SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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/ / 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.
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<PAGE>
TELECOMM INDUSTRIES, CORP.
1743 Quincy Avenue
Naperville, Illinois
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Telecomm Industries, Corp., on July 15, 1999, starting at 10:00
a.m. local time at the Hampton Inn, 6540 South Cicero, Bedford Park, Illinois
60638.
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, ratification of the creation of the
Company's new wholly-owned subsidiary, NetVision.Com Inc., and ratification of
the creation of the NetVision.Com Inc. 1999 Stock Option and Award Plan. 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/ Paul J. Satterthwait
Paul J. Satterthwaite
Secretary
<PAGE>
TELECOMM INDUSTRIES, CORP.
1743 Quincy Avenue
Naperville, Illinois
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 15, 1999
--------------------------------
TO THE STOCKHOLDERS OF TELECOMM INDUSTRIES, CORP.:
The Annual Meeting of the Stockholders of Telecomm Industries, Corp., a
Delaware corporation (the "Company" or "Telecomm"), will be held on July 15,
1999 at the Hampton Inn, 6540 South Cicero, Bedford Park, Illinois 60638,
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 ratify the creation of the wholly-owned Subsidiary
NetVision.Com Inc. (Proposal 2);
3. To ratify the creation of the NetVision.Com Inc. 1999 Stock
Option and Award Plan (Proposal 3);
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 June 1, 1999 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 the proxy.
By Order of the Board of Directors
/s/ James M. Lowery
James M. Lowery
Chairman of the Board
<PAGE>
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
"Telecomm") to be used at the 1999 Annual Meeting of Stockholders of the Company
to be held on July 15, 1999, and any postponements or adjournments thereof (the
"Annual Meeting"). The Annual Meeting will be held at the Hampton Inn, 6540
South Cicero, Bedford Park, Illinois 60638, 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, the ratification of the creation of
a wholly-owned subsidiary named NetVision.Com Inc. and the ratification of the
adoption of the 1999 Stock Option and Award Plan for NetVision.Com Inc.
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
for the fiscal year ended December 31, 1998, are being sent to stockholders
beginning on or about June 15, 1999.
VOTING AND QUORUM
Stockholders of record of the Company's Common Stock at the close of
business on June 1, 1999 are entitled to vote at the Annual Meeting. On March
31, 1998, there were 12,650,746 shares of Common Stock issued, 12,121,559 shares
of Common Stock outstanding, and 20,000,000 shares of Common Stock authorized.
Each outstanding share is entitled to one vote.
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. The ratification of the creation of the
new wholly-owned subsidiary, NetVision.Com Inc., and the ratification of the
adoption of the 1999 Stock Option and Award Plan for NetVision.Com Inc. 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.
<PAGE>
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
Five 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 James M. Lowery, Steven W. Smith,
Raymond W. Sheets, Jr., Paul J. Satterthwaite and David L. Gruber for election
as directors and recommends that the stockholders vote FOR the nominees. 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:
Date Service
Name Age Commenced Positions with Registrant
- -------------------- --- ------------- -------------------------
James M. Lowery 50 February 1997 Chairman of the Board
and Chief Executive Officer
Paul J. Satterthwaite 44 August 1997 Director, Vice-President of
Mergers and Acquisitions
and Secretary
Raymond W. Sheets, Jr. 34 October 1993 Director
Steven W. Smith 39 October 1993 Director
David L. Gruber 29 April 1999 Director
James M. Lowery. Mr. Lowery became Chairman of the Board and Chief
Executive Officer of the Company in February 1997. He was President of Seraphim
Information Systems, Inc. ("Seraphim") from August 1992 until it was merged into
the Company in January 1996. Prior to that time, he was employed by Ameritech as
Director of Channel Management for the authorized distributors in Ameritech's
marketing area.
Paul J. Satterthwaite. Mr. Satterthwaite has served as a Director and as
Vice-President of Mergers and Acquisitions of the Company since August 1997. For
more than five years prior to that time, he served as President and Chief
Executive Officer of Unitel Corporation ("Unitel") until it was acquired by the
Company in August 1997. While Mr. Satterthwaite served as an officer of Unitel,
prior to its acquisition by Telecomm, an involuntary petition was filed under
Chapter 7 of the Bankruptcy Code against Unitel. The petition was dismissed on
July 29, 1997 after a settlement was reached with Unitel's creditors.
2
<PAGE>
Raymond W. Sheets, Jr. Mr. Sheets has been a Director of the Company since
October 18, 1993. In addition, from 1991 to December 31, 1994, he was a Vice
President, Treasurer, Secretary and a Director of Telephone Communications, Inc.
("TCI"), a telephone services leasing company. In January 1995, Mr. Sheets,
together with Steven W. Smith, formed Telephone Communications Ltd., a limited
partnership to acquire and operate TCI ("TCL"). In September 1997, TCL changed
its name to Spectrum Ltd., also a limited partnership ("Spectrum"). Spectrum
continues to operate as a telephone services leasing company. Since their
respective formations, Mr. Smith has been a partner in TCL and Spectrum.
Steven W. Smith. Mr. Smith has been a Director of the Company since October
18, 1993. From 1991 to December 31, 1994, be was also President and Chairman of
the Board of Directors of TCI. Since their respective formations, Mr. Smith has
been a partner in TCL and Spectrum.
David L. Gruber. Mr. Gruber was recently appointed to the Board of
Directors in April 1999. Since May 1997, Mr. Gruber has served as a public
markets and investor relations consultant for the Company. From March 1994 to
May 1997, he was an Investment Consultant with McDonald & Company Investments.
From May 1991 to March 1994, Mr. Gruber served in the same capacity with
Parker/Hunter Inc., an investment banking and brokerage firm headquartered in
Pittsburgh, PA. In addition, Mr. Gruber has served as a Director of Advanced
Medical Supply since January 1995.
Executive Officers
The Company has one Executive Officer in addition to the nominees described
above. Mark Travi has served as the Chief Financial Officer of Telecomm since
July 1998. Before joining Telecomm, Mr. Travi was the former Chief Financial
Officer of the recruitment division of TMP Worldwide ("TMP"). Prior to TMP, he
spent 7 years in public accounting.
Meetings of the Board of Directors and Committees
The Board of Directors met eight (8) times in 1998. During 1998, all
incumbent members of the Board of Directors participated in all of the Board's
meetings, except Mr. Gruber. Mr. Gruber did not become a director until April
23, 1999.
The Compensation Committee of the Company is composed of Mr. Sheets and Mr.
Smith 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.
3
<PAGE>
Based solely upon its review of copies of these reports furnished to the
Company or written representation that no reports were required, the Company
believes that all of the Company's directors, executive officers and persons
holding more than ten percent of the Company's Common Stock are in full
compliance with all Section 16(a) requirements, except that (1) Mr. Lowery and
(2) Mr. Satterthwaite each failed to file a form 5 with regard to a Grant of
Options in 1998. These Options were disclosed in the Company's Proxy Statement
filed in 1998. These forms will be filed for each officer or director with the
Securities and Exchange Commission as soon as possible.
PROPOSAL NO. 2 - CREATION OF WHOLLY-OWNED SUBSIDIARY, NETVISION.COM INC.
The Board of Directors unanimously approved the creation of a new
wholly-owned subsidiary, NetVision.Com Inc., a Delaware corporation
("NetVision.Com" or the "Subsidiary").
Description of the Subsidiary
In late 1998, Telecomm was approached by a company that connects Internet
users with the Internet (an Internet service provider or "ISP") that had been
utilizing the Company to design and procure its Internet backbone. This ISP
expressed its interest in a strategic alliance with the Company. After a
thorough analysis by Telecomm's acquisition team, it appeared prudent to explore
this avenue whereby the Company could increase the demand for circuits and
equipment from its business customers and, due to the increased business volume,
create increased demand for circuits by ISPs. The Company appears to be well
positioned to participate in the consolidation of this industry due to its
established relationships with ISPs within the Company's customer base. Pursuant
to the acquisition team's findings, the Company's Board of Directors instructed
management to develop a strategy that would allow Telecomm to capitalize upon
its unique position without jeopardizing its strong relationship with its RBOC
partners.
In February 1999, the Company created NetVision.Com, a wholly-owned
subsidiary whose primary purpose is to create alliances and consider
acquisitions of ISPs. Since its inception, NetVision.Com has executed letters of
intent to purchase eleven ISPs and related companies. The Company continues to
consider various alternatives to maximize stockholder value created by the
Subsidiary.
To enable NetVision.Com to succeed as an on-going enterprise, the Company
is currently pursuing various possible sources of financing or capitalization,
both internal and external, for the Subsidiary. Such financing or capitalization
is necessary to allow the Subsidiary to capitalize upon the opportunities
available to it in a timely fashion. Possible sources include, by way of example
only and without limitation, use of the Company's acquisition line of credit,
funding out of the working capital of the Company, the development of
independent financing for the Subsidiary, the ability of individual directors,
officers or stockholders of the Company to invest in the Subsidiary and the
offering of securities in NetVision.Com to a wider array of investors.
So long as the Company retains majority control of the Subsidiary,
NetVision.Com shall report to the Board of Directors of the Company through
NetVision.Com's sole director, Mr. Paul Satterthwaite.
Vote Required
For ratification, this proposal 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 ratification of the creation of NetVision.Com unless the Proxy holders are
otherwise instructed.
The Board of Directors Recommends a Vote FOR the Ratification of the Creation of
NetVision.Com Inc.
4
<PAGE>
PROPOSAL NO. 3 - ADOPTION OF THE 1999 STOCK OPTION AND
AWARD PLAN FOR THE NEW SUBSIDIARY, NETVISION.COM, INC.
The Board of Directors unanimously approved the adoption of the
NetVision.Com 1999 Stock Option and Award Plan (the "Stock Plan"), subject to
approval by the stockholders of the Company, to be used to attract and retain
qualified and competent personnel necessary for the success of the Subsidiary.
The Stock Plan allocates a maximum of 2,000,000 shares of NetVision.Com common
stock, no par value ("Subsidiary Common Stock"), for issuance to the key
employees, officers and directors of the Subsidiary or the Company. The number
of shares of Subsidiary Common Stock available under the Stock Plan is
restricted further by a percentage cap such that the number of shares authorized
for use under the Stock Plan shall not exceed fifteen percent (15%) of the
shares of Subsidiary Common Stock issued at the time the Subsidiary begins
operations. The number of authorized shares under the Stock Plan is subject to
modification from time to time.
Description of the Stock Plan
The Stock Plan was adopted to attract and retain qualified and competent
persons who are key to the Subsidiary, including key employees, officers and
directors, and upon whose efforts and judgment the success of the Subsidiary is
largely dependent, by encouraging such persons to own stock in the Subsidiary.
The Stock Plan provides for the grant to employees of incentive stock options
within the meaning of ss.422 of the Internal Revenue Code of 1986, as amended
(the "Code"), for the grant of non-statutory stock options to eligible employees
and non-employee directors (including officers and directors of the Subsidiary
or the Company), 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 Subsidiary 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 Subsidiary Common Stock, or 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 Subsidiary Common Stock. Holders of incentive stock
options qualify for certain favorable tax treatment -- See "Summary of Federal
Income Tax Consequences." Non-statutory stock options may be exercisable for up
to ten years at such exercise price and upon such terms and conditions as the
Compensation Committee (as defined below) of the Board of Directors of the
Subsidiary may determine.
The Stock Plan will be administered by the Compensation Committee of the
Board of Directors of NetVision.Com (the "Committee"), 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. Such terms will include the
exercise price of options, the number of shares subject to an option, the time
of the exercise of an option, and the nature and extent of any restrictions
placed on a restricted stock award. In granting awards, the Committee will take
into consideration the past performance and anticipated future contribution to
the Subsidiary 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 Subsidiary 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
5
<PAGE>
(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 ss.170(c) of the Code; (iii) to any Controlled Entity (as such term
is defined in the Code); or (iv) by will or the laws of intestate succession.
If the optionee ceases to be employed by the Subsidiary or the Company
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 Subsidiary or the Company is terminated by reason
of a mental or physical disability of 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, or more specifically, 90 days from the date of termination. Options
become immediately exercisable in the event of a change in control of the
Subsidiary or other similar event.
The Stock Plan authorizes the Subsidiary 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 Subsidiary's principal lender and (3) be secured by the shares
of Subsidiary 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 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 Subsidiary,
retirement, death or disability of the recipient, or other similar event.
The Board of the Subsidiary 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
Subsidiary 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
Subsidiary Common Stock 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 Subsidiary or Company
insiders subject to Section 36(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.
6
<PAGE>
Tax Consequences to the Subsidiary. To the extent that an optionee
recognizes ordinary income, the Subsidiary or affiliated entity 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 Subsidiary or the Company (one
year if he ceases to be an employee due to disability). To satisfy the holding
period requirement, an optionee must hold the optioned Subsidiary Common Stock
for more than two years from the grant of the option and more than one year
after the Subsidiary Common Stock is transferred to him. If these requirements
are satisfied, upon the sale of the Subsidiary 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 Subsidiary Common Stock and the
proceeds of the sale.
Disqualifying Disposition. If shares of Subsidiary 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 Subsidiary 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 Subsidiary. The granting of an incentive stock
option, or the exercise thereof, generally not result in a deduction for the
Subsidiary. However, to the extent that an optionee recognizes ordinary income
as the result of a Disqualifying Disposition, the Subsidiary 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
with Restrictions 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.
There have been no grants made under the Stock Plan to any individuals to
date.
Vote Required
For ratification, this proposal requires the affirmative vote of the
holders of a majority of the shares of Subsidiary Common Stock present in person
or represented by proxy at the Annual Meeting. The enclosed Proxy will be voted
FOR the ratification of the adoption of the Stock Plan for NetVision.Com unless
the Proxy holders are otherwise instructed.
The Board of Directors Recommends a Vote FOR the Ratification of the
Adoption of the Stock Plan for NetVision.Com.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table summarizes the compensation paid by the Company to the
Company's Chairman and Chief Executive Officer, and the only executive officers
who earned more than $100,000 annually in total compensation in the last three
years (the "Named Executive Officers"). No Named Executive Officer received
perquisites from the Company, the aggregate value of which exceeded the lesser
of $50,000 or 10% of such Named Executive Officer's annual compensation. In
addition, none of Paul Stoyanoff, Rita Koridek or Michael J. Toth were serving
as executive officers or directors of the Company at the fiscal 1998 year end.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation
Fiscal ------------ Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ---- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
James Lowery........................... 1998 $176,000(1) - 200,000 -
Chairman of the Board and 1997 116,460 - - -
Chief Executive Officer 1996 66,000 64,590(2) - -
Paul Stoyanoff.......................... 1998 $ 54,201(1) $ 8,850 100,000 -
Regional Vice-President 1997 65,806 201,703 - -
1996 38,000 179,592 - $30,306
Rita Koridek............................ 1998 $102,745(1) $ 6,718 100,000 $50,000(4)
Vice-President of Sales 1997 70,350 105,715 - 6,763
1996 66,000 132,909(3) - 15,658
Michael J. Toth......................... 1998 $106,000(1) $ 35,100 100,000 -
Regional Vice-President 1997 69,333 76,332 - -
1996 66,000 16,126 - -
Paul Satterthwaite..................... 1998 $106,000(1) - 60,000 -
Vice President Mergers and Acquisitions
and Secretary
<FN>
(1) Includes amounts deferred at the Named Executive's option pursuant to
Section 401(k) of the Code.
(2) Represents an earn-out payment payable to Mr. Lowery, and accrued by
the Company, in 1996 under the terms of the agreement pursuant to
which the Company acquired Seraphim. $27,828 of this amount was paid
in 1996 and $36,762 of this amount was paid on February 15, 1998.
(3) Includes $64,590 which represents an earn-out payment payable to Ms.
Koridek, and accrued by the Company, in 1996 under the terms of the
agreement pursuant to which the Company acquired Seraphim. $27,828 of
this amount was paid in 1996 and $36,762 of this amount was paid on
February 15, 1998.
(4) Represents payment made in connection with a severance agreement
between Ms. Koridek and the Company.
</FN>
</TABLE>
Aggregate Fiscal Year-End Option Values
The following table sets forth information with respect to stock options
held by the Company's Chairman and Chief Executive Officer and other executive
officers of the Company at the fiscal 1998 year end. No stock options issued by
the Company were exercised in 1998.
<TABLE>
<CAPTION>
Value of Unexercisd
Number of Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End
-------------------------- ---------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James Lowery 0 200,000 - -
Chairman of the Board and
Chief Executive Officer
Paul Satterthwaite 0 60,000 - -
Vice President
Mergers and Acquisitions
and Secretary
Mark Travi
Chief Financial Officer 0 20,000 - -
</TABLE>
8
<PAGE>
Stock Plan
The following table sets forth information concerning individual grants of
stock options during 1998 by the Company to the Company's Chairman and Chief
Executive Officer and other executive officers of the Company at the fiscal 1998
year end. The Telecomm 1997 Stock Option and Award Plan was adopted in October
1997, amended in June 1998 and provides for the grant of options to purchase an
aggregate of 2,000,000 shares of the Company's Common Stock. Stock option and
restricted stock awards are designed to provide management with a direct
financial incentive to enhance stockholder values, thereby aligning the
interests of the Company's executives with the long-term interest of its
stockholders.
<TABLE>
<CAPTION>
Individual Grants
-----------------
Percent of Potential Realizable Value at
Total Options Assumed Rates of Stock Price
Number of Granted to Exercise or Appreciation for Option Term
Name and Options Employees in Base Price Expiration ----------------------------
Principal Position Granted Fiscal Year ($/sh) Date 5% 10%
- ------------------ ------- ----------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
James Lowery 200,000 29.4% $1.18 2/18/2008 $148,000 $376,000
Chairman of the Board and
Chief Executive Officer
Paul Satterthwaite 60,000 8.8% $1.18 2/18/2008 $ 44,400 $112,800
Vice President
Mergers and Acquisitions
Mark Travi
Chief Financial Officer 20,000 2.9% $ .94 7/17/2008 $ 11,800 $ 29,800
</TABLE>
Long-Term Incentive and Pension Plans
Other than its 401(k) plan, the Company does not have any long-term
incentive, pension or similar plans.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of April 10, 1999
regarding ownership of Common Stock by each person known to the Company to
beneficially own more than 5% of the Company's Common Stock, each director and
executive officer of the Company who own Common Stock, and directors and
executive officers as a group.
Percent
Name and Address of Beneficial Owner (1) Amount Owned of Class
- ---------------------------------------- ------------ --------
Raymond W. Sheets, Jr .................... 2,003,500(2) 16.5%
9345A Ravenna Road, Suite C9
Twinsburg, OH 44087
Steven W. Smith .......................... 2,041,000(2) 16.8%
9345A Ravenna Road, Suite C9
Twinsburg, OH 44087
Paul J. Satterthwaite .................... 1,000,000 8.2%
Jon Satterthwaite ........................ 1,000,000 8.2%
James M. Lowery .......................... 190,000 1.6%
David L. Gruber .......................... 70,000(2) 0.6%
All Executive Officers and
Directors as a Group ................ 5,234,500 43.2%
(1) Address is the business address of the Company unless otherwise indicated.
(2) One-half of Mr. Gruber's shares, 35,000 shares, are held in Mr. Sheets'
name, and one-half of Mr. Gruber's shares, 35,000 shares, are held in Mr.
Smith's name. Messrs. Sheets and Smith are contractually obligated to
transfer all of these shares to Mr. Gruber upon demand.
9
<PAGE>
Certain Relationships and Related Transactions
The Company's Mentor, Ohio facilities are leased from an entity, which is
owned in part by Michael J. Toth, formerly an officer, director and stockholder
of the Company. Mr. Toth ceased to be an officer, director or 5% stockholder of
the company as of October 28, 1998.
The Company's Indianapolis facility is leased through June 2005 from an
entity controlled by Mr. Jon Satterthwaite, a stockholder of the Company, and
Mr. Paul Satterthwaite, a director, officer and stockholder of the Company. The
Company makes monthly payments on the Indianapolis facility lease of $15,000 for
rent.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A stockholder intending to present a proposal to be included in the
Company's Proxy Statement for the Company's 2000 annual meeting of Stockholders
must deliver a proposal to the Secretary of the Company at the Company's
principal executive offices by January 8, 2000.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB, including financial
statements and schedules and exhibits thereto, may be obtained, without charge,
by written request to Mark Travi, Chief Financial Officer, Telecomm Industries
Corp., 1743 Quincy Avenue, Suite 143, Naperville, Illinois 60540.
OTHER MATTERS
The Board of Directors of the Company 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/ Paul Satterthwaite
-------------------------
Paul Satterthwaite
Secretary
10
<PAGE>
TELECOMM INDUSTRIES CORP.
ANNUAL MEETING OF STOCKHOLDERS, JULY 15, 1999
HAMPTON INN 6540 SOUTH CICERO, BEDFORD PARK, ILLINOIS 60038
10:00 A.M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned hereby appoints James M. Lowery and Paul Satterthwaite, or
R either one of them acting singly with full power of substitution, the proxy
O or proxies of the undersigned to attend the Annual Meeting of the
X Stockholders of Telecomm Industries Corp. to be held on July 15, 1999, at
Y the Hampton Inn, 6540 South Cicero, Bedford Park, Illinois 60038, 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 April 30, 1999 Proxy Statement. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting, Proxy
Statement and Annual Report on Form 10-KSB 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 James M. Lowery, Steven W. Smith, Raymond W. Sheets, Jr.,
Paul J. Satterthwaite and David L. Gruber.
FOR ALL NOMINEES / / (unless struck out above) WITHHOLD FROM ALL NOMINEES / /
(Authority to vote for any nominee may be withheld by lining through or
otherwise striking out the name of such nominee.)
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
<PAGE>
2. Ratification of the creation of the wholly-owned subsidiary
NetVision.Com Inc.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the creation of the NetVision.Com Inc. 1999 Stock
Option and Award Plan
/ / FOR / / AGAINST / / ABSTAIN
(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: _________________________, 1999
______________________________________
Signature
______________________________________
Signature if held jointly
I plan to attend the meeting:
Yes / / No / /
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.
