee so
determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered by the
restricted stock award. The agreement may also, in the discretion of the
Committee, set forth performance or other conditions that will subject the
Common Shares to forfeiture and transfer restrictions. The Committee may, at its
discretion, waive all or any part of the restrictions applicable to any or all
outstanding restricted stock awards.
(b) DELIVERY OF COMMON SHARES AND RESTRICTIONS. At the time of a
restricted stock award, a certificate representing the number of Common shares
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of
the Plan, and shall bear such a legend setting forth the restrictions imposed
thereon as the Committee, in its discretion, may determine. The grantee shall
have all rights of a shareholder with respect to the Common Shares, including
the right to receive dividends and the right to vote such shares, subject to the
following restrictions: (i) the grantee shall not be entitled to delivery of the
stock certificate until the expiration of the restricted period and the
fulfillment of any other restrictive conditions set forth in the restricted
stock agreement with respect to such Common Shares; (ii) none of the Common
Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of during such restricted period or until after the
fulfillment of any such other restrictive conditions; and (iii) except as
otherwise determined by the Committee, all of the Common Shares shall be
forfeited and all rights of the grantee to such Common Shares shall terminate,
without further obligation on the part of the Company, unless the grantee
remains in the continuous employment of the Company for the entire restricted
period in relation to which such Common Shares were granted and unless any other
restrictive conditions relating to the restricted stock award are met. Any
Common Shares, any other securities of the Company and any other property
(except for cash dividends) distributed with respect to the Common Shares
subject to restricted stock awards shall be subject
<PAGE>
to the same restrictions, terms and conditions as such restricted Common Shares.
(c) TERMINATION OF RESTRICTIONS. At the end of the restricted period
and provided that any other restrictive conditions of the restricted stock award
are met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Common Shares subject thereto,
and a stock certificate for the appropriate number of Common Shares, free of the
restrictions and the restricted stock legend, shall be delivered to the grantee
or his or her beneficiary or estate, as the case may be.
SECTION 11. PERFORMANCE AWARDS. The Committee is further authorized to
grant performance awards. Subject to the terms of this Plan and any applicable
award agreement, a performance award granted under the Plan(i) may be
denominated or payable in cash, Common Shares (including, without limitation,
restricted stock), other securities, other awards, or other property and (ii)
shall confer on the holder thereof rights valued as determined by the Committee,
in its discretion, and payable to, or exercisable by, the holder of the
Performance awards, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee, in its
discretion, shall establish. Subject to the terms of this Plan and any
applicable award agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance award granted, and the amount of any payment or transfer to be made
by the grantee and by the Company under any Performance award shall be
determined by the Committee.
SECTION 12. INCOME TAX WITHHOLDING AND TAX BONUSES.
(a) WITHHOLDING OF TAXES. In order to comply with all applicable
federal or state income tax laws or regulations, the Company may take such
action as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and absolute
responsibility of an optionee or grantee under the Plan, are withheld or
collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal and state taxes to be withheld or collected upon
exercise of an option or award which does not qualify as an Incentive Stock
Option hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, shall permit the optionee or
grantee to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the shares otherwise to be delivered upon exercise of such
option or award with a fair market value, determined in accordance with Section
5 herein, equal to such taxes or (ii) delivering to the Company Common Shares
other than the shares issuable upon exercise of such option or award with a fair
market value, determined in accordance with Section 5, equal to such taxes.
(b) TAX BONUS. The Committee shall have the authority, at the time of
grant of an option under the Plan or at any time thereafter, to approve tax
bonuses to designated optionees or grantees to be paid upon their exercise of
options or awards granted hereunder. The amount of any such payments shall be
determined by the Committee. The Committee shall have full authority in its
absolute discretion to determine the amount of any such tax bonus and the terms
and conditions affecting the vesting and payment thereafter.
<PAGE>
SECTION 13. ADDITIONAL RESTRICTIONS. The Committee shall have full and
complete authority to determine whether all or any part of the Common Shares of
the Company acquired upon exercise of any of the options or awards granted under
the Plan shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner the optionee's or grantee's rights
with respect thereto, but any such restriction shall be contained in the
agreement relating to such options or awards.
SECTION 14. TEN PERCENT SHAREHOLDER RULE. Notwithstanding any other
provision in the Plan, if at the time an option is otherwise to be granted
pursuant to the Plan the optionee owns directly or indirectly (within the
meaning of Section 424(d) of the Code) Common Shares of the Company possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporations, if any (within
the meaning of Section 422(b) (6) of the Code), then any Incentive Stock Option
to be granted to such optionee pursuant to the Plan shall satisfy the
requirements of Section 422(c)(5) of the Code, and the option price shall be not
less than 110% of the fair market value of the Common Shares of the Company
determined as described herein, and such option by its terms shall not be
exercisable after the expiration of five (5) years from the date such option is
granted.
SECTION 15. NON-TRANSFERABILITY. No option or award granted under the
Plan shall be transferable by an optionee or grantee, otherwise than by will or
the laws of descent or distribution. Except as otherwise provided in an option
or award agreement, during the lifetime of an optionee or grantee, the option
shall be exercisable only by such optionee or grantee.
SECTION 16. DILUTION OR OTHER ADJUSTMENTS. If there shall be any change
in the Common Shares through merger, consolidation, reorganization,
recapitalization, dividend in the form of stock (of whatever amount), stock
split or other change in the corporate structure, appropriate adjustments in the
Plan and outstanding options and awards shall be made by the Committee. In the
event of any such changes, adjustments shall include, where appropriate, changes
in the aggregate number of shares subject to the Plan, the number of shares and
the price per share subject to outstanding options and awards and the amount
payable upon exercise of outstanding awards, in order to prevent dilution or
enlargement of option or award rights.
SECTION 17. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board of Directors
may amend or discontinue the Plan at any time. Subject to the provisions of
Section 16 no amendment of the Plan, however, shall without shareholder
approval: (i) increase the maximum number of shares under the Plan as provided
in Section 2 herein, (ii) decrease the minimum price provided in Section 5
herein, (iii) extend the maximum term under Section 6,or (iv) modify the
eligibility requirements for participation in the Plan. The Board of Directors
shall not alter or impair any option or award theretofore granted under the Plan
without the consent of the holder of the option.
SECTION 18. TIME OF GRANTING. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Board of Directors or by the
shareholders of the Company, and no action taken by the Committee or the Board
of Directors (other than the execution and
<PAGE>
delivery of an option or award agreement), shall constitute the granting of an
option or award hereunder.
SECTION 19. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The Plan was approved by the Board of Directors on April 11, 1997,
and shall be approved by the shareholders of the Company within twelve (12)
months thereof.
(b) Unless the Plan shall have been discontinued as provided in Section
16 hereof, the Plan shall terminate April 10, 2007. No option or award may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee or grantee, alter or impair any rights or
obligations under any option or award theretofore granted.
FIRST AMENDMENT TO
CHOICETEL COMMUNICATIONS, INC.
1997 LONG-TERM INCENTIVE AND STOCK OPTION PLAN
This First Amendment to the 1997 Long-Term Incentive and Stock Option Plan
of ChoiceTel Communications, Inc. is made this 12th day of September, 1997.
1. The Plan shall be amended by deleting Section 5 thereof in its entirety and
inserting the following in its place:
PRICE. The option price for all Incentive stock Options granted under
the Plan shall be determined by the Committee but shall not be less
than 100% of the fair market value of the Common Shares at the date of
grant of such option. The option price for options granted under the
Plan that do not qualify as Incentive Stock Options and, if applicable,
the price for all awards shall also be determined by the Committee.
Notwithstanding the preceding sentence, the option price for all
options granted under the plan that do not qualify as Incentive Stock
options shall be determined by the Committee but shal lnot be less than
eighty-five percent (85%) of the fair market value of the Common Shares
at the date of grant of such option. For purposes of the foregoing and
for all other valuation purposes under the Plan, the fair market value
of the common Shares shall be as reasonably determined by the
committee. If on the date of grant of any option or award hereunder the
common Shares are not traded on an established securities market, the
Committee shall make a good faith attempt to satisfy the requirements
of this Section 5 and in connection therewith shall take such action as
it deems necessary or advisable.
2. The Plan shall be further amended by deleting Section 7(c) thereof in its
entirety and inserting the following in its place:
METHOD OF EXERCISE. An optionee or grantee electing to exercise an
option or award shall give written notice to the Company of such
election and of the number of shares subject to such exercise. The full
purchase price of such shares shall be tendered with such notice of
<PAGE>
exercise. Payment shall be made to the Company in cash (including bank
check, certified check, personal check, or money order), or, at the
discretion of the Committee and as specified by the Committee, (I) by
delivering certificates for the company's Common Shares already owned
by the optionee or grantee having a fair market value as of the date of
grant equal to the full purchase price of the shares, or (ii)
relinquishing the right to acquire by exercise of any option, such
number of the company's Common Shares otherwise issuable to the
optoinee which in the aggregate have a fair market value equal to the
amount of the full purchase price ("Cashless exercise") or (iii) a
combination of cash, a cashless exercise and such owned shares. The
fair market value of such tendered shares shall be determined as
provided in Section 5 herein. Until such person has been issued the
shares subject to such exercise, he or she shall possess no rights as a
shareholder with respect to such shares.
3. Except as modified hereby, the Plan shall continue in full force and effect.
SECOND AMENDMENT TO
CHOICETEL COMMUNICATIONS, INC.
1997 LONG-TERM INCENTIVE AND STOCK OPTION PLAN
This Section Amendment to ChoiceTel Communications, Inc. 1997 Long-Term
Incentive and Stock Option Plan (the "Plan") has been adopted by the Board of
Directors of the Company on June 1, 2000 and is subject to approval by the
shareholders the Company's next annual meeting.
1. The third sentence of Section 2 of the Plan is hereby amended to read
as follows:
"Subject to adjustment as provided in Section 16 hereof, the maximum
number of shares on which options may be exercised or other awards
issued under this Plan shall be 350,000 shares."
2. Except as modified hereby, the Plan shall continue in full force and
effect.
<PAGE>
CHOICETEL COMMUNICATIONS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
JULY 26, 2000
CHOICETEL COMMUNICATIONS, INC.
PROXY
-------------------------------------------------------------------------------
THE UNDERSIGNED, REVOKING ALL PRIOR PROXIES, HEREBY APPOINTS JEFFREY R.
PALETZ AND JACK S. KOHLER, OR EITHER OF THEM, AS PROXY OR PROXIES, WITH FULL
POWER OF SUBSTITUTION AND REVOCATION, TO VOTE ALL SHARES OF COMMON STOCK OF
CHOICETEL COMMUNICATIONS, INC. (THE "COMPANY") OF RECORD IN THE NAME OF THE
UNDERSIGNED AT THE CLOSE OF BUSINESS ON JUNE 26, 2000, AT THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON WEDNESDAY, JULY 26, 2000, OR AT ANY ADJOURNMENT
THEREOF, UPON THE FOLLOWING MATTERS:
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
- PLEASE DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
1. Election of the following nominees as / / FOR ALL / / WITHHOLD FOR
directors: 01 Gary S. Kohler, NOMINEES ALL NOMINEES
02 Jeffrey R. Paletz, 03 Robert A. Hegstrom,
04 Michael Wigley
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE -------------------------
FOR ANY INDICATED NOMINEE, WRITE THE NUMBER(S) | |
OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) -------------------------
2. Approval of amendment to the 1997 Long-Term FOR AGAINST ABSTAIN
Incentive and Stock Option Plan to increase / / / / / /
the number of shares reserved for issuance
under the Plan:
3. Consent to allow Michael Wigley to convert FOR AGAINST ABSTAIN
the Convertible Promissory Note into shares of / / / / / /
the Company's Common Stock and warrants to
purchase shares of the Company's Common Stock:
4. In their discretion the Proxies are authorized
to vote upon such matters as may properly come
before the meeting
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3. THE BOARD OF
DIRECTORS RECOMMENDS VOTES FOR PROPOSAL 1 , FOR PROPOSAL 2 AND FOR PROPOSAL 3.
Address Change? Mark Box / / Indicate changes below:
Date________________, 2000.
----------------------------
| |
----------------------------
Signatures(s)
Please mark, date, sign, and
mail this proxy promptly in
the enclosed envelope.
Please sign your name
exactly as it appears
below. In the case of
shares woned in joint
tenancy or as tenants in
common, all should sign.
Fiduciaries should
indicate their title and
authority.
