SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ABLE TELCOM HOLDING CORP.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ABLE TELCOM HOLDING CORP.
1601 Forum Place, Suite 110
West Palm Beach, Florida 33401
[Date]
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
Able Telcom Holding Corp. We will hold the meeting on Monday, May 10, 1999, at
The Embassy Suites Hotel, 555 S. 10th Street, Omaha, NE 68102 at 10:00 a.m.
Central Standard Time. The Proxy Statement describes the business that we will
conduct at the Annual Meeting which includes seeking your approval for the
following:
1. To elect six Directors to serve until the 2000 Annual Meeting of Shareholders
or until their respective successors are elected and qualified;
2. To ratify and approve an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of (A) Common Stock from 25 million
to 100 million and (B) Preferred Stock from one million to five million;
3. To amend Able's 1995 Stock Option Plan to increase the number of shares
authorized for issuance from 1,300,000 to 3,500,000 and modify certain of the
terms of the initial grant of options to non-affiliate Directors;
4. To ratify and approve the issuance of stock options granted to certain
Officers and Directors of the Company;
5. To approve the possible issuance of more than 1,917,960 shares of Common
Stock upon the exercise of certain options and stock appreciation rights granted
to WorldCom, Inc.;
6. To approve the possible issuance of more than 1,917,960 shares of Common
Stock upon the conversion of the Company's Series B Convertible Preferred
Stock and exercise of certain Warrants issued in the Series B Offering;
7. To ratify the appointment of Arthur Andersen LLP as the Company's independent
accountants for the fiscal year ended October 31, 1999; and
8. To transact any other business that may properly be presented at the 1999
Annual Meeting of Shareholders or any adjournments or postponements of the
Annual Meeting.
Attendance at the Annual Meeting is limited to Shareholders as of the record
date of March 31, 1999 (or their authorized representatives) and to guests of
the Company. If your shares are registered in your name and you plan to attend
the Annual Meeting, please mark the appropriate box on the enclosed Proxy Card
and you will be pre-registered for the Annual Meeting (if your shares are held
of record by a broker, bank or other nominee and you plan to attend the meeting,
you must also pre-register by returning the registration card forwarded to you
by your bank or broker).
The Notice of the Annual Meeting and Proxy Statement on the following pages
contain information concerning the business to be considered at the Annual
Meeting. Please give these proxy materials your careful attention. It is
important that your shares be represented and voted at the Annual Meeting
regardless of the size of your holdings. Your vote is important. Whether you
plan to attend the Annual Meeting or not, please complete, date, sign and return
the enclosed Proxy Card promptly. If you attend the Annual Meeting and prefer to
vote in person, you may do so.
The continuing interest of the Shareholders in the Company is gratefully
acknowledged. We look forward to seeing you at the Annual Meeting.
C. FRANK SWARTZ
CHAIRMAN OF THE BOARD
<PAGE>
ABLE TELCOM HOLDING CORP.
1601 Forum Place, Suite 1110
West Palm Beach, Florida 33401
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
The 1999 Annual Meeting of the Shareholders of Able Telcom Holding Corp., a
Florida corporation ("Able" or "Company") will be held at The Embassy Suites
Hotel, 555 S. 10th Street, Omaha, NE 68102 on May 10, 1999 at 10:00 a.m. Central
Standard Time for the following purposes:
At the 1999 Annual Meeting of Shareholders, we will ask you to vote on the
following:
1. To elect six Directors to serve until the 2000 Annual Meeting of Shareholders
or until their respective successors are elected and qualified;
2. To ratify and approve an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of (A) Common Stock from 25 million
to 100 million and (B) Preferred Stock from one million to five million;
3. To amend Able's 1995 Stock Option Plan to increase the number of shares
authorized for issuance from 1,300,000 to 3,500,000 and to modify certain of
the terms of the initial grant of options to non-affiliate Directors;
4. To ratify and approve the issuance of stock options granted to certain
Officers and Directors of the Company;
5. To approve the possible issuance of more than 1,917,960 shares of Common
Stock upon the exercise of certain options and stock appreciation rights granted
to WorldCom, Inc.;
6. To approve the possible issuance of more than 1,917,960 shares of Common
Stock upon the conversion of the Company's Series B Convertible Preferred
Stock and exercise of certain Warrants issued in the Series B Offering;
7. To ratify the appointment of Arthur Andersen LLP as the Company's independent
accountants for the fiscal year ended October 31, 1999; and
8. To transact any other business that may properly be presented at the Annual
Meeting or any adjournments or postponements of the Annual Meeting.
The Board of Directors has fixed the close of business on March 31, 1999 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting. A list of the shareholders entitled to vote at the
Annual Meeting may be examined by any shareholder at the Company's corporate
offices at 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Annual Meeting. The Board
of Directors requests that you complete, sign, date and return the enclosed
Proxy Card promptly. You are cordially invited to attend the Annual Meeting in
person. The return of the enclosed proxy card will not affect your right to
revoke your proxy or to vote in person if you do attend the Annual Meeting.
By Order of the Board of Directors
West Palm Beach, Florida C. FRANK SWARTZ
____________, 1999 CHAIRMAN OF THE BOARD
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE
PROXY CARD IS MAILED IN THE UNITED STATES. IF YOU EXECUTE A PROXY CARD, YOU MAY
STILL ATTEND THE MEETING, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
1999 ANNUAL MEETING OF SHAREHOLDERS
OF
ABLE TELCOM HOLDING CORP.
--------------------
PROXY STATEMENT FOR THE ANNUAL MEETING
--------------------
The 1999 Annual Meeting of Shareholders ("Annual Meeting") of Able Telcom
Holding Corp. ("Able/Company") will to be held at The Embassy Suites Hotel, 555
S. 10th Street, Omaha, NE 68102 at 10:00 a.m., Central Standard Time, on May 10,
1999, or at any adjournments or postponements of the Annual Meeting.
We will begin sending this Proxy Statement, the attached Notice of Annual
Meeting and the enclosed Proxy Card on _________, 1999 to all Shareholders
entitled to vote. Common Stock is the only class of voting stock. Shareholders
who owned Common Stock at the close of business on March 31, 1999 (the "Record
Date") are entitled to vote. On the Record Date, there were ____________ shares
of Common Stock outstanding. Able's principal executive offices are located at
1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401, and its telephone
number is (561) 688-0400.
WHY WAS THIS PROXY STATEMENT SENT?
This Proxy Statement and the enclosed Proxy Card were sent to you because the
Company's Board of Directors is soliciting the proxies from Shareholders of the
Common Stock, par value $.001 ("Common Stock") to vote at the Annual Meeting.
This Proxy Statement summarizes the information you need to know to vote
intelligently at the Annual Meeting. However, you do not need to attend the
Annual Meeting to vote your shares. Instead, you may simply complete, date, sign
and return the enclosed Proxy Card.
WHAT IS BEING VOTED ON?
The following proposals are being voted on at the Annual Meeting:
/bullet/ To elect six Directors to serve until the 2000 Annual Meeting of
Shareholders or until their respective successors are elected and qualified;
/bullet/ To ratify and approve an amendment to Able's Articles of Incorporation
to increase the number of authorized shares of (A) Common Stock from 25 million
to 100 million and (B) Preferred Stock from one million to five million;
/bullet/ To amend Able's 1995 Stock Option Plan to increase the number of shares
authorized for issuance from 1,300,000 to 3,500,000 and to modify certain of the
terms of the initial grant of options to non-affiliate Directors;
/bullet/ To ratify and approve the issuance of stock options granted to certain
Officers and Directors of the Company;
/bullet/ To approve the possible issuance of more than 1,917,960 shares of
Common Stock upon the exercise of certain options and stock appreciation rights
granted to WorldCom, Inc.;
/bullet/ To approve the possible issuance of more than 1,917,960 shares of
Common Stock upon the conversion of the Company's Series B Convertible Preferred
Stock and exercise of certain Warrants issued in the Series B Offering;
/bullet/ To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ended October 31, 1999; and
/bullet/ To transact any other business that may properly be presented at the
Annual Meeting or any adjournments or postponements of the Annual Meeting.
<PAGE>
WHO MAY VOTE?
Shareholders who owned Common Stock at the close of business on March 31, 1999
(the Record Date) are entitled to vote at the Annual Meeting. On the Record
Date, there were _________ shares of Common Stock outstanding. Common Stock is
our only class of voting stock.
HOW MANY VOTES DO I HAVE?
Each share of Common Stock that you own entitles you to one vote.
HOW MANY VOTES ARE NEEDED FOR A QUORUM?
As of March 31, 1999, __________ shares of Common Stock were issued and
outstanding. The Annual Meeting will be held if a majority of the outstanding
Common Stock entitled to vote is represented at the Annual Meeting. This means
that _______ shares are required for a quorum. If you have returned the Proxy or
attend the Meeting in person, your Common Stock will be counted for the purpose
of determining whether a quorum exists, even if you wish to abstain from voting
on some or all matters introduced at the Meeting. "Broker non-votes" also count
for quorum purposes. If you hold your Common Stock through a broker, bank, or
other nominee, generally the nominee may only vote the Common Stock which it
holds for you in accordance with your instructions. We do not count abstentions
and "broker non-votes" as votes for or against any proposal.
If a quorum is not present or represented at the Annual Meeting, the
Shareholders who do attend the Annual Meeting in person or who are represented
by Proxy have the power to adjourn the Annual Meeting until a quorum is present
or represented. At any adjournment of the Annual Meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the original Annual Meeting.
HOW DOES A SHAREHOLDER VOTE BY PROXY?
Whether you plan to attend the Annual Meeting or not, we urge you to complete,
sign and date the enclosed Proxy Card and return it promptly in the envelope
provided. No postage is needed if the Proxy Card is mailed in the United States.
Returning the Proxy Card will not affect your right to attend the Annual Meeting
and vote. If you properly fill in your Proxy Card and send it to us in time to
vote, your "Proxy" (one of the individuals named on your Proxy Card) will vote
your shares as you have directed. If you sign the Proxy Card but do not make
specific choices, your Proxy will vote your shares as recommended by the Board
of Directors as follows:
/bullet/ "FOR" electing the slate of Board of Directors proposed by the Company;
/bullet/ "FOR" ratifying and amending Able's Articles of Incorporation to
increase the number of authorized shares of (A) Common Stock from 25 million to
100 million and (B) Preferred Stock from one million to five million;
/bullet/ "FOR" amending Able's 1995 Stock Option Plan to increase the number of
shares authorized for issuance from 1,300,000 to 3,500,000 and to modify certain
of the terms of the initial grant of options to non-affiliate Directors;
/bullet/ "FOR" ratifying and approving the issuance of stock options granted to
certain Officers and Directors of the Company;
/bullet/ "FOR" approving the possible issuance of more than 1,917,960 shares of
Common Stock upon the exercise of certain options and stock appreciation rights
granted to WorldCom, Inc.;
/bullet/ "FOR" approving the possible issuance of more than 1,917,960 shares of
Common Stock upon the conversion of the Company's Series B Convertible Preferred
Stock and exercise of Warrants issued in the Series B Offering;
2
<PAGE>
/bullet/ "FOR" ratifying the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ended October 31, 1999.
If any other matter is presented, your Proxy will vote in accordance with his
best judgment. At the time this Proxy Statement went to press, we knew of no
matter which needed to be acted on at the Annual Meeting, other than those
discussed in this Proxy Statement.
MAY A PROXY BE REVOKED?
If you give a Proxy, you may revoke it at any time before it is exercised. You
may revoke your Proxy in one of three ways. First you may send in another Proxy
with a later date. Second, you may notify Able's Secretary in writing before the
Annual Meeting that you have revoked your Proxy. Third, you may vote in person
at the Annual Meeting.
HOW DOES A SHAREHOLDER VOTE IN PERSON?
If you plan to attend the Annual Meeting and vote in person, we will give you a
ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring an account statement or letter
from the nominee indicating that you are the beneficial owner of the shares on
March 31, 1999 (the Record Date).
WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
PROPOSAL 1:
Electing Six Directors The six nominees for Director who
receive the most votes will be elected. If you do
not vote for a particular nominee, or you indicate
"withhold authority to vote" for a particular
nominee on your proxy card, your vote will not
count either "for" or "against" the nominee. A
"broker non-vote" will also have no effect on the
outcome since only a plurality of votes actually
cast is required to elect a Director.
PROPOSAL 2:
Approving Amendments
to the Articles The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to approve
the amendments to the Articles. If you "abstain"
from voting, it has the same effect as if you
voted "against" this proposal. Broker non-votes
will have no effect on the vote.
PROPOSAL 3:
Approving an Amendment
to the Stock Option Plan The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to approve
to (i) increase the number of shares authorized
for issuances pursuant to the Company's 1995
Stock Option Plan, as amended, and (ii)
modify certain of the terms of the initial
grant of options to non-affiliate Directors.
If you "abstain" from voting, it has the
same effect as if you voted "against" this
proposal. Broker non-votes will have no
effect on the vote.
PROPOSAL 4:
Ratifying and approving the
issuance of stock options to
certain Officers & Directors
of the Company The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to ratify
and approve issuing stock options to certain
Officers and Directors. If you "abstain" from
voting, it has the same effect as if you voted
"against" this proposal. Broker non-votes will
have no effect on the vote.
PROPOSAL 5:
Approving the possible issuance
of more than 1,917,960 shares
3
<PAGE>
to WorldCom, Inc. The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to approve
issuing more than 1,917,960 shares of the Common
Stock to WorldCom upon exercise of certain
derivative securities held by WorldCom. If you
"abstain" from voting, it has the same effect as
if you voted "against" this proposal. Broker
non-votes will have no effect on the vote.
Proposal 6:
Approve the possible issuance
of more than 1,917,960 shares
in connection with the
Series B Offering The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to approve
issuing 20% or more of the Common Stock upon
exercise of the shares of Series B Convertible
Preferred Stock and exercise of certain Warrants
held by the RoseGlen and the Palladin Groups. If
you "abstain" from voting, it has the same effect
as if you voted "against" this proposal. Broker
non-votes will have no effect on the vote.
Proposal 7:
Ratify Selection
of Auditors The affirmative vote of a majority of the votes
cast at the Annual Meeting is required to ratify
and approve the appointment of Arthur Andersen LLP
as the Company's independent accountant for the
fiscal year ended October 31, 1999. If you
"abstain" from voting, it has the same effect as
if you voted "against" this proposal. Broker
non-votes will have no effect on the vote.
IS VOTING CONFIDENTIAL?
Yes. Proxy Cards, ballots and voting tabulations that identify individual
Shareholders are confidential. Only the inspectors of election and certain Able
employees associated with processing Proxy Cards and counting the votes have
access to your card. Additionally, all comments directed to Able management
(whether written on the Proxy Card or elsewhere) remain confidential, unless you
ask that your name be disclosed.
WHO PAYS THE COST OF SOLICITING THE PROXIES?
Able will pay the cost of this Proxy solicitation, which includes preparing,
assembling and mailing the Notice of Annual Meeting, the Proxy Statement and the
Proxy Card. In addition to soliciting proxies by mail, we expect that a number
of our employees will solicit Shareholders for the same type of Proxy,
personally and by telephone. None of these employees will receive any additional
or special compensation for doing this. We will, upon request, reimburse
brokers, banks and other nominees for their expenses in sending Proxy material
to their principals and obtaining their proxies.
HOW DOES A SHAREHOLDER OBTAIN A COPY OF AN ANNUAL REPORT ON FORM 10-K/A?
IF YOU WOULD LIKE A COPY OF OUR ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED
OCTOBER 31, 1998 THAT WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WE
WILL SEND YOU ONE WITHOUT CHARGE. PLEASE WRITE TO:
INVESTOR RELATIONS
ABLE TELCOM HOLDING CORP.
1601 FORUM PLACE, SUITE 1110
WEST PALM BEACH, FLORIDA 33401
ATTENTION: ELIZABETH TERRERO
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of March 22, 1999, the Common Stock owned
beneficially by (i) each of the current Directors of the Company and each
"nominee for director" (ii) each Executive Officer, (iii) all Directors and
Executive Officers as a group, and (iv) each person known by the Company to be
the "beneficial owner" of more than five percent (5%) of such Common Stock.
"Beneficial ownership" is a technical term broadly defined by the Securities and
Exchange Commission to mean more than ownership in the usual sense. For example,
you "beneficially" own Common Stock only if you hold it directly, but also if
you indirectly (through a relationship, a position as a director or trustee, or
a contract or understanding), have (or share the power to vote the stock, or
sell it) the right to acquire it within 60 days. Except as disclosed in the
footnotes below, each of the Directors and Executive Officers listed have sole
voting and investment power over his or her shares. As of March 22, 1999, there
were 11,754,593 shares of Common Stock issued and outstanding and approximately
395 holders of record.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME (1) CURRENT TITLE OWNED OWNED
<S> <C> <C> <C>
F. Carl Swartz (2)(7) Chairman of the Board of Directors 20,000 *
Gideon D. Taylor (3) Vice President of Special Projects 946,638 7.91%
Frazier L. Gaines (4) President - Able Telcom International 684,430 6.19%
Jonathan A. Bratt (5) Director 36,500 *
Thomas M. Davidson (2)(6) Director 20,000 *
Alex McLarty(7) Director --- *
Gerald Pye(6) Director --- *
Collier Ross(7) Nominee for Director --- *
William Spencer(6) Director --- ---
Douglas Tatum(7) Nominee for Director --- *
Robert Young(7) Director --- ---
Billy V. Ray, Jr. (2)(7) President, Chief Executive Officer and Acting 110,000 *
Chief Financial Officer, Director
Jesus G. "Jay" Dominguez (2) Chief Accounting Officer 97,000 *
Michael Arp (2) Financial Vice President 50,000 *
Curtis A. "Butch" Dale (8) Chief Operating Officer 103,300 *
Edward Z. Pollock (2) In-House Counsel 15,000 *
Stacy Jenkins (2) President - MFS Network Technologies 100,000 *
G. Vance Cartee President - MFS Transportation Systems --- ---
J. Barry Hall (9) President - Traffic Management Group 373,500 3.18%
Richard A. Boyle President - Patton Management Group --- ---
All Directors and Executive
Officers as a Group (18 Persons) 2,826,368 24.04%
</TABLE>
- -------------
5
<PAGE>
* Less than 1%.
(1) The address for each of Able's Directors and Executive Officers is 1601
Forum Place, Suite 1110, West Palm Beach, Florida 33401.
(2) These represent stock options that are immediately exercisable.
(3) These include (i) 21,619 shares owned by Mr. Taylor's wife, and (ii)
220,000 shares underlying stock options which are immediately
exercisable at $5.75 per share. Mr. Taylor resigned as a Director of
the Company on March 9, 1998 but will continue as Vice President of
Special Projects.
(4) These include 210,000 shares underlying stock options are immediately
exercisable at $5.75 per share and 474,430 shares held in a trust
controlled by Mr. Gaines. Mr. Gaines resigned as a Director of the
Company on March 16, 1999, but will continue as President--Able Telcom
International.
(5) Includes 30,000 shares underlying options which are immediately
exercisable at $5.75 per share and 6,500 shares owned by Mr. Bratt. Mr.
Bratt will not be standing for re-election as a Director of the
Company.
(6) Will not be standing for re-election as a Director of the Company.
(7) Nominee for Director.
(8) Includes 3,300 shares owned by Mr. Dale and 100,000 shares underlying
stock options which are immediately exercisable at $5.75 per share.
(9) Includes 107,500 shares owned by Mr. Hall, and 326,000 shares issued to
Mr. Hall in February 1999 related to consideration on the Company's
acquisition of Georgia Electric Company from Mr. Hall and his brother,
Gerry W. Hall.
PROPOSAL NO. 1:
TO ELECT SIX DIRECTORS TO SERVE UNTIL THE 2000 ANNUAL MEETING OF SHAREHOLDERS
OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED;
DIRECTORS
The following are the persons nominated to be Directors of the Company, their
respective ages, the year in which each was elected a Director and, where
applicable, the office held by the Director. Each Director elected will hold
office until the next Annual Meeting of Shareholders, expected to be held in May
2000, or until their respective successors have been duly elected and qualified.
In the election, the six (6) persons who receive the highest number of votes
actually cast will be elected. The proxies named in the proxy card intend to
vote for the election of the nominees unless otherwise instructed. If a holder
does not wish his or her shares to be voted for a particular nominee, the holder
must identify the exception in the appropriate space provided on the proxy card,
in which event the shares will be voted for the other listed nominees. If any
nominee becomes unable to serve, the proxies may vote for another person
designated by the Board of Directors or the Board may reduce the number of
Directors. The Company has no reason to believe that any nominee will be unable
or refuse to serve.
NAME AGE SERVED AS A DIRECTOR SINCE
Alec McLarty 48 1999
Billy V. Ray 40 1999
Collier Ross 72 --
C. Frank Swartz 60 1998
Douglas Tatum -- --
Robert Young 72 1999
6
<PAGE>
All Directors are elected annually at the Annual Meeting of the Shareholders of
Able Telcom Holding Corp. and hold office following election or until their
successors are elected and qualified. Once elected, the newly elected Directors
will determine who will serve as members of the Company's Audit Committee,
Compensation Committee, and Nominating Committee.
ALEC MCLARTY is the Chairman and Chief Executive Officer of Clarion Resources
Communications Corporation. Since 1971, Mr. Tatum has developed six companies,
three of which are telecommunication companies. In 1987, Mr. McLarty founded
Resurgens West and in 1996, founded Clarion Resources Communications
[illegible], a multifacted company in the domestic and international
telecommunications industry providing services ranging from research and
development to international long distance services.
BILLY V. RAY, JR. has been the Company's President, Chief Executive Officer and
acting Chief Financial Officer since November 30, 1998 and as a Director since
March 5, 1999. From October 1, 1998 to November 30, 1998, Mr. Ray was the
Company's Executive Vice President of Mergers and Acquisitions and Treasurer.
From May 1998 to October 1998 and from January 1997 to June 1997, Mr. Ray served
as a consultant to the Company. Mr. Ray served as the Chief Financial Officer of
the Company from June 1997 to April 1998. From December 1995 to January 1997 and
from April 1997 to July 1997, Mr. Ray was the President of Ten-Ray Utility
Construction, Inc., a utility construction company. During a part of that
period, he also served as a consultant to Alcatel, a maker of intelligent
highway systems. From September 1994 to November 1995, Mr. Ray was the
Controller of Tri-Duct, a utility construction company, and served as a
consultant to such company from November 1995 to March 1996. From March 1994 to
September 1994, Mr. Ray was the staff manager at Mastec, Inc. a utility
construction company and he was assistant to the president at Burnup & Sims, a
utility construction company, from January 1993 to March 1994.
COLLIER ROSS is a retired Lt. General from the Army and currently serves as a
Director and a member of the audit committee of Aaron Rents. He is the former
Executive Vice President of Sidwell-Ross and Associates, Inc., a management and
technical consulting firm.
C. FRANK SWARTZ has served as a Director of the Company since August 1998 and as
Chairman of the Board since November 30, 1998. Mr. Swartz has been retired since
November 1994. For the five (5) years prior to November 1994, Mr. Swartz was
employed by GTE as the Director of Internal Support, based in Caracas,
Venezuela.
DOUGLAS TATUM is the founder of Tatum CFO, a partnership that out-sources
chief financial officers to growing companies.
ROBERT H. YOUNG has served as a Director of the Company since January 1999. Mr.
Young is a principal in the firm of Neos Communications, Inc. in Dallas, Texas.
Mr. Young is the founder of S-B Communications, the founder of Gateway National
Bank, Dallas, Texas, and co-founder of First State Bank of Midland, Texas.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Company's Board of Directors met 14 times during the fiscal year ended
October 31, 1998 and acted 8 times by unanimous written consent.
The Board has an Audit Committee, a Compensation Committee, and a Nominating
Committee.
The Audit Committee reviews the scope of the accountants' engagement, including
the remuneration to be paid, and reviews the independence of the accountants.
The Audit Committee, with the assistance of the Company's Chief Financial
Officer and other appropriate personnel, reviews the Company's annual financial
statements and the independent auditor's report, including significant reporting
and operational issues; corporate policies and procedures as they relate to
accounting and financial reporting and financial controls; litigation in which
the Company is a party;
7
<PAGE>
and use by the Company's Executive Officers of expense accounts and other
non-monetary perquisites, if any. The Audit Committee may direct the Company's
legal counsel, independent auditors and internal audit staff to inquire into and
report to it on any matter having to do with the Company's accounting or
financial procedures or reporting. The Audit Committee held two meetings during
the fiscal year ended October 31, 1998. During fiscal year 1998, the members of
the Audit Committee consisted of C. Frank Swartz, who also served as its
Chairman, and Thomas Davidson.
The Compensation Committee is responsible for setting and approving the
salaries, bonuses and other compensation for the Company's Executive Officers,
establishing compensation programs, and determining the amounts and conditions
of all grants of awards under the Company's Stock Option Plan, as amended, and
grants of awards outside of the Plan. The Compensation Committee held two
meetings during the fiscal year ended October 31, 1998. During the fiscal year
ended October 31, 1998, the Compensation Committee consisted of Thomas Davidson,
who served as its Chairman, C. Frank Swartz, and Gideon D. Taylor.
The Nominating Committee is responsible for selecting those individuals who will
stand for election to the Company's Board of Directors. The Nominating Committee
held one meeting during the fiscal year ended October 31, 1998. During the
fiscal year ended October 31, 1998, the Nominating Committee consisted of
Frazlier L. Gaines, who served as its Chairman, and C. Frank Swartz.
No Director attended fewer than 75% of the meetings of the Board of Directors or
of any committee on which such Director served held during the fiscal year ended
October 31, 1998.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $12,000 annually plus
$750 for each committee meeting attended and are reimbursed for expenses
associated with Board responsibilities. In addition, pursuant to the Company's
1995 Stock Option Plan, as amended, non-employee Directors receive one-time
automatic grants of options to purchase 5,000 shares of Common Stock having an
exercise price equal to the fair market value at the date of grant. In April
1998, the Company granted an option to purchase 10,000 shares of the Common
Stock to all Directors. Directors who are also employed by the Company receive
no additional fees or remuneration for acting in their capacity as a Director of
the Company.
During fiscal 1998, the following options were granted to Directors of the
Company (certain of whom no longer serve in that capacity and will not stand for
re-election). The initial terms of these option grants are summarized below.
8
<PAGE>
<TABLE>
<CAPTION>
FAIR MARKET DATE
NUMBER INITIAL VALUE AT DATE OF OF INITIAL EXPIRATION
DIRECTOR OF SHARES GRANT PRICE INITIAL GRANT(1) GRANT DATE(2)
-------- ---------- ----------- ---------------- ----- -------
<S> <C> <C> <C> <C> <C>
Jonathan A. Bratt 10,000(3) $6.20 $7.75 4/24/98 7/3/04
20,000(3) $11.9375 $7.4325 4/24/98 7/3/04
Thomas M. Davidson 20,000(3) $11.9375 $7.625 8/18/98 7/3/04
John D. Foster (5) 10,000(3) $6.20 $7.75 4/24/98 7/3/04
20,000(3) $11.9375 $7.9375 4/24/98 7/3/04
Frazier L. Gaines 10,000(4) $6.20 $7.75 4/24/98 7/3/04
20,000(4) $11.9375 $7.9375 4/24/98 7/3/04
80,000(4) $14.00 $14.00 7/8/98 12/31/00
100,000(4) $6.00 $11.1875 3/10/97 12/31/00
Robert C. Nelles (6) 10,000(4) $6.20 $7.75 4/24/98 7/3/04
20,000(4) $11.9375 $7.9375 4/24/98 7/3/04
15,000(4) $5.34 $8.50 2/19/98 9/19/05
Richard J. Sandulli (7) 10,000(3) $6.20 $7.75 4/24/98 7/3/04
20,000(3) $11.9375 $7.9375 4/24/98 7/3/04
C. Frank Swartz 20,000(3) $11.9375 $7.625 8/18/98 7/3/04
Gideon D. Taylor 10,000(4) $6.20 $7.75 4/24/98 7/3/04
20,000(4) $11.9375 $7.9375 4/24/98 7/3/04
120,000(4) $14.00 $14.00 7/8/98 12/31/00
70,000(4) $6.00 $11.1875 3/10/97 12/31/00
</TABLE>
- ------------
(1) On December 31, 1998, in an effort to clear up a large number of
ambiguities in the minutes of Board of Directors meetings and in order
to maintain compliance with various debtor documents as well as to keep
the Company in substantial compliance with certain rules of the
Securities and Exchange Commission and The Nasdaq Stock Market, Inc.
("Nasdaq") the Board of Directors rescinded all of the above option
grants with the exception of the grant to Nelles for 15,000 shares, and
reissued new options in the amounts set forth above at the calculated
fair market value per share on December 31, 1998, which was $5.75.
(2) The initial expiration dates ranged from July 8, 2000 to April 24, 2005
prior to the reissuances.
(3) Issued outside the Company's 1995 Stock Option Plan.
(4) Non-qualified stock options granted pursuant to the Company's 1995
Stock Option Plan.
(5) Mr. Foster resigned from the Company's Board of Directors on June 5,
1998.
(6) Mr. Nelles resigned from the Company's Board of Directors on May 5,
1998
(7) Mr. Sandulli resigned from the Company's Board of Directors on August
25, 1998.
9
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and 10% stockholders to file reports regarding
initial ownership and changes in ownership with the Securities and Exchange
Commission and the Nasdaq Stock Market. Executive officers, directors and 10%
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. The
Company's information regarding compliance with Section 16(a) is based solely on
a review of the copies of such reports furnished to the Company by the Company's
executive officers, directors and 10% stockholders. The Company believes that
the majority of the Company's executive officers and directors were delinquent
in filing one or more Section 16(a) forms and may have failed to file certain
forms during the fiscal year ended October 31, 1998. The Company is currently
investigating such delinquent filings and failures to file and is verifying that
all forms that have been filed have been provided to the Company. Once the
Company's review is complete, a complete list of executive officers and
directors with Section 16(a) compliance violations will be provided in the
Company's proxy materials for its 1999 Annual Meeting.
EXECUTIVE OFFICERS
Biographical information concerning the certain of the Company's Executive
Officers is presented below.
<TABLE>
<CAPTION>
OFFICER'S NAME AGE OFFICE
<S> <C> <C>
Billy V. Ray, Jr. 40 President, Chief Executive Officer and Acting Chief Financial Officer
Gideon D. Taylor 56 Vice President of Special Projects
Frazier L. Gaines 59 President - Able Telecom International
Jesus G. "Jay" Dominguez 54 Chief Accounting Officer
Michael Arp 52 Financial Vice President
Curtis A. "Butch" Dale 51 Chief Operating Officer
Edward Z. Pollock 60 In-House Counsel
Stacy Jenkins 42 President - MFS Network Technologies
G. Vance Cartee 56 President - MFS Transportation Systems
J. Barry Hall 50 President - Traffic Management Group
Richard A. Boyle 44 President - Patton Management Group
</TABLE>
BILLY V. RAY. See "Directors."
GIDEON D. TAYLOR has served as a Director of the Company since its inception
through March 9, 1999 and served as Chairman of the Board of the Company from
March 25, 1997 through November 30, 1998. In addition, Mr. Taylor served as the
Company's Chief Administrative Officer from March 25, 1997 through November 30,
1998 and the Company's Vice President of Special Projects since December 1998.
From October 1988 to August 1992, Mr. Taylor was also President and Chief
Executive Officer of the Company. Mr. Taylor has also served in various
executive capacities with the Company for the past ten years.
FRAZIER L. GAINES has served as a Director of the Company from August 1992
through March 19, 1999 and served as Interim President and Chief Executive
Officer of the Company from March 6, 1998 to November 30, 1998. Mr. Gaines has
also served as the President of the Company's subsidiary, Able Telcom
International, Inc. ("ATI") since June 1994. From 1992-1994, Mr.
10
<PAGE>
Gaines was Chief Operating Officer of the Company. From 1987 to 1992, Mr. Gaines
was Vice President of Judycom, Inc. and Judycom Construction Corporation, both
of which were located in Lexington, Kentucky and engaged in fiber optic
installation.
JESUS G. "JAY" DOMINGUEZ has been the Chief Accounting Officer since April 1998.
Mr. Dominguez has served as Vice President - Finance of Able Telcom
International since May 1995 and controller of the Company from October 1993 to
May 1995. From April 1993 to October 1993, Mr. Dominguez served as Vice
President - Finance of Novatek International Inc., a construction company. Mr.
Dominguez is a licensed certified public accountant.
MICHAEL ARP became the Company's Financial Vice President and principal
accounting officer in January 1999. From February 1997 through December 1998,
Mr. Arp was the group controller of the Company's Traffic Management Group. From
January 1994 to February 1997, Mr. Arp was President of American Turf
Manufacturing.
CURTIS A. "BUTCH" DALE has served as Chief Operating Officer of the Company
since August 1998. Prior to that time, from March 1998 until his appointment as
Chief Operating Officer, Mr. Dale was Vice President of Operations for the
Company. From March 1970 to October 1997, Mr. Dale was a Project/Staff Manager -
Support for Network Operations for GTE, a telecommunications company.
EDWARD Z. POLLOCK has been the Company's In-House Counsel since November 1998.
From 1963 to 1998, Mr. Pollock was a sole practitioner at the law firm of Edward
Z. Pollock.
STACY JENKINS was named President of MFS Network Technologies, Inc. ("MFSNT") in
July 1998. From 1990 to July 1996, Mr. Jenkins served as the Senior Vice
President, Operations Vice President, Engineering and Estimating; and as Project
Manager for the nationally recognized Iowa Communications Network. During this
time, he directed operations for more than 40 projects, with a combined value in
excess of $300 million, in the United States and abroad.
G. VANCE CARTEE has been the President of MFS Transportation Systems since
January 1999. From June 1998 to December 1998, Mr. Cartee served as a
telecommunications consultant, including performing consulting services for the
Company. From January 1996 to June 1998, Mr. Cartee was a business unit director
for Loral/Lockheed Martin Corp. From March 1993 to January 1996, Mr. Cartee was
Vice President and General Manager of Alcatel Contracting, N.A.
J. BARRY HALL has been the President of Georgia Electric Company, a subsidiary
of the Company, since October 1996. From 1990 to October 1996, Mr. Hall was Vice
President of Georgia Electric Company.
RICHARD A. BOYLE has been the President of Patton Management Corp. and
subsidiaries, a subsidiary of the Company since April 1998, since March 1996.
From May 1991 to March 1996, Mr. Boyle was Vice President and General Manager of
Wright & Lopez, Inc. and Pressure Concrete Construction Co. From January 1990 to
May 1991, Mr. Boyle was Vice President and General Manager of Pressure Concrete
Construction Company, a division of South Eastern Public Services Co.
The Chief Executive Officer is elected by and serves at the discretion of the
Company's Board of Directors. All other executive officers are appointed by the
Chief Executive Officer.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for the years
indicated concerning the compensation awarded to, earned by, or paid to (i)
those persons serving as the Chief Executive Officer during the 1998 fiscal
year, (ii) the other four most highly compensated Executive Officers of the
Company who were serving as such at October 31, 1998, and (iii) up to two
additional individuals who had served as an Executive Officer of the Company
during the 1998 fiscal year but who were not Executive Officers at October 31,
1998, except that persons referred to in clauses (ii) and (iii) above generally
are not included in the table if they received total annual salary and bonus of
$100,000 or less for the
11
<PAGE>
1998 fiscal year end. The persons named in this table shall be collectively
referred to as the "Named Executive Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND COMPEN- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) SARS(#) SATION($)
<S> <C> <C> <C> <C> <C> <C>
Frazier L. Gaines(1) 1998 153,986 210,000 4,609
Chief Executive Officer 1997 110,000 5,000 1,024,375
President- Able Telcom 1996 110,000 36,000
International
Robert DuPuis (2) 1998 6,058
Former Chief Executive Officer
Gerry W. Hall (3) 1998 103,846 4,787
Former Chief Executive Officer 1997 180,769 75,000 27,500 3,200
Billy V. Ray, Jr. (4) 1998 48,462 35,000 110,818
Executive Vice President of 1997 34,615 40,000 56,961
Mergers and Acquisitions and
Treasurer; promoted to Chief
Executive Officer on December 1,
1998
J. Barry Hall (5) 1998 209,173 75,000 33,906
President - Traffic Management 1997 161,538 27,500
Group
Gideon D. Taylor(6) 1998 133,846 750 220,000 10,198
Chairman of the Board and Chief 1997 45,308
Administrative Officer
Richard J. Sandulli 1998 134,615 30,000 12,078
Former Vice President - Finance 1997 71,000 3,750
</TABLE>
- ------------
(1) Mr. Gaines served as the President and Chief Executive Officer of the
Company from March 1998 through November 30, 1998 (except for the
period between August 19, 1998 and August 31, 1998). Prior thereto, Mr.
Gaines was President of Able Telcom International, Inc. (a position
which he continues to hold). For 1998, other compensation includes an
automobile allowance of $4,500 and health insurance premiums paid by
the Company on Mr. Gaines behalf in the amount of $109. For 1997, other
compensation consists of an automobile allowance, a housing allowance
and an amount of $991,375, which represents the difference between the
price paid by Mr. Gaines upon the exercise of certain stock options and
the fair market value of the underlying Common Stock on the date of
exercise. For 1996, other compensation includes an automobile allowance
and a housing allowance.
(2) Mr. DuPuis was appointed President and Chief Executive Officer of the
Company on August 19, 1998 and resigned on August 31, 1998.
(3) Mr. Hall was President and Chief Executive Officer of the Company from
June 1997 to March 1998 at an annual salary of $200,000. Mr. Hall also
served as President of Georgia Electric Company during the fiscal year
ended October 31, 1997. In 1998, other compensation consists of a
living allowance of $3,000, a car allowance
12
<PAGE>
of $1,000, health insurance premiums paid on Mr. Hall's behalf of $227
and contributions of $560 to the Company's 401(k) plan. In 1997, other
compensation consists of an automobile allowance.
(4) In 1998, other compensation includes consulting fees in the amount of
$92,099, an automobile allowance of $5,400, a housing allowance of
$12,600 and health insurance premiums paid on Mr. Ray's behalf of $719.
In 1997, other annual compensation includes compensation for consulting
services rendered prior to Mr. Ray's appointment in June 1997 as the
Company's Chief Financial Officer, and a travel and housing allowance.
25,000 of Mr. Ray's options expired on August 30, 1998.
(5) In 1998, other compensation includes a housing allowance of $24,000, an
automobile allowance of $7,800 and contributions of $2,106 to the
Company's 401(k) plan.
(6) In 1998, other compensation includes a housing allowance of $6,000, use
of a company vehicle estimated at $3,633 and health insurance premiums
paid on Mr. Taylor's behalf of $565.
THE ABLE TELCOM HOLDING CORP. 1995 STOCK OPTION PLAN, AS AMENDED
The Company has adopted the 1995 Stock Option Plan (the "Plan") pursuant to
which 550,000 shares of Common Stock were originally authorized for issuance. In
April 1998, the shareholders of the Company approved the amendment to the Plan
to increase the number of shares outstanding under the Plan to 1,300,000. The
Company intends to amend its registration statement on Form S-8 to register the
additional 750,000 shares of Common Stock reserved for issuance under the Plan.
The Company may grant stock options (both Nonqualified Stock Options and
Incentive Stock Options, as defined in the Plan) and restricted stock under the
Plan to Non-Affiliate Directors (as defined in the Plan), key employees,
advisors and consultants (the "Participants"). The Plan also provides for the
automatic grant to Non-Affiliate Directors, at such time as an individual
becomes a Non-Affiliate Director of the Company, of Nonqualified Stock Options
to purchase 5,000 shares of Common Stock at an exercise price per share equal to
100% of the fair market value of the shares on the date of grant. With respect
to the grant of awards under the Plan to persons other than Non-Affiliate
Directors, the Board of Directors, or a committee appointed by the Board of
Directors (in either case, the "Plan Administrators"), will determine persons to
be granted stock options and restricted stock, the amount of stock to be
optioned or granted to each such person, and the terms and conditions of any
stock options and restricted stock. Both Incentive Stock Options and
Nonqualified Stock Options may be granted under the Plan. An Incentive Stock
Option is intended to qualify as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Any
Incentive Stock Option granted under the Plan will have an exercise price of not
less than 100% of the fair market value of the shares on the date on which such
option is granted. With respect to an Incentive Stock Option granted to a
Participant who owns more than 10% of the total combined voting stock of the
Company or any parent or subsidiary of the Company, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted. A Nonqualified Stock Option
granted under the Plan (i.e., an option to purchase the Common Stock that does
not meet the Code's requirements for Incentive Stock Options) shall be as
determined by the Plan Administrators. Subject to the terms of the Plan, the
Plan Administrators may award shares of restricted stock to the Participants.
Generally, a restricted stock award will not require the payment of any option
price by the Participant but will call for the transfer of shares to the
Participant subject to forfeiture, without payment of any consideration by the
Company, if the Participant's employment terminates during a "restricted" period
(which must be at least six months) specified in the award of the restricted
stock.
The Plan is proposed to be amended to, among other things, increase the
aggregate number of shares of Common Stock which may be issued pursuant to
awards granted thereunder to 3,500,000. The proposed amendments and the features
of the Stock Option Plan are described in more detail under "Proposal No.
3--Amendment of Stock Option Plan" elsewhere in this Proxy Statement.
13
<PAGE>
STOCK OPTIONS ISSUED OUTSIDE THE PLAN DURING FISCAL YEAR 1998.
During the fiscal year ended 1998, the Company issued options to purchase an
aggregate of 902,000 shares of Common Stock to employees, Officers and Directors
of the Company and its subsidiaries at exercise prices ranging from $5.34 to
$14.00 per share. On December 31, 1998, in an effort to clear up a large number
of ambiguities in the minutes of Board of Directors meetings and in order to
maintain compliance with various debtor documents as well as to keep the Company
in substantial compliance with certain rules of the Securities and Exchange
Commission and Nasdaq, 840,000 of these options were rescinded. Immediately
thereafter, the same number of options were issued on December 31, 1998 at an
exercise price of $5.75, which was the average of the ten-day closing market
price for the Common Stock for the period from December 16-December 30, 1998.
The expiration for the exercise period for these options range from December 31,
2000 to April 24, 2005. Of the 902,000 options granted in the fiscal year ended
October 31, 1998, all were immediately vested as of December 31, 1998.
OPTION GRANTS DURING FISCAL YEAR 1998
The following table shows all grants during the fiscal year ended October 31,
1998 of stock options to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
NUMBER OF GRANTED TO MARKET APPRECIATION
SHARES EMPLOYEES EXERCISE OR PRICE ON FOR OPTION TERM(3)
UNDERLYING IN FISCAL BASE PRICE DATE OF EXPIRATION ---------------
NAME OPTIONS(# ) YEAR(1) ($/SH)(2) GRANT DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Frazier L. Gaines 10,000 29% 6.20 7.75 4/24/05 $47,100 $89,000
20,000 11.9375 7.9375 7/3/04 -- 47,600
80,000 14.00 14.00 7/8/00 114,400 235,200
100,000 6.00 11.1875 12/31/00 661,000 813,00
Gideon D. Taylor 10,000 30% 6.20 7.75 4/24/05 47,100 89,000
20,000 11.9375 7.9375 7/3/04 -- 47,600
120,000 14.00 14.00 7/8/00 171,600 352,800
70,000 6.00 11.1875 12/31/00 462,700 569,100
Billy V. Ray, Jr.(4) 10,000 5% 14.00 14.00 7/8/00 14,300 29,400
25,000 7.75 7.75 9/19/05 90,250 215,000
Richard J. Sandulli 10,000 4% 6.20 7.75 4/24/05 47,100 89,000
20,000 11.9375 7.9375 7/3/04 -- 47,600
</TABLE>
- ------------
Note: Mr. Robert DuPuis was also granted an option to purchase 125,000 shares
of the Common Stock on August 19, 1998. Due to the fact that Mr.
DuPuis' employment with the Company was less than two weeks, the
Company has not included a valuation of those options in the above
table. At the time of Mr. DuPuis' separation from the Company, this
option had not vested and the option was forfeited.
(1) There were option grants to purchase 902,000 shares of the Common Stock
during the fiscal year ended October 31, 1998, of which 735,000 related
to employees of the Company. The percentage of total options granted to
employees is based upon grants of options to purchase 735,000 shares.
(2) On December 31, 1998, in an effort to clear up a large number of
ambiguities in the minutes of Board of Directors meetings and in order
to maintain compliance with various debtor documents as well as to keep
the Company in substantial compliance with certain rules of the
Securities and Exchange Commission and Nasdaq,
14
<PAGE>
the Board of Directors rescinded all of the above option grants and
reissued new options in the amounts set forth above at the then fair
market value per share on December 31, 1998, which was $5.75.
(3) The potential realizable values are based upon assumed 5% and 10%
annualized stock price growth rates and are not intended to forecast
future price appreciation of the Common Stock. Actual gains, if any, on
stock option exercises will depend on the amount, if any, by which the
fair market value exceeds the option exercise price on the date the
option is exercised. There is no assurance that the amounts reflected
in this table will be achieved.
(4) The option to purchase 25,000 shares of the Common Stock were canceled
in August 1998 pursuant to the 1995 Stock Option Plan, as amended.
OPTION EXERCISES AND PERIOD-END VALUES.
The following table provides information on options exercised in the fiscal year
ended October 31, 1998 by the Named Executive Officers, the number of
unexercised options each of them held at October 31, 1998 and the value of the
unexercised "in-the-money" options each of them held as of that date.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
OPTIONS/AT FY END(#)(1) AT FY-END ($)
SHARES VALUE ----------------------- --------------
ACQUIRED ON REALIZED($) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) UNEXERCISABLE UNEXERCISABLE(1)
<S> <C> <C> <C> <C>
Frazier L. Gaines --- --- 210,000/--- $804,375/---
Gideon D. Taylor --- --- 220,000/--- $585,000/---
Billy V. Ray, Jr. --- --- 100,000/10,000 $0/$0
Richard J. Sandulli --- --- 30,000/--- $73,125/---
</TABLE>
- ------------
(1) On December 31, 1998, in an effort to clear up a large number of
ambiguities in the minutes of Board of Director meetings and in order
to maintain compliance with various debtor documents as well as to keep
the Company in substantial compliance with certain rules of the
Securities and Exchange Commission and Nasdaq, the Board of Directors
rescinded all of the above options grants and reissued new options in
the amounts set forth above at the calculated fair market value per
share on December 31, 1998, which was $5.75.
EMPLOYMENT AND CONSULTING AGREEMENTS
BILLY V. RAY, JR., President, Chief Executive Officer and Acting Chief Financial
Officer and Director, is party to an employment agreement, dated December 1,
1998 with the Company (the "Ray Employment Agreement"). The Ray Employment
Agreement terminates on November 30, 2000, and provides that Mr. Ray is to be
paid a salary of $180,000 per year, plus a monthly housing allowance of $1,500
per month and an automobile allowance of $500 per month, plus health insurance
and other benefits. The Ray Employment Agreement may be extended for an
additional two year period. The Ray Employment Agreement also contains a
covenant by Mr. Ray not to compete with the Company for a period of three years
following his employment. The Ray Employment Agreement also provides that if Mr.
Ray's employment is terminated with cause, Mr. Ray would be entitled to 90 days
prior notice. However, should Mr. Ray be terminated without cause, Mr. Ray would
be paid out the remainder of his contract, or for 90 days, whichever is greater.
In addition, the Ray Employment Agreement provides for the grant of 100,000
options to purchase 100,000 shares of the Common Stock, as approved by the
Company's Board of Directors, which vest immediately. On December 31, 1998, the
Company's Board of Directors rescinded the above grant of options and issued new
options to purchase 100,000 shares through December 31, 2001 at an exercise
price of $5.75 per share.
15
<PAGE>
EDWARD POLLOCK, In-House Counsel, is party to an employment agreement, dated
January 1, 1999 with the Company (the "Pollock Employment Agreement"). The
Pollock Employment Agreement terminates on December 31, 2000 and provides that
Mr. Pollock is to be paid an initial salary of $10,000 per month for the period
from January 1, 1999 to June 30, 1999, increased to $11,000 per month for the
period from July 1, 1999-December 31, 1999, increased to $12,000 monthly for the
period from January 1, 2000 to June 30, 2000, and increased to $12,500 monthly
for the period from July 1, 2000 to December 31, 2000. In addition, the Pollock
Employment Agreement provides an automobile allowance of $300 per month, plus
health insurance and other benefits. The Pollock Employment Agreement may be
extended for an additional two year period. The Pollock Employment Agreement
also contains a covenant by Mr. Pollock not to compete with the Company for a
period of three years following his employment. The Pollock Employment Agreement
also provides that if Mr. Pollock is terminated with cause, Mr. Pollock would be
entitled to 90 days prior notice. However, should Mr. Pollock be terminated
without cause, Mr. Pollock would be paid out the remainder of his contract. In
addition, the Pollock Employment Agreement provides for the grant of options to
purchase 40,000 shares of the Common Stock, as approved by the Company's Board
of Directors, which vest over a three year period (15,000 options vested on
January 1, 1999, 15,000 options will vest on January 1, 2000 and 10,000 options
will vest on January 2, 2001), unless there is a change in control/ownership of
the Company, in which case, the options will vest immediately.
CURTIS A. "BUTCH" DALE, Chief Operating Officer, is party to an employment
agreement, dated August 17, 1998 with the Company (the "Dale Employment
Agreement"). The Dale Employment Agreement terminates on August 16, 2001, and
provides that Mr. Dale is to be paid a salary of $150,000 per year, an
automobile allowance of $500 per month, plus health insurance and other
benefits. The Dale Employment Agreement also contains a covenant by Mr. Dale not
to compete with the Company for a period of one year following his employment.
The Dale Employment Agreement also provides that if Mr. Dale is terminated with
cause that Mr. Dale would be entitled to 90 days prior notice. However, should
Mr. Dale be terminated without cause, Mr. Dale would be paid out the remainder
of his contract, or for 180 days, whichever is greater. In addition, the Dale
Employment Agreement provides for the grant of options to purchase 100,000
shares of the Common Stock, as approved by the Company's Board of Directors,
which vests after one year of employment, or immediately upon either a change in
control/ownership of the Company or Mr. Dale is terminated without cause. On
December 31, 1998, the Company's Board of Directors rescinded the above grant of
options and issued new options to purchase 100,000 shares, which options are
fully vested and are exercisable at $5.75 per share through December 31, 2004.
JESUS G. "JAY" DOMINGUEZ, Chief Accounting Officer, is party to an employment
agreement, dated April 27, 1998 with the Company (the "Dominguez Employment
Agreement"). The Dominguez Employment Agreement terminates on April 26, 2001,
and provides that Mr. Dominguez is to be paid a salary of $125,000 per year,
plus an automobile allowance of $500 per month, plus health insurance and other
benefits. The Dominguez Employment Agreement also contains a covenant by Mr.
Dominguez not to compete with the Company for a period of one year following his
employment. The Dominguez Employment Agreement also provides that if Mr.
Dominguez is terminated with cause that Mr. Dominguez would be entitled to 90
days prior notice. However, should Mr. Dominguez be terminated without cause,
Mr. Dominguez would be paid out the remainder of his annual contract salary, or
for 180 days, whichever is greater. In addition, the Dominguez Employment
Agreement provides for the grant of options to purchase 50,000 shares of Common
Stock, as approved by the Company's Board of Directors, which vests after one
year of employment, or immediately upon either a change in control/ownership of
the Company or Mr. Dominguez is terminated without cause. On December 31, 1998,
the Company's Board of Directors rescinded the above grant of options and issued
new options to purchase 50,000 shares at an exercise price of $5.75 per share
through December 31, 2004.
GIDEON D. TAYLOR, Vice President of Special Projects, is party to an employment
agreement, dated December 7, 1998 with the Company (the "Taylor Employment
Agreement"). The Taylor Employment Agreement terminates on June 6, 1999 and may
be extended for a one year term at the option of the Company, and provides that
Mr. Taylor is to be paid at a rate of $15,000 per month, plus an automobile
allowance of $500 per month, health and life insurance and other benefits. The
Taylor Employment Agreement also provides that the Company will pay all fringe
benefits plus $75,000 per year for the number of years equal to Mr. Taylor years
of service, subject to a minimum of ten (10) years, and will be payable
beginning at Mr. Taylor termination date. The Taylor Employment Agreement also
contains a covenant by
16
<PAGE>
Mr. Taylor not to compete with the Company for a period of three years following
his employment. The Taylor Employment Agreement also provides that if Mr. Taylor
is terminated with cause that Mr. Taylor would be entitled to 30 days prior
notice. However, should Mr. Taylor be terminated without cause which can only be
effected by a majority vote of the Company's Board of Directors, Mr. Taylor
would be paid the remaining balance on the employment contract plus regular
Company fringe benefits.
FRAZIER L. GAINES, President of Able Telcom International, is party to an
employment agreement, dated November 12, 1998 with the Company (the "Gaines
Employment Agreement"). The Gaines Employment Agreement terminates on November
11, 2001, may be extended for one additional year, allows for a consulting
agreement to be signed at the end of the initial three year term, and provides
that Mr. Gaines is to be paid a salary of $200,000 per year, health and life
insurance, other fringe benefits, and a monthly automobile allowance of $500.
The Gaines Employment Agreement also provides that the Company will also pay all
fringe benefits plus $60,000 per year for the number of years equal to Mr.
Gaines years of service and will be payable beginning at Mr. Gaines termination
date. The Gaines Employment Agreement also contains a covenant by Mr. Gaines not
to compete with the Company for a period of three years following his
employment. The Gaines Employment Agreement also provides that if Mr. Gaines is
terminated with cause that Mr. Gaines would be entitled to 30 days prior notice.
However, should Mr. Gaines be terminated without cause, Mr. Gaines would be paid
one-year's severance plus regular Company fringe benefits. $100,000 of this
amount would be payable immediately upon termination with the remainder of
$100,000 payable within 45 days from termination. In addition, the Gaines
Employment Agreement provides for the grant of options to purchase 100,000
shares of the Common Stock, subject to approval by the Company's Board of
Directors, which vest over a three year period, or immediately upon either a
change in control/ownership of the Company. To date, these options have not been
approved by the Company's Board of Directors.
STACY JENKINS, President of MFS Network Technologies, Inc., is party to an
employment agreement, dated July 16, 1998 with the Company (the "Jenkins
Employment Agreement"). The Jenkins Employment Agreement terminates on July 15,
2001, and provides that Mr. Jenkins is to be paid a salary of $200,000 per year,
an automobile allowance of $500 per month, plus health insurance and other
benefits. The Jenkins Employment Agreement also contains a covenant by Mr.
Jenkins not to compete with the Company for a period of two years following his
employment. The Jenkins Employment Agreement also provides that if Mr. Jenkins
is terminated with cause that Mr. Jenkins would be entitled to 30 days prior
notice. However, should Mr. Jenkins be terminated without cause, Mr. Jenkins
would be paid out the remainder of his annual salary contract rate, or for 90
days, whichever is greater. In addition, the Jenkins Employment Agreement
provides for the grant of options to purchase 100,000 shares of the Common
Stock, as approved by the Company's Board of Directors, which vest after one
year of employment, or immediately upon either a change in control/ownership of
the Company or Mr. Jenkins is terminated without cause. On December 31, 1998,
the Company's Board of Directors rescinded the above grant of options and issued
new options to purchase 100,000 shares at $5.75 per share through December 31,
2000 or 90 days after termination of employment, whichever is earlier.
G. VANCE CARTEE, President of MFS Transportation Systems, Inc., is party to an
employment agreement, dated January 4, 1999 with the Company (the "Cartee
Employment Agreement"). The Cartee Employment Agreement terminates on January 2,
2001, and provides that Mr. Cartee is to be paid a salary of $150,000 per year,
plus insurance and other benefits. The Cartee Employment Agreement also contains
a covenant by Mr. Cartee not to compete with the Company for a period of one
year following his employment. The Cartee Employment Agreement also provides
that if Mr. Cartee is terminated with cause that Mr. Cartee would be entitled to
90 days prior notice. However, should Mr. Cartee be terminated without cause,
Mr. Cartee would be paid out the remainder of his contract, or for 180 days,
whichever is greater. In addition, the Cartee Employment Agreement provides for
the grant of options to purchase 40,000 shares of the Common Stock, as approved
by the Company's Board of Directors, which vest on January 1, 2000, or
immediately upon either a change in control/ownership of the Company or Mr.
Cartee is terminated without cause. On December 31, 1998, the Company's Board of
Directors rescinded the above grant of options and issued new options to
purchase 40,000 shares at $5.75 per share, all of which are fully vested,
through December 31, 2001.
17
<PAGE>
J. BARRY HALL, President of the Transportation Services Group, which includes
both Transportation Safety Contractors, Inc. ("TSCI") and Georgia Electric
Company, is party to an employment agreement dated October 12, 1996 with TSCI
(the "Hall Employment Agreement"). The Hall Employment Agreement terminates on
October 11, 2001, and provides that Mr. Hall is to be paid a salary of $150,000
per year, plus insurance and other benefits. The Hall Employment Agreement also
contains a covenant by Mr. Hall not to compete with the Company for a period of
two years following his employment, unless the Company terminates the Hall
Employment Agreement for cause or if Mr. Hall terminates the agreement with good
reason, in which case the non-competition period will terminate after six (6)
months (which period may be extended by the Company up to one year in exchange
for additional compensation). In addition, an additional $100,000 in annual
salary has been assigned to J. Barry Hall from Gerry Hall, a former Chief
Executive Officer of the Company currently under contract.
RICHARD A. BOYLE, President of the Patton Management Group, is party to an
employment agreement, dated April 1, 1998 with the Company (the "Boyle
Employment Agreement"). The Boyle Employment Agreement terminates on March 31,
2000, and provides that Mr. Boyle is to be paid a salary of $159,000 per year,
plus insurance and other benefits. The Boyle Employment Agreement also contains
a covenant by Mr. Boyle not to compete with the Company for a period of two
years following his employment. Also, per the terms of the Patton Management
Corporation acquisition, Mr. Boyle's non-competition agreement has been extended
for one additional year. The Boyle Employment Agreement also provides that if
Mr. Boyle is terminated with cause that Mr. Boyle would not be entitled to any
notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended October 31, 1998, compensation for the Company's
Officers was determined by the Company's Compensation Committee, consisting of
Messrs. C. Frank Swartz, Thomas Davidson and Gideon Taylor, of which Messrs.
Swartz and Davidson are non-employee members of the Board of Directors. Mr.
Taylor was Chairman of the Compensation Committee from November 1, 1997 through
August 18, 1998. On August 18, 1998, Mr. Davidson became the Chairman of the
Company's Compensation Committee. During the year, Mr. Taylor was Chairman of
the Company's Board of Directors and the Company's Chief Administrative Officer.
In April 1998, the Company engaged Washington Equity Partners ("WEP") as an
advisor in connection with the acquisition of MFS Network Technologies, Inc., a
division of WorldCom, Inc. ("MFSNT Acquisition"), including the financing
thereof. At the time of the engagement, Mr. Thomas M. Davidson who subsequently
became a member of the Company's Board of Directors and a member of the
Compensation Committee, was Managing Director of WEP. In connection with the
engagement, the Company agreed to pay WEP a fee if the Company consummated the
financing of the MFSNT Acquisition through an investor contacted by WEP. Such
fee equals 2% of the gross proceeds of any senior indebtedness issued by the
Company, 3% of the gross proceeds of any subordinated indebtedness issued by the
Company, and 4% of the gross proceeds of any equity securities issued by the
Company. In addition, the Company agreed to pay WEP, upon the consummation of
the MFSNT Acquisition, a fee of 2% of the aggregate purchase price paid by the
Company for this acquisition up to $50 million, and 1-1/2% of the aggregate
purchase price in excess of $50 million. The Company also committed to reimburse
WEP for its reasonable travel and out-of-pocket expenses (up to a maximum of
$20,000 without prior approval) incurred in connection with its engagement.
Under the agreement, the Company agreed to indemnify WEP and its permitted
assigns against all losses and expenses, including reasonable counsel fees and
expenses, arising out of the MFSNT Acquisition or the financing, except any
losses or expenses found in a final judgment by a court of competent
jurisdiction to have resulted from WEP's bad faith, gross negligence or breach
of its agreement with the Company. Mr. Davidson subsequently left his position
as Managing Director of WEP in April 1998 and WEP assigned its rights in the
agreement to Mr. Davidson, who became a Director of the Company in June 1998. On
October 21, 1998, Mr. Davidson and the Company executed a letter agreement
pursuant to which the Company agreed to pay Mr. Davidson $1,332,000 in
satisfaction of amounts owing under the agreement with WEP with respect to the
MFSNT Acquisition and the related financing.
On April 24, 1998, to finance part of the non-refundable deposit for the MFSNT
Acquisition, Frazier L. Gaines, the Company's then President and Chief Executive
Officer, and Gideon D. Taylor, the Company's then Chairman of the Board of
Directors, borrowed $5.0 million from a bank on an unsecured basis. This loan
was secured by a pledge of
18
<PAGE>
1,047,000 shares of Common Stock owned by Messrs. Taylor and Gaines. On July 2,
1998, to finance an additional non-refundable deposit on the MFSNT Acquisition
purchase price, Messrs. Taylor and Gaines borrowed an additional $4.2 million.
This loan was also secured by a pledge of 1,047,000 shares of Common Stock owned
by Messrs. Taylor and Gaines. On June 11, 1998, the Company repaid both of these
loans as well as agreed to pay Messrs. Taylor and Gaines $25,000 each for
interest related to the loans. On July 8, 1998, Messrs. Taylor and Gaines were
granted two year options to purchase 120,000 and 80,000 shares, respectively, of
the Common Stock, at an exercise price of $14.00 per share, as compensation for
providing the capital necessary to fund the initial deposits required to
consummate the MFSNT Acquisition. On August 11, 1998, Messrs. Taylor and Gaines
each loaned the Company $1.0 million on an unsecured basis to cover certain
expenses associated with the MFSNT Acquisition. These loans were repaid in full
on August 17, 1998 and interest of $2,200 was paid to each Messrs. Taylor and
Gaines.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On October 12, 1996, the Company acquired all of the issued and outstanding
capital stock of Georgia Electric Company ("GEC"), which prior to the
acquisition was owned equally by Gerry W. and J. Barry Hall (collectively, the
"Halls"). Following the acquisition, Gerry Hall was elected to the Board of
Directors of the Company, and on June 12, 1997, was elected President and Chief
Executive Officer of the Company. Gerry Hall resigned as President, Chief
Executive Officer and a director of the Company on March 2, 1998. The purchase
price for the GEC acquisition was $3 million in cash, plus the issuance at the
end of each of the next five fiscal years of a number of shares of Common Stock
to be determined pursuant to a formula contained in the acquisition agreement by
dividing a dollar figure derived from GEC's actual pre-tax profits and operating
margins compared with target profits and margins for each such fiscal year by a
discounted per share price. In the event that GEC is sold by the Company prior
to the end of fiscal year 2001, the Company is obligated to issue to Gerry Hall
and Barry Hall a number of shares of Common Stock having a market value (as
determined in accordance with the contract) of $1 million for each year that
earn-out consideration remains payable. The GEC acquisition agreement was
amended in February 1998 to increase the percentage discount applicable to the
price of the Common Stock for purposes of determining the number of shares to be
issued with respect to each fiscal year and to limit the total market value of
the shares of Common Stock which could be issued under the agreement.
In November 1997, a subsidiary of the Company assumed the obligations of Ten-Ray
Utility Construction, Inc. ("Ten-Ray"), a North Carolina corporation, as
contractor under two network construction contracts and paid the costs Ten-Ray
had accrued under the contracts of approximately $131,000. On January 30, 1998,
the Company purchased from Ten-Ray certain construction equipment used in
connection with the contracts. The purchase price for the equipment was the
satisfaction of Ten-Ray's bank loans secured by the equipment in the amount of
$330,188, including principal and interest, which in the opinion of the
executives of the subsidiary was not more than the fair market value of the
equipment. Billy V. Ray, Jr., then the Company's Chief Financial Officer and
currently, the Company's Chief Executive Officer, President and Acting Chief
Financial Officer, beneficially owned approximately 7.7% of the voting stock of
Ten-Ray and had personally guaranteed the equipment loans to the bank.
On July 1, 1997, the Company entered into a six month consulting agreement with
Nelles & Associates, Inc. ("NAI"), an international telecommunications
consulting firm founded by Robert C. Nelles, a Director of the Company. The
consulting agreement provided for NAI to be paid $6,000 per month to provided
consulting services in support of the Company's business activities for eight
days per month and for Mr. Nelles to be granted options to purchase 15,000
shares of Common Stock. On January 1, 1998, the Company entered into a three
month consulting agreement with NAI which provided for NAI to be paid $2,000 per
month to provide consulting services in support of the Company's business
activities for up to three days per month and an hourly fee for additional
services. On March 6, 1998, the Company entered into a four month consulting
agreement with NAI, pursuant to which Mr. Nelles served as the interim Chief
Operating Officer of the Company for which the Company paid him consulting fees
of $12,500 per month, provided Mr. Nelles with the use of a leased automobile
and reimbursed NAI for temporary living, travel and related expenses incurred in
connection with Mr. Nelles' performance of services as interim Chief Operating
Officer.
19
<PAGE>
See also "Compensation Committee Interlocks and Insider Participation" regarding
certain related party transactions with between the Company, members of the
Compensation Committee and with Mr. Frazier Gaines, the former President and
Chief Executive Officer of the Company and a Director of the Company.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the following Report on Executive Compensation and the
Performance Graph shall not be incorporated by reference into any such filings.
REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended October 31, 1998, the Compensation Committee was
responsible for setting and approving the salaries, bonuses and other
compensation for the Company's Executive Officers, establishing compensation
programs, and determining the amounts and conditions of all grants of awards
under the Plan.
Compensation Objectives. The Compensation Committee believes that the objectives
of executive compensation are to attract, motivate and retain highly qualified
executives, to align the interests of these executives with those of the
Company's shareholders and to motivate Company executives to increase
shareholder value by improving corporate performance and profitability. To meet
these objectives, the Board of Directors seeks to provide competitive salary
levels and compensation incentives that attract and retain qualified executives,
to recognize individual performance and achievements as well as performance of
the Company relative to its peers, and to encourage ownership of Company stock.
Executive Salaries. Base salaries for executives are determined initially by
evaluating the responsibilities of the position, the experience of the
individual, internal comparability considerations, as appropriate, the
competition in the marketplace for management talent, and the compensation
practices among public companies of the size of, or in businesses similar to,
the Company. Salary adjustments are determined and normally made at twelve-month
intervals.
Annual Bonuses. The Company has historically paid bonuses to executives whom the
Board of Directors determines have contributed materially to the Company's
success during the most recently completed fiscal year. The bonuses are intended
to enable the Company's executives to participate in the Company's success as
well as to provide incentives for future performance. Bonus compensation has
typically been determined as a percentage of the executive's salary based upon
the pre-tax net income of the Company as a whole or the subsidiary which employs
the executive.
Compensation of the Chief Executive Officer. The compensation of Gerry W. Hall,
former President and Chief Executive Officer of the Company, is fixed pursuant
to the Hall Employment Agreement. The Board of Directors increased Mr. Hall's
annual base salary to $200,000 in connection with his appointment on June 12,
1997 as the Company's President and CEO. The increase was based upon arms-length
negotiations between Mr. Hall and the remaining members of the Board of
Directors. In agreeing to increase Mr. Hall's compensation, the Board of
Directors sought to provide an appropriate incentive to Mr. Hall, who has
extensive experience in the Company's industry by virtue of his former ownership
and management of GEC, to accept an appointment as the Company's Chief Executive
Officer. The Board of Directors believes that Mr. Hall's salary was appropriate
for the chief executive officer of a public company the size of the Company. See
"Summary Compensation Table" for information concerning Mr. Hall's compensation.
Mr. Hall resigned as CEO of the Company in March 1998 and resumed full time
performance of his duties at GEC pursuant to the terms of the Hall Employment
Agreement. The Board of Directors approved payment of a bonus to Mr. Hall of
$75,000, based upon the Company's operating results and strategic
accomplishments during the period of Mr. Hall's service as President and Chief
Executive Officer.
20
<PAGE>
Frazier Gaines served as the CEO of the Company from March 1998 through November
1998 (excluding August 19-31, 1998). During the fiscal year ended October 31,
1998. Mr. Gaines was paid $153,986. Mr. Gaines received other compensation that
is more fully presented in the "Summary of Compensation" above.
Stock Options. The Board of Directors may grant to certain employees of the
Company long-term incentives consisting of non-qualified stock options and
incentive stock options. In order to vary the types of awards that may be
offered, the Board of Directors approved the Plan Amendments, which will
increase the number of shares of stock available for grant under the Stock
Option Plan and will allow for the grant of shares of Common Stock subject to
restrictions. During fiscal year 1998, the Board of Directors approved grants of
stock options to Messrs. Hall, Gaines, Taylor and Ray. See "Executive
Compensation--Option Grants During the Fiscal Year Ended October 31, 1998".
Respectfully Submitted:
Thomas Davidson, Chair
C. Frank Swartz
Gideon D. Taylor
STOCK PERFORMANCE
The following performance graph compares the cumulative total return on the
Company's Common Stock with the cumulative total return of the companies in the
Standard and Poor's 500 index, the NASDAQ Telecommunications Stocks Index, and a
self-determined peer group consisting of Advanced Communications Systems, Inc.,
AmeriLink Corp.; ANTEC Corporation; C-Cor Electronics, Inc.; Comtech
Telecommunications Corp.; Dycom Industries, Inc.; Eltrax Systems, Inc.; Internet
Communications Corp.; IPC Information Systems, Inc.; IWL Communications,
Inc.;MasTec, Inc.; NumereX Corp.; Porta Systems Corp.; Tollgrade Communications
Corp.; View Tech, Inc.; and World Access, Inc. In fiscal 1998, due to a change
in business associates with MFSNT the peer group was changed by adding Lockheed
Martin ("peer group-new"). The cumulative total return for each of the periods
shown in the performance graph is measured assuming an initial investment of
$100 on October 31, 1991 and assuming dividend reinvestment. No dividends have
been paid on the Common Stock.
COMPARISON OF 12-MONTH CUMULATIVE TOTAL RETURN
Among Able Telcom Holding Corp., the S&P 500 Index, a self-determined peer group
and the NASDAQ Telecommunications Stocks Index
<TABLE>
<CAPTION>
10/31/94 10/31/95 10/31/96 10/31/97 10/31/98
<S> <C> <C> <C> <C> <C>
Able Telcom Holding Corp. 78 59 93 86 79
Peer Group-Old 47 85 175 171 147
Peer Group-New 109 159 216 240 273
S&P 500 104 131 163 215 263
NASDAQ
Telecommunications 84 95 99 145 200
</TABLE>
21
<PAGE>
THE BOARD OF DIRECTORS VOTES "FOR" ELECTING THE SLATE OF SIX DIRECTORS TO
SERVE UNTIL THE 2000 ANNUAL MEETING OF SHAREHOLDERS OR UNTIL THEIR
RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED
PROPOSAL NO. 2:
TO RATIFY AND APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF (A) COMMON
STOCK FROM 25 MILLION TO 100 MILLION AND (B) PREFERRED STOCK FROM ONE MILLION
TO FIVE MILLION
BACKGROUND
On March 4, 1999, the Board of Directors unanimously adopted a resolution
setting forth proposed amendments (the "Amendments") to the Company's Articles
of Incorporation ("Articles")
1. authorizing an amendment to the first paragraph of Article III of the
Articles to increase the number of authorized shares of
/bullet/ Common Stock from 25 million shares to 100 million shares, and
/bullet/ Preferred Stock, par value $.10 ("Blank Check Preferred Stock"
or "Preferred Stock") from one million shares to five million
shares; and
2. directing that the Amendments be submitted to the Shareholders for
their review, adoption and approval at the Company's 1999 Annual Meeting of
Shareholders.
As of the Record Date, there were
/bullet/ 25 million shares of Common Stock authorized, of which
_______ shares of Common Stock were issued and outstanding,
and
/bullet/ one million shares of Preferred Stock, of which
--1,200 shares have been designated as of Series A Convertible
Preferred Stock ("Series A Preferred Stock"), of which no
shares remain issued and outstanding, and
--4,000 shares have been designated as Series B Convertible
Preferred Stock ("Series B Preferred Stock"), of which 779
shares remain issued and outstanding.
EFFECT OF THE INCREASE IN AUTHORIZED SHARES
Each of the additional authorized shares of Common Stock will have the same
rights and privileges as the currently authorized Common Stock. The additional
authorized Preferred Stock may be issued by resolutions of a majority of the
Board of Directors of the Company in one or more series with such designations,
powers, preferences and relative, participating, option and other rights,
including without limitation, dividend rights, conversion rights, voting rights,
redemption terms and liquidation preferences and such qualifications and
limitations as the Board of Directors shall determine. Assuming the Amendment is
approved, no further Shareholder approval is required for the issuance of
authorized Common Stock or Preferred Stock.
22
<PAGE>
REASONS FOR INCREASING THE NUMBER OF AUTHORIZED SHARES
Of the 25 million shares of Common Stock currently authorized for issuance under
the Articles, as of the Record Date there were __________ shares of Common Stock
issued and outstanding. As of the Record Date, there were
/bullet/ certain outstanding options and warrants to purchase
approximately ____________ additional shares of Common Stock,
for a total of approximately ________________ shares (on a
fully diluted basis), and
/bullet/ 779 shares of Series B Preferred Stock outstanding, with a
stated value of $5,000 per share, which are convertible into
an indeterminable number of additional shares.
Additionally, pursuant to the terms of certain agreements with the holders of
the "Series B Securities," as defined in Proposal No. 5 below, the Company is
required to reserve approximately ________ shares of Common Stock, (estimated
based on the closing price of the Common Stock on ________, 1999). By increasing
the number of authorized shares of Common Stock from 25 million to 100 million,
the Company will have more than a sufficient number of shares in the event that
all derivative securities are converted or exercised, as well as to meet its
contractual obligations to the holders of the Series B Preferred Stock.
The Amendment will also authorize an increase in the number of authorized shares
of Preferred Stock from one million shares to five million shares, on terms
which may be fixed by the Board of Directors without further Shareholder action.
The Articles currently authorize 1,000,000 shares of Preferred Stock. As of the
Record Date,
/bullet/ 1,200 shares have been designated as Series A Convertible
Preferred Stock, none of which remain issued or outstanding,
and
/bullet/ 4,000 shares have been designated as Series B Convertible
Preferred Stock, of which 779 shares remain issued and
outstanding.
The terms of any series of Preferred Stock, which may include priority claims to
assets and dividends and special voting rights, could adversely affect the
rights of holders of the Common Stock. The Company has no present plans to issue
any additional shares of Preferred Stock.
Increasing the number of authorized shares of Common Stock as well as Preferred
Stock will allow the Company's Board of Directors to have the flexibility to act
promptly to meet future business needs as such needs arise. Sufficient shares
should be readily available for general corporate purposes, including for
maintaining the Company's financial and capital raising flexibility, in the
event of stock splits or stock dividends, for acquisitions and mergers, in
connection with employee benefit plans and for other proper business purposes.
Furthermore, by having additional shares readily available, the Board of
Directors will be able to act expeditiously without spending the time and
incurring the expense of soliciting proxies and holding additional special
Shareholders' meetings. The Board however, may issue additional shares of Common
Stock and Preferred Stock without action on the part of the Shareholders only if
the action is permissible under Florida Law, and the rules of the exchange on
which the Common Stock is listed (currently the Nasdaq National Market System).
There are no additional costs or expenses due to the State of Florida, where the
Company is incorporated, as a result of the increase in authorized shares, other
than the costs associated with the filing of an Amendment to the Company's
Articles of Incorporation.
Moreover, the additional authorized shares of Common Stock and Preferred Stock
may be used to discourage persons from attempting to gain control of the Company
by diluting the voting power of shares then outstanding or increasing the voting
power of persons who would support the Board of Directors in opposing a takeover
bid or a solicitation in opposition to management. These shares could also be
used by the Board of Directors in a public or a private sale, merger or similar
transaction by increasing the number of outstanding shares and thereby diluting
the equity interest and voting power of a party attempting to obtain control of
the Company. The Company is not currently aware of any effort to obtain control
of the Company and has no plans to use the new shares for purposes of
discouraging any such effort. Similarly, the Company has no present plans,
agreements, commitments or understandings to issue or use these proposed
23
<PAGE>
additional shares of Common Stock or Preferred Stock in connection with any
acquisitions, financing transactions, or other corporate transactions, however,
it may do so in the foreseeable future.
If Proposal No. 2 is approved, the first paragraph of Article III of the
Articles of Incorporation will read as follows:
ARTICLE III
The number of shares of stock that this Corporation is authorized to
have outstanding at any one time is:
ONE HUNDRED AND FIVE MILLION (105,000,000) SHARES CONSISTING
OF ONE HUNDRED MILLION (100,000,000) SHARES OF COMMON STOCK
HAVING A PAR VALUE OF ONE TENTH OF A CENT ($.001) PER SHARE
AND FIVE MILLION (5,000,000) SHARES OF PREFERRED STOCK HAVING
A PAR VALUE OF TEN CENTS ($.10) PER SHARE.
If Shareholder approval is obtained, the Amendment becomes effective once it is
filed with Secretary of State of the State of Florida, which is expected to
occur as soon as possible after the Shareholders approve the Amendment.
THE BOARD OF DIRECTORS RECOMMEND THAT YOU VOTE "FOR" APPROVING AN
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF (A) COMMON STOCK FROM 25 MILLION TO 100
MILLION AND (B) PREFERRED STOCK FROM ONE MILLION TO FIVE MILLION
PROPOSAL NO 3:
TO AMEND ABLE'S 1995 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE FROM 1,300,000 TO 3,500,000 AND TO MODIFY
CERTAIN OF THE TERMS OF THE INITIAL GRANT OF
OPTIONS TO NON-AFFILIATE DIRECTORS
BACKGROUND
The Company is seeking Shareholder approval to amend Able's 1995 Stock Option
Plan, as amended (the "Plan"), to (i) increase the maximum number of options and
underlying shares of Common Stock available for issuance under the Plan from
1,300,000 shares to 3,500,000 shares and (ii) modify certain of the terms of the
initial grant of options to non-affiliate Directors including (A) increasing the
initial grant of options to non-Affiliate Directors to 10,000 non-qualified
stock options and (B) extending the expiration of the term of such options to
the earlier of (I) six years or (II) two years after the date such optionee no
longer serves on the Board. The amendment was adopted by the Board on March 4,
1999, subject to Shareholder approval at the Annual Meeting. Below is a summary
of certain key provisions of the Plan. Because it is a summary, it may not
contain all the information that is important. Before deciding how to vote,
Shareholders should review the full text of the Plan, which is attached as
Appendix A. The proposed amendments are also highlighted.
In addition to the Plan, the Company has also granted options outside the Plan
to non-employee members of the Board of Director's totaling 130,000 options
underlying the Common Stock, as well as reserved 1,200,000 options underlying
the Common Stock for employees of the Company's subsidiaries, MFS Network
Technologies, Inc. and MFS Transportation Systems, Inc., of which significantly
all of the options have been granted as of December 31, 1998.
HOW MANY SHARES OF COMMON STOCK ARE CURRENTLY AVAILABLE UNDER THE STOCK OPTION
PLAN?
Under the Plan, stock options to purchase an aggregate of not more than
1,300,000 shares of Common Stock, subject to certain adjustments to reflect
changes in Able's corporate structure or shares of Able, may be granted from
time to time to employees of, consultants and advisors to, Able and its
affiliates, and directors who are neither officers nor employees of Able or its
affiliates. In general, if stock options are for any reason canceled, or expire
or terminate
24
<PAGE>
unexercised, the shares covered by such options will again be available for the
grant of options. No options may be granted under the Stock Option Plan after
September 19, 2005.
WHY IS THE COMPANY PROPOSING TO INCREASE THE NUMBER OF AUTHORIZED SHARES?
Of the 1,300,000 shares of Common Stock authorized for issuance under the Plan,
as of March 31, 1999, there were only __________ shares that remain unissued and
unreserved. The Board believes this number of shares is insufficient to
adequately serve the purposes and objectives of the Plan. The proposed amendment
increases the number of shares of Common Stock authorized for issuance under the
Plan by 2,200,000. The Company believes that the increase in the number of
shares is necessary in order to ensure that Able will have a sufficient reserve
of Common Stock under the Plan to continue to attract, retain and motivate key
individuals essential to Able's long-term growth and success. The availability
of additional shares under the Plan also serves to encourage qualified persons
to seek and accept employment with Able.
WHY IS THE COMPANY PROPOSING TO INCREASE THE NUMBER OF OPTIONS GRANTED TO
NON-AFFILIATE DIRECTORS AND EXTENDING THE EXPIRATION OF THE EXERCISE PERIOD?
The Board of Directors believes that in order to attract highly qualified,
well-respected non-employee Directors to its Board, it is necessary to initially
grant non-qualified stock options ("NQSOs") to purchase at least 10,000 shares
of Common Stock in the Company (an increase of 5,000 options currently described
in the Plan). As a result, the Board of Directors has proposed modifying Section
7(a) of the Plan to initially grant a NQSO to purchase 10,000 shares of Common
Stock. Additionally, the expiration of the option term is currently the earlier
of (i) the date which is six years from the date of its grant or (ii) the date
which is 30 days after the date that such Optionee shall no longer serve as a
member of the Board. The Board of Directors is proposing to extend the
expiration of the option term to the earlier of (i) the date which is six years
from the date of its grant or (ii) the date which is two years after the date
that such Optionee shall no longer serve as a member of the Board. By extending
the term, non-affiliate Directors will have more time to exercise their options,
which in turn, could result in additional revenues to the Company upon such
exercise(s).
WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
All employees, non-employee Directors who do not own more than 5% of any class
of Able's outstanding capital stock, consultants or advisors of Able and its
affiliates are eligible to participate in the Plan.
WHO ADMINISTERS THE PLAN?
Able's Board of Directors administers the Plan (the "Plan Administrators"). The
Plan Administrators select those persons who are eligible for awards, determine
the types of awards and the number of shares subject to the awards, and set the
terms and conditions of the awards. The Plan Administrators are also authorized
to interpret the Plan, establish, amend and rescind any rules and regulations
relating to the Plan, and make all other determinations which are necessary for
the administration of the Plan. The Board may amend, revise or terminate the
terms of the Stock Option Plan or any part thereof without further action of the
Shareholders; provided, however, that certain material modifications affecting
the Stock Option Plan must be approved by the Shareholders and any change in the
Stock Option Plan that may impair any option or deprive any optionee of shares
that may have been granted to him under the Stock Option Plan requires the
consent of the optionee.
WHAT TYPE OF AWARDS MAY BE GRANTED UNDER THE PLAN?
The awards granted under the Plan may be either (i) stock options, which may be
either options which qualify as "incentive stock options" ("ISOs") designed to
meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or options which do not so qualify (NQSOs), and (ii)
restricted stock.
WHAT ARE THE DETAILS OF THE STOCK OPTIONS?
Stock options intended to be ISOs may be granted to employees and to those
intended to be NQSO, to directors who are neither officers nor employees of the
Company, consultants and other persons who provide services to Able and its
affiliates. The Plan Administrators determine the purchase price of each share
of Common Stock purchasable under any ISO at the time of grant, however, the
purchase price cannot be less than 100% of the fair market value of Common Stock
on the date the option is granted. The purchase price per share of Common Stock
purchasable under any NQSO will be determined by the Plan Administrators.
Non-employee directors may receive nondiscretionary grants of NQSOs under the
Stock Option Plan in accordance with the terms thereof. The Plan currently
[illegible] non-employee director will receive a grant of an option to purchase
5,000 shares of Common Stock as of the date he or she begins service as a
director on the Board at an exercise price equal to 100% of the fair market
value of Able's Common Stock on the date the option is granted. The proposal
seeks to change this provision such that each Director, at the completion of
eacb year's Annual Meeting, would receive an option to purchase 10,000 shares.
25
<PAGE>
Options will vest and become exercisable only after the non-employee director
has served as a director of Able for at least one year; provided, however, that
the option will not vest if the non-employee director fails to attend at least
60% of all Board meetings and meetings of committees of which he or she is a
member, which take place between the date of grant and the first anniversary of
the date of grant.
DO OPTIONEES HAVE SHAREHOLDER RIGHTS?
Optionees have shareholder rights (E.G., right to vote and receive dividends)
when they exercise their options and receive shares of Common Stock.
WHEN DO THE STOCK OPTIONS EXPIRE?
Each stock option expires and is no longer exercisable on such dates as the Plan
Administrators determine when the options are granted. Any NQSO granted to a
non-employee Director expires on the earlier of
/bullet/ six years from the date the option is granted, or
/bullet/ 30 days after the optionee no longer serves as a member of the
Board. Stock options can also be terminated under certain
circumstances following a "Change of Control" (as set forth
below).
Approval of Proposal No. 3 would extend the 30 days to two
(2) years.
WHAT ARE THE DETAILS OF AWARDS OF COMMON STOCK?
The Plan Administrators may grant awards to employees consisting of shares of
Common Stock, which may be subject to such restrictions and on such terms and
conditions as the Plan Administrators may determine, including the time period
over which such shares will become vested, the date or dates as of which the
risk of forfeiture of the shares will lapse, the establishment of conditions for
the lapse or termination of the risk of forfeiture other than the expiration of
the vesting period, and the circumstances under which vesting requirements will
be waived or accelerated.
Upon the award of Common Stock, the recipient has all rights of a shareholder
with respect to the shares, including, without limitation, the right to receive
dividends, the right to vote such shares and, subject to and conditioned upon
the full vesting of the shares of restricted stock, the right to tender such
shares.
ARE AWARDS ASSIGNABLE?
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered,
except by will or by the laws of descent and distribution. Each stock option is
exercisable during the optionee's lifetime and only by the optionee.
WHAT HAPPENS IF THERE IS A CHANGE IN ABLE'S CORPORATE STRUCTURE?
If Able's corporate structure changes or if there is a change in Able's shares
(i.e., a recapitalization, stock split, reverse stock split, consolidation,
rights offering, stock dividend, reorganization or liquidation), the Plan
Administrators will make such substitution or adjustment in the number or class
of shares which may be distributed under the Plan and in the number, class and
option price or other price of shares subject to the outstanding awards under
the Plan in order to maintain the purpose of the original grant.
WHAT HAPPENS TO THE OPTIONS UPON A CHANGE OF CONTROL OF ABLE?
A Change of Control occurs from the dissolution or liquidation of Able, or a
reorganization, merger or consolidation of Able with one or more corporations
where Able is not the surviving entity, or a transfer of substantially all of
Able's property or more than 80% of Able's then outstanding shares to another
corporation not controlled by Able's shareholders. Upon a Change of Control, the
Plan and any outstanding options will be terminated unless provision is made in
connection with such transaction for the assumption and continuation of the Plan
and the options or the
26
<PAGE>
substitution of new options covering the shares of a successor corporation, and
all vesting requirements, risks of forfeiture and other restrictions shall lapse
and terminate. If no such provision is made, Able will give all option holders
advance written notice of the Change of Control, all options will become fully
exercisable and the option holders will then have 30 days to exercise their
options.
WHAT ARE THE FEDERAL INCOME TAX ASPECTS OF THE STOCK OPTIONS?
Incentive Stock Options ("ISOs").
The following is a summary of the federal income tax consequences generally
arising with respect to stock options granted and to be granted under the Plan.
The grant and exercise of an ISO generally results in no taxable income to the
participant and no income tax deduction for Able; it does not set forth any
state or local income tax or estate tax consequences that may be applicable. If
the participant holds the shares acquired upon exercise of an ISO for at least
two years from the date of the grant of the ISO and at least one year from the
date of exercise, the participant will recognize long-term capital gain or loss
upon a subsequent sale of the shares based upon the difference between the sale
proceeds and the fair market value of the shares on the exercise date and no
deduction would be allowed to Able for federal income tax purposes. If the
participant disposes of the shares acquired upon exercise of an ISO within
either of the holding periods described above, the participant will generally
recognize as ordinary income an amount equal to the lesser of
/bullet/ the fair market value of Able's Common Stock on the date of
exercise over the exercise price, or
/bullet/ the amount realized upon disposition over the exercise price.
In such event, Able generally will be entitled to an income tax deduction equal
to the amount recognized as ordinary income. Any gain in excess of such amount
realized by the participant as ordinary income would be taxed at the rates
applicable to short-term or long-term capital gains, depending on the holding
period.
Nonqualified Stock Options ("NQSOs").
The grant of an NQSO has no tax consequences to the Company or to the
participant, unless such option has a readily ascertainable fair market value
(as determined under applicable tax law at the time of grant). Upon exercise of
an NQSO, however, the participant generally will recognize ordinary income in
the amount of the excess of the fair market value on the date of exercise of the
shares of Common Stock acquired over the exercise price, and such amount will be
deductible for federal income tax purposes by Able. The holder of such shares
will, upon a subsequent disposition of the shares, recognize short-term or
long-term capital gain or loss, depending on the holding period of the shares.
All Stock Options.
With regard to both ISOs and NQSOs, the following material federal income tax
consequences also apply:
/bullet/ any officers or directors of Able subject to Section 16(b) of
the Exchange Act may be subject to special tax rules regarding
the income tax consequences concerning their NQSOs;
/bullet/ any entitlement to a tax deduction on the part of Able is
subject to the applicable tax rules (including, without
limitation, Section 162(m) of the Code regarding a $1 million
limitation on deductible compensation);
/bullet/ in the event that the exercisability or vesting of any award
is accelerated because of a Change of Control, payments
relating to the awards (or a portion thereof), either alone or
together with certain other payments, may constitute parachute
payments under Section 280G of the Code, which excess amounts
may be subject to excise taxes; and
27
<PAGE>
/bullet/ the exercise of an ISO may have implications in the
computation of alternative minimum taxable income.
In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for federal income tax purposes for compensation in excess of $1
million per year per person to its chief executive officer and the four other
officers whose compensation is disclosed in its proxy statement, subject to
certain exceptions. Stock options will generally qualify under one of these if
they are granted under a plan that states the maximum number of shares with
respect to which options may be granted to any recipient during a specified
period and the exercise price is no less than fair market value at the time of
grant and the plan under which the options are granted is approved by
shareholders and is administered by a compensation committee comprised of
outside directors. The Plan is not intended to comply with Section 162(m) of the
Code.
The Plan is not subject to any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Plan is not, nor is it intended to
be, qualified under Section 401(a) of the Code.
WHAT IS THE BOARD'S RECOMMENDATION?
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" AMENDING THE
COMPANY'S STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE FROM 1,300,000 TO 3,500,000 AND TO MODIFY CERTAIN OF
THE TERMS OF THE INITIAL GRANT OF OPTIONS TO NON-AFFILIATE DIRECTORS
NASDAQ MARKETPLACE RULE 4460(i)
Proposals No. 4 through 7 below have been submitted for Shareholder approval
pursuant to certain rules and regulations including Nasdaq Marketplace Rule
4460(i) ("Rule 4460(i)"), which is one of several non-quantitative designation
criteria described in Rule 4460 and required of a Nasdaq National Market ("NNM")
issuer, such as the Company. Rule 4460(i) sets forth the criteria when
Shareholder approval is required.
The other non-quantitative designation criteria for NNM issuers include, among
other things,
/bullet/ distributing annual and interim reports,
/bullet/ making available copies of shareholder and financial reports,
/bullet/ maintaining a minimum of two independent directors,
/bullet/ establishing and maintaining an audit committee, a majority of
which shall be independent directors,
/bullet/ holding an annual shareholders meeting,
/bullet/ soliciting proxies and providing proxy statements for all
shareholder meetings,
/bullet/ conducting an appropriate review of all related party
transactions, and
/bullet/ being audited by an independent public accountant.
Among the events that necessitate Shareholder approval pursuant to Rule 4460(i)
are the following:
(A) when a stock option plan or other arrangement is made whereby stock may be
acquired by officers or directors, with certain exceptions including, among
others:
28
<PAGE>
--for warrants or rights issued generally to security holders of a
company or broadly based plans or arrangements including other
employees such as Employee Stock Option Plans, or
--if the arrangement or plan does not exceed the lesser of (i) 1% of
the number of shares of Common Stock, (ii) 1% of the voting power
outstanding, or (iii) 25,000 shares.
(B) when the issuance will result in a change of control;
(C) in connection with acquiring stock or assets of another company if where,
due to the present or potential issuance of common stock, or securities
convertible into or exercisable for common stock, other than a public offering
for cash including, among other things:
--the common stock has or will have upon issuance voting power equal to
or in excess of 20% of the voting power outstanding before the issuance
of stock or securities convertible into or exercisable for common
stock; or
--the number of shares of common stock to be issued is or will be equal
to or in excess of 20% of the number of shares of common stock
outstanding before the issuance of the stock or securities.
(D) in connection with a transaction other than a public offering involving the
sale or issuance of common stock (or securities convertible into or exercisable
for common stock) either
--at a price less than the greater of book or market value which
together with the sales by officers, directors or substantial
shareholders of a company equals 20% or more of common stock or 20% or
more of the voting power outstanding before the issuance; or
--equal to 20% or more of the common stock or 20% or more of the voting
power outstanding before the issuance for less than the greater of book
or market value of the stock.
Shareholder approval is required prior to the issuance of designated securities
under paragraphs (B), (C), and (D) above.
If the Company does not maintain the criteria (including, among others, the
non-designation criteria described above) required by Nasdaq or shareholder
approval is not obtained, but the Company nonetheless undertakes the grants of
options and issues Common Stock as described below in Proposals No. 4 through 7,
the Company's securities could be delisted by Nasdaq. As a result of such an
event, the Common Stock would be trading in the Over-The-Counter market on the
OTC Electronic Bulletin Board. In such an event, the market price of the Common
Stock may be adversely impacted and a Shareholder may find it difficult to
dispose, or obtain accurate quotations as to the market value, of the Common
Stock.
PROPOSAL NO. 4
TO RATIFY AND APPROVE THE ISSUANCE OF STOCK OPTIONS GRANTED TO
CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY
BACKGROUND
During fiscal year 1998, the Company issued options to purchase an aggregate of
902,000 shares of Common Stock to employees, officers and directors of the
Company and its subsidiaries at exercise prices ranging from $5.34 to $14.00 per
share. On December 31, 1998, 840,000 of these options were rescinded.
Immediately thereafter, the same number of options were issued on December 31,
1998 at an exercise price of $5.75, which was the average of the ten-day closing
market price for the Common Stock for the period from December 16-December 30,
1998. The expiration for the
29
<PAGE>
exercise period for these options range from December 31, 2000 to April 24, 2005
and immediately vested on December 31, 1998.
These options were granted as an additional incentives to attract, retain and
award those persons who provide management services and whose efforts and
judgment the success of which the Company and its subsidiaries are largely
dependent. The Board of Directors also granted these options to continue
encouraging stock ownership in the Company by such persons.
NASDAQ MARKETPLACE RULE 4460(i)(1)(A)
Rule 4460(i)(1)(A) requires Shareholder approval of an arrangement when options
are made where stock may be acquired by officers or directors, except for
warrants or rights issued generally to security holders of a company or
broadly based plans or arrangements including other employees (e.g., ESOPs).
Shareholder approval is not necessary where the amount of securities which may
be issued does not exceed the lesser of
/bullet/ one percent of the number of shares of common stock,
/bullet/ 1% of the voting power outstanding, or
/bullet/ 25,000 shares.
Because the grant to certain Officers and Directors of the Company exceeds the
de minimus limitations set forth in the Rule 4460(i)(1)(A), Shareholder approval
is being sought to ratify the issuances of the options described below, and the
Board of Directors is soliciting the enclosed proxy as to that decision. None of
the options described in this Proposal No. 4 were granted within the Plan.
A brief description of the material terms of the stock option grants and a table
summarizing the benefits to be conferred under the grants follow:
GRANT OF OPTIONS
<TABLE>
<CAPTION>
NAME OF NUMBER OF EXERCISE DATE OF EXERCISE
OFFICER/DIRECTOR OPTIONS GRANTED PRICE GRANT PERIOD THROUGH
<S> <C> <C> <C> <C>
Michael Breslin(2) 50,000 $5.75 December 31, 1998 December 31, 2000(1)
Former President - MFS Transportation Systems
Jonathan Bratt 30,000 $5.75 December 31, 1998 July 3, 2004
Director
G. Vance Cartee 40,000 $5.75 December 31, 1998 December 31, 2001
President - MFS Transportation Systems, Inc.
Thomas Davidson 20,000 $5.75 December 31, 1998 July 3, 2004
Director
John Foster 30,000 $5.75 December 31, 1998 July 3, 2004
Former Director
Stacy Jenkins 100,000 $5.75 December 31, 1998 December 31, 2000(1)
President - MFS Network Technologies
Robert Nelles 30,000 $5.75 December 31, 1998 July 3, 2004
Former Director
Edward Z. Pollock 40,000 $5.75 December 31, 1998 December 31, 2001
In-House Counsel
Billy V. Ray, Jr. 100,000 $5.75 December 31, 1998 December 31, 2001
President, Chief Executive Officer and Acting Chief Financial Officer
Richard Sandulli 30,000 $5.75 December 31, 1998 July 3, 2004
Former Vice President-Finance and Former Director
C. Frank Swartz 20,000 $5.75 December 31, 1998 July 3, 2004
Chairman of the Board and Director
</TABLE>
- ------------
(1) The expiration date is the earlier of December 31, 2000 or 90 days after
termination of employment.
(2) In January 1999, in connection with Mr. Breslin termination of employment
with the Company, 25,000 of these options were rescinded.
30
<PAGE>
ADMINISTRATION
The Board of Directors administers the grant of options outside the Plan and
selects those officers and directors who are eligible for awards and the number
of shares subject to the awards, sets the terms and conditions of awards and
makes all other determinations which are necessary for the administration of the
grant of the stock options.
TYPE OF STOCK OPTION GRANTS
All grants described in Proposal No. 4 are non-qualified stock options (NQSOs).
See discussion above under Proposal No. 3 for a more detailed discussion
concerning NQSOs.
TAX CONSIDERATIONS
The following description addresses the federal income tax consequences of the
options proposed to be ratified to the Officers and Directors of the Company and
certain of its subsidiaries. Although the Company believes the following
statements are correct based on existing provisions of the Code and legislative
history and administrative and judicial interpretations thereof, no assurance
can be given that changes will not occur which would modify such statements.
Also, such statements are intended only to provide basic information. Each
optionee should consult his or her own tax advisor concerning the tax
consequences of participation in the grant of stock options because individual
financial and federal tax situations may vary, and state and local tax
considerations may be significant.
The options proposed to be ratified will be treated as NQSOs for federal income
tax purposes. Under federal income tax law presently in effect, no income is
realized by the grantee of a NQSO until the option is exercised. When the NQSO
is exercised, the optionee will realize ordinary income, and the Company will
generally be entitled to a deduction, in the amount by which the fair market
value of the shares subject to the option at the time of exercise exceeds the
exercise price. Upon the sale of shares acquired upon exercise of a NQSO, the
excess of the amount realized from the sale over the fair market value of the
shares on the date of exercise will be taxable as short-term or long-term
capital gain or loss, depending on the holding period of the shares.
Section 162(m) of the Code limits to $1 million per person the amount the
Company may deduct for compensation paid to its Chief Executive officer and the
four other officers whose compensation is disclosed in the proxy statement,
subject to certain exceptions. Compensation received through the exercise of an
option will not be subject to the $1 million limit if the option and the plan
pursuant to which it is granted meet certain requirements. The applicable
requirements are
/bullet/ the option be granted and administered by a compensation
committee of outside directors,
/bullet/ the plan under which the option is granted states the maximum
number of shares with respect to which options may be granted
to any recipient during a specified period,
/bullet/ the plan under which the option is granted is approved by the
shareholders, and
/bullet/ the exercise price of the option be not less than fair market
value of the Common Stock on the date of grant.
31
<PAGE>
Accordingly, the Company believes compensation received on exercise of options
granted outside the Plan will be subject to the $1 million deduction limit.
REASONS, RECOMMENDATION
The Board of Directors, subject to Shareholder approval, approved the grant of
stock options to certain Officers and Directors. The Board of Directors believes
it would be in the best interests of the Company to allow for the issuance of
such stock options to the Officers and Directors set forth above in order to
attract, retain and motivate key individuals essential to the Company's
long-term growth and success.
If Proposal No. 4 is not ratified by the Shareholders and the options described
above nevertheless remain issued, the Company's securities could be delisted by
Nasdaq. In such an event, the Common Stock would be trading in the
over-the-counter market on the OTC Electronic Bulletin Board. In such an event,
the market price of the Common Stock may be adversely impacted and a Shareholder
may find it difficult to dispose, or obtain accurate quotations as to market
value, of the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFYING AND
APPROVING THE ISSUANCE OF STOCK OPTIONS GRANTED TO CERTAIN OFFICERS AND
DIRECTORS OF THE COMPANY
THE MFSNT TRANSACTION AND RULE 4460(i)(1)(C)
Proposal Nos. 5 through 7 below have been submitted for Shareholder approval
pursuant to certain rules and regulations including Nasdaq Marketplace Rule
4460(i)(1)(C) ("Rule 4460(i)(1)(C)").
Rule 4460(i)(1)(C) requires shareholder approval when stock of another company
is acquired if, due to the present or potential issuance of common stock or
securities convertible or exercisable for common stock (other than a public
offering for cash), the number of shares of common stock to be issued is or will
be equal to or in excess of 20% of the number of shares of common stock
outstanding before the issuance of the securities. As a result of the Company's
transaction with certain subsidiaries and divisions of WorldCom, Inc. whereby
the Company acquired substantially all of the outstanding common stock of MFS
Network Technologies, Inc. (the "MFSNT Transaction") and issued options and
other derivative securities described below as part of the consideration, Rule
4460(i)(1)(C) is applicable.
Nasdaq has notified the Company that it believes that the grant of the
securities described in Proposal Nos. 5 through 7 below, which securities
include the include "WorldCom Option" and the "WorldCom Equity Award" (described
in Proposal No. 5) should be integrated with the issuance of securities by the
Company in connection with the "Series B Offering," (described in "THE SERIES B
OFFERING" below) and that all such securities should be considered part of the
MFSNT Transaction. Nevertheless, Nasdaq has raised no objection to the Company
submitting the transactions covered by Proposal No. 5 and Proposal No. 6 as
separate proposals by which Shareholders may separately vote.
Immediately prior to the MFSNT Transaction (when the first securities were
issued in connection therewith), there were 9,379,824 shares of Common Stock
outstanding, of which approximately 1,875,960 shares (the "20% Share
Limitation") represented just less than 20% of the number of shares of Common
Stock then outstanding. As a result, pursuant to Rule 4460(i)(1)(C), the
aggregate number of shares of Common Stock that may be issued in connection with
the MFSNT Transaction is the 20% Share Limitation. The WorldCom Option and the
WorldCom Equity Award, the conversion of any shares of Series B Preferred Stock
and the exercise of any of the Warrants issued to the holders of the Series B
Preferred Stock, as described below, are all in the aggregate, subject to the
20% Share Limitation.
As of the Record Date, an aggregate of 436 shares of Series B Common Stock had
been converted into 1,007,927 shares of Common Stock by the holders of the
Series B Preferred Stock. No other securities issued in connection with the
MFSNT Transaction have, as of the date of this mailing, been exercised or
converted. Under Rule 4460(i)(1)(C), only
32
<PAGE>
the difference between the 20% Share Limitation and the number of shares issued
as of the date of this mailing of 1,007,927, (an additional 868,033 shares) may
be issued with regard to any securities issued in connection with the MFSNT
Transaction without obtaining Shareholder approval. If the Shareholders do not
approve both Proposal No. 5 and Proposal No. 6, but only approve one of these
Proposals, the conversion or exercise of the securities described in the
Proposal not so approved shall be subject to the 20% Share Limitation. See
Proposal Nos. 5 and 6 for a discussion of the adverse impact on the Company if
Shareholder approval is not obtained.
PROPOSAL NO. 5
APPROVING THE POSSIBLE ISSUANCE OF MORE THAN 1,917,960 SHARES OF COMMON STOCK
UPON THE EXERCISE OF CERTAIN OPTIONS AND STOCK APPRECIATION RIGHTS GRANTED
TO WORLDCOM, INC. IN CONNECTION WITH THE MFS NETWORK TECHNOLOGIES, INC.
ACQUISITION
BACKGROUND
On April 26, 1998, an Agreement and Plan of Merger was entered into by and among
the Company and certain subsidiaries and divisions of WorldCom, Inc. as of July
2, 1998 (collectively the "MFS Agreement") whereby the Company acquired
substantially all of the outstanding common stock of MFS Network Technologies,
Inc. The MFS Agreement included, among other things, a grant of options by the
Company to purchase two million shares of Common Stock of the Company at $7.00
per share (the "WorldCom Option"). The WorldCom Option also provided that the
holder exercise the WorldCom Option on a "cashless" basis rather than for cash
to the extent necessary to ensure that the actual number of shares of Common
Stock issued would not exceed 1,817,941 (the then estimated 20% Share
Limitation).
On September 9, 1998, the Company entered into an additional agreement with
WorldCom that provided for a grant of an equity award to be issued to WorldCom,
Inc. in the form of a phantom stock award or other equity participation award
("WorldCom Equity Award"). The WorldCom Equity Award is to be convertible into
600,000 shares of Common Stock exercised, in whole or in part, by WorldCom on
three exercise days--July 2, 1999 or July 2, 2000 or July 2, 2001. Subject to
the adjustments described below, the per share exercise price will be $5-3/32
and the maximum per share stock price as to which the valuation difference will
be calculated is $30-3/32.
Effective June 30, 1998, the Company completed a private placement transaction
(the "Series B Offering") of 4,000 shares of its Series B Preferred Stock and
warrants to purchase 1,000,000 shares of the Common Stock at $19.80 per share
(the "Warrants") which exercise price has subsequently been modified to an
average of $13.40 per share (the Series B Preferred Stock and Warrants sometimes
collectively the "Series B Securities"). See "THE SERIES B OFFERING." Gross
proceeds from the offering totaled $20 million which were used to pay a portion
of the MFSNT purchase price as well as other costs associated with the MFSNT
Transaction.
THE WORLDCOM OPTION AND WORLDCOM EQUITY AWARD
Because of Nasdaq's position regarding the integration of the WorldCom Option,
the WorldCom Equity Award and the Series B Securities and after discussions with
the staff at Nasdaq, the Company and WorldCom modified the terms of the WorldCom
Option and the WorldCom Equity Award to avoid any inadvertent violation of
Rule 4460(i)(1)(C) with regard to the issuance of securities in excess of the
20% Share Limitation. As a result of these modifications, WorldCom currently is
not entitled to receive any Common Stock upon the exercise of either the
WorldCom Option or the WorldCom Equity Award.
The modifications to the WorldCom Option and the WorldCom Equity Award are
summarized below as follows:
/bullet/ THE WORLDCOM OPTION
33
<PAGE>
Until Shareholder approval is obtained by the Company in accordance with Rule
4460(i)(1)(C):
--the WorldCom Option has been modified to a stock appreciation rights
("SAR") award, whereby the holder is entitled to participate in an
increase in the value of an aggregate of two million shares of Common
Stock.
--For each SAR exercised, the holder is entitled to receive an amount
equal to the excess of the fair market value of the Common Stock as of
the applicable exercise period over $7.00 (the "Appreciation Amount"),
payable in cash only. The Appreciation Amount is payable only in cash
within fifteen days of receipt of an exercise notice; provided,
however, that to the extent that the Company is required to pay in
excess of $10 million in any twelve month period as a result of any
exercises of any SARs, then the amount of such excess shall be
represented by a promissory note with quarterly payments amortized
ratably over a period of six months at 10% per annum.
--The exercise period for the SAR commences the earlier of:
-May 10, 1999 (assuming that Proposal No. 5 is voted upon on
at the Annual Meeting of Shareholders), and
-July 1, 1999 and ends at the close of business on January 2,
2002.
/bullet/ THE WORLDCOM EQUITY AWARD
Until Shareholder approval is obtained by the Company in accordance with Rule
4460(i)(1)(C)
--The WorldCom Equity Award will be in the form of a Stock Appreciation
Rights Agreement ("SAR Agreement") and will be executed at such time as
it meets certain conditions to issuance which includes the satisfaction
of any restrictions set forth in the agreements with regard to the
Series B Offering. When executed, the SAR Agreement will grant WorldCom
the right to participate in an increase in the value of an aggregate of
600,000 shares ("Aggregate Base Common Stock") of Common Stock whereby
for each SAR exercise, the holder is entitled to receive an amount
equal to the excess of the fair market value over $5-3/32 (the "Floor
Collar Price"), as of July 1, 2000, July 2, 2001, or July 2, 2002 only;
provided that in no event shall the maximum amount payable exceed
$25.00 per SAR.
--to the extent that the fair market value of a share of Common Stock
as of the date immediately preceding the executing of this SAR
Agreement is greater $5-3/32 then, the Floor Collar Price shall be
adjusted to the then fair market value, and the ceiling collar price
shall be adjusted to a dollar amount equal to the then fair market
value plus $25.00; and the Aggregate Base Common Stock shall be
adjusted (the "Adjusted Aggregate Base Common Stock")
-by multiplying 600,000 by a fraction,
-the numerator of which shall be the adjusted floor Collar
Price, and
-the denominator of which shall be $5-3/32;
provided that the Adjusted Aggregate Base Common Stock shall
in no event exceed a maximum of 700,000 shares of Common Stock
and the maximum aggregate proceeds (whether in cash, stock or
a combination thereof) that may be received by the holder from
the Company from the exercise of the SAR rights issued
pursuant to this SAR Agreement shall not exceed $15,000,000.
--Upon receipt of such notice, the Company shall have up to thirty (30)
days to pay the holder the value of any SARs so exercised, payable in
cash only by the Company.
34
<PAGE>
EFFECT OF SHAREHOLDER APPROVAL
When and if Shareholder approval is obtained by the Company in accordance with
Rule 4460(i)(1)(C),
--As to the WorldCom Option, as modified, the grant of the SARs reverts
back to an option to purchase an aggregate of two million shares of
Common Stock at $7.00 per share through January 2, 2002 and the SARs
become void. In such an event, the Company would issue shares of its
Common Stock upon any exercise of such Options.
--As to the WorldCom Equity Award, upon any exercise of the SARs, the
Company would have the option to make payments in cash, stock, or a
combination thereof.
The WorldCom Option and the WorldCom Equity Award each provide that at such time
as Shareholder approval is obtained in compliance with Rule 4460(i)(1)(C), each
of the agreements are automatically modified, without any further actions, as
described in this Proposal No. 5.
In the event that Shareholder approval is obtained as to this Proposal No. 5 and
the Company elects to pay the WorldCom Equity Award in Common Stock or in the
event of an exercise of the WorldCom Option, the Shareholders' interest in the
Company would be diluted.
BOARD RECOMMENDATION; REASONS
The Board of Directors believes that it is in the Company's best interest for
the WorldCom Option, as modified, to revert back to the WorldCom Option whereby
the Company would receive cash in payment for any options exercised (as opposed
to paying out cash in the event of an exercise any SAR). Similarly, the Board of
Directors also believes that it would be in the Company's best interest to have
the flexibility of paying any SARs granted pursuant to the WorldCom Equity Award
in cash, stock, or a combination thereof, in the Company's discretion, as
opposed to paying any SAR solely in cash. Payment upon the exercise of any SARs
(under either the WorldCom Option or the WorldCom Equity Award) in cash only
could materially and adversely affect the Company's cash flow because
/bullet/ of the short time frame to pay for any SARs exercised (between
15 and 30 days from the date notice is received by the
Company),
/bullet/ depending on the number of SARs exercised, could possibly
necessitate a multi-million dollar payment to the holders, and
/bullet/ while the Company's senior lender has approved the grant of
the SARs to WorldCom, it has not waived the right to call a
default in the event that any of the SARs are exercised.
Additionally, the Company wants to encourage WorldCom to have an equity position
in the Company, given the volume of business currently and contemplated to be
conducted between the Company and WorldCom affiliates, including, among other
agreements, the five-year Master Services Agreement between the Company and
WorldCom Network to provide telecommunications infrastructure services to
WorldCom affiliates. That Agreement could provide potential revenues to the
Company of more than $420 million over the five year period.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVING THE POSSIBLE
ISSUANCE OF MORE THAN 1,917,960 SHARES OF COMMON STOCK UPON THE EXERCISE OF
CERTAIN OPTIONS AND STOCK APPRECIATION RIGHTS GRANTED TO WORLDCOM, INC. IN
CONNECTION WITH THE MFS NETWORK TECHNOLOGIES, INC. ACQUISITION
35
<PAGE>
THE SERIES B OFFERING
BACKGROUND
In June 1998, the Company sold 4,000 shares of Series B Preferred Stock and
Warrants to purchase up to 1,000,000 shares of Common Stock at a then exercise
price of $19.80 per share. The terms of the Series B Preferred Stock and the
Warrants are summarized below. See "Terms of the Series B Securities."
The purchasers of the Series B Securities included two groups of accredited
investors (totaling seven investors):
/bullet/ The RoseGlen Group (the "RoseGlen Group"), which purchased
2,000 shares of Series B Preferred Stock and acquired Warrants
to purchase 330,000 shares of Common Stock, and
/bullet/ The Palladin Group (the "Palladin Group"), which purchased
2,000 shares of Series B Preferred Stock and acquired Warrants
to purchase 670,000 shares of Common Stock.
During September and October 1998, an aggregate of 436 shares of Series B
Preferred Stock were converted by the holders into an aggregate of 1,007,927
shares of Common Stock (of which the RoseGlen Group currently owns 461,907
shares and the Palladin Group currently owns 546,020 shares).
THE FEBRUARY AGREEMENTS
In February 1999, pursuant to certain purchase agreements (the "February
Agreements"), Cotton Communications, Inc., a Georgia corporation ("Cotton"),
purchased approximately 78% of the outstanding shares of Series B Preferred
Stock or 2,785 shares of the 3,564 shares outstanding (1,425 shares from the
RoseGlen Group and 1,360 shares from the Palladin Group). The sole shareholder,
officer and director of Cotton is Tyler Dixon. Mr. Dixon is a partner with the
law firm of Raiford, Dixon & Thaxton, LLP, which, during fiscal 1998, received
approximately $125,000 in legal fees from the Company. Initially, the Cotton
entity was used since it was anticipated that an unrelated third party would
acquire Cotton's position with regard to the Series B Securities.
As part of the February Agreements, generally,
--Until Shareholder Approval is obtained to issue more than the 20%
Limitation described in Proposal Nos. 5 and 6, the RoseGlen Group has
retained the right to convert certain of its shares of Series B
Preferred Stock into an additional 476,073 shares of Common Stock
(which represents RoseGlen Group's pro-rata portion of the remaining
20% Share Limitation).
--Cotton and the Company agreed that notwithstanding any other
documents, the conversion price of the Series B Preferred Stock owned
by Cotton would not be less than $8.25 per share, thus eliminating the
"floorless" conversion concerns as to the 2,785 shares of Series B
Preferred Stock owned by Cotton. But see "The March Cotton Redemption."
The $8.25 per share exercise price does not apply to the 779 shares of
Series B Preferred Stock which continue to be owned by the RoseGlen
Group and the Palladin Group.
--Assuming Shareholder Approval, the RoseGlen Group agreed to convert
its 375 shares of Series B Preferred Stock within 30 days after the
Registration Statement registering the underlying Common Stock is
effective.
--The exercise price of the Warrants was reduced from $19.80 per share
to an average of $13.40 per share.
--As to the RoseGlen Group,
-if the Common Stock is trading at 150% of the exercise price
of the Warrants (which is approximately $19.875 per share,
subject to certain reductions) for three consecutive trading
day periods, the Company may call for redemption of the
Warrants held by the RoseGlen Group, subject to the Common
Stock meeting certain requirements and adjustments.
36
<PAGE>
--As to the Palladin Group,
-if, on or before April 30, 1999, the closing bid price for
the Common Stock is above $17.00 and there is an effective
Registration Statement, the Company may call for redemption of
the Warrants held by the Palladin Group, subject to certain
requirements and adjustments, including the 20% Share
Limitation.
-if the Warrants to purchase 670,000 shares owned by the
Palladin Group are not exercised by April 30, 1999, Cotton
agreed to purchase the Palladin Group Warrants at a price of
$3.00 per Warrant. The Company does expect that it will
purchase the 670,000 Warrants owned by the Palladin Group, on
or about April 30, 1999 at $3.00 per Warrant, at which time
such Warrants so purchased will be retired by the Company.
THE MARCH COTTON REDEMPTION
On March 22, 1999, the Board of Directors redeemed the 2,785 shares of Series B
Preferred Stock owned by Cotton in consideration for forgiveness of
approximately $18.5 million (that portion which was used to purchase the 2,875
shares of Series B Preferred Stock) of the $32.0 million advanced to Cotton by
the Company.
SERIES B SECURITIES OWNERSHIP
Below is the anticipated status of the Series B Securities ownership as of the
date of the Annual Meeting:
<TABLE>
<CAPTION>
SERIES B PREFERRED STOCK WARRANTS(1) COMMON STOCK
<S> <C> <C> <C>
The RoseGlen Group 375 330,000 461,907
The Palladin Group 404 ---0-- 546,020
--- ------- ---------
TOTAL 779 330,000 1,007,927
=== ======= =========
</TABLE>
- ------------
(1) Assumes the sale of 670,000 Warrants by the Palladin Group to the Company,
which Warrants will then be retired.
TERMS OF THE SERIES B SECURITIES
The terms of the Series B Securities are complex. Any summary of the terms will
be general in nature and must be qualified by reference to the actual agreements
attached as exhibits to the Company's filings with the SEC. Shareholders
desiring a more complete understanding of the Series B Securities and its
operation are urged to refer to such exhibits. Additionally, certain of the
terms described below have been modified by the February Agreements or are
applicable to only certain of the Series B Securities held by the RoseGlen Group
and the Palladin Group, on the one hand, not to Cotton.
/bullet/ The Series B Preferred Stock
- --Stated Value $5,000.
- --Dividends Four Percent (4%) of the Stated Value per share per
annum, are cumulative, and accrue daily. Dividends
are payable on October 31, January 31, April 30, and
July 31, and are payable in shares of Common Stock at
the Conversion Rate described below (assuming certain
37
<PAGE>
criteria are met) or, at the option of the Company,
in cash. Any accrued and unpaid dividends that have
not been paid within five business days bear interest
at a rate of 2% per month until paid.
- --Conversion Rate Each share of Series B Preferred Stock (as
represented by the Stated Value) is convertible at
any time prior to the Maturity Date (as described
below) into shares of Common Stock of the Company by
dividing the Stated Value of the Series B Preferred
Stock to be converted by the Conversion Price (as
described below) in effect at the time of the
conversion. In no event may any holder convert shares
of Series B Preferred Stock if that holder (together
with its affiliates) would beneficially own,
immediately after and giving effect to the
conversion, more than 4.99% of the then outstanding
shares of Common Stock. However, this prohibition may
be waived if the holder gives the Company at least 61
days prior notice of its intent to waive the 4.99%
limitation. To the extent that the Palladin Group's
Warrants are called for redemption on or before April
30, 1999, the Company has waived the 4.99% limitation
to 9.99%.
- --Conversion Price Generally, the Conversion Price is calculated at a
price equal to a percentage discount (which is
subject to adjustment in the event of certain
defaults) off of the lesser of
--the average of the low trading price of the Common
Stock on Nasdaq as reported by Bloomberg Financial
Markets ("Trading Price") for shares of Common Stock
for any three (3) trading days (which need not be
consecutive) during the twenty-two (22) trading days
(the "Pricing Period") immediately preceding the
conversion date (which Pricing Period may be subject
to adjustment in the event that the registration
statement filed with the SEC is not effective by May
17, 1999), and
--the low Trading Price for Shares of Common Stock,
each on the Trading Day immediately preceding the
conversion date (the "Low Sales Price"), on Nasdaq,
the New York Stock Exchange or the American Stock
Exchange, as applicable; provided that the Conversion
Price shall not be less than ninety-five percent
(95%) of the Low Sales Price on the Conversion Date.
- --Liquidation In the event of liquidation, dissolution or winding
up of Able, prior and in preference to any
distribution of assets or surplus funds of the
Company to any holder of Common Stock, for each share
of Series B Preferred Stock held, the liquidation
value is equal to an amount equal to $5,000 plus any
unpaid dividends and accrued interest to which
holders of Series B Preferred Stock may be entitled
(the "Liquidation Value").
- --Adjustments The Conversion Price is subject to adjustment in the
event of
-any issuances of securities prior to June 30, 1999
at a discount greater than the discount described
above or at a ceiling price less than the Conversion
Price (with certain exceptions),
-a forward or reverse stock split,
-a stock dividend,
-a merger, consolidation or transfer or sale of all
or substantially all of Able's assets,
-a reorganization or reclassification of the Common
Stock,
38
<PAGE>
-certain Common Stock issuances or any securities
convertible or exchangeable into Common Stock, or
-any other similar action of the type described or
contemplated above.
- --Maturity Date If any Series B Preferred Stock is not converted
by June 30, 2003, it will automatically convert
(unless extended according to the Articles of
Amendment or the Registration Rights Agreement
applicable to the shares of Common Stock underlying
the Series B Preferred Stock or unless otherwise
prohibited by applicable Nasdaq rules such as Rule
4460(i)) into Common Stock.
- --Redemption Upon a
Major Transaction Holders are entitled to redemption of the Series B
preferred stock upon a "Major Transaction," at such
holder's option. A "Major Transaction" includes
-the consolidation, merger or other business
combination of the Company with or into another
person, other than
a consolidation, merger or other business
combination in which holders of the
Company's voting power immediately prior to
the transaction continue after the
transaction to hold, directly or indirectly,
the voting power of the surviving entity or
entities necessary to elect a majority of
the members of the Board of Directors (or
their equivalent if other than a
corporation) of such entity or entities, or
pursuant to a statutory merger effected
solely for the purpose of changing the
jurisdiction of incorporation of the
Company;
-the sale or transfer of all or substantially all of
the Company's assets; or
-a purchase, tender or exchange offer made to and
accepted by the holders of more than 30% of the
outstanding shares of Common Stock.
Generally, the redemption price ("Premium Redemption
Price") per share of Preferred Stock is equal to the
greater of
130% of the Liquidation Value, and
the product of (A) the Conversion Rate at
such time, and (B) the Closing Bid Price on
the date of the public announcement of such
Major Transaction or the next date on which
the exchange or market on which the Common
Stock is traded is open if such public
announcement is made (X) after 12:00 p.m.
Eastern Time, on such date or (Y) on a date
on which the exchange or market on which the
Common Stock is traded is closed.
- --Redemption Upon a
Triggering Event Holders are entitled to redemption of the
Series B Preferred Stock upon a "Triggering Event,"
at such holders' option. A "Triggering Event" shall
be deemed to have occurred at such time as any of the
following events:
-the failure of the Registration Statement to be
declared effective by the SEC by May 17, 1999,
39
<PAGE>
-while the Registration Statement is required to be
maintained effective pursuant to the terms of the
Registration Rights Agreements, the effectiveness of
the Registration Statement lapses for any reason
(including, without limitation, the issuance of a
stop order) or is unavailable,
-delisting or suspension from listing of the Common
Stock from NASDAQ, for a period of 5 consecutive days
or for an aggregate of at least 10 days in any
365-day period,
-the Company's notice to any holder of any shares of
Series B Preferred Stock at any time of its intention
not to comply with proper requests for conversion, or
-any representation or warranty by the Company was
not true and correct at the time made or the Company
breaches any covenant or other term or condition of
the documents relating to the Series B Offering.
Generally, the redemption price per share of Series B
Preferred Stock is equal to the greater of:
130% of the Liquidation Value, and
the product of (A) the Conversion Rate on
the date of such holder's delivery of a
notice of redemption, and (B) the greater of
(i) the closing bid price on the trading day
immediately preceding such Triggering Event
or (ii) the closing bid price on the date of
the holder's delivery to the Company of such
Notice or, if such date of delivery is not a
trading day, the next date on which the
exchange or market on which the Common Stock
is traded is open.
- --Payment of the
Redemption Price In the case of redemption upon a Major Transaction,
upon proper notice, the Company is obligated to pay
the holder prior to the consummation of the Major
Transaction. In the case of redemption upon a
Triggering Event, upon proper notice, the Company is
obligated to pay the holder within five business days
after receipt of such notice. In the event the
Company fails to redeem the shares submitted for
redemption, the applicable redemption price payable
with respect to such unredeemed shares of Series B
Preferred Stock bears interest at 2.0% per month (pro
rated for partial months) until paid in full. Until
payment is made, such holder has the option to void
its redemption notice.
- --Registration A registration statement registering the
Rights underlying Common Stock has been filed with the SEC,
but is not yet effective.
- --Voting Rights Holders of the Series B Preferred Stock generally
have no voting rights. However, the affirmative vote
of the holders of a majority of the outstanding
Preferred Stock is necessary for
-any amendment of the Certificate of Designations of
the Series B Preferred Stock,
-any amendment to the Certificate of Incorporation or
by-laws of the Company that may amend or change or
adversely affect any of the rights, preferences, or
privileges of the Series B Preferred Stock,
-any waiver of a default in payment of dividends on
the Series B Preferred Stock, and
-any reorganization or reclassification of the
capital stock of the Company, any consolidation or
merger of the Company with or into any other
corporation or corporations, or any sale of
40
<PAGE>
all or substantially all of the assets of the
Company, that would have an adverse effect on any of
the rights, preferences, or privileges of the Series
B Preferred Stock.
Securities such as the Series B Preferred Stock that may be converted into
Common Stock at a price lower than the future market price of the Common Stock
are often referred to as "Future-Priced Securities." Because the conversion rate
of the Series B Preferred Stock cannot be determined and, as to the shares held
by the RoseGlen Group and the Palladin Group, there is no limit on the number of
shares of Common Stock into which the Series B Preferred Stock may be converted,
if the issuance of a Future-Priced Security is followed by a decline in the
Common Stock price the existing holders of the Common Stock will face additional
dilution (The minimum Conversion Price of the shares of Series B Preferred Stock
owned by Cotton is $8.25 per share). Additionally, as the Company issues more
shares, the Common Stock price may tend to decline further.
/bullet/ The Warrants
- --Number of Warrants Initially 1,000,000. 330,000 remain outstanding
(assuming on April 30, 1999 either a redemption by
the Company, or the exercise by the holders of
670,000 Warrants).
- --Exercise Through June 30, 2003, subject to certain
Period adjustments, including among others, an extension of
1.5 days for each day from October 28, 1998 that
there is no Registration Statement effective with the
Securities and Exchange Commission registering the
Common Stock underlying the Warrants.
- --Exercise Price $13.25 per share for the projected 330,000 remaining
Warrants. The Exercise Price and the number of shares
of Common Stock that may be purchased upon exercise
of the Warrants are also subject to certain
adjustments, including, among others, in the event
-at any time prior to June 30, 1999, the Company
issues or sells any Common Stock or convertible
securities, (other than previously issued securities
or those issued to employees, directors or
consultants) at a purchase price per share less than
the greater of the (A) the Exercise Price or (B) the
fair market value of the Common Stock on the trading
day next preceding such issue or sale,
-of a forward or reverse stock split,
- of a stock dividend,
-of a merger, consolidation or transfer or sale of
all or substantially all of Able's assets,
-of a reorganization or reclassification of the
Common Stock (vi) of certain Common Stock issuances
or any securities convertible or exchangeable into
Common Stock, or
-of any other similar action of the type described or
contemplated above.
- --Cashless Exercise The Warrants may be exercised, in whole or in part,
on a "cashless" basis.
- --Call Provisions See discussion above under "February Agreements."
- --Redemption As to the RoseGlen Group Warrants, the Company may,
at its option, repurchase the Warrants at a purchase
price per share of (a) $35.00 multiplied by (b) the
number of Warrant shares remaining exercisable,
subject to adjustment.
41
<PAGE>
EFFECT OF RULE 4460(i) ON THE SERIES B OFFERING
Since the number of shares of Common Stock into which the Series B Preferred
Stock is convertible depends, in part, on the market price of the Common Stock
at the time of conversion, even if the Series B Securities were not integrated
with the grant of the WorldCom Option and the WorldCom Equity Award pursuant to
Rule 4460(i)(1)(C), as discussed above under "NASDAQ MARKETPLACE RULES" and "THE
MFSNT TRANSACTION AND RULE 4460(i)(1)(C)," it is possible that based upon the
total number of shares of Series B Preferred Stock initially issued in
connection with the Series B Offering, the number of shares of Series B
Preferred Stock that could ultimately be convertible into a number of shares of
Common Stock could exceed the 20% Share Limitation, depending on the Conversion
Price. In addition, the shares of Common Stock issuable upon exercise of the
Warrants must also be aggregated with shares of Common Stock issuable upon
conversion of the Series B Preferred Stock. As a result, Rule 4460(i)(1)(C) is
applicable.
Additionally, the Series B Preferred Stock is convertible into Common Stock at
any time at a discount from the market price of the Common Stock at the time of
conversion. Rule 4460(i)(1)(D), among other things, requires Shareholder
approval in connection with a transaction involving the sale or issuance of
common stock (or securities convertible into or exercisable for common stock)
equal to 20% or more of the common stock outstanding before the issuance for
less than the greater of book or market value of the Common Stock. Because the
Conversion Rate is discounted from the market price of the Common Stock, Rule
4460(i)(1)(D) applies to the conversion of the Series B Preferred Stock and may
apply to the exercise of the Warrants, in the event that the exercise price of
the Warrants is less than the book or market value of the Common Stock.
As a result, conversion or exercise of the Series B Securities is limited (along
with the WorldCom Option and the WorldCom Equity Award) to the 20% Share
Limitation of 1,875,960 shares.
PROPOSAL NO. 6
APPROVING THE POSSIBLE ISSUANCE OF MORE THAN 1,917,960 SHARES OF COMMON STOCK
UPON THE CONVERSION OF THE SHARES OF SERIES B PREFERRED STOCK AND EXERCISE OF
WARRANTS ISSUED IN THE SERIES B OFFERING
On June 30, 1998, Able issued an aggregate of 4,000 shares of Series B Preferred
Stock and Warrants to purchase an aggregate of 1,000,000 shares of Common Stock
to the RoseGlen Group and the Palladin Group. Able received total gross proceeds
of $20 million from the sale of the Series B Securities. Currently, the RoseGlen
Group and the Palladin Group own the following Company securities:
<TABLE>
<CAPTION>
SERIES B PREFERRED STOCK WARRANTS(1) COMMON STOCK
<S> <C> <C> <C>
The RoseGlen Group 375 330,000 461,907
The Palladin Group 404 ---0-- 546,020
--- ------- ---------
TOTAL 779 330,000 1,007,927
=== ======= =========
</TABLE>
- ------------
(1) Assumes the sale of 670,000 Warrants by the Palladin Group to the Company,
which Warrants will then be retired.
As discussed above, Rule 4460(i) requires Shareholder approval in certain
events including
/bullet/ when stock of another company is acquired if, due to the
present or potential issuance of common stock or securities
convertible or exercisable for common stock, the number of
shares of common stock to be issued is or will be equal to or
in excess of 20% of the number of shares of common stock
outstanding before the issuance of the securities, or
42
<PAGE>
/bullet/ in connection with a transaction involving the sale or
issuance of common stock (or securities convertible into or
exercisable for common stock) equal to 20% or more of the
common stock outstanding before the issuance for less than the
greater of book or market value of the stock.
As of the date of this mailing, the RoseGlen Group and the Palladin Group have
converted an aggregate of 436 shares of Series B Preferred Stock into an
aggregate of 1,007,917 shares of Common Stock. The 20% Share Limitation is
1,875,960 shares of Common Stock and only an additional 868,033 shares of Common
Stock may be issued by the Company to holders of securities issued in
connection with the MFSNT Acquisition, without exceeding the 20% Share
Limitation.
Because the Series B Preferred Stock are "Future-Priced Securities", the
Conversion Price cannot be determined as to the shares of Series B Preferred
Stock held by the RoseGlen Group and the Palladin Group which are convertible
constantly changes, depending on the stock price of the Common Stock. Moreover,
there is no minimum Conversion Price nor a maximum number of shares of Common
Stock into which the Series B Preferred Stock held by the RoseGlen Group and the
Palladin Group is convertible. As a result, the Company is seeking Shareholder
approval to permit the RoseGlen Group and the Palladin Group (and any subsequent
holder) to convert or exercise their respective Series B Securities (in excess
of the 20% Share Limitation).
Additionally, because the Conversion Price of the Series B Preferred Stock held
by the RoseGlen Group and the Palladin Group is at a discount from the market
price and the number of shares into which the Series B Preferred Stock and
Warrants owned by the RoseGlen Group exceed the 20% Share Limitation, Rule
4460(i)(1)(D) also applies and thus, Shareholder approval is required to permit
the conversion of the Series B Preferred Stock and the exercise of the Warrants
held by the RoseGlen Group and the Palladin Group (or any subsequent holder).
BOARD RECOMMENDATION; REASONS
The Board of Directors believes that it is in the Company's best interest for
the holders of the Series B Securities (presently RoseGlen Group and the
Palladin Group) to be entitled to convert their shares of Series B Preferred
Stock into Common Stock and exercise the Warrants in an amount that represents
more than the 20% Share Limitation (taking into consideration the securities
described in both Proposal No. 5 and Proposal No. 6). Approval of Proposal No. 6
by Shareholders would satisfy the Shareholder approval requirements of Nasdaq
Rule 4460(i)(1)(C) and Rule 4460(i)(1)(D).
If Shareholder approval is not obtained, the holders of the Series B Securities
may be entitled to require the Company to redeem up to 709 shares of Series B
Preferred Stock for an aggregate redemption price of up to more than $4,608,500
(based upon a Premium Redemption Price of 130% of the Stated Value, but without
giving effect to any accrued dividends, interest or monetary penalties, which
could substantially increase the amount that may be due in the event of
redemption). Payment of any redemption would materially and adversely affect the
Company's cash flow because
/bullet of the short time frame to pay for such redemption (five
business days upon a Triggering Event), and
/bullet/ depending on the number of shares of Series B Preferred Stock
to be redeemed, such redemption could necessitate a
multi-million dollar payment to the holders, which could
severely diminish the Company's existing cash flow, working
capital and credit line and adversely impact on the Company's
business and its financial condition.
Such an exercise and/or payment would also result in a default in one or more
other obligations of the Company, including its obligations to senior lenders
under its credit line. Such defaults would have a material adverse impact on the
Company and its operations.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVING THE POSSIBLE
ISSUANCE OF MORE THAN 1,917,960 SHARES OF COMMON STOCK UPON THE CONVERSION OF
THE SHARES OF SERIES B PREFERRED STOCK AND THE EXERCISE OF CERTAIN WARRANTS
ISSUED IN THE SERIES B OFFERING
43
<PAGE>
PROPOSAL NO. 7
RATIFYING THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP to serve as the
Company's principal accountants for the fiscal year ending October 31, 1999. In
the event the appointment of Arthur Andersen LLP for 1999 is ratified, it is
expected that Arthur Andersen LLP will also audit the books and accounts of the
Company's subsidiaries at the close of their current fiscal years. A
representative of Arthur Andersen LLP will be present at the Annual Meeting and
will have the opportunity to make a statement, if such person desires to do so,
and to respond to appropriate questions.
The proposal to ratify the appointment of Arthur Andersen LLP will be approved
by the Shareholders if it receives the affirmative vote of a majority of the
votes cast by Shareholders entitled to vote on the proposal. If a proxy card is
specifically marked as abstaining from voting on the proposal, the shares
represented thereby will not be counted as having been voted for or against the
proposal. Unless otherwise instructed, the persons named on the proxy card
intend to vote shares as to which a proxy is received in favor of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFYING THE
SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
OTHER BUSINESS
The Company knows of no other business to be brought at the Annual Meeting. If,
however, any other business should be properly brought up before the Annual
Meeting, those persons named in the accompanying Proxy Card will vote proxies as
in their discretion they may deem appropriate, unless you direct them to do
otherwise in your Proxy.
OTHER MATTERS
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended,
Shareholders may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the next Annual Meeting of Shareholders by
submitting such proposals to the Company in a timely manner. In order to be so
included for the 2000 Annual Meeting, Shareholder proposal must be received by
the Company no later than December 12, 1999 and must otherwise comply with the
requirements of Rule 14a-8.
The cost of solicitation of proxies for use at the Annual Meeting will be borne
by the Company. Solicitations will be made primarily by mail or by facsimile,
but regular employees of the Company may solicit proxies personally or by
telephone.
OTHER INFORMATION
The Company's Annual Report on Form 10-K/A for fiscal year 1998 and all
subsequent Quarterly Reports on Form 10-Q filed before the date of the Annual
Meeting are incorporated by reference in this Proxy Statement. The Company will
provide to any Shareholder, upon written request and without charge, a copy
(without exhibits) of all information incorporated by reference in this Proxy
Statement. Requests should be addressed to Investor Relations, Able Telcom
Holding Corp., 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401.
By Order Of The Board of Directors
C. FRANK SWARTZ
CHAIRMAN OF THE BOARD
West Palm Beach, Florida
____________, 1999
44
<PAGE>
APPENDIX A
ABLE TELCOM HOLDING CORP.
1995 STOCK OPTION PLAN, AS AMENDED
SECTION 1. PURPOSE.
This 1995 Stock Option Plan is intended to provide incentives to the officers,
employees and other eligible persons performing services for Able Telcom Holding
Corp. and its present and future subsidiaries to acquire an ownership interest
in the Company through the exercise of options to purchase Common Stock or the
receipt of awards of shares of Common Stock which may be granted pursuant to
this Plan.
SECTION 2. DEFINITIONS.
(a) "Agreement" shall have the meaning, ascribed to the term as set
forth in Section 6 hereof.
(b) "Award" means an Option or a Stock Award granted to an eligible
person pursuant to this Plan.
(c) "Board of Directors" means the Board of Directors of the Company.
(d) "Common Stock" means the common stock, $.001 par value per share,
of the Company.
(e) "Company" means Able Telcom Holding Corp., a Florida corporation.
(f) "Employee" means every individual performing services for the
Company or any Subsidiary if the relationship between him and the person for
whom he performs such services is the legal relationship of employer and
employee as determined in accordance with Section 3401(c) of Internal Revenue
Code and Treasury Regulations promulgated thereunder. A member of the Board of
Directors in his sole capacity as such is not an Employee.
(g) "Incentive Stock Option" means a right granted pursuant to this
Plan to purchase Common Stock that satisfies the requirements of Section 422 of
the Internal Revenue Code.
(h) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
(i) "Non-Affiliate Director" means every member of the Board of
Directors who is not an Employee of the Company or any Subsidiary and who does
not beneficially own, within the meaning of Rule 13d-2 of the Securities
Exchange Act of 1934, as amended, more than five percent (5%) of any class of
the outstanding capital stock of the Company.
(j) "Nonqualified Stock Option" means a right granted pursuant to this
Plan to purchase Common Stock that does not satisfy the requirements of Section
422 of the Internal Revenue Code.
(k) "Option" means a right granted pursuant to this Plan to purchase
Common Stock which may be either an Incentive Stock Option or a Nonqualified
Stock Option as determined by the Board of Directors.
(l) "Optionee" means an individual who has received an Option under the
Plan.
(m) "Option Shares" means the shares of Common Stock issuable upon the
exercise of an Option.
(n) "Plan" means this 1995 Stock Option Pan of Able Telcom Holding
Corp..
45
<PAGE>
(o) "Plan Administrators" shall have the meaning ascribed to the term
as set forth in Section 5 hereof.
(p) "Plan Adoption Date" means the date on which this Plan shall have
been adopted by the Board of Directors.
(q) "Reserved Shares" shall have the meaning ascribed to the term as
set forth in Section 3 hereof.
(r) "Stock Award" shall mean an award of shares of Common Stock under
Section 6-A hereof.
(s) "Subsidiary" means any corporation (other than the Company) in an
(unbroken chain of corporations beginning with the Company if, at the time the
Option is granted, each of the corporations other than the last corporation in
the unbroken chain owns 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
SECTION 3. SHARES SUBJECT TO THE PLAN.
Subject to adjustments pursuant to Section 9 of the Plan, no more than Three
Million Five Hundred Thousand (3,500,000) shares in the aggregate of the
Company's Common Stock (the "Reserved Shares") may be issued pursuant to the
Plan to eligible participants. The number of the Reserved shall be reduced by
the number of Options of Stock Awards granted under the Plan. The Reserved
Shares may be made available from authorized but unissued Common Stock of the
Company, from Common Stock of the Company held as treasury stock, from any
shares which may become available due to the expiration, cancellation or other
termination of any Option or the forfeiture of any Common Stock issued pursuant
to a Stock Award previously granted by the Company, or from any combination of
the foregoing.
SECTION 4. ELIGIBILITY.
The individuals eligible to receive Awards under this Plan shall be such valued
Employees, Non-Affiliate Directors, advisors or consultants of the Company or
any Subsidiary, as the Plan Administrators may from time to time determine and
select. Non-Affiliate Directors, advisors and consultants shall be eligible to
receive only Nonqualified Stock Options. Employees shall be eligible to receive
Incentive Stock Options, Nonqualified Stock Options and Stock Awards. An
Optionee may receive more than one Option or Stock Award or any combination of
the two. No Employee of the Company or any Subsidiary is eligible to receive any
Incentive Stock Options if such Employee, at the time the option is granted,
owns, beneficially or of record, in excess of 10% of the outstanding voting
stock of the Company or a Subsidiary; provided, however, that such Employee will
be eligible to receive an Incentive Stock Option if at the time such Option is
granted the Option price is at least 110% of the fair market value (determined
with regard to Section 422(c)(7) of the Internal Revenue Code) of the stock
subject to the Option and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted. Pursuant to
Section 422(d) of the Internal Revenue Code, no Option granted pursuant to this
Plan shall be treated as an Incentive Stock Option to the extent that the
aggregate fair market value, determined at the time the Option was granted, of
Common Stock with respect to which Options that otherwise qualify as Incentive
Stock Options are exercisable for the first time by an Employee during any
calendar year, under all plans of the Company and its Subsidiaries, exceeds
$100,000.
SECTION 5. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board of Directors or a
committee thereof consisting solely of two or more "Non-Employee Directors" (as
such term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended) as determined by the Board of Directors, which may be the compensation
Committee or a subcommittee of the Compensation Committee (in any such case, the
"Plan Administrators").
(b) The Plan Administrators shall have the power, subject to, and
within the limits of, the express provisions of the Plan:
46
<PAGE>
(i) To determine from time to time which eligible persons
shall be granted Awards under the Plan, and the time
when any Award shall be granted;
(ii) To determine the number of shares of Common
Stock to be subject to any Option or included in any
Stock Award granted to any person and, in the case of
Options, whether such Options are Incentive Stock
Options, Nonqualified Stock Options or any
combination thereof;
(iii) To determine the duration and purposes of leaves of
absence which may be granted to Optionees without
constituting a termination of their employment for
purposes of the Plan;
(iv) To prescribe the terms and provisions of each Option
granted under the Plan (which need not be identical),
including the exercise price and the period of time
during which such Option may be exercised or shall
become exercisable, and the conditions, restrictions,
risks of forfeiture and other limitations, if any,
applicable to any Stock Award;
(v) To construe and interpret the Plan and Awards granted
under it, and to establish, amend and revoke rules
and regulations for its administration; and
(vi) Generally, to exercise such powers and perform such
acts as are deemed necessary or expedient to promote
the best interests of the Company with respect to the
Plan.
(c) The Plan Administrators, in the exercise of these powers, may
correct any defect or supply any omission, or reconcile any inconsistency in the
Plan, or in any Award, in the manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective. All determinations of the Plan
Administrators shall be made by majority vote. Subject to any applicable
provisions of the Company's By-laws, all decisions made by the Plan
Administrators pursuant to the provisions of the Plan and related orders or
resolutions of the Plan Administrators shall be final, conclusive and binding on
all persons, including the Company, shareholders of the Company, Employees and
Optionees.
(d) The Plan Administrators may designate the Secretary of the Company,
or other employees of the Company or competent professional advisors, to assist
in the administration of this Plan and may grant authority to such persons to
execute agreements or other documents on behalf of the Plan Administrators.
(e) The Plan Administrators may employ such legal counsel, consultants
and agents as they may deem desirable for the administration of this Plan and
may rely upon any opinion received from any such counselor consultant and any
computation received from any such consultant or agent. No present or former
Plan Administrator shall be liable for any action or determination made in good
faith with respect to this Plan or any Award granted hereunder. To the maximum
extent permitted by applicable law and the Company's Certificate of
Incorporation and By-laws, each present or former Plan Administrator shall be
indemnified and held harmless by the Company against any cost or expenses
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to
act in connection with this Plan unless arising out of such person's own fraud
or bad faith. Such indemnification shall be in addition to any rights of
indemnification the person may have as a director, officer or employee or under
the Certificate of Incorporation of the Company, the By-laws of the Company or
otherwise. Expenses incurred by the Plan Administrators in the engagement of
such counsel, consultant or agent shall be paid by the Cornpany.
SECTION 6. OPTION TERMS AND CONDITIONS.
The Options granted under the Plan shall be evidenced by written Option
Agreements (the "Agreements") consistent with the terms of the Plan which shall
be executed by the Company and the Optionee. The Agreements, in such form as the
Plan Administrators shall from time to time approve, shall, incorporate the
following terms and conditions:
47
<PAGE>
(a) TIME OF EXERCISE. Options shall be exercisable in accordance with
the terms of the Agreements as approved by the Plan Administrators from time to
time. Incentive Stock Options may be exercised only if, at all times during the
period that begins on the date of the granting of the Incentive Stock Option and
that ends on the day three (3) months before the date of such exercise, the
Optionee was an Employee of the Company or any Subsidiary; provided, however,
that if the Optionee is "disabled" within the meaning of Section 22(e) of the
Internal Revenue Code, then the end of the preceding post-employment exercise
period shall be extended to one (1) year.
(b) PURCHASE PRICE. Except as otherwise provided in Section 4 hereof,
the purchase price per share of Common Stock deliverable upon the exercise of an
Incentive Stock Option shall not be less than the fair market value of the
Common Stock on the date the Option is granted. The purchase price per share of
Common Stock deliverable upon the exercise of a Nonqualified Stock Option shall
be determined by the Plan Administrators in their sole discretion.
(c) METHOD OF EXERCISE. In order to exercise an Option in whole or in
part, the Optionee shall give written notice to the Company at its principal
place of business of such exercise, stating the number of shares with respect to
which the Option is being exercised. Such notice shall be accompanied by full
payment of the purchase price thereof either (i) in cash, or (ii) at the
discretion of the Plan Administrators, in whole shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Option, or (iii) at the discretion of the Plan Administrators, by
delivery of the Optionee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest applicable Federal rate,
as defined in Section 1274(d) of the Internal Revenue Code, or (iv) any
combination of (i), (ii) and (iii) above. If the Plan Administrators exercise
their discretion to permit payment of the exercise price of any Option by means
of the methods set forth in clauses (ii), (iii) or (iv) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of die Option in question. The exercise date of the Option shall be the date the
Company receives such notice with any necessary accompaniments in satisfactory
order.
(d) TRANSFERABILITY. An Option shall not be transferable by the
Optionee other than at death and an Option granted to such Optionee is
exercisable, during his lifetime, only by such Optionee.
The Agreements may also contain such other terms, provisions, and conditions
consistent with the Plan and applicable provisions of the Internal Revenue Code
as the Plan Administrators may determine are necessary or proper.
SECTION 6-A. STOCK AWARDS
Subject to the limitations of this Plan, the Plan Administrators may select
persons to receive Stock Awards and determine the time when each Award shall be
granted, the number of shares of Common Stock subject to each Award, the period
of time, if any, during which all of or a portion of such shares shall be
subject to forfeiture and the other terms and conditions of such Award, if any.
Subject to the restrictions set forth below, the recipient of a Stock Award
shall have all the rights of a shareholder of the Company with respect to the
shares of Common Stock subject to such Award, including voting rights and the
right to receive all dividends and other distributions of the Company with
respect to such shares. Certificates representing shares of Common Stock issued
upon the grant of a Stock Award may be by the Company until the lapse of any
conditions to vesting or risks of forfeiture. Shares of Common Stock included in
any Stock Award are not transferable until fully vested or until the lapse or
termination of any other risks of forfeiture.
SECTION 7. STOCK OPTION GRANT FOR NON-AFFILIATE DIRECTORS
(a) GRANT OF OPTIONS. Each Non-Affiliate Director of the Company as of
the date of approval of this Plan by the Board of Directors (the "Plan Adoption
Date"), or any other person as of the date he or she first becomes a Non-
Affiliate Director, in each case who has not previously been granted an Option
or any other stock option by the Company, is hereby, and shall be, automatically
granted a Nonqualified Stock Option to purchase Ten Thousand (10,000) shares of
Common Stock. The Options granted to existing Non-Affiliate Directors as of the
Plan Adoption Date shall be at an exercise price equal to the closing market
price for the Common Stock on that date.
48
<PAGE>
(b) OPTION PRICE. Notwithstanding anything to the contrary contained in
this Plan, any Nonqualified Stock Option granted pursuant to this Section 7
shall provide an exercise price per share equal to 100% of the fair market value
per share of the Common Stock on the date of such grant.
(c) OPTION TERM. Any Nonqualified Stock Option granted pursuant to this
Section 7 shall expire on the earlier of (i) the date which is six years from
the date of its grant or (ii) the date which is two years after the date that
such Optionee shall no longer serve as a member of the Board. Nonqualified Stock
Options issued to a NonAffiliate Director shall not be exercisable until the
first anniversary of the date of grant (the "Vesting Date"); provided, however,
that said Options shall not vest and shall expire if the Non-Affiliate Director
fails to attend at least 60% of all Board of Directors' meetings, and meetings
of committees of which he is a member, which take place between the date of
grant and the Vesting Date.
(d) OTHER TERMS. All grants of Nonqualified Stock Options pursuant to
this Section 7 shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. The provisions of
this Section 7 shall not be amended more than once in any six month period,
other than to comply with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act of 1974, as amended, or other applicable federal
or state law.
SECTION 8. RIGHTS OF STOCKHOLDERS AND OPTIONEE.
An Optionee shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option, unless
and until: (a) the Option shall have been exercised pursuant to the terms
thereof; (b) the Company shall have issued and delivered the shares to the
Optionee; and (c) the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
voting and other ownership rights with respect to such shares.
SECTION 9. ADJUSTMENTS IN THE EVENT OF CHANGES IN THE
CAPITAL STRUCTURE, REORGANIZATION ANTI-DILUTION OR ACCOUNTING CHANGES.
(a) CHANGES IN CAPITAL STRUCTURE. In the event of a change in the
corporate structure or shares of the Company, the Plan Administrators (subject
to any required action by the stockholders) shall make such equitable
adjustments as they may deem appropriate in the number and kind of shares
authorized by the Plan and, with respect to outstanding Options in the number
and kind of shares covered thereby and in the exercise price of such Options on
the dates granted. For the purpose of this Section, a change in the corporate
structure or shares of the Company shall include, but is not limited to, changes
resulting from a recapitalization, stock split, reverse stock split,
consolidation, rights offering, stock dividend, reorganization, or liquidation.
Any additional shares of Common Stock or other securities or rights issued or
issuable with respect to any portion of a Stock Award which is unvested or
remains subject to risks of forfeiture or other conditions at the time of any
such change shall be subject to the same restrictions, risks or other
conditions, for the same period of time, as are then applicable to such portion
of the Stock Award.
(b) REORGANIZATION-CONTINUATION OF THE PLAN. Upon the effective date of
the dissolution or liquidation of the Company, or a reorganization, merger or
consolidation of the Company with one or more corporations in which the Company
is not the surviving corporation, or of a transfer of substantially all of the
Company's property or more than 80% of the then outstanding shares of the
Company to another corporation not controlled by the Company's stockholders, the
Plan and any Option previously granted under the Plan shall terminate unless
provision be made in writing in connection with such transaction for the
continuation of (i) the Plan and for the assumption of the Options previously
granted, or for the substitution of new Options covering the shares of a
successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments (in accordance with the applicable provisions of the
Internal Revenue Code) as to the number and kind of shares and price per share,
in which event the Plan and the Options previously granted or new Options
substituted therefor shall continue in the manner and under the terms as
provided, and (ii) all vesting requirements for any portion of a Stock Award
which is unvested shall be deemed satisfied and the
49
<PAGE>
shares subject thereto fully vested, and all risks of forfeiture or other
restrictions or conditions applicable to any Stock Award shall lapse and
terminate.
(c) REORGANIZATION-TERMINATION OF THE PLAN. In the event of a
dissolution, liquidation, reorganization, merger, consolidation, transfer of
assets or transfer of shares, as provided in Section 9(b) above, and if
provision is not made in such transaction for the continuance of the Plan and
for the assumption of Options previously granted or the substitution of new
Options covering die shares of a successor employer corporation or a parent or
subsidiary thereof, then an Optionee under the Plan shall be entitled to written
notice prior to the effective date of any such transactions stating that rights
under his Option must be exercised within thirty (30) days of the date of such
notice or they will be terminated.
SECTION 10. GENERAL RESTRICTIONS.
(a) No Option shall be exercisable, in whole or in part, and die
Company shall not be obligated to sell any Option Shares, if such exercise or
sale would, in the opinion of the Company, violate the applicable requirements
of any Federal or state law. Additionally, no Option shall be exercisable if, at
any time, the Company shall determine in its discretion that:
(i) the listing of the Option Shares is necessary or desirable
under any securities exchange requirements; or
(ii) the qualification of the Option Shares is necessary or
desirable under any applicable law; or
(iii) the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with, the
issuance of the Option Shares; unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
(b) If any law or regulation of any state or Federal commission or
agency having jurisdiction shall require the Company or the Optionee to take any
action with respect to the Option Shares, then the date upon which the Company
shall deliver or cause to be delivered the certificate or certificates for the
Option Shares shall be postponed until full compliance shall have been made with
all such requirements.
SECTION 11. EMPLOYMENT.
Nothing in this Plan shall be deemed to grant any right of continued employment
to a participating employee or to limit or waive any rights of the Company or
its Subsidiary to terminate such employment at any time, with or without cause.
SECTION 12. AMENDMENT.
Subject to the provisions of Section 7(d) hereof, the Board of Directors shall
have the power to amend or revise the terms of this Plan or any part thereof
without further action of the stockholders; provided, however, that no such
amendment shall impair any Award or deprive any Optionee of shares that may have
been granted to him under the Plan without his consent; and provided further
that no such amendment shall, without shareholder approval:
(a) increase the aggregate number of the Reserved Shares;
(b) change the class of persons eligible to receive Awards under the
Plan;
(c) extend the maximum period during which any Option may be granted or
exercised;
(d) reduce the Option price per share under any Option below fair
market value at the time such Option was granted; or
50
<PAGE>
(e) extend the term of the Plan.
SECTION 13. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The effective date of the Plan shall be the Plan Adoption Date;
provided, however, in the event that the Plan is not approved by the voting
stockholders of the Company on or before December 31, 1996, the Plan and all
Options granted and to be granted hereunder shall be null and void and the
Company shall have no obligation of any nature whatsoever to any employee or
other person arising out of the Plan or any options granted or to be granted
hereunder.
(b) The Board of Directors of the Company may terminate the Plan at any
time with respect to any shares that are not subject to Awards. Unless
terminated earlier by the Board of Directors, the Plan shall terminate on
September 19, 2005, and no Awards shall be granted under this Plan after it has
been terminated. Termination of this Plan shall not affect the right and
obligation of any Optionee with respect to Awards granted prior to termination.
SECTION 14. WITHHOLDING TAXES.
Whenever under the Plan shares are to be issued in respect of Awards granted
hereunder, the Company shall have the right to require the recipient to make
arrangements to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements, if any, prior to or following the
delivery of any certificate or certificates for such shares.
SECTION 15. QUALIFICATION.
This Plan is adopted pursuant to, and is intended to comply with, the applicable
provisions of the Internal Revenue Code and the regulations thereunder.
Incentive Stock Options granted pursuant to this Plan are intended to be
"incentive stock options" as that term is defined in Section 422 of the Internal
Revenue Code and the regulations thereunder. In the event this Plan or any
Incentive Stock Option granted pursuant to this Plan is in any way inconsistent
with the applicable legal requirements of the Internal Revenue Code or any
regulation thereunder, this Plan and any Incentive Stock Option granted pursuant
to this Plan shall be deemed automatically amended as of the date hereof to
conform to such legal requirements, if such conformity can be achieved by
amendment.
SECTION 16. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Employee who receives an Incentive Stock Option must agree to notify the
Company in writing immediately after the Employee makes a disqualifying
disposition of any Common Stock acquired pursuant to the exercise of an
Incentive Stock Option. For purposes of this Plan, a "disqualifying disposition"
is any disposition (including any sale) of such Common Stock before the later of
(i) two years after the date the Employee was granted the Incentive Stock
Option, or (ii) one year after the date the Employee acquired Common Stock by
exercising die Incentive Stock Option.
51
<PAGE>
ABLE TELCOM HOLDING CORP.
PROXY AND VOTING INSTRUCTION
1999 ANNUAL MEETING OF SHAREHOLDERS - MAY 10, 1999
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints ______________ and ______________, or any of
them, proxies with full power of substitution, as a proxy or proxies, to
represent the undersigned at the 1999 Annual Meeting of Shareholders (the
"Annual Meeting") of Able Telcom Holding Corp. (the "Company") to be held at The
Embassy Suites Hotel, 555 S. 10th Street, Omaha, NE 68102 on May 10, 1999 at
10:00 a.m. Central Standard Time, and at all adjournments or postponements
thereof, and to vote all the shares of Common Stock, $.001 par value per share,
held of record by the undersigned at the close of business on March 31, 1999,
with all the power that the undersigned would possess if personally present, as
designated on the reverse side. Your vote is important to us. Feel free to
direct your comments to the Corporate Secretary at 1-561-688-0400. Shares will
be voted as specified.
The undersigned also hereby revokes previous proxies and acknowledges receipt of
the Company's Notice of Annual Meeting and Proxy Statement.
The Board recommends a vote FOR for Items 1-7. IF YOU DO NOT SPECIFY HOW YOU
INTEND TO VOTE, THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL. The proxies or
substitutes may vote accordingly in their discretion upon any other business
that may properly come before the Annual Meeting or any adjournments or
postponements of the Annual Meeting.
1. Election of the Directors
Nominees for Class A Directors
ALEC MCLARTY BILLY V. RAY COLLIER ROSS
C. FRANK SWARTZ DOUGLAS TATUM ROBERT H. YOUNG
___ FOR ALL THE NOMINEES LISTED ABOVE __ WITHHOLD AUTHORITY TO VOTE FOR THE
NOMINEES LISTED ABOVE
List Exceptions:
___________________________________________________________________________
2. Amending the Articles of Incorporation to increase the number of authorized
shares of (A) Common Stock from 25 million to 100 million and (B) Preferred
Stock from one million to five million.
___ FOR ___ AGAINST ___ ABSTAIN
3. Amending the Company's 1995 Stock Option Plan, as amended, to increase the
number of shares authorized for issuance from 1,300,000 to 3,500,000,
increase the initial grant of options to non-affiliate Directors from 5,000
to 10,000 and extend the expiration period.
___ FOR ___ AGAINST ___ ABSTAIN
4. Ratifying and approving the issuance of stock options granted to certain
Officers and Directors of the Company.
___ FOR ___ AGAINST ___ ABSTAIN
5. Approving the possible issuance of more than 1,917,96 shares of Common Stock
upon the exercise of certain options and stock appreciation rights granted to
WorldCom, Inc.
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE>
6. Approving the possible issuance of more than 1,917,960 shares of Common Stock
upon the conversion of the Series B Convertible Preferred Stock and exercise of
certain Warrants issued in connection with the Series B Offering.
___ FOR ___ AGAINST ___ ABSTAIN
7. Ratifying the appointment of Arthur Andersen LLP as the Company's independent
accountants for the fiscal year ended October 31, 1999.
___ FOR ___ AGAINST ___ ABSTAIN
8. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the 2000 Shareholders' Annual Meeting
________________________________________________________________________________
________________________________________________________________________________
NOTE: Please sign this Proxy Card as your name appears hereon, including the
title "Executor," "Trustee," etc. if such is indicated. If a joint account, each
joint owner should each sign. If stock is held by a corporation, this Proxy Card
should be executed by a proper officer thereof.
PLEASE DATE AND SIGN THIS PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
Dated: ______________________, 1999
____________________________________
Shareholder
____________________________________
Co-owner, if applicable
