<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
File No. 0-17973
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement (revised)
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
MEDCROSS, INC.
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
--------------------------------------------------------------
5) Total fee paid: $______________
[_] Fee paid previously with preliminary materials.
<PAGE>
MEDCROSS, INC.
13751 S. Wadsworth Park Drive
Suite 200
Draper, UT 84020
_____________, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Medcross, Inc. on ____________, 1997. The meeting will begin at (time) a.m. at
the (place), (address).
Information regarding each of the matters to be voted upon at the Annual
Meeting is contained in the attached Proxy Statement. We urge you to read the
Proxy Statement carefully. The Proxy Statement is being mailed to all
shareholders on or about ________________, 1997.
Because it is important that your shares be voted at the Annual Meeting,
whether or not you plan to attend in person, we urge you to complete, date, and
sign the enclosed proxy card and return it as promptly as possible in the
accompanying envelope. If you are a shareholder of record and do attend the
Annual Meeting and wish to vote your shares in person, even after returning your
proxy, you still may do so.
We look forward to seeing you in (city) , on ________________, 1997.
Very truly yours,
John W. Edwards, President
<PAGE>
MEDCROSS, INC.
13751 S. Wadsworth Park Drive, Suite 200
Draper, UT 84020
------------------------------
Notice of Annual Meeting of Shareholders
To be Held ________________, 1997
------------------------------
To the Shareholders of Medcross, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Medcross,
Inc., a Florida corporation (the "Company"), will be held at (place), (address),
on ____________, 1997, at (time) a.m. and thereafter as it may from time to
time be adjourned, for the following purposes:
1. To elect two Class III Directors to serve for three years or until their
successors have been duly elected and qualified;
2. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the change of the Company's name to I-Link, Inc.;
3. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the increase in the number of authorized shares of
Preferred Stock of the Company from 500,000 shares of preferred stock, $10
par value, to 10,000,000 shares of preferred stock, $10 par value, to
permit the conversion of convertible notes issued in September 1996, the
issuance of Class M Preferred Stock and for other corporate purposes;
4. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the increase in the number of authorized shares of
common stock from 20 million shares of common stock, $.007 par value, to 50
million shares of common stock, $.007 par value, to permit the issuance of
shares in connection with the Company's acquisition of Family
Telecommunications Incorporated, the issuance of options and warrants and
for other general corporate purposes;
5. To approve the adoption of the 1997 Recruitment Stock Option Plan which
provides for the issuance of Incentive Stock Options, Non-Qualified Stock
Options and Stock Appreciation Rights; and
6. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Shareholders should note that the Company's By-Laws provide that no
proposals or nominations of Directors by Shareholders shall be presented for
vote at an Annual Meeting of Shareholders unless notice complying with the
requirements in the By-Laws is provided to the Board of Directors or the
Company's Secretary no later than the close of business on the fifth day
following the day that notice of the meeting is first given to Shareholders.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
AMERICAN STOCK TRANSFER & TRUST COMPANY, 40 WALL STREET, 46TH FLOOR, NEW YORK,
NEW YORK 10005.
By Order of the Board of Directors,
David E. Hardy, Secretary
Draper, Utah
______________, 1997
<PAGE>
MEDCROSS, INC.
Proxy Statement
Dated _______________, 1997
Annual Meeting of Shareholders
SUMMARY
This Proxy Statement is being furnished to Shareholders in connection
with the solicitation of proxies by the Board of Directors of Medcross, Inc., a
Florida corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on _____________, 1997, at (time) , at the (address) or
at any adjournments thereof (the "Annual Meeting"), as set forth in the
accompanying Notice of Annual Meeting. This Proxy Statement and the accompanying
form of proxy are first being mailed to Shareholders on or about
_______________, 1997. The principal executive offices of the Company are
located at 13751 S. Wadsworth Park Drive, Draper, UT 84020.
The Annual Meeting has been called to consider and take action on the
following proposals:
1. To elect two Class III Directors to serve for three years or until
their successors have been duly elected and qualified;
2. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the change of the Company's name to I-Link,
Inc.;
3. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the increase in the number of authorized
shares of Preferred Stock of the Company from 500,000 shares of
Preferred Stock, $10 par value, to 10,000,000 shares of Preferred
Stock, $10 par value, to permit the conversion of the Convertible
Notes issued in September 1996, the issuance of Class M Preferred
Stock and for other corporate purposes;
4. To approve and adopt an amendment to the Company's Articles of
Incorporation to effect the increase in the number of authorized
shares of Common Stock from 20 million shares of Common Stock, $.007
par value, to 50 million shares of Common Stock, $.007 par value, to
permit the issuance of shares in connection with the Company's
acquisition of Family Telecommunications Incorporated, the issuance
of options and warrants and for other general corporate purposes;
5. To approve the adoption of the Medcross, Inc. 1997 Recruitment Stock
Option Plan; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Affirmative action with respect to each of the above proposals has been
taken by a majority of the Company's Board of Directors and the Board of
Directors recommends that the Shareholders vote in favor of each of the
proposals. The close of business on [_____________, 1997], has been fixed as the
record date for the determination of Shareholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournment thereof (the "Record Date"). The
stock transfer books will not be closed.
<PAGE>
SOLICITATION AND REVOCATION OF PROXIES
As of [Record Date] there are [11,607,597] shares of the Company's
common stock, par value $.007 per share (the "Common Stock"), issued and
outstanding, 7,500 shares of the Company's Class B Variable Rate Cumulative
Convertible Preferred Stock, par value $10.00 per share (the "Class B Preferred
Stock"), issued and outstanding, and 240,000 shares of Class C Convertible
Cumulative Redeemable Preferred Stock, par value $10.00 per share (the "Class C
Preferred Stock") issued and outstanding. Each share of Common Stock of record
as of the Record Date is entitled to one vote in all matters properly brought
before the Annual Meeting. The Class B Preferred Stock and Class C Preferred
Stock are non-voting except as otherwise specifically required by applicable
law. Only holders of record of shares of Common Stock as of the close of
business on the Record Date will be entitled to vote at the Annual Meeting;
however, holders of the Company's outstanding Preferred Stock are entitled to
notice of all stockholder meetings at the same time and in the same manner as
notice is given to all stockholders entitled to vote at such meetings.
The holders of a majority of all of the shares of stock entitled to vote
at the Annual Meeting, present in person or by proxy, will constitute a quorum
for the transaction of business at the Annual Meeting. If a quorum should not be
present, the Annual Meeting may be adjourned from time to time until a quorum is
obtained. Shares as to which authority to vote has been withheld with respect to
the election of any nominee for director will not be counted as a vote for such
nominee. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business
but are not counted as an affirmative vote for purposes of determining whether a
proposal has been approved.
The Class III Director nominees named in Proposal 1 of this Proxy
Statement must receive a plurality of the votes cast by the shares entitled to
vote to be elected. In order to obtain the approval of Proposals 2, 3, 4 and 5,
the votes cast by the holders of the Common Stock and represented at the Annual
Meeting and entitled to vote, in person or by proxy, favoring the action must
exceed the votes cast opposing the action.
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, including audited financial statements, is enclosed herewith.
Proxies given by Shareholders of record for use at the Annual Meeting
may be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, Shareholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the Shareholder or his attorney authorized in writing or, if the Shareholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournment thereof, that the proxy is to be used,
or with the chairman of such meeting on the day of the Annual Meeting or
adjournment thereof, and upon either of such deposits the proxy is revoked.
As of [Record Date] , all of the present directors, as a group of five
persons, own beneficially [5,416,683] shares ([42.1%] of the total outstanding
shares) and all of the present directors and executive officers of the Company,
as a group of nine persons, owned beneficially [5,712,851] shares ([43.4%] of
the total outstanding shares) of the Common Stock of the Company. The Company
believes that such officers and directors intend to vote their shares for each
of the proposals set forth herein. Officers and directors of the Company have
agreed to vote an aggregate of [6,956,000] shares of Common Stock in
2
<PAGE>
favor of Proposals 3 and 4. To the knowledge of management, as of [Record Date],
the only executive officers, directors and nominee for director who owned
beneficially five percent or more of the Company's outstanding shares of Common
Stock were [Clay Wilkes, R. Huston Babcock and John W. Edwards]. In addition, I-
Link, Ltd., of which GNet Enterprises, Inc. is the general partner, and which
corporation is owned by Clay Wilkes, owned beneficially [16.6%] of the Company's
outstanding shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ABSTENTIONS AND BROKER NON-VOTES ARE COUNTED FOR
PURPOSES OF DETERMINING THE PRESENCE OR ABSENCE OF A QUORUM BUT ARE NOT COUNTED
AS AN AFFIRMATIVE VOTE FOR PURPOSES OF DETERMINING WHETHER A PROPOSAL HAS BEEN
APPROVED. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE
BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE
MEETING.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. The Company may reimburse brokerage firms and others for their
expenses in forwarding proxy materials to the beneficial owners and soliciting
them to execute the proxies.
Certain Information Concerning the Company
Certain information concerning the Company, including recent events, a
description of the business of Medcross, Inc., I-Link Worldwide, Inc. and Family
Telecommunications Incorporated, certain market information, management's
discussion and analysis and financial statements for the Company as of December
31, 1996 and for the year ended December 31, 1996, is included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996, which
accompanies this Proxy Statement and is incorporated herein by this reference.
Further information is included in the Company's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 1997, and in the Company's Current Report on
Form 8-K filed January 28, 1997 and on Form 8-K/A#1 filed May 2, 1997, each of
which reports is incorporated herein by this reference.
DISSENTERS' RIGHTS OF APPRAISAL
The Board of Directors has not proposed any action for which the laws
of the State of Florida, the Certificate of Incorporation or By-Laws of the
Company provide a right of a Shareholder to dissent and obtain payment for
shares.
INTEREST OF OFFICERS AND DIRECTORS
IN MATTERS TO BE ACTED UPON
Mr. John Edwards and Dr. R. Huston Babcock, Class III Directors, are
being nominated for election to the office of Director and serve in their
capacities as Directors. In addition, officers and directors of the Company have
an interest in Proposals 3, 4 and 5 inasmuch as officers and directors owning
options to purchase an aggregate of [4,153,501] shares of Common Stock have
agreed not to exercise any options owned by them unless and until the
shareholders of the Company approve an
3
<PAGE>
increase in authorized capital stock and such persons will also be entitled to
receive options to purchase Common Stock under the 1997 Recruitment Stock Option
Plan.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Common Stock constitutes the only voting securities of the Company.
Each share of Class B Preferred Stock is convertible, at the option of the
holder thereof, into approximately 24.47 shares of Common Stock, subject to
adjustment upon the occurrence of certain events. Each share of Class C
Preferred Stock is convertible, at the option of the holder thereof, into such
number of shares of the Company's Common Stock as shall equal $60 divided by the
lower of (i) $2.50 or (ii) the closing bid price for any five consecutive
trading days during the period commencing on September 6, 1996 and ending on
March 5, 1998. The table below sets forth information, to the best of the
Company's knowledge, with respect to the total number of shares of the Company's
Common Stock, Class B Preferred Stock and Class C Preferred Stock beneficially
owned by each director, the Company's Named Executive Officers, each beneficial
owner of more than five percent of the Common Stock, and all directors and
executive officers as a group, as reported by each such person, as of [Record
Date]. On that date, there were [11,607,597] shares of the Company's Common
Stock issued and outstanding, no shares of the Company's Class A Preferred Stock
issued and outstanding, 7,500 shares of the Company's Class B Preferred Stock
issued and outstanding, and 240,000 shares of the Company's Class C Preferred
Stock issued and outstanding.
<TABLE>
<CAPTION>
% of Outstanding
Name and Address Number of Shares Shares of Common Stock
of Beneficial Owner/(1)/ Title of Class Beneficially Owned Beneficially Owned /(2)/
- --------------------------------- -------------------- ----------------------- ------------------------------
<S> <C> <C> <C>
Four M International, Ltd./(3)/ Common Stock 3,772,832/(4)/ 32.5%
1980 Post Oak Boulevard
Houston, TX 77056
I-Link, Ltd./(5)/ Common Stock 1,925,141 16.6%
c/o Clay Wilkes
2100 E. Bengal Blvd. #M104
Salt Lake City, UT 84121
Clay Wilkes/(6)/ Common Stock 3,713,344/(7)/ 31.9%
2100 E. Bengal Blvd. #M104
Salt Lake City, UT 84121
Benchmark Equity Group Inc. Common Stock 2,099,174/(10)/ 17.9%
700 Gemini Class C Preferred 752
Houston, TX 77058 Stock
R. Huston Babcock, M.D. Common Stock 682,173/(11)/ 5.8%
741 12th Street North Class B Preferred 7,500
St. Petersburg, FL 33705 Stock
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
% of Outstanding
Name and Address Number of Shares Shares of Common Stock
of Beneficial Owner/(1)/ Title of Class Beneficially Owned Beneficially Owned/(2)/
- --------------------------------- -------------------- ----------------------- ------------------------------
<S> <C> <C>
Henry Y.L. Toh/(3)/ Common Stock 188,501/(12)/ 1.6%
3227 Bennet Street North
St. Petersburg, FL 33713
John W. Edwards Common Stock 711,665/(13)/ 5.8%
13751 S. Wadsworth Park Drive
Draper, UT 84020
T6-G Limited Partnership/(8)/ Common Stock 720,083/(9)/ 6.1%
185 South State Street Class C Preferred 7,133
Salt Lake City, UT Stock
William A. Baquet Common Stock 785,284/(14)/ 6.8%
33 Libby Avenue
Hicksville, NY 11801
Commonwealth Associates Common Stock 1,911,392/(15)/ 15.4%
733 Third Avenue Class C Preferred 3,750
Suite 700 Stock
New York, NY 10017
Alex Radulovic/(16)/ Common Stock 769,824/(17)/ 6.6%
13751 S. Wadsworth Park Drive
Draper, UT 84020
Joseph A. Cohen Common Stock 121,000/(18)/ 1.0%
1370 Avenue of the Americas Class C Preferred 3,000
New York, NY 10019 Stock
Karl S. Ryser, Jr. Common Stock 65,910/(12)/ *
13751 S. Wadsworth Park Drive
Draper, UT 84020
William H. Flury Common Stock 105,650/(19)/ *
13751 S. Wadsworth Park Drive Class C Preferred 2,666
Draper, UT 84020 Stock
David E. Hardy Common Stock 71,750/(12)/ *
60 East South Temple
Salt Lake City, UT 84111
All Executive Officers and Common Stock 5,712,851/(20)/ 43.4%
Directors as a Group (9 Persons) Class C Preferred 5,666
Stock
</TABLE>
- --------------------------------
* Represents less than 1%.
(1) Unless noted, all of such shares are owned of record by each person or
entity named as beneficial owner and such person or entity has sole
voting and dispositive power with respect to the shares of Common Stock
owned by each of them.
(2) As to each person or entity named as beneficial owners, such person or
entity's percentage of ownership is determined by assuming that any
options or convertible securities held by such person or entity which are
exercisable or
5
<PAGE>
convertible within 60 days from the date hereof have been
exercised or converted, as the case may be. Does not give effect to the
agreement of certain holders of outstanding options not to exercise such
options pending shareholder approval of an increase in the authorized
capital stock of the Company. See Footnote 4.
(3) Mr. Toh, a director of the Company and one of two directors of Four M,
has disclaimed beneficial ownership of the shares of the Common Stock
owned by Four M.
(4) Represents the number of shares of Common Stock owned by the noted
shareholder. As set forth hereinbelow, Four M has granted certain options
exercisable commencing July 1, 1996 (subject to the satisfaction of
certain conditions) to purchase 3,722,832 shares of Common Stock.
Commonwealth and affiliates or associates thereof have the right to
purchase 224,187 shares of Common Stock prior to September 6, 1997 and
270,696 shares of Common Stock prior to December 31, 1997. Benchmark
Equity Group, Inc. ("Benchmark") has the right to purchase 514,559 shares
of Common Stock prior to September 6, 1997 and 537,500 shares prior to
December 31, 1997. Certain employees and members of management of I-Link
and/or the Company have the right to purchase 825,000 shares of Common
Stock prior to September 6, 1997 and 825,000 shares prior to December 31,
1997.
(5) G Net Enterprises, Inc. ("G Net") is the General Partner of I-Link, Ltd.
and Clay Wilkes, a director of the Company, is the sole shareholder of G
Net.
(6) I-Link, Ltd., a limited partnership, owns an aggregate 1,925,141 shares
of Common Stock. The Company has been informed that Mr. Wilkes, a
director of the Company, may be deemed to indirectly beneficially own the
1,925,141 shares owned by I-Link, Ltd.
(7) Includes 1,925,141 shares of Common Stock held of record by I-Link, Ltd.
See previous footnote. Also includes 780,000 shares of Common Stock
purchasable upon exercise of an option exercisable commencing on July 1,
1996 granted by Four M and options to purchase 20,000 shares of Common
Stock issuable by the Company. Excludes an option granted by the Company
on July 1, 1996 to purchase 1,500,000 shares of Common Stock at an
exercise price of $7.00 per share, vesting in 25% increments in the event
that the average closing bid price of a share of the Company's Common
Stock for five consecutive trading days exceeds $10, $15, $20 and $25,
respectively. Such option becomes exercisable (to the extent vested) on
June 30, 1997, vests in its entirety on June 30, 2001 and lapses on June
30, 2002. Of the shares owned, 30,000 have been pledged to secure the
repayment of loans in the principal amount of $90,000 made in March 1997.
The loans bear interest at the rate of 8% per annum and are due and
payable on or before September 30, 1997, at the discretion of the payee
in cash or the shares of Common Stock.
(8) I-Link, Ltd., a limited partnership, owns an aggregate 1,925,141 shares
of Common Stock. The Company has been informed that T6-G Limited
Partnership may be deemed to indirectly beneficially own 548,891 of the
shares owned by I-Link, Ltd.
(9) Includes 548,891 shares of Common Stock held of record by I-Link, Ltd.
See previous footnote. Also includes 171,192 shares of Common Stock which
are issuable upon conversion of 7,133 shares of Class C Preferred Stock.
(10) Includes 761,570 shares of Common Stock and 91,771 shares of Common Stock
issuable upon conversion of 3,750 shares of Class B Preferred Stock
subject of an option exercisable commencing July 1, 1996 granted by R.
Huston Babcock to the noted shareholder and 30,726 shares issued, and an
additional 1,052,059 shares of Common Stock which may be purchased, upon
exercise of an option exercisable commencing July 1, 1996 granted by Four
M to the noted shareholder. Also includes (a) 18,048 shares of Common
Stock issuable upon conversion of 752 shares of Class C Preferred Stock,
and (b) 145,000 shares of Common Stock, all of which 163,048 shares are
beneficially owned by Trident I, LLC, of which the noted shareholder is
the manager with the power to exercise investment, dispositive and voting
control.
(11) Includes: (a) 183,542 shares of Common Stock into which the 7,500 shares
of Class B Preferred Stock owned by the noted stockholder are
convertible; and (b) 38,501 shares of Common Stock issuable pursuant to
options exercisable within 60 days of the date hereof. 91,771 of the
shares of Common Stock issuable upon conversion of such shares of the
Class B Preferred Stock are subject to an option granted by the noted
stockholder to Benchmark.
(12) Represents 4,000 shares of Common Stock and 67,750 shares issuable
pursuant to options exercisable within 60 days of the date hereof.
(13) Includes 416,665 shares of Common Stock subject to the vested portion of
Mr. Edwards' option to purchase 1,000,000 shares of Common Stock. Also
includes 295,000 shares of Common Stock subject to options held by Mr.
Edwards, and 25,000 shares of Common Stock subject to a warrant held by
Mr. Edwards. See "Executive Compensation -- Employment Agreements" and
"Certain Relationships and Related Transactions."
(14) Includes 15,503 shares of Common Stock issued and 525,890 shares issuable
pursuant to options exercisable commencing July 1, 1996 granted by Four M
and 243,891 Kanter Shares.
(15) Includes 46,509 shares issued and an additional 494,883 shares of Common
Stock issuable pursuant to options exercisable commencing July 1, 1996
granted by Four M to Commonwealth and 530,000 shares of Common Stock
6
<PAGE>
owned by certain affiliates and control persons of the named shareholder.
Also includes 750,000 shares of Common Stock subject to warrants held by
the named stockholder and 90,000 shares of Common Stock issuable upon
conversion of 3,750 shares of Class C Preferred Stock which are held by
certain affiliates of the named stockholder. Does not include shares of
Common Stock which may be held by Commonwealth from time to time in its
trading account in connection with ordinary market-making activities.
(16) I-Link, Ltd., a limited partnership, owns 1,925,141 shares. The Company
has been informed that Mr. Radulovic may be deemed to indirectly
beneficially own 269,824 of the shares owned by I-Link, Ltd.
(17) Includes 269,824 shares of Common Stock held of record by I-Link, Ltd.
See previous footnote. Also includes 500,000 shares of Common Stock
issuable pursuant to options exercisable commencing July 1, 1996 granted
by Four M but excludes an option granted by the Company on July 1, 1996,
to purchase 500,000 shares of Common Stock at an exercise price of $7.00
per share, vesting in 25% increments in the event that the average
closing bid price of a share of the Company's Common Stock for five
consecutive trading days exceeds $10, $15, $20 and $25, respectively.
Such option becomes exercisable (to the extent vested) on June 30, 1997,
vests in its entirety on June 30, 2001 and lapses June 30, 2002.
(18) The Company has agreed to issue options to purchase 64,000 shares of
Common Stock to Mr. Cohen, to be exercisable at the fair market value
thereof on September 30, 1996. Of such options, 24,000 shall vest and
become exercisable immediately upon grant, 20,000 shall vest and become
exercisable on the first anniversary of the grant, and 20,000 shall vest
and become exercisable on the second anniversary of the grant. Represents
shares to become immediately issuable upon exercise of such options.
Includes an additional 25,000 shares issuable upon exercise of options
issuable to Mr. Cohen and 72,000 Conversion Shares, subject to
adjustment, issuable to the Leslie Group upon conversion of Class C
Preferred Stock. Mr. Cohen is President of the Leslie Group, Inc., which
is a limited partner of the parent of Commonwealth, and which holds 3,000
shares of Class C Preferred Stock.
(19) Includes 41,666 shares of Common Stock issuable pursuant to options
exercisable within 60 days of the date hereof and 54,000 shares of Common
Stock issuable upon conversion of 2,666 shares of Class C Preferred
Stock, including 500 shares of Class C Preferred Stock held in the name
of Mr. Flury's wife.
(20) Includes 1,140,243 shares of Common Stock which may be obtained pursuant
to options exercisable within 60 days of the date hereof, 183,542 shares
of Common Stock into which the 7,500 shares of Class B Preferred Stock
are convertible and 111,984 shares of Common Stock, into which 4,666
shares of Class C Preferred Stock are convertible. Also includes 780,000
shares of Common Stock subject of an option exercisable commencing on
July 1, 1996 granted by Four M and 1,925,141 shares owned of record by
I-Link, Ltd. (see footnote 6), and excludes certain unvested options
granted by the Company.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Title
- -------------------- --- ----------------------------------------------------------
<S> <C> <C>
John W. Edwards 41 President, Chief Executive Officer and Director of the
Company and Chief Executive Officer of I-Link
Clay Wilkes 36 Chairman of the Board of the Company
Karl S. Ryser, Jr. 41 Treasurer and Chief Financial Officer of the Company and
Chief Financial Officer of I-Link
David E. Hardy 44 Secretary of the Company
William H. Flury 42 Vice President, Sales & Marketing of I-Link
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dorothy L. Michon 41 Vice President, Operations of the Company
Henry Y.L. Toh 39 Director of the Company
R. Huston Babcock, M.D. 67 Director of the Company
Joseph A. Cohen 49 Director of the Company
</TABLE>
The Company's Articles of Incorporation provide that the number of
directors of the Company shall not be less than five or more than nine.
Currently, the Board of Directors has five members. The Company's Articles of
Incorporation provide that the Board of Directors is divided into three classes.
Messrs. Joel S. Kanter (who resigned in July 1996 for personal reasons) and
Henry Y.L. Toh, Class II Directors, stood for re-election at the annual meeting
of shareholders in 1995. The terms of office of Mr. Toh and Joseph A. Cohen, who
was appointed a Class II Director in September 1996 as the designee of
Commonwealth, will expire at the second annual meeting of shareholders following
the Annual Meeting. The terms of office of Dr. R. Huston Babcock and John W.
Edwards, Class III Directors, expire at the upcoming Annual Meeting of
shareholders and such persons have been nominated for re-election. See Proposal
1. The term of office of Clay Wilkes, a Class I Director, expires at the next
succeeding Annual Meeting of shareholders. Commonwealth has also designated
Michael Falk to be a non-voting advisor to the Board. In addition, Commonwealth
has the right to approve the Company's selection of a second outside director in
accordance with the terms of the Sales Agency Agreement between the Company and
Commonwealth Associates entered into in July 1996 in connection with the
Company's private placement of Class C Preferred Stock. A second outside
director has not been selected as of the date hereof.
Biographical information with respect to the present executive officers,
directors, and key employees of the Company are set forth below. There are no
family relationships between any present executive officers and directors except
that John W. Edwards and Robert W. Edwards, Jr. are brothers.
John W. Edwards, President, Chief Executive Officer and Director of the
Company. Mr. Edwards was selected to fill a vacancy on the Board of Directors as
a Class III director in June 1996. Mr. Edwards serves as the Chief Executive
Officer of I-Link and, as of September 30, 1996, serves as the President and
Chief Executive Officer of the Company. Mr. Edwards served as Acting Chief
Financial Officer of the Company from September 1996 to January 1997. Mr.
Edwards served as President and a director of Coresoft, Inc., a software company
developing object-oriented computer solutions for small businesses from
September 1995 to April 1996. During the period August 1988 through July 1995,
Mr. Edwards served in a number of executive positions with Novell, Inc., a
software company providing networking software, including Executive Vice
President of Strategic Marketing, Executive Vice President of the Appware and
Desktop Systems Groups and Vice President of Marketing of the NetWare Systems
Group. Mr. Edwards was involved in the development of the NetWare 386 product
line. Until May 1996, he was a visiting faculty member at the Marriott School of
Management at Brigham
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Young University. Mr. Edwards received a B.S. degree in
Computer Science from Brigham Young University and has taken graduate courses in
Computer Science at Brigham Young University. Mr. Edwards has been nominated for
reelection to the Board of Directors as a Class III Director.
Clay Wilkes, Chairman of the Board of the Company since September 1996.
Mr. Wilkes was elected by the Board of Directors of the Company as a Class I
Director in April 1996. Mr. Wilkes served as President and Chief Executive
Officer of I-Link from inception to April 1996, Chief Technology Officer of
I-Link until January 1997 and is a director of I-Link. Mr. Wilkes has served as
President of GNET Enterprises, Inc., the general partner of I-Link, Ltd., since
its inception. From February 1993 through June 1994, Mr. Wilkes has served as a
consultant to IBM in Austin, Texas on the PowerPC project. From August 1990
through September 1992, he was responsible for UNIX product development at
Novell, Inc. in Provo, Utah, where he managed the networking server and client
development groups. Mr. Wilkes has spent many years in the management and
development of computer communications software. Mr. Wilkes attended the
University of Oregon and Brigham Young University and course work in Computer
Science at Utah State University.
Karl S. Ryser, Jr., Treasurer and Chief Financial Officer of the Company
and of I-Link. Mr. Ryser was elected Treasurer of the Company and Treasurer and
Chief Financial Officer of L-Link in September 1996, and Chief Financial Officer
of the Company in January 1997. Mr. Ryser was self-employed as a corporate
financial consultant from May 1995 until September 1996, when he joined I-Link
as its Treasurer. From July 1993 through April 1995, Mr. Ryser served as Vice
President of Finance and Treasurer of Megahertz Corporation, a publicly-held
manufacturer of data communication products, in which position he served until
Megahertz was acquired by U.S. Robotics Corporation. After earning his MBA, Mr.
Ryser's work experience was concentrated in the investment banking field,
working first with the Capital Markets Division of First Security Corporation
and later with Dain Bosworth, Inc. Mr. Ryser holds a B.S. degree in Finance from
the University of Utah in 1979, and an MBA from the University of San Diego in
1982.
David E. Hardy, Secretary of the Company. Mr. Hardy was appointed
Secretary of the Company in December 1996. He is a founding partner of the law
firm of Hardy & Allen, in Salt Lake City. From February 1993 to April 1995, Mr.
Hardy served as Senior Vice President and General Counsel of Megahertz
Corporation, a publicly-held manufacturer of data communication products. Prior
to his association with Megahertz Corporation, Mr. Hardy was a senior partner of
the law firm of Allen, Hardy, Rasmussen & Christensen which was founded in 1982.
Mr. Hardy holds a Bachelor of Arts degree from the University of Utah and a
Juris Doctor degree from the University of Utah School of Law.
William H. Flury, Vice President, Sales and Marketing of I-Link since May
1996. Mr. Flury has over 17 years of sales and marketing management experience.
From November 1994 to March 1996, Mr. Flury held the Vice President of Worldwide
Sales position at Zebra Technologies, VTI. From June 1988 to September 1989, Mr.
Flury was employed by Novell, Inc., where he was the Senior Director of National
Accounts and Industry Markets. From
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November 1989 to July 1992, he worked for Adobe Systems as Director of Market
Development. From August 1992 to October 1994, he was employed by NetLabs as
Vice President of Worldwide Sales and Customer Support. From October 1994 to
March 1996, he was employed by Vertical Technologies. Mr. Flury has established
domestic and international programs in direct sales, multi-tiered channel sales,
and OEM sales. Mr. Flury holds Business and Sociology degrees from the
University of Utah, and is a graduate of the Stanford Executive Program.
Dorothy L. Michon, Vice President, Operations of the Company. Ms. Michon
joined the Company in August 1983 as C.T. Technologist, was promoted to
Technical Director in 1983, and then Associate Director of Operations in 1985.
She was elected as the Company's Vice President - Operations in March 1990. She
holds an Associate Degree in Radiology Technology and a B.S. degree in
Professional Management from Nova University.
Henry Y.L. Toh, Director of the Company. Mr. Toh was elected by the Board
of Directors as a Class II Director and as Vice Chairman of the Board of
Directors in March 1992. Mr. Toh was elected President of the Company in May
1993, Acting Chief Financial Officer in September 1995 and Chairman of the Board
in May 1996, and served as such through September 1996. Mr. Toh is a Director of
Four M. Mr. Toh served as a senior tax manager in international taxation and
mergers and acquisitions with KPMG Peat Marwick from March 1980 to February 17,
1992. He is a graduate of Rice University.
R. Huston Babcock, M.D., Neurosurgeon and Director of the Company since
April 1983. Dr. Babcock served as Chairman of the Board of Directors of the
Company from its inception in April 1983 until March 1992. He was President of
the Company from inception until November 1987. He was Medical Director of the
Company from November 1987 to February 1993. Dr. Babcock is a neurosurgeon and
has been engaged in the full-time private practice of medicine on the West Coast
of Florida since 1960. Dr. Babcock's term as a Director of the Company expires
at the Annual Meeting and upon election and qualification of a successor.
Joseph A. Cohen, President of an investment firm and Director of the
Company. Mr. Cohen was appointed a Class II Director of the Company in September
1996 as the designee of Commonwealth. He has been the Chairman, Chief Executive
Officer and Director of New Frontier Entertainment, Inc. ("New Frontier") since
its formation in May 1995 and held the same positions since January 1993 in New
Frontier's predecessor company, The Frondelle Company, Inc. He is also President
of Leslie Group, Inc., a diversified company with holdings primarily in the
music, film, home video and other entertainment-oriented businesses. The Leslie
Group is a limited partner of Commonwealth Associates Management Corp., a
limited partnership which is the parent of Commonwealth. He is also a Founder
and President of Leslie/Linton Entertainment Inc., a merchant banking company
that provides investment funds and assists in raising capital and debt for
companies. Mr. Cohen also serves as President of Pickwick Communications, Inc.,
an independent music publishing company. From 1977 to 1986, Mr. Cohen served as
Executive Vice President of the National Association of Recording
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Merchandisers, Inc. and Founder and Executive Vice President of Video Software
Dealers Association, Inc., trade associations representing all segments of the
recorded music and home video industries, respectively.
Robert W. Edwards, Jr., Vice President of Network Operations of I-Link.
Mr. Edwards was appointed Vice President of Network Operations of I-Link in
January 1997. From its inception in March 1996 to January 1997 Mr. Edwards
served as President and a Director of Family Telecommunications Incorporated
("FTI"), a long-distance telecommunications carrier. Prior to incorporating FTI,
Mr. Edwards worked from September 1995 to March 1996 on preliminary regulatory,
tariff, equipment lease, employment and other organizational matters for FTI.
Mr. Edwards was President of FTI Publishing, Inc., a publisher of travel-related
advertising brochures (not associated or affiliated with FTI) from 1993 to 1995.
From 1984 through 1993, Mr. Edwards was a partner in ONE-2-ONE Communications,
Inc., a telecommunications reseller for the southwest region of the United
States. He received his B.S. Degree in Computer Science from the University of
Utah in 1976.
Each officer of the Company is chosen by the Board of Directors and holds
his or her office until his or her successor shall have been duly chosen and
qualified or until his or her death or until he or she shall resign or be
removed as provided by the By-Laws.
There are no material proceedings to which any director, officer or
affiliate of the Company, any owner of record or beneficially of more than five
percent of any class of voting securities of the Company, or any associate of
any such director, officer, affiliate of the Company or security holder is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership of equity
securities of the Company with the Securities and Exchange Commission ("SEC").
Officers, directors, and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
that they file.
Based solely upon a review of Forms 3 and Forms 4 furnished to the
Company pursuant to Rule 16a-3 under the Exchange Act during its most recent
fiscal year and Forms 5 with respect to its most recent fiscal year, the Company
believes that all such forms required to be filed pursuant to Section 16(a) of
the Exchange Act were timely filed, as necessary, by the officers, directors,
and security holders required to file the same during the fiscal year ended
December 31, 1996, except that reports were filed late by the following persons:
John W. Edwards, 3 transactions; Clay Wilkes, 3 transactions; Karl S. Ryser,
Jr., 1 transaction; Alex Radulovic, 3 transactions; William H. Flury, 3
transactions; Joseph A. Cohen, 2 transactions; and I-Link, Ltd., 1 transaction.
In addition, the Company has received no copies of Forms, 3, 4 or 5 for
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the following persons relating to the following number of transactions:
Benchmark, 6 transactions; and Commonwealth, 5 transactions.
Certain Relationships and Related Transactions
During the first quarter of fiscal 1995, the Company received advances
totaling $218,000 from Mortgage Network International ("MNI"). Henry Y.L. Toh, a
Director of the Company, has management control over MNI. Such advances were
previously payable upon demand. Subsequent to the extension of such advances,
the Board of Directors approved delivery of a promissory note representing the
aggregate amount of such advances, which promissory note matured by its terms on
October 1, 1995 and bore interest at one percent over the prime rate of interest
established by Southwest Bank of Texas, N.A. The balance due as of December 31,
1996, was $175,682 which will be discharged as follows: (i) a principal payment
of $88,000 originally due December 31, 1996 will be paid in 21 equal monthly
payments of approximately $4,600 beginning March 10, 1997; and (ii) the
remaining principal amount of $87,682 plus interest at 10.5% per annum will be
paid at the rate of $4,200 per month.
I-Link was a party to a 12-month consulting agreement with Benchmark dated
August 10, 1995 pursuant to which I-Link was obligated to pay $6,000 per month
to Benchmark for consulting services rendered. Those payments accrued and were
deferred pending the Company's attaining stockholder's equity of at least
$2.5 million. The sums due were paid and the agreement has not been renewed.
I-Link entered into a consulting agreement with T6-G Limited Partnership
("T6-G") for two years commencing upon the successful completion of at least
$4 million in funding. The agreement required the payment of a total of $70,000
payable monthly over 24 months. I-Link discharged the entirety of the sums due
in September 1996 and T6-G designated such sums to be allocated to its purchase
of Class C Preferred Stock.
I-Link was indebted to T6-G in the amount of $300,000, which sums were
repaid in full from the proceeds of the Class C Offering. T6-G owns a 9.5%
interest in I-Link, Ltd.
The Company also entered into two consulting agreements with Jason H.
Pollak, the initial term of one of which expired on January 31, 1996 and the
second of such agreements commenced thereafter. The term of the second agreement
was for a period of three years, subject to earlier termination by the Company.
Pursuant to the terms of the first of such agreements (collectively, the "Pollak
Agreements"), Mr. Pollak received 50,000 shares of Common Stock. The second of
the Pollak Agreements provided Mr. Pollak with an option to purchase up to
50,000 shares of Common Stock each year at prices of $1.50, $2.50 and $3.50,
respectively. The shares of Common Stock were included in a registration
statement on Form S-8. The second of the Pollak Agreements was terminated by the
Company effective April 4, 1996.
In January 1996, certain associates and affiliates of Commonwealth
purchased an aggregate of 878,891 shares of Common Stock (the "Kanter Option
Shares") upon conversion of Class A
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Preferred Stock held by Walnut Capital Corp. ("WCC"), Windy City, Inc. ("WCI")
and Canadian Imperial Bank of Commerce Trust Company (Bahamas) Limited at a cost
per share of approximately $0.49. Joel Kanter, a director of the Company at the
time of the transaction, is affiliated with WCC and WCI.
On February 21, 1996, Four M International, Ltd. ("Four M"), a principal
shareholder of the Company, granted certain options to purchase shares of the
Company owned by Four M exercisable commencing July 1, 1996 (subject to the
satisfaction of certain conditions) to purchase 3,915,570 shares of Common
Stock. Henry Y.L. Toh, a director of the Company, is one of the two directors of
Four M. The exercise price of $1.79 per share represents the lesser of 200% of
the average of the closing bid and ask price per share of Common Stock for the
ten (10) business days preceding July 1, 1996 or $1.79 per share. Commonwealth
and affiliates or associates thereof received the right to purchase 545,285
shares of Common Stock prior to December 31, 1996 and 537,500 shares of Common
Stock prior to December 31, 1997. Benchmark received the right to purchase
545,285 shares of Common Stock prior to December 31, 1996 and 537,500 shares
prior to December 1997. Certain members of management of I-Link, namely, Clay
Wilkes, Floyd Wilkes and Alex Radulovic, have the right to purchase an aggregate
of 825,000 shares of Common Stock prior to December 31, 1996 and 825,000 shares
prior to December 31, 1997. Scott Cook received the right to purchase 100,000
shares prior to December 31, 1996. On February 21, 1996, I-Link agreed to pay an
aggregate of $1,275 to Four M by Mr. Cook on or before July 1, 1996. On
April 24, 1996, the Four M Options issued to Mr. Cook were cancelled and options
were issued as of that date by Four M to Mr. Cook (50,000 shares), S.C. Culbreth
(25,000 shares) and John Beardmore (25,000 shares).
In August 1996 the Four M Options were amended to provide that in the event
that $200,000 in principal amount (i.e., exercise proceeds) of the Four M
Options have been exercised prior to December 31, 1996, the exercise period of
the remaining Four M Options exercisable during 1996 (the "1996 Four M Options")
will be extended to September 6, 1997 and the exercise price would be increased
by four percent (4%) of the then current exercise price for each 30 day period
or portion thereof commencing January 1, 1997 in which the remainder of the 1996
Four M Options are not exercised. In December 1996 Four M Options to purchase
the following shares were exercised by the following persons: 25,000 shares by
Scott Cook, 12,500 shares by John Beardmore, 12,500 shares by S.C. Culbreth,
30,726 shares by Benchmark, 46,509 shares by Commonwealth and 15,503 shares by
William Baquet. Inasmuch as the aggregate amount exercised exceeded $200,000 in
principal amount, the exercise period of the remaining Four M Options was
extended.
The shares of Common Stock owned by Four M are subject of a lockup
agreement with Commonwealth from and after the termination of the option
agreements and until 12 months from September 6, 1996; provided, however, that
to the extent Commonwealth releases more than 300,000 shares in the aggregate on
behalf of any affiliate or associated person of Commonwealth, any officer or
director of the Company or its subsidiaries or Benchmark, Commonwealth shall
release a number of Four M Shares equal to the same percentage as the number of
shares owned by such person. In addition, the Company has been informed that the
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holders of the Four M Options have executed lock-up agreements with Commonwealth
for 12 months after September 6, 1996.
On February 21, 1996, R. Huston Babcock, M.D., a director of the Company,
granted certain options (the "Babcock Options") to Benchmark exercisable
commencing July 1, 1996 (subject to the satisfaction of certain conditions) to
purchase 183,542 shares of Common Stock issuable upon conversion of outstanding
Class B Convertible Preferred Stock. The exercise price is equal to the lesser
of 200% at the average of the closing bid and ask price per share of Common
Stock for the ten (10) business days preceding July 1, 1996 or $1.79 per share.
Benchmark received the right to purchase 91,771 shares of Common Stock prior to
December 31, 1996, which options have expired, and the right to purchase 91,771
shares prior to December 1997.
Certain shares of Common Stock owned by Dr. Babcock are subject to a lock-
up agreement with Commonwealth for a period of twelve (12) months from
September 6, 1996.
In August 1996, William H. Flury, Vice President, Sales & Marketing of
I-Link, loaned I-Link the sum of $100,000, with $105,000 (including a loan
origination fee of $5,000) due and payable the earlier of September 16, 1996 or
upon the closing of a debt or equity offering by the Company. In connection with
such loan, the Company agreed to issue Mr. Flury a warrant to purchase 5,000
shares of Common Stock for two years at $2.50 per share. The Company recorded
additional interest expense of $11,875 in connection with the transaction. The
funds from the loan were used for general working capital purposes of I-Link.
The loan was repaid in September 1996 and the sums directed by Mr. Flury to
purchase 1,666 shares of Class C Preferred Stock.
In August 1996, John W. Edwards, President and Chief Executive Officer of
I-Link, loaned I-Link the sum of $131,250 (including a $6,250 original issue
discount) due and payable the earlier of September 6, 1996, or upon the receipt
of proceeds from a debt or equity financing of the Company. In connection with
such loan, the Company agreed to issue Mr. Edwards a warrant to purchase 25,000
shares of Common Stock for two years at $4.87 per share. Funds from the loan
were used to pay a $100,000 payment due to AT&T and for general working capital
purposes. The loan was repaid in September 1996 from the proceeds of the Class C
Offering.
In September 1996, the Company advanced the sum of $685,000 to FTI to be
utilized by FTI to acquire from Harris Corporation certain items of
telecommunications switches known as "Harris switches." FTI is an authorized
Harris reseller and was able to obtain favorable pricing for these switches.
These Harris switches are included in the equipment covered by the IBM operating
lease, and IBM paid FTI for the switches as a vendor, and leased them to
I-Link. As of December 31, 1996, the remaining portion of the advance was
$120,000. The majority owner of FTI is Robert W. Edwards, a brother of John W.
Edwards, the Company's President, Chief Executive Officer and Director.
Effective January 1, 1997, the Company acquired all of the outstanding stock of
FTI. See "Proposal 4 -- Information About the FTI Acquisition" and "-- Reasons
for Acquisition."
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Clay Wilkes, the sole shareholder of G Net Enterprises, Inc. ("G Net"), the
general partner of I-Link, Ltd. pledged all of the issued and outstanding shares
of G Net to secure the Company's guarantee of $100,000 of the principal amount
of a loan on October 19, 1995 from Scott Cook to I-Link. The loan was repaid in
September 1996 from the proceeds of the Class C Offering.
Certain officers and directors of the Company and/or I-Link have agreed to
vote shares over which they exercise voting power in an aggregate amount of
6,956,000 shares of Common Stock in favor of a proposal to increase the
authorized shares of Common Stock and Preferred Stock of the Company. In
addition, pending the solicitation of the necessary stockholder approval and as
a condition to the first closing of the Class C Offering, securityholders,
including certain officers and directors of the Company and/or I-Link, have
agreed not to exercise any options owned by them unless and until the
shareholders of the Company approve an increase in authorized capital stock.
On September 6, 1996, the Company closed a private placement of 240,000
shares of Class C Preferred Stock and $717,000 of principal amount of
Convertible Promissory Notes (the "Class C Offering"). As a result of the
closing of the Class C Offering, 1.6 million shares of the Company's restricted
Common Stock held in escrow for the benefit of the former shareholders of I-Link
have been released from escrow, in accordance with the terms of the Stock
Purchase Agreement between I-Link and the Company. Upon such release, the
Company recorded additional acquired in-process research and development expense
of $9.8 million and an increase to paid-in capital of $9.8 million.
Commonwealth Associates (previously defined and hereinafter referred to as
"Commonwealth"), acted as the placement agent for the Class C Offering.
Commonwealth received a commission equal to seven percent of the aggregate
purchase price of the shares of Class C Preferred Stock and Convertible Notes
sold, a non-accountable expense allowance equal to three percent of the gross
proceeds from the sale of the Class C Preferred Stock and Convertible Notes and
certain other specified offering-related costs. Pursuant to the terms of the
Class C Preferred Stock, the shares of Common Stock issuable upon conversion
thereof and any shares of Common Stock issuable as a dividend on such Class C
Preferred Stock may not be publicly sold prior to September 5, 1997 without the
prior written consent of Commonwealth.
In addition, the Company granted Commonwealth a right of first refusal to
underwrite or place any future public or private sale of debt or equity
securities or any such sale by certain principal shareholders of the Company,
its subsidiaries and successors, for a period of five years after the closing of
the Class C Offering.
The Company issued to Commonwealth Warrants to purchase up to 250,000
shares of the Company's Common Stock and Consultant's Warrants to purchase up to
500,000 shares of Common Stock (together previously defined as the "Commonwealth
Warrants"). The Commonwealth Warrants will be exercisable for five (5) years
commencing March 1997 at an exercise price of $2.50 per share, subject to
adjustment.
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The Company also entered into a Consulting Agreement with Commonwealth,
pursuant to which: (i) the Company shall employ Commonwealth as its investment
banker and financial consultant for a period of twelve (12) months; (ii) the
Company paid Commonwealth a fee of $200,000, plus two percent of the gross
proceeds of the Class C Offering in excess of $10,000,000, for such twelve-month
period; and (iii) the Company agreed to pay Commonwealth a fee of five percent
of the first $5,000,000 and two and one-half percent of the amount over
$5,000,000 of the consideration paid or received by the Company (or by any
affiliated entity of the Company) in any transaction (including mergers,
acquisitions, joint ventures and other business transactions) consummated by the
Company or any subsidiary or affiliate of the Company introduced to the Company
by Commonwealth.
Certain officers, directors and affiliated persons, including holders of
the 10% Notes, the Four M Options, the Kanter Option Shares and the Babcock
Option have agreed with Commonwealth not to sell any shares of Common Stock or
options to purchase Common Stock for a period of 12 months from September 6,
1996 without the prior written consent of Commonwealth. In addition, holders of
the 10% Notes and certain other promissory notes who acquired Class C Preferred
Stock in the Class C Offering have agreed with Commonwealth not to sell any
shares of Common Stock or the Conversion Shares for a period of twelve (12)
months from September 6, 1996, without the prior written consent of
Commonwealth; provided, however, Commonwealth has agreed that such persons will
be permitted to sell a sufficient amount of the shares of Common Stock or
Conversion Shares as will equal the principal amount of the note previously held
by such shareholder. In addition, certain officers, directors and affiliated
persons of the Company have agreed not to exercise any options owned by them
(and to waive reservation of the shares of Common Stock underlying such options)
until shareholders authorize such number of additional shares of Common Stock
necessary to accommodate the lowest Conversion Price of the Class C Preferred
Stock and, finally, all such persons have agreed to vote their shares of Common
Stock for such increase in authorized capital.
Commonwealth designated Joseph A. Cohen for election to the Board of
Directors of the Company, and designated Michael Falk as a non-voting advisor to
the Board of Directors. In addition, Commonwealth was granted the right to
approve the Company's selection of a second outside director to be nominated for
election at the next annual or special meeting of stockholders.
Commonwealth also arranged bridge financings for the Company in the amount
of $375,000 and was paid $37,500 in commissions from the proceeds of the Class C
Offering.
On April 29, 1997 the Company entered into a Settlement Agreement
("Settlement Agreement") with JW Charles Financial Services, Inc. ("JWC"),
pursuant to which the Company and JWC settled certain litigation between them.
Pursuant to the Settlement Agreement, the Company agreed (a) to pay or cause JWC
to be paid the sum of six hundred thousand dollars ($600,000); and (b) to
terminate a financial consulting agreement between the parties (the "1994
Consulting Agreement"); concurrently JWC agreed (c) to transfer to the Company
or its designees and/or assignees all of its right, title and interest to a
warrant (the "JWC Warrant") representing the right to purchase shares of Common
Stock, which warrant had been issued
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pursuant to the 1994 Consulting Agreement, (d) to deliver to the Company the JWC
Warrant with an executed assignment of the JWC Warrant with the name of the
assignee left in blank to be filled in by the Company, and (e) to terminate the
1994 Consulting Agreement. Both parties executed general releases in full
settlement of all claims and disputes between them. The JWC Warrant, as adjusted
through the date of its surrender to the Company, represents the right to
purchase 331,126 shares of Common Stock at $1.51 per share until November 3,
1999. In connection with the execution of the Settlement Agreement the JWC
Warrant was purchased by a group of investors which includes David E. Hardy and
Karl S. Ryser, Jr., both of whom are members of Company management (the "Hardy
Group"), in consideration for payment by the Hardy Group of six hundred thousand
dollars ($600,000) to JWC in satisfaction of the amounts owed to JWC under the
Settlement Agreement. As additional compensation for the Hardy Group's
commitment to purchase the JWC Warrant, the Company also (i) will amend the JWC
Warrant to provide for adjustment of its exercise price in the event that the
conversion rate of the Class C Preferred Stock is adjusted; (ii) will issue to
the Hardy Group new warrants to purchase an aggregate of 175,000 shares of
Common Stock at an exercise price of $2.50 per share (adjustable in relation to
any adjustments in the Class C Preferred Stock conversion rate) for a term of
five years, pursuant to which the members of the Hardy Group shall have piggy-
back registration rights; and (iii) will amend options previously issued to each
of Messrs. Hardy and Ryser to provide that, as to the unvested portion of such
options, 100,000 options would vest immediately and the balance would vest in
four equal installments over twelve months.
See "Compensation of Executive Officers and Directors -- Employment
Agreements" and "Compensation of Executive Officers and Directors -- Consulting
Agreements" for descriptions of the terms of employment and consulting
agreements between the Company or I-Link and certain officers, directors and
other related parties.
THE BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides that the number of
Directors of the Company shall not be less than five nor more than nine. The
Board of Directors currently consists of five members. The Company's Certificate
of Incorporation provides that the Board of Directors shall be divided into
three classes. The terms of office of Messrs. Joseph A. Cohen and Henry Y.L.
Toh, Class II Directors, expire at the second succeeding shareholders' meeting.
The terms of office of Mr. John W. Edwards and Dr. R. Huston Babcock, Class III
Directors, expire at the Annual Meeting. The term of office of Mr. Clay Wilkes,
Class I Director, will expire at the next succeeding shareholders' meeting.
Mr. Edwards and Dr. Babcock have been nominated for reelection at the Annual
Meeting.
The Board of Directors held seven meetings during the fiscal year ended
December 31, 1996. During the fiscal year ended December 31, 1996, no incumbent
director attended fewer than 75 percent of the meetings of the Board of
Directors or of the committees on which he served.
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Committees of the Board of Directors
Audit Committee. The Company's audit committee (the "Audit Committee") is
responsible for making recommendations to the Board of Directors concerning the
selection and engagement of the Company's independent certified public
accountants and for reviewing the scope of the annual audit, audit fees, and
results of the audit. The Audit Committee also reviews and discusses with
management and the Board of Directors such matters as accounting policies and
internal accounting controls, and procedures for preparation of financial
statements. Henry Y.L. Toh, Chairman of the Audit Committee, Clay Wilkes and
Joseph A. Cohen are members of the Audit Committee. The Audit Committee held one
meeting during the last fiscal year.
Compensation Committee. The Company's compensation committee (the
"Compensation Committee") approves the compensation for executive employees of
the Company. Dr. R. Huston Babcock, Chairman of the Compensation Committee,
John W. Edwards, and Joseph A. Cohen are members of the Compensation Committee.
The Compensation Committee held one meeting during the last fiscal year.
Finance Committee. The Company's finance committee (the "Finance
Committee") is responsible for reviewing and evaluating financing, strategic
business development and acquisition opportunities. Joseph A. Cohen, Chairman of
the Finance Committee, Clay Wilkes and John W. Edwards are members of the
Finance Committee. The Finance Committee held one meeting during the last fiscal
year.
The Company has no nominating committee or any committee serving a similar
function.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid for
services rendered to the Company during the last three fiscal years by each
person serving as the Company's Chief Executive Officer during the last year and
the Company's three most highly compensated executive officers serving at
December 31, 1996 whose compensation was in excess of $100,000.
18
<PAGE>
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------- ------------------------- ------------
Name and Year Salary($) Bonus($) Other Restricted Securities LTIP All Other
Principal Position Annual Stock Underlying Payouts($) Compensation($)
Compensation($) Awards($) Options/
SARs(#)
- --------------------- ------ -------- --------- ---------------- ------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry Y.L. Toh/1/ 1996 55,802 0 837/2/ 0/3/ 173,501 0 N/A
President and CEO 1995 58,051 0 225/2/ 0 11,167 0 N/A
1994 54,362 0 815/2/ 0 1,167 0 N/A
John W. Edwards/4/ 1996 101,663/4/ 0 0 0 1,250,000/5/ 0 N/A
President and CEO 1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
Karl S. Ryser, Jr./6/ 1996 41,665/6/ 0 0 0 250,000 0 N/A
Treasurer and CFO 1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
William H. Flury/7/
Vice President, Sales 1996 91,667/7/ 0 0 0 250,000/8/ 0 N/A
and Marketing of 1995 -- -- -- -- -- -- --
I-Link 1994 -- -- -- -- -- -- --
</TABLE>
- ---------------
<TABLE>
<S> <C>
1 Mr. Toh began his employment with the Company in April 1992 and was
appointed President and CEO in May 1993 and served as such through
September 30, 1996.
2 Represents Company contributions to 401(k) plan on behalf of Mr. Toh.
3 None of Mr. Toh, Mr. Edwards, Mr. Ryser or Mr. Flury had restricted stock
holdings at the end of the last year.
4 Mr. Edwards began his employment with I-Link in April 1996 and was
appointed President and CEO as of September 30, 1996; his annual salary was
$175,000 from April to August 21, 1996 and was $96,000 for the balance of
the year. See " -- Employment Agreements."
5 Excludes warrants to purchase 25,000 shares of Common Stock at an exercise
price of $4.875 per share issued in connection with a bridge loan. See
"Directors and Executive Officers --Certain Relationships and Related
Transactions."
6 Mr. Ryser began his employment with I-Link in September 1996; his annual
salary during the 1996 year was $125,000. See "--Employment Agreements."
7 Mr. Flury began his employment with I-Link in May 1996; his annual salary
during the 1996 year was $137,500 per year. See "--Employment Agreements."
8 Excludes warrants to purchase 5,000 shares of Common Stock at an exercise
price of $2.50 per share issued in connection with a bridge loan. See
"Directors and Executive Officers -- Certain Relationships and Related
Transactions."
</TABLE>
Option/SAR Grants in Last Fiscal Year (1996)
The following table sets forth certain information with respect to the
options granted during the year ended December 31, 1996, for the persons named
in the Summary Compensation Table (the "Named Executive Officers"):
19
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Fiscal or Base Expiration
Name Granted (#) Year Price ($/Sh) Date
- --------------------- ----------------- ----------------------- ---------------- --------------
<S> <C> <C> <C> <C>
Henry Y.L. Toh 150,000 3.5% $1.125 2/3/2006
10,000 *% 1.000 1/1/2006
John W. Edwards/1/ 1,000,000 23.1% 7.000 4/8/2006
250,000 5.8% 4.875 8/21/2006
Karl S. Ryser, Jr. 250,000 5.8% 4.410 10/15/2006
William H. Flury/2/ 250,000 5.8% 4.410 10/15/2006
</TABLE>
- ------------------------------
* Less than 1%.
/1/ Does not include warrants to purchase 25,000 shares of Common Stock at an
exercise price of $4.875 issued in connection with a bridge loan. See
"Directors and Executive Officers -- Certain Relationships and Related
Transactions."
/2/ Does not include warrants to purchase 5,000 shares of Common Stock at an
exercise price of $2.50 in connection with a bridge loan. See "Directors
and Executive Officers -- Certain Relationships and Related Transactions."
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth certain information with respect to options
exercised during 1996 by the Named Executive Officers and with respect to
unexercised options held by such persons at the end of fiscal 1996.
<TABLE>
<CAPTION>
Name Shares Value Number of Securities Value of Unexercised in the
Acquired On Realized Underlying Unexercised Money Options/SARs at
Exercise ($) Options/SARs at FY-End (#) FY-End ($)/1/
(#)
- ------------------- --------------- ------------ ------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Henry Y.L. Toh 0 0 173,501 0 581,919 0
John W. Edwards 0 0 416,666 833,334 N/A N/A
Karl S. Ryser, Jr. 0 0 25,000 225,000 N/A N/A
William H. Flury 0 0 0 250,000 N/A N/A
</TABLE>
- ---------------------
/1/ The calculations of the value of unexercised options are based on the
difference between the closing bid price on Nasdaq of the Common Stock on
December 31, 1996, and the exercise price of each option, multiplied by
the number of shares covered by the option.
20
<PAGE>
Director Compensation
During 1996, Directors of the Company then serving received options to
purchase 10,000 shares of Common Stock on the first business day of January at
an exercise price equal to the fair market value of the Common Stock on the date
of grant. Mr. Cohen received options to purchase 64,000 shares of Common Stock
upon his appointment to the Board. Effective February 6, 1997, and the first
business day of January of each year thereafter, each Director then serving will
receive options, to purchase 10,000 shares of Common Stock and, for each
committee on which the Director serves, options to purchase 5,000 shares of
Common Stock. The exercise price of such options shall be equal to the fair
market value of the Common Stock on the date of grant. The Directors are also
eligible to receive options under the Company's stock option plans at the
discretion of the Board of Directors.
Employment Agreements
In February 1996, the Company entered into two-year employment agreements
with Henry Y.L. Toh, then President and Chief Executive Officer; Dorothy Michon,
Vice President, Operations; and Stephanie Giallourakis, Controller and
Secretary. The employment agreements are each for an initial period ending on
December 31, 1997 and are automatically renewable for successive one-year
periods unless written notice to the contrary is given by the Company not less
than 120 days prior to expiration of the term. Pursuant to the terms of the
employment agreements, each such officer is required to devote such of his or
her time to the business and affairs of the Company as is required to fulfill
the duties and responsibilities of his or her office. Mr. Toh is entitled under
his employment agreement to receive compensation at the rate of $54,000 per
year. Ms. Michon is entitled to compensation at the rate of $63,000, and
Ms. Giallourakis is entitled to compensation at the rate of $53,000 per year.
Each such officer is entitled to an annual bonus at the discretion of the Board
of Directors and may participate in fringe benefits, deferred compensation,
stock benefits and option plans of the Company. In the event of termination of
his employment by the Company other than for "cause" (as defined in the
agreement) or by Mr. Toh upon "good reason" (as defined in the agreement), the
Company is required to pay Mr. Toh, as liquidated damages or severance pay,
monthly termination payments equal to the base salary in effect for a period of
six months after such termination and, with respect to Ms. Michon and
Ms. Giallourakis, each such officer is entitled to monthly termination payments
equal to the base salary for periods of three months after any such termination.
Each of the employment agreements contains confidentiality and non-solicitation
provisions.
I-Link entered into three-year employment agreements on February 21, 1996
with each of Clay Wilkes, Chairman of the Board, and Alex Radulovic, senior
engineer of I-Link. Under his employment agreement, Mr. Wilkes is employed at a
salary of $95,000 per annum, subject to adjustment upon satisfaction of
performance criteria. Under his employment agreement, Mr. Radulovic is employed
at a salary of $90,000 per annum, subject to adjustment upon satisfaction of
performance criteria. In the event of termination by the Company not involving
"Just Cause" (as defined in the agreement), or upon a material breach by the
Company which is unremedied for 30 days after written notice, each of Mr. Wilkes
and Mr. Radulovic is entitled to receive, as liquidated damages or severance
pay, an amount equal to the Monthly Compensation (as defined in the agreement)
for the remaining term of the Agreement and, in addition, all options shall vest
and all Common Stock of Medcross held in escrow shall be released. Each of the
agreements contain non-competition and confidentiality provisions. On
July 1, 1996, the Company approved the grant of options to purchase 1,500,000
and 500,000 shares of Common Stock at $7.00 per share for five years, to Messrs.
Wilkes and Radulovic, respectively. To the extent vested, the options may be
exercised commencing June 30, 1997. The options vest on June 30,
21
<PAGE>
2001; provided however, that vesting will accelerate in 25% increments at such
time as the average closing bid price of a share of Common Stock equals or
exceeds $10, $15, $20 and $25, respectively.
On April 8, 1996, subject to the approval of the I-Link Board of Directors,
I-Link entered into a three-year employment agreement with John W. Edwards,
President, Chief Executive Officer and Director of the Company. Pursuant to the
terms of the employment agreement, Mr. Edwards was employed as the Chief
Executive Officer and a Director of I-Link, and is required to devote
substantially all of his working time to the business and affairs of I-Link.
Mr. Edwards is entitled under his employment agreement to receive compensation
at the rate of $175,000 per year and is entitled to a profitability bonus in the
discretion of the I-Link Board of Directors and to participate in fringe
benefits of the Company as are generally provided to executive officers. In
addition, Mr. Edwards is entitled to receive an option to purchase one million
shares of Common Stock of Medcross, Inc. at an exercise price of $7.00. Of such
options, 83,333 vested immediately and 83,333 vest and become exercisable on the
first calendar day of each quarter after April 8, 1996. In the event of
termination by I-Link or in the event of a violation of a material provision of
the agreement by I-Link which is unremedied for thirty (30) days and after
written notice or in the event of a "Change in Control" (as defined in the
agreement), Mr. Edwards is entitled to receive, as liquidated damages or
severance pay, an amount equal to the Monthly Compensation (as defined in the
agreement) for the remaining term of the agreement. The agreement contains non-
competition and confidentiality provisions. Mr. Edwards agreed to amend his
contract, effective August 21, 1996, to reduce his annual salary from $175,000
to $96,000; and in consideration of the salary reduction, the Company has agreed
to grant him options to purchase 250,000 shares of Common Stock at an exercise
price of $4.875 per share.
In October 1996, I-Link entered into three-year employment agreements
with Karl S. Ryser, Jr., Treasurer and Chief Financial Officer of the Company,
and with William H. Flury, I-Link's Vice President, Sales and Marketing.
Pursuant to the terms of the employment agreements, each such officer is
required to devote all of his time to the business and affairs of the Company
except for vacations, illness or incapacity. Mr. Ryser is entitled under his
employment agreement to receive compensation at the rate of $125,000 per year
and a bonus in the sole discretion of the Chief Executive Officer and Mr. Flury
is entitled to compensation at the rate of $137,500 per year and a bonus
commensurate with his performance and that of I-Link. Each such employee may
participate in fringe benefits, deferred compensation, stock benefits and option
plans of the Company. In addition, each of Mr. Ryser and Mr. Flury is entitled
to options to purchase 250,000 shares of Common Stock exercisable at an exercise
price equal to the closing bid price on the date of the employment agreement.
Options issuable to Mr. Ryser to purchase 25,000 shares vest immediately and the
remaining options will vest in quarterly increments of 20,455 commencing
January 1, 1997. Options issuable to Mr. Flury to purchase 41,666 shares vest
six months from the date of the employment agreement and the remaining options
will vest in quarterly increments of 20,833. In the event of a change of control
or upon termination of the employment agreement by the Company without cause all
options shall thereupon be fully vested and immediately exercisable. In the
event of termination by the Company other than for "cause" (as defined in the
agreement), the Company is required to pay Mr. Ryser or Mr. Flury, as the case
may be, a lump sum severance payment equal to one year's then current salary.
Each of the employment agreements contains confidentiality and non-competition
provisions.
Consulting Agreements
The Company is a party to a consulting agreement for the period beginning
January 1, 1996 and ending December 31, 1998 with Windy City, Inc. Joel Kanter,
a director of the Company until July 30, 1996, is the President and a director
of Windy City, Inc. Pursuant to such agreement, Windy City, Inc.
22
<PAGE>
was engaged to provide such consulting services as the Company may request in
exchange for compensation at the rate of $6,250 per calendar quarter.
The Company entered into a consulting agreement for the three-month period
ended October 23, 1995 with Bijan Taghavi, formerly an officer and director of
the Company. Pursuant to such agreement, Mr. Taghavi was engaged to provide such
consulting services as requested by the Company in exchange for compensation at
the rate of $5,208 per month. Mr. Taghavi's consulting agreement contains
certain mutual release, non-competition and confidentiality provisions.
The Company entered into a consulting agreement with Timothy R. Barnes,
formerly an officer of the Company (the "Barnes Agreement"), which agreement
expired February 6, 1996. The Barnes Agreement provided for the issuance to
Mr. Barnes of warrants to purchase 36,858 shares of Common Stock exercisable at
a purchase price equal to the fair market value of the Common Stock at the date
of grant. The shares of Common Stock were included in a registration statement
on Form S-8. The Barnes Agreement also contained standard non-competition and
confidentiality provisions.
The Company entered into a consulting agreement with David E. Hardy
effective February 6, 1997 and for a term of 36 months thereafter. Pursuant to
the agreement, Mr. Hardy shall provide legal services to the Company in exchange
for compensation at the rate of $10,417 per month for the term of the Agreement.
In addition, in the event the Company increases the salary of its senior-level
vice presidents, the consulting fee shall be equally increased and in the event
the Company shall pay any company performance-based bonuses to its senior level
vice presidents, the Company shall pay an equal amount to Mr. Hardy. In
addition, Mr. Hardy was granted options to purchase 250,000 shares of the
Company's Common Stock at an exercise price equal to the closing price of the
Company's publicly traded shares as of the effective date of the Agreement
($5.375 per share). The options vest as to 47,500 shares upon the execution of
the Agreement and options relating to 20,250 shares shall vest at the
commencement of each calendar quarter for ten quarters, with the first quarterly
vesting to occur on April 1, 1997 and the final quarterly vesting to occur
July 1, 1999. In the event of the termination of the Agreement prior to the
expiration of the full term for any reason other than as a result of a material,
unremedied breach by Mr. Hardy which remains uncured following 30 days written
notice, Mr. Hardy is entitled to a lump sum payment equal to the lesser of the
monthly consulting fee payable through the end of the term of the Agreement or
the monthly consulting fee payable over 12 months and all unvested options shall
accelerate and immediately become fully vested and exercisable.
Director Stock Option Plan
The Company's Director Stock Option Plan (the "DSOP") authorizes the grant
of stock options to directors of the Company. Options granted under the DSOP are
non-qualified stock options exercisable at a price equal to the fair market
value per share of Common Stock on the date of any such grant. Options granted
under the DSOP are exercisable not less than six (6) months nor more than ten
(10) years after the date of grant.
As of December 31, 1996, options for the purchase of 8,169 shares of Common
Stock at prices ranging from $.875 to $3.875 per share were outstanding. As of
December 31, 1996, options to purchase 15,228 shares of Common Stock have been
exercised. In connection with adoption of the 1995 Director Plan (as hereinafter
defined) the Board of Directors authorized the termination of future grants of
options under the DSOP; however, outstanding options granted under the DSOP will
continue to be governed by the terms thereof until exercise or expiration of
such options.
23
<PAGE>
Stock Purchase Plan
In accordance with the Employee Qualified Stock Purchase Plan (the
"Purchase Plan"), employees may contribute up to ten percent of their base wages
toward the purchase of Common Stock. The exercise price of options granted under
the Purchase Plan is the lesser of 85% of the market value on the first business
day of the payment period (September 1) or the last business day of the payment
period (August 31). As of December 31, 1996, the Company had 35,146 shares of
Common Stock reserved for issuance on exercise of the purchase rights granted
under the Purchase Plan.
1995 Director Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Director Stock Option and Appreciation Rights Plan, which plan
provides for the issuance of incentive options, non-qualified options and stock
appreciation rights (the "1995 Director Plan").
The 1995 Director Plan provides for automatic and discretionary grants of
stock options which qualify as incentive stock options (the "Incentive Options")
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
as well as options which do not so qualify (the "Non-Qualified Options") to be
issued to directors. In addition, stock appreciation rights (the "SARs") may be
granted in conjunction with the grant of Incentive Options and Non-Qualified
Options. No SARs have been granted to date.
The 1995 Director Plan provides for the grant of Incentive Options, Non-
Qualified Options and SARs to purchase up to 250,000 shares of Common Stock
(subject to adjustment in the event of stock dividends, stock splits and other
similar events). To the extent that an Incentive Option or Non-Qualified Option
is not exercised within the period of exercisability specified therein, it will
expire as to the then-unexercised portion. If any Incentive Option, Non-
Qualified Option or SAR terminates prior to exercise thereof and during the
duration of the 1995 Director Plan, the shares of Common Stock as to which such
option or right was not exercised will become available under the 1995 Director
Plan for the grant of additional options or rights to any eligible employees.
The shares of Common Stock subject to the 1995 Director Plan may be made
available from either authorized but unissued shares, treasury shares, or both.
The 1995 Director Plan also provides for the grant of Non-Qualified Options
on a non-discretionary basis pursuant to the following formula: each member of
the Board of Directors then serving shall receive a Non-Qualified Option to
purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value per share of the Common Stock on that date. Pursuant to such
formula, directors received options to purchase 10,000 shares of Common Stock as
of October 17, 1995, options to purchase 10,000 shares of Common Stock on
January 2, 1996, and will receive options to purchase 10,000 shares of Common
Stock on the first business day of each January. Each option is immediately
exercisable for a period of ten years from the date of grant. The Company has
250,000 shares of Common Stock reserved for issuance under the 1995 Director
Plan. As of December 31, 1996, options exercisable to purchase 190,000 shares of
Common Stock at prices ranging from $1.00 to $1.25 per share are outstanding
under the 1995 Director Plan. As of December 31, 1996, options to purchase
40,000 shares have been exercised under the 1995 Director Plan.
24
<PAGE>
1995 Employee Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Employee Stock Option and Appreciation Rights Plan (the "1995
Employee Plan"), which plan provides for the issuance of Incentive Options,
Non-Qualified Options and SARs.
Directors of the Company are not eligible to participate in the 1995
Employee Plan. The 1995 Employee Plan provides for the grant of stock options
which qualify as Incentive Stock Options under Section 422 of the Code, to be
issued to officers who are employees and other employees, as well as Non-
Qualified Options to be issued to officers, employees and consultants. In
addition, SARs may be granted in conjunction with the grant of Incentive Options
and Non-Qualified Options. No SARs have been granted to date.
The 1995 Employee Plan provides for the grant of Incentive Options, Non-
Qualified Options and SARs of up to 400,000 shares of Common Stock (subject to
adjustment in the event of stock dividends, stock splits and other similar
events). To the event that an Incentive Option or Non-Qualified Option is not
exercised within the period of exercisability specified therein, it will expire
as to the then-unexercised portion. If any Incentive Option, Non-Qualified
Option or SAR terminates prior to exercise thereof and during the duration of
the 1995 Employee Plan, the shares of Common Stock as to which such option or
right was not exercised will become available under the 1995 Employee Plan for
the grant of additional options or rights to any eligible employee. The shares
of Common Stock subject to the 1995 Employee Plan may be made available from
either authorized but unissued shares, treasury shares, or both. The Company has
400,000 shares of Common Stock reserved for issuance under the 1995 Employee
Plan. As of December 31, 1996, options to purchase 400,000 shares of Common
Stock with exercise prices of $1.125 to $6.75 per share have been granted under
the 1995 Employee Plan. As of December 31, 1996, no options have been exercised
under the 1995 Employee Plan.
1997 Recruitment Stock Option Plan
For a description of the 1997 Recruitment Stock Option Plan, see
Proposal 5.
PROPOSAL 1
TO ELECT TWO CLASS III DIRECTORS TO SERVE FOR THREE YEARS OR UNTIL
THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED
The Board of Directors has concluded that the reelection of John W. Edwards
and R. Huston Babcock as Class III Directors is in the best interest of the
Company and recommends approval of their election. Biographical information
concerning Mr. Edwards and Dr. Babcock can be found under "Directors and
Executive Officers." The remaining Directors will continue to serve in their
positions for the remainder of their terms.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted for the election of Mr. John W. Edwards and
Dr. R. Huston Babcock, the nominees listed herein. Although the Board of
Directors of the Company does not contemplate that such nominees will be unable
to serve, if such a situation arises prior to the Annual Meeting, the persons
named in the enclosed proxy will vote for the election of such other person as
may be nominated by the Board of Directors. The election of directors will be
decided by a plurality of votes cast.
25
<PAGE>
The Board of Directors unanimously recommends a vote FOR the election of
Mr. John W. Edwards and Dr. R. Huston Babcock, the nominees listed above.
PROPOSAL 2
TO APPROVE AND ADOPT AN AMENDMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION TO EFFECT THE CHANGE OF
THE COMPANY'S NAME TO I-LINK, INC.
The Board of Directors has unanimously determined that it is in the best
interest of the Company and its stockholders to amend the Company's Articles of
Incorporation to effect the change of the Company's name from Medcross, Inc. to
"I-Link, Inc." (the "Name Change Amendment") and directed that the Name Change
Amendment be considered at the Annual Meeting of shareholders.
Principal Effects of and Reasons for Name Change
The Company believes that the name "I-Link, Inc." will more accurately
reflect the business of the Company since the Company's acquisition, in February
1996, of 100% of the issued and outstanding shares of the equity securities of
I-Link Worldwide, Inc. The Company's new name will be I-Link, Inc. The Company
changed its stock symbol for Nasdaq Stock Market(SM) purposes to "ILNK"
effective March 8, 1996.
The name change, if adopted, will not affect the rights of any holder of
Common Stock of the Company nor of any holder of any right to receive Common
Stock of the Company.
The text of the proposed amendment to the Articles of Incorporation is
set forth in full in Exhibit A hereto and reference is made thereto for a
complete statement of its terms. The amendment to the Articles of Incorporation
will become effective upon approval by the shareholders and the filing of the
Articles of Amendment to the Articles of Incorporation containing such amendment
with the Secretary of State of Florida. If approved by the shareholders, the
Company anticipates that such Articles of Amendment to the Articles of
Incorporation will be filed as soon as practicable.
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment of the Articles of Incorporation to change the name of the
corporation to I-Link, Inc. as set forth in Exhibit A hereto. Unless marked to
the contrary, shares of Common Stock represented by proxy cards received from
shareholders will be voted in favor of the proposed amendment.
Vote Required for Approval
Approval of the amendment of the Articles of Incorporation will require
the affirmative vote of the holders of at least a majority of the outstanding
shares of Common Stock entitled to vote thereon. The enclosed proxy will be
voted as specified, but if no specification is made with respect to the proposed
amendment to the Articles of Incorporation, it will be voted in favor of the
proposal to amend the Articles of Incorporation.
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment of the Articles of Incorporation to change the name of the Company
to I-Link, Inc., as set forth in Exhibit A hereto.
26
<PAGE>
PROPOSAL 3
TO APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION TO EFFECT THE INCREASE IN THE
NUMBER OF AUTHORIZED PREFERRED STOCK FROM 500,000 SHARES
OF PREFERRED STOCK, $10 PAR VALUE, TO 10,000,000 SHARES OF
PREFERRED STOCK, $10 PAR VALUE, TO PERMIT THE CONVERSION
OF THE CONVERTIBLE NOTES ISSUED IN SEPTEMBER 1996,
THE ISSUANCE OF CLASS M PREFERRED STOCK AND
FOR OTHER CORPORATE PURPOSES
The Board of Directors has adopted a resolution declaring it advisable and
in the best interest of the Company and its stockholders that the Company's
Articles of Incorporation be amended to provide for an increase in the
authorized number of shares of Preferred Stock of the Company from five hundred
thousand (500,000) shares of Preferred Stock to ten million (10,000,000) shares
of Preferred Stock. Such resolution also recommends that such amendment be
approved and adopted by the Company's stockholders and directs that such
proposal be submitted to the Company's stockholders at the Annual Meeting.
The Company is currently authorized to issue up to five hundred thousand
(500,000) shares of Preferred Stock, $10.00 par value (the "Preferred Stock").
The Company has designated, issued and retired 7,500 shares of 12% Cumulative
Convertible Preferred Stock and 200,000 shares of Class A Variable Rate
Cumulative Convertible Preferred Stock. As of the date hereof, 22,500 shares of
Preferred Stock have been designated Class B Variable Rate Cumulative
Convertible Preferred Stock (the "Class B Preferred Stock") of which 7,500
shares are issued and outstanding and 240,000 shares of Preferred Stock have
been designated Class C Convertible Cumulative Redeemable Preferred Stock (the
"Class C Preferred Stock") of which 240,000 shares are issued and outstanding.
Accordingly, there remain 30,000 shares of Preferred Stock which are
undesignated, unissued and not reserved for any specific purpose.
The Class C Preferred Stock provides the holders thereof the right to
cumulative preferential dividends, when, as and if declared by the Board of
Directors on a quarterly basis in an amount equal to 8% per annum of the
liquidation preference per share of $60. The Class C Preferred Stock dividend
rate is subject to an upward adjustment to 12% per annum if a registration
statement relating to such stock has not been declared effective by the SEC
within twelve months of the date of the final closing of the private placement
of the Class C Preferred Stock, which occurred on September 6, 1996 (the "Final
Closing"). Dividends may be payable in cash or, at the option of the Company,
in shares of Common Stock. Except as otherwise provided by law, the Class C
Preferred Shares have no voting rights. The Class C Preferred Stock is
redeemable by the Company in certain circumstances at any time prior to the
fourth anniversary of the Final Closing at a redemption price equal to $60 per
share plus accrued and unpaid. After the fourth anniversary of the Final Closing
the Class C Preferred Stock is redeemable at a redemption price of $90 per share
plus accrued and unpaid interest. With respect to the payment of dividends and
rights to redemption and upon liquidation, the shares of Class C Preferred Stock
are subordinate to any issued and outstanding shares of Class A Preferred Stock
and Class B Preferred Stock of the Company, and shall rank senior to the
Company's Common Stock. Class C Preferred Stock may be converted, at the option
of the holder thereof, into shares of Common Stock ("Conversion Shares"), at a
conversion rate of 24 Conversion Shares for each share of Class C Preferred
Stock, subject to adjustment. On the fifth anniversary of the Final Closing the
Class C Preferred Stock shall be automatically converted into Conversion Shares.
The shares of Class C Preferred Stock carry registration rights which obligate
the Company to file a registration statement registering the reoffer and
27
<PAGE>
resale of the Conversion Shares by the holders thereof. The Conversion Shares,
and any shares of Common Stock which may be issued as dividends on the Class C
Preferred Stock may not be publicly sold until after the first anniversary of
the Final Closing without the prior written consent of Commonwealth.
If the Board of Directors' proposal is approved by the Company's
stockholders, the Board of Directors would have authority to issue up to ten
million (10,000,000) shares of Preferred Stock to such persons, for such
consideration and with such rights and preferences, including dividend rates,
conversion prices, voting rights, redemption prices, and similar matters as the
Board of Directors may determine without further action by the stockholders
except as may be required by law.
The Board of Directors has proposed the increase in and classification of
the authorized capital stock to provide shares which could be used for a variety
of corporate purposes, including stock splits, mergers, acquisitions and the
raising of additional capital (including public and private offerings of
securities). The Company issued $717,000 in aggregate principal amount of
Convertible Promissory Notes in September 1996. The Convertible Promissory Notes
are due and payable on July 31, 1997 and bear interest at 8%. The unpaid
principal balance of the Convertible Promissory Notes will be automatically
converted into an aggregate of 11,950 shares of Class C Preferred Stock (equal
to one share of Class C Preferred Stock for each $60 of principal amount of the
Convertible Promissory Notes) upon the amendment of the Company's Articles of
Incorporation to increase the number of shares of Preferred Stock to at least
2,000,000 and the authorized number of shares of Common Stock to at least
50,000,000 shares and the designation of sufficient shares to accommodate
conversion.
The Company realized net proceeds from the offering of the Class C
Preferred Stock and Convertible Notes of $12,898,000. Of such amount, the
Company repaid short-term debt ($2,214,000, or 17.2% of net proceeds); paid
software license fees ($300,000, or 2.3% or net proceeds); repaid current
accounts payable in the amount of $532,000 (4.1%); and used $2,757,000 (21.4%)
for network infrastructure capital expenditure; $1,409,000 (10.9%) for network
operations; $344,000 (2.7%) for marketing and advertising programs; and
approximately $5,342,000 (41.4%) for working capital purposes. The principal
amount of the Convertible Notes outstanding is $717,000.
Winter Harbor Loan and Investment; Class M Preferred Stock
On June 6, 1997, Medcross, Inc. (the "Company") entered into a term loan
agreement ("Loan Agreement") and promissory note ("Note") with Winter Harbor,
L.L.C. ("Winter Harbor") pursuant to which Winter Harbor agreed to loan to the
Company the principal sum of $2,000,000 (the "Loan") for capital expenditures
and working capital purposes. As further consideration for Winter Harbor's
commitment to make the Loan, the Company granted to Winter Harbor a warrant
("Loan Warrant") to purchase up to five hundred thousand (500,000) shares of
common stock of the Company (the "Common Stock") at a purchase price of $4.97
per share, subject to adjustment, pursuant to the terms of a Warrant Agreement
between the parties. The Loan Warrant expires on March 11, 2002, and contains
demand and piggyback registration rights and customary anti-dilution terms. The
maturity date of the Note is October 15, 1998; however, the Loan Agreement
anticipates an equity investment in the Company by Winter Harbor (the
"Investment"). Upon closing of the Investment, all principal and accrued
interest then due under the Note shall be credited toward payment of Winter
Harbor's purchase price for the Investment and the Note shall be cancelled.
Also on June 6, 1997 the Company executed a letter of intent ("LOI") with
Winter Harbor relating to the Investment. The LOI contemplates that Winter
Harbor will invest $12,100,000 in a series
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of the Company's convertible preferred stock to be created (the "Series M
Preferred Stock"). Winter Harbor will purchase such number of shares of Series M
Preferred Stock as are convertible into 4,400,000 shares of Common Stock for an
aggregate cash consideration of $12,100,000 (equivalent to $2.75 per share of
Common Stock, subject to adjustment). As additional consideration for its equity
financing commitments, Winter Harbor will be issued additional warrants by the
Company to acquire (a) 2,500,000 shares of Common Stock at an exercise price of
$2.75 per share (the "Series A Warrants"), (b) 2,500,000 shares of Common Stock
at an exercise price of $4.00 per share (the "Series B Warrants") and (c)
5,000,000 shares of Common Stock at an exercise price of $9.31 (the "Series C
Warrants"). The respective exercise prices for the Series A Warrants, the Series
B Warrants and the Series C Warrants (collectively, the "Investment Warrants")
shall be subject to adjustment. The Series A Warrants will be exercisable at any
time for thirty months from the date of issuance, and the Series B Warrants and
Series C Warrants will be exercisable at any time for sixty months from the date
of issuance. All of the Investment Warrants (i) will have demand registration
rights and anti-dilution rights and (ii) will contain cashless exercise
provisions.
The Series M Preferred Stock will be entitled to receive cumulative
dividends in the amount of 10% per annum before any other class of preferred or
common stock receives any dividends. Thereafter, the Series M Preferred Stock
will participate with the common stock in the issuance of any dividends on a per
share basis. The Series M Preferred Stock will be senior to all other series of
the Company's preferred stock or Common Stock as to liquidation rights, which
rights shall be deemed to include accrued or unpaid dividends relating to the
Series M Preferred Stock. The Series M Preferred Stock shall be convertible at
any time prior to the fifth anniversary of its issuance, at the sole option of
Winter Harbor, into shares of Common Stock on a one-to-one basis; provided,
however, that the Series M Preferred Stock shall be automatically converted to
Common Stock on the fifth anniversary of its issuance at no cost to Winter
Harbor. The conversion price ("Class M Conversion Price") shall be equal to the
lower of $2.75 per share or 50% of the average closing bid price of the Common
Stock for the ten trading days immediately preceding the fifth anniversary of
issuance. The basis for discretionary conversion, or the conversion price for
automatic conversion, shall be adjusted upon the occurrence of certain events,
including without limitation, issuance of stock dividends, recapitalization of
the Company, or the issuance of stock by the Company at less than the fair
market value thereof. Conversion of the Series M Preferred Stock will be subject
to approval by the Company's shareholders of an increase in the number of shares
of authorized capital stock at the Company's next annual shareholders meeting.
The Series M Preferred Stock will vote with the Common Stock on an as-converted
basis on all matters which are submitted to a vote of the stockholders, except
as may otherwise be provided by law or by the Company's Articles of
Incorporation or By-laws; provided, however, that the Series M Preferred Stock
will have the right to appoint two members of the Company's board of directors.
The Board of Directors believes it important that the Company have the
flexibility that would be provided by having additional authorized preferred
stock available and by having the ability to designate and issue additional
classes thereof. The Board of Directors believes it would be in the Company's
best interest to have such additional shares of authorized stock available and
by having the ability to designate and issue additional classes thereof to
enable the Company to take advantage of opportunities for possible future
acquisitions and for raising capital for future growth. The Company may enter
into acquisition agreements involving the issuance of additional shares of
preferred or common stock. Of course, there can be no assurance that the Company
will effect any acquisitions. If such opportunities arise in the future,
significant amounts of capital stock may be issued by the Company's Board of
Directors without further authorization by the Company's Stockholders. Such
issuances could have a significant dilutive effect on the current stockholders
of the Company. The Company currently has no binding commitments or arrangements
that would require the issuance of such stock, except as described herein.
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It is possible that the additional capital stock that would be authorized
by the proposed amendment could be issued in a transaction that might discourage
offers by takeover bidders or make such offers more difficult or expensive to
accomplish, although the Board of Directors has no current plans for any such
use of the capital stock. For example, the Board of Directors could approve the
issuance of stock, or grant rights or stock options for such issuance, to
persons, firms or entities that are known to be friendly to management of the
Company. The Board of Directors could also approve the issuance of additional
shares of preferred stock having classes, series, rights and preferences
(including the number of votes applicable to each share of such class or series
of capital stock) which may render it more difficult in the future for takeover
bidders or others to accomplish takeovers or changes in control of the Company.
Any issuance of preferred stock must be made for proper business purposes and
for proper consideration from the recipient.
The text of the proposed amendment to the Articles of Incorporation is set
forth in full in Exhibit B hereto and reference is made thereto for a complete
statement of its terms. The amendment to the Articles of Incorporation will
become effective upon approval by the stockholders and the filing of the
Articles of Amendment to the Articles of Incorporation containing such amendment
with the Secretary of State of Florida. If approved by the stockholders, the
Company anticipates that such Articles of Amendment to the Articles of
Incorporation will be filed as soon as practicable.
Vote Required for Approval
The Amendment to the Articles of Incorporation will be approved if the
votes cast by the holders of the Common Stock and represented at the Annual
Meeting and entitled to vote favoring the action exceed the votes cast opposing
the action. The enclosed proxy will be voted as specified, but if no
specification is made with respect to the proposed amendment to the Articles of
Incorporation, it will be voted in favor of the proposal to amend the Articles
of Incorporation; however, broker non-votes will not be counted as an
affirmative vote for purposes of determining whether the proposal has been
approved. Certain officers, directors and shareholders of the Company owning an
aggregate of [7,751,081] shares (or approximately [66.78%] of the outstanding
shares) of Common Stock have agreed to vote in favor of Proposal 3.
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment of the Articles of Incorporation to increase the number of shares
of authorized preferred stock from 500,000 shares of Preferred Stock to
10,000,000 shares of Preferred Stock, as set forth in Exhibit B.
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PROPOSAL 4
TO APPROVE AND ADOPT AN AMENDMENT TO THE ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 20 MILLION SHARES OF COMMON STOCK, $.007 PAR
VALUE, TO 50 MILLION SHARES OF COMMON STOCK, $.007 PAR VALUE, TO
PERMIT THE ISSUANCE OF SHARES IN CONNECTION WITH THE COMPANY'S
ACQUISITION OF FAMILY TELECOMMUNICATIONS INCORPORATED,
THE ISSUANCE OF OPTIONS AND WARRANTS
AND FOR OTHER GENERAL CORPORATE PURPOSES
The Board of Directors has adopted a resolution declaring it advisable
and in the best interest of the Company and its stockholders that the Company's
Articles of Incorporation be amended to provide for an increase in the
authorized number of shares of Common Stock of the Company from twenty million
shares of Common Stock to fifty million shares of Common Stock. Such resolution
also recommends that such amendment be approved and adopted by the Company's
stockholders and directs that such proposal be submitted to the Company's
stockholders at the Annual Meeting.
If the Board of Directors' proposal is approved by the Company's
stockholders, the Board of Directors would have authority to issue up to fifty
million shares of Common Stock for such consideration as the Board of Directors
may determine without further action by the stockholders except as may be
required by law.
General
The Company is currently authorized to issue up to 20,000,000 shares of
Common Stock. As of [Record Date], there were [11,607,597] shares of Common
Stock issued and outstanding. The Board of Directors of the Company has reserved
[____________________] shares of Common Stock for issuance pursuant to the
exercise of outstanding warrants and stock options and conversion of outstanding
convertible securities. Accordingly, the Company is without additional shares of
Common Stock which are unissued and are not reserved for any specific purpose.
Upon approval of Proposal 4 by the Shareholders the Board of Directors will
reserve an additional 4,400,000 shares of Common Stock for issuance upon
conversion of Class M Preferred Stock to be issued pursuant to the Winter Harbor
LOI, and another 10,500,000 shares of Common Stock for issuance upon exercise of
warrants issued or to be issued to Winter Harbor. See "Proposal 3 - Winter
Harbor Loan and Investment; Class M Preferred Stock."
The Board of Directors has proposed the increase in and classification of
the authorized capital stock to provide shares which could be used for a variety
of corporate purposes, including stock splits, stock dividends, mergers,
acquisitions, the raising of additional capital (including public and private
offerings of securities), and implementation of incentive and other option
plans. The Board of Directors believes it important that the Company have the
flexibility that would be provided by having additional authorized capital stock
available and by having the ability to designate and issue additional classes
thereof. The Board of Directors believes it will require additional financing in
order to fund the cash flow operating deficit of I-Link, to expand its business
and that of FTI and to discharge outstanding indebtedness. Failure to increase
the Company's authorized capital could significantly impair the Company's
ability to raise additional capital and could limit the effect of the Conversion
Price adjustment or reset provisions of the Class C Preferred Stock insofar as
the Company may not have sufficient shares of available Common Stock issuable
upon conversion as a result of a reduction in the Conversion Price. The Company
may, in its discretion, pay cumulative dividends on its outstanding shares of
Preferred Stock
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through the issuance of shares of Common Stock provided such shares of Common
Stock are registered under the Securities Act of 1933. Additional shares of
authorized stock are also needed to enable the Company to take advantage of
opportunities for possible future acquisitions, and the establishment of option
plans. The Company from time to time conducts discussions with possible
acquisition candidates. The Company may enter into acquisition agreements
involving the issuance of additional shares of preferred or common stock. Of
course, there can be no assurance that the Company will effect any acquisitions.
If such opportunities arise in the future, significant amounts of capital stock
may be issued by the Company's Board of Directors without further authorization
by the Company's Shareholders. Such issuances could have a significant dilutive
effect on the current Shareholders of the Company.
It is possible that the additional capital stock that would be authorized
by the proposed amendment could be issued in a transaction that might discourage
offers by takeover bidders or make such offers more difficult or expensive to
accomplish, although the Board of Directors has no current plans for any such
use of the capital stock. For example, the Board of Directors could approve the
issuance of stock, or grant rights or stock options for such issuance, to
persons, firms or entities that are known to be friendly to management of the
Company. The Board of Directors could also approve the issuance of additional
shares of common stock having classes, series, rights and preferences (including
the number of votes applicable to each share of such class or series of capital
stock) which may render it more difficult in the future for takeover bidders or
others to accomplish takeovers or changes in control of the Company. Any
issuance of Common Stock must be made for proper business purposes and for
proper consideration from the recipient. Shares of Common Stock of the Company
do not entitle holders thereof to preemptive rights.
The Company has reserved a total of 4,400,000 shares for future issuances
under the 1997 Plan as described in the discussion of Proposal 5. In addition,
the Company has agreed to issue warrants to purchase 5,000 and 25,000 shares of
Common Stock to William H. Flury, Vice President of Sales & Marketing of I-Link,
and John W. Edwards, President of the Company, respectively, in connection with
loans to I-Link in August 1996. The Company has also agreed to issue an
aggregate of 400,000 shares of Common Stock, subject to satisfaction of certain
conditions, in connection with its acquisition of FTI. In addition, the Company
is in discussions with Joseph A. Cohen, a Director, concerning his engagement as
a consultant to the Company, the terms of which have not been finalized but
which are expected to include options to purchase up to 100,000 shares of Common
Stock. The Company has also reserved 175,000 shares of Common Stock for issuance
upon exercise of the warrants issued to the Hardy Group in connection with the
Settlement Agreement. See "Information about the FTI Acquisition" below and
"Description of Business of FTI" in the Company's Form 10-KSB for the fiscal
year ended December 31, 1996.
Information About the FTI Acquisition
On January 13, 1997, pursuant to the terms of a Share Exchange Agreement
for the Acquisition of Family Telecommunications Incorporated by Medcross, Inc.
effective as of January 1, 1997 (the "Exchange Agreement"), the Company acquired
the outstanding stock of Family Telecommunications Incorporated, a Utah
corporation ("FTI"), from the stockholders of FTI, namely, Robert W. Edwards,
Jr. and Jerald L. Nelson. The consideration for the transaction consists of an
aggregate of 400,000 shares of the Company's Common Stock to be issued by the
Company upon the satisfaction of certain conditions as follows: (i) completion
of FTI's audited financial statements for the period ended December 31, 1996
containing an unqualified audit opinion by the Company's auditor; (ii)
completion of a formal valuation of FTI and its assets by the Company's auditor,
Coopers & Lybrand, LLP; (iii) approval of the Company's shareholders of an
amendment to the Articles of Incorporation authorizing an increase in the
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number of shares of Common Stock from 20 million to 50 million; and (iv) no
material breach of any representations and warrants as of the date of completion
of items (i) through (iii). Only the third of such conditions has not been
satisfied or waived as of [Record Date]; upon approval of Proposal 4 by the
Shareholders, the consideration will be paid in full. The operations and
business of FTI, however, are being integrated with the Company's business and
operations. There are no written employment agreements with any of the
principals of FTI. The Company intends to maintain the current FTI employment
arrangements. The purchase price was determined based upon the negotiated value
of the assets and operations of FTI. John W. Edwards, President, a Director and
Chief Executive Officer of the Company, and Robert W. Edwards, Jr., the
principal shareholder and one of two shareholders of FTI, are brothers. For a
description of the Company's advance to FTI, see "--Reasons for Acquisition"
below and "Directors and Executive Officers--Certain Relationships and Related
Transactions."
No federal or state regulatory requirements must be complied with or
approval obtained in connection with the acquisition.
Reasons for Acquisition
The focus of the Company's business following the Company's acquisition
(the "I-Link Acquisition") of I-Link Worldwide, Inc. ("I-Link") in February
1996, shifted to the business of delivering business communications services via
the emerging worldwide communication network (which includes the Internet) to
existing users of traditional telecommunications services. The Company's
acquisition of FTI in January 1997 provided the Company with an existing long
distance network licensed to do business in approximately 44 states, as of the
time of the time of acquisition ([48] states as of the date hereof); and a
customer base in excess of 17,000 and, through FTI's contractual agreements with
MCI and telephone facilities and equipment owned and operated by FTI, access to
the switched telephone network at favorable rates. Access to the switched
telephone network is a necessary component of the I-Link Network (as hereinafter
defined) in order for phone and fax transmissions to be routed to destinations
in lesser populated geographic areas that are not serviced by one of I-Link's
Points of Presence ("POPs"), which the Company estimates encompasses
approximately 15% to 20% of users nationwide. In addition, the access to the
switched telephone network at favorable pricing that FTI affords to I-Link
permits I-Link to rapidly develop and expand its customer bases in given
geographic areas across the switched telephone network until such time as the
size of the customer base and deployment of the I-Link Network in the area
determines that the customers be transferred from the switched telephone network
to the I-Link Network.
The principal shareholder of FTI (prior to its acquisition by the
Company) is the brother of the President of the Company. During the period from
March 20, 1996 (the inception of FTI) to December 31, 1996, FTI rendered long
distance services and sold switching equipment to the Company. Revenues and
expenses relating to these transactions were as follows: long distance revenue
was $5,026; revenue from sale of switching equipment was $1,723,369; and cost of
switching equipment sold was $1,137,828. As of December 1, 1996 FTI had a
receivable from the Company for services in the amount of $30,726 and an advance
from the Company in the amount of $120,000 for services to be rendered by FTI
for the Company subsequent to year end. Subsequent to December 31, 1996, FTI
entered into the share exchange agreement for the acquisition of FTI by the
Company.
The consideration payable for the FTI acquisition was derived from
negotiation. The Company's assessment as to the amount of consideration that was
appropriate to be paid was based on a number of factors, including but not
limited to: (i) FTI's ability to provide long distance services throughout the
United States immediately; (ii) the opportunity costs (both in terms of time and
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monetary costs) to be suffered by the Company if it attempted to establish its
own long distance network licensed to do business throughout the United States;
and (iii) the Company's perception as to the per-Subscriber value of similarly
situated companies. The Company assumed no liabilities of FTI incurred through
the date of the acquisition; rather, it acquired the stock of FTI. The
negotiations were led by John Edwards and Frank DeLape (an affiliate of
Benchmark Equity Group, Inc.) on behalf of the Company and by Robert Edwards on
behalf of FTI. Mr. John Edwards abstained from all Company Board of Directors
votes relating to the FTI acquisition.
Nature of FTI Business
Family Telecommunications Incorporated (previously defined as "FTI") was
incorporated under the law of the state of Utah on March 20, 1996, and maintains
its principal place of business in Phoenix, Arizona. FTI also maintains
facilities in Salt Lake City, Utah. It is a long-distance telecommunications
carrier that provides long distance service to most of the United States.
Through its Carrier Agreement with MCI Telecommunications Corporation ("MCI"),
FTI provides 1-plus long distance service, 800/888, worldwide calling card
service, worldwide prepaid phone card service, long distance cellular phone
service, data line service and T-span service. FTI is a switchless reseller
(having no equipment) in all states but Arizona. In Arizona, FTI provides
service through a pair of HARRIS 20-20 switches. This allows FTI to offer
additional services in its home state and surrounding states, and to offer
specialized services, including a variety of customized 800/888 services, voice
mail, voice inter-active services, debit cards, travel cards and other
customized services to its entire customer base. See "Description of Business of
Family Telecommunications Incorporated" in the Company's Form 10-KSB.
Accounting Treatment
The acquisition of FTI is expected to be accounted for using the purchase
method of accounting. This method accounts for a business combination as the
acquisition of one enterprise by another. The Company shall record at its cost
the acquired assets less liabilities assumed. In the event that the cost of FTI
is greater than the sum of the fair values of tangible and identifiable
intangible assets less liabilities assumed, such difference shall be recorded as
goodwill. The reported income of the acquiring corporation shall include the
operations of the acquired enterprise after acquisition, based on the cost to
the acquiring corporation.
Representatives of the Company's independent public accountants, Coopers
& Lybrand, LLP, are expected to be present at the Annual Meeting. They will have
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
Regulatory Approvals
The transaction contemplated by the Exchange Agreement is not subject to
any material regulatory review or approval.
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Federal Income Tax Consequences of the Acquisition
It is the intention of Company and FTI that the acquisition will qualify
as a "tax free reorganization" within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"). Assuming the acquisition
is treated as a reorganization under the Code, generally no gain or loss will be
recognized by the Company or FTI as a result of the acquisition. The acquisition
will not have any tax consequences to the Company's stockholders. Neither the
Company nor FTI has requested or will request any ruling from the Internal
Revenue Service in connection with the acquisition. However, the acquisition has
been structured with the intention that it will qualify as a tax-free
reorganization under Code Section 368(a)(1)(B).
Comparative Market Price and Dividend Information
The Company's Common Stock is traded on the Nasdaq SmallCap Market under
the symbol "ILNK." Prior to March 8, 1996, the Common Stock was traded on the
Nasdaq SmallCap Market under the symbol "MDCR." There is no established trading
market for the FTI common stock. Neither the Company nor FTI has paid a cash
dividend on its respective Common Stock. The Company does not currently
anticipate paying any dividends on its Common Stock in the foreseeable future.
Holders of the Company's outstanding Class B and Class C Preferred Stock are
entitled to cumulative preferential dividends when, as and if declared by the
Board of Directors. At the Company's option, the dividend may be paid in shares
of Common Stock provided that such shares are registered under the Act. As of
July 31, 1997, no dividends have been declared; accrued and unpaid dividends on
all shares of Preferred Stock totaled $885,407.
On January 15, 1997, the last full trading day prior to the public
announcement of the FTI Acquisition, the high and low sale prices per share of
the Company's Common Stock as reported on Nasdaq were $7.125 and $6.50,
respectively, and on January 10, 1997, the last full trading day prior to the
execution of the Exchange Agreement, the high and low sale prices per share were
$6.875 and $6.50, respectively.
Proposed Amendment
The text of the proposed amendment to the Articles of Incorporation is
set forth in full in Exhibit C hereto and reference is made thereto for a
complete statement of its terms. The amendment to the Articles of Incorporation
will become effective upon approval by the stockholders and the filing of the
Articles of Amendment to the Articles of Incorporation containing such amendment
with the Secretary of State of Florida. If approved by the stockholders, the
Company anticipates that such Articles of Amendment to the Articles of
Incorporation will be filed as soon as practicable.
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Vote Required for Approval
The Amendment to the Articles of Incorporation will be approved if the
votes cast by the holders of the Common Stock and represented at the Annual
Meeting and entitled to vote favoring the action exceed the votes cast opposing
the action. The enclosed proxy will be voted as specified, but if no
specification is made with respect to the proposed amendment to the Articles of
Incorporation, it will be voted in favor of the proposal to amend the Articles
of Incorporation; however, broker non-votes will not be counted as an
affirmative vote for purposes of determining whether the proposal has been
approved. Certain officers, directors and shareholders of the Company owning an
aggregate of [7,751,081] shares (or approximately [66.78%] of the outstanding
shares) of Common Stock have agreed to vote in favor of Proposal 4.
The Board of Directors unanimously recommends a vote FOR the approval of
the amendment of the Articles of Incorporation to increase the number of shares
of authorized capital stock from 20 million shares of Common Stock to 50 million
shares of Common Stock.
PROPOSAL 5
TO APPROVE THE ADOPTION OF THE
1997 RECRUITMENT STOCK OPTION PLAN WHICH PROVIDES FOR THE
ISSUANCE OF INCENTIVE STOCK OPTIONS, NON-QUALIFIED OPTIONS AND
STOCK APPRECIATION RIGHTS.
The Board of Directors has adopted a resolution authorizing the
establishment of the 1997 Recruitment Stock Option Plan (the "Recruitment
Plan"), which plan shall provide for the issuance of Incentive Options,
Non-Qualified Options and SARs. Pursuant to the resolution, the Board of
Directors has declared it to be advisable and in the best interests of the
Company and its stockholders that the Company adopt such plan and has directed
that the proposal to adopt the Recruitment Plan, as set forth herein, be
submitted to the stockholders of the Company for vote at the Annual Meeting.
Proposal 5 will be submitted to the Company's stockholders for approval
only if the Company's stockholders have approved the amendment of the Company's
Articles of Incorporation to increase the authorized shares of Common Stock set
forth in Proposal 4.
The summary of the material provisions of the Recruitment Plan set forth
herein is not intended to be complete and is qualified in its entirety by
reference to the Recruitment Plan, a copy of which is attached hereto in Exhibit
D to this Proxy Statement.
General
The purpose of the Recruitment Plan is to induce officers, directors,
employees and consultants of the Company (or any of its subsidiaries) who are in
a position to contribute materially to the Company's prosperity to remain with
the Company, to offer such persons incentives and rewards in recognition of
their contributions to the Company's progress and to encourage such persons to
continue to promote the best interests of the Company. The Recruitment Plan
provides for the grant of stock options which qualify as incentive stock options
(previously defined as "Incentive Options") under Section 422 of the Code, to be
issued to officers who are employees and other employees, as well as options
which do not so qualify (previously defined as "Non-Qualified Options") to be
issued to officers, directors, employees
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and consultants. In addition, stock appreciation rights (previously defined as
"SARs") may be granted in conjunction with the grant of Incentive Options and
Non-Qualified Options.
The Recruitment Plan provides for the granting of Incentive Options,
Non-Qualified Options and SARs with respect to, in the aggregate, up to
4,400,000 shares of Common Stock (which number is subject to adjustment in the
event of stock dividends, stock splits and other similar events). To the extent
that an Incentive Option or Non-Qualified Option is not exercised within the
period of exercisability specified therein, it will expire as to the then
unexercised portion. If any Incentive Option, Non-Qualified Option or SAR
terminates prior to exercise thereof and during the duration of the Recruitment
Plan, the shares of Common Stock as to which such option or right was not
exercised will become available under the Recruitment Plan for the grant of
additional options or rights to any eligible employee. The shares of Common
Stock subject to the Recruitment Plan may be made available from either
authorized but unissued shares, treasury shares, or both. The Recruitment Plan
became effective upon adoption by the Board of Directors, subject to its
approval by the affirmative vote of the holders of a majority of the Company's
outstanding voting stock entitled to vote thereon and subject to the approval of
the amendment of the Company's Articles of Incorporation to increase the
authorized shares of Common Stock (see Proposal 4). In the event that the
Recruitment Plan is not approved by the stockholders, the Recruitment Plan shall
remain in force; provided, however, that all options granted thereunder shall
automatically be deemed to be Non-Qualified Options.
Administration
The Recruitment Plan will be administered by: (a) the Board of Directors
or (b) in the discretion of the Board of Directors, by a committee (the
"Committee") of the Board of Directors of two or more members of the Board of
Directors, each of whom is a "Non-Employee" Director as such term is defined by
Rule 16b-3 (as such rule may be amended from time to time, "Rule 16b-3") under
the Exchange Act of 1934, as amended (the "Exchange Act"). The Board of
Directors or the Committee generally has the authority to determine the
individuals to whom and the date on which options and rights are to be granted,
the number of shares of stock to be subject to each option and right, the
exercise price of shares of stock subject to options and rights, the terms of
any vesting or forfeiture schedule and the other terms and provisions of each
option and right.
Section 16(b) Compliance
It is intended that transactions pursuant to the Recruitment Plan will
satisfy the conditions of Rule 16b-3, as amended, promulgated under Section 16
of the Exchange Act. Section 16(b) of the Exchange Act provides that any
so-called "short-swing profits," that is, a profit realized by an officer,
director or owner of 10 percent or more of the outstanding securities on a
purchase and a sale of stock within a six-month period, are recoverable by the
issuer of the securities. Although the application of Section 16(b) (and the
rules promulgated thereunder) is complex, Rule 16b-3 generally mitigates the
impact of Section 16(b) by providing an exemption from the liability provisions
for transactions which satisfy the conditions of Rule 16b-3.
Eligibility and Extent of Participation
Incentive Options may be granted pursuant to the Recruitment Plan only to
employees of the Company (or any subsidiary). Non-Qualified Options and SARs may
be granted pursuant to the Recruitment Plan to officers, directors, employees or
consultants of the Company or any subsidiary.
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There is no minimum number of shares of Common Stock with respect to
which an option or right may be granted. However, if the aggregate fair market
value of shares with respect to which Incentive Options are exercisable for the
first time by any employee during any calendar year (under all stock option
plans of the Company) exceeds $100,000, such excess options shall be treated as
Non-Qualified Options. For the purpose of the foregoing limitation, the fair
market value of shares subject to an Incentive Option is to be determined as of
the time the option is granted.
The Board of Directors or the Committee may require, as a condition of
granting any option or right, that the optionee enter into a stock option
agreement which shall require, among other things, the agreement by the employee
with the Company that the employee not sell or otherwise dispose of shares
acquired pursuant to the exercise of an Incentive Option for a minimum of two
years from the date of grant of the Incentive Option and one year from the date
of issuance of the Common Stock, absent the written approval, consent or waiver
of the Board of Directors or Committee.
As of June 30, 1997, there have been 3,540,000 options or rights granted
under the Recruitment Plan as follows: (a) 2,350,000 options to officers of the
Company (including 550,000 options to each of Karl Ryser and David Hardy,
500,000 options to each of John Edwards and Robert Edwards and 250,000 options
to William Flury); (b) 150,000 options to directors who are not officers; and
(c) 1,040,000 options to employees and consultants. An aggregate of
approximately 140 persons are eligible to participate in the Recruitment Plan.
Consultants engaged by the Company from time to time are also expected to be
eligible to receive Non-Qualified Options under such Plan.
Purchase Price and Exercise of Options
The price at which shares of Common Stock covered by an option may be
purchased shall be determined by the Board of Directors or the Committee;
however, the purchase price of shares of Common Stock issuable upon exercise of
an Incentive Option must not be less than 100 percent of the fair market value
of such shares on the date the Incentive Option is granted. Any cash proceeds
received by the Company from the exercise of the options will be used for
general corporate purposes.
Expiration and Transfer of Options
The Board of Directors or the Committee has the sole discretion to fix
the period within which any Incentive or Non-Qualified Option may be exercised.
Any Incentive Option granted under the Recruitment Plan to a 10 percent or less
shareholder and any Non-Qualified Option shall be exercised during a period of
not more than ten years from the date of grant and any Incentive Option granted
to a greater than 10 percent shareholder shall be exercised within five years
from the date of grant. No Incentive Options may be granted under the
Recruitment Plan more than ten years after the date of adoption of the
Recruitment Plan.
Options granted under the Recruitment Plan are not transferable except
upon death. Options generally may be exercised only while the option holder is
employed by the Company, or in some cases, within three months of termination of
employment. In the event of disability of an option holder, options may be
exercised to the extent of the accrued right to purchase the option within one
year of termination of employment due to disability. In the event of the death
of an option holder, options may be exercised within three years after the date
of death.
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Upon a reorganization, merger or consolidation of the Company as a result
of which the outstanding Common Stock is changed into or exchanged for cash or
property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company, the Recruitment Plan will
terminate and all outstanding options previously granted thereunder shall
terminate, unless provision is made in connection with such transaction for the
continuance of the Recruitment Plan or for the assumption of options theretofore
granted. If the Recruitment Plan and unexercised options are to terminate
pursuant to such transaction, persons owning any unexercised portions of options
then outstanding will have the right, prior to the consummation of the
transaction, to exercise the unexercised portions of their options, including
the portions thereof which would, but for such transaction, not yet be
exercisable.
Federal Income Tax Considerations
In the case of Incentive Options, no taxable gain will be realized by an
option holder upon grant or exercise of the option, and the Company will not be
entitled to a tax deduction at the time any such option is granted or exercised.
However, the excess of the fair market value of any stock received over the
option price will constitute an adjustment in computing alternative minimum
taxable income at the time of the transfer of stock pursuant to the exercise of
the option, or if later, at the earlier of the time that the stock is
transferable or is not subject to a substantial risk of forfeiture.
The treatment for federal income tax purposes of Non-Qualified Options
depends on whether the option has a readily ascertainable fair market value at
the time it is granted. Because the Non-Qualified Options are not actively
traded on an established market and because it is likely that the Non-Qualified
Options will be nontransferable by the optionee or will not be immediately
exercisable, it is expected that the Non-Qualified Options will not have a
readily ascertainable fair market value. If a Non-Qualified Option does not have
a readily ascertainable fair market value at the time of grant, there is no
taxable event at grant; rather, the excess of (i) the fair market value of the
Common Stock on the date it is acquired pursuant to exercise of the option over
(ii) the exercise price, plus the amount, if any, paid for the option must be
included in the optionee's gross income at the time of the receipt of stock
pursuant to exercise of the option, or if later, at the earlier of the time that
the stock is transferable or is not subject to a substantial risk of forfeiture.
If stock received pursuant to the exercise of a Non-Qualified Option is not
taxable at receipt because the stock is nontransferable and subject to a
substantial risk of forfeiture, the optionee may nevertheless elect to include
such amount in gross income when the stock is received pursuant to exercise of
the option.
Under Section 280G of the Code, certain persons who receive compensation
payments in connection with a change in control of a company may be subject to a
20 percent excise tax and the issuer may lose its tax deduction with respect to
such payments. These rules may apply to options and rights granted under the
Recruitment Plan. The determination of the application of these rules will
depend upon a number of factual matters not determinable at this time. It should
be realized, however, that these rules may affect the ability of the Company to
secure a tax deduction on the exercise of certain Non-Qualified Options granted
under the Recruitment Plan.
The tax consequences summarized above may change in the event of
amendment to the Code or the regulations adopted thereunder.
Exercise of Options; SARs
Generally, an option will be exercised by the tender in cash of the total
exercise price for the shares of stock for which the option is being exercised.
The Board of Directors or the Committee
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may, however, permit an optionee to pay all or a portion of the exercise price
by delivering to the Company shares of Common Stock having an aggregate fair
market value at least equal to such total exercise price. An option may also be
exercised by tender to the Company of a written notice of exercise together with
advice of the delivery of an order to a broker to sell part or all of the shares
of Common Stock subject to such exercise notice and an irrevocable order to such
broker to deliver to the Company sufficient proceeds from the sale of such
shares to pay the exercise price and any withholding taxes (a "cashless
exercise") provided all documentation and procedures are approved in advance by
the Board of Directors or the Committee. The Company has the authority under the
Recruitment Plan to assist any employee of the Company with the payment of the
purchase price of the Common Stock by lending the amount of the purchase price
to the employee, on terms, including rate of interest and security for the loan,
as the Board of Directors shall authorize.
The Board of Directors or the Committee may, in its discretion, at any
time prior to the exercise of any option, grant in connection with such option
the right to surrender part or all of such option to the extent the option is
exercisable, and receive an amount (payable in cash, shares of the Company's
Common Stock or combination thereof as determined by the Board of Directors or
the Committee) equal to the difference between the then fair market value of the
shares issuable upon the exercise of the option (or portions thereof
surrendered) and the exercise price of the option or portion thereof
surrendered.
Amendments to the Recruitment Plan
The Board of Directors may at any time terminate the Recruitment Plan or
make such amendments thereto as it deems advisable and in the best interests of
the Company, without action on the part of the Company's shareholders, unless
such approval is required pursuant to Section 422 of the Code or other federal
or state law. Such amendments may include, without limitation, changes in the
number of shares reserved for issuance under the plan, the class or classes of
individuals eligible to participate therein and the manner of administration and
duration of the plan.
Vote Required for Approval
The Recruitment Plan will be approved if the votes cast by the holders of
the Common Stock and represented at the Annual Meeting and entitled to vote
favoring the action exceed the votes cast opposing the action. The enclosed
proxy will be voted as specified, but if no specification is made with respect
to the proposal, it will be voted in favor of the proposal to approve the
adoption of the Recruitment Plan; however, broker non-votes will not be counted
as an affirmative vote for purposes of determining whether the proposal has been
approved.
The Board of Directors unanimously recommends a vote FOR the approval and
adoption of the 1997 Recruitment Stock Option Plan, which plan shall provide for
the issuance of Incentive Options, Non-Qualified Options and SARs, as set forth
in Exhibit D hereto.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters before
the Annual Meeting, nor does the Board of Directors know of any matters that
other persons intend to bring before the Annual Meeting. If, however, other
matters not mentioned in this Proxy Statement properly come before the Annual
Meeting, the persons named in the accompanying form of proxy will vote thereon
in accordance with the recommendation of the Board of Directors.
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Shareholders should note that the Company's By-Laws provide that no
proposals or nominations of Directors by Shareholders shall be presented for
vote at an Annual Meeting of Shareholders unless notice complying with the
requirements in the By-Laws is provided to the Board of Directors or the
Company's Secretary no later than the close of business on the fifth day
following the day that notice of the Annual Meeting is first given to
Shareholders.
SHAREHOLDER PROPOSALS AND SUBMISSION
If any Shareholder wishes to present a proposal for inclusion in the
proxy materials to be solicited by the Company's Board of Directors with respect
to the next Annual Meeting of Shareholders, such proposal must be presented to
the Company's management prior to April 14, 1998.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
SHAREHOLDER OF RECORD AND ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
MEDCROSS, INC.
By:
-------------------------------
David E. Hardy, Secretary
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EXHIBIT A
AMENDMENT TO ARTICLE I
OF CERTIFICATE OF INCORPORATION
MEDCROSS, INC.
Article I of the Articles of Incorporation of Medcross, Inc. shall be
deleted and the following substituted therefor:
"Article I. The name of the corporation is I-Link, Inc."
A - 1
<PAGE>
EXHIBIT B
AMENDMENT TO ARTICLE III
OF CERTIFICATE OF INCORPORATION
OF MEDCROSS, INC.
Article III of the Corporation's Articles of Incorporation shall be
amended by the substitution of the following paragraph (a) for paragraph (a) of
Article III:
"(a) Fifty million (50,000,000) shares of common stock, having a par
value of $.007 per share (the "Common Stock"); and
B - 1
<PAGE>
EXHIBIT C
AMENDMENT TO ARTICLE III
OF CERTIFICATE OF INCORPORATION
OF MEDCROSS, INC.
Article III of the Corporation's Articles of Incorporation shall be
amended by the substitution of the following paragraph (b) for paragraph (b) of
Article III:
"(b) Ten million (10,000,000) shares of preferred stock, having a par
value of $10.00 per share (the "Preferred Stock"). The Preferred Stock may be
issued in one or more series. The Board of Directors shall have the authority to
divide the Preferred Stock into one or more series and, subject to the
provisions and limitations set forth herein, to determine the relative rights
and preferences of the shares of any series so established with regard to the
rate or manner of payment of dividends, whether such shares may be redeemed and,
if so, the redemption price and the terms and conditions of redemption, sinking
fund provisions, if any, for the redemption or purchase of such shares, the
terms and conditions, if any, on which such shares may be converted, and voting
rights, if any. Provided, however, except as to any rights and preferences as
determined by the Board of Directors as set forth above, all shares of such
Preferred Stock regardless of series shall be identical."
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<PAGE>
EXHIBIT D
1997 RECRUITMENT STOCK OPTION PLAN
OF MEDCROSS, INC.
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1 Medcross, Inc. (the "Company"), a Florida corporation,
hereby establishes a stock option plan to be named the 1997 Recruitment Stock
Option Plan (the "1997 Plan").
Section 1.2 The purpose of this 1997 Plan is to induce persons who
are officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This 1997 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value $.007 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to persons who are
employees, as well as options which do not so qualify ("Non-Qualified Options")
to be issued to persons or consultants, including those who are not employees.
This 1997 Plan also provides for grants of stock appreciation rights ("SARs") in
connection with the grant of options under this 1997 Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require.
Section 1.3 All options and other rights previously granted by the
Company under any other plan previously adopted by the Company shall continue to
be governed by such plan. All Options granted hereunder on or after the date
that this 1997 Plan has been approved and adopted by the Company's board of
directors (the "Board of Directors") shall be governed by the terms and
conditions of this 1997 Plan unless the terms of such Option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section 2.1 All determinations under this 1997 Plan concerning the
selection of persons eligible to receive awards under this 1997 Plan and with
respect to the timing, pricing and amount of an award under this 1997 Plan shall
be made by the administrator (the "Administrator") of this 1997 Plan. The
Administrator shall be either: (a) the Board of Directors or (b) in the
discretion of the Board of Directors by a committee (the "Committee") of the
Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee Director" as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In such case, a majority
of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at
any meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee shall be necessary to constitute action
by the Committee.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this 1997 Plan
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are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent that any provision of this 1997
Plan or action by the Administrator fails to so comply, it shall be deemed to be
null and void, to the extent permitted by law and deemed advisable by the
Administrator.
Section 2.2 The provisions of this 1997 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code
("Section 422") and the regulations promulgated thereunder. In the event that
any future statute or regulation shall modify Section 422, this 1997 Plan shall
be deemed to incorporate by reference such modification. Any stock option
agreement relating to the grant of any Incentive Option pursuant to this 1997
Plan, which option is outstanding and unexercised at the time that any modifying
statute or regulation becomes effective, shall also be deemed to incorporate by
reference such modification, and no notice of such modification need be given to
the Optionee (as hereinafter defined). Any stock option agreement relating to an
Incentive Option shall provide that the Optionee (as hereinafter defined) hold
the stock received upon exercise of such Incentive Option for a minimum of two
years from the date of grant of the Incentive Option and one year from the date
of exercise of such Incentive Option, absent the written approval, consent or
waiver of the Administrator.
Section 2.3 If any provision of this 1997 Plan is determined to
disqualify the shares of Common Stock purchasable upon exercise of an Incentive
Option granted under this 1997 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify such shares of Common Stock for said tax
treatment.
Section 2.4 The Company shall grant Options under this 1997 Plan in
accordance with determinations made by the Administrator pursuant to the
provisions of this 1997 Plan. All Options granted pursuant to this 1997 Plan
shall be clearly identified as Incentive Options or Non-Qualified Options. The
Administrator may from time to time adopt (and thereafter amend or rescind) such
rules and regulations for carrying out this 1997 Plan and take such action in
the administration of this 1997 Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The Board of Directors or, subject to the
supervision of the Board of Directors, the Committee, as the Administrator,
shall have plenary discretion, subject to the express provisions of this 1997
Plan, to determine which officers, directors, employees and consultants shall be
granted Options, the number of shares subject to each Option, the time or times
when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of
the respective option agreements (which need not be identical), including such
terms and provisions which may be amended from time to time as shall be
required, in the judgment of the Administrator, to conform to any change in any
law or regulation applicable hereto, and to make all other determinations deemed
necessary or advisable for the administration of this 1997 Plan. The
interpretation and construction of any provision of this 1997 Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be
final, conclusive and binding upon all persons.
Section 2.5 No member of the Administrator shall be liable for any
action or determination made in good faith with respect to administration of
this 1997 Plan or the Options granted hereunder. A member of the Administrator
shall be indemnified by the Company, pursuant to the Company's bylaws,
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for any expenses, judgments or other costs incurred as a result of a lawsuit
filed against such member claiming any rights or remedies arising out of such
member's participation in the administration of this 1997 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1 There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 1997 Plan an
aggregate of 4,400,000 shares of Common Stock of the Company (subject to
adjustment as provided in Article VIII hereof). The shares issued upon exercise
of any Options granted under this 1997 Plan may be shares of Common Stock
previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section 3.2 In the event that any Options outstanding under this 1997
Plan for any reason expire or are terminated without having been exercised in
full or shares of Common Stock subject to Options are surrendered in whole or in
part pursuant to Rights granted under Section 7.6 hereof (except to the extent
that shares of Common Stock are issued as payment to the holder of the Option
upon such surrender) the unpurchased shares of Common Stock subject to such
Option and any such surrendered shares of Common Stock may again be available
for transfer under this 1997 Plan.
Section 3.3 No Options shall be granted pursuant to this 1997 Plan to
any Optionee after the tenth anniversary of the date that this 1997 Plan is
adopted by the Board of Directors.
ARTICLE IV
ELIGIBILITY
Section 4.1 Non-Qualified Options may be granted pursuant to this
1997 Plan to officers, directors, employees and consultants of the Company (or
any of its subsidiaries) selected by the Administrator, and Incentive Options
may be granted pursuant to this 1997 Plan only to employees (including officers
and directors who are also employees) of the Company (or any of its
subsidiaries) selected by the Administrator. Persons granted Options pursuant to
this 1997 Plan are referred to herein as "Optionees." For purposes of
determining who is an employee with respect to eligibility for Incentive
Options, Section 422 shall govern. The Administrator may determine (in its sole
discretion) that any person who would otherwise be eligible to be granted
Options shall, nonetheless, be ineligible to receive any award under this 1997
Plan.
Section 4.2 The Administrator will (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; provided,
however, no Option will be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee,
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his or her present and potential contributions to the Company, and such other
factors which are deemed relevant in accomplishing the purpose of this 1997
Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1 Each Option granted under this 1997 Plan shall be
evidenced by a stock option certificate and agreement (the "Stock Option
Certificate and Agreement") in a form consistent with this 1997 Plan, provided
that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by an
Option may be purchased shall be set forth in the Stock Option Certificate and
Agreement and shall be determined by the Administrator, provided that the option
price for any Incentive Option shall not be less than the "fair market value" of
the shares of Common Stock at the time of grant determined in accordance with
Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1997 Plan to an
Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the fair market value
shall be based upon the following: (i) if the shares of Common Stock are not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the shares of Common Stock published by a
recognized stock quotation service, on the basis of the recent purchases and
sales of the shares of Common Stock in arms-length transactions; or (ii) if the
shares of Common Stock are not then listed and traded upon a recognized
securities exchange or quoted on the NASDAQ Stock Market, and there are reports
of stock prices by a recognized quotation service, upon the basis of the last
reported sale or transaction price of such stock on the date of grant as
reported by a recognized quotation service, or, if there is no last reported
sale or transaction price on that day, then upon the basis of the mean of the
last reported closing bid and closing asked prices for such stock on that day or
on the date nearest preceding that day; or (iii) if the shares of Common Stock
shall then be listed and traded upon a recognized securities exchange or quoted
on the NASDAQ Stock Market, upon the basis of the last reported sale or
transaction price at which shares of Common Stock were traded on such recognized
securities exchange on the date of grant or, if the shares of Common Stock were
not traded on such date, upon the basis of the last reported sale or transaction
price on the date nearest preceding that date. The Administrator shall also
consider such other factors relating to the fair market value of the shares of
Common Stock as it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%)
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of the voting power of all classes of stock of the Company, an Optionee is
considered to own those shares which are owned directly or indirectly through
brothers and sisters (including half-blooded siblings), spouse, ancestors and
lineal descendants; and proportionately as a shareholder of a corporation, a
partner of a partnership, and/or a beneficiary of a trust or an estate that owns
shares of the Company.
(d) Notwithstanding any other provision of this 1997 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the extent that
the aggregate fair market value (determined at the time the Option is granted)
of the shares of Common Stock of the Company with respect to which Incentive
Options (without reference to this provision) are exercisable for the first time
by any individual in any calendar year under any and all stock option plans of
the Company, its subsidiary corporations and its parent (if any) exceeds
$100,000, such Options shall be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted
more than one Incentive Option or Non-Qualified Option during the duration of
this 1997 Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; provided, however, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option and any Right related thereto shall be
within the sole discretion of the Administrator; provided, however, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any
Non-Qualified Option shall, by its terms, be exercised within ten years after
the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five
years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable
by the Optionee other than by will, or by the laws of descent and distribution.
An Option may be exercised during the Optionee's lifetime only by the Optionee.
(h) The Administrator may impose such other or further conditions on
any transaction under the 1997 Plan, including without limitation, the grant or
award of any Option or the exercise or other disposition thereof, as it, in its
discretion, may deem necessary or advisable in order to exempt the transaction
from Section 16(b) of the Exchange Act, including without limitation thereto,
the approval or ratification of the transaction by shareholders or a six-month
restriction on disposition of the Option or the Common Stock issuable upon
exercise thereof.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1 If the employment or service of an Optionee is terminated
for cause, the option rights of such Optionee, both accrued and future, under
any then outstanding Non-Qualified or Incentive Option shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties,
disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of patents,
processes or trade secrets of the Company, individually or as an employee,
partner, associate, officer or director of any organization. The determination
of the existence and the proof of "cause" shall be made by the Administrator
and, subject to the review of any determination made by the Administrator, such
determination shall be binding on the Optionee and the Company.
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Section 6.2 If the employment or service of the Optionee is
terminated by either the Optionee or the Company for any reason other than for
cause, death, or for disability, as defined in Section 22(e)(3) of the Code, the
option rights of such Optionee under any then outstanding Non-Qualified or
Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option
or within three months after the date of such termination, whichever period of
time is shorter, but only to the extent of the accrued right to exercise the
Option at the date of such termination.
Section 6.3 In the case of an Optionee who becomes disabled, as
defined by Section 22(e)(3) of the Code, the option rights of such Optionee
under any then outstanding Non-Qualified or Incentive Option shall, subject to
the provisions of Section 5.1(h) hereof, be exercisable by such Optionee at any
time prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of such termination.
Section 6.4 In the event of the death of an Optionee, the option
rights of such Optionee under any then outstanding Non-Qualified or Incentive
Option shall be exercisable by the person or persons to whom these rights pass
by will or by the laws of descent and distribution, at any time prior to the
expiration of the Option or within three years after the date of death,
whichever period of time is shorter, but only to the extent of the accrued right
to exercise the Option at the date of death. If a person or estate acquires the
right to exercise a Non-Qualified or Incentive Option by bequest or inheritance,
the Administrator may require reasonable evidence as to the ownership of such
Option, and may require such consents and releases of taxing authorities as the
Administrator may deem advisable.
Section 6.5 The Administrator may also provide that an employee must
be continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section 6.6 Options granted under this 1997 Plan shall not be
affected by any change of duties or position, so long as the Optionee continues
in the service of the Company.
Section 6.7 Nothing contained in this 1997 Plan, or in any Option
granted pursuant to this 1997 Plan, shall confer upon any Optionee any right
with respect to continuance of employment or service by the Company nor
interfere in any way with the right of the Company to terminate the Optionee's
employment or service or change the Optionee's compensation at any time.
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ARTICLE VII
PURCHASE OF SHARES
Section 7.1 Except as provided in this Article VII, an Option shall
be exercised by tender to the Company of the full exercise price of the shares
of Common Stock with respect to which the Option is exercised and written notice
of the exercise. The right to purchase shares of Common Stock shall be
cumulative so that, once the right to purchase any shares of Common Stock has
accrued, such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. A partial exercise of an
Option shall not affect the right of the Optionee to exercise the Option from
time to time, in accordance with this 1997 Plan, as to the remaining number of
shares of Common Stock subject to the Option. The purchase price of the shares
shall be in United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the
approval of the Administrator, exercise his or her Option by tendering to the
Company shares of Common Stock of the Company owned by him or her and having an
aggregate fair market value at least equal to the full exercise price. The fair
market value of any shares of Common Stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof.
Section 7.2 Except as provided in Article VI above, an Option may not
be exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section 7.3 No Optionee, or Optionee's executor, administrator,
legatee, or distributee or other permitted transferee, shall be deemed to be a
holder of any shares of Common Stock subject to an Option for any purpose
whatsoever unless and until a stock certificate or certificates for such shares
are issued to such person under the terms of this 1997 Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article VIII hereof.
Section 7.4 If: (i) the listing, registration or qualification of the
Options issued hereunder, or of any securities issuable upon exercise of such
Options (the "Subject Securities") upon any securities exchange or quotation
system or under federal or state law is necessary as a condition of or in
connection with the issuance or exercise of the Options, or (ii) the consent or
approval of any governmental regulatory body is necessary as a condition of or
in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for their issuance.
Section 7.5 An Optionee may be required to represent to the Company
as a condition of his or her exercise of Options issued under this 1997 Plan
that: (i) the Subject Securities acquired upon exercise of his or her Option are
being acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act or the rules and regulations thereunder.
Optionees may also be required to
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provide (as a condition precedent to exercise of an Option) such documentation
as may be reasonably requested by the Company to assure compliance with
applicable law and the terms and conditions of this 1997 Plan and the subject
Option.
Section 7.6 The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the right
(previously defined as an "SAR" or collectively, the "SARs") to surrender all or
part of the Option to the extent that such Option is exercisable and receive in
exchange an amount (payable in cash, shares of Common Stock valued at the then
fair market value, or a combination thereof as determined by the Administrator)
equal to the difference (the "Spread") between the then fair market value of the
shares of Common Stock issuable upon the exercise of the Option (or portions
thereof surrendered) and the option price payable upon the exercise of the
Option (or portions thereof surrendered). Such SARs may be included in an Option
only under the following conditions: (a) the SARs will expire no later than the
expiration of the underlying Option; (b) the SARs may be for no more than one
hundred percent (100%) of the Spread; (c) the SARs are transferable only when
the underlying Option is transferable and under the same conditions; (d) the
SARs may be exercised only when the underlying Option is eligible to be
exercised; and (e) the SARs may be exercised only when the Spread is positive,
i.e., when the market price of the stock subject to the Option exceeds the
exercise price of the Option.
Section 7.7 An Option may also be exercised by tender to the Company
of a written notice of exercise together with advice of the delivery of an order
to a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section 8.1 In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this 1997 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding
adjustment in the option price per share. Any such adjustment made by the
Administrator shall be conclusive.
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Section 8.2 The grant of an Option pursuant to this 1997 Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
Section 8.3 Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to Options hereunder are
changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this 1997 Plan shall
terminate, and all outstanding Options theretofore granted hereunder shall
terminate, unless provision be made in writing in connection with such
transaction for the continuance of this 1997 Plan and/or for the assumption of
Options theretofore granted, or the substitution for such Options of options
covering the stock of a successor employer corporation, or a parent or a
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in which event this 1997 Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If this 1997 Plan
and unexercised Options shall terminate pursuant to the foregoing sentence, all
persons owning any unexercised portions of Options then outstanding shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of their Options, including the portions thereof which would, but for
this Section 8.3 not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1 The Board of Directors may at any time terminate this 1997
Plan or make such amendments hereto as it shall deem advisable and in the best
interests of the Company, without action on the part of the shareholders of the
Company unless such approval is required pursuant to Section 422 of the Code or
the regulations thereunder or other federal or state law; provided, however,
that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, materially
adversely affect or impair the rights of such individual under such Option.
Pursuant to Section 422(b) of the Code, no Incentive Option may be granted
pursuant to this 1997 Plan after ten years from the date this 1997 Plan is
adopted or the date this 1997 Plan is approved by the shareholders of the
Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section 10.1 Any Options and shares of Common Stock issued pursuant to
this 1997 Plan shall be subject to such restrictions on transfer and limitations
as shall, in the opinion of the Administrator, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. In addition, the Administrator
may in any Stock Option Certificate and Agreement impose such other restrictions
upon the disposition or exercise of an Option or upon the sale or other
disposition of the shares of Common Stock deliverable
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upon exercise thereof as the Administrator may, in its sole discretion,
determine. By accepting an award pursuant to this 1997 Plan, each Optionee shall
thereby agree to any such restrictions.
Section 10.2 Any certificate issued to evidence shares of Common Stock
issued pursuant to an Option shall bear such legends and statements as the
Committee, the Board of Directors or counsel to the Company shall deem advisable
to assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. No shares of Common Stock will
be delivered pursuant to exercise of the Options granted under this 1997 Plan
until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as
the Committee, the Board of Directors or counsel to the Company deems necessary
or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section 11.1 The Company is vested with authority under this 1997 Plan to
assist any employee to whom an Option is granted hereunder (including any
officer or director of the Company or any of its subsidiaries who is also an
employee) in the payment of the purchase price payable on exercise of such
Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as
shall have been authorized by or under authority of the Board of Directors. Any
such assistance shall comply with the requirements of Regulation G promulgated
by the Board of the Federal Reserve System, as amended from time to time, and
any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section 12.1 The proceeds received by the Company from the issuance and
sale of Common Stock upon exercise of Options granted pursuant to this 1997 Plan
are to be added to the general funds of the Company and used for its corporate
purposes as determined by the Board of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section 13.1 This 1997 Plan shall become effective upon adoption by the
Board of Directors, and approval by the Shareholders and Options may be issued
hereunder from and after that date subject to the provisions of Section 3.3
above. This 1997 Plan must be approved by the Company's shareholders in
accordance with the applicable provisions (relating to the issuance of stock or
options) of the Company's governing documents and state law or, if no such
approval is prescribed therein, by the affirmative vote of the holders of a
majority of the votes cast at a duly held shareholders meeting at which a quorum
representing a majority of all the Company's outstanding voting stock is present
and voting (in
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person or by proxy) or, without regard to any required time period for approval,
by any other method permitted by Section 422 of the Code and the regulations
thereunder.
IN WITNESS WHEREOF, pursuant to the approval of this 1997 Plan by the
Board of Directors, this 1997 Plan is executed and adopted subject to
Shareholder approval as of the ____ day of _______________, 1997.
ATTEST: MEDCROSS, INC.
By: By:
--------------------------- --------------------------
Secretary Its:
--------------------------
[CORPORATE SEAL]
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PROXY
ANNUAL MEETING OF SHAREHOLDERS OF
MEDCROSS, INC.
ON __________, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Clay Wilkes, John W. Edwards, Henry Y.L. Toh, R.
Huston Babcock and Joseph A. Cohen and each or any of them proxies, with power
of substitution, to vote all shares of the undersigned at the Annual Meeting of
Shareholders to be held on _________, 1997, at ____ a.m. at ___________________,
or at any adjournment thereof, upon the matters set forth in the Proxy Statement
for such meeting, and in their discretion, or such other business as may
properly come before the meeting.
1. TO ELECT TWO CLASS III DIRECTORS TO SERVE FOR THREE YEARS AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND SHALL QUALIFY.
[ ]FOR THE NOMINEES LISTED BELOW [ ]WITHHOLD AUTHORITY
to vote for the nominees
listed below
(INSTRUCTION: To withhold authority to vote for the nominee strike a line
through the nominee's name below:)
John W. Edwards R. Huston Babcock
2. APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY TO I-LINK, INC.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. TO APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED
STOCK FROM 500,000 SHARES OF PREFERRED STOCK, $10.00 PAR VALUE, TO
10,000,000 SHARES OF PREFERRED STOCK, $10.00 PAR VALUE, TO PERMIT THE
CONVERSION OF CONVERTIBLE NOTES ISSUED IN SEPTEMBER 1996 AND FOR OTHER
GENERAL CORPORATE PURPOSES.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
<PAGE>
4. TO APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 20 MILLION SHARES OF COMMON STOCK, $.007 PAR VALUE, TO 50 MILLION
SHARES OF COMMON STOCK, $.007 PAR VALUE, TO PERMIT THE ISSUANCE OF SHARES
IN CONNECTION WITH THE COMPANY'S ACQUISITION OF FAMILY TELECOMMUNICATIONS
INCORPORATED, THE ISSUANCE OF OPTIONS AND WARRANTS AND FOR OTHER GENERAL
CORPORATE PURPOSES.
[_]FOR [_]AGAINST [_]ABSTAIN
5. TO APPROVE THE ADOPTION OF THE 1997 RECRUITMENT STOCK OPTION PLAN WHICH
PROVIDES FOR THE ISSUANCE OF INCENTIVE STOCK OPTIONS, NON-QUALIFIED STOCK
OPTIONS AND STOCK APPRECIATION RIGHTS.
[_]FOR [_]AGAINST [_]ABSTAIN
Dated: 1997
-------------------, ------------------------------------
Signature
------------------------------------
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. Persons signing
as Executor, Administrator, Trustee, etc. should so indicate. Please sign
exactly as the name appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2, 3, 4 and 5.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
