Sector Communications, Inc.
Notice of 1997
Annual Meeting of Stockholders
and
Proxy Statement
YOUR VOTE IS IMPORTANT!
Please mark, date, sign and return your proxy
form in the enclosed envelope.
<PAGE>
SECTOR COMMUNICATIONS, INC.
September XX, 1997
Dear Shareholder:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the rescheduled Annual Meeting of Stockholders of Sector Communications,
Inc. on October 21, 1997, in McLean, Virginia. Information about the rescheduled
meeting is presented in the following pages.
In addition to the formal items of business to be brought before the
meeting, members of management will report on the Company's operations and
answer stockholder questions.
Your vote is very important. Please ensure that your shares will be
represented at the meeting by completing, signing and returning your proxy card
in the envelope provided. Please return the proxy card even if you plan to
attend the meeting. Sending us your proxy will not prevent you from voting in
person at the meeting, should you wish to do so.
Sincerely,
Theodore J. Georgelas
President and Chief Executive Officer
<PAGE>
SECTOR COMMUNICATIONS, INC.
September XX, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the rescheduled annual meeting of the
stockholders of Sector Communications, Inc. (the "Company") will be held at the
Company's offices located at 7601 Lewinsville Road, Suite 250, McLean, Virginia
22102, on October 21, 1997 at 10:00 a.m. local time, for the following purposes:
1. To elect the Directors of the Company to serve for the ensuing year;
2. To approve an amendment to the Company's Articles of Incorporation to
authorize a reverse split of the Company's common stock.
3. To approve Merdinger, Fruchter, Rosen & Corso, P.C. as independent
auditors;
4. To transact such other and further business as may properly come before
the meeting.
The accompanying Proxy Statement contains further information with respect
to these matters. Which supersedes the previous Proxy Statement mailed on or
about August 29, 1997.
The Board of Directors has fixed the close of business on September 2,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting. A list of such stockholders showing the
address and number of shares registered in the name of each Stockholder will be
available during regular business hours at the Company's office located at 7601
Lewinsville Road, Suite 250, McLean, Virginia 22102, on or after September 2,
1997, for inspection by any stockholder for any purpose germane to the meeting.
The list will also be available at the meeting.
By Order of the Board of Directors,
Jeff Shear
Secretary
<PAGE>
SECTOR COMMUNICATIONS, INC.
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sector Communications, Inc. (the "Company")
for use at the annual meeting of stockholders of the Company to be held at the
time and place and for the purposes set forth in the foregoing Notice of Annual
Meeting of Stockholders. The address of the Company's principal executive office
is 7601 Lewinsville Road, Suite 250, McLean, Virginia 22102. This Proxy
Statement and the form of proxy are being mailed to stockholders on or about
September XX, 1997.
A copy of the Company's Annual Report, including financial statements for
the fiscal year ended February 28, 1997 was mailed with the initial Proxy
Statement.
REVOCABILITY AND VOTING OF PROXY
A proxy given by a stockholder may be revoked at any time before it is
exercised by giving another proxy bearing a later date, by notifying the
Secretary of the Company in writing of such revocation at any time before the
proxy is exercised, or by attending the meeting in person and casting a ballot.
Any proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated on the proxy,
the proxy will be voted FOR the election of the nominees for Directors named
herein and in favor of Items 2 and 3 in the Notice of Annual Meeting. The
Company knows of no reason why any of the nominees named herein would be unable
to serve. In the event, however, that any nominee named should, prior to the
election, become unable to serve as a Director, the proxy will be voted in
accordance with the best judgment of the Proxy Committee named therein. The
Board of Directors knows of no matters, other than as described herein, that are
to be presented at the meeting, but if matters other than those herein mentioned
properly come before the meeting, the proxy will be voted by that Committee in a
manner that the members of the Committee (in their judgment) consider to be in
the best interests of the Company.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on September 2, 1997,
are entitled to vote at the meeting. On such record date the Company had
outstanding and entitled to vote 45,998,066 shares of Common Stock. Each
stockholder entitled to vote shall have one vote for each share of Common Stock
registered in such stockholder's name on the books of the Company as of the
record date.
PRINCIPAL SECURITY HOLDERS
The following table sets forth the Common Stock ownership information as of
February 28, 1997, and is adjusted for the reverse stock split and stock
dividend described in the Annual Report, with respect to (i) each person known
to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock; (ii) each director of the Company; and (iii) all directors,
executive officers and designated stockholders of the Company as a group. This
information as to beneficial ownership was furnished to the Company by or on
behalf of the persons named. Unless otherwise indicated, each has sole voting
and investment power with respect to the shares beneficially owned.
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SHARES OF COMPANY COMMON STOCK BENEFICIALLY OWNED
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OF TOTAL
---------------- ------ --------
Telecom Partners Ltd. 16,000,000 (1) *
1350 Beverly Road, #115-339
McLean, VA 22102
S. Allan Kline 3,223,391 (2) 7.16%
1415 Bay Laurel Drive
Menlo Park, CA
Biomyne North Company 3,049,681 (3) 6.78%
c/o S. Allan Kline
1415 Bay Laurel Drive
Menlo Park, CA
Theodore Georgelas 851,000 (4) 1.89%
7601 Lewinsville Road
Suite 250
McLean, VA 22102
Jeff Shear 172,377 (5) *
1421 Wildhorse Parkway
Chesterfield, MO 63005
Geoff Button 655,000 (6) 1.46%
The Millhouse
Chicksgrove
Salisbury, Wilts SP3 6LY, UK
Joan Brown 5,384,800 11.97%
Isle of Man, UK
All Officers and Directors 1,678,377 3.74%
as a group (6 persons) (4,5,6)
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* represents less than 1%.
(1) Shares received effective June 18, 1996, in exchange for 100% of the capital
stock interest in Global Communications Group, Inc. acquired by the Company
on that date. These shares were subsequently reissued to the following
persons or entities: Jeff Finley (1,000,000), Keith Finley (1,000,000),
Murray Services, Ltd. (1,000,000), Private Equity Investors, Ltd.
(1,000,000), Northern Capital Corporation, Ltd. (1,000,000), Azimud, Ltd.
(1,000,000), Ayala Financial Holding Limited (918,000), Dahlia Financial
Limited (1,080,000), Silver Creek Investments, Ltd. (1,188,000), Wallington
Investments, Ltd. (945,000), Maroon Bell Holding, Ltd. (1,100,000), Rover
Enterprises, Ltd. (1,100,000), Western Slopes, Ltd. (1,100,000), Brentwood
Financial, Ltd. (1,100,000), Vicente Holdings, Ltd. (1,100,000), H. E.
Sheikh Faisal Alhegelan (600,000). None of the above described persons or
entities are known to the Company to be a beneficial owner of more than 5%
of the Company's Common Stock.
(2) Consists of 173,710 shares of Common Stock held directly by Mr. Kline and
3,049,681 shares of Common Stock held by Biomyne North Company on May 15,
1996. Biomyne Technology Company, of which Mr. Kline is a general partner,
is the sole shareholder of Biomyne, Inc. Biomyne Inc. is the general partner
of Biomyne North Company. Mr. Kline is the president and a director of
Biomyne, Inc. Mr. Kline was granted 166,666 shares of Common Stock effective
June 18, 1996, which grant was rescinded prior to the issuance of these
shares by mutual agreement between Mr. Kline and the Company.
(3) Biomyne North Company, a limited partnership, holds 3,049,681 shares of
Common Stock received as part consideration for the transfer of its mining
claims to the Company on August 9, 1991.
(4) Consists of 500,000 shares of Common Stock received by Mr. Georgelas on June
18, 1996; 1,000 shares purchased on June 18, 1996 and 100,000 shares
purchased on January 31, 1997 and held directly by him; and assumes exercise
of presently exercisable warrants to purchase 250,000 shares at $0.79 per
share.
(5) Consists of 166,666 shares of Common Stock received by Mr. Shear on June 18,
1996 held directly by him and the right to purchase of 5,711 shares issuable
on the exercise of a presently exercisable warrant.
(6) Consists of 50,000 shares granted by the Company on July 19, 1996 and 5,000
of Common Stock purchased by Mr. Button on July 26, 1996 and held by him
directly and assumes exercise of a vested stock option to purchase 300,000
shares at $0.32 per share
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and the exercise of a presently exercisable warrants, granted on July 19,
1996, to purchase 100,000 shares at $2.25 per share, 100,000 shares at $3.00
per share and 100,000 shares at $4.00 per share.
LEGAL PROCEEDINGS
The Company is not aware of any material proceeding to which any director,
officer or 5% shareholder of the Company is a party to the Company or has a
material interest adverse to the small business issuer.
ITEM 1: ELECTION OF DIRECTORS
Four directors are to be elected at the Annual Meeting to hold office until
the next annual meeting of stockholders and until their respective successors
shall have been elected and qualified. Except as herein stated, the proxies
solicited hereby will be voted FOR the election of the four nominees listed
below, unless otherwise directed. Each nominee elected is expected to serve
until the next annual meeting and until his successor shall be duly elected and
qualified.
The Board has been informed that all persons listed below are willing to
serve as directors, but in case any one or more of the nominees is unable or
unwilling to stand for election or serve if elected, the named proxies will vote
for such person or persons as they in their discretion may choose to replace any
such nominees. The Board has no reason to believe that any nominees will be
unable or unwilling to stand for election or serve if elected.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
ELECTION OF THE BELOW LISTED NOMINEES AS DIRECTORS
The name, age, principal occupation for the last five years, selected
biographical information, and period of previous service as a director of the
Company with respect to each such nominee are set forth below. The principal
occupations listed refer to positions with the Company unless otherwise
indicated.
NAME AGE POSITION
---- --- --------
Theodore J. Georgelas 50 President, Chief Executive Officer and
Chairman of the Board of Directors
Geoffrey A. Button 48 Vice President, Chief Operating Officer
Jeff Shear 55 Outside Director
C. Donald Johnson 49 Outside Director
All directors hold office until the annual meeting of stockholders of the
Company and until their successors have been elected and qualified. Information
about each nominee for Director is given below.
Theodore J. Georgelas became President and Chief Executive Officer
effective January 17, 1996, and was elected as Chairman of the Board of
Directors of the Company at that time. Mr. Georgelas has been the Manager/Member
of various partnerships established as developers of commercial, retail,
industrial and residential properties both domestically and internationally for
at least the last six years. He serves on the Executive Committee and Board of
United Bankshares, Inc. and is Chairman of the Board of one of its subsidiaries,
United Bank (Virginia). He is a cofounder of a cellular telephone business in
Delaware and a cofounder of DBE Software, Inc., a software company marketing a
database utility programming tool.
Geoffrey A. Button joined Sector's board on July 19, 1996 and was appointed
Vice President and
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<PAGE>
Chief Operating Officer on February 3, 1997. Prior to joining the Company, he
was an independent real estate and financing consultant. Prior to 1996, he was
executive Director of Wyndham Investments Limited, a property holding company of
Allied Domecq Pension Funds. He has also been on the board of Duke Realty
Investments Inc. since 1993 and is a member of that board's audit and
compensations committees.
Jeff Shear has been a director of the Company since March 31, 1993. Since
1988 he has been president of Shear Kershman Labs, a consulting company for new
products for food and pharmaceutical companies. He was formerly chairman and
chief executive officer of Pharmaceutical Delivery Systems, a company that
manufactured and marketed pharmaceuticals.
C. Donald Johnson, an international corporate lawyer by profession, joined
Sector's Board of Directors subsequent to the year ending February 28, 1997. He
is currently the President of Global Markets, Inc., an international trade and
investment company which focuses on the newly emerging markets in South Asia and
Eastern Europe. Prior to 1994, he served as a U.S. Congressman representing the
10th District of the State of Georgia. During his congressional tenure, Mr.
Johnson's principal areas of interest included budget reform, national security,
international trade, and economic and technology policies.
ADDITIONAL INFORMATION CONCERNING THE BOARD
OF DIRECTORS OF THE COMPANY
Regular meetings of the Board of Directors of the Company are normally held
bi-monthly. During 1997, the Board of Directors held six meetings. A quorum of
Directors attended each meeting of the Board of Directors. The full Board of
Directors fulfills the functions of an audit and compensation committee. In
addition to regularly scheduled meetings, a number of Directors were involved in
several informal meetings with management, offering valuable advice and
suggestions on a broad range of corporate matters.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a monthly fee of
$2,000, and are reimbursed for out-of-pocket expenses incurred in their capacity
as members of the Board of Directors. As part of his compensation as director,
Mr. Button received warrants, granted on July 19, 1996, to purchase 100,000
shares of common stock at $2.25 per share, 100,000 shares at $3.00 per share and
100,000 shares at $4.00 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock of the Company. Officers, directors and greater than
10% shareholders are required by the Securities and Exchange Commission to
furnish the Company with copies of all section 16(a) reports they file. To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company, all Section 16(a) filing requirements applicable to
its officers, directors and greater than 10% beneficial owners were complied
with for the year ended February 28, 1997 and were filed in a timely manner with
the exception of one 10% shareholder, Joan Brown, who despite being notified of
the reporting requirement of Section 16, has failed to file a Form 3.
EXECUTIVE OFFICERS
The executive officers of the Company as of July 31, 1997, are as follows:
NAME AGE POSITION
---- --- --------
Theodore J. Georgelas 50 Chief Executive Officer and President
Geoffrey A. Button 48 Vice President and Chief Operating Officer
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See "Election of Directors" for information regarding Theodore Georgelas
and Geoffrey Button.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the current Chief
Executive Officer of the Company in the fiscal year ended February 28, 1997. The
table includes compensation paid to Mr. Grabowski, Mr. Silver and Mr. Schultz
all of whom also served in such capacity during the fiscal years ended February
29, 1996 and February 28, 1995. No other Executive officers of the Company
received cash compensation of salary and bonus of more than $100,000 due such
fiscal year as an executive officer.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- -------------------------
RESTRICTED
STOCK
NAME YEAR SALARY BONUS AWARDS (#) OPTIONS (#)
---- ---- ------ ----- ---------- -----------
Theodore Georgelas (1) 1997 $120,000 $82,500 500,000 0
President and CEO
Armin Grabowski (2) 1996 14,000 0 0 0
Former President and CEO
Douglas Silver (3) 1996 124,000 0 0 0
Former President and CEO
Trevor Schultz (4) 1996 130,150 0 0 0
Former President and CEO
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(1) On January 17, 1996, Mr. Theodore J. Georgelas was appointed Chairman of
the Board of Directors and President and CEO of the Company. Mr. Georgelas'
annual base salary is $120,000. On June 17, 1996, upon the purchase of 100%
of the outstanding capital stock of Global Communications Group, Inc. and
completion of the reverse stock split, the Company issued to Mr. Georgelas,
in connection with his employment agreement, 500,000 fully vested shares of
post split Company common stock. None of the above shares of Company Common
Stock have been registered by the Company, however, the shares do hold
piggyback registration rights. Additionally, Mr. Georgelas received a bonus
in the form of warrants to purchase 250,000 shares of the Company's common
stock at $0.79 per share. The market value per share on the date of grant
was $1.12 yielding a net bonus of $82,500. The warrant expires July 18,
1999.
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(2) Mr. Armin Grabowski, who was appointed Chairman of the Board of Directors,
President and CEO of the Company on November 22, 1995 resigned from the
Board of Directors as well as all of his positions in the Company effective
January 1, 1996 because of increased commitments in Germany.
(3) Mr. Silver's employment with the Company began on June 1, 1995. At that
time he was appointed President and Chief Executive Officer, and elected to
the Board of Directors of the Company. In connection with the appointment
of Mr. Grabowski, Mr. Silver stepped down as the Company's Chief Executive
Officer and as a director but remained President. Mr. Silver resigned as
President on December 1, 1995. In connection with Mr. Silver's resignation,
the Company entered into a Severance Agreement with him and he received
payment of $50,000 in full satisfaction of any potential severance
obligations the Company had under his Employment Agreement. This amount is
included in the above summary compensation table. The unvested portion of
Mr. Silver's outstanding stock option was canceled upon his resignation,
and the vested portion expired, unexercised on February 29, 1996.
(4) Mr. Schultz's employment with the Company began in December of 1993. He was
appointed as President and Chief Executive Officer, and elected to the
Board of Directors on January 5, 1994. On May 1, 1995, Mr. Trevor Schultz
resigned as President, Chief Executive Officer and as a Director of the
Company for personal reasons. Concurrent with Mr. Schultz's resignation,
the Company entered into a Consulting Agreement with him which provided
for, among other things, a severance payment of $104,720 on May 1, 1995,
which amount is included in the above summary compensation table, and for
monthly payments of $6,000 during the consulting period. Mr. Schultz was
paid monthly payments totaling $18,000 during the year ended February 29,
1996. The Consulting Agreement also provided that all stock options granted
to Mr. Schultz which were not exercised on May 1, 1995 become fully
exercisable and that the Company register on a Form S-8 registration
statement the common stock issuable on the exercise of unexercised options
held by Mr. Schultz. Mr. Schultz purchased 300,000 shares through the
exercise of his stock options during the year ended February 29, 1996. The
Consulting Agreement terminated when Mr. Schultz obtained full time
employment.
The Company and Mr. Georgelas have entered into an Employment Agreement
which is effective until January 1998. Mr. Georgelas is compensated at a rate of
$120,000 per year, effective January 15, 1996, subject to annual review by the
Board of Directors and annual bonuses at the discretion of the Board of
Directors. The amount of any increases to base salary and bonuses granted by the
Board of Directors is based upon a review of Mr. Georgelas' overall performance.
The Company does not have any contingent forms of remuneration, including
any pension, retirement, stock appreciation, cash or stock bonus, or other
compensation plan.
CERTAIN TRANSACTIONS
As of the date of the acquisition of Sector AG, Murray Services, Ltd.
("Murray") beneficially owned 1,000,000 shares of the Company's common stock,
representing less than a 5% interest in the Company. These shares were being
held at that time for Murray by Telecom Partners Ltd. ("Telecom") and were
received by Telecom in connection with the Company's acquisition of Global. Mr.
Hugo Wyss, a director of both Sector AG and Histech, is also a director of
Murray.
On February 18, 1997, the Company entered into an agreement (the "Peacetime
Agreement") with Peacetime Communications, Ltd. ("Peacetime"); Emerald Capital,
Inc. ("Emerald"); and Wallington Investment, Ltd. ("Wallington"), whereby the
Company canceled obligations to Peacetime, Emerald and Wallington in the
aggregate amount of approximately $4,080,000 and obtained additional financing
in the amount of $1,000,000 (or less, at the Company's discretion) through the
sale of 25% of its ownership in
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Histech; all of the Company's interests in DBE Software, Inc. ("DBE"); and
1,000,000 shares of the Company's common stock. Under this Agreement, Wallington
received 134 shares of Histech common stock (representing 1% of the total number
of outstanding shares of Histech) and 500,000 shares of the Company's common
stock. Wallington previously held 945,000 shares of the Company's common stock.
The Company currently subleases 49% of its leased office space to DBE at
the face rate of the lease apportioned by square footage (approximately $9,100
per month). The Chairman and CEO of the Company owns 38,700 shares of DBE common
stock purchased in October 1993 prior to the Company's investment of $1.1M in
DBE.
On August 23, 1996, Sector AG acquired 54.45% of the capital stock of
Histech from two Histech shareholders, Joan Brown and Aledo Services, Ltd.
("Aledo"), and 100% of the stock of Mountain from Simon Brown, the sole
shareholder of Mountain, in exchange for 9,846,154 shares and 1,712,375 shares
of the Company's common stock, respectively. The Company also purchased 3,428
shares of previously unissued Histech shares representing a 25.55% interest for
$1,200,000. Hugo Wyss, a director of Sector AG and the Chairman of the Board of
Directors of Histech, is also a director of Aledo.
ITEM 2: AMENDMENT TO THE ARTICLES OF INCORPORATION TO PERMIT A
REVERSE STOCK SPLIT OF SHARES OF COMMON STOCK
At the Annual Meeting, shareholders will vote upon the proposal to amend
the Sector Communications, Inc. (the "Company") Certificate of Incorporation to
authorize a reverse split of the Company's common stock (the "Reverse Split").
The Board of Directors of the Company adopted a resolution authorizing an
amendment (the "Amendment") to the Company's Amended and Restated Articles of
Incorporation to effect a reverse stock split of the Company's Common Stock,
$0.001 par value, so that every 40 shares of Company Common Stock will be
converted into one share of the Company Common Stock. No fractional shares of
stock shall be issued in connection with the Reverse Stock Split, but in lieu
thereof, each holder of Common Stock who would otherwise be entitled to receive
a fraction of a share of Common Stock shall have the number of shares rounded up
or down to the closest number of whole shares of Common Stock.
PRINCIPAL EFFECT
The Company is currently authorized to issue 50,000,000 shares of Common
Stock. The number of authorized shares of the Company's Common Stock will not be
changed by the Amendment and, consequently, the Company will be able to issue a
substantial number of additional shares of Common Stock without further
stockholder approval.
The par value of the post-split Common Stock will remain $0.001 per share
upon effectiveness of the Amendment. At the close of business on September 2,
1997, there were 45,998,066 shares of Common Stock outstanding. The impact on
the capitalization of the Company of the Reverse Stock Split will decrease the
number of outstanding shares of Common Stock by approximately 97%, to 1,149,952
shares of Common Stock, with such numbers increased or reduced by the effect of
rounding of the shares of Common Stock in lieu of issuing fractional shares. The
Reverse Stock Split would not affect any stockholder's proportionate equity
interest in the Company, except to the extent that any fractional shares are
rounded up to the next whole number. Upon effectiveness of the Amendment, all
outstanding warrants to acquire Common Stock will be adjusted automatically to
entitle the holders thereof to purchase proportionately fewer shares of Common
Stock at a proportionately higher exercise price.
REASONS FOR THE REVERSE STOCK SPLIT AND CHANGE IN AUTHORIZED SHARES AND
POTENTIAL DISADVANTAGES TO SHAREHOLDERS
The Company is currently authorized to issue 50,000,000 shares of Common
Stock. The number of authorized shares of the Company's Common Stock was not
changed by the Amendment, and consequently the Company will be able to issue a
substantial number of additional shares of Common Stock without further
shareholder approval. The issuance of additional shares of post-split Common
Stock will have a dilutive effect on earnings per share and on the equity of
present holders of Common Stock and their voting rights.
The Board of Directors believes it is desirable for the Company to have
additional authorized but unissued Common Stock to provide flexibility to act
promptly with respect to acquisitions, public and private financings and for
other appropriate purposes. Such availability will eliminate the delays and
expense which otherwise might be incurred if stockholder approval were required
for certain transactions involving the issuance of securities. Furthermore, in
the event of a proposed merger, tender offer or other attempt to gain control of
the Company of which the Board of Directors did not approve, it would be
possible for the Board of Directors to authorize the issuance of a substantial
block of Common Stock, without obtaining stockholder approval, as part of an
alternative business combination or a recapitalization which stockholders might
find more attractive. However, additional authorized Common Stock could also be
issued to one or more persons who might thereby obtain sufficient voting power
to ensure that any proposal to remove directors, to accomplish certain business
combinations opposed by the Board of Directors, or to alter, amend or repeal any
provisions of the Company's Amended and restated Articles of Incorporation or
By-laws, would be defeated. An effect of the increase in the number of
authorized shares available for issuance following the Reverse
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Stock Split, therefore, may be to deter a future takeover attempt which holders
of Common Stock may deem to be in their best interests or in which holders of
Common Stock may receive a premium for their shares over the market price.
However, the Board of Directors believes that the benefits of providing it with
the flexibility to issue shares without delay for any business purpose,
including as an alternative to an unsolicited takeover attempt opposed by the
Board, outweigh the possible disadvantages of dilution and discouraging such
unsolicited takeover proposals and that it is prudent and in the best interests
of the stockholders to provide the advantage of greater flexibility which will
result from the Reverse Stock Split. Although the Board of Directors has a
fiduciary duty to act in the best interests of the Company's shareholders at all
times, the ability of the Board to issue additional shares of Sector
Communications, Inc. Common Stock could prevent the proposal of transactions
which some shareholders might consider to be in their best interest.
There can be no assurance that the market price of the Common Stock will
increase after the effectiveness of the Reverse Stock Split in an amount
proportionate to the decrease in the number of outstanding shares, that the
Reverse Stock Split will result in a price level for the Company's Common Stock,
that will comply with listing requirements of the SmallCap tier of the Nasdaq
Stock Market, or increase investor interest or enhance the interest of brokerage
firms in trading the Company's stock.
Consummation of the Reverse Stock Split will not result in a change in the
relating equity position or voting power of the holders of Common Stock.
NEVADA'S ANTI-TAKEOVER LAW
Sections 78.411 to 78.444 (the "Anti-Takeover Law") of the Nevada
Corporation, Partnership and Association Law (the "Nevada Law") prevents certain
Nevada corporations, including those whose securities are listed on the NASDAQ
Stock Market, from engaging, under certain circumstances, in a "combination"
with any "interested shareholder" for three years following the date that such
shareholder became an "interested shareholder." A Nevada corporation may "opt
out" of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from a shareholders amendment approved by at
least a majority of the outstanding voting shares. Sector Communications, Inc.
has not "opted out" of the provisions of the Anti-Takeover Law.
FEDERAL INCOME TAX CONSEQUENCES OF THE RESERVE STOCK SPLIT
The federal income tax consequences of the Reverse Stock Split component of
the Amendment are as follows: (i) the Reverse Stock Split should not result in
the recognition of gain or loss by the Company or any of its stockholders; (ii)
a Common stockholder's total basis in shares of post-split Common Stock received
from the Company will be the same as the existing basis in the shares of Common
Stock previously held; and (iii) a Common stockholder's holding period or
periods for shares of post-split Common Stock will include the holding period or
periods of a proportionate number of shares of the stockholder's Common Stock.
The foregoing information is based upon existing law which is subject to
change by legislation, administrative action and judicial decision and is
necessarily general. The preceding paragraph is a general description of the
federal income tax consequences of the Reverse Stock Split. It does not take
into account state, local or foreign tax consequences and does not take into
account special rules that may apply to a stockholder's individual tax
circumstances.
Therefore, stockholders are advised to consult with their own tax advisor
for more detailed information relating to their individual tax circumstances.
EXCHANGE OF STOCK CERTIFICATES
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Upon approval by the Shareholders and as soon as practicable after the
Effective Date, transmittal letters will be mailed to each holder of record of
the Company's Common Stock on the date of such effectiveness to be used in
forwarding their certificates for surrender and exchange for certificates
representing the number of shares of Common Stock such stockholders are entitled
to receive as a result of the Reverse Stock Split. After receipt of such
transmittal letter, each such stockholder should surrender, using the
transmittal letter, the stock certificates issued prior to the Reverse Stock
Split, and such stockholder shall receive in exchange therefor certificates
representing the whole number of shares of Common Stock to which he is entitled
as a result of the Reverse Stock Split. STOCKHOLDERS SHOULD NOT SEND THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL LETTER.
After the Effective Date, each certificate representing shares of Common
Stock will, until surrendered and exchanged as provided above, be deemed, for
all corporate purposes, to evidence ownership of the whole number of shares of
Common Stock into which the shares evidenced by such certificates have been
converted. No service charge will be payable by stockholders in connection with
the exchange of certificates, and the costs will be borne and paid by the
Company.
SIGNATURE STOCK TRANSFER
The Company's current transfer agent, located in Dallas, Texas has been
appointed to act as exchange agent (the "Exchange Agent") for the stockholders
in effecting the exchange of their certificates.
The affirmative vote of the holders of a majority of the shares of Sector
Communications Common Stock outstanding and entitled to vote at the Company's
Annual Meeting is required to approve the amendment to the Company's Certificate
of Incorporation.
THE BOARD OF DIRECTORS OF SECTOR COMMUNICATIONS, INC. UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE SECTOR COMMUNICATIONS
CERTIFICATE OF INCORPORATION.
ITEM 3: APPROVAL OF INDEPENDENT ACCOUNTANTS
Action will be taken with respect to the approval of independent
accountants for the Company for the year 1997. The Audit Committee and Board of
Directors have, subject to such approval, selected Merdinger, Fruchter, Rosen &
Corso, P.C. ("MFR&C") of New York, New York to serve in this capacity. MFR&C
will
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<PAGE>
serve as the Company's principal accountant to audit the Company's financial
statements.
Representatives of MFR&C are expected to be present at the Annual Meeting,
and will have the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
CHANGE IN ACCOUNTANTS
Pursuant to a letter dated December 9, 1996, the Company informed Stark
Tinter & Associates ("Stark Tinter") that it would no longer engage Stark Tinter
as the independent auditors to audit the Company's financial statements. The
Board of Directors unanimously approved the engagement of Merdinger, Fruchter,
Rosen and Corso, P.C. as the Company's independent auditors.
No disagreements between the Company and Stark Tinter regarding any matter
of accounting principles or practice, financial statement disclosure, or
auditing scope or procedure occurred in connection with the audits of the years
ending February 28, 1995 and 1996, or during the period from February 28, 1996
to December 9, 1996.
The reports of Stark Tinter on the Company's financial statements for the
years ended February 28, 1996 and 1995 were unqualified.
Merdinger, Fruchter, Rosen and Corso, P.C. has been the independent
auditors for Global Communications Group, Inc., a company acquired by the
Company in June 1996, for the years ended December 31, 1995 and 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO APPROVE THE ENGAGEMENT OF MERDINGER, FRUCHTER, ROSEN
AND CORSO, P. C. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
AVAILABILITY OF FORM 10-KSB
The Company has mailed a copy of its Annual Report to each stockholder
entitled to vote at this meeting. Copies of the Company's Form 10-KSB for the
year ended February 28, 1997 and Form 10-QSB for the three months ended May 31,
1997 are available, upon request, at no charge to all stockholders upon request
to the Company and will also be available at the Annual Meeting.
STOCKHOLDER PROPOSALS FOR 1998
Proposals of security holders intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Company by not later
than May 16, 1998.
OTHER MATTERS
The cost of soliciting proxies will be borne by the Company and will
consist primarily of printing, postage and handling, including the expenses of
brokerage houses, custodians, nominees, and fiduciaries in forwarding documents
to beneficial owners. Solicitation also may be made by the Company's officers,
Directors, or employees, personally or by telephone.
By Order of the Board of Directors
Jeff Shear
Secretary
McLean, Virginia
September XX, 1997
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SECTOR COMMUNICATIONS, INC.
7601 LEWINSVILLE ROAD
McLEAN, VIRGINIA 22102
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Theodore Georgelas and Geoffrey Button and
each of them, with full power of substitution, as proxies to vote as designated
on the reverse side, all the shares of common stock held by the undersigned at
the annual meeting of shareholders of Sector Communications, Inc. to held on
October 21, 1997, at 10:00 a.m. at the Company's corporate offices, or any
adjournment thereof, and with discretionary authority to vote on all other
matters that may properly come before the meeting.
<TABLE>
<CAPTION>
<S> <C>
[ X ] Please mark you votes as in this example.
FOR WITHHELD Nominees:
1. ELECTION OF [ ] [ ] Theodore J. Georgelas
DIRECTORS Geoffrey A. Button
Jeff Shear
C. Donald Johnson
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
2. APPROVAL [ ] [ ] [ ] 3. APPROVAL OF [ ] [ ] [ ]
OF REVERSE INDEPENDENT
SPLIT ACCOUNTANTS
</TABLE>
This proxy will be voted as directed, or if no direction is indicated, will be
vote FOR all nominees listed above for election of directors and FOR approval of
the increase in number of authorized common share and FOR approval of the
independent auditors and in the discretion of the persons named as proxies with
respect to any other business that may properly come before the meeting.
If you wish to vote in accordance with the recommendations of the Board of
Directors, you may just sign and date below and mail in the postage paid
envelope provided. Specific choices may be made above.
SIGNATURE ______________________________________ DATE _____________
SIGNATURE ______________________________________ DATE _____________
NOTE: Please sign exactly as names appears hereon. Joint owners each should
sign. When signing as attorney, executor, administrator, trustee or guardian
please give full title as such.
