COMTEC INTERNATIONAL, INC
10855 East Bethany Drive Suite 300
Aurora, CO 80014
March __, 1997
To the Stockholders of
ComTec International, Inc.
You are cordially invited to attend an Annual Meeting (hereinafter referred to
as "Annual Meeting") of Stockholders of ComTec International, Inc. (the
"Company"), to be held at the offices of ComTec International, Inc. located at
10855 East Bethany Drive, Suite 300, Aurora, Colorado 80014 on March __,1997,
3:00 P.M., Mountain time, to elect a Board of Directors and to consider and
vote upon the matters set forth in the accompanying Notice of Annual Meeting
of Stockholders.
In addition to approval of an increase in the currently authorized common
stock of the Company and the approval of recapitalization plan authorizing a
reverse stock split, shareholders will be asked to approve the Company's 1997
Stock Option Plan.
Details and discussions concerning the various proposals are provided in the
proxy statement included herewith and should be carefully reviewed.
Since it is important that your shares be represented at the meeting whether
or not you plan to attend in person, please indicate on the enclosed proxy
your decisions about how you wish to vote and sign, date and return the proxy
promptly in the envelope provided. If you find it possible to attend the
meeting and wish to vote in person, you may withdraw your proxy at that time.
Your vote is important, regardless of the number of shares you own.
Sincerely,
___________________________
Donald Mack, President
<PAGE>
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
To Be Held
March __, 1997
To the Stockholders of
ComTec International, Inc.
NOTICE IS HERBY GIVEN that the Annual Meeting of Stockholders of ComTec
International, Inc. (the "Company") will be held on March __, 1997 at 3:00
o'clock in the afternoon, local time at the offices of ComTec International,
Inc., Suite 300, 10855 East Bethany Drive, Aurora, Colorado 80014 for the
following purposes; all as more specifically set forth in the attached Proxy
Statement.
1. To elect directors for the following year.
2. To consider and vote upon the proposal to authorize implementation
of a reverse stock split.
3. To consider and vote upon the proposal to adopt the 1997 stock
option plan.
4. To consider and vote upon the proposal to amend the articles of
incorporation to increase the authorized number of Common Shares to
100,000,000.
5. To transact such other business as may properly be brought before
this meeting.
Only holders of record of Common Stock of the Corporation as of the close of
business on February 20, 1997, are entitled to notice of or to vote at the
meeting or any adjournment thereof. The stock transfer books of the
Corporation will not be closed.
Stockholders are encouraged to attend the meeting in person. To ensure that
your shares will be represented, we urge you to vote, date, sign and mail the
Proxy Card in the envelope which is provided, whether or not you expect to be
present at the meeting. The prompt return of your Proxy Card will be
appreciated. It will also save the Company the expense of follow up contacts.
The giving of such Proxy will not affect your right to revoke such Proxy by
appropriate written notice or to vote in person should you later decide to
attend the meeting.
By Order of the Board of Directors
____________________________
Donald Mack, President
March __, 1997
<PAGE>
COMTEC INTERNATIONAL, INC.
10855 East Bethany Drive Suite 300
Aurora, CO 80014
(303) 743-7983
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held March __, 1997
INTRODUCTION
The Proxy enclosed with this Proxy Statement will be first sent or given
to shareholders on or about March __, 1997, in connection with the
solicitation by the directors of ComTec International, Inc. (the "Company") of
Proxies to be used at an Annual Meeting of Shareholders to be held at 1055
East Bethany Drive, Suite 300, Aurora, Colorado (the "Annual Meeting").
Persons Making the Solicitation
The Proxy is solicited on behalf of the directors of the Company. The
original solicitation will be by mail. Following the original solicitation,
management expects that certain individual shareholders will be further
solicited through telephonic or other oral communications from management.
Management may use specially engaged employees or paid solicitors for such
solicitation. Management intends to solicit Proxies which are held of record
by brokers, dealers, or voting trustees, or their nominees, and may pay the
reasonable expenses of such record holders for completing the mailing of
solicitation materials to persons for whom they hold the shares. All
solicitation expenses will be borne by the Company. As of the date of this
mailing, however, the Company has not made any contracts or arrangements for
such solicitation, hence it cannot identify any parties or estimate the cost
of such solicitation.
Terms of the Proxy
The enclosed Proxy indicates the matters to be acted upon at the Annual
Meeting and provides a box corresponding to each such matter. By
appropriately marking each box, a shareholder may specify whether to confer to
or to withhold from management the authority to vote the shares represented by
the Proxy. The Proxy also confers upon management discretionary voting
authority with respect to such other business as may properly come before the
Annual Meeting.
If the Proxy is executed properly and is received by management prior to
the Annual Meeting, the shares represented by the Proxy will be voted. Where
a shareholder specifies a choice with respect to the matter to be acted upon,
the shares will be voted in accordance with such specification. Any Proxy
which is executed in such a manner as not to withhold authority shall be
deemed to confer such authority.
A Proxy may be revoked at any time prior to its exercise by (1) so
notifying the Company in writing, (2) filing with the Company a duly executed
proxy bearing a later date, or (3) voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Voting Securities
<PAGE>
The securities entitled to vote at the Annual Meeting consist of all the
issued and outstanding shares of the Company's $.001 par value common stock
(the "Common Stock"). The close of business on February 20, 1997, has been
fixed by the Board of Directors of the Company as the record date. Only
shareholders of record as of the record date may vote at the Annual Meeting.
As of the record date, there were 49,933,000 shares of Common Stock issued and
outstanding.
Voting Rights and Requirement
Each shareholder of record as of the record date will be entitled to one
vote for each share of Common Stock held as of the record date.
Quorum and Votes Required for Approval. The presence at the Annual
Meeting of the holders of an amount of shares of each class of stock entitled
to vote at the meeting, representing the right to vote shares of Common Stock
of not less than a majority of the number of shares of Common Stock
outstanding as of the record date will constitute a quorum for transacting
business. Directors will be elected by plurality vote. The affirmative vote
of the majority of outstanding shares is necessary to amend the Articles of
Incorporation. The affirmative vote of the majority of shares represented at
the meeting and entitled to vote thereat is necessary to approve the Plan of
Recapitalization, to adopt the 1997 Stock Option Plan and to approve all other
matters that may come before the Annual Meeting.
Principal Security Holders. The following table sets forth information,
as of the record date, with respect to the beneficial ownership of the
Company's Common Stock by each person known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding Common
Stock, and by directors, nominees, and officers of the Company, and by
officers and directors as a group.
Name of Beneficial Owner Amount and Nature of Percent of Class (2)
Beneficial Ownership (1)
Clifford S. Perlman 1,971,449 3.9%
Donald G. Mack 2,568,977 5.1%
Thomas Moscariello 1,048,042 2.1%
All officers and directors as a 5,588,468 11.2%
group (3 persons)
(1) Information with respect to beneficial ownership is based upon
information furnished by each shareholder of the Company contained in filings
made with the Securities and Exchange Commission. Unless otherwise indicated,
the beneficial owner has sole voting and investment power with respect to the
shares shown.
(2) Based on 49,933,000 outstanding. Where the persons listed on this table
have the right to obtain additional shares of Common Stock within 60 days from
February 20, 1997, these additional shares are deemed to be outstanding for
the purpose of computing the percentage of class owned by such persons, but
are not deemed to be outstanding for the purpose of computing the percentage
of any other person.
Changes in Control
No arrangements are known to the Company, including any pledge by any
person of securities of the Company, the operation of which may, at a
subsequent date, result in further change in control of the company.
<PAGE>
MATTERS TO BE ACTED UPON
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected to serve until the next annual
shareholders' meeting or until their respective successors are elected and
qualify. Officers of the Company hold office until the meeting of the Board
of Directors immediately following the next annual shareholders' meeting or
until removal by the Board of Directors. Interim replacements for resigning
directors and officers are appointed by the Board of Directors.
The names of the nominees for directors and certain information about
them are set forth below:
Name Age Position with the
Company
Clifford Perlman 72 Chairman of the Board
of Directors
Donald G. Mack 39 President
Thomas Moscariello 40 Secretary
Business Experience:
CLIFFORD S. PERLMAN - Chairman of the Board - 1994
Mr. Perlman has served since June 1994 as Chairman of the Board of Directors,
Chief Executive Officer and President of the Company. From 1990 to present,
Mr. Perlman continues to serve as an independent business consultant to both
private and public companies. In 1991, Mr. Perlman served as Chief Executive
Officer and Director of the MGM Grand Hotels, Inc., also a NYSE company. From
1958 to 1982, Mr. Perlman was founder and Director of LUM Restaurants, a NYSE
company. Through LUMS, Mr. Perlman founded and served as Chairman of Caesar's
World, Inc., a New York Stock Exchange (NYSE) company and the parent company
of Caesar's Palace Casino and Resort in Las Vegas, Nevada.
DONALD G. MACK - Chief Executive Officer, President and Director - 1995
From 1989 Mr. Mack has been with the predecessor to ComTec International,
Keystone Holding Corp., a private Denver company engaged in telecommunication
activities focusing on wireless and data services, as President, CEO, and
founder. From 1990 to 1993. Mr. Mack was the CEO of Learning and Leisure
Technologies Inc., a Denver company engaged in developing child care centers.
Mr. Mack may be considered the "promoter" of the Company pursuant to the SEC
definition as such.
THOMAS J. MOSCARIELLO - Vice President of Sales and Marketing and Director -
1995
Since May 1995, Mr. Moscariello has served as an executive officer and
director of Key Communication Group and became an officer and director of
ComTec International in May 1996. Simultaneously therewith and since 1995, Mr.
Moscariello has been employed as an account executive by InterTel DataCom,
Inc. From 1990 to 1995, Mr. Moscariello was employed as an account executive
by WilTel Communication Systems, Inc.. Mr. Moscariello received a Bachelor of
Science degree in Engineering Technology from the University of Hartford
(Hartford, CT) in 1982.
<PAGE>
+ The following table sets forth, as of the date of this Proxy Statement,
the names and ages of the Company's executive officers, including all
positions and offices held by each such person. These officers are elected to
hold office for one year or until their respective successors are duly elected
and qualified:
Name Age Position with the Business Experience
Company
Clifford Perlman 72 Chairman of the Board See table above
of Directors
Donald G. Mack 39 President and Chief See table above
Executive Officer,
Treasurer and
Director
Thomas Moscariello 40 Secretary See table above
Except as otherwise indicated below, no organization by which any
officer or director previously has been employed is an affiliate, parent, or
subsidiary of the Company.
The Company does not have any standing audit, nominating, or
compensation committees of the Board of Directors.
Mr. Perlman has been a director since 1994, Messrs. Mack and Moscariello
have been directors since May 1995. They took action four times by unanimous
written consent during the 1996 fiscal year. Each director participated in
the written consents that occurred during the period he was a director. There
have been six board meetings since June 30, 1995.
Compliance with Section 16(a) of the Exchange Act
During the fiscal year ended June 30, 1996, to the knowledge of the
Company, none of the directors has filed on a timely basis the Forms 3, 4,
and/or 5 with the Securities and Exchange Commission as required by Section
16(a) of the Securities Exchange Act of 1934.
Executive Compensation
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the Chief
Executive Officer of the Company and by each other executive officer of the
Company whose total salary and bonus exceeded $100,000 in the Company's fiscal
year ended June 30, 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
_______________________________ _______________________________
Name and Position Year Salary Bonus Other SAR Options LTIP Other
_______________________ ____ _______ ______ ______ _____ _______ ________ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clifford S. Perlman 1995 $60,000 None None None None $312,383 None
Chairman of the 1996 $60,000 None None None None $281,949 None
Board of Directors
Donald G. Mack 1995 $120,000 None None None None None None
President and 1996 $224,600* None $30,000 None None None None
Chief Executive Officer
Mitchell B. Chi 1996 $84,000 $27,000 None None None None None
Chief Operating Officer
Thomas Moscariello 1996 $45,000 None None None None None None
VP Sales and Marketing
<PAGE>
Robert Clauson 1995 $60,000 None None None None None None
Corporate Secretary 1996 $60,000 None None None None None None
____________________
<FN>
* Mr. Mack salary listed above includes the value of stock in the Company received in lieu
of compensation
</TABLE>
The Company does not pay non-officer directors for their services as
such, with the exception of Mr. Perlman who performs day to day administration
activities and is also designated as Chairman of the board, nor does it pay
any director's fees for attendance at meetings. Directors are reimbursed for
any expenses incurred by them in their performance as directors.
The Company has no long-term incentive plans.
There are no arrangements pursuant to which directors of the Company are
compensated in their capacities as such.
Employee Agreements
Effective May 10, 1995, the Company entered into a two year Employment
Contract with Clifford Perlman to manage and direct the affairs of the Company
and act in the capacity of Chairman of the Board at an annual base salary of
$60,000. In addition, the Company agreed to compensate Perlman by: (1)
paying him 50% cash and 50% stock on the balance of his $80,000 accrued salary
from a prior agreement once the Company has closed on adequate financing; and
(2) Perlman shall receive a stock bonus paid annually equal to 5% of the
issued and outstanding shares on June 20 of each year throughout the term of
his agreement. On February 12, 1996, Perlman settled the Company's $130,000
cash obligation to him for the ten months ended February 28, 1996 for
1,300,000 shares of the Company's common stock.
By virtue of a written three year employment agreement between the
Company and Donald G. Mack dated as of May 10, 1995, Mack agreed to accrue
monthly compensation of $10,000, with the option to convert the same to shares
of the Company's common stock at a 20% discount from the bid price of the
Company's common stock in the over the counter market on the date of
conversion. As additional compensation, the Company agreed to pay Mack: (i)
a bonus equal to 5% of the quarterly net increase in the Company's net assets
payable semiannually; (ii) 10% of the Company's net before tax profit payable
annually; and (iii) performance stock options, effective for four years, based
upon the Company reaching certain financial criteria. In the latter regard,
and when the Company reached $1,000,000, $5,000,000 and $15,000,000 in gross
revenues, the Company becomes obligated to issue Mack 1,000,000 shares at
$.10, 2,000,000 shares at $.20 and 3,000,000 shares at $.30, respectively.
The agreement also obligated the Company to purchase a $1,500,000 term life
policy on Mack payable to his named beneficiaries.
Certain Transactions
On February 12, 1996, Mr. Perlman converted all of the Company's cash
obligations to him through February 28, 1996 into shares of common stock
valued at $.10 per share or 80% of the $.125 bid price on that date. Mr.
Perlman received 1,300,000 shares in settlement of the Company's $130,000
obligation to him, and computed as follows: ten months salary at $5,000 per
month, $40,000 in prior unpaid obligation and $40,000 worth of stock
previously unpaid. This transaction was approved by the Company's Board of
Directors on February 12, 1996.
On June 20, 1996, Mr. Perlman earned 1,666,666 of the Company's Common
Stock pursuant to the terms and conditions of his Employment Agreement dated May
10, 1995. This transaction was valued at $.162 per share or 80% of the $.211 bid
price on that date.
<PAGE>
On June 17, 1994, the Company purchased from Mr. Mack, the Company's
President and CEO a car lot located in Parker, Colorado. The purchase price paid
was $392,214. In connection with this transaction, the Company assumed a first
mortgage of $352,000, issued 172,720 preferred shares of stated $1 value per
share of Key Car Finance (a subsidiary of the Company) to the President of the
Company and issued a note payable to the President of the Company in the amount
of $148,000.
Donald G. Mack, the Company's President and Chief Executive Officer was a
principal stockholder of Keystone Holding Corp., whose assets were purchased by
the Company on May 10, 1995. As a result of this transaction, Mr. Mack received
.08% of the Company's common stock as of June 30, 1995 and executed two related
party - notes payable to him in the amount of: 1). $81,202 in connection with
the purchase of the commercial property in Parker, Colorado and 2). $10,000 in
connection with amounts owed him from Key Communications, Inc., a subsidiary of
the Company.
On February 12, 1996, Mr. Mack converted part of the Company's cash
obligations to him through February 28, 1996 into shares of common stock valued
at $.10 per share or 80% of the $.125 bid price on that date. Mr. Mack received
2,200,000 shares in settlement of the Company's $220,000 obligation to him, and
computed as follows: $120,600 in salary earned from the Company, a $30,000
management fee from the Company and a partial reduction of the notes payable due
him in the amount of $69,300. This transaction was approved by the Company's
Board of Directors on February 12, 1996.
On July 16, 1996, Mr. Mack converted all of the Company's cash obligations
to him as of June 30, 1996 into shares of common stock valued at $.10 per share
or 80% of the $.125 bid price on that date. Mr. Mack received 1,387,030 shares
in settlement of the Company's $138,703 obligation to him as follows: $104,000
in salary earned from the Company and final reduction on any remaining notes
payable due him in the amount of $34,703. This transaction was approved by the
Company's Board of Directors on July 16, 1996.
The Company and Keystone Holding Corp. are related through certain common
stockholders and common management.
Except for the foregoing and during the fiscal year ended June 30, 1996,
no officer, director or relative or spouse of the foregoing persons or any
relative of such person who has the same home as such person, or is a director
or other officer of any parent or subsidiary of the Company or any shareholder
known by the Company to own of record or beneficially more than five (5%)
percent of the Company's Common Stock, had a direct or indirect material
interest in any transaction or presently proposed transaction to which the
Company or any of its parents or subsidiaries was or is a party.
PROPOSAL 2: AUTHORIZATION TO IMPLEMENT REVERSE SPLIT
The shareholders are being asked to authorize the Board of Directors of
the Company to implement a future reverse split of the Company's Common Stock
of at least 1-for-3 but no greater than 1-for-100 which can be implemented at
any time at the discretion of the Board of Directors on or before December 31,
1997.
Reasons for the Proposed Reverse Stock Split
Management of the Company believes a future reverse stock split will (1)
reduce the number of outstanding shares of Common Stock and thereby make
available shares of Common Stock with which to acquire assets into the
company; and (2) help raise the trading price of the Company's Common Stock.
In discussions by the Company's executive officers with members of the
brokerage and banking industries, the Company has been advised that the
<PAGE>
brokerage firms might be more willing to evaluate the Company's securities as
a possible investment opportunity for their clients and may be more willing to
act as a market maker in the Company's securities if the price range for the
Company's Common Stock were substantially higher. Management believes that
additional interest by the investment community in the Company's stock, of
which there can be no assurance, is desirable.
Management of the Company also believes that existing low trading prices
of the Company's Common Stock may have an adverse impact upon the current
level of the trading market for the Common Stock. In particular, brokerage
firms often charge higher commissions for transactions involving low-priced
stocks than they would for the same dollar amount of securities with a higher
per share price. Some brokerage firms will not recommend purchases of low-
priced stocks to their clients or make a market in such stock, which
tendencies may adversely affect the liquidity for current shareholders and the
Company's ability to obtain additional equity financing.
Management will determine the exact ratio for the reverse stock split
based upon the market price at the time. At least two weeks prior to the
implementation of the reverse stock split, the Company will notify the OTC
Bulletin Board and interested broker-dealers and file a Current Report on Form
8-K, disclosing the effective date and ratio of the reverse stock split. The
Company anticipates that it will notify shareholders by press release and by
mailing at the same time.
Effects of Approval of the Reverse Stock Split
Theoretically, the market price of the Company's Common Stock should
increase in proportion to the reverse stock split. For example, if a 1-for-10
reverse stock split is implemented, in theory the market price of the
Company's Common Stock should increase ten-fold. It is hoped that this will
result in a price level which will overcome the reluctance, policies, and
practices of broker-dealers described above and increase interest in the
Company's Common Stock by investors. Shareholders should note that the effect
of the reverse stock split upon the market price for the Company's Common
Stock cannot be accurately predicted. Further, there can be no assurance that
the per share market price of the post-split Common Stock will trade at a
price which is a multiple of the price of the pre-split Common Stock or, if it
does, that the price can be maintained at that level for any period of time.
On March __,1997, the closing bid and asked prices of the Company's
Common Stock were $___ and $___ per share, respectively, as reported by the
OTC Bulletin Board. The foregoing quotation reflects inter-dealer prices,
without retail mark-up, mark-down, or commission and may not represent actual
transactions.
Management, by implementing a reverse stock split, does not intend to
"take the company private" by decreasing the number of shareholders of the
Company. Management does not believe that a 1-for-100 reverse stock split
would result in any shareholders being eliminated or closed out as a result of
holding less than one share after the reverse stock split. As disclosed
below, the Company will round to the nearest whole share any fractional shares
resulting from the reverse stock split.
Preferred Stock. As of the date of this Proxy Statement, the Company
had 420,000 shares of Series A Preferred Stock issued and outstanding, no
shares of Series B Preferred Stock issued or outstanding, and 39,700 shares of
Series C Preferred Stock issued and outstanding. The various series of
Preferred are convertible into Common Stock. A reverse stock split would not
be implemented as to the Preferred Stock and would not amend the terms of the
Preferred Stock. However, the terms of the various series of Preferred Stock
provide that upon a reverse stock split of the Common Stock, the conversion
ratio specified shall be adjusted to reflect the decrease in the number of
shares of Common Stock.
<PAGE>
Procedure for Implementing the Reverse Split
If this proposal is adopted by the shareholders, shares of pre-split
Common Stock will be exchanged for each share of post-split Common Stock.
Shares of post-split Common Stock may be obtained by surrendering certificates
representing shares of pre-split Common Stock to the Company's transfer agent,
General Securities Transfer Agency, Inc. (the "Transfer Agent"). To determine
the number of shares of post-split Common Stock issuable to any record holder,
the total number of shares represented by all of the certificates issued in
the name of that record holder held in each account as set forth on the record
of the Transfer Agent on the date upon which the reverse split becomes
effective will be divided by the reverse split ratio (a number ranging from 3
to 100). Upon surrender to the Transfer Agent of the share certificate(s)
representing shares of pre-split Common Stock and the applicable transfer fee,
which presently is $15.00 per certificate payable by the holder, the holder
will receive a share certificate representing the appropriate number of shares
of post-split Common Stock. Fractional shares of post-split Common Stock will
be rounded to the nearest whole share if the division described above results
in a quotient which contains a fraction. Shareholders are not required to
exchange their certificates of pre-split Common Stock for post-split Common
Stock.
Federal Income Tax Effects of the Plan
Holders of Common Stock will not be required to recognize any gain or
loss if the reverse stock split is effected. The tax basis of the aggregate
shares of post-split Common Stock received by present shareholders will be
equal to the basis of the aggregate shares of the pre-split Common Stock
exchanged therefor. The holding period for shares of post-split Common Stock
will include the holding period of the pre-split Common Stock when calculated
for purposes of taxation or sales under Rule 144 of the Rules and Regulations
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Rule 144 requires that "restricted securities," as defined in Rule
144, be held at least two years before routine sales can be made in accordance
with the provisions of the Rule. Rule 144 provides that shares issued in a
reverse stock split are deemed to have been held from the date of acquisition
of the shares involved in the reverse stock split.
Recommendation and Vote Required
The Board recommends that the shareholders vote "FOR" this proposal to
approve the reverse stock split. The affirmative vote of a majority of the
shares represented at the Meeting and entitled to vote is required for
approval. See "Voting Securities and Principal Holders Thereof" above.
If this proposal is approved, management will have the authority to
effect a reverse stock split of at least 1-for-3 but no greater than 1-for-100
at any time in the discretion of management on or before December 31, 1997.
PROPOSAL 3: ADOPTION OF 1997 STOCK OPTION PLAN
The Board is requesting that the shareholders of the Company adopt the
1997 Stock Option Plan (the "Plan") reserving an aggregate of 4,500,000 shares
of the Company's Common Stock (the "Available Shares") for issuance pursuant
to the exercise of stock options ("Options") which may be granted to
employees, officers, and directors of the Company and consultants to the
Company. The Plan also provides for annual adjustment in the number of
Available Shares, commencing June 30, 1997, to a number equal to 10% of the
number of shares outstanding on June 30 of the preceding year or 4,500,000
shares, whichever is greater. The Plan was adopted by the Board of Directors
on February 12, 1997. The Plan is designed to (i) induce qualified persons to
become employees, officers, or directors of the Company; (ii) reward such
persons for past services to the Company; (iii) encourage such persons to
remain in the employ of the Company or associated with the Company; and (iv)
provide additional incentive for such persons to put forth maximum efforts for
<PAGE>
the success of business of the Company. To the extent that management
personnel may be eligible to receive Options which may be granted under the
Plan, management has as interest in obtaining approval of the Plan by the
Company's shareholders. As of February 20, 1997, three persons were eligible
to participate in the Plan.
The Plan will be administered by the Compensation Committee of the Board
of Directors (the "Committee"). Transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). In addition to determining
who will be granted Options, the Committee has the authority and discretion to
determine when Options will be granted and the number of Options to be
granted. The Committee may determine which Options may be intended to qualify
("Incentive Stock Option") for special treatment under the Internal Revenue
Code of 1986, as amended from time to time (the "Code") or Non-Qualified
Options ("Non-Qualified Stock Options") which are not intended to so qualify.
See "Federal Income Tax Consequences" below. The Committee also may determine
the time or times when each Option becomes exercisable, the duration of the
exercise period for Options and the form or forms of the instruments
evidencing Options granted under the Plan. The Committee may adopt, amend,
and rescind such rules and regulations as in its opinion may be advisable for
the administration of the Plan. The Committee may amend the Plan without
shareholder approval where such approval is not required to satisfy any
statutory or regulatory requirements.
The Plan provides that disinterested directors will receive automatic
option grants to purchase 70,000 shares of the Company's Common Stock upon
their initial appointment or election as directors, and on the date of each
subsequent annual shareholders' meeting in which such director is reelected as
a director. Grants to employee directors and officer/directors can be either
Non-Qualified Stock Options or Incentive Stock Options, to the extent that
they do not exceed the Incentive Stock Option exercise limitations, and the
portion of an option to an employee director or officer/director that exceeds
the dollar limitations of Code Section 422 will be treated as a Non-Qualified
Stock Option. All options granted to disinterested directors will be Non-
Qualified Options.
The Committee also may construe the Plan and the provisions in the
instruments evidencing options granted under the Plan to employee and officer
participants and is empowered to make all other determinations deemed
necessary or advisable for the administration of the Plan. Option grants to
disinterested directors are self-administering and not subject to the
Committee's discretion. The Committee may not adversely affect the rights of
any participant under any unexercised option or any portion thereof without
the consent of such participant. This Plan will remain in effect until it is
terminated by the Compensation Committee, except that no Incentive Stock
Option will be granted after January 31, 2007.
The Plan contains provisions for proportionate adjustment of the number
of shares for outstanding options and the option price per share in the event
of stock dividends, recapitalizations resulting in stock, reverse stock splits
or combinations or exchanges of shares.
Participants in the Plan may be selected by the Committee from employees
and officers of the Company and its subsidiaries and consultants to the
Company and its subsidiaries. Disinterested directors receive annual
automatic option grants, as described above. In determining the persons to
whom options will be granted and the number of shares to be covered by each
option, the Committee will take into account the duties of the respective
persons, their present and potential contributions to the success of the
Company, and such other factors as the Committee deems relevant to accomplish
the purposes of the Plan.
Only employees of the Company and its subsidiaries, as the term
"employee" is defined for the purposes of the Code will be entitled to receive
Incentive Stock Options. Incentive Stock Options granted under the Plan are
intended to satisfy all requirements for incentive stock options under Section
422 of the Code and the Treasury Regulations thereunder.
<PAGE>
Each option granted under the Plan will be evidenced by a written option
agreement between the Company and the optionee. The option price of any
Incentive Stock Option may be not less than 100% of the Fair Market Value per
share on the date of grant of the option; provided, however, that any
Incentive Stock Option granted under the Plan to a person owning more than ten
percent of the total combined voting power of the Common Stock will have an
option price of not less than 110% of the Fair Market Value per share on the
date of grant of the Incentive Stock Option. Each Non-Qualified Stock Option
granted under the Plan will be at a price no less than 85% of the Fair Market
Value per share on the date of grant. "Fair Market Value" per share as of a
particular date is defined in the Plan as the last sale price of the Company's
Common Stock as reported on a national securities exchange or on the NASDAQ
System or, if none, the average of the closing bid and asked prices of the
Company's Common Stock as reported by NASDAQ or, if such quotations are
unavailable, the value determined by the Committee in its discretion in good
faith.
The exercise period of options granted under the Plan may not exceed ten
years from the date of grant thereof. Incentive Stock Options granted to a
person owning more than ten percent of the total combined voting power of the
Common Stock of the Company will be for no more than five years. Except in
the case of options granted to disinterested directors, who comprise the
Compensation Committee, the Committee will have the authority to accelerate or
extend the exercisability of any outstanding option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. However,
no exercise period may be extended to increase the term of the option beyond
ten years from the date of the grant.
To exercise an option, the optionee must pay the full exercise price in
cash, in shares of Common Stock having a Fair Market Value equal to the option
price or in property or in a combination of cash, shares, and property and,
subject to approval of the Committee. The Committee has the sole and absolute
discretion to determine whether or not property other than cash or Common
Stock may be used to purchase the shares of Common Stock thereunder and, if
so, to determine the value of the property received.
An option may not be exercised unless the optionee then is an employee,
officer, or director of the Company or its subsidiaries, and unless the
optionee has remained continuously as an employee, officer, or director of the
Company since the date of grant of the option. If the optionee ceases to be
an employee, officer, or director of the Company or its subsidiaries other
than by reason of death, disability, or for cause, all options granted to such
optionee, fully vested to such optionee but not yet exercised, will terminate
three months after the optionee ceases to be an employee, officer or director
of the Company. All options which are not vested to an optionee, under the
conditions stated in this paragraph for which employment ceases, will
immediately terminate on the date the optionee ceases employment of
association.
If an optionee dies while an employee, officer or director of the
Company, or if the optionee's employment, officer, or director status
terminates by reason of disability, all options theretofore granted to such
optionee, whether or not otherwise exercisable, unless earlier terminated in
accordance with their terms, may be exercised at any time within one year
after the date of death or disability of said optionee or by the optionee's
estate or by a person who acquired the right to exercise such options by
bequest or inheritance or otherwise by reason of the death or disability of
the optionee.
Options granted under the Plan are not transferable other than by will
or by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title 1 of the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Options may be
exercised, during the lifetime of the optionee, only by the optionee and
thereafter only by his legal representative. An optionee has no rights as a
shareholder with respect to any shares covered by an option until the option
has been exercised.
<PAGE>
As a condition to the issuance of shares upon the exercise of an option,
the Company will require the optionee to pay to the Company the amount of the
Company's tax withholding liability required in connection with such exercise.
The Company, to the extent permitted or required by law, may deduct a
sufficient number of shares due to the optionee upon exercise of the option to
allow the company to pay such withholding taxes. The Company is not obligated
to advise any optionee of the existence of any tax or the amount which the
Company will be so required to withhold.
Federal Income Tax Consequences
The federal income tax discussion set forth below is included for
general information only. Optionees are urged to consult their tax advisors
to determine the particular tax consequences applicable to them, including the
application and effect of foreign, state, and local income and other tax laws.
Incentive Stock Options. No income results to the holder of an
Incentive Stock Option upon the grant thereof or issuance of shares upon
exercise thereof. The amount realized on the sale or taxable exchange of the
Option Shares in excess of the option exercise price will be considered a
capital gain, except that, if a sale, taxable exchange, or other disposition
occurs within one year after exercise of the Incentive Stock Option or two
years after the grant of the Incentive Stock Option (generally considered to
be a "disqualifying disposition"), the optionee will realize compensation, for
federal income tax purposes, on the amount by which the lessor of (i) the fair
market value on the date of exercise or (ii) the amount realized on the sale
of the shares, exceeds the exercise price. Any appreciation on the shares
between the exercise date and the disposition will be taxed to the optionee as
capital gain. The difference between the exercise price and the fair market
value of the shares acquired at the time of exercise is a tax preference item
for the purpose of calculating the alternative minimum tax on individuals
under the Code. This preference amount will not be included again in
alternative minimum taxable income in the year the taxpayer disposes of the
stock.
Non-Qualified Stock Options. No compensation will be realized by the
optionee of a Non-Qualified Stock Option at the time it is granted. Upon the
exercise of a Non-Qualified Stock Option, an optionee will realize
compensation for federal income tax purposes on the difference between the
exercise price and the fair market value of the shares acquired at the time of
exercise. If the optionee exercises a Non-Qualified Stock Option by
surrendering shares of the Company's Common Stock, the optionee will not
recognize income or gain at the time of exercise.
Consequences to the Company. The Company recognizes no deduction at the
time of grant of exercise of an Incentive Stock Option and recognizes no
deduction at the time of grant of a Non-Qualified Stock Option. The Company
will recognize a deduction at the time of exercise of a Non-Qualified Stock
Option on the difference between the option price and the fair market value of
the shares on the date of grant. The Company also will recognize a deduction
to the extent the optionee recognizes income upon a disqualifying disposition
of shares underlying an Incentive Stock Option.
Vesting
Vesting schedules for the options granted must be determined by the
compensation committee on an individual basis and specified in each optionee's
agreement.
Recommendation and Vote Required
The Board recommends that the Shareholders vote "FOR" this proposal to
approve the 1997 Stock Option Plan. The affirmative vote of a majority of the
<PAGE>
shares represented at the Meeting and entitled to vote is required for
approval of the 1997 Stock Option Plan. See "Voting Securities and Principal
Holders Thereof" above. Actual instituting of the plan would require that the
shareholders also affirm Proposal 4 herein to amend the articles of
incorporation.
PROPOSAL 4: AMENDMENT OF ARTICLES OF INCORPORATION
The Board of Directors proposes to amend the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock, par
value $.001 per share, from 50,000,000 to 100,000,000 and the authorized
Preferred stock from 5,000,000 shares to 10,000,000. The Board of Directors
believes that approval of the increase in the Company's authorized Common and
Preferred Stock will assist the Company by enhancing its ability to raise
capital in public or private offerings to be used for, among other things,
acquisition and equity financing purposes. As of June 30, 1996, a contingent
liability for a potential repurchase requirement of 11,352,898 common shares
(related to stock issuances, since June 30, 1996, conversion rights, warrants
and options) existed. An increase of authorized Common shares is necessary to
eliminate this contingent liability. As of February 20, 1997, there were
approximately 49,933,000 shares of Common Stock outstanding.
The Company proposes to amend of its Articles of Incorporation to
increase its authorized Common Stock from 50,000,00 to 100,000,000 shares.
Article (A) of the Articles of Incorporation is hereby proposed to be
amended to read in its entirety as follows:
(A) Authorized Shares. The aggregate number of shares which the
corporation shall have the authority to issue is 110,000,000 shares. One
Hundred Million (100,000,000) shares shall be designated "Common Stock",
and shall have a par value of $.001 per share. Ten Million (10,000,000)
shares shall be designated "Preferred Stock", and shall have a par value
of $.001 per share, and shall be issued for such consideration, expressed
in dollars, as the Board of Directors may, from time to time, determine.
This Amendment would increase the number of common shares available for
issuance by the Company by 50,000,000 shares and the number of preferred
shares available for issuance by 5,000,000 shares.
The proposed increase in the amount of authorized Common Stock is
necessary among other things, to enable the Company to meet its contingent
obligation to issue common stock in satisfaction of certain outstanding
conversion rights, options and warrants. At the present level of 50,000,000
authorized common shares, the Company does not have sufficient authorized
shares to issue the potential of 11,352,898 shares required by the outstanding
conversion rights, options and warrants. The Company currently has a
footnoted contingent liability for such obligation in its June 30, 1996
financial statements of $9,649,963. Included in this group are options and
warrants held by officers and directors. These officers, including three, who
are also directors, have an interest in the passage of this amendment. In
addition to satisfying this immediate need, the increase in authorized common
stock will permit the Company to maintain some flexibility in addressing its
future capital needs, and will allow for future growth of the Company through
new product acquisition and possible merger/acquisition situations.
If the proposed amendment is approved, the additional shares of Common
Stock of the Company shall entitle the holders thereof to identical rights,
privileges and duties as present holders of the Company's Common Stock. The
shares of Common Stock do not have cumulative voting rights. No holder of any
shares of the Company has or shall have any preemptive rights with respect to
the issuance of Common Stock by the Company.
If the proposed amendment is approved, the Company may seek to obtain
additional capital for general corporate purposes by one or more public or
private offerings of its Common Stock. Although the Company has entered into
one non binding letter of intent with a NASD member firm contemplating a
future offering of common stock and debt, it is not possible at this time to
describe the specifics of any offering since the Company cannot make anything
beyond tentative and preliminary plans until after the issues presented at the
annual meeting are resolved.
<PAGE>
The Board of Directors does not intend to seek shareholder approval
prior to the issuance of any additional shares of Stock. Under the Business
Corporation Law of the State of New Mexico, the Company is not required to
obtain approval of its shareholders in order to issue the authorized Stock.
If the proposed amendment is adopted, the Company could, but does not
intend at this time, to issue the Common Stock to a shareholder or
shareholders friendly to management thereby making a merger, tender offer,
change of control, or proxy contest more difficult even though such
transactions may be favorable to the interests of shareholders. Management is
not aware of any attempt by any person or group to obtain control of the
Company. The Company's Certificate of Incorporation and By-Laws do not
contain any provisions having an anti-takeover effect and management does not
presently intend this amendment to be a part of a plan to adopt a series of
anti-takeover measures in future proxy solicitations. As stated above, the
reason for the amendment is to create an adequate reserve of Common Stock to
be used for, among other things, acquisitions and financing purposes.
In addition to the possible issuance of the additional authorized Common
Stock to interests friendly to management, the issuance of additional Common
Stock would have a dilutive effect on the shareholders' voting rights and may
have a dilutive effect on other shareholder rights. The advantage of the
amendment is that, when adopted, the Company will have an adequate reserve of
equity securities immediately available to it in order to enable it to take
advantage of acquisition and equity financing opportunities as the arise. The
expense and delay of having to obtain shareholder approval to issue equity
securities for specific transactions may in effect cause the Company to lose
such opportunities.
The Board of Directors approved this amendment to the Certificate of
Incorporation by a unanimous vote. Adoption of this amendment requires the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stock. If it is adopted, the amendment will become effective as soon
after the Meeting as practicable upon the filing of the Certificate of
Amendment to the Certificate of Incorporation by the Secretary of State of New
Mexico.
Recommendation and Vote Required
The Board recommends that the shareholders vote "FOR" this proposal to
adopt the Articles of Amendment. The affirmative vote of a majority of the
outstanding shares entitled to vote is required for approval. See "Voting
Securities and Principal Holders Thereof" above.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ehrhardt Keefe Steiner & Hottman PC served as the independent
accountants for the Company for the year ended June 30, 1996. Management of
the Company intends to select such firm as the Company's independent
accountant for the fiscal year ending June 30, 1997.
A representative of Ehrhardt Keefe Steiner & Hottman PC is not expected
to be present at the Annual Meeting.
OTHER MATTERS
Except for the matters referred to in the accompanying Notice of Annual
Meeting, management does not intend to present any matter for action at the
Annual Meeting and knows of no matter to be presented that is a proper subject
for action by the shareholders at the meeting. However, if any other matters
should properly come before the meeting, it is intended that votes will be
cast pursuant to the authority granted by the enclosed Proxy in accordance
with the best judgment of the person or persons acting under the Proxy.
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the year ended June 30,
1996 including the financial statements, as filed with the Securities Exchange
Commission under the Securities Act of 1934, constitutes the annual report to
shareholders and is being mailed with this Proxy Statement.
Upon written request and payment of a reasonable fee to cover the
Company's expenses, the Company will furnish any person who is a shareholder
of the Company as of February 20, 1997, a copy of any Exhibit to the Form 10-
KSB described above and for the latest Form 10QSB as filed with the Securities
Exchange Commission. Any such written request may be addressed to the
Corporate Secretary, ComTec International, Inc., 10855 East Bethany Drive,
Aurora, Colorado 80014. The written request shall include a good faith
representation that, as of February 20, 1997, the person making the request
was the beneficial owner of Common Stock of the Company entitled to vote at
the Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder proposing to have any appropriate matter brought before
the next annual meeting of shareholders must submit such proposal in
accordance with the proxy rules of the Securities and Exchange Commission.
Such proposals should be sent to the Corporate Secretary, ComTec
International, Inc., 10855 East Bethany Drive, Aurora, Colorado 80014 for
receipt no later than March ___, 1997.
By order of the Board of Directors:
Donald G. Mack, President
Aurora, Colorado
March ___, 1997
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTIORS OF
COMTEC INTERNATIONAL, INC. (the "Company")
Donald Mack is hereby authorized to represent and to vote the shares of the
undersigned in the Company at an annual Meeting (hereafter referred to as
at an annual Meeting (hereafter referred to as
(A) Authorized Shares. The aggregate number of shares which the
corporation shall have the authority to issue is 110,000,000 shares. One
Hundred Million (100,000,000) shares shall be designated "Common Stock",
and shall have a par value of $.001 per share. Ten Million (10,000,000)
shares shall be designated "Preferred Stock", and shall have a par value
of $.001 per share, and shall be issued for such consideration, expressed
in dollars, as the Board of Directors may, from time to time, determine.
and
Present Chairman of the Board
Donald G. Mack 39 May 1995 to Director, CEO, CFO,
Present and President
Thomas Moscariello 40 May 1995 to Director, Secretary and
Present VP of Marketing
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name below)
________________________________
Item 2. FOR [ ] AGAINST [ ] ABSTAIN [ ] Proposal to authorize
implementation of reverse stock split.
Item 3. FOR [ ] AGAINST [ ] ABSTAIN [ ] Proposal to adopt the
1997 stock option plan.
Item 4. FOR [ ] AGAINST [ ] ABSTAIN [ ] Proposal to amend the
articles of incorporation to increase the authorized number of Common Shares
to 100,000,000.
Item 5. In their discretion, on any other business that may properly come
before the meeting.
FOR [ ] WITHHOLD AUTHORITY [ ]
The shares represented hereby will be voted. With respect to Items 1 - 4
above, the shares will be voted in accordance with the specifications made and
where no specifications are given, said proxies will vote for all three
directors and for all the proposals.
Please sign and date and return to, Corporate Secretary, ComTec International,
Inc., 10855 East Bethany Drive, Aurora Colorado 80014.
<PAGE>
Receipt is acknowledged of (1) Notice of Annual Meeting, (2) Proxy statement
for the annual meeting and (3) Form 10KSB for year ended June 30, 1996.
Dated ___________________, 1997
_____________________________
Print Shareholder Name
_____________________________
Signature
_____________________________
Signature
______________________________
Approximate Number of Common Shares
Represented by Proxy (if known)
Joint Owners should each sign. Attorneys-in-fact, executors, administrators,
trustees, guardians or corporation officers, please give full title and name
of entity represented by the proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
