<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
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>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
TELECOMM INDUSTRIES CORP.
(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)(4) 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: ...........................................................
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<PAGE> 2
TELECOMM INDUSTRIES CORP.
9310 PROGRESS PARKWAY
MENTOR, OHIO 44060
September 17, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Telecomm Industries Corp., on October 16, 1997, starting at
10:00 a.m. local time at the Westin Hotel O'Hare, 6100 North River Road,
Rosemont, Illinois 60018.
As more fully described in the attached Notice of Annual Meeting and
the accompanying Proxy Statement, the principal business to be addressed at the
meeting is the election of directors, adoption of the Company's 1997 Stock
Option and Award Plan and ratification of the appointment of Coopers & Lybrand
L.L.P. as independent accountants for the current year. In addition, the
Company's management team will report on the Company's results and will be
available to respond to stockholders' questions.
Your vote is important to the Company. Whether or not you plan to
attend the Annual Meeting, please return the enclosed proxy as soon as possible
to ensure your representation at the meeting. You may choose to vote in person
at the Annual Meeting even if you have returned a proxy.
On behalf of the Directors and management of Telecomm Industries Corp.,
we would like to thank you for your continued support and confidence in the
Company and look forward to seeing you at the meeting.
Sincerely,
/s/ Peter Olk
Peter Olk
Secretary
<PAGE> 3
TELECOMM INDUSTRIES CORP.
9310 PROGRESS PARKWAY
MENTOR, OHIO 44060
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 16, 1997
TO THE STOCKHOLDERS OF TELECOMM INDUSTRIES CORP.:
The Annual Meeting of the Stockholders of Telecomm Industries Corp., a
Delaware corporation (the "Company"), will be held on October 16, 1997 at the
Westin Hotel O'Hare, 6100 North River Road, Rosemont, Illinois 60018, beginning
at 10:00 A.M. local time for the following purposes:
1. To elect the board of directors to serve for a term of one
year (Proposal 1);
2. To adopt the Company's 1997 Stock Option and Award Plan
(Proposal 2);
3. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for the fiscal year
ending December 31, 1997 (Proposal 3); and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on September 5,
1997 are entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to insure your representation at the meeting, please sign and return
the enclosed proxy as promptly as possible in the postage prepaid envelope
enclosed for your convenience. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy.
By Order of the Board of Directors
/s/ James M. Lowery
James M. Lowery
Chairman of the Board
<PAGE> 4
TELECOMM INDUSTRIES CORP.
------
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Telecomm Industries Corp. (the "Company"
or the "Corporation") to be used at the 1997 Annual Meeting of Stockholders of
the Company to be held on October 16, 1997, and any postponements or
adjournments thereof (the "Annual Meeting"). The Annual Meeting will be held at
the Westin Hotel O'Hare, 6100 North River Road, Rosemont, Illinois 60018,
beginning at 10:00 A.M. local time. As more fully described below, the principal
business to be addressed at the Annual Meeting is the election of directors,
adoption of the Company's 1997 Stock Option and Award Plan and the ratification
of the appointment of Coopers & Lybrand L.L.P. as independent public accountants
for the Company's 1997 fiscal year.
The expense of soliciting proxies, including the cost of preparing,
printing and mailing the proxy materials, will be borne by the Company. In
addition to solicitation of proxies by mail, solicitation may be made personally
and by telephone, and the Company may pay persons holding shares for others
their expenses for sending proxy materials to their principals. No solicitation
will be made other than by directors, officers and employees of the Company.
Any person giving a proxy pursuant to this solicitation may revoke it
at any time before it is voted by delivering to the Secretary of the Company at
its principal office a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not in and of itself revoke a proxy. Each
validly executed, unrevoked proxy received by the Board of Directors of the
Company pursuant to this solicitation will be voted at the Annual Meeting as
specified by the stockholder. If no choice is indicated, the proxy will be voted
FOR the election of the nominees and FOR the proposals set forth in the Notice.
This Proxy Statement and the accompanying Chairman's letter, Notice and
proxy, together with the Company's annual report to stockholders on Form
10-KSB/A for the fiscal year ended December 31, 1996, are being sent to
stockholders beginning on or about September 17, 1997.
VOTING AND QUORUM
Holders of record of shares of the Company's Common Stock at the close
of business on September 5, 1997 are entitled to vote at the Annual Meeting. On
August 29, 1997, there were 11,771,559 shares of Common Stock outstanding and
20,000,000 shares of Common Stock authorized. Each outstanding share is entitled
to one vote.
<PAGE> 5
A majority of the issued and outstanding shares of Common Stock
entitled to vote constitutes a quorum at the Annual Meeting. Shares of Common
Stock represented in person or by proxy at the Annual Meeting, including
abstentions and "broker non-votes," will be tabulated by the inspectors of
election appointed for the Annual Meeting and will determine whether or not a
quorum is present. A broker non-vote occurs when a broker holding stock in
"street name" indicates on the proxy that it does not have discretionary
authority to vote on a particular matter.
The affirmative vote of the holders of a plurality of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting is
required for the election of directors. Adoption of the Company's 1997 Stock
Option and Award Plan and the ratification of Coopers & Lybrand L.L.P. as the
Company's independent accountants require the affirmative vote of the holders of
a majority of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting.
With respect to the election of directors, votes may be cast in favor
or withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals (other than
the election of directors) and will be counted as shares that are present and
entitled to vote for a proposal, but will not be counted as votes in favor of
such proposal. Accordingly, an abstention from voting on a proposal by a
stockholder present in person or represented by proxy at the Annual Meeting will
have the same legal effect as a vote "against" the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret the abstention differently. Broker non-votes are not shares entitled
to vote, will not be counted in the total number of votes, and thus will have no
effect on the outcome of voting.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Eight directors are to be elected to the Company's Board of Directors
at the Annual Meeting. The elected directors will hold office until the next
annual meeting of stockholders of the Company, or until their successors are
duly elected and qualified. The Board has nominated Michael J. Toth, James M.
Lowery, Rita Koridek, Steven W. Smith, Raymond W. Sheets, Jr., Peter Olk, Paul
Satterthwaite and Paul Stoyanoff for election as directors and recommends that
the stockholders vote FOR the nominees. Except for Mr. Satterthwaite, all the
nominees are currently directors of the Company.
The enclosed Proxy will be voted FOR the nominees unless the proxy
holders are otherwise instructed. If any of the nominees are unavailable or
decline to serve as a director for any reason, the proxy holders will vote the
proxies for a substitute nominee designated by the Board of Directors. The Board
of Directors does not expect that any of the nominees will be unavailable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
Certain information about the nominees is set forth below.
2
<PAGE> 6
JAMES M. LOWERY. Mr. Lowery became Chairman of the Corporation in
February 1997 and has served as a Director of the Corporation since January
1996. Since August 1992, Mr. Lowery has served as President of Seraphim
Information Systems, Inc. ("Seraphim"), which was acquired by the Corporation's
wholly-owned subsidiary Authorized Network Distributors, Inc. ("A.N.D.") in
January 1996. From January 1996 to February 1997, Mr. Lowery served as the
President of the Corporation's Data Division. Prior to that time, he was
employed by Ameritech Corporation as Director of Channel Management for the
authorized distributors in Ameritech's marketing area. Mr. Lowery is 49 years
old.
RITA KORIDEK. Ms. Koridek has served as a Director of the Corporation
since February 1997 and as a Regional Vice President since January 1996. From
January 1995 to January 1996, she was a partner in Seraphim and from January
1995 to January 1997 she owned and managed St. James Sales and Consulting Group,
an Ameritech pay phone distributorship in Illinois. From December 1993 to
January 1995, Ms. Koridek served as a Vice President of Ameritech. Ms. Koridek
is 42 years old.
PETER OLK. Mr. Olk has served on the Board of Directors of the
Corporation since February 1997, and has been Secretary of the Corporation since
May 1997. For more than five years prior to that time, Mr. Olk served as
President and a member of the Board of Directors of Northeastern Communications
Systems, Inc., which was acquired by the Corporation in January 1997. Mr. Olk is
49 years old.
PAUL SATTERTHWAITE. Mr. Satterthwaite has served as Regional Vice
President of the Corporation since August 1997. For more than five years prior
to that time, he served as President and Chief Executive Officer of Unitel, Inc.
("Unitel"). The assets of Unitel were acquired by the Company in August 1997.
Mr. Satterthwaite is 42 years old.
PAUL STOYANOFF. Mr. Stoyanoff has served as a Director and Vice
President for the Corporation since February 1997. Prior to such time, he served
as the Managing Vice President of A.N.D. since October 1994. From October 1990
to October 1994, Mr. Stoyanoff served as a Regional Sales Manager for Tone
Commander Systems of Redmond, Washington, an equipment manufacturer of telephone
and data hardware. Mr. Stoyanoff is 40 years old.
RAYMOND W. SHEETS, JR. Mr. Sheets has been a Director of the
Corporation since October 18, 1993. From 1991 to December 31, 1994, he was also
Vice President, Treasurer, Secretary and a Director of Telephone Communications,
Inc. ("TCI"), a telemarketing company. Mr. Sheets is 32 years old.
STEVEN W. SMITH. Mr. Smith has been a Director of the Corporation since
October 18, 1993. From 1991 to December 31, 1994, he was also President and
Chairman of the Board of Directors of TCI. Mr. Smith is 36 years old.
MICHAEL J. TOTH. Mr. Toth served as the Chairman of the Corporation
from July 1995 to February 1997, and as a Director since July 1994. He has also
been President and a Director of
3
<PAGE> 7
Centel Corporation, a wholly-owned subsidiary of the Corporation doing
business under the trade name Teleco ("Teleco"), since its inception. Mr. Toth
has been for more than the past five years the President, a Director and
controlling shareholder of Associate Security, Inc., from which Teleco acquired
its operating assets in April 1994. Mr. Toth is 53 years old.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met 5 times in 1996. During 1996, all incumbent
members of the Board of Directors participated in all of the Board's meetings.
The Compensation Committee is composed of Mr. Sheets, Mr. Smith, Ms.
Koridek and Mr. Stoyanoff, and its purpose is to review and make recommendations
regarding the compensation of executive officers of the Company and to
administer option grants under the Company's 1997 Stock Option and Award Plan.
This Committee was established in March 1997.
DIRECTOR COMPENSATION
Members of the Board of Directors are not compensated for their
services in such capacity.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's Common Stock, to file
with the Securities and Exchange Commission ("SEC") and the NASDAQ System
initial reports of ownership and reports of changes in ownership of the Common
Stock. Officers, directors and stockholders holding more than 10% of the
outstanding shares of the Company's Common Stock are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of these reports furnished to the
Company or written representation that no reports were required, the Company
believes that: (1) Michael J. Toth failed to file three Form 4's to report four
dispositions of Common Stock by him. Such transactions were reported on a Form 5
for Mr. Toth, which was filed with the Securities and Exchange Commission on
February 3, 1997; and (2) Both Raymond W. Sheets, Jr. and Stephen W. Smith
failed to file three Form 4's to report nine dispositions of Common Stock each
in 1996, and one Form 4 to report the acquisition of Common Stock from the
Corporation.
4
<PAGE> 8
PROPOSAL NO. 2 -- APPROVAL OF THE CORPORATION'S 1997 STOCK OPTION AND AWARD PLAN
On September 15, 1997 the Board of Directors unanimously approved
adopting the Telecomm Industries Corp. 1997 Stock Option and Award Plan (the
"Stock Plan"). The following description of the Stock Plan is qualified in its
entirety by reference to the full text of the Stock Plan, a copy of which is
attached as Appendix A to this Proxy Statement.
DESCRIPTION OF STOCK PLAN
The Board of Directors approved the Stock Plan to attract and retain
qualified and competent persons who are key to the Corporation, including key
employees, Officers and Directors, and upon whose efforts and judgment the
success of the Corporation is largely dependent, by encouraging such persons to
own stock in the Corporation. The Stock Plan provides for the grant to employees
of incentive stock options within the meaning of sec. 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), for the grant of nonstatutory
stock options to eligible employees (including officers and directors) and
non-employee directors and for the grant of restricted stock awards. Incentive
stock options may be exercisable for up to ten years at an option price of not
less than the fair market value of the Common Stock on the date that the option
is granted, or for up to five years at an option price of not less than 110% of
the fair market value of the Common Stock in the case of an officer or other key
employee who owns, at the time the option is granted, more than ten percent of
the Common Stock. Holders of incentive stock options qualify for certain
favorable tax treatment. See "Summary of Federal Income Tax Consequences."
Nonstatutory stock options may be exercisable for up to ten years at such
exercise price and upon such terms and conditions as the Compensation Committee
of the Board of Directors may determine.
The Stock Plan will be administered by the Compensation Committee of
the Board of Directors, which will be charged with designating those persons to
whom options or restricted stock awards are to be granted and determining the
terms of such awards, including the exercise price of options, the number of
shares subject to an option, the time of the exercise of an option and the
number of shares of, and the restrictions placed on, a restricted stock award.
In granting awards, the Compensation Committee will take into consideration the
past performance and anticipated future contribution of the potential grant
recipient and such other considerations the Committee deems relevant.
Options granted under the Stock Plan are subject to the following
restrictions, among others: (1) the per share exercise price for incentive stock
options must be equal to or greater than 100% of the fair market value of a
share of Common Stock on the date of grant of the option; (2) no option may be
exercisable after the expiration of ten years from the date of its grant; and
(3) options granted under the Stock Plan are subject to transfer restrictions as
follows:
(a) No Incentive Stock Option shall be transferable by the Optionee
other than by will, the laws of descent and distribution, and each Incentive
Stock Option shall be exercisable during the Optionee's lifetime only by the
Optionee; and
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<PAGE> 9
(b) No Non-Statutory Stock Options may be sold, exchanged, pledged,
transferred, assigned or otherwise encumbered or disposed of, except as follows:
(i) to the spouse or any children or grandchildren of the holder; (ii) as a
charitable contribution or gift to or for the use of any person or entity
described in sec.170(c) of the Code; (iii) to any Controlled Entity; or (iv) by
will or the laws of intestate succession.
If the optionee ceases to be employed by the Corporation because he or
she is terminated for Cause (as defined in the Stock Plan), any options held by
the terminated employee will automatically expire. If an optionee's employment
by the Corporation is terminated by reason of a mental or physical disability or
death, then his or her options will expire one year after the date of
termination. If an optionee's employment is terminated for any other reason,
then his or her options will terminate three months from the date of
termination. Options become immediately exercisable in the event of a change in
control of the Corporation or other similar event.
The Stock Plan authorizes the Corporation to make loans to optionees to
enable them to exercise their options. Such loans must (1) provide for recourse
to the optionee, (2) bear interest at a rate no less than the prime rate of
interest of the Corporation's principal lender and (3) be secured by the shares
of Common Stock purchased.
An award of restricted stock constitutes an immediate transfer of
ownership to the recipient in consideration of the performance of services.
Awards of restricted stock may be made for no additional consideration or for
consideration of a payment by the participant that is less than the current fair
market value. The participant has immediate dividend and voting rights on the
shares but the shares will be subject to a "substantial risk of forfeiture,"
within the meaning of Section 83 of the Code, for a period of at least one year,
as determined by the Compensation Committee. In order to enforce these
forfeiture provisions, the transferability of restricted stock granted under the
Stock Plan will be prohibited or restricted in the manner prescribed by the
Committee on the date of the grant. The Committee may provide for the earlier
termination of the forfeiture provisions in the event of a change in control of
the Corporation, retirement, death or disability of the recipient, or other
similar event.
The Board has the authority to amend or terminate the Stock Plan,
provided that no such action impairs the rights of the holder of any outstanding
option or restrictive stock without the written consent of such holder, and
provided further that certain amendments of the Stock Plan are subject to
stockholder approval. Unless terminated sooner, the Stock Plan will terminate
ten years from its effective date.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options
Generally. An optionee generally will not recognize income upon the
grant of a nonqualified stock option. If an optionee receives unrestricted
shares of Common Stock upon the exercise of a nonqualified stock option, he will
normally recognize ordinary income at the time of exercise equal to the excess
of the fair market value, at the time of exercise, of the optioned Common Stock
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<PAGE> 10
received over the exercise price. When the optionee disposes of the shares,
capital gain will be recognized, either long or short term depending on the
holding period beginning on the date the shares are acquired.
Special Rules Applicable to Optionees Subject to Section 16(b) of the
Exchange Act. The tax consequences to optionees who are Corporation insiders
subject to sec. 16(b) of the Exchange Act may differ from the tax consequences
described above. In the case of such an optionee, ordinary income will generally
be recognized upon exercise only if six months have elapsed since the date of
the grant.
Tax Consequences to the Corporation. To the extent that an optionee
recognizes ordinary income, the Corporation or subsidiary for which the optionee
performs services will generally be entitled to a corresponding deduction. The
deduction is allowed in the tax year in which the optionee is required to
include the amount in income.
Incentive Stock Options
Generally. An optionee will not recognize income upon the grant of an
incentive stock option. In addition, an optionee will not recognize income upon
the exercise of an incentive stock option if he or she satisfies certain
employment and holding period requirements. To satisfy the employment
requirement, an optionee generally must exercise the option not later than three
months after he ceases to be an employee of the Corporation or a subsidiary of
the Corporation (one year if he ceases to be an employee due to disability). To
satisfy the holding period requirement, an optionee must hold the optioned
Common Stock for more than two years from the grant of the option and more than
one year after the Common Stock is transferred to him. If these requirements are
satisfied, upon the sale of the Common Stock, the optionee will be taxed at
long-term capital gains rates on any gain, measured by the difference between
his or her basis in the Common Stock and the net proceeds of the sale.
Disqualifying Disposition. If shares of Common Stock acquired upon the
timely exercise of an incentive stock option are sold, exchanged or otherwise
disposed of without satisfying the holding period requirement (a "Disqualifying
Disposition"), the optionee will usually recognize ordinary income at the time
of disposition equal to the amount of the excess of the fair market value of the
optioned Common Stock on the date of the exercise of the incentive stock option
over the exercise price.
Alternative Minimum Tax. An optionee generally must include in
alternative minimum taxable income the amount by which the amount paid for the
option is exceeded by the option's fair market value at the time the rights to
the stock are freely transferable or not subject to a substantial risk of
forfeiture.
Tax Consequences to the Corporation. The granting of an incentive stock
option, or the exercise thereof, will generally not result in a deduction for
the Corporation. However, to the extent
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<PAGE> 11
that an optionee recognizes ordinary income as the result of a Disqualifying
Disposition, the Corporation will generally be entitled to a corresponding
deduction.
Restricted Stock Awards
The recipient of restricted stock awards generally will be subject to
tax at ordinary income rates on the fair market value of the restricted stock
reduced by any amount paid by the participant at such time as the shares are no
longer subject to forfeiture or restrictions on transfer for purposes of Section
83 of the Code ("Restrictions"). However, a recipient who so elects under
Section 83(b) of the Code within 30 days of the date of transfer of the shares
will have taxable ordinary income on the date of transfer of the shares equal to
the excess of the fair market value of such shares (determined without regard to
the Restrictions) over the purchase price, if any, of such restricted stock. If
a Section 83(b) election has not been made, any dividends received with respect
to restricted stock subject to Restrictions generally will be treated as
compensation that is taxable as ordinary income to the recipient.
VOTE REQUIRED
Adoption of the Stock Plan requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting. The enclosed Proxy will be voted FOR the adoption
of the Stock Plan unless the Proxy holders are otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE STOCK PLAN.
PROPOSAL NO. 3 -- APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Corporation has selected Coopers &
Lybrand L.L.P. as independent accountants to examine the consolidated financial
statements of the Corporation for the fiscal year ending December 31, 1997.
Although the Bylaws of the Corporation do not require the selection of
independent accountants to be submitted to stockholders for approval, this
selection is being presented to stockholders for ratification or rejection at
the Annual Meeting. The Board of Directors recommends that the stockholders vote
FOR the ratification of such selection. Coopers & Lybrand L.L.P. has been the
independent accountant of the Corporation since 1995, and is considered by the
Board of Directors to be well qualified. A representative of Coopers & Lybrand
L.L.P. is expected to be present at the Annual Meeting, and will have an
opportunity to make a statement if he so desires and will be available to
respond to appropriate questions.
VOTE REQUIRED
For ratification, this proposal will require the affirmative vote of
the holders of a majority of the shares of Common Stock represented at the
meeting in person or by proxy. If the resolution
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<PAGE> 12
is rejected, or if Coopers & Lybrand L.L.P. declines to act or becomes incapable
of action, or if its employment is discontinued, the Board will appoint other
independent accountants whose continued employment after the following Annual
Meeting of Stockholders will be subject to ratification by stockholders. The
enclosed Proxy will be voted FOR ratification of Coopers & Lybrand L.L.P.
unless the Proxy holders are otherwise instructed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF COOPERS &
LYBRAND L.L.P.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate annual remuneration of
Michael J. Toth, Chairman, James M. Lowery, President of the Corporation's Data
Division, Rita Koridek, Vice President, and Paul Stoyanoff, Vice President
(collectively, the "Named Officers"), for the Corporation's fiscal year ended
December 31, 1996. No other officer of the Corporation earned or received
remuneration in excess of $100,000 in 1996.
<TABLE>
<CAPTION>
CAPACITIES IN WHICH
NAME OF INDIVIDUAL REMUNERATION WAS RECEIVED SALARY BONUS (1)
- ------------------ ------------------------- ---------- ---------
<S> <C> <C> <C>
Michael J. Toth Chairman(2) $66,000 $ 16,126
James M. Lowery President of the Corporation's $66,000 $ 88,064(3)
Data Division(2)
Rita Koridek Vice President $66,000 $148,567(4)
Paul Stoyanoff Vice President $38,000 $209,898(5)
- ----------------
<FN>
(1) Bonuses earned in 1996 were paid in 1997 (except where otherwise
indicated).
(2) Subsequent to year end 1996, Mr. Lowery became Chairman of the
Corporation.
(3) Represents an earn-out payment paid to Mr. Lowery under the terms of
the agreement pursuant to which the Company acquired Seraphim.
(4) Includes: (1) $88,064 which represents an earn-out payment paid to Ms.
Koridek under the terms of the agreement pursuant to which the Company
acquired Seraphim; (2) $44,845 in bonus; and (3) $15,658 in commissions
which were accrued and paid in 1996.
(5) Includes $30,306 in commissions which were accrued and paid in 1996.
</TABLE>
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<PAGE> 13
AGGREGATE FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
non-qualified stock options granted to Mr. Toth on July 5, 1995. In general,
under the stock option agreement with Mr. Toth, options granted vest in equal
quarterly increments over a two-year period from the date of grant and expire
July 5, 2005. No stock options issued by the Company were exercised in 1996, and
none of the other Named Officers holds any stock options issued by the Company.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR-END FISCAL YEAR-END
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------- -------------
<S> <C> <C>
Michael J. Toth 45,314/27,186 $30,814/$18,486
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of August 29,
1997 regarding ownership of Common Stock by each person known to the Corporation
to beneficially own more than 5% of the Corporation's Common Stock, each
director and executive officer of the Corporation, and directors and executive
officers as a group.
10
<PAGE> 14
<TABLE>
<CAPTION>
NAME AND ADDRESS(1) OF BENEFICIAL OWNER AMOUNT OWNED PERCENT OF CLASS
- --------------------------------------- ------------ ----------------
<S> <C> <C>
Paul Satterthwaite 1,000,000 8.5%
Jon Satterthwaite 1,000,000 8.5%
James M. Lowery 190,000 1.6%
Frank Campanale 147,501 1.3%
Deborah J. Heaton 352,500(2) 3.0%
Rita Koridek 190,000 1.6%
Peter Olk 378,400 3.2%
Raymond W. Sheets, Jr. 2,061,000 17.5%
9345A Ravenna Road, Suite C9
Twinsburg, Ohio 44087
Steven W. Smith 2,061,000 17.5%
9345A Ravenna Road, Suite C9
Twinsburg, Ohio 44087
Michael J. Toth 532,500(2) 4.5%
All executive officers and directors as a 7,912,901(3) 67.2%
group
- ------------------
<FN>
(1) Address is the business address of the Corporation unless otherwise
indicated.
(2) Includes 72,500 shares subject to stock options that are presently
exercisable.
(3) Includes 145,000 shares subject to stock options that are presently
exercisable by Mr. Toth and Ms. Heaton.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Corporation's Mentor, Ohio facilities are leased from an entity
which is owned in part by Michael J. Toth, an officer, director and stockholder
of the Corporation. Mr. Toth was also an
11
<PAGE> 15
officer, director and stockholder of Long-Tell Communications, Inc.
("Long-Tell"), a reseller of long distance telephone services. Certain sales
personnel of Teleco also acted as independent contractors of Long-Tell and
received commissions from Long-Tell for sales in fiscal 1996. The Corporation
purchased all of the outstanding stock of Long-Tell on January 2, 1997.
On April 30, 1996, the Corporation loaned Mr. Toth $100,000, which loan
accrued interest at a rate of 9.0% per annum. The principal of the loan was paid
in full on June 30, 1996. A balance of $1,500, representing interest, remains
outstanding.
The assets of TCI, a subsidiary of the Company, were sold to Telephone
Communications, Ltd., a corporation owned by Messrs. Smith and Sheets,
stockholders and directors of the Corporation, effective December 31, 1994. In
consideration for such sale, Messrs. Smith and Sheets issued the Corporation a
promissory note in the principal amount of $580,000, payable in 35 monthly
installments of $20,000. On January 2, 1997, the Corporation forgave the then
remaining balance of this promissory note, which was $59,469, in consideration
for the payment of the remaining balance of $400,000 then due.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A stockholder intending to present a proposal to be included in the
Corporation's Proxy Statement for the Corporation's 1998 annual meeting of
Stockholders must deliver a proposal to the Secretary of the Corporation at the
Corporation's principal executive office a reasonable time before the
solicitation for the 1998 annual meeting is made.
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any other
matters to be submitted to the Annual Meeting. If any other matters properly
come before the Annual Meeting, it is the intention of the persons named in the
accompanying Proxy to vote the shares they represent as the Board of Directors
may recommend.
You are urged to sign and return your Proxy promptly to make certain
your shares will be voted at the Annual Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
By Order of the Board of Directors,
/s/ Peter Olk
Peter Olk
Secretary
12
<PAGE> 16
APPENDIX A
TELECOMM INDUSTRIES CORP.
1997 STOCK OPTION AND AWARD PLAN
1. PURPOSE. The purpose of this Plan is to advance the interests of
TELECOMM INDUSTRIES CORP., a Delaware corporation (the "Company"), by providing
additional incentive to attract and retain qualified and competent persons who
are key to the Company, including key employees, Officers and Directors, and
upon whose efforts and judgment the success of the Company is largely dependent,
by encouraging such persons to own stock in the Company.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change of Control" shall mean the occurrence of any of
the following:
(i) any transaction (which shall include a series
of transactions occurring within sixty days or occurring pursuant to a plan)
that has the result that stockholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of the Company or of
any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) the stockholders of the Company approving a
plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) the stockholders of the Company approving a
plan for the sale, lease, exchange, transfer, assignment or other disposition of
all or substantially all the property and assets of the Company (unless such
plan is subsequently abandoned).
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the compensation committee
appointed by the Board pursuant to Section 15 hereof or, if not appointed, the
full Board.
(e) "Common Stock" shall mean the Company's Common Stock, par
value $0.01 per share.
<PAGE> 17
(f) "Controlled Entity" shall mean any trust, partnership,
limited liability company or other entity in which such person that receives
Options or Restricted Shares under this Plan acts as trustee, managing partner,
managing member or otherwise controls; provided that, to the extent any such
Option or Restricted Shares received under this Plan is awarded to a spouse
pursuant to any divorce proceeding, such interest shall be deemed to be
terminated and forfeited notwithstanding any vesting provisions or other terms
herein or in the agreement evidencing such Option.
(g) "Director" shall mean a member of the Board.
(h) "Effective Date" shall mean September 15, 1997.
(i) "Fair Market Value" of a Share on any date of reference
shall be the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee in its sole
discretion shall determine otherwise in a fair and consistent manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be the average of the average bid and ask prices
of the Common Stock on the National Association of Securities Dealers Over the
Counter Bulletin Board for the five business days preceding such day.
(j) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.
(k) "Non-Employee Director" shall mean a Director who: (i) is
not an Officer or employee of the Company or any Subsidiary; (ii) does not (A)
receive compensation, directly or indirectly, from the Company or any Subsidiary
for services rendered as a consultant or in any other capacity other than as a
Director, except for an amount that does not exceed the dollar amount for which
disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R.
Section 229.404(a), or (B) possess an interest in any transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R.
Section 229.404(a); and (iii) is not engaged in a business relationship for
which disclosure would be required under Item 404(b) of Regulation S-K,
17 C.F.R. Section 229.404(b).
(l) "Non-Statutory Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(m) "Officer" shall mean the Company's Chairman, Chief
Financial Officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice president of the Company in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of Subsidiaries shall be deemed Officers of the Company if
they perform such policy-making functions for the
- 2 -
<PAGE> 18
Company. As used in this paragraph, the phrase "policy-making function" does not
include policy-making functions that are not significant.
(n) "Option" (when capitalized) shall mean any option granted
under this Plan.
(o) "Optionee" shall mean a person to whom an Option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of a transfer made pursuant to Section 13 hereof.
(p) "Participant" shall mean either a person to whom
Restricted Shares are granted under this Plan, an Optionee or any person who
succeeds to the rights of either such person under this Plan by reason of the
death of such person.
(q) "Plan" shall mean this 1997 Stock Option and Award Plan of
the Company.
(r) "Restricted Shares" shall mean Shares granted or sold
pursuant to Section 10 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 10 has
expired.
(s) "Restricted Share Agreement" shall mean the agreement
entered into between the Company and the Participant who is to receive
Restricted Shares at the time of any Restricted Share grant.
(t) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(u) "Share(s)" shall mean a share or shares of the Common
Stock.
(v) "Subsidiary" shall mean a "subsidiary corporation" as
defined in Section 424(f) of the Code.
3. AVAILABLE SHARES. The Company may grant to Participants from time to
time an aggregate of up to 75,000 Restricted Shares or Options from Shares held
in the Company's treasury or from authorized and unissued Shares. If any Option
granted under this Plan shall terminate, expire, or be canceled or surrendered
as to any Shares, or if any Restricted Shares are forfeited by the holder
thereof, new Options or Restricted Shares may thereafter be granted covering
such Shares.
4. OPTION GRANTS. An Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or a Non-Statutory Stock Option. All Incentive
Stock Options shall be granted within ten years from the date this Plan is
- 3 -
<PAGE> 19
adopted by the Board or the date this Plan is approved by the stockholders of
the Company, whichever is later.
5. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Code Section 422(b) are exercisable for the first time by any individual
during any calendar year (under all plans of the Company and any Subsidiary),
exceeds $100,000.
6. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by a written agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all
Directors, Officers and regular employees of the Company or its Subsidiaries.
Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
(b) In granting Options to Directors, Officers and employees
of the Company or its Subsidiaries, the Committee shall take into consideration
the contribution the person has made to the success of the Company or its
Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options to Directors, Officers and employees of the Company or its
Subsidiaries under this Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) prescribing the date or dates on which the Option becomes exercisable, (ii)
providing that the Option rights accrue or become exercisable in installments
over a period of years, or upon the attainment of stated goals or both, or (iii)
relating an Option to the continued employment of the Optionee for a specified
period of time, provided that such terms and conditions are not more favorable
to an Optionee than those expressly permitted herein.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither this
Plan nor any Option granted under this Plan shall confer upon any person any
right to employment or continuance of employment by the Company or its
Subsidiaries.
7. OPTION PRICE. The Committee shall establish, at the time any Option
is granted, the price per Share for which the Shares covered by the option may
be purchased; provided, however, that if the option is an Incentive Option, such
price shall not be less than 100% of the Fair Market Value of the Shares on the
date on which the option is granted; provided, further, that with respect
- 4 -
<PAGE> 20
to an Incentive Option granted to a Participant who at the time of the grant
owns (after applying the attribution rules of Section 424(d) of the Code) more
than 10% of the total combined voting stock of the Corporation or of any parent
corporation (as defined in Section 424(e) of the Code) or Subsidiary, the option
price shall not be less than 110% of the fair market value of the Shares subject
to the Incentive Option on the date such Option is granted.
8. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of an amount that is sufficient to satisfy
all applicable federal or state tax withholding requirements relating to
exercise of the Option, if any. Unless further limited by the Committee in any
Option, the option price of any Shares purchased shall be paid in cash, by
certified or official bank check, by money order, with Shares or by a
combination of the above; provided further, however, that the Committee in its
sole discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, the value
of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established in connection with this Plan,
lend money to an Optionee, guarantee a loan to an Optionee, or otherwise assist
an Optionee to obtain the cash necessary to exercise all or a portion of an
Option granted hereunder or to pay any tax liability of the Optionee
attributable to such exercise. If the exercise price is paid in whole or in part
with an Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
base lending rate of the Company's principal lender, and (iv) contain such other
terms as the Committee in its sole discretion shall reasonably require. No
Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of this Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 12 hereof.
9. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 9.
(a) The expiration date of an Option shall be determined by
the Committee at the time of grant, but in no event shall (i) an Option be
exercisable after the expiration of ten years from the date of grant of the
Option or (ii) an Incentive Option granted to a Participant, who at the time of
the grant owns (after applying the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting stock of the Corporation or of
any parent corporation (as defined in Section 424(e) of the Code) or Subsidiary,
be exercisable after the expiration of five years from the date of grant of the
Incentive Option.
- 5 -
<PAGE> 21
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable upon any Change in Control.
(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
10. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment is terminated for any reason other than by reason of (A)
Cause, which, solely for purposes of this Plan, shall mean the termination of
the Optionee's employment by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the meaning of
Section 22(e) of the Code) as determined by a medical doctor satisfactory to the
Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment for
Cause;
(iii) one year after the date on which the
Optionee's employment is terminated by reason of a mental or physical disability
(within the meaning of Section 22(e) of the Code) as determined by a medical
doctor satisfactory to the Committee; or
(iv) (A) one year after the date of termination of
the Optionee's employment by reason of death of the Optionee, or (B) three
months after the date on which the Optionee dies if the Optionee dies during the
one year period specified in Section 9(a)(iii) hereof.
(b) The Committee in its sole discretion may, by giving
written notice (a "cancellation notice"), cancel, effective upon the date of the
consummation of any corporate transaction described in Sections 2(b)(ii) or
(iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
11. RESTRICTED SHARES. The Committee may also authorize the grant or
sale to Directors, Officers and employees of the Company or its subsidiaries of
Restricted Shares. Each such grant or sale may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of Shares to the Participant in consideration of the
performance of services, entitling such Participant
- 6 -
<PAGE> 22
to voting, dividend and other ownership rights, but subject to the substantial
risk of forfeiture and restrictions on transfer referred to in the Restricted
Share Agreement.
(b) In granting Restricted Share awards to Directors, Officers
and employees of the Company or its Subsidiaries, the Committee shall take into
consideration the contribution the person has made to the success of the Company
or its Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Restricted Share awards to Directors, Officers and employees of the
Company or its Subsidiaries under this Plan prescribe such other terms and
conditions concerning such grants as it deems appropriate.
(c) Each Restricted Share grant or sale may be made without
additional consideration or in consideration of a payment by the Participant
that is less than Fair Market Value per Share at the date of grant.
(d) Each such grant or sale shall be subject to a Restricted
Share Agreement, which shall provide that the Restricted Shares covered by such
grant or sale shall be subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code for a period of not less than one (1) year to
be determined by the Committee at the date of grant, and any grant or sale may
provide for the earlier termination of such period in the event of a Change in
Control, retirement, or death or disability of the Participant or other similar
transaction or event as approved by the Committee.
(e) Each Restricted Share Agreement shall provide that during
the period for which such substantial risk of forfeiture is to continue, and any
other period prescribed by law, the transferability of the Restricted Shares
shall be prohibited or restricted in the manner and to the extent prescribed by
the Committee or law, as the case may be, at the date of grant (which
restrictions may include, without limitation, prohibitions on transfer, rights
of repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the hands of
any transferee).
(f) Any grant or sale of Restricted Shares may require that
any or all dividends or other distributions paid thereon during the period of
such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
12. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
- 7 -
<PAGE> 23
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant to Participants under this Plan, so
that the same percentage of the Company's issued and outstanding Shares shall
continue to be subject to being so granted; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of any corporate transaction described in Sections 2(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of Shares then subject to outstanding Options granted under this
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, lease, exchange, transfer, assignment or other disposition of all or any
part of the assets or business of the Company; or (vi) any other corporate act
or proceeding, whether of a similar character or otherwise.
13. TRANSFERABILITY OF OPTIONS AND RESTRICTED SHARES.
(a) No Incentive Stock Option shall be transferable by the
Optionee other than by will, the laws of descent and distribution, and each
Incentive Stock Option shall be exercisable during the Optionee's lifetime only
by the Optionee.
(b) A person that receives Non-Statutory Stock Options under
this Plan or such person's beneficiary shall have the power or right to sell,
exchange, pledge, transfer, assign or otherwise encumber or dispose of such
person's or beneficiary's Non-Statutory Stock Options received under this Plan
only as follows: (i) to the spouse or any children or grandchildren of such
- 8 -
<PAGE> 24
person that receives Non-Statutory Stock Options under this Plan; (ii) as a
charitable contribution or gift to or for the use of any person or entity
described in Section 170(c) of the Code; (iii) to any Controlled Entity; or
(iv) by will or the laws of intestate succession.
(c) Restricted Shares may be transferred only as set forth in
the applicable Restricted Share Agreement.
14. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option or Restricted Share award grant, the
Committee may require such agreements or undertakings (in an Option Agreement or
Restricted Share Agreement), if any, as the Committee may deem necessary or
advisable to assure compliance with any such federal or state securities or
other law or regulation including, but not limited to, the following:
(i) a representation and warranty by the Participant to the
Company, at the time any Option is exercised or Restricted Share granted, that
he is acquiring the Shares to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such Shares;
and
(ii) a representation, warranty and/or agreement by the
Participant to the Company to be bound by any legends that are, in the opinion
of the Committee or counsel to the Company, necessary or appropriate to comply
with the provisions of any securities law deemed by the Committee or counsel to
the Company to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
15. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by the Committee, which
shall consist of not less than two Directors. The Committee shall have all of
the powers of the Board with respect to this Plan; provided that if any member
of the Committee is not a Non-Employee Director, then the Board shall approve
any Option or Restricted Share that the Committee proposes to grant hereunder.
The Board may change the membership of the Committee at any time and fill any
vacancy occurring in the membership of the Committee by appointment.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written consent of the
members of the Committee.
- 9 -
<PAGE> 25
16. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof,
but instead this Plan shall be construed and enforced as if such provision had
never been included in this Plan.
(b) This Plan shall be governed by the laws of the State of
Ohio.
(c) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
17. AMENDMENT AND DISCONTINUATION OF THE PLAN.
(a) Either the Board or the Committee may from time to time
amend this Plan or any Option; provided, however, that, except to the extent
provided in Section 12, no such amendment may, without approval by the
stockholders of the Company, (i) materially increase the benefits accruing to
participants under this Plan, (ii) materially increase the number of securities
which may be issued under this Plan, or (iii) materially modify the requirements
as to eligibility for participation in this Plan; and provided further, that
except to the extent provided in Section 10, no amendment or suspension of this
Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.
(b) Notwithstanding anything herein to the contrary, the
provisions of this Plan which govern the exercise price per Share under each
such Option, when and under what circumstances such Option will be granted and
the period within which each such Option may be exercised, shall not be amended
more than once every six months (even with stockholder approval) other than to
conform to changes to (i) the Code or the rules promulgated thereunder, (ii) the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder, or (iii) rules promulgated by the Securities and
Exchange Commission.
18. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be effective
upon the Effective Date and shall terminate on the tenth anniversary of the
Effective Date.
*
- 10 -
<PAGE> 26
PROXY
TELECOMM INDUSTRIES CORP.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 16, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James M. Lowery and Peter Olk, or
either one of them acting singly with full power of substitution, the proxy
or proxies of the undersigned to attend the Annual Meeting of the
Stockholders of Telecomm Industries Corp. to be held on October 16, 1997,
at the Westin Hotel O'Hare, 6100 North River, Rosemont, Illinois 60018,
beginning at 10:00 a.m. local time, and any adjournments, and to vote all
shares of stock that the undersigned would be entitled to vote if
personally present in the manner indicated below and on the reverse side,
and on any other matters properly brought before the Meeting or any
adjournments thereof, all as set forth in the September 17, 1997 Proxy
Statement. The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting, Proxy Statement and Annual Report on Form 10-KSB/A of
Telecomm Industries Corp.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR "FOR ALL NOMINEES" AND
FOR PROPOSALS 2 AND 3.
1. Election of Michael J. Toth, James M. Lowery, Rita Koridek, Steven W.
Smith, Raymond W. Sheets, Jr., Peter Olk, Paul Satterthwaite and Paul
Stoyanoff.
<TABLE>
<S> <C>
FOR ALL NOMINEES [ ] WITHHOLD FROM ALL NOMINEES [ ]
(unless struck out above)
(Authority to vote for any nominee may be withheld by lining through or otherwise striking out the name of such
nominee.)
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
(CONTINUED FROM THE OTHER SIDE.)
2. Adoption of the 1997 Stock Option and Award Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratification of appointment of independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY WILL BE VOTED FOR THE NOMINEES AND THE ABOVE MATTERS UNLESS
OTHERWISE INDICATED,
AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY
BROUGHT BEFORE THE MEETING.
(SIGNATURE SHOULD BE EXACTLY AS NAME OR NAMES APPEAR ON THIS PROXY. IF
STOCK IS HELD JOINTLY EACH HOLDER SHOULD SIGN. IF SIGNATURE IS BY
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE.)
Dated , 1997
-----------------------------
Signature
-----------------------------
Signature if held jointly
I plan to attend the
meeting: Yes [ ] No [ ]
