<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
World Access, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
WORLD ACCESS LOGO
945 E. PACES FERRY ROAD
SUITE 2240
ATLANTA, GEORGIA 30326
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1997
---------------------
To the Stockholders of World Access, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (together
with any adjournments or postponements thereof, the "Meeting") of World Access,
Inc. (the "Company") will be held at the Resurgens Plaza building, 945 E. Paces
Ferry Road, Atlanta, Georgia 30326, on Tuesday, June 10, 1997 at 10:00 a.m.,
Eastern daylight time, for the purpose of considering and voting upon the
following matters:
(1) To elect a board of six directors as follows: (a) two directors to
serve a one-year term, two directors to serve a two-year term and two
directors to serve a three-year term; or (b) if proposal 2 is not approved,
six directors to serve a one-year term;
(2) To consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation to provide for the classification of
the Board of Directors and related matters;
(3) To consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation to prohibit stockholder action by
written consent;
(4) To consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation to increase the authorized capital of
the Company, authorize a new class of preferred stock and eliminate the
Company's Class B Common Stock;
(5) To consider and act upon a proposal to increase the number of
options issuable under the Company's 1991 Stock Option Plan from 2,500,000
to 3,500,000; and
(6) To transact such other business as may properly come before the
Meeting.
These items are more fully described in the accompanying Proxy Statement,
which is hereby made a part of this Notice of Annual Meeting of Stockholders.
The Board of Directors has fixed the close of business on April 24, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Meeting.
<PAGE> 3
A copy of the Company's Annual Report for the year ended December 31, 1996
is enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this Notice.
By Order of the Board of Directors
Martin D. Kidder
Corporate Controller and Secretary
Atlanta, Georgia
April , 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE-PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST BRING TO THE MEETING A
LETTER FROM THE BROKER, BANK OR OTHER NOMINEE CONFIRMING YOUR BENEFICIAL
OWNERSHIP OF THE SHARES. ADDITIONALLY, IN ORDER TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
2
<PAGE> 4
WORLD ACCESS, INC.
PRELIMINARY PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1997
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement (the "Proxy Statement") and the accompanying form of
proxy are being furnished to the stockholders of World Access, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board") from holders of its outstanding common
stock, $.01 par value per share (the "Common Stock"), for use at the Annual
Meeting of Stockholders of the Company (together with any adjournments or
postponements thereof, the "Meeting") to be held at the Resurgens Plaza
building, 945 E. Paces Ferry Road, Atlanta, Georgia 30326, on Tuesday, June 10,
1997 at 10:00 a.m., Eastern daylight time. This Proxy Statement, the
accompanying form of proxy and the Annual Report to Stockholders are expected to
be mailed to stockholders of the Company on or about April 28, 1997.
SOLICITATION
The expense of this solicitation will be borne by the Company. Solicitation
will be primarily by use of the mails. Executive officers and other employees of
the Company may solicit proxies, without extra compensation, personally and by
telephone and other means of communication. The Company will also reimburse
brokers and other persons holding Common Stock in their names or in the names of
their nominees for their reasonable expenses in forwarding proxies and proxy
materials to beneficial owners.
VOTING RIGHTS AND OUTSTANDING SHARES
Stockholders of record as of the close of business on April 24, 1997 (the
"Record Date") will be entitled to vote at the Meeting. Each share of
outstanding Common Stock is entitled to one vote. As of April 15, 1997, there
were 17,663,882 shares of Common Stock outstanding and entitled to vote. The
Company has been advised that certain beneficial owners, directors and executive
officers of the Company, who hold in the aggregate approximately 30% of the
Common Stock, intend to vote their shares in favor of the nominees and in
accordance with the recommendations of the Board.
The presence at the Meeting, in person or by proxy, of a majority of the
outstanding shares of Common Stock as of the Record Date will constitute a
quorum for transacting business at the Meeting. Abstentions and broker non-votes
are counted towards quorum. Provided a quorum is present at the Meeting,
directors will be elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Meeting. Approval of Proposals
2, 3 and 4 require the affirmative vote of a majority of the holders of all the
outstanding Common Stock as of the Record Date and approval of Proposal 5
requires the affirmative vote of the holders of a majority of the Common Stock
present in person or represented by proxy and entitled to vote at the Meeting.
All votes will be tabulated by the inspector of elections appointed for the
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for any purposes in determining whether a matter has been approved.
<PAGE> 5
REVOCABILITY OF PROXIES
The shares represented by proxy will be voted as instructed if received in
time for the Meeting. If no instructions are indicated, such shares will be
voted in favor of (FOR) the proposals specified herein and in the discretion of
the proxy holder as to any other matter that may properly come before the
Meeting. Any person signing and mailing the proxy may, nevertheless, revoke it
at any time before it is exercised by written notice to the Company (Attention:
Mark A. Gergel, Executive Vice President and Chief Financial Officer) at its
headquarters at 945 E. Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326 or
by attending in person and voting at the Meeting. Attendance at the Meeting,
however, will not itself constitute the revocation of a proxy.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Six directors, constituting the entire Board are to be elected at the
Meeting and, if elected, will hold office until their successors have been
elected and qualified. If the proposed amendment to the Company's Restated
Certificate of Incorporation relating to the classification of the Board of
Directors into three classes with differing terms of office is approved by the
stockholders at the Meeting (see Proposal 2 below), it is intended that the
shares represented by the enclosed proxy will be voted, unless authority is
withheld, for the election of two directors to each of Classes I, II and III.
Such directors will serve for the terms indicated below:
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
- ----------------------- ----------------------- -----------------------
(TERM EXPIRING IN 1998) (TERM EXPIRING IN 1999) (TERM EXPIRING IN 2000)
<C> <C> <C>
Stephen J. Clearman William P. O'Reilly Steven A. Odom
Stephen E. Raville Hensley E. West John D. Phillips
</TABLE>
If Proposal 2 is not adopted by the stockholders at the Meeting, then six
directors will be elected for a term of one year each to serve until the 1998
Annual Meeting of Stockholders and until their successors are elected and
qualified. The Company's bylaws provide that the Board shall consist of no less
than one member, with the actual number to be established by resolution of the
Board. The Board has by resolution established the number of directors at six.
The nominees of the Board are set forth below. All of the current members
of the Board have been nominated to continue to serve as directors of the
Company. In the event any nominee is unable or declines to serve as a director
at the time of the Meeting, the proxies will be voted for any nominee who shall
be designated by the present Board to fill the vacancy. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them for the nominees listed below unless
instructed otherwise. As of the date of this Proxy Statement, the Company is not
aware of any nominee who is unable or will decline to serve as a director, if
elected.
NOMINEES FOR ELECTION AS DIRECTORS
Set forth below are the names, ages (at December 31, 1996), positions and
offices held and a brief account of the business experience during the past five
years of each person nominated to serve as a director of the Company. The date
within the parenthetical represents the year the nominee joined the Board.
Stephen J. Clearman (1988)
In 1984, Mr. Clearman, 46, co-founded Geocapital Partners. Since 1984, he
has served as a general partner of four Geocapital venture capital partnerships.
Two of these partnerships (Geocapital Ventures and Geocapital II, L.P.) are
principal stockholders of the Company. Mr. Clearman currently serves as a
director of Expert Software, Inc. and several private companies, all of which
principally provide computer software and/or information services.
Steven A. Odom (1994)
Mr. Odom, 43, joined the Company's Board in October 1994. In November 1994,
he was appointed to the newly created position of Chairman of the Board. In
August 1995, he became Chairman and Chief Executive
2
<PAGE> 6
Officer of the Company. From 1983 to 1987, he founded and served as Chairman and
Chief Executive Officer of Data Contract Company, Inc. ("DCC"), a designer and
manufacturer of intelligent data PBX systems, pay telephones and diagnostic
equipment. From 1987 to 1990, he was Vice President for the Public
Communications Division of Executone Information Systems, Inc., a public company
that acquired DCC in 1987. Mr. Odom has also served as a director for Telematic
Products, Inc., a manufacturer of telephone central office equipment and
Resurgens Communications Group, Inc. ("Resurgens"), a provider of long distance
operator services that later merged with LDDS Communications, Inc., now known as
LDDS WorldCom ("WorldCom").
William P. O'Reilly (1994)
Mr. O'Reilly, 50, has been Chairman of the Board and Chief Executive
Officer of Eltrax Systems, Inc., a provider of network information products and
services, since July 1995. He has over 20 years experience in the
telecommunications industry as a private investor and entrepreneur and has
initiated several successful business ventures. In 1981, he founded and served
as the Chief Executive Officer of Lexitel Corporation, a provider of long
distance services, which is now part of ALC Communications, Inc. Mr. O'Reilly
was also a founder and Chief Executive Officer of Digital Signal, Inc., a
leading provider of a low-cost fiber optic capacity to long distance carriers.
In 1989, he acquired Military Communications Corporation ("MCC"), which provides
international public switched network services by means of phone centers to the
U.S. military worldwide. MCC was acquired by WorldCom in 1994. Mr. O'Reilly is
also a founder and past President of Comptel, an industry trade association.
John D. ("Jack") Phillips (1994)
Mr. Phillips, 54, was President, Chief Executive Officer and a director of
Metromedia International Group, Inc. ("Metromedia"), a global media,
entertainment and communications company, from November 1995 until December
1996. Metromedia was formed in November 1995 through the merger of The Actava
Group, Inc. ("Actava"), Orion Pictures Corporation, MCEG Sterling Incorporated
and Metromedia International Telecommunications, Inc. He served as President,
Chief Executive Officer and a director of Actava from April 1994 until November
1995. In May 1989, Mr. Phillips became Chief Executive Officer of Resurgens and
served in this capacity until September 1993 when Resurgens merged with
Metromedia Communications Corporation and WorldCom in a transaction that created
the fourth largest long distance company in the United States. From June 1985 to
October 1988, he was President and Chief Operating Officer of Advanced
Telecommunications Corporation ("ATC").
Stephen E. Raville (1994)
Mr. Raville, 49, has been Chairman of the Board of Charter Communications
International, Inc. ("Charter") since October 1996. Mr. Raville is also
President and controlling shareholder of First Southeastern Corp., a private
investment company he formed in 1992. In 1983, Mr. Raville founded TA
Communications, a long-distance telephone company, and served as its President.
In 1985, in conjunction with a merger between TA and ATC, he became Chairman and
Chief Executive Officer of ATC until the merger of ATC into WorldCom in late
1992. He currently serves on the board of advisors of First Union National Bank
of Atlanta and the board of directors of Charter and several private companies.
Hensley E. ("Buddy") West (1996)
Mr. West, 51, joined the Company in January 1996 as President and Chief
Operating Officer and was also elected a director in January 1996. From January
1994 to December 1995, he was Group Vice President for the Access Systems Group
of DSC Communications Corporation ("DSC"), a manufacturer of digital switching,
transmission and access telecommunications equipment. During his nine year
tenure with DSC, he held six sales and general management positions, including
Senior Vice President of North American Sales from July 1993 to December 1993,
Vice President of Access Products Division from March 1992 to July 1993, Vice
President of RBOC Sales from October 1991 to March 1992 and Vice President of
Business Development from March 1990 to October 1991. Prior to joining DSC, Mr.
West held general, engineering and sales management positions with California
Microwave, Inc., ITT Telecommunications, Inc. and Western Electric Co.
3
<PAGE> 7
BOARD COMMITTEES AND MEETINGS
During 1996, the Board met three times and took actions by unanimous
written consent five times. The Board has a standing Audit Committee and
Compensation Committee. No incumbent Board member attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board which such director
was eligible to attend during 1996 and (ii) the total number of meetings held by
any committee of the Board upon which such director served during 1996.
The Audit Committee recommends engagement of the Company's independent
auditors, reviews and approves services performed by such auditors, reviews and
evaluates the Company's accounting system and its system of internal controls
and performs other related duties delegated to such Committee by the Board. The
Audit Committee, which presently consists of Mr. Raville and Mr. Clearman, met
twice during 1996.
The Compensation Committee performs such duties regarding compensation for
executive officers as the Board may delegate to such Committee from time to
time. The Compensation Committee, which presently consists of Mr. O'Reilly and
Mr. Clearman, met once during 1996 and took action by unanimous written consent
two times.
The Board has not established a separate committee of its members to
nominate candidates for election as directors.
INTRODUCTION TO PROPOSALS 2, 3 AND 4
GENERAL
The Board of Directors has observed that certain tactics, including proxy
rights, hostile tender offers and "greenmail", have become relatively common in
recent takeover practice. The Board of Directors considers such tactics to be
highly disruptive to a corporation and often contrary to the overall best
interests of its stockholders. In particular, such tactics frequently represent
an attempt to acquire a corporation in the marketplace at an unfairly low price.
Proposals 2, 3 and 4, proposed amendments (the "Amendments") to the Company's
Restated Certificate of Incorporation, are being submitted for stockholder
approval to strengthen the Company's position against the use of these takeover
tactics.
The Amendments are intended to encourage persons seeking to acquire control
of the Company to initiate such efforts through negotiations with the Company's
Board of Directors. The Board of Directors believes that the Amendments will
help give it the time necessary to evaluate unsolicited offers, as well as
appropriate alternatives, in a manner which assures fair treatment of the
Company's stockholders. The Amendments are also intended to increase the
bargaining leverage of the Board of Directors, on behalf of the Company, in any
negotiations concerning a potential change of control of the Company. The
Amendments will, however, make more difficult or discourage a proxy contest or
the assumption of control by a substantial stockholder and thus could increase
the likelihood that incumbent directors will retain their positions. If adopted,
the Amendments could also have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of the Company
even though such attempt might be beneficial to the Company's stockholders.
The Amendments are permitted by Delaware law and are consistent with the
rules of the Nasdaq National Market on which the Company's Common Stock is
traded. The Amendments are not the result of any specific efforts, of which the
Company is aware, to obtain control of the Company. The Board of Directors does
not contemplate recommending the adoption of any further amendments to the
Restated Certificate of Incorporation or Bylaws of the Company that would affect
the ability of third parties to effect a change in control of the Company.
However, the Company's Board of Directors has previously considered, and may
consider in the future, adopting a so-called stockholder rights plan to provide
special conversion, voting or other rights or features designed to deter a
hostile takeover of the Company, and the Board of Directors may wish in the
future to review the advisability of adopting other measures that may effect
takeovers in the context of applicable law and judicial decisions.
4
<PAGE> 8
ABSENCE OF CUMULATIVE VOTING
The Company's Restated Certificate of Incorporation does not provide for
cumulative voting. As a result, in order to be assured of representation on the
Company's Board of Directors, a stockholder must control the votes of a majority
of the shares present and voting at a stockholders' meeting at which a quorum is
present. The absence of cumulative voting requires a person seeking a takeover
to acquire a substantially greater number of shares to be assured of
representation on the Board of Directors than would be necessary were cumulative
voting available.
EXISTING DEFENSES
The Company has in place certain charter and bylaw provisions, or is
subject to certain provisions of Delaware law, that may have an anti-takeover
effect. Section 203 of the Delaware General Corporation Law (the "DGCL")
provides that, subject to certain exceptions specified therein, an "interested
stockholder" of a Delaware corporation shall not engage in any business
combination, including mergers or consolidations or acquisitions of additional
shares of the corporation, with the corporation for a three-year period
following the date that such stockholder becomes an interested stockholder
unless (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an "interested
stockholder," the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares), or (iii) on or subsequent to such date, the business
combination is approved by the board of directors of the corporation and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder. Except as otherwise specified in Section 203, an
interested stockholder is defined to include (x) any person that is the owner of
15% or more of the outstanding voting stock of the corporation or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the date of determination, and (y) the affiliates and
associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. The
provisions of Section 203 may encourage persons interested in acquiring the
Company to negotiate in advance with its Board of Directors because the
stockholder approval requirement would be avoided if a majority of the directors
then in office approves either the business combination or the transaction which
results in any such person becoming an interested shareholder. Such provisions
also may have the effect of preventing changes in the management of the Company.
It is possible that such provisions could make it more difficult to accomplish
transactions which the Company's stockholders may otherwise deem to be in their
best interests.
The Company's Restated Certificate of Incorporation also provides that the
Company's Board of Directors may amend the Company's Bylaws, and the Company's
Bylaws provide that special meetings of the Company's stockholders may only be
called by the Company's Board of Directors or officers as instructed by the
Board of Directors and that the number of directors may be fixed by action of
the Board of Directors. Except as indicated above, management is not aware of
the existence of any other provision in the Restated Certificate of
Incorporation or Bylaws having an anti-takeover effect.
DESCRIPTION OF THE PROPOSED AMENDMENTS
The Amendments described in Proposals 2, 3 and 4 are set forth in Appendix
A to this Proxy Statement, in substantially the form in which they will take
effect if the Amendments are approved by the stockholders. The following
description of the Amendments is qualified in its entirety by reference to
Appendix A. In addition, if the Amendments are approved by the stockholders,
certain conforming amendments will be made to the Company's Bylaws.
5
<PAGE> 9
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
In proposing the Amendments, the Board of Directors unanimously recommended
that they be submitted to the Company's stockholders for approval. As noted
herein, however, certain of these provisions might make it significantly more
difficult to change control of the Board of Directors of the Company.
Accordingly, to the extent that management might be deemed to benefit from the
increased protections afforded by the proposed amendments, the Board of
Directors might be viewed as having a conflict of interest in recommending the
Amendments to stockholders for approval.
PROPOSAL 2 -- PROPOSAL TO AMEND AND RESTATE ARTICLE VII
OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO
CLASSIFY THE BOARD OF DIRECTORS AND TO EFFECT CERTAIN RELATED AMENDMENTS
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval an
amendment to the Company's Restated Certificate of Incorporation to provide: (i)
that the Board of Directors be divided into three classes of directors serving
staggered three-year terms; (ii) the size of the Board of Directors shall be
determined by the Board within a range set in the Restated Certificate of
Incorporation; (iii) any vacancy on the Board of Directors shall be filled by
the directors remaining in office; (iv) that a majority of the directors would
constitute a quorum of the Board of Directors; (v) that a director may be
removed only for cause; (vi) advance notice of stockholder nominations to the
Board of Directors must be given to the Company and certain information provided
in connection therewith; and (vii) that the affirmative vote of the holders of
at least 75% of the voting power of all outstanding shares of the Company's
capital stock then entitled to vote in an election of director, voting as a
single class, shall be required to alter, amend or repeal the foregoing
provisions to be added to the Restated Certificate of Incorporation or to adopt
any provision of the Restated Certificate of Incorporation or Bylaws
inconsistent with the foregoing ("Proposal 2"). Currently, directors are elected
annually to serve one-year terms.
Proposal 2 provides for three classes of directors, each consisting as
nearly as possible of one-third of the Board and for one-third of the Board to
be elected each year. However, members of all three classes would be elected
initially at the 1997 Annual Meeting. If Proposal 2 is approved and the slate of
six directors proposed for election at the Meeting is elected, they would be
elected in three separate classes as follows: two "Class I Directors" would be
elected for a term expiring at the 1998 Annual Meeting; two "Class II Directors"
would be elected for a term expiring at the 1999 Annual Meeting; and two "Class
III Directors" would be elected for a term expiring at the 2000 Annual Meeting.
At each annual meeting of stockholders after the Meeting, only directors of the
class whose term is expiring would be voted upon, and upon election each such
director would serve a three-year term.
Under Proposal 2, the Board of Directors would be empowered to determine
from time to time the size of the Board of Directors, but in no event could they
determine to have a Board consisting of less than three directors nor more than
12 directors. The total number of directors and the number of directors
constituting each class of directors (with each of three classes being as nearly
equal as possible) could be fixed or changed from time to time by the Board of
Directors subject to the three director minimum. Currently, the Company's
Restated Certificate of Incorporation provides that the number of directors of
the Company shall be fixed by the Bylaws. Proposal 2 would further provide that
when holders of any class of stock (other than Common Stock) shall have the
right to elect a specified number of directors (as is often required by the
terms of preferred stock in the event dividend payments are in arrears for a
period of time), then the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the applicable terms
of the Restated Certificate of Incorporation, and such directors shall not be
classified pursuant to Proposal 2, unless so provided. In addition, the
directors elected by such class of stock would not be counted towards the
maximum number of directors determined by the Board of Directors for the size of
the Board, unless so provided.
Subject to the DGCL and the terms of the Company's stock then outstanding,
Proposal 2 expressly delegates to incumbent directors sole power to fill
vacancies whether occurring by an increase in the number of directors or
otherwise. A director elected to fill a vacancy would hold office for the
unexpired portion of the term of the director who was being replaced. A director
elected to fill a newly created directorship would hold office until the
6
<PAGE> 10
next election for the class to which such director was elected. If the size of
the Board is increased, the additional directors would be apportioned among the
three classes of directors to keep all such classes as nearly equal as possible.
Proposal 2, if approved, would provide that a majority of directors would
constitute a quorum for the transaction of business. The Company's Bylaws
presently provide that a majority of directors shall constitute a quorum, but
the Bylaws may be amended by the holders of a majority of the Company's total
authorized voting power.
Under the DGCL, directors serving on a classified board may be removed only
for cause unless the Certificate of Incorporation provides otherwise. The
Company's Restated Certificate of Incorporation currently provides that a
director of the Company may be removed at any time in the manner provided in the
Company's Bylaws, and the Bylaws provide that a director may be removed with or
without cause. In order to remove any ambiguity with respect to the removal of
directors, the Board of Directors proposes to add Article VII, Section 1(f) to
the Company's Restated Certificate of Incorporation to provide that a director
may be removed only for cause.
Proposal 2 provides that nominations of persons for election to the Board
may be made by or at the direction of the Board of Directors or by any
stockholder of record entitled to vote in the election of directors. However,
Proposal 2 also provides a special procedure for stockholder nominations which
is not applicable to nominations by or at the direction of the Board of
Directors. Stockholders intending to nominate director candidates for election
must deliver written notice thereof to the Secretary of the Company not less
than 120 days in advance of the date which is one year later than the date of
the proxy statement of the Company released to stockholders in connection with
the previous year's annual meeting (or by other specified dates in certain
circumstances, including a meeting which is not an annual meeting).
Proposal 2 further provides that the notice must set forth certain
information concerning such stockholder and the nominee(s), including their
names, ages, addresses, occupations, and stock ownership in the Company, a
description of all arrangements and understandings between the stockholder and
each nominee and any other person relating to the proposed nomination, any other
information that would be required to be included in solicitations of proxies
for the election of directors of the Company, and the consent of each nominee to
being named as a nominee and to serve as a director of the Company if elected.
The chairman of the meeting must refuse to accept the nomination of any person
not made in compliance with the foregoing procedure.
Under the DGCL, amendments to the Company's Restated Certificate of
Incorporation generally require approval of the holders of a majority of the
outstanding stock entitled to vote on such amendments and of the outstanding
stock of each class (if any) entitled to vote on such amendments as a class; and
amendments to the Bylaws of the Company may be approved by the affirmative vote
of a majority of the shares of capital stock present in person or by proxy and
entitled to vote on such amendments at the meeting at which such amendments are
considered. However, the DGCL law also permits provisions in a certificate of
incorporation which require a greater vote than the vote otherwise required by
law for any corporate action. With respect to any such provisions requiring a
greater vote, the DGCL requires that any alteration, amendment, or repeal of
such provisions be approved by an equally large stockholder vote. As permitted
by these provisions of the DGCL, Proposal 2 provides that the affirmative vote
of the holders of at least 75% of the voting power of all outstanding shares of
capital stock of the Company then entitled to vote in an election of directors,
voting as a single class, shall be required for the alteration, amendment, or
repeal of the provisions described in Proposal 2 (including the requirement
therein for such 75% vote) or for the adoption of provisions inconsistent
therewith. This required vote is in addition to any separate class vote that
might in the future be accorded by the Board of Directors to any class or series
of preferred stock of the Company which might be outstanding at the time any
such alteration, amendment, repeal or adoption of inconsistent provisions is
submitted to stockholders for a vote. However, except to the extent specified in
Proposal 2 with respect to alteration, amendment or repeal of the provisions
thereof or the adoption of inconsistent provisions, as set forth above, Proposal
2 will not affect (i) the concurrent authority of the Board of Directors and the
stockholders to alter, amend or repeal Bylaws of the Company and (ii) the vote
required for the exercise of such powers by the Board of Directors or the
stockholders.
7
<PAGE> 11
The number of directors to be elected at the 1997 Annual Meeting is six,
which is the number currently provided by resolution of the Board of Directors
for the size of the Board and the present number of directors. The Board of
Directors has no present plans, arrangements, commitments or understandings with
respect to increasing or decreasing the size of the Board or any class of
directors.
If Proposal 2 is approved, the Company's Restated Certificate of
Incorporation will be amended and replaced in its entirety with new Article VII
as set forth in Appendix A. Subject to approval of Proposal 2, the Board of
Directors plans to adopt various conforming amendments to the Company's Bylaws,
including repeal of the provision fixing the number of directors of the Company.
The Board of Directors believes that the adoption of Proposal 2 is
advantageous to the Company and its stockholders for a number of reasons.
Public companies are potentially subject to attempts by various individuals
and entities to acquire significant minority positions in the company with the
intent either of obtaining actual control of the company by electing their own
slate of directors, or of achieving some other goal, such as the repurchase of
their shares by the company at a premium. Public companies also are potentially
subject to inadequately priced or coercive bids for control through majority
share ownership. These prospective acquirors may be in a position to elect a
company's entire board of directors through a proxy contest or otherwise, even
though they do not own a majority of the company's outstanding shares at the
time. If Proposal 2 is approved, a majority of the Company's directors could not
be removed by such persons until two annual meetings of stockholders have
occurred, unless such removal was for cause and the requisite vote was obtained.
By providing this additional time to the Board of Directors and eliminating the
possibility of rapid removal of the Board, the directors of the Company will
have the necessary time to most effectively satisfy their responsibility to the
Company's stockholders to evaluate any proposal and to assess and develop
alternatives without the pressure created by the threat of imminent removal. In
addition, Proposal 2, by providing that directors will serve three-year terms
rather than one-year terms, will enhance continuity and stability in the
composition of the Company's Board of Directors and in the policies formulated
by the Board. The Board believes that this, in turn, will permit it more
effectively to represent the interests of all stockholders, including responding
to demands or actions by any stockholder or group.
Proposal 2 may discourage potential purchasers because its provisions would
operate to delay the purchaser's ability to obtain control of the Board of
Directors because it will generally take a purchaser two annual meetings of
stockholders to elect a majority of the Board. In addition, Proposal 2 would
similarly delay stockholders who do not approve of policies of the Board from
replacing a majority of the directors, unless they can show cause, obtain the
requisite vote and then convince the remaining directors to elect more
acceptable replacements. For the same reasons, the adoption of Proposal 2 may
also deter certain mergers, tender offers or other takeover attempts which some
or a majority of holders of the Company's voting stock may deem to be in their
best interests.
The Company's Restated Certificate of Incorporation and Bylaws presently do
not address stockholder nominations. The advance notice requirement of Proposal
2, by regulating stockholder nominations at any meeting of stockholders, affords
the Board of Directors the opportunity to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the Board
of Directors, inform stockholders about such qualifications. Although Proposal 2
does not give the Board of Directors any power to approve or disapprove of
stockholder nominations of persons for election as directors, Proposal 2 may
have the effect of precluding a contest for the election of directors if the
procedures established by Proposal 2 are not followed and may discourage or
deter a third party from conducting a solicitation of proxies to elect its own
slate of directors, without regard to whether this might be harmful or
beneficial to the Company and its stockholders. In addition, this provision
would prevent the nomination at a stockholder's meeting of a candidate as to
whom no information had been provided or made available in advance to the
Company's stockholders, many of whom typically vote by proxy and do not
personally attend the meeting and therefore would have no opportunity to obtain
information about such candidate.
The requirement of an increased stockholder vote on alteration, amendment
or repeal of the provisions of Proposal 2, or the adoption of inconsistent
provisions, will give minority stockholders a veto power over any changes to
such provisions, or the adoption of inconsistent provisions, even if the Board
of Directors or a simple
8
<PAGE> 12
majority of the stockholders favors such changes or inconsistent provisions.
However, such requirement will also prevent a stockholder with less than the
requisite majority of voting stock from avoiding the requirements of the
provisions of Proposal 2 by simply repealing them.
The Board has no knowledge of any present effort to gain control of the
Company or to organize a proxy contest. In addition, there has been no problem
in the past or at the present time with the Board's continuity or stability.
However, the Board believes that adopting Proposal 2 is prudent, advantageous
and in the best interests of stockholders because it will give the Board more
time to fulfill its responsibilities to stockholders, and it will provide
greater assurance of continuity and stability in the composition and policies of
the Board of Directors. The Board also believes such advantages outweigh any
disadvantage relating to discouraging potential acquirors from attempting to
obtain control of the Company.
Approval of Proposal 2 requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting. If approved by the stockholders, the amendment to the Restated
Certificate of Incorporation will become effective upon filing with the
Secretary of the State of Delaware a Certificate of Amendment to the Company's
Restated Certificate of Incorporation, which filing is expected to take place
shortly after the Meeting.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3 -- PROPOSAL TO ADD ARTICLE VI
TO THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO
PROHIBIT ACTION BY WRITTEN CONSENT
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval an
amendment to the Company's Restated Certificate of Incorporation to provide
therein a new provision to require that stockholder action must be taken at an
annual or special meeting of stockholders and to prohibit stockholder action by
written consent ("Proposal 3"). Under the DGCL, any actions required or
permitted to be taken by stockholders may be taken (unless a company's
certificate of incorporation otherwise provides) without a meeting, without
prior notice and without a stockholder vote if a written consent setting forth
the action to be taken is signed by the holders of stock having the requisite
number of votes. The Company's existing Restated Certificate of Incorporation
does not prohibit such action by written consent and the Company's present
Bylaws provide that action may be taken by written consent. Consequently, unless
Proposal 3 is approved, persons holding a majority interest in the Company could
take significant corporate action without giving all stockholders notice or the
opportunity to vote.
Subject to the approval of Proposal 3 by the Company's stockholders, the
Board of Directors plans to adopt various conforming amendments to the Company's
Bylaws, including an amendment that eliminates the provision of the Bylaws
providing for action by written consent.
The Board of Directors believes that the approval of Proposal 3 is
advantageous to the Company and its stockholders. The provision of Proposal 3
prohibiting stockholder action by written consent would give all stockholders of
the Company, entitled to vote on a particular matter, notice of and the
opportunity to participate in the determination of any proposed action on such
matter and the chance to take judicial or other action to protect their
interests.
In addition, the Board of Directors believes that this change to eliminate
stockholder action by written consent is desirable to avoid untimely action in a
context that might not permit stockholders to have the full benefit of the
knowledge, advice and participation of the Company's management and Board of
Directors. In the event of a proposed acquisition of the Company, the Board of
Directors believes that the interests of stockholders will best be served by a
transaction that results from negotiations based on careful consideration of the
proposed terms. Although there can be no certainty as to the result of any
particular negotiations, the Board believes that the intended effect of Proposal
3 of promoting negotiations concerning any proposed acquisition of the Company,
with bargaining power in the Board of Directors, will be in the long-term
interests of the Company and its stockholders. However, any provision in the
Company's Restated Certificate of Incorporation which effectively requires a
potential acquiror to negotiate with the Company's management and Board of
Directors could be
9
<PAGE> 13
characterized as increasing management's and the Board's ability to retain their
positions with the Company and to resist a transaction which may be deemed
advantageous by certain stockholders.
The elimination of action by written consent may deter acquisitions of the
Company's stock and may delay, deter or impede stockholder action not approved
by the Board of Directors. Such actions may include stockholder attempts to
obtain control of the Board, unsolicited tender offers or other efforts to
acquire control of the Company. Proposal 3 may impede or delay, at least until
the next regularly scheduled annual meeting (and, if the proposal to adopt a
classified Board of Directors is approved, beyond such meeting), the initiation
or consummation of business transactions, such as reorganizations, mergers, or
recapitalizations, which are opposed by the Board of Directors even though
sought by a majority of the stockholders.
Approval of this Proposal 3 requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting. If approved by the stockholders, the amendment to the Restated
Certificate of Incorporation will become effective upon filing with the
Secretary of the State of Delaware a Certificate of Amendment to the Company's
Restated Certificate of Incorporation, which filing is expected to take place
shortly after the Meeting.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
PROPOSAL 4 -- PROPOSAL TO AMEND AND RESTATE ARTICLE IV
OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 40,000,000, AUTHORIZE 10,000,000 SHARES
OF A NEW CLASS OF PREFERRED STOCK AND ELIMINATE
CLASS B COMMON STOCK
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval an
amendment to the Company's Restated Certificate of Incorporation to provide
therein for (i) an increase to 40,000,000 shares of Common Stock, $.01 par
value, (ii) the creation of 10,000,000 shares of Preferred Stock in one or more
series with voting rights as determined by the Board of Directors, and (iii) the
elimination of the Company's non-voting Class B Common Stock, $.01 par value
(the "Class B Common Stock").
The authorized capital stock of the Company currently consists of (i)
20,000,000 shares of Common Stock, $.01 par value per share, of which 17,663,882
were issued and outstanding as of April 15, 1997 and approximately 2,150,000
were reserved for issuance under the Company's 1991 Stock Option Plan, the
Outside Directors' Warrant Plan and the Directors' Warrant Incentive Plan, and
(ii) 500,000 shares of Class B Common Stock, none of which was issued and
outstanding or received for issuance as of April 15, 1997. Accordingly, as of
April 15, 1997, the Company had available for issuance approximately 186,000
shares of Common Stock and 500,000 shares of Class B Common Stock.
The Board of Directors believes the authorization of the increase in the
number of shares of Common Stock and the creation of the Preferred Stock is
desirable to enhance the Company's flexibility in connection with possible
future actions, such as public or private offerings of shares for cash,
dividends payable in stock of the Company whether in connection with the
possible implementation of a stockholder rights plan or otherwise, corporate
mergers and acquisitions, and implementation and continuation of employee
benefit plans. Having such authorized shares for issuance in the future would
allow shares of Common Stock to be issued without the expense and delay of a
special meeting of stockholders. The additional shares of Common Stock may be
voting or non-voting as determined in the Board's sole discretion with no
further authorization by security holders required for the creation and issuance
thereof, subject to the requirements of the Nasdaq National Market that
stockholder approval be obtained for certain issuances of additional shares of
Common Stock in excess of 20% of the number of shares then outstanding. In
addition, if the Company issued a new series of common stock or any preferred
stock that disparately reduced the voting rights of the Common Stock, then the
Common Stock could be excluded from the Nasdaq National Market.
The designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the
"Limitations and
10
<PAGE> 14
Restrictions"), of the Preferred Stock will be determined by the Board of
Directors. Thus, the Board of Directors will, in the event of the approval of
this proposal by the Company's stockholders, be entitled to authorize the
creation and issuance of 10,000,000 shares of Preferred Stock in one or more
series with such Limitations and Restrictions as may be determined in the
Board's sole discretion, with no further authorization by security holders
required for the creation and issuance thereof.
The Board of Directors is required to make any determination to issue
shares of Common Stock or Preferred Stock based on its judgment as to the best
interests of the stockholders and the Company. Although the Board of Directors
has no present intention of doing so, it could issue shares of Common Stock or
Preferred Stock that could, depending on the terms of such series, make more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or other means. Such shares could be used
to create voting or other impediments or to discourage persons seeking to gain
control of the Company and could also be privately placed with purchasers
favorable to the Board of Directors in opposing such action. In addition, the
Board of Directors could authorize holders of a series of Common or Preferred
Stock to vote either separately as a class, or with the holders of the Company's
currently outstanding Common Stock, on any merger, sale or exchange of assets by
the Company or any other extraordinary corporate transaction. The mere existence
of the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares also could have a
dilutive effect on the voting power of existing holders of Common Stock and on
earnings per share and could be used to dilute the stock ownership of a person
or entity seeking to obtain control of the Company should the Board of Directors
consider the action of such entity or person not to be in the best interest of
the stockholders and the Company.
While the Company from time to time considers issuing shares of Common
Stock in connection with the acquisition of related businesses or assets, the
Company currently has no plans, agreements or understandings for issuing any
shares of Common Stock not currently authorized in connection with any such
acquisition, nor does the Company currently have any plans, agreements or
understandings for otherwise issuing any shares of Common Stock other than
pursuant to the Company's 1991 Stock Option Plan, as proposed to be amended in
Proposal 3 hereof. In addition, the Company currently has no plans, agreements
or understandings for issuing any shares of a new series of Common Stock or any
shares of Preferred Stock. However, if this proposal is approved by the
stockholders, no assurances can be given that the Company will not consider
effecting an equity offering of Common or Preferred Stock or otherwise issuing
such stock in the future for purposes of raising additional working capital,
acquiring related businesses or assets or otherwise. Therefore, the terms of any
new series of Common Stock or any Preferred Stock subject to this proposal
cannot be stated or estimated at this time.
Approval of this Proposal 4 requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting. If approved by the stockholders, the amendment to the Restated
Certificate of Incorporation will become effective upon filing with the
Secretary of the State of Delaware a Certificate of Amendment to the Company's
Restated Certificate of Incorporation, which filing is expected to take place
shortly after the Meeting.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4
PROPOSAL 5 -- PROPOSAL TO AMEND 1991 STOCK OPTION PLAN
In June 1991, the Company established the 1991 Stock Option Plan (the "1991
Plan") covering 157,500 shares of Common Stock. From March 1992 to December
1995, the 1991 Plan was amended on several occasions to increase the aggregate
number of shares of Common Stock underlying the 1991 Plan to 2,500,000 shares.
In December 1996, the Board approved an additional increase in the authorized
shares underlying the 1991 Plan to 3,500,000, subject to ratification by the
Company's stockholders at this Meeting, primarily to support the 1997 voluntary
salary reduction program and the continued growth of the Company. The 1991 Plan
authorizes the Board to grant stock options which may be incentive stock options
(the "ISOs") or non-qualified options as defined by the Internal Revenue Code of
1986, as amended (the "Code").
The purpose of the 1991 Plan is to (i) increase the proportion of
compensation and benefits for management employees that is tied to stock
ownership; (ii) encourage stock ownership by persons instrumental to the success
11
<PAGE> 15
of the Company in order to give them a greater personal interest in the
Company's business; and (iii) align management and stockholder long-term
interests. The exercise price of any options granted to an eligible employee who
owns 10% or less of the outstanding Common Stock may not be less than 100% of
the fair market value of the shares underlying such options on the date of
grant. The exercise price of any options granted to an eligible employee who
owns more than 10% of the outstanding Common Stock may not be less than 110% of
such fair market value. The term of all options and the manner in which they may
be exercised is determined by the Board, provided that no options may be
exercisable more than 10 years after the date of grant, and in the case of
options to an eligible employee owning more than 10% of the outstanding Common
Stock, no more than five years. In general, all unexercised options granted to
employees terminate either immediately upon termination of employment or 90 days
thereafter depending on the reasons for the employee's termination. Unexercised
options may be reissued at the discretion of the Board.
Based on the success of the Company's 1995 and 1996 voluntary salary
reduction/incentive programs in achieving key financial and operational
objectives for the Company, a similar voluntary salary reduction/incentive
program was offered for 1997. In December 1996, 72 of the Company's salaried
employees agreed to forego $826,038 in compensation in exchange for options to
acquire an aggregate of 413,019 shares of Common Stock at $8.00 per share, the
then-current market value of Common Stock (i.e., one stock option for every $2
of compensation). These options are non-qualified, expire on December 30, 2001
and vest in 1997 if the Company achieves specific operational objectives,
including 25% internal sales growth, ISO quality certification, predefined
standards for accounts receivable collection and inventory management, and
upgraded information systems that will support accelerated growth and improve
corporate communications.
Under the program, employees could participate to a maximum level of 50% of
their 1997 salaries. The $826,038 represents approximately 19% of the total
salaries for the 72 participants. The Company's executive officers participated
in the 1997 program as follows: Mr. Odom -- $110,000 (50%); Mr. West -- $96,250
(50%); Mr. Gergel -- $75,000 (50%); and Mr. Madigan -- $20,000 (18%).
An additional element of the 1997 voluntary salary reduction program
provides for the potential repayment of all or a portion of salaries if certain
pre-tax income amounts are realized by the Company in 1997. Full repayment is
earned if the pre-tax income exceeds $13.0 million for 1997, a $5.5 million or
approximately 75% increase over actual pre-tax income during 1996.
The Company believes the 1997 salary reduction/incentive program and the
corresponding increase to the authorized shares in the 1991 Plan are in the best
interests of all stockholders. In addition to the further alignment of salaried
employees and stockholders interests, the program significantly reduces 1997
salary expenses until such time as sufficient pre-tax income is earned and
provides the Company with approximately $3.3 million of new capital in the
future, assuming full exercise of the options. In addition, the non-qualified
nature of the options may result in significant future tax deductions for the
Company equal to the market value of the options on the dates of exercise.
As of December 31, 1996, there were 2,327,128 options issued and
outstanding under the 1991 Plan at exercise prices ranging from $1.25 to $8.62
per share, 892,409 of which were vested. All options issued to date under the
1991 Plan, except for those issued in connection with the 1995, 1996 and 1997
salary reduction/incentive programs, vest over a two to four year period and
generally expire five years after the date of grant. As of December 31, 1996,
329,392 options have been exercised under the 1991 Plan.
The executive officers of the Company have been granted options to acquire
the following number of shares of Common Stock under the 1991 Plan, including
options issued under the 1995, 1996 and 1997 salary reduction/ incentive
programs: Mr. Odom -- 355,000 shares, Mr. West -- 535,625 shares, Mr.
Gergel -- 242,000 shares; and Mr. Madigan -- 110,000 shares.
12
<PAGE> 16
Since employee-directors are eligible to receive options under the 1991
Plan, the Board acknowledges that current and future directors may personally
benefit from the approval of the amendment to the 1991 Plan. For the reasons
stated above, the Board believes that the proposal is in the best interests of
the Company and therefore recommends a vote in favor of it. Approval of this
Proposal 5 requires the affirmative vote of the holders of a majority of the
shares of Common Stock of the Company present in person or represented by proxy
and entitled to vote at the Meeting.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning beneficial ownership
of Common Stock as of April 15, 1997, by (i) all persons known by the Company to
be the beneficial owners of five percent or more of Common Stock, (ii) each of
the directors and executive officers of the Company and (iii) the directors and
executive officers of the Company as a group. This table is based on information
provided by the Company's directors, executive officers and principal
stockholders. With the exception of the directors and executive officers, all
addresses are as listed for Geocapital II, L.P.
<TABLE>
<CAPTION>
SHARES UNDER
EXERCISABLE OPTIONS TOTAL SHARES PERCENTAGE
NAME AND ADDRESS SHARES OWNED(1) AND WARRANTS(2) BENEFICIALLY OWNED OWNED
- ---------------- --------------- ------------------- ------------------ ----------
<S> <C> <C> <C> <C>
Geocapital II, L.P..................... 1,024,930 77,000 1,101,930 6.2%
One Bridge Plaza
Fort Lee, NJ 07024
Softven Management(3).................. 1,024,930 77,000 1,101,930 6.2
Geocapital Ventures.................... 726,142 55,000 781,142 4.4
Clearman, Lieber & Co.(4).............. 726,142 55,000 781,142 4.4
BVA Associates(4)...................... 726,142 55,000 781,142 4.4
Stephen J. Clearman+(5)................ 1,751,072 132,000 1,883,072 10.6
Steven A. Odom+++(6)................... 285,280 650,000 935,280 5.1
Stephen E. Raville+.................... 118,000 150,000 268,000 1.5
William P. O'Reilly+................... 257,000 150,000 407,000 2.3
John D. Phillips+...................... -- 150,000 150,000 *
Hensley E. West+++..................... 16,000 187,500 203,500 1.1
Mark A. Gergel++(7).................... 60,560 111,750 172,310 *
Scott N. Madigan++..................... 2,000 30,000 32,000 *
All directors and executive officers as
a group (8 persons).................. 2,489,912 1,561,250 4,051,162 21.1
</TABLE>
- ---------------
* Less than one percent
+ Director of the Company
++ Executive Officer of the Company
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934 (the "Exchange Act"). Unless otherwise
noted, the Company believes that all persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) Includes shares which may be acquired by the exercise of stock options and
warrants granted by the Company and exercisable on or before June 15, 1997.
(3) Represents 1,024,930 shares of Common Stock owned by Geocapital II, L.P. of
which Softven Management, as its general partner, is deemed the beneficial
owner.
(4) Represents 726,142 shares of Common Stock owned by Geocapital Ventures of
which Clearman, Lieber & Co. and BVA Associates, as its general partners,
are deemed beneficial owners.
13
<PAGE> 17
(5) Represents an aggregate of 1,751,072 shares owned by Geocapital II, L.P. and
Geocapital Ventures, of which Mr. Clearman may be deemed a beneficial owner
under Rule 13d-3 of the Exchange Act because he has shared investment and
voting power.
(6) Includes 18,000 shares held in the aggregate by two minor children of Mr.
Odom.
(7) Includes 2,521 shares contributed to the Company's Profit Sharing and
Retirement Savings Plan (the "401(k) Plan") under a matching 401(k)
contribution feature offered to substantially all employees of the Company.
The 401k Plan currently does not allow participants to sell or transfer
these shares unless an employee retires or otherwise terminates his or her
employment with the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive no cash compensation from the
Company for their service as directors. Their compensation is in the form of
stock warrants as discussed below. The directors are reimbursed for
out-of-pocket travel and related expenses incurred in connection with their
attendance at meetings of the Board or its committees and at other Company
events to which they are invited.
In December 1994, in an effort to attract and retain experienced executives
to serve as outside directors for the Company, the Board adopted the Outside
Directors' Warrant Plan (the "Warrant Plan"). The stockholders of the Company
approved the Warrant Plan at the Annual Meeting of Stockholders held on May 23,
1995.
The purposes of the Warrant Plan are to attract and retain the best
available personnel for service as directors of the Company, to provide
additional incentive to the persons serving as directors of the Company, to
align director and stockholder long-term interests and to encourage continued
service on the Board. Warrants may be granted under the Warrant Plan only to
directors of the Company who are neither employees of the Company nor of any of
its affiliates. The aggregate number of shares of Common Stock authorized to be
issued pursuant to the Warrant Plan is 1,200,000, subject to adjustment in
certain instances as described below. The Warrant Plan provides that each
eligible non-employee director elected to serve as a director of the Company on
or after October 1, 1994 may be granted, in the discretion of the Board,
warrants to purchase no more than 450,000 shares of Common Stock in the
aggregate. The initial exercise price of the warrants will be not less than the
fair market value of the Common Stock subject to the warrant on the date of
grant.
In December 1994, three new outside directors of the Company, Messrs.
O'Reilly, Phillips and Raville, each received warrants entitling him to purchase
150,000 shares of Common Stock on or prior to December 15, 1999, all of which
warrants are currently exercisable at an exercise price of $1.50 per share with
respect to 50,000 shares, $2.25 per share with respect to 50,000 shares and
$4.00 per share with respect to 50,000 shares. At the time these warrants were
granted, the fair market value of the Common Stock was $1.25 per share.
Concurrent with the above initial grant, Mr. Clearman, the fourth outside
director of the Company, was awarded warrants to purchase 126,000 shares of
Common Stock. The terms of this grant were identical to those described above
except the number of shares exercisable at the $1.50 exercise price was set at
26,000 instead of 50,000.
In December 1994, the Board awarded Steven A. Odom, who joined the Board in
October 1994 and became Chairman in November 1994, warrants under the Warrant
Plan to purchase 450,000 shares of Common Stock. The warrants entitle Mr. Odom
to purchase 450,000 shares of Common Stock on or prior to December 15, 1999 at
an exercise price of $1.50 per share for 150,000 shares, $2.25 per share for
150,000 shares and $4.00 per share for 150,000 shares.
In December 1994, the Board also adopted the Directors' Warrant Incentive
Plan (the "Incentive Plan") pursuant to which the Board may grant, beginning in
February 1997, to each non-employee director on an annual basis warrants to
purchase up to 50,000 shares of Common Stock at an exercise price per share
equal to no less than 110% of the fair market value of the Common Stock at the
date of grant. No warrants may be granted under the Incentive Plan in a given
year unless the Company's Common Stock has appreciated by a compounded annual
14
<PAGE> 18
average rate of return in excess of 35% for the four year period preceding the
year of grant. The aggregate number of shares of Common Stock authorized to be
issued pursuant to the Incentive Plan is 600,000 subject to adjustment in
certain instances as described below.
Warrants granted under the Warrant Plan and the Incentive Plan become
exercisable in one or more installments, as the Board may determine, six months
and one day after the date of the grant and expire on the fifth anniversary
following the date of grant, provided that if the Director has not attended at
least 75% of the meetings of the Board for the year in which an installment
first becomes exercisable, then such installment may not be exercised.
On March 26, 1997, the Board granted the four outside Directors of the
Company warrants to each purchase 50,000 shares of Common Stock with an exercise
price of $9.21. These warrants will be exercisable on or after December 31,
1997, provided that the Director attends at least 75% of the Board and
applicable Committee meetings held during 1997.
Notwithstanding the foregoing, the Warrant Plan and the Incentive Plan
provide that warrants awarded pursuant to these plans will become immediately
exercisable (i) if the Company is to be consolidated with or acquired by another
entity in a merger, (ii) upon the sale of substantially all of the Company's
assets or the sale of at least 90% of the outstanding Common Stock to a third
party, (iii) upon the merger or consolidation of the Company with or into any
other corporation or the merger or consolidation of any corporation with or into
the Company (in which consolidation or merger the stockholders of the Company
receive distributions of cash or securities as a result thereof), or (iv) upon
the liquidation or dissolution of the Company.
LIMITED LIABILITY OF DIRECTORS
Provisions included in the Company's Restated Certificate of Incorporation
protect the Company's directors against personal liability for monetary damages
from breaches of their duty of care. As a result, the Company's directors will
not be liable for monetary damages from negligence and gross negligence in the
performance of their duties. They remain liable for monetary damages for any
breach of their duty of loyalty to the Company and its stockholders, as well as
acts or omissions not made in good faith or which involve intentional misconduct
or a knowing violation of law and for transactions from which a director derives
improper personal benefit. They also remain liable under another provision of
Delaware law which makes directors personally liable for unlawful dividends,
stock repurchases or redemptions and expressly sets forth a negligence standard
with respect to such liability. The liability of the Company's directors under
federal or applicable state securities laws is also unaffected. The Company
carries an appropriate amount of directors' liability insurance.
While these provisions protect the Company's directors from awards of
monetary damages for breaches of the duty of care, they do not eliminate their
duty of care. In addition, equitable remedies, such as an injunction or
rescission based upon a director's breach of the duty of care, are still
available.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation awarded
or paid by the Company for services rendered during each of the years in the
three year period ended December 31, 1996 to its Chief Executive Officer and
other executive officers whose compensation exceeded $100,000 ("Named
Executives").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS (1)-(4)
ANNUAL COMPENSATION ----------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(5)(6)
- --------------------------- ---- --------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Steven A. Odom(2)............ 1996 $200,000 $100,000 105,000 $ --
Chairman and Chief 1995 -- -- 250,000 --
Executive Officer 1994 -- -- -- --
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS (1)-(4)
ANNUAL COMPENSATION ----------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(5)(6)
- --------------------------- ---- --------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Hensley E. West(3)(5)........ 1996 175,000 87,500 91,875 35,000
President and Chief 1995 -- -- 443,750 --
Operating Officer 1994 -- -- -- --
Mark A. Gergel............... 1996 110,000 110,000 37,500 780
Executive Vice President, 1995 90,000 35,000 74,000 495
Chief Financial Officer 1994 90,000 -- 90,500 2,875
and Treasurer
Scott N. Madigan(4)(5)....... 1996 81,500 30,000 110,000 20,000
Vice President of 1995 -- -- -- --
Business Development 1994 -- -- -- --
</TABLE>
- ---------------
(1) Long-Term Compensation Awards for 1996 include non-qualified stock options
granted in December 1996 in connection with a 1997 voluntary salary
reduction/incentive program offered to all salaried employees of the
Company. Under this program, the Named Executives elected to forego a total
of $301,250 in exchange for options to purchase 150,625 shares of Common
Stock at the then current market price of $8.00 per share. Refer to Proposal
5 of this Proxy Statement for a discussion of vesting and other terms of
this program. The securities underlying options for 1996 for this program
include: Mr. Odom -- 55,000 shares; Mr. West -- 48,125 shares; Mr.
Gergel -- 37,500 shares; and Mr. Madigan -- 10,000 shares. Similar salary
reduction programs were offered in 1996 and 1995 to all salaried employees
of the Company. Stock options issued in December 1995 and December 1994
under these programs are fully vested as of December 31, 1996. The
securities underlying options for 1995 and 1994, respectively, for these two
programs include: Mr. Odom -- 50,000 shares; Mr. West -- 43,750 shares; Mr.
Gergel -- 24,000 and 45,000 shares; and Mr. Madigan -- 10,000 shares.
(2) Mr. Odom joined the Company's Board of Directors in October 1994 and was
elected Chairman in November 1994. He was appointed Chairman and Chief
Executive Officer in August 1995. Mr. Odom elected to not receive a salary
in 1995. In December 1995, he was awarded non-qualified stock options to
acquire 200,000 shares of Common Stock at $7.00 per share, the then current
market price. These options vest 50% on each of the first two anniversaries
from the date of grant.
(3) Mr. West joined the Company in January 1996 as its new President and Chief
Operating Officer. In August 1995, in connection with his acceptance of the
Company's offer of employment, he was awarded non-qualified stock options to
acquire 400,000 shares of Common Stock at $3.78 per share, the then current
market price. These options vest 25% on each of the first four anniversaries
from his effective date of employment.
(4) Mr. Madigan joined the Company in March 1996 as its new Vice President of
Business Development. He was awarded non-qualified stock options to acquire
80,000 shares of Common Stock at $7.81 per share, the then current market
price. These options vest 25% each on the first four anniversaries from the
date of grant.
(5) Mr. West and Mr. Madigan were paid flat-sum allowances of $35,000 and
$20,000, respectively, for the relocation of their households to Atlanta,
Georgia.
(6) Except as noted otherwise, all other compensation represents matching
contributions by the Company under its 401(k) Plan in the form of Common
Stock.
16
<PAGE> 20
1996 AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information concerning the value of options
exercised by the Named Executives during 1996 and the value at December 31, 1996
of unexercised options held by each such officer. The value of unexercised
options reflects the increase in market value of Common Stock from the date of
grant through December 31, 1996, when the closing price of Common Stock was
$8.00 per share.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
NUMBER OF OPTIONS OPTIONS AT
SHARES AT 12-31-96 12-31-96
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- --------------- --------------------
<S> <C> <C> <C> <C>
Steven A. Odom(3)................... -- -- 650,000/155,000 $2,587,500/$100,000
Hensley E. West..................... -- -- 87,500/448,125 43,750/1,688,000
Mark A. Gergel...................... 45,000 $320,625 111,750/85,250 437,665/176,060
Scott N. Madigan.................... -- -- 10,000/100,000 10,000/15,200
</TABLE>
- ---------------
(1) The "value realized" represents the difference between the exercise price of
the option shares and the market price of the option shares on the date the
options were exercised. The value realized was determined without
considering any taxes which may have been owed.
(2) "In-the-Money" options are options with an exercise price less than $8.00
per share, the closing price of Common Stock at December 31, 1996.
(3) Includes securities underlying warrants issued to Mr. Odom pursuant to the
Warrant Plan.
STOCK OPTION GRANT TABLE
The following table sets forth information regarding the grant of stock
options to the Named Executives during the year ended December 31, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE($) AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
--------------------------------------------------------------- PRICE APPRECIATION FOR
% TOTAL OPTION TERM
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE -----------------------
UNDERLYING OPTIONS EMPLOYEES PRICE PER EXPIRATION 5% 10%
NAME GRANTED(1) IN FISCAL YEAR SHARE(2) DATE (3) (3)
- ---- -------------------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven A. Odom.......... 50,000 5.7% $8.38 12/19/01 $ 91,500 225,000
55,000 6.2 8.00 12/30/01 121,550 268,400
Hensley E. West......... 43,750 5.0 8.38 12/19/01 80,065 196,875
48,125 5.4 8.00 12/30/01 106,355 234,850
Mark A. Gergel.......... 37,500 4.2 8.00 12/30/01 82,875 183,000
Scott N. Madigan........ 10,000 1.1 7.00 12/27/00 27,200 47,100
80,000 9.1 7.81 3/08/01 160,800 328,000
10,000 1.1 8.38 12/19/01 18,300 45,000
10,000 1.1 8.00 12/30/01 22,100 48,800
</TABLE>
- ---------------
(1) Individual grants in 1996 including the following stock options issued in
connection with the Company's 1997 salary reduction/incentive program: Mr.
Odom -- 55,000; Mr. West -- 48,125; Mr. Gergel -- 37,500; and Mr.
Madigan -- 10,000. Refer to Proposal 5 of this Proxy Statement for a
discussion of the vesting and certain other terms of the options granted
under the 1997 program. The remainder of Mr. Odom's and Mr. West's options
were granted in December 1996 and vested immediately. Of Mr. Madigan's
remaining options, 10,000 were vested as of December 31, 1996 and 90,000
vest at 25% each on the first four anniversaries from the date of grant.
(2) The average exercise price represents the fair market value of the shares at
dates of grant.
(3) The 5% and 10% appreciation rates are set forth in the Securities and
Exchange Commission rules and no representation is made that the Common
Stock will appreciate at these assumed rates or at all.
17
<PAGE> 21
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report by the Compensation Committee of the Board
concerning the compensation policies applicable to the Company's executive
officers:
COMPENSATION PHILOSOPHY
The Compensation Committee of the Board (the "Committee") is composed of
two non-employee directors, Messrs. O'Reilly and Clearman. Among other things,
the Committee reviews and approves annual executive officer compensation. In
general, the compensation policies adopted by the Committee are designed to (i)
attract and retain executives capable of leading the Company to meet its
business objectives and (ii) motivate the Company's executives to enhance
long-term stockholder value.
The annual compensation of Mr. Odom, the Company's Chairman and Chief
Executive Officer consists of a combination of base salary, incentive bonuses
and stock options. The incentive bonus program is designed to reward Mr. Odom if
well defined business objectives, principally tied to the Company's net income
performance, are reached or exceeded.
The Committee sets salaries and incentive programs for the Company's other
executive officers based principally on a subjective assessment of the Company's
short and long-term goals and individual performance of each officer.
Information on individual performance is provided to the Committee by the Chief
Executive Officer. In addition to individual performance, the Committee is aware
of executive compensation practices at comparable companies (i.e., companies
which are generally of the same size in related industries). The Committee uses
this information only as a general reference, however, and not to set specific
salary amounts.
STOCK OPTION PROGRAM
The stock option program is the Company's long-term incentive plan for
executive officers and other key employees. The objectives of the program are to
align executive and stockholder long-term interests by creating a strong and
direct relationship between executive compensation and stockholder returns. The
Committee strongly believes that by providing those individuals who have
substantial responsibility for the management and growth of the Company and the
maximizing of stockholder returns with an opportunity to increase their
ownership of Common Stock, the best interests of stockholders and executives
will be more closely aligned. The Company's stock options typically vest over
four years which increases the long-term value of these awards.
The Committee's determination of the number of options to award to an
individual executive officer is made in a manner similar to that described above
with respect to the setting of salaries. In addition, in determining the number
of options to be granted to an individual, the Committee takes into account the
number of options already granted to that individual and the value of those
options.
18
<PAGE> 22
DISCUSSION OF 1996 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Odom's base salary and bonus awards for 1996 were determined with
reference to the same criteria used for all other executive officers of the
Company, including Company sales growth, appreciation in market capitalization
and net income per share performance. The Committee also based its compensation
decision on the Company's continued progress in establishing a broad,
experienced management team and an operating infrastructure that will facilitate
accelerated sales growth, the efficient integration of new acquisitions and
increased profitability. Finally, the Company's successful secondary equity
offering of $26.2 million during 1996 and the dramatic overall improvement in
the Company's financial condition were considered. After considering all of the
above, the Committee exercised its subjective judgement and discretion in
determining the 1996 compensation for Mr. Odom.
Submitted by the Compensation
Committee
STEPHEN J. CLEARMAN
WILLIAM P. O'REILLY
Pursuant to Securities and Exchange Commission ("SEC") regulations, this
report is not "soliciting material," is not deemed filed with the SEC and is not
to be incorporated by reference in any filing of the Company under the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange Act").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company consists of the two persons named
as signatories to the Compensation Committee report above. There are no
Compensation Committee Interlocks.
19
<PAGE> 23
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return (including reinvested
dividends) of the Nasdaq Stock Market ("Nasdaq") -- United States owned
companies and Nasdaq Telecommunications Stocks for the five years ended December
31, 1996. The Nasdaq total returns were prepared by the Center for Research in
Security Prices ("CRSP"), at the University of Chicago.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) World Access Nasdaq (U.S.) Nasdaq (Telcom)
<S> <C> <C> <C>
1991 100 100 100
1992 23.14 116.38 122.82
1993 26.69 133.59 189.38
1994 35.59 130.59 157.33
1995 106.78 184.67 206.96
1996 113.90 227.16 211.57
</TABLE>
- ---------------
Assumes that the value of the investment in Company Common Stock and each
index was $100 on December 31, 1991, and that all dividends were reinvested.
(1) World Access, Inc. Common Stock
(2) CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies)
(3) CRSP Total Return Index for Nasdaq Telecommunications Stocks
Pursuant to SEC regulations, this performance graph is not "soliciting
material," is not deemed filed with the SEC and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the Exchange
Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, the Company subleased its executive office space in
Atlanta, Georgia from Metromedia International Group, Inc. under a two year
agreement. The lease covered approximately half of Metromedia's leased space for
approximately $10,000 per month, or approximately half of Metromedia's monthly
base rent and operating expenses. At the time the lease was executed, John D.
Phillips was President of Metromedia. He resigned from this position in December
1996.
20
<PAGE> 24
ACCOUNTANTS
The Board of Directors currently plans to appoint Price Waterhouse LLP as
independent auditors for the Company for the fiscal year ending December 31,
1997. Price Waterhouse LLP has examined the Company's financial statements since
1991 and has no relationship with the Company other than that arising from its
appointment as independent auditors. Representatives of Price Waterhouse LLP are
expected to be present at the Meeting, will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers, and persons who own beneficially more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of such
securities of the Company. Directors, executive officers and greater than
ten-percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than ten-percent beneficial owners were complied
with during the 1996 fiscal year, except that Mr. Madigan did not file his form
3 Report until January 10, 1997, although he became an executive officer of the
Company on March 8, 1996.
OTHER MATTERS
The Board does not know of any other matters which may come before the
Meeting. If any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
to act, in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company no later than
December 31, 1997, in order to be included in the proxy statement and proxy
relating to that annual meeting.
The Board hopes that stockholders will attend the Meeting. Whether or not
you plan to attend, you are urged to complete, sign and return the enclosed
proxy in the accompanying envelope. A prompt response will greatly facilitate
arrangements for the Meeting, and your cooperation will be appreciated.
Stockholders who attend the Meeting may vote their shares personally even though
they have sent in their proxies.
By Order of the Board of Directors
Martin D. Kidder
Corporate Controller and Secretary
Atlanta, Georgia
April , 1997
21
<PAGE> 25
APPENDIX A
PROPOSED AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of the Company as presently in
effect is proposed to be amended by deleting Article IV thereof in its entirety
and replacing it with the following:
"ARTICLE IV
CAPITAL STOCK
The total number of shares of stock that the Corporation shall have
authority to issue is fifty million (50,000,000), consisting of forty
million (40,000,000) shares of common stock, $.01 par value per share
("Common Stock"), and ten million (10,000,000) shares of preferred stock,
$.01 par value per share ("Preferred Stock").
The designation, relative rights, preferences and limitations of the
shares of each class are as follows:
The shares of Common Stock may be issued from time to time in one
or more series of any number of shares, provided that the aggregate
number of shares issued and not canceled of any and all such series
shall not exceed the total number of shares of Common Stock hereinabove
authorized, and with distinctive serial designations, all as shall
hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such shares of Common Stock from time to time
adopted by the Board of Directors pursuant to authority so to do which
is hereby vested in the Board of Directors, and each series of shares of
Common Stock may have such voting powers, full or limited, or may be
without voting powers as shall be stated in said resolution or
resolutions providing for the issue of such shares of Common Stock.
The shares of Preferred Stock may be issued from time to time in
one or more series of any number of shares, provided that the aggregate
number of shares issued and not canceled of any and all such series
shall not exceed the total number of shares of Preferred Stock
hereinabove authorized, and with distinctive serial designations, all as
shall hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such shares of Preferred Stock from time to
time adopted by the Board of Directors pursuant to authority so to do
which is hereby vested in the Board of Directors. Each series of shares
of Preferred Stock (a) may have such voting powers, full or limited, or
may be without voting powers; (b) may be subject to redemption at such
time or times and at such prices; (c) may be entitled to receive
dividends (which may be cumulative or non-cumulative) at such rate or
rates, on such conditions and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or
classes or series of stock; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the
Corporation; (e) may be made convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the same
or any other class or classes of shares of the Corporation at such price
or prices or at such rates of exchange and with such adjustments; (f)
may be entitled to the benefit of a sinking fund to be applied to the
purchase or redemption of shares of such series in such amount or
amounts; (g) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of the Corporation or any
subsidiary, upon the issue of any additional shares (including
additional shares of such series or of any other series) and upon the
payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the Corporation or any
subsidiary of, any outstanding shares of the Corporation; and (h) may
have such other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof; all as
shall be stated in said resolution or resolutions providing for the
issue of such shares of Preferred Stock. Shares of Preferred Stock of
any series that have been redeemed (whether through the operation of a
sinking fund or otherwise) or that, if convertible or exchangeable, have
been converted into or exchanged for shares of any other class or
classes shall have the status of authorized and unissued shares of
Preferred Stock of the same series and may be reissued as a part of the
series of which they were originally a part or may be reclassified and
A-1
<PAGE> 26
reissued as part of a new series of shares of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as
part of any other series of shares of Preferred Stock, all subject to
the conditions or restrictions on issuance set forth in the resolution
or resolutions adopted by the Board of Directors providing for the issue
of any series of shares of Preferred Stock.
Subject to the provisions of any applicable law or of the Bylaws of
the Corporation, as from time to time amended, with respect to the
closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote and except as otherwise
provided by law or by the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock or any shares of a
series of Common Stock as to which the voting powers have been expressly
limited by the resolution or resolutions providing for the issuance of
such series of Common Stock, the holders of outstanding shares of Common
Stock shall exclusively possess voting power for the election of
directors and for all other purposes, each holder of record of shares of
Common Stock being entitled to one vote for each share of Common Stock
standing in his or her name on the books of the Corporation. Except as
otherwise provided by the resolution or resolutions providing for the
issue of any series of shares of Preferred Stock, the holders of shares
of Common Stock shall be entitled, to the exclusion of the holders of
shares of Preferred Stock of any and all series, to receive such
dividends as from time to time may be declared by the Board of
Directors. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after payment shall
have been made to the holders of shares of Preferred Stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of shares of Preferred
Stock, the holders of shares of Common Stock shall be entitled, to the
exclusion of the holders of shares of Preferred Stock of any and all
series, to share, ratably according to the number of shares of Common
Stock held by them, in all remaining assets of the Corporation available
for distribution to its stockholders.
Subject to the provisions of this Restated Certificate of
Incorporation and except as otherwise provided by law, the stock of the
Corporation, regardless of class, may be issued for such consideration
and for such corporate purposes as the Board of Directors may from time
to time determine."
The Restated Certificate of Incorporation of the Company as presently in
effect is proposed to be amended by adding Article VI thereto to read in its
entirety as follows:
"ARTICLE VI(1)
ACTION BY STOCKHOLDERS
No action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of the stockholders of the
Corporation may be taken without a meeting, and the power to consent in
writing, without a meeting, to the taking of any action is specifically
denied."
The Restated Certificate of Incorporation of the Company as presently in
effect is proposed to be amended by deleting Article VII thereof in its entirety
and replacing it with the following:
"ARTICLE VII
MANAGEMENT
1. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors.
(a) The Board of Directors shall consist of not fewer than three
(3) members and not more than twelve (12) members, the exact number of
authorized directors within such range to be fixed from time
- ---------------
(1) Article VI of the Company's Restated Certificate of Incorporation was
previously deleted in its entirety but the subsequent Articles of such Restated
Certificate of Incorporation were not redesignated.
A-2
<PAGE> 27
to time by a resolution of the Board of Directors adopted by the
affirmative vote of at least a majority of the total number of
authorized directors most recently fixed by the Board of Directors.
(b) The directors of the Corporation shall be divided into three
classes for the purpose of determining their terms of office. Each such
class shall consist, as nearly as possible, of one-third of the total
number of directors fixed by the Board of Directors. At the annual
meeting of stockholders of the Corporation held in 1997, one class of
directors (designated as Class I) shall be elected for a term expiring
at the annual meeting of stockholders of the Corporation held in 1998,
one class of directors (designated as Class II) shall be elected for a
term expiring at the annual meeting of stockholders of the Corporation
held in 1999, and one class of directors (designated as Class III) shall
be elected for a term expiring at the annual meeting of stockholders of
the Corporation held in 2000. At each succeeding annual meeting of
stockholders of the Corporation, beginning in 1998, successors to the
class of directors whose term expires at that annual meeting shall be
elected for a term expiring at the annual meeting of stockholders of the
Corporation held in the third year following the year of their election.
(c) If the number of directors is changed, then any increase or
decrease in such number shall be apportioned by the Board of Directors
among the classes of directors so as to maintain as nearly as possible
an equal number of directors in each class. No reduction in the
authorized number of members of the Board of Directors shall have the
effect of removing any director from office before that director's term
of office expires.
(d) Vacancies on the Board of Directors and newly created
directorships resulting from an increase in the authorized number of
members of the Board of Directors may be filled only by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director.
(e) Each director, including a director elected to fill a vacancy
or a newly created directorship, shall hold office until the next
election of the class of directors to which such director belongs and
until his or her successor is elected and qualified or until his or her
earlier death, resignation, or removal from office for cause.
(f) Any director or the entire Board of Directors may be removed
from office at any time but only for cause and only by the affirmative
vote of the holders of at least a majority of the voting power of all
outstanding shares of capital stock of the Corporation then entitled to
vote in an election of directors of the Corporation, voting as a single
class.
(g) A majority of total directors shall constitute a quorum for the
transaction of business.
(h) Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at
an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Restated Certificate of
Incorporation applicable thereto, such directors so elected shall not be
divided into classes pursuant to this Article VII, and the number of
such directors shall not be counted in determining the maximum number of
directors permitted under the foregoing provision of this Article VII,
in each case unless expressly provided by such terms.
2. Nominations of persons for election to the Board of Directors may
be made at a meeting of stockholders of the Corporation either by or at the
direction of the Board of Directors or by any stockholder of record
entitled to vote in the election of directors at such meeting who has
complied with the notice procedures set forth in this Paragraph 2. A
stockholder who desires to nominate a person for election to the Board of
Directors at a meeting of stockholders of the Corporation and who is
eligible to make such nomination must give timely written notice of the
proposed nomination to the secretary of the Corporation. To be timely, a
stockholder's notice given pursuant to this Paragraph 2 must be received at
the principal executive office of the Corporation not less than one hundred
twenty (120) calendar days in advance of the date which is one year later
than the date of the proxy statement of the Corporation released to
stockholders in connection with the previous year's annual meeting of
stockholders of the Corporation; provided, however, that if no annual
meeting of stockholders of the Corporation was held in the previous year or
if the
A-3
<PAGE> 28
date of the forthcoming annual meeting of stockholders has been changed by
more than thirty (30) calendar days from the date contemplated at the time
of the previous year's proxy statement or if the forthcoming meeting is not
an annual meeting of stockholders of the Corporation, then to be timely
such stockholder's notice must be so received not later than the close of
business on the tenth day following the earlier of (a) the day on which
notice of the date of the forthcoming meeting was mailed or given to
stockholders by or on behalf of the Corporation or (b) the day on which
public disclosure of the date of the forthcoming meeting was made by or on
behalf of the Corporation. Such stockholder's notice to the secretary of
the Corporation shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director (i) the
name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and
number of shares of capital stock of the Corporation which then are
beneficially owned by such person, (iv) any other information relating to
such person that is required by law or regulation to be disclosed in
solicitations of proxies for the election of directors of the Corporation,
and (v) such person's written consent to being named as a nominee for
election as a director and to serve as a director if elected and (b) as to
the stockholder giving the notice (i) the name and address, as they appear
in the stock records of the Corporation, of such stockholder, (ii) the
class and number of shares of capital stock of the Corporation which then
are beneficially owned by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each nominee
for election as a director and any other person or persons (naming such
person or persons) relating to the nomination proposed to be made by such
stockholder, and (iv) any other information required by law or regulation
to be provided by a stockholder intending to nominate a person for election
as a director of the Corporation. At the request of the Board of Directors,
any person nominated by or at the direction of the Board of Directors for
election as a director of the Corporation shall furnish to the secretary of
the Corporation the information concerning such nominee which is required
to be set forth in a stockholder's notice of a proposed nomination. No
person shall be eligible for election as a director of the Corporation
unless nominated in compliance with the procedures set forth in this
Paragraph 2. The chairman of a meeting of stockholders of the Corporation
shall refuse to accept the nomination of any person not made in compliance
with the procedures set forth in this Paragraph 2, and such defective
nomination shall be disregarded.
3. The power to adopt, amend or repeal the Bylaws of the Corporation
may be exercised by the Board of Directors of the Corporation.
4. Notwithstanding any provision of this Restated Certificate of
Incorporation or the Bylaws of the Corporation to the contrary, the
affirmative vote of the holders of at least seventy-five percent (75%) of
the voting power of all outstanding shares of capital stock of the
Corporation then entitled to vote in an election of directors of the
Corporation, voting as a single class, shall be required to alter, amend or
repeal this Article VII or to adopt any provision of this Restated
Certificate of Incorporation or the Bylaws of the Corporation which is
inconsistent with this Article VII."
A-4
<PAGE> 29
APPENDIX
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WORLD ACCESS,
INC.
The Board recommends a vote FOR the following proposals:
1. To elect the six nominees listed below to the Board of Directors of World
Access, Inc.
[ ] FOR all nominees (except as marked below) [ ] WITHHOLD authority to
vote for all nominees
<TABLE>
<S> <C> <C>
CLASS I CLASS II CLASS III
- ------------------------------------ ------------------------------------ ------------------------------------
(TERM EXPIRING IN 1998) (TERM EXPIRING IN 1999) (TERM EXPIRING IN 2000)
Stephen J. Clearman William P. O'Reilly Steven A. Odom
Stephen E. Raville Hensley E. West John D. Phillips
</TABLE>
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that name in the space provided below.
- --------------------------------------------------------------------------------
2. To approve the Amendment to the Company's Restated Certificate of
Incorporation to provide for the classification of the Board of Directors and
related matters.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve the Amendment to the Company's Restated Certificate of
Incorporation to prohibit stockholder action by written consent.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To approve the Amendment to the Company's Restated Certificate of
Incorporation to increase the Company's authorized capital, authorize a new
class of preferred stock and eliminate the Company's Class B Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. To approve the Amendment to the 1991 Stock Option Plan to increase the shares
of Common Stock underlying the Plan to 3,500,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The undersigned appoints Steven A. Odom and Hensley E. West, and each of
them, with full power of substitution, the proxies and attorneys of the
undersigned, to vote as specified hereon at the Annual Meeting of Stockholders
(the "Annual Meeting") of World Access, Inc. (the "Company") to be held on June
10, 1997 at 10:00 a.m. Eastern Daylight time, and at any adjournments or
postponements thereof, with all powers (other than the power to revoke the proxy
or vote the proxy in a manner not authorized by the executed form of proxy) that
the undersigned would have if personally present at the Annual Meeting, to act
in their discretion upon any other matter or matters that may properly be
brought before the Annual Meeting and to appear and vote all the shares of
Common Stock of the Company that the undersigned may be entitled to vote. The
undersigned hereby acknowledges receipt of the accompanying Proxy Statement and
Annual Report to Stockholders, and hereby revokes any proxy or proxies
heretofore given by the undersigned relating to the Annual Meeting.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED FOR THE
PROPOSALS ABOVE.
Signature
---------------------
Signature if
jointly held
------------------
Dated: , 1997
------------------
PLEASE DATE AND SIGN AS NAME
APPEARS HEREON. WHEN SIGNING AS
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR ATTORNEY,
PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED
CORPORATE OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON. JOINT OWNERS SHOULD
EACH SIGN.
