AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1999
REGISTRATION NO. 33-____________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
GTC TELECOM CORP.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 88-0318246
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3151 Airway Ave., Suite P-3
Costa Mesa, California 92626
(Address of Principal Executive Offices, Including Zip Code)
____________________
1999 Stock Incentive Plan
Consulting Agreements
Legal Services Agreements
(Full Title of the Plan)
____________________
Paul Sandhu
President & CEO
3151 Airway Ave., Suite P-3
Costa Mesa, California
(714) 549-7700
(Name, Address, and Telephone Number of Agent for Service)
COPIES TO:
M. Richard Cutler, Esq.
Cutler Law Group
610 Newport Center Drive, Suite 800
Newport Beach, California 92660
(949) 719-1977
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price per Share(1) Aggregate Offering Price Registration Fee
- ------------------ ------------ ------------------------ ------------------------ ----------------
Common Stock, 67,675 $4.00 $ 270,700 $ 75.25
par value
$0.001 (2)
Common Stock 411,000 $2.88 $1,183,680 $ 329.06
par value
$0.001 (3)
Common Stock 750,000 $4.00 $3,000,000 $ 834.00
par value
$0.001 (4)
- -----------------------------------------------------------------------------------------------------------
Total Registration Fee $1,238.31
</TABLE>
(1)Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c).
(2)Represents shares of Common Stock issued to employees and consultants.
Please refer to the Selling Shareholders section of this document.
(3)Represents shares of Common Stock underlying options issued
to employees and consultants of the Company. Please refer to the
Selling Shareholders section of this document.
(4)Represents the total number of shares of Common Stock
which may be issued until September 30, 2000 under the 1999
Stock Incentive Plan.
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EXPLANATORY NOTE
GTC Telecom Corp. ("GTC") has prepared this Registration Statement
in accordance with the requirements of Form S-8 under the Securities
Act of 1933, as amended (the "1933 Act"), to register shares of
common stock, $.001 par value per share, of GTC, issuable pursuant
to GTC's 1999 Stock Incentive Plan.
Under cover of this Form S-8 is a Reoffer Prospectus GTC prepared in
accordance with Part I of Form S-3 under the 1933 Act. The Reoffer
Prospectus may be utilized for reofferings and resales of up to
478,675 shares of common stock acquired by a selling shareholders.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
GTC will send or give the documents containing the information
specified in Part 1 of Form S-8 to employees or consultants as
specified by Securities and Exchange Commission Rule 428 (b) (1)
under the Securities Act of 1933, as amended (the "1933 Act"). GTC
does not need to file these documents with the commission either as
part of this Registration Statement or as prospectuses or prospectus
supplements under Rule 424 of the 1933 Act.
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REOFFER PROSPECTUS
GTC TELECOM CORP.
3151 AIRWAY AVE., SUITE P-3
COSTA MESA, CALIFORNIA 92626
(714) 549-7700
478,675 SHARES OF COMMON STOCK
The shares of common stock, $0.001 par value per share, of GTC
Telecom Corp. ("GTC" or the "Company") offered hereby (the "Shares")
will be sold from time to time by the individuals listed under the
Selling Shareholders section of this document (the "Selling
Shareholders"). The Selling Shareholders acquired the Shares
pursuant to compensatory benefit plans or pursuant to Options for
the purchase of the Shares granted pursuant to employment benefit
plans with GTC for employment, consulting and legal services that
the Selling Shareholders provided to GTC.
The sales may occur in transactions on the NASDAQ over-the-counter
market at prevailing market prices or in negotiated transactions.
GTC will not receive proceeds from any of the sale the Shares.
However, GTC will receive proceeds from the exercise of Options
granted pursuant to the employee benefit plans for which some of the
Shares underlie. GTC is paying for the expenses incurred in
registering the Shares.
The Shares are "restricted securities" under the Securities Act of
1933 (the "1933 Act") before their sale under the Reoffer
Prospectus. The Reoffer Prospectus has been prepared for the
purpose of registering the Shares under the 1933 Act to allow for
future sales by the Selling Shareholders to the public without
restriction. To the knowledge of the Company, the Selling
Shareholders have no arrangement with any brokerage firm for the
sale of the Shares. The Selling Shareholders may be deemed to be an
"underwriter" within the meaning of the 1933 Act. Any commissions
received by a broker or dealer in connection with resales of the
Shares may be deemed to be underwriting commissions or discounts
under the 1933 Act.
GTC's common stock is currently traded on the NASDAQ
Over-the-Counter Bulletin Board under the symbol "GTCC".
________________________
This investment involves a high degree of risk. Please see "Risk
Factors" beginning on page 8.
________________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED WHETHER THIS REOFFER PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________________
OCTOBER 6, 1999
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TABLE OF CONTENTS
Where You Can Find More Information. . . . . . . . . . 5
Incorporated Documents . . . . . . . . . . . . 5
The Company . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . 14
Selling Shareholders . . . . . . . . . . . . 15
Plan of Distribution . . . . . . . . . . . . 16
Legal Matters . . . . . . . . . . . . 17
Experts . . . . . . . . . . . . 17
________________________
You should only rely on the information incorporated by reference or
provided in this Reoffer Prospectus or any supplement. We have not
authorized anyone else to provide you with different information.
The common stock is not being offered in any state where the offer
is not permitted. You should not assume that the information in
this Reoffer Prospectus or any supplement is accurate as of any date
other than the date on the front of this Reoffer Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
GTC is required to file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange
Commission (the "SEC") as required by the Securities Exchange Act of
1934, as amended (the "1934 Act"). You may read and copy any
reports, statements or other information we file at the SEC's Public
Reference Rooms at:
450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, N.Y. 10048
Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Rooms. Our filings are also available to the
public from commercial document retrieval services and the SEC
website (http://www.sec.gov).
INCORPORATED DOCUMENTS
The SEC allows GTC to "incorporate by reference" information into
this Reoffer Prospectus, which means that the Company can disclose
important information to you by referring you to another document
filed separately with the SEC. The information incorporated by
reference is deemed to be part of this Reoffer Prospectus, except
for any information superseded by information in this Reoffer
Prospectus.
GTC's Registration Statement on Form 10-SB, as amended, dated July
20, 1999, is incorporated herein by reference. In addition, all
documents filed or subsequently filed by the Company under Sections
13(a), 13(c), 14 and 15(d) of the 1934 Act, before the termination
of this offering, are incorporated by reference.
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The Company will provide without charge to each person to whom a
copy of this Reoffer Prospectus is delivered, upon oral or written
request, a copy of any or all documents incorporated by reference
into this Reoffer Prospectus (excluding exhibits unless the exhibits
are specifically incorporated by reference into the information the
Reoffer Prospectus incorporates). Requests should be directed to the
Chief Financial Offer at GTC, at GTC's executive offices, located at
3151 Airway Ave., Suite P-3, Costa Mesa, California 92626. GTC's
telephone number is (714) 549-7700. The Company's corporate Web
site address is http://www.gtctelecom.com.
THE COMPANY
GTC is a provider of various Telecommunication and Internet related
services, including long distance telephone, and calling card
services as well as various Internet related services including
Internet Service Provider Access and Web Page Hosting. On May 29,
1997, our founders formed GenX, LLC ("GenX") in the state of
Delaware for the purpose of providing long distance telephone
service. On February 3, 1998, GenX reorganized from a limited
liability company to a corporation and changed its name to GenTel
Communications, Inc., a Colorado corporation ("GenTel"). On August
31, 1998, GenTel was acquired by Bobernco, Inc., a Nevada
corporation ("Bobernco"). Prior to its acquisition of GenTel,
Bobernco had no significant operations. Immediately following the
tranaction, our founder owned a majority of the outstanding stock of
Bobernco, and thus had control of Bobernco. For accounting purposes
we recorded the transaction as a reverse acquisition whereby GenTel
was treated as having acquired Bobernco. Following the transaction,
Bobernco changed its name to GTC Telecom Corp.
The founders of GenTel agreed to be acquired by Bobernco because
Bobernco was a public company whose common stock was listed for
trading on the Over The Counter Bulletin Board. As a public
company, we felt that it would be easier to raise the money
necessary to carry out our business plan.
Immediately prior to the acquisition, Bobernco had 1,800,000 shares
of Common Stock outstanding. As part of Bobernco's reorganization
with GenTel, Bobernco issued 8,986,950 shares of its Common Stock
to the shareholders of GenTel in exchange for 8,986,950 shares of
GenTel Common Stock. Subsequent to the acquisition, the former
shareholders of GenTel constituted 83.31% of the total outstanding
shares of the Common Stock of GTC and the original shareholders of
Bobernco constituted 16.69% of the total outstanding shares of the
Common Stock of the Company. Our common stock currently trades on
the NASD OTC Bulletin Board under the symbol "GTCC."
BUSINESS OF THE COMPANY
GTC currently offers a variety of services designed to meet its
customer's telecommunications and Internet related needs. The
Company's services currently consists of the following:
Telecommunications Related Services
The Company is currently licensed in 46 states and the District of
Columbia to provide long distance telecommunications services. GTC
primarily services small and medium sized businesses and residential
customers throughout the United States. GTC has positioned itself
to be a low-cost provider in the marketplace. By offering low
rates, GTC expects to add customers at an accelerated pace. To
date, GTC has operated as a switchless, nonfacilities-based reseller
of long distance services. By committing to purchase large usage
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volumes from carriers such as MCI/WorldCom, Inc. pursuant to
contract tariffs, GTC has been able to procure substantial discounts
and offer low-cost, high-quality long distance services to its
customers at rates below the current standard industry levels.
GTC provides long distance telephone service under a variety of
plans. These include outbound service, inbound toll-free 800
service and dedicated private line services for data. GTC does not
currently provide local telephone service. GTC's long distance
services are billed on a monthly basis either directly by GTC or by
the Local Exchange Carrier ("LEC") through the services of Billing
Concepts, Inc. dba U.S. Billing ("USBI"). If these services are
billed directly by GTC, the customer has a choice of paying by
credit card or sending payment to GTC. If these services are billed
by the LEC, the LEC is responsible for collecting the amount billed
and remitting the proceeds to GTC. GTC is also in the process of
purchasing a voice-over-IP ("VoIP") technology network to complement
its long distance telecommunications services. In addition, GTC is
also exploring the possibility of providing local telephone service.
Whether GTC will be able to provide local telephone services is
dependent on its ability to negotiate contracts with third-party
providers of local telephone service on favorable terms. GTC has
initiated negotiations with certain local telephone providers but
has not reached any agreements. Therefore, there can be no
assurances that GTC will be able to offer local telephone service.
Internet Related Services
GTC also recently began providing a variety of Internet related
services. These services, available to both consumer and business
users, include prepaid calling cards at GTC's ecallingcards.com web
site; Internet Services Provider access through dial-up, Digital
Subscriber Line ("DSL"), and Wireless T-1 methods; and Internet Web
Page development and hosting services. GTC's Internet related
services are billed using the same methods as those used for billing
its Telecommunication services. GTC's Internet related services,
with the exception of its prepaid calling cards, are provided
pursuant to contracts with third-party providers, who remain
competitors with GTC. By contracting with third-party providers to
purchase large quantities of usage volumes, GTC is able to secure
significant discounts which then allows GTC to offer these services
to its end-users at rates at or lower than its competitors.
GTC's Internet Service Provider Access service is currently provided
on a nationwide basis. Dial-up service provides unlimited Internet
access and several related services using conventional modems at
access speeds up to 56 kbps for a $9.95 monthly fee. DSL service
provides a faster, more efficient method for communicating digital
data over telephone lines. DSL speeds are significantly faster than
conventional modem speeds (up to 1.1 Mbps versus 56 kbps for Dial-up
service). The monthly DSL service charge ranges from $100 to $260
depending on speed and service options. A one-time set-up fee of
$500 is also charged.
Currently, GTC's Wireless T-1 services are only available in the
Southern California region. Wireless T-1 allows businesses to
utilize connections at 1.5 Mbps without contracting for T-1 service
from local telephone companies. Wireless T-1 Service fees range
from $299 to $899 per month with a one-time set-up fee of $2,500.
GTC plans on expanding this service to include other regions.
Whether GTC is able to provide its Wireless T-1 services to other
regions depends on whether GTC will be able to secure contracts with
third-party suppliers on favorable terms. There can be no
assurances that GTC will be able to obtain such contracts and
therefore be able to expand its Wireless T-1 service to other
regions.
7
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GTC's Internet Web Page Hosting services are currently available on
a nationwide basis. Internet Web Page Hosting services provides
space on GTC's Web Server computers for customers to publish their
own Web Pages. Internet Web Page Hosting fees are $29.95 per month,
with a one-time set-up fee of $29.95.
RISK FACTORS
In this section we highlight some of the risks associated with GTC's
business and operations. Prospective investors should carefully
consider the following risk factors when evaluating an investment in
the common stock offered by this Reoffer Prospectus.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT. Our
executive officers commenced our major lines of business providing
long distance and Internet service relatively recently.
Accordingly, your evaluation of GTC will be based on an extremely
limited operating history. You must consider that GTC's prospects
are subject to the risks, expenses and uncertainties frequently
encountered by companies in the early stage of development in new
and rapidly evolving markets. As of March 31, 1999, GTC had an
accumulated deficit of $2,731,936. Although GTC has experienced
revenue growth in recent months, there can be no assurance that
GTC's revenues will continue to increase. GTC has not achieved
profitability to date, and GTC anticipates that it will continue to
incur net losses for the foreseeable future. GTC currently expects
to increase its operating expenses significantly, expand its sales
and marketing operations and continue to develop and extend its
Telecommunications and Internet related services. If these expenses
exceed revenues, GTC's business, results of operations and financial
condition could be materially and adversely affected.
The extremely limited operating history of GTC and the uncertain
nature of the markets addressed by GTC make the prediction of future
results of operations difficult or impossible. Therefore, GTC's
recent revenue growth should not be taken as indicative of the rate
of revenue growth, if any, that can be expected in the future. GTC
believes that period-to-period comparisons of its results of
operations are not meaningful and that you should not rely on the
results for any period as an indication of future performance.
WE ARE DEPENDENT ON A LIMITED NUMBER OF SUPPLIERS. We currently
depend upon MCI/WorldCom, Inc., ("MCI/WCOM") as our sole provider of
long distance service. We contract with MCI/WCOM to provide us with
long distance services which we resale to our customers. We will
continue to depend upon MCI/WCOM to provide transmission facilities,
maintenance and international long distance services for the
foreseeable future. This agreement is probably our most vital
agreement and our ability to provide our long distance service
depends upon whether we can continue to maintain a favorable
relationship with MCI/WCOM. MCI/WCOM may terminate its contract
with us for limited reasons, including for nonpayment by GTC, for
national defense purposes or if the provision of services to GTC
were to have a substantial adverse impact on MCI/WCOM's network.
Under the terms of the contract, MCI/WCOM is required to provide us
with a minimum of 5-days notice in the case of a material breach
prior to termination of the contract. Although we have no specific
contingency arrangements in place to provide service to our
customers if MCI/WCOM were to discontinue its service to GTC, based
upon discussions we have had with other long distance providers and
based on such providers' published rates, we believe that we could
negotiate and obtain contracts with other long distance providers to
resell long distance services at rates at or below our current rates
with MCI/WCOM. If we were to switch to another provider, however,
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we believe that it would take approximately thirty (30) days to
switch our customers to a new provider. Although we believe that we
have the right to switch our customers without their consent to such
other providers, our customers have the right to discontinue such
service at any time. Accordingly, the termination or nonrenewal of
our contract with MCI/WCOM or the loss of the telecommunications
services provided by MCI/WCOM would likely have a material adverse
effect on GTC's results of operations and financial condition.
We currently use and will continue to use billing services provided
by US Billing, a publicly traded company ("USBI"). USBI is in the
business of providing billing services. There can be no assurance
that USBI will continue to offer us billing services on terms we
find acceptable. USBI may decrease the extent to which its name may
be used on bills for which it provides billing services. The loss
of USBI's billing services or decreased customer awareness of the
USBI name could have a material adverse effect on GTC's marketing
strategy and retention of existing customers.
We do not have our own Internet Network. We currently provide our
Internet Service Provider Access services pursuant to a one-year
agreement with Level 3 Communications, LLC ("Level 3") to provide
its Internet Service Provider Access. The agreement, which began in
July 1999, provides for GTC to initially pay $36,000 per month with
an initial set-up fee of $8,000. As Level 3 is able to provide
service throughout the nation, our monthly minimum commitment will
increase from $36,000 per month to a maximum of $60,750 per month
depending on the number of Level 3's Internet nodes we use.
In addition, GTC is committed to pay an additional set-up fee of up
to $5,500. Although we believe that our relations with Level 3
are strong and should remain so with continued contract compliance,
the termination of our contract with Level 3, the loss of Internet
services provided by Level 3, or a reduction in the quality of
service we receive from Level 3 could have a material
adverse effect on our results of operations.
Prior to using Level 3, our Internet Service Provider Access
services was provided through Epoch Networks, Inc. dba Epoch
Internet ("Epoch"). Under the terms of the three year contract with
Epoch dated February 3, 1999, GTC is obligated to an initial monthly
minimum revenue commitment of $0.00 increasing to $25,000 per month
over a seven month ramp up period beginning March 1, 1999 to
September 1, 1999 and thereafter until the end of the contract
period ending on February 28, 2002. Pursuant to the terms of the
contract with Epoch, GTC must pay liquidated damages in an amount
equal to the aggregate minimum revenue commitment for the remaining
term of the contract if GTC terminates the contract prior to the
expiration date. In July 1999, we decided to switch our Internet
Service Provider Access supplier from Epoch to Level 3. Our
Management determined that the cost per customer using Level 3 is
approximately $3.00 versus $13.00 per customer using Epoch.
Additionally, we believe that the services provided by Level 3 are
superior to those provided by Epoch.
As a result of this decision, GTC is currently in the process of
negotiating the termination of its agreement with Epoch. Unless we
are able to negotiate the termination of our agreement with Epoch on
more favorable terms, GTC will be committed to pay Epoch a monthly
minimum of $25,000 beginning in September, 1999 or an aggregate of
$792,500 over the entire term of the contract (terminating on
February 28, 2002).
GTC's Wireless T-1 services are currently provided pursuant to a
contract with Global Pacific Internet ("Global"). Currently, GTC's
T-1 services are available only in the Southern California region.
Under the terms of its contract with Global, GTC is not subject to a
monthly minimum revenue commitment. Although GTC believes that its
relations with Global are strong and should remain so with continued
contract compliance, the loss of Wireless T-1 services provided by
Global, or a reduction in the quality of service GTC receives from
Global could have a material adverse effect on GTC' s results of
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operations. GTC anticipates that it would take between thirty (30)
to sixty (60) days to locate a replacement supplier in the event
that GTC's agreement with Global is terminated. GTC currently plans
to expand its Wireless T-1 services to other regions. However,
there can be no assurances that GTC will or will be able to expand
this service to other regions.
FUTURE CAPITAL NEEDS. To date, we have relied mostly on private
funding from the sale of restricted shares of our Common Stock and
short term borrowing to fund our operations. To date, we have
generated little revenue and have extremely limited cash liquidity
and capital resources. Our future capital requirements will depend
on many factors, including our ability to market our services
successfully, our cash flow from operations, and competing market
developments. Our business plan requires additional funding beyond
the proceeds previously generated from the sale of our restricted
Common Stock. Consequently, although we currently have no specific
plans or arrangements for financing, we intend to raise additional
funds through private placements, public offerings or other
financings. Any equity financings would result in dilution to our
then-existing shareholders. Additionally, sources of debt financing
may result in higher interest expense. Any financing, if available,
may be on terms unfavorable to us. If adequate funds are not
obtained, we may be required to reduce or curtail operations. We
currently anticipate that our existing capital resources will not be
adequate to satisfy our current operating expenses and capital
requirements for the next full fiscal year. Consequently, we may
have to secure additional financing in order to develop our business
plan.
THERE IS A LIMITED PUBLIC TRADING MARKET FOR OUR COMMON STOCK. Our
Common Stock presently trades on the Nasdaq over-the-counter
bulletin board under the symbol GTCC. There can be no assurance,
however, that such market will continue, or that investors in this
offering will be able to liquidate their shares acquired in this
Offering at the price herein or otherwise. There can be no
assurance that any other market will be established in the future.
There can be no assurance that an investor will be able to liquidate
his or her investment without considerable delay, if at all. The
price of our Common Stock may be highly volatile. Additionally, the
factors discussed in this Risk Factors section may have a
significant impact on the market price of the shares offered in this
Reoffer Prospectus.
COMPETITION. The long distance telecommunications industry is
highly competitive and affected by the introduction of new services
by, and the market activities of, major industry participants,
including AT&T Corp., MCI/WorldCom, Sprint Corporation, local
exchange carriers, and other national and regional interexchange
carriers. Competition in the long distance business is based upon
pricing, customer service, billing services and perceived quality.
We compete against various national and regional long distance
carriers that are composed of both facilities-based providers (those
that carry long distance traffic on their own equipment) and
switchless resellers (those that resale long distance carried by
facilities-based providers) offering essentially the same services
as GTC. Several of our competitors are substantially larger and
have greater financial, technical and marketing resources. Although
we believe that we have the human and technical resources to pursue
our strategy and compete effectively in this competitive
environment, our success will depend upon our continued ability to
profitably provide high quality, high value services at prices
generally competitive with, or lower than, those charged by our
competitors.
We expect to encounter continued competition from major domestic and
international communications companies. In addition, we may be
subject to additional competition due to the enactment of the
Telecommunications Act, the development of new technologies and
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increased availability of domestic and international transmission
capacity. A continuing trend toward business combinations and
alliances in the telecommunications industry may create significant
new competitors, which may have financial, personnel and other
resources significantly greater than those of GTC. Other potential
competitors include cable television companies, wireless telephone
companies, electric utilities, microwave carriers and private
networks of large end users.
The telecommunications industry is in a period of rapid
technological evolution, marked by the introduction of new product
and service offerings and increasing transmission capacity for
services similar to those provided by us. We cannot predict which
of many possible future product and service offerings will be
important to maintain our competitive position or what expenditures
will be required to develop and provide such products and services.
The market for Internet-based online services is relatively new,
intensely competitive and rapidly changing. Since the advent of
commercial services on the Internet, the number of Internet Service
Providers and online services competing for users' attention and
spending has proliferated because of, among other reasons, the
absence of substantial barriers to entry, and we expect that
competition will continue to intensify. Many of our current and
potential competitors such as Earthlink, PsiNet, AOL, UUNET,
Microsoft Network, and Prodigy have longer operating histories,
larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources. These competitors
may be able to respond more quickly to new or emerging technologies
and changes in customer requirements and to devote greater resources
to the development, promotion and sale of their products and
services than we are.
We currently believe that our Internet Related Services are marketed
at competitive rates and provide quality and services comparable to
our competitors. However, our Internet Related Services are
intended more as a value added service to attract customers to the
our Telecommunication Services as opposed to a revenue generating
service. We are offering unlimited dial-up service for $9.95 per
month. We anticipate that revenue generated exclusively from our
Internet Related Services will be immaterial to our results of
operations. Rather, we expect to derive sufficient revenue from our
Telecommunication Services and Internet related advertising revenue
to pay for the costs of our Internet Related Services.
We can make no representations or assurances that there will not be
increased competition or that our projections will ever be realized
due to the intensity of competition.
CONCENTRATION OF STOCK OWNERSHIP. As of September 30, 1999, the
present directors and executive officers, and their respective
affiliates beneficially owned approximately 38.97% of GTC's
outstanding common stock. As a result of their ownership,
the directors and executive officers shareholders and
their respective affiliates collectively are able
to control all matters requiring shareholder approval, including the
election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the
effect of delaying or preventing a change in control of GTC.
YEAR 2000 COMPLIANCE. The Year 2000 (or "Y2K") issue involves the
potential for system and processing failures of date-related data
resulting from computer-controlled systems using two digits rather
than four to define the applicable year. For instance, computer
programs that contain time-sensitive software may recognize a date
using two digits of "00" as the year 1900 rather than the year 2000.
This could result in system failure or miscalculations causing
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disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices or engage
in similar ordinary business activities. We have completed a review
of our computer systems and non-information technology ("non-IT")
systems to identify all systems that could be affected by the Year
2000 issue. We are dependent on third-party computer systems and
applications, particularly with respect to such critical tasks as
accounting, billing and our underlying carrier (MCI/WorldCom) of our
long distance telephone service. We also rely on our own computer
and non-IT systems (which consists of personal computers, internal
telephone systems, internal network server, Internet server and
associated software and operating systems). In conducting a review
of our internal systems, we have performed operational tests of our
systems which revealed no Y2K problems. As a result of our review,
we have discovered no problems with our systems relating to the Y2K
issue and believe that such systems are Y2K compliant.
Additionally, we have obtained written assurances from all of our
major suppliers of third-party computer systems and applications,
indicating that they have completed a review of their respective
computer systems and that such systems are Y2K compliant. Costs
associated with our review were not material to our results of
operations.
While we believe that our procedures have been designed to be
successful, because of the complexity of the Y2K issue and the
interdependence of organizations using computer systems, there can
be no assurances that our efforts, or those of third parties with
whom we interact, have fully resolved all possible Y2K issues.
Failure to satisfactorily address the Y2K issue could have a
material adverse effect on GTC. The most likely worst case Y2K
scenario which management has identified to date is that, due to
unanticipated Y2K compliance problems, we may be unable to bill our
customers, in full or in part, for services used. Should this
occur, it would result in a material loss of some or all gross
revenue for an indeterminable amount of time, which could cause us
to cease operations. Although we have received written assurances
from our major suppliers that they are, or will be, Year 2000
compliant, should any such supplier fail to adequately address the
Year 2000 problem, our only recourse for any damages suffered as a
result would be through litigation. We have not yet developed a
contingency plan to address this worst case Y2K scenario, and do not
intend to develop such a plan in the future.
DEPENDENCE ON MANAGEMENT. Our success depends, to a significant
extent, upon certain key employees and directors, including
primarily, Paul Sandhu, Eric Clemons, Mark Fleming, Gerald A.
DeCiccio, Frank Naccarelli and Clay T. Whitehead. The loss of
services of one or more of these employees or director could have a
material adverse effect on our business. In addition, we have
substantial need for additional qualified management and marketing
personnel. We believe that our future success will also depend in
part upon our ability to attract, retain and motivate qualified
personnel. There can be no assurance that we will be successful in
attracting and retaining such personnel. Competition for such
personnel is intense. We currently do not maintain a policy of key
man life insurance on any employees.
MAINTENANCE OF CUSTOMER DATABASE. Our customers are not obligated
to purchase any minimum usage amount and can discontinue service,
without penalty, at any time. There can be no assurance that
customers will continue to buy their long distance telephone service
through us. In the event that a significant portion of our
customers decide to purchase long distance service from another long
distance service provider, there can be no assurance that we will be
able to replace our customer base from other sources. Loss of a
significant portion of our customers would have a material adverse
effect on our results of operations and financial condition.
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<PAGE>
A high level of customer attrition is inherent in the long distance
industry, and our revenues are affected by such attrition.
Attrition is attributable to a variety of factors, including
termination of customers by us for nonpayment and the initiatives of
existing and new competitors as they engage in, among other things,
national advertising campaigns, telemarketing programs and the
issuance of cash or other forms of incentives.
LACK OF CONTROL OVER MARKETING ACTIVITIES. Certain marketing
practices, including the methods and means to convert a customer's
long distance telephone service from one carrier to another, have
recently been subject to increased regulatory review at both the
federal and state levels. This increased regulatory review could
affect adversely the possible future acquisition of new business
from other resellers. Our marketing activities mandate compliance
with applicable state and federal regulations. We are unable to
predict the effect of such increased regulatory review.
GOVERNMENT REGULATION. Our provision of communications services is
subject to government regulation. Federal law regulates interstate
and international telecommunications, while states have jurisdiction
over telecommunications that originate and terminate within the same
state. Changes in existing policies or regulations in any state or
by the Federal Communications Commission ("FCC") could have a
material adverse effect on our financial condition or results of
operations, particularly if those policies make it more difficult
for us to obtain service from MCI/WCOM or other long distance
companies at competitive rates, or otherwise increase the cost and
regulatory burdens of marketing and providing service. There can be
no assurance that the regulatory authorities in one or more states
or the FCC will not take action having an adverse effect on the
business or financial condition or results of operations of GTC.
We are subject to regulation by the FCC and by various state public
service and public utility commissions as a nondominant provider of
long distance services. We are required to file tariffs for
interstate and international service with the FCC, which tariffs are
presumed lawful and become effective on one day's notice. We are
also required to file tariffs or obtain approval for intrastate
service provided in most of the states in which they market long
distance services. By engaging in direct marketing to end users,
GTC will be subject to applicable regulatory standards for marketing
activities and the increased FCC and state attention to certain
marketing practices may become more significant to GTC.
ADVERSE EFFECT OF RAPID TECHNOLOGICAL CHANGE AND SERVICE. The
telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and
evolving industry standards. GTC believes that its future success
will depend on our ability to anticipate such changes, and to offer
services on a timely basis that meet these evolving standards.
There can be no assurance that we will have sufficient resources to
make necessary investments or to introduce new services that would
satisfy an expanded range of end user needs.
EXPANSION INTO NEW BUSINESS ACTIVITIES. GTC will market its long
distance services directly to end users. Such direct marketing will
increase our costs as we hire new employees, provide increased
customer support and collection services, and acquire additional
equipment. GTC is required to comply with additional regulatory
standards for direct marketing of telecommunications services.
PROTECTION OF PROPRIETARY INFORMATION. Currently, GTC does not hold
patents or trademarks on any of its names, products or processes
under development. We do, however, treat our technical data as
confidential and rely on internal nondisclosure safeguards, as well
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<PAGE>
as on laws protecting trade secrets, to protect its proprietary
information. There can be no assurance that these measures will
adequately protect the confidentiality of our proprietary
information or that others will not independently develop products
or technology that are equivalent or superior to those of GTC. We
may receive in the future, communications from third parties
asserting that our products infringe the proprietary rights of third
parties. There can be no assurance that any such claims would not
result in protracted and costly litigation, having a materially
adverse and negative effect on GTC and our financial results.
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH. GTC plans to
expand its level of operations. Our operating results will be
adversely affected if net sales do not increase sufficiently to
compensate for the increase in operating expenses caused by this
expansion. In addition, our planned expansion of operations may
cause significant strain on our management, technical, financial and
other resources. To manage its growth effectively, we must continue
to improve and expand our existing resources and management
information systems and must attract, train and motivate qualified
managers and employees. There can be no assurance, however, that we
will successfully be able to achieve these goals. If we are unable
to manage growth effectively, our operating results will be
adversely affected.
SHARES ELIGIBLE FOR FUTURE SALE. At the conclusion of this
offering, a maximum of 17,247,519 shares of the Company's Common
Stock will be issued and outstanding or will represent shares of Common
Stock underlying options which are being registered pursuant to this
Form S-8, of which 13,965,074 shares will be "restricted securities,"
and under certain circumstances may, in the future, be sold
in compliance with Rule 144 adopted under the Securities Act.
In general, under Rule 144, subject to the satisfaction
of certain other conditions, a person, including an affiliate
of GTC, who has beneficially owned restricted shares of
Common Stock for at least one year is entitled to sell, in certain
brokerage transactions, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class, or if the Common Stock is
quoted on Nasdaq or a stock exchange, the average weekly trading
volume during the four calendar weeks immediately preceding the
sale. A person who presently is not and who has not been an
affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of
Common Stock for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the volume limitations
described above.
AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK. Our Articles of
Incorporation authorize the issuance of up to 50,000,000 shares of
Common Stock. GTC's Board of Directors has the authority to issue
additional shares of Common Stock and to issue options and warrants
to purchase shares of GTC's Common Stock without shareholder
approval. Future issuance of Common Stock could be at values
substantially below current market prices therefore could represent
further substantial dilution to investors in this Offering. In
addition, the Board could issue large blocks of voting stock to fend
off unwanted tender offers or hostile takeovers without further
shareholder approval.
USE OF PROCEEDS
GTC will not receive any of the proceeds from the sale of shares of
common stock by the Selling Shareholders. However, GTC will receive
proceeds from the exercise of the options held by the Selling
Shareholders and from options issued pursuant to the GTC 1999 Stock
Incentive Plan. All proceeds received as a result of the exercise
of those options will be used as working capital for GTC's operations.
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<PAGE>
SELLING SHAREHOLDERS
The Shares of the Company to which this Reoffer Prospectus relates
are being registered for reoffers and resales by the Selling
Shareholders, who acquired the Shares pursuant to a compensatory
benefit plan with GTC for consulting services they provided to GTC.
The Selling Shareholders may resell all, a portion or none of such
Shares from time to time.
The table below sets forth with respect to the Selling Shareholders,
based upon information available to the Company as of September 23,
1999, the number of Shares owned, the number of Shares registered by
this Reoffer Prospectus and the number and percent of outstanding
Shares that will be owned after the sale of the registered Shares
assuming the sale of all of the registered Shares.
<TABLE>
<S> <C> <C> <C> <C>
NUMBER OF Number of Shares % of Shares Owned
SELLING SHARES OWNED Registered by Number of Shares by Shareholder
SHAREHOLDERS BEFORE SALE Prospectus Owned After Sale After Sale
- -------------- ----------- ------------ ---------------- ----------------
Paul Sandhu(1) 4,204,136 25,000 4,179,136 25.98%
Eric Clemons (2) 1,431,784 25,000 1,406,784 8.75%
Mark Fleming (3) 100,000 100,000 0 0.00%
Gerald A. DeCiccio (4) 150,000 150,000 0 0.00%
Frank Naccarelli (5) 45,000 45,000 0 0.00%
Azad Rob (6) 25,000 25,000 0 0.00%
Liz Hurtado (7) 25,000 25,000 0 0.00%
Rion Johnston (8) 5,000 5,000 0 0.00%
Marla Timmer (9) 10,000 10,000 0 0.00%
Mike Novotny (10) 1,000 1,000 0 0.00%
Chris Zomaya 15,000 15,000 0 0.00%
Crystal Pyatt 6,050 6,050 0 0.00%
Rebecca Raff 23,500 23,500 0 0.00%
Mark Richardson 500 500 0 0.00%
Tim Cumings 5,000 5,000 0 0.00%
Joe Ferris 10,000 10,000 0 0.00%
Martin Williams 4,500 4,500 0 0.00%
M. Richard Cutler (11) 21,625 3,125 18,500 0.11%
</TABLE>
(1) Mr. Sandhu is currently the President and CEO of GTC. The
securities registered pursuant to this Reoffer Prospectus represents
25,000 shares of common stock underlying options to purchase up to
an total of 200,000 shares of GTC's common stock at an exercise
price of $0.235 per share granted pursuant to Mr. Sandhu's
employment agreement. These options are immediately exercisable.
(2) Mr. Clemens is currently the Chief Operating Officer,
Secretary, and Treasurer of GTC. The securities registered pursuant
to this Reoffer Prospectus represents 25,000 shares of common stock
underlying options to purchase up to a total of 100,000 shares of
GTC's common stock at an exercise price of $0.235 per share granted
pursuant to Mr. Clemen's employment agreement. These options are
immediately exercisable.
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<PAGE>
(3) Mr. Fleming is currently the Executive Vice President of GTC.
The securities registered pursuant to this Reoffer Prospectus
represents shares of common stock underlying options to purchase up
to 100,000 shares of GTC's common stock. Of the 100,000 options,
10,000 options are immediately exercisable at an exercise price of
$0.01. The remaining 90,000 options will vest in 1/3 increments per
year beginning on October 14, 1999 at an exercise price of $4.00 per
share granted pursuant to Mr. Fleming's employment agreement.
(4) Mr. DeCiccio is currently the Chief Financial Officer of GTC.
The securities registered pursuant to this Reoffer Prospectus
represents shares of common stock underlying options to purchase up
to 150,000 shares of GTC's common stock. Of the 150,000 options,
25,000 options are immediately exercisable at an exercise price of
$0.01. The remaining 125,000 options will vest in 1/3 increments
per year beginning on December 1, 1999 at an exercise price of $4.00
per share granted pursuant to Mr. DeCiccio's employment agreement.
(5) Mr. Nacarelli is currently the Vice-President of Sales of GTC.
The securities registered pursuant to this Reoffer Prospectus
represents shares of common stock underlying options to purchase up
to 45,000 shares of GTC's common stock vesting in 1/3 increments per
year beginning on September 3, 1999 at an exercise price of $5.50
per share granted pursuant to Mr. Naccarelli's employment agreement.
(6) Mr. Rob is currently an employee of GTC. The securities
registered pursuant to this Reoffer Prospectus represents shares of
common stock underlying options to purchase up to 25,000 shares of
the common stock of GTC at $0.01. These options are immediately
exercisable.
(7) Ms. Hurtado is currently an employee of GTC. The securities
registered pursuant to this Reoffer Prospectus represents shares of
common stock underlying options to purchase up to 25,000 shares of
the common stock of GTC at $0.01. These options are immediately
exercisable.
(8) Mr. Johnston is currently an employee of GTC. The securities
registered pursuant to this Reoffer Prospectus represents shares of
common stock underlying options to purchase up to 5,000 shares of
the common stock of GTC. Of the 5,000 options, 1,000 options are
immediately exercisable at an exercise price of $1.00 per share.
The remaining 4,000 options vest in 1/3 increments per year
beginning on January 4, 2000 at an exercise price of $5.00 per share.
(9) Ms. Timmer is currently an employee of GTC. The securities
registered pursuant to this Reoffer Prospectus represents shares of
common stock underlying options to purchase up to 10,000 shares of
the common stock of GTC. Of the 10,000 options, 2,500 options are
immediately exercisable at an exercise price of $1.00 per share.
The remaining 7,500 options vest in 1/3 increments per year
beginning on February 22, 1999 at an exercise price of $5.00 per share.
(10) Mr. Novotny is a former employee of GTC. The securities
registered pursuant to this Reoffer Prospectus represents shares of
common stock underlying options to purchase up to 1,000 shares of
the common stock of GTC at an exercise price of $1.00.
(11) Mr. Cutler is GTC's securities attorney. The securities
registered pursuant to the Reoffer Prospectus represents shares of
common stock issued to Mr. Cutler in exchange for legal services
provided to GTC.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares for value from time to
time under this Reoffer Prospectus in one or more transactions on
the Nasdaq Over-the-Counter Bulletin Board, or other exchange, in a
negotiated transaction or in a combination of such methods of sale,
at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at prices otherwise negotiated.
The Selling Shareholders may effect such transactions by selling the
Shares to or through brokers-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or the
purchasers of the Shares for whom such broker-dealers may act as
agent (which compensation may be less than or in excess of customary
commissions).
The Selling Shareholders and any broker-dealers that participate in
the distribution of the Shares may be deemed to be "underwriters"
within the meaning of Section 2(11) of the 1933 Act, and any
commissions received by them and any profit on the resale of the
Shares sold by them may be deemed be underwriting discounts and
commissions under the 1933 Act. All selling and other expenses
incurred by the Selling Shareholders will be borne by the Selling
Shareholders.
In addition to any Shares sold hereunder, the Selling Shareholders
may, at the same time, sell any shares of common stock, including
the Shares, owned by him or her in compliance with all of the
requirements of Rule 144, regardless of whether such shares are
covered by this Reoffer Prospectus.
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<PAGE>
There is no assurance that the Selling Shareholders will sell all or
any portion of the Shares offered.
The Company will pay all expenses in connection with this offering
and will not receive any proceeds from sales of any Shares by the
Selling Shareholders.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon
for the Company by the Cutler Law Group, Newport Beach, California.
The Cutler Law Group currently holds 21,625 shares of the Company's
Common Stock.
EXPERTS
The balance sheets as of June 30, 1998 and June 30, 1997 and the
statements of operations, shareholders' equity and cash flows for
the periods ended June 30, 1998 and 1997 and for the period March
29, 1997 (date of inception) through June 30, 1998 of GenTel
Communications, Inc., have been incorporated by reference in
this Registration Statement in reliance on the report of
Corbin & Wertz LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The balance sheets as of June 30, 1998 and December 31, 1997 and the
statements of operations, shareholders' equity and cash flows for
the periods ended June 30, 1998 and December 31, 1997 and 1996 of
GTC Telecom Corp. (formerly Bobernco, Inc.) have been incorporated
by reference in this Registration Statement in reliance on the
report of Barry L. Friedman CPA, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
17
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
Registration Statement:
(i) Registrant's Registration Statement on Form 10-SB as
amended by Amendment No. 2 filed with the Commission on
July 20, 1999.
(ii) All other reports and documents subsequently filed by the
Registrant pursuant after the date of this Registration
Statement pursuant to Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 and prior to the
filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference and to be a
part hereof from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Certain legal matters with respect to the Common Stock offered
hereby will be passed upon for the Company by the Cutler Law Group,
counsel to the Company.
Mr. M. Richard Cutler, principal of the Cutler Law Group is the
beneficial owner of 21,625 shares of Common Stock of the Company.
3,125 shares of the foregoing are being registered for sale herein.
Employees of the Cutler Law Group hold an additional 1,500 shares of
the Common Stock of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation Laws of the State of Nevada and the Company's Bylaws
provide for indemnification of the Company's Directors for
liabilities and expenses that they may incur in such capacities. In
general, Directors and Officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company, and with
respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
Furthermore, the personal liability of the Directors is limited as
provided in the Company's Articles of Incorporation.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The Shares were issued for advisory and legal services rendered.
These sales were made in reliance of the exemption from the
registration requirements of the Securities Act of 1933, as amended,
contained in Section 4(2) thereof covering transactions not
involving any public offering or not involving any "offer" or "sale".
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<PAGE>
ITEM 8. EXHIBITS
4.1 Articles of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibits 3.1, 3.2, and
3.3 of the Registrant's Registration Statement on Form
10-SB (File No. O-25703), as amended (the "Form 10-SB").
4.2 Bylaws of the Registrant (incorporated herein by reference
to Exhibit 3.4 of the Registrant's Form 10-SB).
4.3 1999 Employee Stock Incentive Plan
4.4 Employment Agreement by and between GTC and Paul Sandhu,
dated December 1, 1998 (incorporated by reference to
Exhibit 10.8 of the Registrant's Form 10-SB).
4.5 Employment Agreement by and between GTC and Eric Clemons,
dated December 1, 1998 (incorporated by reference to
Exhibit 10.6 of the Registrant's Form 10-SB).
4.6 Employment Agreement by and between GTC and Gerald A.
DeCiccio, dated December 1, 1998 (incorporated by reference
to Exhibit 10.7 of the Registrant's Form 10-SB).
4.7 Employment Agreement by and between GTC and Mark Fleming,
dated October 14, 1998 (incorporated by reference to
Exhibit 10.5 of the Registrant's Form 10-SB).
4.8 Employment Agreement by and between GTC and Frank
Naccarelli, dated March 3, 1999 (incorporated by reference
to Exhibit 10.9 of the Registrant's Form 10-SB).
4.9 Letter Agreement between GTC and Azad Rob regarding
issuance of stock options.
4.10 Letter Agreement between GTC and Liz Hurtado regarding
issuance of stock options.
4.11 Letter Agreement between GTC and Rion Johnston regarding
issuance of stock options.
4.12 Letter Agreement between GTC and Maria Timmer regarding
issuance of stock options.
4.13 Letter Agreement between GTC and Mike Novotny regarding
issuance of stock options.
4.14 Letter Agreement between GTC and Chris Zomaya regarding
issuance of stock.
4.15 Letter Agreement between GTC and Crystal Pyatt regarding
issuance of stock.
4.16 Letter Agreement between GTC and Rebecca Raff regarding
issuance of stock.
4.17 Letter Agreement between GTC and Mark Richardson regarding
issuance of stock.
4.18 Letter Agreement between GTC and Tim Cumings regarding
issuance of stock.
4.19 Letter Agreement between GTC and Joe Ferris regarding
issuance of stock.
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4.20 Letter Agreement between GTC and Martin Williams regarding
issuance of stock.
4.21 Letter Agreement between GTC and M. Richard Cutler
regarding issuance of stock.
5.1 Opinion of M. Richard Cutler, Esq., counsel to the
Registrant, regarding legality of securities being registered.
23.1 Consent of M. Richard Cutler (included in Exhibit 5.1).
23.2 Consent of Barry L. Friedman, CPA
23.3 Consent of Corbin & Wertz LLP, Independent Public Accountants.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by section
10(a) (3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement; provided, however, that
paragraphs (a) (1)(i) and (a) (1) (ii) do not apply
if the registration statement is on Form S-3, Form
S-8 or Form F-3 and the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
20
<PAGE>
(b) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the
Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering
thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of
the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that
is meets all of the requirements for filing on Form S-8 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Costa Mesa,
State of California, on October 6, 1999.
GTC TELECOM CORP.
/s/ Paul Sandhu
By: Paul Sandhu
Its: President & CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
/s/ Paul Sandhu President, CEO and Director
Paul Sandhu
/s/ Eric Clemons Secretary, Chief Operating
Eric Clemons Officer and Director
/s/ Gerald A. DeCiccio Chief Financial Officer
Gerald A. DeCiccio
22
GTC TELECOM, INC.
an Nevada corporation
OMNIBUS STOCK OPTION PLAN
1. Name, Effective Date and Purpose.
1.1 This Plan document is intended to implement and govern two
separate stock option plans of GTC TELECOM, INC. (the "Company"):
The Incentive Stock option plan ("Plan A") and the Nonstatutory
Stock Option Plan ("Plan B"). Plan A provides for the granting of
options that are intended to qualify as incentive stock options
("Incentive Stock Options") within the meaning of Section 422A(b) of
the Internal Revenue Code (the "Code"), as amended. Plan B provides
for the granting of options that are not intended to so qualify.
Unless specified otherwise, all the provisions of this Plan relate
equally to both Plan A and Plan B and are condensed for convenience
into one Plan document.
1.2 Plan A and Plan B are each established effective as of
October 1, 1999. The purpose of Plan A and Plan B (sometimes
together referred to as the "Plan" or this "Plan") is to promote the
growth and general prosperity of the Company and its Affiliated
Companies. This Plan will permit the Company to grant options
("Options") to purchase shares of its common stock ("Common Stock").
The granting of Options will help the Company attract and retain
the best available persons for positions of substantial
responsibility, and will provide certain employees with an
additional incentive to contribute to the success of the Company and
its Affiliated Companies. For purposes of this Plan, the term
"Affiliated Companies" shall mean any component member of a
controlled group of corporations, as defined under Code Section
1563, in which the Company is also a component member.
2. Administration.
2.1 The Plan shall be administered solely by the Board of
Directors (the "Board"). All decisions, determinations and
interpretations of the Board shall be final and binding on all
Optionees.
2.2 The Board shall have sole authority, in its absolute
discretion, to determine which of the eligible persons of the
Company and its Affiliated Companies shall receive Options
("Optionees"), and, subject to the express provisions and
restrictions of this Plan, shall have sole authority, in its
absolute discretion, to determine the time when Options shall be
granted, the terms and conditions of any Option other than those
terms and conditions fixed under this Plan, the number of shares
which may be issued upon exercise of an Option and the means of
payment for such shares, and shall have authority to do everything
necessary or appropriate to administer the Plan.
2.3 Aggregate limitations with respect to all participants in
the Plan:
2.3.1 The Board shall not grant Options covering more than
the number of Available Shares of Common Stock to any employee in
any Plan Year.
2.4 Aggregate limitations with respect to the participation of
directors and officers in the Plan:
2.4.1 No more than the number of Available Shares of Common
Stock may be optioned and sold to directors of the Company under
Plan A and Plan B considered in the aggregate in any Plan Year.
2.4.2 No more than the Available Shares of Common Stock may
be optioned and sold to non-director officers of the Company under
Plan A and Plan B considered in the aggregate in any Plan Year.
2.5 Definitions:
2.5.1 Available Shares: Those shares specified in Section
4.1 as available for issuance pursuant to this Plan in any Plan Year.
2.5.2 Officer: The chief executive officer, president,
chief financial officer, chief accounting officer, any vice
president in charge of a principal business function (such as sales,
administration, finance, or legal) and any other person who performs
similar policy-making functions for the Company.
2.5.3 Parent Corporation: A corporation as defined in
Section 425(e) of the Code.
2.5.4 Plan Year: Any twelve (12) month period (or shorter
period during the final year of this Plan) commencing October 1
during the term of this Plan.
2.5.5 Restricted Shareholder: An individual who, at the
time an Option is granted under either Plan A or Plan B, owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the employer corporation or of its Parent
Corporation or Subsidiary Corporation, with stock ownership to be
determined in light of the attribution rules set forth in Section
425(d) of the Code.
2.5.6 Subsidiary Corporation: A corporation as defined in
Section 425(f) of the Code.
3. Eligibility.
3.1 Plan A: The Board may, in its discretion, grant one or more
Options under Plan A to any employee of the Company or its
Affiliated Companies, including any employee who is a director of
the Company or of any of its Affiliated Companies presently existing
or hereinafter organized or acquired. Such Options may be granted
to one or more such employees without being granted to other
eligible employees, as the Board may deem fit.
3.2 Plan B: The Board may, in its discretion, grant one or more
options under Plan B to any key management employee, any employee or
non-employee director of the Company or its Affiliated Companies,
including any employee who is a director of the Company or of any of
its Affiliated Companies presently existing or hereinafter organized
or acquired, or any person who performs consulting or other services
for the Company or its Affiliated Companies and who is designated by
the Board as eligible to participate in Plan B. Such Options may be
granted to one or more such persons without being granted to other
eligible persons, as the Board may deem fit.
4. Stock to be Optioned.
4.1 The aggregate number of shares which may be optioned and
sold under Plan A and Plan B in any Plan Year shall not exceed the
following amounts of the shares of Authorized Common Stock of the
Company:
Plan Year Available Shares
---------- ----------------
October 1, 1999 - September 30, 2000 750,000 shares
Each subsequent Plan Year beginning 5% of outstanding stock
on October 1 of each such
Plan Year
The foregoing constitutes an absolute cumulative limitation on the
total number of shares, that may be optioned under both Plan A and
Plan B in any Plan Year. Therefore, at any particular date during a
Plan Year, the maximum aggregate number of shares which may be
optioned under either Plan A or Plan B or both is equal to the
Available Shares minus the number of shares previously optioned and
sold under both Plan A and Plan B during that Plan Year. All shares
to be optioned and sold under either Plan A or Plan B may be either
authorized but unissued shares or shares held in the treasury.
4.2 Shares of Common Stock that: (i) are repurchased by the
Company after issuance hereunder pursuant to the exercise of an
Option, or (ii) are not purchased by the Optionee prior to the
expiration or termination of the applicable Option, shall again
become available to be covered by Options to be issued hereunder and
shall not, as of the effective date of such repurchase or
expiration, be counted as covered by an outstanding Option for
purposes of the above-described maximum number of shares which may
be optioned hereunder.
5. Option Price. The Option Price for shares of Common Stock to
be issued under Plan A shall be 100%, and under Plan B between 25%
to 100%, of the fair market value of such shares on the date on
which the Option covering such shares is granted by the Board (or
the Committee, if authorized by the Board), except that if on the
date on which such Option is granted the Optionee is a Restricted
Shareholder, then such Option Price for Options granted under Plan A
shall be 110% of the fair market value of the shares of Common Stock
subject to the Option on the date such Option is granted by the
Board. The fair market value of the shares of Common Stock for all
purposes of this Plan is to be determined by the Board in its sole
discretion, exercised in good faith.
6. Term of Plan. Plan A and Plan B shall become effective on
October 1, 1999. Both Plan A and Plan B shall continue in effect
until September 30, 2009 unless terminated earlier by action of the
Board. No Option may be granted hereunder after September 30, 2009.
7. Exercise of Option. Subject to the actions, conditions
and/or limitations set forth in this Plan document and/or any
applicable Stock Option Agreement entered into hereunder, Options
granted under this Plan shall be exercisable in accordance with the
following rules:
7.1 No Option granted under Plan A may be exercised in whole or
in part until six (6) months after the date on which the Option is
granted by the Board, or by the Committee if so authorized
(hereinafter the "Option Grant Date").
7.2 Subject to the specific provisions of this Section 7,
Options shall become exercisable at such times and in such
installments (which may be cumulative) as the Board shall provide in
the terms of each individual Option; provided, however, each Option
granted under the Plan shall become exercisable in installments of
not more than 20% of the number of shares covered by such Option
each year from the Option Grant Date; and provided, further, that by
a resolution adopted after an Option is granted the Board may, on
such terms and conditions as it may determine to be appropriate and
subject to the specific provisions of this section 7, accelerate the
time at which such Option or installment thereof may be exercised.
For purposes of this Plan, any accrued installment of an Option
granted hereunder shall be referred to as an "Accrued Installment."
7.3 Subject to the specific restrictions contained in this
Section 7, an Option may be exercised when Accrued Installments
accrue, as provided in the terms under which such Option was
granted, for a period of up to ten (10) years from the Option Grant
Date. In no event shall any Option be exercised on or after the
expiration of said maximum applicable period, regardless of the
circumstances then existing (including but not limited to the death
or termination of employment of the Optionee).
7.4 The Board shall fix the expiration date of the Option (the
"Option Expiration Date") at the time the Option grant is authorized.
8. Rules Applicable to Certain Dispositions.
8.1 Notwithstanding the foregoing provisions of Section 7, in
the event the Company or the shareholders of the Company enter into
an agreement to dispose of all or substantially all of the assets or
capital stock of the Company by means of a sale, merger,
consolidation, reorganization, liquidation, or otherwise, an Option
shall become immediately exercisable with respect to the full number
of shares subject to that Option during the period commencing as of
the later of (i) date of execution of such agreement or (ii) six (6)
months after the Option Grant Date, and ending as of the earlier of:
8.1.1 the Option Expiration Date; or
8.1.2 the date on which the disposition of assets or
capital stock contemplated by the agreement is consummated.
The exercise of any Option made exercisable solely by reason of this
Section 8.1 shall be conditioned upon the consummation of the
disposition of assets or stock under the above referenced agreement.
Upon the consummation of any such disposition of assets or stock,
the Plan and any unexercised Options issued hereunder (or any
unexercised portion thereof) shall terminate and cease to be effective.
8.2 Notwithstanding the foregoing, in the event that any such
agreement shall be terminated without consummating the disposition
of said stock or assets, any unexercised non-vested installments
that had become exercisable solely by reason of the provisions of
section 8.1 shall again become non-vested and unexercisable as of
said termination of such agreement.
8.3 Notwithstanding the provisions set forth in Section 8.1, the
Board may, at its election and subject to the approval of the
corporation purchasing or acquiring the stock or assets of the
Company (the "Surviving Corporation"), arrange for the Optionee to
receive upon surrender of Optionee's Option a new option covering
shares of the Surviving Corporation in the same proportion, at an
equivalent option price and subject to the same terms and conditions
as the old Option. For purposes of the preceding sentence, the
excess of the aggregate fair market value of the shares subject to
such new option immediately after consummation of such disposition
of stock or assets over the aggregate option price of such shares of
the Surviving Corporation shall not be more than the excess of the
aggregate fair market value of all shares subject to the old Option
immediately before consummation of such disposition of stock or
assets over the aggregate Option Price of such shares of the
Company, and the new option shall not give the Optionee additional
benefits which such Optionee did not have under the old Option or
deprive the Optionee of benefits which the Optionee had under the
old Option. If such substitution of options is effectuated, the
Optionee's rights under the old Option shall thereupon terminate.
9. Mergers and Acquisitions.
9.1 If the Company at any time should succeed to the business of
another corporation through a merger or consolidation, or through
the acquisition of stock or assets of such corporation, Options may
be granted under the Plan to option holders of such corporation or
its subsidiaries, in substitution for options or rights to purchase
stock of such corporation held by them at the time of succession.
The Board shall have sole and absolute discretion to determine the
extent to which such substitute Options shall be granted (if at
all), the person or persons within the eligible group to receive
such substitute Options (who need not be all option holders of such
corporation), the number of Options to be received by each person,
the Option Price of such Option, and the terms and conditions of
such substitute Options; provided however, that the terms and
conditions of the substitute Options shall comply with the
provisions of Section 425 of the Code, such that the excess of the
aggregate fair market value of the shares subject to such substitute
Option immediately after the substitution or assumption over the
aggregate option price of such shares is not more than the excess of
the aggregate fair market value of all shares subject to the
substitution Option immediately before such substitution or
assumption over the aggregate option price of such shares, and the
substitution Option or the assumption of the old option does not
give the holder thereof additional benefits which he or she did not
have under such old option.
9.2 Notwithstanding anything to the contrary herein, no Option
shall be granted, nor any action taken, permitted or omitted, which
could cause the Plan, or any Options granted hereunder as to which
Rule 16b-3 under the Securities Exchange Act of 1934 may apply, not
to comply with such Rule.
10. Termination of Employment.
10.1 In the event that the Optionee's employment,
directorship or consulting or other arrangement with the Company (or
Affiliated Company) is terminated for any reason other than death or
disability, any unexercised Accrued Installments of the Option
granted hereunder to such terminated Optionee shall expire and
become unexercisable as of the earlier of:
10.1.1 the applicable Option Expiration Date; or
10.1.2 a date 30 days after such termination occurs,
provided, however, that the Board may, in the exercise of its
discretion, extend said date up to and including a date three months
following such termination with respect to Options granted under
Plan A, or up to and including a date two years following such
termination with respect to Options granted under Plan B.
10.2 In the event that Optionee's employment, directorship
or consulting or other arrangement with the Company is terminated
due to the death or disability of the Optionee, any unexercised
Accrued Installments of the Option granted hereunder to such
Optionee shall expire and become unexercisable as of the earlier of:
10.2.1 the applicable Option Expiration Date; or
10.2.2 the first anniversary of the date of death of
such Optionee (if
applicable); or
10.2.3 the first anniversary of the date of the
termination of employment, directorship or consulting or other
arrangement by reason of disability (if applicable). Any such
Accrued Installments of a deceased Optionee may be exercised prior
to their expiration by (and only by) the person or persons to whom
the Optionee's Option right shall pass by will or by the laws of
descent and distribution, if applicable, subject, however, to all
the terms and conditions of this Plan and the applicable Stock
Option Agreement governing the exercise of Options granted hereunder.
10.3 For purposes of this section 10, an Optionee shall be
deemed employed by the Company (or Affiliated Company) during any
period of leave of absence from active employment as authorized by
the Company (or Affiliated Company).
11. Exercise of Options.
11.1 An Option shall be deemed exercised when written
notice of such exercise has been given to the Company at its
principal business office by the person entitled to exercise the
Option and full payment in cash or cash equivalents (or with shares
of Common Stock pursuant to section 14) for the shares with respect
to which the Option is exercised has been received by the Company.
The Board may cause the Company to give or arrange for financial
assistance (including without limitation direct loans, with or
without interest, secured or unsecured, or guarantees of third party
loans) to an Optionee for the purpose of providing funds for the
purchase of shares pursuant to the exercise of Options, when in the
judgment of the Board such assistance is in the best interests of
the Company, is consistent with the Certificate of Incorporation and
Bylaws of the Company and applicable laws, and will permit the
shares to be fully paid and nonassessable when issued.
11.2 An Option may be exercised in accordance with this
section 11 as to all or any portion of the shares covered by an
Accrued Installment of the Option from time to time during the
applicable Option period, but shall not be exercisable with respect
to fractions of a share.
11.3 As soon as practicable after any proper exercise of
an Option in accordance with the provisions of this Plan, the
Company shall deliver to the Optionee at the main office of the
Company, or such other place as shall be mutually acceptable, a
certificate or certificates representing the shares of Common Stock
as to which the Option has been exercised. The time of issuance and
delivery of the Common Stock may be postponed by the Company for
such period as may be required for it with reasonable diligence to
comply with any applicable listing requirements of any national or
regional securities exchange and any law or regulation applicable to
the issuance and delivery of such shares.
12. Authorization to Issue Options and Shareholder Approval.
Unless in the judgment of counsel to the Company such permit is not
necessary with respect to particular grants, Options granted under
the Plan shall be conditioned upon the Company obtaining any
required permit from the California Department of Corporations
and/or other appropriate governmental agencies, free of any
conditions not acceptable to the Board, authorizing the Company to
grant such Options, provided, however, such condition shall lapse as
of the effective date of issuance of such permit(s) in a form to
which the Company does not object within sixty (60) days. The grant
of Options under the Plan also is conditioned on approval of the
Plan by the vote or consent of the holders of a majority of the
outstanding shares of the Company's Common Stock and no Option
granted hereunder shall be effective or exercisable unless and until
the Plan has been so approved.
13. Limit on Value of Optioned Shares. The aggregate fair market
value (determined as of the Option Grant Date) of the shares of
Common Stock to which Options granted under Plan A are exercisable
for the first time by any employee of the Company during any
calendar year under all incentive stock option plans of the Company
and its Affiliated Companies shall not exceed $100,000. The
limitation imposed by this section 13 shall not apply to Options
granted under Plan B.
14. Payment of Exercise Price with Company Stock. The Board may
provide that, upon exercise of the Option, the Optionee may elect to
pay for all or some of the shares of Common Stock underlying the
Option with shares of Common Stock of the Company previously
acquired and owned at the time of exercise by the Optionee, subject
to all restrictions and limitations of applicable laws, rules and
regulations, including Section 425(c)(3) of the Code, and provided
that the Optionee will make representations and warranties
satisfactory to the Company regarding his or her title to the shares
used to effect the purchase, including without limitation
representations and warranties that the Optionee has good and
marketable title to such shares free and clear of any and all liens,
encumbrances, charges, equities, claims, security interests, options
or restrictions, and has full power to deliver such shares without
obtaining the consent or approval of any person or governmental
authority other than those which have already given consent or
approval in a form satisfactory to the Company. The equivalent
dollar value of the shares used to effect the purchase shall be the
fair market value of the shares on the date of the purchase as
determined by the Board in its sole discretion, exercised in good
faith.
15. Stock Option Agreements. The terms and conditions of Options
granted under the Plan shall be evidenced by a Stock Option
Agreement (hereinafter referred to as the "Agreement") executed by
the Company and the person to whom the Option is granted. Each
agreement shall contain the following provisions:
15.1 A provision fixing the number of shares which may be
issued upon exercise of the Option;
15.2 A provision establishing the Option exercise price
per share;
15.3 A provision establishing the times and the
installments in which Options may be exercised, provided, however,
such times and installments shall not be more than 20% of the number
of shares covered by such Option each year from the Option Grant Date;
15.4 A provision incorporating therein this Plan by
reference;
15.5 A provision clarifying which Options are intended to
be Incentive Stock Options under Plan A and which are intended to be
nonstatutory stock options under Plan B;
15.6 A provision fixing the maximum duration of the Option
as not more than five (5) years from the Option Grant Date for
Options granted under Plan A and not more than ten (10) years from
the Option Grant Date for Options granted under Plan B;
15.7 Such representations and warranties by the Optionee
as may be required by section 25 of this Plan or as may be required
by the Board in its discretion;
15.8 Any other restriction (in addition to those
established under this Plan) as may be established by the Board with
respect to the exercise of the Option, the transfer of the Option,
and/or the transfer of the shares purchased by exercise of the
Option, provided that such restrictions are not in conflict with
this Plan; and
15.9 Such other terms and conditions consistent with this
Plan as may be established by the Board.
16. Taxes, Fees and Expenses. The Company shall pay all original
issue and transfer taxes (but not income taxes, if any) with respect
to the grant of Options and/or the issue and transfer of shares
pursuant to the exercise of such Options, and all other fees and
expenses necessarily incurred by the Company in connection
therewith, and will from time to time use its best efforts to comply
with all laws and regulations which, in the opinion of counsel for
the Company, shall be applicable thereto.
17. Withholding of Taxes. The grant of Options hereunder and the
issuance of Common Stock pursuant to the exercise of such Options is
conditioned upon the Company's reservation of the right to withhold,
in accordance with any applicable law, from any compensation payable
to the Optionee any taxes required to be withheld by federal, state
and local law as a result of the grant or exercise of any such Option.
18. Amendment or Termination of the Plan.
18.1 The Board may amend this Plan from time to time in
such respects as the Board may deem advisable, provided, however,
that no such amendment shall operate to (i) affect adversely an
Optionee's rights under this Plan with respect to any Option granted
hereunder prior to the adoption of such amendment, except as may be
necessary, in the judgment of counsel to the Company, to comply with
any applicable law, (ii) increase the maximum aggregate number of
shares which may be optioned and sold under the Plan (unless
shareholders approve such increase), (iii) change the manner of
determining the option exercise price, (iv) change the classes of
persons eligible to receive Options under the Plan, or (v) extend
the maximum duration of the Option or the Plan.
18.2 The Board may at any time terminate this Plan. Any
such termination of the Plan shall not, without the written consent
of the Optionee, alter the terms of Options already granted, and
such Options shall remain in full force and effect as if this Plan
had not been terminated.
19. Options Not Transferable. Options granted under this Plan
may not be sold, pledged, hypothecated, assigned, encumbered, gifted
or otherwise transferred or alienated in any manner, either
voluntarily or involuntarily by operation of law, other than by will
or the laws of descent of distribution, and may be exercised during
the lifetime of an Optionee only by such Optionee.
20. No Restrictions on Transfer of Stock. Common Stock issued
pursuant to the exercise of an Option granted under this Plan
(hereinafter "Optioned Stock"), or any interest in such Optioned
Stock, may be sold, assigned, gifted, pledged, hypothecated,
uncumbered or otherwise transferred or alienated in any manner by
the holder(s) thereof, subject, however, to any representations or
warranties requested under section 25 of this Plan and also subject
to compliance with any applicable federal, state or other local law,
regulation or rule governing the sale or transfer of stock or
securities.
21. Reservation of Shares of Common Stock. The Company, during
the term of this Plan, shall at all times reserve and keep available
such number of shares of its Common Stock sufficient to satisfy the
requirements of the Plan.
22. Restrictions on Issuance of Shares. The Company, during the
term of this Plan, shall use its best efforts to obtain from the
appropriate regulatory agencies any requisite authorization to grant
Options or issue and sell such number of shares of its Common Stock
as necessary to satisfy the requirements of the Plan. The inability
of the Company to obtain from any such regulatory agency having
jurisdiction thereof the authorization deemed by the Company's
counsel to be necessary to the lawful grant of Options or the
issuance and sale of any shares of its stock hereunder or the
inability of the Company to confirm to its satisfaction that any
grant of Options or issuance and sale of any shares of such stock
will meet applicable legal requirements shall relieve the Company of
any liability in respect of the non-issuance or sale of such stock
as to which such authorization or confirmation have not been obtained.
23. Notices. Any notice to be given to the Company pursuant to
the provisions of this Plan shall be addressed to the Company in
care of its Secretary at its principal office, and any notice to be
given to a person to whom an Option is granted hereunder shall be
addressed to him or her at the address given beneath his or her
signature on his or her Stock Option Agreement, or at such other
address as such person or his or her transferee (upon the transfer
of Optioned Stock) may hereafter designate in writing to the
Company. Any such notice shall be deemed duly given when enclosed
in a properly sealed envelope or wrapper addressed as aforesaid,
registered or certified, and deposited, postage and registry or
certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service. It should
be the obligation of each Optionee and each transferee holding
optioned stock to provide the Secretary of the Company, by letter
mailed as provided hereinabove, with written notice of his or her
correct mailing address.
24. Adjustments Upon Changes in Capitalization. If the
outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind
of shares of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock
split, then an appropriate and proportionate adjustment shall be
made in the number or kind of shares which may be issued upon
exercise or Options granted under the Plan; provided, however, that
no such adjustment need be made if, upon the advice of counsel, the
Board determines that such adjustment may result in the receipt of
federally taxable income to holders of Options granted hereunder or
the holders of Common Stock or other classes of the Company's
securities.
25. Representations and Warranties. As a condition to the grant
of any Option hereunder or the exercise of any portion of an Option,
the Company may require the person to be granted or exercising such
Option to make any representations and/or warranty to the Company as
may, in the judgment of counsel to the Company, be required under
any applicable law or regulation, including, but not limited to, a
representation and warranty that the Option and/or shares issuable
or issued upon exercise of such Option are being acquired only for
investment, for such person's own account and without any present
intention to sell or distribute such Option or shares, as the case
may be, if, in the opinion of counsel for the Company, such
representation is required under the Securities Act of 1933, the
California Corporate Securities Law of 1968 or any other applicable
law, regulation or rule of any governmental agency.
26. No Enlargement of Employee Rights. This Plan is purely
voluntary on the part of the Company, and the continuance of the
Plan shall not be deemed to constitute a contract between the
Company and any employee, or to be consideration for or a condition
of the employment of any employee. Nothing contained in the Plan
shall be deemed to give any employee the right to be retained in the
employ of the Company or its Affiliated Companies, or to interfere
with the right of the Company or an Affiliated Company to discharge
any employee thereof at any time. No employee shall have any right
to or interest in Options authorized hereunder prior to the grant of
such an Option to such employee, and upon such grant he or she shall
have only such rights and interests as are expressly provided
herein, subject, however, to all applicable provisions of the
Company's Certificate of Incorporation, as the same may be amended
from time to time.
27. Information to Option Holders. During the period any options
granted to employees of the Company remain outstanding, such
employee-option holders shall be entitled to receive, on an annual
or other periodic basis, financial and other information regarding
the Company. The Board shall exercise its discretion with regard to
the nature and extent of the financial information so provided,
giving due regard to the size and circumstances of the Company and,
if the Company provides annual reports to its shareholders, the
Company's practice in connection with such annual reports.
Notwithstanding the above, if the issuance of options under either
Plan A or Plan B is limited to key employees whose duties in
connection with the company assure their access to equivalent
information, this section 27 shall not apply to such employees and
plan. A copy of this Plan shall be delivered to the Secretary of
the Company and shall be shown by him or her to each eligible person
making reasonable inquiry concerning it. A copy of this Plan also
shall be delivered to each Optionee at the time his or her Options
are granted.
28. Legends on Stock Certificates. Each certificate representing
Common Stock issued under this Plan shall bear whatever legends are
required by federal or state law or by any governmental agency. In
particular, unless an appropriate registration statement is filed
pursuant to the Federal Securities Act of 1933, as amended, with
respect to the shares of Common Stock issuable under this Plan, each
certificate representing such Common Stock shall be endorsed on its
face with the following legend or its equivalent:
Neither the Option pursuant to which the shares represented
by this certificate are issued nor said shares have been
registered under the Securities Act of 1933, as amended (the
"Act"). Transfer or sale of such securities or any interest
therein is unlawful except after registration, or pursuant to
an exemption from the registration requirements, as provided
in the Act and the regulations thereunder.
29. Specific Performance. The Options granted under this Plan
and the Optioned Stock issued pursuant to the exercise of such
Options cannot be readily purchased or sold in the open market, and,
for that reason among others, the Company and its shareholders will
be irreparably damaged in the event that this Plan is not
specifically enforced. In the event of any controversy concerning
the right or obligation to purchase or sell any such Option or
Optioned Stock, such right or obligation shall be enforceable in a
court of equity by a decree of specific performance. Such remedy
shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the parties may have.
30. Invalid Provision. In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any
applicable law, such invalidity or enforceability shall not be
construed as rendering any other provisions contained herein invalid
or unenforceable, and all such other provisions shall be given full
force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
31. Applicable Law. This Plan shall be governed by and construed
in accordance with the laws of the State of California.
32. Successors and Assigns. This Plan shall be binding on and
inure to the benefit of the Company and the employees to whom an
Option is granted hereunder, and such employees' heirs, executors,
administrators, legatees, personal representatives, assignees and
transferees.
IN WITNESS WHEREOF, pursuant to the due authorization and
adoption of this Plan by the Board on September 20, 1999, the Company
has caused this Plan to be duly executed by its duly authorized
officers.
GTC TELECOM, INC.
__/s/ Paul Sandhu____________
By: Paul Sandhu
Its: President
[GTC TELECOM CORP. LETTERHEAD]
This letter confirms our understanding that you were granted 25,000
options in August 1998 to purchase up to 25,000 shares of GTC
Telecom common stock at an exercise price of $0.01 per share. These
options vest 12 months from August 1998.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
/s/ Eric Clemons /s/ Azad Rob
Eric Clemons Azad Rob
COO
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
This letter confirms our understanding that you were granted 25,000
options in August 1998 to purchase up to 25,000 shares of GTC
Telecom common stock at an exercise price of $0.01 per share. These
options vest 12 months from August 1998.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
/s/ Eric Clemons /s/ Liz Hurtado
Eric Clemons Liz Hurtado
COO
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
This letter confirms our understanding that you were granted 5,000
options on January 4, 1999. Of the 5,000 options, 1,000 of the options
of GTC Telecom common stock at an exercise price of $0.01 per share. These
options vest six months after January 4, 1999. The remaining 4,000 options
vest in 1/3 increments per year beginning January 4, 2000 at an exercise
price of $5.00 per share.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
/s/ Paul Sandhu /s/ Rion Johnston
Paul Sandhu Rion Johnston
President & CEO
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
February 4, 1999
Ms. Marla S. Timmer
21432 Calle De Oro
Lake Forest, CA 92630
Dear Marla,
We are pleased to offer you a position at GTC Telecom Corp. (the
"Company") as our Billing Manager. As we discussed, your offer
package includes the following:
State date: February 22, 1999
Salary: $85,000 annual
Stock Options: 2,500 options @$1.00 purchase price per share,
Vested in 6 months from hire date
7,500 options @$5.00 purchase price per share,
1/3 vesting every year from hire date.
Medical/Dental: GTC Telecom will reimburse COBRA monthly
payments until employee is eligible on
GTC Telecom's medical and dental
provider(s) plans
In accordance with the Company's general employment practices, your
employment with the Company will be on an "at-will" basis. Please
sign below indicating your acceptance of the terms of your offer and
return the original to the Company.
Marla, we look forward to having you as part of Team GTC. Welcome
aboard!
Regards,
/s/ Mark Fleming
Mark Fleming
Executive Vice President
/s/ Marla S. Timmer
Marla S. Timmer
[GTC TELECOM CORP. LETTERHEAD]
February 5, 1999
Mr. Michael R. Novotny
3666 Oak Haven Lane
Chino Hills, CA 91709-2882
Dear Mike,
We are pleased to offer you a position at GTC Telecom Corp. (the
"Company") as our Business Operations Analyst. As we discussed,
your offer package includes the following:
State date: February 11, 1999
Salary: $50,000 annual
Stock Options: 1,000 options @$1.00 purchase price per share,
Vested in 6 months from hire date
4,000 options @$5.00 purchase price per share,
1/3 vesting every year from hire date.
Medical/Dental: GTC coverage to commence 90 days from hire date.
In accordance with the Company's general employment practices, your
employment with the Company will be on an "at-will" basis. Please
sign below indicating your acceptance of the terms of your offer and
return the original to the Company.
Mike, we look forward to having you as part of Team GTC. Welcome
aboard!
Regards,
/s/ Mark Fleming
Mark Fleming
Executive Vice President
/s/ Michael R. Novotny
Michael R. Novotny
[GTC TELECOM CORP. LETTERHEAD]
September 22, 1999
Dear Chris:
This letter confirms our understanding that you are to be issued
15,000 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, for services
provided per our agreement dated September 9, 1999.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Chris Zomaya
COO Chris Zomaya
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
September 22, 1999
Dear Crystal:
This letter confirms our understanding that you are to be issued
6,050 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment in full,
against open invoices relating to the services provided in
establishing our ecallingcards.com website and other activities.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Crystal Pyatt
COO Crystal Pyatt
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
September 22, 1999
Dear Rebecca:
This letter confirms our understanding that you are to be issued
23,500 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment against
$94,000 for services rendered relating to the establishment of our
gtcinternet, gtczone and gtcmail websites and other activities.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Rebecca Raff
COO Rebecca Raff
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
September 22, 1999
Dear Mark:
This letter confirms our understanding that you are to be issued 500
shares of GTC Telecom common stock with registration rights. These
shares are issued to you, in lieu of cash, as payment in full for
legal services provided to GTC relating to its S8 filing.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
/s/ Eric Clemons
Eric Clemons /s/ Mark Richardson
COO Mark Richardson
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
September 23, 1999
Dear Tim:
This letter confirms our understanding that you are to be issued
5,000 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment against
$20,000 for services rendered relating to the design and printing of
the Company's corporate brochures.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Tim Cummings
COO Tim Cummings
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
September 22, 1999
Dear Joe:
This letter confirms our understanding that you are to be issued
10,000 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment against
$40,000 for services provided in advertising on behalf of GTC.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Joe Ferris
COO Joe Ferris
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
Dear Martin:
This letter confirms our understanding that you are to be issued
4,500 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment against
$18,000 for services provided in marketing on behalf of GTC.
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ Martin Williams
COO Martin Williams
GTC Telecom
[GTC TELECOM CORP. LETTERHEAD]
Dear Richard:
This letter confirms our understanding that you are to be issued
3,125 shares of GTC Telecom common stock with registration rights.
These shares are issued to you, in lieu of cash, as payment against
$10,000 for legal services provided..
Please sign this letter confirming your understanding of the agreement.
Sincerely,
Eric Clemons
/s/ Eric Clemons /s/ M. Richard Cutler
COO M. Richard Cutler
GTC Telecom
CUTLER LAW GROUP LETTERHEAD
October 6, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
RE: GTC TELECOM CORP.
Ladies and Gentlemen:
This office represents GTC Telecom Corp., a Nevada corporation
(the "Registrant") in connection with the Registrant's Registration
Statement on Form S-8 under the Securities Act of 1933 (the
"Registration Statement") for registration of an aggregate of
750,000 shares of the Registrant's common stock, $.001 par value
(the "Common Stock"), which will be issuable under
the 1999 Omnibus Stock Option Plan (the "Plan"). In connection with
our representation, we have examined the proceedings taken by you in
connection with the adoption of the Plan and the authorization of
the issuance of the shares of Common Stock under the Plan (the "Plan
Shares"), examined such documents and undertaken such further
inquiry as we consider necessary for rendering the opinion
hereinafter set forth.
Based upon the foregoing, it is our opinion that the Plan
Shares, when issued pursuant to the terms of the Plan, will be
validly issued, fully paid and non-assessable shares of Common
Stock.
We hereby consent to the inclusion of this opinion in the
Registration Statement and to the filing of this opinion as Exhibit
5.1 to the Registration Statement and with such state regulatory
agencies in such states as may require such filing in connection
with the registration of the Registered Securities for offer and
sale in such states.
Cutler Law Group
/s/ M. Richard Cutler
By: M. Richard Cutler, Esq.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the incorporation by reference in the Registration
Statement (Form S-8 File No. O-25703) pertaining to the 1999
Employee Stock Incentive Plan - Consulting Agreement - Legal
Services Agreement Plan of GTC Telecom Corp. of our report dated
March 22, 1999, with respect to the financial statements of GTC
Telecom Crop. (formerly Bobernco, Inc.), included in the
Registrant's Annual Report (Form 10-SB) for the periods ended June
30, 1998, December 31, 1997, and December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ Barry L. Friedman
Barry L. Friedman, CPA
Las Vegas, Nevada
September 22, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement of GTC Telecom Corp. (the "Company") on Form S-8, and in
the Reoffer Prospectus referred to therein, of our report dated
March 4, 1999, on our audit of the financial statements of GenTel
Communications, Inc. as of June 30, 1998, and for the periods from
May 29, 1987 (date of inception) to June 30, 1998 and the year ended
June 30, 1998, which report is included in the Company's
Registration Statement on Form 10-SB (File No. O-25703), as amended.
We also consent to the use of our name as it appears under the
caption "Experts."
Irvine, California CORBIN & WERTZ
October 6, 1999
