SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X| Filed by a party other than the registrant |_|
Check the appropriate box: |X| Preliminary proxy statement |_| Definitive
proxy statement |_| Definitive additional materials |_|
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Name of Registrant as Specified in Its Charter)
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(j)(2). |_| $500 per each
party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). |_| 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 transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
|_| 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:
- --------
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
40 Elmont Road
Elmont, New York 11003
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
AUGUST 20, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
("Meeting") of Global Telecommunication Solutions, Inc. ("Company"), will be
held at ________________________, on Tuesday, August 20, 1996, at 10:00 a.m.,
for the following purposes, all as more fully described in the attached Proxy
Statement:
(i) To elect two Class II Directors, each to serve for the ensuing two-year
period, and two Class III Directors, each to serve for the ensuing three-year
period, and, in each case, until his respective successor is elected and
qualified;
(ii) To approve an amendment to the Company's 1994 Performance Equity Plan
to increase the number of shares of Common Stock available for issuance upon
exercise of options and other awards granted or which may be granted thereunder
from 550,000 shares to 1,500,000 shares;
(iii) To approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of Common Stock authorized for issuance
thereunder from 15,000,000 shares to 35,000,000 shares; and
(iv) To transact such other business as may properly come before the
Meeting and any and all adjournments thereof.
The transfer books will not be closed for the Meeting. The
Board of Directors has fixed the close of business on July 8, 1996 as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Meeting or any adjournment thereof.
You are earnestly requested to date, sign and return the
accompanying form of proxy in the envelope enclosed for that purpose (to which
no postage need be affixed if mailed in the United States) whether or not you
expect to attend the Meeting in person. The proxy is revocable by you at any
time prior to its exercise and will not affect your right to vote in person in
the event you attend the Meeting or any adjournment thereof. The prompt return
of the proxy will be of assistance in preparing for the Meeting and your
cooperation in this respect is appreciated. You are urged to read the attached
Proxy Statement, which contains information relevant to the actions to be taken
at the Meeting.
By Order of the Board of Directors
David S. Tobin
Secretary
Elmont, New York
July 10, 1996
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of Global
Telecommunication Solutions, Inc. ("Company"), in connection with the
solicitation of proxies, in the accompanying form, by the Board of Directors for
use in voting at the Annual Meeting of Stockholders ("Meeting") to be held at
_________________, on Tuesday, August 20, 1996, and at any and all adjournments
thereof.
The Company's executive offices are located at 40 Elmont Road, Elmont,
New York 11003. On or about July 10, 1996, this Proxy Statement and the
accompanying form of proxy, together with a copy of the Annual Report of the
Company for the year ended December 31, 1995, including financial statements,
are to be mailed to each stockholder of record at the close of business on July
8, 1996.
Record Date and Outstanding Shares
The Board of Directors has fixed the close of business on July 8, 1996
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Meeting. Only stockholders of record at the close of
business on that date will be entitled to vote at the Meeting or any and all
adjournments thereof. As of July 8, 1996, the Company has issued and outstanding
5,512,801 shares of Common Stock, comprising all of the Company's issued and
outstanding voting stock. Each stockholder of the Company will be entitled to
one vote for each share of Common Stock.
Solicitation and Revocation
Proxies in the form enclosed are solicited by and on behalf of the
Board of Directors. The persons named in the proxy have been designated as
proxies by the Board of Directors. Any proxy given pursuant to such solicitation
and received in time for the Meeting will be voted as specified in such proxy.
If no instructions are given, proxies will be voted "FOR" the election of the
nominees listed below under Proposal I, "FOR" the approval of the amendment to
the 1994 Performance Equity Plan ("1994 Plan") as described below under Proposal
II, "FOR" the approval of the amendment to the Company's Certificate of
Incorporation as described below under Proposal III, and in the discretion of
the proxies named on the proxy card, with respect to any other matters properly
brought before the meeting and any adjournments thereof. In such unanticipated
event that any other matters are properly presented at the Meeting for action,
the persons named in the proxy will vote the proxies in accordance with their
best judgment. Any proxy given pursuant to this solicitation may be revoked by
the stockholder at any time before it is exercised by written notification
delivered to the Secretary of the Company, by voting in person at the Meeting,
or by delivering another proxy bearing a later date. Attendance by a stockholder
at the Meeting does not alone serve to revoke his or her proxy.
<PAGE>
Quorum
The presence, in person or by proxy, of a majority of the votes
entitled to be cast at the Meeting will constitute a quorum at the Meeting. A
proxy submitted by a stockholder may indicate that all or a portion of the
shares represented by such proxy are not being voted ("stockholder withholding")
with respect to a particular matter. Similarly, a broker may not be permitted to
vote stock ("broker nonvote") held in street name on a particular matter in the
absence of instructions from the beneficial owner of such stock. The shares
subject to a proxy which are not being voted on a particular matter (because of
either stockholder withholding or broker nonvote) will not be considered shares
present and entitled to vote on such matter. These shares, however, may be
considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum, unless the proxy indicates
that such shares are not being voted on any matter at the Meeting, in which case
such shares will not be counted for purposes of determining the presence of a
quorum.
Voting
Under Proposal I, each Class II and Class III Director will be elected
by a plurality of the votes cast at the Meeting with respect to the election of
directors. "Plurality" means that the nominees who receive the highest number of
votes will be elected as the Class II and Class III Directors of the Company for
the ensuing two-year and three-year period, respectively. Consequently, any
shares not voted "FOR" a particular nominee (because of either stockholder
withholding or broker nonvote), will not be counted in such nominee's favor.
Under Proposal II, the amendment to the 1994 Plan must be approved by
the affirmative vote of the majority of votes cast at the Meeting. Shares deemed
present at the Meeting but not entitled to vote on Proposal II (because of
either stockholder withholding or broker nonvote) are not deemed "votes cast"
with respect to such proposal and, therefore, will have no effect on such vote.
Under Proposal III, the amendment to the Company's Certificate of
Incorporation must be approved by the affirmative vote by the holders of a
majority of the outstanding shares of Common Stock. Accordingly, abstentions
from voting, stockholder withholdings and broker nonvotes with respect to
Proposal III will have the same effect as a vote against the proposal.
Security Ownership of Certain Beneficial Owners
The table and accompanying footnotes on the following pages set forth
certain information as of July 8, 1996 with respect to the stock ownership of
(i) those persons or groups who beneficially own more than 5% of the Company's
Common Stock, (ii) each director and director-nominee of the Company, (iii) the
Company's Chief Executive Officer and each of the Company's next two most highly
compensated executive officers whose individual compensation was $100,000 or
greater in the year ended December 31, 1995, and (iv) all directors and
executive officers of the Company as a group (based upon information furnished
by such persons). The address for each of Messrs. Finkel and McCabe is 40 Elmont
Road, Elmont, New York 11003 and for Mr. Wasserson is 5697 Rising Sun Avenue,
Philadelphia, Pennsylvania 19120. The addresses for other holders are as
indicated below.
2
<PAGE>
<TABLE>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Outstanding Shares
<S> <C> <C>
Shelly Finkel...................................... 887,736(2) 15.7%
Gary J. Wasserson.................................. 400,523(3) 7.3%
John P. McCabe..................................... 43,334(4) *
Alan W. Kaufman.................................... 20,000(5) *
c/o Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, New York 11577
Jack N. Tobin...................................... 10,000(6) *
7759 Highlands Circle
Margate Florida 33063
Donald L. Ptalis................................... 27,294(7) *
16 Ross Avenue
Emerson, New Jersey 07630
Norton Herrick..................................... 333,000(8) 6.0%
7709 Wood Duck Drive
Boca Raton, Florida 33434
Eli Oxenhorn....................................... 350,340(9) 6.1%
56 The Intervale
Roslyn Estates, New York 11576
Barry Rubenstein................................... 383,338(10) 6.7%
39 Woodland Road
Roslyn, New York 11576
Peoples Telephone Company, Inc..................... 636,866 11.6%
2300 N.W. 89th Place
Miami, Florida 33172
Paul Silverstein................................... 582,500(11) 10.5%
32 Edgewood Avenue
Larchmont, New York 10538
All executive officers and directors as a group (11
persons)........................................... 1,595,269(12) 27.3%
- ------------------------------------
<FN>
* Less than 1%.
(1) A person is deemed to be the beneficial owner of voting
securities that can be acquired by such person within 60 days
from the date of this report upon the exercise of options,
warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that
convertible securities, options or warrants that are held by
such person (but not those held by any other person) and which
are exercisable within 60 days of the date of this report have
been exercised. Unless otherwise noted, the Company believes
that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) Includes 50,000 shares of Common Stock issuable upon exercise of currently
exercisable options and an aggregate of 92,618 shares of Common Stock issuable
upon exercise of warrants issued in connection with the
Company's initial public offering ("IPO") in December 1994 and currently quoted on the
Nasdaq Small Cap Market ("Public Warrants"). See "1994 Performance
3
<PAGE>
Equity Plan," "Other Options and Warrants," and "Certain Relationships and Related
Transactions -- General."
(3) Includes 390,523 shares of Common Stock, all of which are owned jointly by
Mr. Wasserson and his spouse and 10,000 shares of Common Stock issuable upon
exercise of currently exercisable options. See "Certain Relationships and Related
Transactions -- The Global Link Acquisition." Does not include 125,000 shares
underlying options which become exercisable commencing in February 1997. See
"Employment Agreements."
(4) Represents 43,334 shares issuable upon exercise of currently exercisable options.
Does not include 66,666 shares underlying options which become exercisable
commencing March 1997. See "Employment Agreements."
(5) Represents 20,000 shares of Common Stock issuable upon exercise of currently
exercisable options. See "1994 Performance Equity Plan."
(6) Represents 10,000 shares of Common Stock issuable upon exercise of currently
exercisable options. See "1994 Performance Equity Plan."
(7) Includes 16,192 shares of Common Stock issuable upon
conversion of $50,000 principal amount of Debentures, 379
shares of Common Stock issuable upon exercise of warrants
issued in connection with such Debentures and 10,000 shares of
Common Stock issuable upon exercise of currently exercisable
options. See "Certain Relationships and Related Transactions
-- The Global Link Acquisition."
(8) Includes 233,000 shares of Common Stock issuable upon exercise of Public Warrants.
(9) Includes 1,000 shares of Common Stock and 1,000 shares issuable upon exercise of
Public Warrants owned by Mr. Oxenhorn's son, of which he disclaims beneficial
ownership, 54,170 shares of Common Stock issuable upon exercise of Public
Warrants, 100,000 shares issuable upon exercise of currently exercisable options and
40,000 shares of Common Stock issuable upon exercise of certain warrants ("Private
Warrants") issued in a private placement in May 1996. See "Consulting Agreements."
(10) Includes 15,000 shares of Common Stock owned by The Marilyn and Barry
Rubenstein Family Foundation, a tax exempt organization of which Mr.
Rubenstein is a trustee, and 20,000 shares of Common Stock owned by
Marilyn Rubenstein, Mr. Rubenstein's spouse. Mr. Rubenstein disclaims
beneficial ownership over all of such shares. Also includes 94,500
shares of Common Stock (including 40,000 shares issuable upon exercise
of Private Warrants) beneficially owned by Woodland Partners, a New
York general partnership of which Mr. Rubenstein is a partner,
attributable to Mr. Rubenstein as a result of his equity interest in
such entity. 10,500 of such shares represent Marilyn Rubenstein's
equity interest in such partnership and Mr. Rubenstein disclaims
beneficial ownership over such shares. Also includes 9,000 shares of
Common Stock owned by the Woodland Venture Fund, a New York limited
partnership, of which Mr. Rubenstein is a general partner. 5,557 of
such shares represent Mr. Rubenstein's equity interest in such
partnership and he disclaims beneficial ownership over the remaining
3,443 shares. Also includes 54,169 shares of Common Stock issuable upon
exercise of Public Warrants and 100,000 shares issuable upon exercise
of currently exercisable options. See "Consulting Agreements."
(11) Includes 50,000 shares issuable upon exercise of currently exercisable options. See
"1994 Performance Equity Plan," "Other Options and Warrants" and "Certain
Relationships and Related Transactions - General."
4
<PAGE>
(12) Includes those shares of Common Stock deemed to be included in Messrs.
Finkel, Wasserson, McCabe, Kaufman, Tobin and Ptalis' respective
beneficial ownership as described in notes 2, 3, 4, 5, 6 and 7 above.
Also includes 12,500 shares of Common Stock issuable upon exercise of
currently exercisable options held by each of Maria Bruzzese, Chief
Financial Officer of the Company, and Cory Eisner, Vice President of
the Company. Also includes 1,000 shares of Common Stock and 1,000
shares issuable upon exercise of Public Warrants beneficially owned by
each of Ms. Bruzzese and Mr. Eisner. Also includes (i) 32,382 shares of
Common Stock issuable upon exercise of currently exercisable options
granted to David Tobin, General Counsel and Secretary of the Company,
and (ii) 135,000 shares of Common Stock and 10,000 shares issuable upon
exercise of currently exercisable options granted to Joseph Clark,
Executive Vice President of the Company. Does not include those shares
which, as described in notes 3 and 5 above, are not included in Messrs.
Wasserson's and McCabe's ownership. Also does not include (i) 12,500
shares underlying options granted to each of Ms. Bruzzese and Mr.
Eisner, 6,250 of which vest in each of October 1996 and 1997, (ii)
10,000 shares underlying options granted to Mr. Eisner, 5,000 of which
vest in October 1996 and 2,500 of which vest in each of October 1997
and 1998 and (iii) 50,000 shares underlying options granted to David
Tobin, 33-1/3% of which vest in each of February 1997, 1998 and 1999.
See "Employment Agreements."
</FN>
</TABLE>
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who
beneficially own more than ten percent of the Company's Common Stock to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership of Common Stock. Executive officers,
directors and greater-than-ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all such reports they file. To
the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the year ended December 31, 1995, all filings under Section
16(a) were made as required.
PROPOSAL I: ELECTION OF CLASS II AND CLASS III DIRECTORS
The Board of Directors of the Company is divided into three classes,
each of which generally serves for a term of three years. The term of the first
class of directors (Class I Directors), currently consisting of Shelly Finkel
and Gary Wasserson, will expire at the annual meeting of stockholders to be held
in 1997; the term of the second class of directors (Class II Directors),
currently consisting of Alan W. Kaufman and Donald L. Ptalis, will expire at the
Meeting; and the term of the third class of directors (Class III Directors),
currently consisting of John McCabe and Jack N. Tobin will also expire at the
Meeting.
In connection with a certain voting agreement entered into in
connection with the acquisition of Global Link Teleco Corporation
("Global Link") described in "Certain Relationships and Related
Transactions - Global Link Acquisition," certain stockholders of the
Company ("GTS Major Stockholders") and certain former stockholder of
Global Link ("Global Link Major Stockholders," all of whom are now stockholders
of the Company) have the right to designate nominees to the Company's Board of
Directors. Messrs. Kaufman and McCabe are designees ("GTS Designees") of the
GTS Major Stockholders and Messrs. Ptalis and Tobin are designees ("Global Link
Designees") of the Global Link Major Stockholders. Each of the GTS Major
Stockholders has agreed to vote all of his shares of Common Stock for the
election of each of the Global Link Designees and each of the Global Link
Major Stockholders agreed to vote all of his shares of Common Stock for the
GTS Designees.
Information Concerning Nominees
Two persons will be elected at the Meeting to serve as Class II
Directors for a term of two years and two persons will be elected at the Meeting
to serve as Class III Directors for a term of three years. The Board of
Directors of the Company has nominated Alan W. Kaufman and Donald L. Ptalis, the
incumbent Class II Directors, and John McCabe and Jack N. Tobin, the incumbent
Class III Directors, as candidates for election. Unless otherwise specified in
the form of proxy, the proxies solicited by the management will be voted "FOR"
the election of these candidates. In case any of these nominees becomes
unavailable for election to the Board of Directors, an event which is not
anticipated, the persons named as proxies, or their substitutes, shall have full
discretion and authority to vote or refrain from voting for any other nominee in
accordance with their judgment.
The following information was furnished by the nominees:
5
<PAGE>
Class II Directors
Alan W. Kaufman has been a director of the Company since November 1994.
Since April 1986, Mr. Kaufman has held various positions, including Vice
President of Marketing and Vice President of Sales and Marketing, and is
currently the Executive Vice President of Sales of Cheyenne Software, Inc. Mr.
Kaufman is currently Chairman of the New York Software Alliance, a statewide
alliance of three regional software trade associations.
Donald L. Ptalis has been a director of the Company since March 1996.
Since January 1995, Mr. Ptalis has been the President of Masque Sound &
Recording Corp., a sound equipment rental company. From June 1993 to December
1995, Mr. Ptalis managed his personal investments. From 1987 to June 1993, Mr.
Ptalis was the President and Chief Executive Officer of Desks Inc., an office
furniture supply company. From 1984 to 1987, he was the Vice President and
General Manager of Lubin Business Interiors, Inc., an office furniture supply
company.
Class III Directors
John P. McCabe has been the President of the Company since the Merger
in February 1996 and a director of the Company since October 1995. From October
1995 through February 1996, Mr. McCabe was the Chief Executive Officer of the
Company and from March 1995 to October 1995, he was the President of the
Company. From June 1987 to March 1995, Mr. McCabe was employed by National
Westminster Bank in various capacities, including Senior Vice President of its
credit card division (January 1994 through March 1995), Senior Vice President of
its business strategies division (July 1991 through December 1993), and Senior
Vice President of its processing and custody services division (June 1987
through June 1991). From 1985 to 1987, Mr. McCabe was Vice President of Chemical
Bank's information products division.
Jack N. Tobin has been a director of the Company since March 1996.
Since March 1989, Mr. Tobin has been the President of Jack Tobin & Associates,
Inc., a marketing, public relations and lobbying firm which he founded. Since
November 1982, Mr. Tobin has been a member of the State of Florida House of
Representatives. As a member of the House of Representatives, Mr. Tobin has
served as the Chairman of the Health and Rehabilitative Services, Science
Industry and Technologies and Business and Professional Regulation committees.
Since November 1989, Mr. Tobin has chaired the full committee or subcommittee
which regulates telecommunications companies operating within the state. From
October 1981 to January 1989, Mr. Tobin was the Senior Vice President of
Marketing and Public Relations for Commonwealth Savings & Loan Association. Jack
Tobin is the father of David Tobin, the General Counsel and Secretary of the
Company.
Information Concerning Other Directors and Executive Officers
Class I Directors
Shelly Finkel has been the Chairman of the Board since April 1993 and
was the Chief Executive Officer of the Company from April 1993 through March
1995. Mr. Finkel has been active in the promotional field since June 1965 and
has been the President of Shelly Finkel Management, Inc., a New York-based
personal management firm, since 1980. In December 1993, Mr. Finkel promoted the
Howard Stern New Year's Eve telecast, which had the largest entertainment
pay-per-view audience in history. Since late 1980, Mr. Finkel has been involved
in boxing management and has managed several world champions including Evander
Holyfield and Pernell Whitaker. In 1973, Mr. Finkel, together with a stockholder
of the Company, promoted the Watkins Glen concert which attracted approximately
600,000 people.
Gary J. Wasserson has been the Chief Executive Officer and a director
of the Company since March 1996 and has been the President, Chief Executive
Officer and Chairman of the Board of Directors of Global Link since its
inception in March 1994. From June 1992 to February 1993, Mr. Wasserson was the
interim President, consultant and a director of Robin Enterprises Inc., a
6
<PAGE>
company organized to rehabilitate, develop, manage and lease residential and
commercial properties located in Moscow, Russia. From 1984 to December 1993, Mr.
Wasserson was the principal stockholder, Chairman and Chief Executive Officer of
Sterling Supply Corporation ("Sterling"), a cleaning supply and equipment
distribution company serving the laundry and textile industries. In 1992,
Sterling filed a voluntary petition in bankruptcy under Chapter 11 of the
Federal Bankruptcy Code.
Other Executive Officers
Joseph F. Clark has been Executive Vice President of the Company since
August 1995, was the Vice President of the Company from its inception in
December 1992 through July 1995 and Secretary and was a director of the Company
from its inception through February 1996. From January 1989 to September 1992,
Mr. Clark was President and owner of Clark-Wertheimer & Associates, a marketing
and management firm. Mr. Clark's background includes experience in modems,
multiplexers, and audiotext- and videotext-related products and services.
David S. Tobin has been the General Counsel and Secretary of the
Company since March 1996 and General Counsel of Global Link since February 1995.
From April 1992 to February 1995, Mr. Tobin was the Assistant General Counsel of
Peoples, where he was responsible for acquisitions, general corporate matters
and federal securities law compliance. From 1990 to April 1992, Mr. Tobin was an
associate of the law firm of Ruden, McClosky, Smith, Schuster and Russell, P.A.
David Tobin is the son of Jack Tobin, a director of the Company.
Maria Bruzzese has been the Chief Financial Officer and Treasurer of
the Company since October 1994. From April 1994 to October 1994, Ms. Bruzzese
was Chief Financial Officer of CompLink, Ltd., a developer of computer software
products primarily for the electronic messaging sector of the office automation
market. From 1986 to March 1994, Ms. Bruzzese was employed by KPMG Peat Marwick
LLP, an international, full service accounting firm, where she specialized in
the information and communications industry and most recently served as a senior
manager. Ms. Bruzzese is a certified public accountant and a member of the
American Institute of Certified Public Accountants and the New York State
Society of Certified Public Accountants.
Cory Eisner has been a Vice President of the Company since October
1994. From 1977 to October 1994, Mr. Eisner was employed by Phone Programs,
Inc., a telepromotions agency, most recently as Executive Vice President of
Sales. From 1975 to 1977, Mr. Eisner was the director of the sports department
for Long Island Weekly, a local area news show owned and broadcasted by
Cablevision Systems Corporation.
Michael Kresky has been the Vice President - Finance of the Company
since March 1996 and was the Chief Financial Officer of Global Link from August
1994 until February 1996. From 1983 to August 1994, Mr. Kresky was the
Controller of RCM Technologies, Inc., a publicly traded personnel services
company. Mr. Kresky is a certified public accountant and a member of the
American Institute of Certified Public Accountants and the New Jersey Society of
Certified Public Accountants.
Board Meetings, Committees and Compensation
The Board of Directors met once during 1995 and took numerous actions
throughout the year through the execution of unanimous written consents.
On March 14, 1996, the Board of Directors formed an Audit Committee,
which is currently composed of Gary J. Wasserson, Alan W. Kaufman and Donald L.
Ptalis. The responsibilities of the Audit Committee include, in addition to such
other duties as the Board may specify, (i) recommending to the Board the
appointment of independent accountants; (ii) reviewing the timing, scope and
results of the independent accountants' audit examination and the related fees;
(iii) reviewing periodic comments and recommendations by the Company's
independent accountants, and the Company's response thereto; (iv) reviewing the
scope and adequacy of internal accounting
7
<PAGE>
controls and internal auditing activities; and (v) reviewing and making
recommendations to the Board with respect to significant changes in accounting
policies and procedures.
On March 14, 1996, the Board of Director formed a Compensation
Committee, which is currently composed of Shelly Finkel, Alan W. Kaufman and
Jack N. Tobin. The responsibilities of the Compensation Committee include, in
addition to such other duties as the Board may specify, (i) reviewing and
recommending to the Board the salaries, compensation and benefits of the
executive officers and key employees of the Company, (ii) reviewing any related
party transactions on an ongoing basis for potential conflicts of interest and
(iii) administering the Company's stock option plans.
Executive Compensation
The following table shows the compensation earned during 1995, 1994 and
1993 by Shelly Finkel, Chairman of the Board, John McCabe, President, and Paul
Silverstein, a Vice President of the Company during 1995.
<TABLE>
SUMMARY COMPENSATION TABLE(1)
- ------------------------------------------------------------------------------------------------------------------------
Annual Long Term
Compensation Compensation
-------------------------------------------------------------
Restricted
Fiscal Stock Options
Name and principal position Year Salary ($) Awards ($) (# Shares)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Shelly Finkel(2) 1995 51,042 --- 10,000(3)
Chairman of the Board 1994 23,542 --- 30,000(4)
1993 20,000 --- ---
- ------------------------------------------------------------------------------------------------------------------------
John McCabe(5) 1995 121,154 --- 100,000(6)
President 1994 --- --- ---
1993 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
Paul Silverstein(7) 1995 125,000 --- 10,000(3)
Vice President 1994 232,500 --- 30,000(4)
1993 70,000 --- ---
- ------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
<FN>
(1) No other person received aggregate compensation equal to or exceeding
$100,000 during 1995, 1994 or 1993. None of Messrs. Finkel, McCabe or
Silverstein received noncash compensation benefits having a value
exceeding 10% of his cash compensation during 1995, 1994 or 1993.
(2) Mr. Finkel served as the Chief Executive Officer of the Company from
April 1994 through March 1995 at which time, Paul Silverstein was
appointed as Chief Executive Officer of the Company (in which position
Mr. Silverstein served until October 1995), with Mr. Finkel remaining
Chairman of the Board. The compensation received by Mr. Finkel during
1994 set forth above represents $21,459 received by him from the
Company through December 13, 1994 and $2,083 received from December 14,
1994 through December 31, 1994 under his employment agreement which
became effective simultaneously with the effectiveness of the Company's
IPO. See "Employment Agreements."
(3) Represents currently exercisable options to purchase 10,000 shares of
Common Stock for $5.875 per share granted pursuant to the terms of the
Company's 1994 Performance Equity
8
<PAGE>
Plan which provide for stock option grants for 10,000 shares to be made to each director of
the Company on March 31st of each year. See "1994 Performance Equity Plan."
(4) Represents currently exercisable options to purchase 30,000 shares of Common Stock for
$3.33 per share through October 2004. See "Other Options and Warrants."
(5) Mr. McCabe served as the Chief Executive Officer of the Company from
October 1995 through February 1996 (at which time Mr. Wasserson became
Chief Executive Officer of the Company) and as President of the Company
from March 1995 to October 1995 (and resumed in such office beginning
in February 1996 upon consummation of the Global Link Acquisition). See
"Certain Relationship and Related Transactions -- Global Link
Acquisition."
(6) Represents currently exercisable options to purchase 33,334 shares of Common Stock and
options to purchase 66,666 shares of Common Stock which become exercisable commencing
March 1997. The per-share purchase price pursuant to all such options is $5.00. See
"Employment Agreements."
(7) Mr. Silverstein served as President of the Company from its inception through March 1995,
at which time he became Chief Executive Officer of the Company, in which capacity he served
through October 1995. Mr. Silverstein most recently served as a Vice President of the
Company until May 1996. The compensation received by Mr. Silverstein during 1994 set
forth above represents $227,292 received by him from the Company through December 13,
1994 and $5,208 received from December 14, 1994 through December 31, 1994 under his
employment agreement, which became effective simultaneously with the effectiveness of the
IPO. See "Employment Agreements."
</FN>
</TABLE>
The Company cannot determine, without unreasonable effort or expense,
the specific amount of certain personal benefits afforded to its employees, or
the extent to which benefits are personal rather than business. The Company has
concluded that the aggregate amounts of such personal benefits which cannot be
specifically or precisely ascertained do not in any event exceed, as to each
individual named in the preceding table, the lesser of $50,000 or 10% of the
compensation reported in the preceding table for such individual, and that such
information set forth in the preceding table is not rendered materially
misleading by virtue of the omission of the value of such personal benefits.
<TABLE>
AGGREGATE YEAR-END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------
Number of unexercised options Value of unexercised in-the-
at fiscal year-end (#) money options at fiscal
year-end ($)(1)
Name
-----------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Shelly Finkel 40,000 0 86,350 0
Chairman of the Board
- ------------------------------------------------------------------------------------------------------------------------
John McCabe --- 100,000 --- 112,500
Presiden
- ------------------------------------------------------------------------------------------------------------------------
Paul Silverstein 40,000 0 86,350 0
Vice President
- ------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
9
<PAGE>
<FN>
(1) Represents the difference between the aggregate market value at
December 31, 1995 of the Common Stock underlying the options (based on
a last sale price of $6.125 on that date) and the options' aggregate
exercise price.
</FN>
</TABLE>
<TABLE>
OPTIONS/SHARES GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------
Individual Grants
- ---------------------------------------------------------------------------------------------------------------
% of Total
Options/Shares Market
Granted to Exercise Price on
Options/Shares Employees in Price Date of Expiration
Name Granted (#) Fiscal Year ($/Share) Grant ($) Date
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Shelly Finkel 10,000(1) 5.1% 5.875 5.875 2005
Chairman of the Board
- ---------------------------------------------------------------------------------------------------------------
John McCabe 100,000(2) 51.0% 5.00 5.00 2003
President
- ---------------------------------------------------------------------------------------------------------------
Paul Silverstein 10,000(1) 5.1% 5.00 5.875 2005
Vice President
- ---------------------------------------------------------------------------------------------------------------
- -----------------------------------
<FN>
(1) Represents immediately exercisable options to purchase 10,000 shares of Common Stock
granted pursuant to the terms of the Company's 1994 Performance Equity Plan which provides
for stock option grants for 10,000 shares to be made to each director of the Company on
March 31st of each year. See "1994 Performance Equity Plan."
(2) Represents options granted pursuant to the terms of Mr. McCabe's employment agreement.
See "Employment Agreements."
</FN>
</TABLE>
Employment Agreements
The Company has entered into an employment agreement with each of
Shelly Finkel, Chairman of the Board, Gary Wasserson, Chief Executive Officer,
John McCabe, President, David Tobin, General Counsel and Secretary, and Maria
Bruzzese, Chief Financial Officer. Each of Mr. Finkel's and Ms. Bruzzese's
employment agreement provides for an initial three-year term, commencing on
December 14, 1994. Each of Messrs. Wasserson's and Tobin's employment agreement
provides for an initial three-year term, commencing on March 1, 1996. Mr.
McCabe's employment agreement provides for an initial three-year term commencing
March 1, 1995. Mr. Finkel's employment agreement requires him to devote at least
50% of his business time to the management and operations of the Company and
provides for a base annual salary of $50,000 during the first year and $75,000
during the second and third years. Messrs. McCabe's, Wasserson's and Tobin's and
Ms. Bruzzese's employment agreements require each such person to devote
substantially all of his or her business time to the operations of the Company
and provide for base annual salaries of $150,000, $150,000, $140,000 and
$85,000, respectively, during the term of the agreements. Each of Mr.
Wasserson's and Tobin's employment agreements provide that if such person's
employment is terminated without cause, such person shall receive salary due
through the later of February 28, 1999 and one year from the date of
termination. All of these officers also may be granted annual bonuses at the
discretion of the Board of Directors. Each of the agreements contains a
provision prohibiting the employee from competing with the Company during the
term of employment and for a period of two years thereafter.
Consultants
In February 1995, the Company entered into consulting agreements with
each of Barry Rubenstein and Eli Oxenhorn, principal stockholders of the
Company. Each of Messrs. Rubenstein and Oxenhorn has held senior executive
positions with numerous publicly-held companies and has
10
<PAGE>
knowledge and expertise in negotiating and consummating mergers and acquisitions
and establishing commercial relationships, which abilities the Company believes
will be valuable in the pursuit of its strategy of rapid growth. Pursuant to the
terms of each consulting agreement, Messrs. Rubenstein and Oxenhorn shall render
consulting services for a maximum of eight hours per month for a two-year period
through February 1997, with a principal focus on potential mergers, acquisitions
and other business combinations and business development activities. Each of
Messrs. Rubenstein and Oxenhorn agreed to certain noncompetition provisions and
agreed to refer to the Company any opportunity presented to him to acquire or
enter into a business relationship with an entity engaged in activities similar
to or synergistic with those of the Company, without the receipt of any finder's
fee. The Company granted to each of Messrs. Rubenstein and Oxenhorn, in
consideration for the specified consulting services, options to purchase 100,000
shares of Common Stock at $4.75 per share (the fair market value of the Common
Stock on the date of grant), which options became exercisable in February 1996
and remain exercisable until February 2001.
1994 Performance Equity Plan
In October 1994, the Board of Directors adopted and the stockholders of
the Company approved the 1994 Plan under which an aggregate of 550,000 shares of
Common Stock were reserved for issuance upon exercise of options and other
stock-based awards granted and which may be granted thereunder. As of the date
of this Proxy Statement, options to purchase a total of [514,000] shares of
Common Stock are outstanding under the 1994 Plan. On March 14, 1996, the Board
of Directors of the Company approved an amendment to the 1994 Plan, pursuant to
which the number of shares available under the 1994 Plan will be increased from
550,000 to 1,500,000 shares, upon stockholder approval of such amendment.
On March 31st of each calendar year during the term of the 1994 Plan,
assuming there are enough shares then available for grant under the 1994 Plan,
each person who is then a director of the Company is awarded stock options to
purchase 10,000 shares of the Company's Common Stock at the fair market value
thereof (as determined in accordance with the 1994 Plan), all of which options
are immediately exercisable as of the date of grant and have a term of ten
years. These are the only awards which may be granted to a director of the
Company under the 1994 Plan. The 1994 Plan is administered by the Board of
Directors which determines the persons (other than directors) to whom awards
will be granted, the number of awards to be granted and the specific terms of
each grant, including the vesting thereof, subject to the provisions of the 1994
Plan.
In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the Common Stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of the outstanding stock of the Company). The aggregate
fair market value of shares for which qualified stock options are exercisable
for the first time by such employee during any calendar year may not exceed
$100,000. Nonqualified stock options granted under the 1994 Plan may be granted
at a price determined by the Board of Directors, not to be less than the fair
market value of the Common Stock on the date of grant. Generally, options
granted to employees are exercisable as to 50% of the shares covered thereby on
the first anniversary of the date of grant and 25% of the shares covered thereby
on each of the second and third anniversaries of the date of such grant.
The 1994 Plan also contains certain change in control provisions which
could cause options and other awards to become immediately exercisable and
restrictions and deferral limitations applicable to other awards to lapse in the
event any person, as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including a
group as defined in Section 13(d), but excluding certain stockholders of the
Company, acquires beneficial ownership of more than 25% of the Company's
outstanding shares of Common Stock.
Options outstanding under the 1994 Plan include options to purchase
25,000 and 35,000 shares granted to Maria Bruzzese and Cory Eisner,
respectively, at exercise prices ranging from
11
<PAGE>
$5.00 to $5.75 per share. In addition, pursuant to the terms of the 1994 Plan,
the Company granted to each director of the Company, on March 31, 1995,
immediately exercisable options to purchase 10,000 shares for $5.875 per share,
and on March 31, 1996, immediately exercisable options to purchase 10,000 shares
for $5.25 per share. In February 1995, in connection with their
respective consulting agreements with the Company, Barry Rubenstein
and Eli Oxenhorn, each stockholders of the Company, each were granted
options under the 1994 Plan to purchase 100,000 shares of Common Stock
at an exercise price of $4.75 per share. These options vested in February 1996
and remain exercisable until February 2001. The exercise price of all of
the foregoing options is equal to the fair market value of the Common Stock on
the date of grant.
Other Options and Warrants
In October 1994, the Board of Directors granted ten-year options to
Shelly Finkel, Paul Silverstein and James Koplik, a stockholder of the Company,
to purchase 30,000, 30,000 and 15,000 shares, respectively. All of these options
are currently exercisable at a price of $3.33 per share.
In December 1994, in connection with serving as underwriter of the
Company's IPO, the Company issued and sold to the Placement Agent and its
designees, for nominal consideration, five-year warrants to purchase up to
150,000 shares of Common Stock at a purchase price of $8.05 per share and/or up
to 150,000 Public Warrants at a purchase price of $.161 per Public Warrant,
which are exercisable at a price of $4.00 per share.
In March 1995, in connection with his employment with the Company, John
McCabe, the Company's President, was granted options to purchase 100,000 shares
of Common Stock at an exercise price of $5.00 per share (the fair market value
of the Common Stock on the date of grant). These options vest in three equal
annual installments commencing in March 1996 and will remain exercisable for a
period of five years from the date of vesting.
In April 1995, in connection with consulting services rendered to the
Company, Eleanor Feffer and Jon Silverman were granted options to purchase 5,000
and 2,500 shares of Common Stock, respectively. These options are currently
exercisable at a price of $5.50 per share.
In April 1995, the Company issued five-year warrants to a designee of
the Placement Agent to purchase 50,000 shares of Common Stock at an exercise
price of $5.00 per share in consideration of the Placement Agent granting the
Company the right of first refusal to pursue any prospective acquisition target
in the phone card industry that the Placement Agent identifies prior to February
1998. In October 1995, in further consideration of such right of first refusal,
the Company issued five-year warrants to another designee
of the Placement Agent to purchase 50,000 shares of Common Stock at an exercise
price of $5.00 per share. In January 1996, the Company issued five-year warrants
to the Placement Agent to purchase 200,000 shares at an exercise price of $5.125
per share in consideration of consulting services provided and to be provided to
the Company.
In January 1996, the Company entered into a consulting agreement with
Payne Financial Group ("Payne"), pursuant to which the Company agreed to grant
Payne options to purchase 100,000 shares of Common Stock at an exercise price of
$5.50 per share. These options would become exercisable in January 1997 and
remain exercisable until January 1999; provided, however, that if the Company
terminates the agreement without cause, the options would become immediately
exercisable and if the Company terminates the agreement with cause, the options
would terminate immediately.
In February 1996, in connection with their employment with the Company,
Messrs. Gary Wasserson and David Tobin, the Company's Chief Executive Officer
and General Counsel, respectively, were granted options to purchase 125,000 and
50,000 shares, respectively, at an exercise price of $6.125 per share. These
options vest in three equal annual installments
12
<PAGE>
commencing in February 1997 and will remain exercisable for a period of five
years from the date of vesting.
In connection with the Private Offering (as defined and described below
under Certain Relationships and Related Transactions - General), the Company
issued to Whale Securities Co., L.P. ("Whale"), the placement agent and the
underwriter of the Company's IPO, an option to purchase up to 60,000 shares of
Common Stock and 120,000 warrants (having terms identical to the Public
Warrants) in units of one share and two warrants at an exercise price of $5.00
per unit until May 10, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
The Company's operations have been funded, in large part, by loans to
the Company (the "Loans") made by Shelly Finkel and Shelly Finkel Management,
Inc. ("SFM"), a company owned in part by Mr. Finkel. The Loans were made at
various times between April 1993 and June 1994 and were payable on a demand
basis, bearing interest at 8% per annum.
In July 1994, the Company consummated a private placement ("Bridge
Financing"), pursuant to which it issued $1,000,000 principal amount of Bridge
Notes and warrants to purchase 1,000,000 shares of Common Stock. From the
proceeds of the Bridge Financing, the Company repaid $75,000 principal amount of
the Loans owed to Mr. Finkel and SFM, together with $5,000 interest due and
owing on such principal amount, reducing the principal amount of the Loans from
$694,723 (the maximum amount which was outstanding at any time), then owing on
such date, to $619,723, the repayment of which (together with interest) was
extended to the later of July 1995 or one year from the date of the consummation
of this offering. Mr. Finkel and SFM agreed to subordinate the repayment of the
Loans to the repayment of the Bridge Notes.
In September 1994, Mr. Finkel and SFM converted all of the principal
amount of the Loans and all interest due and owing thereon (the Loans and
interest due and owing thereon collectively referred to herein as the "Debt
Amount") into shares of Common Stock and Conversion Warrants at the rate of one
share of Common Stock and one Conversion Warrant for each $3.00 of Debt Amount
converted. Mr. Finkel and SFM converted $136,359 and $513,675 of Debt Amount,
respectively, into 45,453 shares of Common Stock and 45,453 Conversion Warrants
and 171,225 shares of Common Stock and 171,225 Conversion Warrants,
respectively.
In September 1994, SFM sold 54,169 shares of Common Stock and 54,169
Conversion Warrants for an aggregate purchase price of $162,507 ($3.00 per share
and warrant) to Barry Rubenstein and 54,170 shares of Common Stock and 54,170
Conversion Warrants for an aggregate purchase price of $162,510 ($3.00 per share
and warrant) to Eli Oxenhorn. Messrs. Rubenstein and Oxenhorn also participated
in the Bridge Financing purchasing $200,000 and $225,000 of Notes and 200,000
Bridge Warrants and 225,000 Bridge Warrants, respectively. Mr. Rubenstein's
spouse also participated in the Bridge Financing, purchasing $50,000 of Notes
and 50,000 Warrants. The remaining 62,886 shares of Common stock and 62,886
Conversion Warrants owned by SFM were sold in September 1994 to Messrs. Finkel
and Koplik, the two stockholders of SFM. In October 1994, Mr. Joseph Clark, a
director of the Company, contributed 75,000 shares of Common Stock to the
Company.
In February 1995, the Company entered into consulting agreements with
each of Barry Rubenstein, and Eli Oxenhorn, principal stockholders of the
Company. As the entire consideration for consulting services to be provided
thereunder, the Company granted to each of Messrs. Rubenstein and Oxenhorn
options to purchase 100,000 shares of Common Stock for $4.75 per share.
In May 1996, the Company consummated a "best efforts $2,000,000
minimum, $3,000,000 maximum" private placement offering ("Private Offering") in
which it sold 30 Units, each Unit
13
<PAGE>
consisting of 20,000 shares of Common Stock, $.01 par value ("Common Stock"),
and 40,000 Private Warrants, exercisable until December 14, 1999 at an exercise
price of $4.00, pursuant to a Placement Agent Agreement, dated as of March 25,
1996, between the Company and Whale. The per Unit sales price was $100,000.
Among the purchasers in the Private Offering were a certain entity in which Mr.
Rubenstein has an equity interest (one Unit) and Mr. Oxenhorn (one Unit).
Each of Messrs. Rubenstein and Oxenhorn is a principal stockholder of,
and consultant to, the Company.
The principal offices of Global Link are leased from JilJac Realty
Company, a general partnership owned by Gary Wasserson and his spouse. The lease
is for space of approximately 7,500 square feet and is for a term of five years.
The lease provides for an annual rental of $50,400 during 1996, $52,900 during
1997, $55,566 during 1998 and $58,344 during 1999.
The Company believes that each of the foregoing transactions were on
terms no less favorable to the Company as those which could have been obtained
from unaffiliated third parties. All future transactions and loans between the
Company and its officers, directors and principal stockholders or their
affiliates will be on terms no less favorable than could be obtained from
unaffiliated third parties and will be approved by a majority of the then
disinterested directors of the Company.
The Global Link Acquisition
On January 18, 1996, the Company, Link Acquisition Corp., a
wholly-owned subsidiary of the Company ("Merger Sub"), and Global Link Teleco
Corporation ("Global Link") executed an Agreement And Plan Of Merger (the
"Merger Agreement"), pursuant to which Merger Sub was merged (the "Merger") with
and into Global Link and Global Link became a wholly-owned subsidiary of the
Company. The Merger was consummated on February 29, 1996 (the "Merger Date").
In connection with the Merger, the Company agreed to issue to the
holders of Global Link's common stock (the "Global Link Shares"), upon surrender
of such shares, an aggregate of 1,718,318 shares of the Company's Common Stock,
based upon an exchange ratio of .64763 shares of Common Stock for each
outstanding Global Link Share. Outstanding options and warrants to purchase an
aggregate of 145,000 Global Link Shares, as a result of the Merger automatically
converted into the right to purchase an aggregate of 109,926 shares of Common
Stock at the rate of .75811 shares of Common Stock for each Global Link Share
(with an exercise price of 1.32 times the exercise price per Global Link share).
In addition, in connection with the Merger, the holders of $2,800,000
aggregate principal amount of Global Link's Debentures executed an Amended and
Restated Securities Purchase Agreement (the "Securities Purchase Agreement"),
pursuant to which such holders consented to the Merger and waived certain
rights. The Debentures are due and payable on June 23, 1999 and are secured by a
first lien on all assets of Global Link. The Debentures bear interest at 6% per
annum, payable on May 30th and November 30th of each year; provided, however,
that the 6% per annum interest due on May 30, 1996 and November 30, 1996 was
prepaid by Global Link with Global Link shares prior to the Merger. The
Debentures are immediately due and payable, at the option of the holders, upon a
change in control of Global Link, which is defined as a merger, consolidation or
sale of substantially all of the assets of Global Link, as a result of the
existing Global Link directors no longer comprising a majority of the members of
the board of directors of the surviving entity. The Company has guaranteed the
payment of principal and interest owed under the Debentures. The principal
amount of the Debentures is convertible at the option of the holders at any time
into shares of Common Stock (the "Conversion Shares") at a conversion price of
approximately $3.088 per share. The Company may require the conversion of the
Debentures if (i) the Company has received aggregate gross proceeds of not less
than $5,000,000 from certain private placements or public offerings of its
securities; (ii) the Conversion Shares are the subject of an effective
registration statement under the Securities and Exchange Act of 1933, as amended
(the "Act") or are eligible for sale under an exemption therefrom; (iii) the
Common Stock is traded on a national securities exchange or quoted on Nasdaq;
(iv) the price of the Common Stock is at least $3.50; and (v) the lock-up
agreements of the holders of the Debentures (as described in the penultimate
paragraph of this section) are terminated. Global Link may prepay the Debentures
if the Conversion Shares are registered under the Act or an exemption therefrom
is available, the
14
<PAGE>
Common Stock is listed on a national securities exchange or quoted on Nasdaq and
the lock-up agreements of the holders of the Debentures are terminated.
Simultaneously with the execution of the Merger Agreement, Global Link
executed an agreement (the "Peoples Agreement") with Peoples Telephone Company,
Inc. ("Peoples"), pursuant to which, on the Merger Date, Peoples accepted (i)
$1,050,000 ($550,000 of which was paid on the Merger Date with the balance of
$500,000 plus accrued interest at the rate of 8% per annum payable on June 28,
1996 (the "Second Peoples Payment")) and (ii) 52,805 shares of Common Stock (the
"Peoples Shares") in full satisfaction of any and all monies owed by Global Link
to Peoples other than $954,630 of the Peoples Accounts Receivable owed by Global
Link to Peoples, the payment of which Peoples agreed could be made in four equal
quarterly installments commencing in January 1997. The payment to Peoples of the
Second Peoples Payment and the Peoples Accounts Receivable were guaranteed by
the Company.
On the Merger Date, the Company entered into an employment agreement
("Employment Agreement"), as described under "Employment Agreements," above,
with each of Gary J. Wasserson and David S. Tobin, the Chief Executive Officer
and General Counsel, respectively, of Global Link who were appointed the Chief
Executive Officer and General Counsel, respectively, of the Company.
Additionally, Messrs. Wasserson and Tobin were granted options to purchase
125,000 and 50,000 shares of Common Stock, respectively, as described under
"Other Options and Warrants."
Simultaneously with the execution of the Merger Agreement, the Company
on the one hand, the GTS Major Stockholders (i.e.Shelly Finkel, James Koplik,
Paul Silverstein and Joseph Clark), who hold an aggregate of
1,533,339 shares of Common Stock, and on the other hand the Global Link Major
Stockholders (i.e. Gary J. Wasserson, Jody Frank, Bernard Frank, Edward
Marx, Joel D. Hornstein and members of their respective immediate
families), who hold an aggregate of 1,090,075 shares of Common Stock,
entered into a voting agreement (the "Directors Voting Agreement"), pursuant to
which the Company agreed to nominate and use its best efforts to have elected to
its Board of Directors and the Board of Directors of three Global Link Designees
and four GTS Designees. Each of the GTS Major Stockholders agreed to vote all
of his shares of Common Stock for the election of each of the three Global Link
Designees and each of the Global Link Major Stockholders agreed to vote all of
his shares of Common Stock for the GTS Designees. The term of the Directors
Voting Agreement expires on February 28, 1999.
Pursuant to the Merger Agreement, the Company agreed to register the
shares of Common Stock issued in the Merger, as well as the Conversion Shares
and the Peoples Shares, by means of a registration statement which the Company
is required to use its best efforts to file by June 30, 1996 and have declared
effective by September 30, 1996. Notwithstanding the foregoing, each stockholder
to be included on such registration statement executed a lock-up agreement
prohibiting his sale of such shares for a period of one year after the Merger
Date and limiting sales to 25% of his holdings in each three-month period during
the second year after the Merger Date. There are certain exceptions to these
lock-up agreements which will allow the holders of the Debentures to sell that
aggregate number of Conversion Shares equal to the aggregate amount of shares of
Common Stock sold by the GTS Major Stockholders during the one-year period
immediately following the Merger Date in excess of 160,000 shares of Common
Stock.
Between November 1995 and February 1996, the Company had loaned an
aggregate of $487,000 to Global Link, which had been guaranteed by certain
holders of Global Link shares, which guaranty was secured by a pledge of such
shares. As a result of the Merger, the debt owed by Global Link to the Company
was consolidated and the guaranty and pledge were terminated.
15
<PAGE>
PROPOSAL II: APPROVAL OF AN AMENDMENT TO THE 1994 PERFORMANCE EQUITY
PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE UPON EXERCISE OF
OPTIONS AND OTHER AWARDS GRANTED OR WHICH MAY BE GRANTED THEREUNDER
Under the 1994 Plan, which was approved by the Board of Directors and
adopted by the stockholders of the Company in October 1994, an aggregate of
550,000 shares of Common Stock are currently reserved for issuance upon exercise
of options and other stock-based awards granted and which may be granted
thereunder. As of the date of this Proxy Statement, there are outstanding
options granted under the 1994 Plan to purchase an aggregate of 514,000 shares
of Common Stock. On March 14, 1996, the Board of Directors of the Company
approved an amendment to the 1994 Plan, pursuant to which the number of shares
available under the 1994 Plan will be increased from 550,000 shares to 1,500,000
shares. Without giving effect to the proposed amendment, there are 36,000
shares currently available for future grant under the 1994 Plan. As a result
of the Company's continued planned growth and the recent addition of numerous
employees in connection with the recent acquisition of Global Link,
the Board believes that the increase in the size of the 1994 Plan is necessary
to continue to allow the Company to use stock options to attract and retain
employees and consultants of the highest caliber and provide increased incentive
for them to continue to promote the well-being of the Company through the grant
of options, which acquire value only with an increase in the market value of the
Company's Common Stock.
The Board of Directors recommends voting "FOR" Proposal II.
SUMMARY OF THE 1994 PLAN
Administration
The 1994 Plan is administered by the Board or, at its discretion, by
the Company's compensation committee. The Board has full authority, subject to
the provisions of the 1994 Plan, to award (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock
Reload Options and/or (vi) other stock-based awards (collectively "Awards").
Subject to
16
<PAGE>
the provisions of the 1994 Plan, the Board determines, among other things, the
persons to whom from time to time Awards may be granted ("Holders" or
"Participants"), the specific type of Awards to be granted (e.g., Stock Option,
Restricted Stock), the number of shares subject to each Award, share prices, any
restrictions or limitations on such Awards (e.g., the "Deferral Period" in the
grant of Deferred Stock and the "Restriction Period" when Restricted Stock is
subject to forfeiture), and any vesting, exchange, deferral, surrender,
cancellation, acceleration, termination, exercise or forfeiture provisions
related to such Awards. The interpretation and construction by the Board of any
provisions of, and the determination by the Board of any questions arising
under, the 1994 Plan, or any rule or regulation established by the Board
pursuant to the 1994 Plan, shall be final, conclusive and binding on all persons
interested in the 1994 Plan. Awards under the 1994 Plan are evidenced by
agreements between the Company and the Participants.
Shares Subject to the 1994 Plan
The 1994 Plan, as amended, authorizes the granting of Awards whose
exercise would allow up to an aggregate of 1,500,000 shares of Common Stock to
be acquired by the Holders of such Awards. In order to prevent the dilution or
enlargement of the rights of Holders under the 1994 Plan, the shares of Common
Stock authorized by the 1994 Plan are subject to adjustment by the Board of
Directors in the event of a stock dividend, stock split, reverse stock split,
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Company's stock. The shares of Common Stock
acquirable pursuant to the Awards will be made available, in whole or in part,
from authorized and unissued shares of Common Stock. If any Award granted under
the 1994 Plan is forfeited or terminated, the shares of Common Stock that were
available pursuant to such Award shall again be available for distribution in
connection with Awards subsequently granted under the 1994 Plan.
Eligibility
Subject to the provisions of the 1994 Plan, Awards may be granted to
key employees, officers, directors and consultants who are deemed to have
rendered or to be able to render significant services to the Company and are
deemed to have contributed or to have the potential to contribute to the success
of the Company. Incentive Stock Options may be awarded only to persons who, at
the time of such awards, are employees of the Company or its wholly- or
majority-owned subsidiaries ("Subsidiaries").
Specifically, on March 31st of each year during the term of the 1994
Plan, assuming there are enough shares then available for grant under the 1994
Plan, each person who is then a director of the Company is awarded a stock
option to purchase 10,000 shares of the Company's Common Stock at the fair
market value thereof (as determined in the accordance with the 1994 Plan), all
of which options are immediately exercisable as of the date of grant and have a
term of ten years. These are the only Awards which may be granted to a director
of the Company under the 1994 Plan.
Types of Awards
Options. The 1994 Plan provides both for "Incentive" stock options
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and for options not qualifying as Incentive
Options ("Non-qualified Options"), both of which may be granted with any other
stock based award under the 1994 Plan. The Board will determine the exercise
price per share of Common Stock purchasable under an Incentive or Non-qualified
Option (collectively "Options"). The exercise price of an Incentive Option may
not be less than 100% of the fair market value on the last trading day before
the date of grant (or, in the case of an Incentive Option granted to a person
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, not less than 110% of such fair market value). The
exercise price of a Non-qualified Option may be less than 100% of the fair
market value on the last trading day before the date of the grant. An Incentive
Option may only be granted within a 10-year period from the date the 1994 Plan
was adopted and approved and may only be exercised within 10 years
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of the date of the grant (or within 5 years in the case of an Incentive Option
granted to a person who, at the time of the grant, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company). Subject to any limitations or conditions the Board may impose, Options
may be exercised, in whole or in part, at any time during the term of the Option
by giving written notice of exercise to the Company specifying the number of
shares of Common Stock to be purchased. Such notice must be accompanied by
payment in full of the purchase price, in cash or in the discretion of the
Board, in securities of the Company, or any combination thereof.
Options granted under the 1994 Plan are generally exercisable only by
the Holder during his or her lifetime. The Options granted under the 1994 Plan
may not be transferred other than by will or by the laws of descent and
distribution, except that the Board may in its sole discretion allow a
Non-qualified Option to be transferable, subject to compliance with applicable
securities laws.
Generally, if the Holder is an employee, no Incentive Option, or any
portion thereof, granted under the 1994 Plan may be exercised by the Holder
unless he or she is employed by the Company or a Subsidiary at the time of the
exercise and has been so employed continuously from the time the Incentive
Option was granted. However, in the event the Holder's employment with the
Company is terminated due to disability, the Holder may still exercise his or
her Incentive Option for a period of one year (or such other lesser period as
the Board may specify at the time of grant) from the date of such termination or
until the expiration of the stated term of the Incentive Option, whichever
period if shorter. Similarly, should a Holder die while in the employment of the
Company or a Subsidiary, his or her legal representative or legatee under his or
her will may exercise the decedent Holder's Incentive Option for a period of one
year from death (or such other greater or lesser period as the Board specifies
at the time of grant) or until the expiration of the stated term of the
Incentive Option, whichever is shorter. Further, if the Holder's employment is
terminated without cause or due to normal retirement (upon attaining the age of
65), then the portion of any Incentive Option which has vested by the date of
such retirement may be exercised for the lesser of three months after retirement
or the balance of the Incentive Option's term. The Board is afforded more
flexibility with respect to the terms of Non-qualified Options, since such
options are not subject to Code requirements.
Other. The Board may grant Stock Appreciation Rights ("SARs" or
singularly "SAR") in conjunction with all or part of any Option granted under
the 1994 Plan, or may grant SARs on a free-standing basis. In conjunction with
Nonqualified Options, SARs may be granted either at or after the time of the
grant of such Nonqualified Options. In conjunction with Incentive Options, SARs
may be granted only at the time of the grant of such Incentive Options. An SAR
entitles the Holder thereof to receive an amount (payable in cash and/or Common
Stock as determined by the Board) equal to the excess fair market value of one
share of Common Stock over the SAR price or the exercise price of the related
Option, multiplied by the number of shares subject to the SAR. Additionally, the
Board may award shares of Restricted Stock, Deferred Stock and other stock-
based awards either alone or in addition to, or in tandem with, other Awards
granted under the 1994 Plan.
Stock Reload Options. The Board may grant Stock Reload Options in
conjunction with any Option granted under the 1994 Plan. In conjunction with
Incentive Options, Stock Reload Options may be granted only at the time of the
grant of such Incentive Option. In conjunction with Non- qualified Options,
Stock Reload Options may be granted either at or after the time of the grant of
such Non-qualified Options. A Stock Reload Option permits a Holder who exercises
an Option by delivering already owned stock (i.e., the stock-for-stock method),
to receive back from the Company a new Option (at the current market price) for
the same number of shares delivered to exercise the Option.
Acceleration of Award Vesting. Generally, under the 1994 Plan, if (i)
any person or entity other than the Company and/or any director, officer or
principal stockholder of the Company as of the date the 1994 Plan was adopted
acquires securities of the Company (in one or more transactions) having 25% or
more of the total voting power of all the Company's securities then outstanding
and
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(ii) the Board of Directors of the Company does not authorize or otherwise
approve such acquisition, then, the vesting periods of any and all Options and
other awards granted and outstanding under the 1994 Plan will be accelerated and
all such Options and awards will immediately and entirely vest, and the
respective holders thereof will have the immediate right to purchase and/or
receive any and all shares of Common Stock subject to such Options and awards on
the terms set forth in such Plan and the respective agreements respecting such
Options and awards.
Withholding Taxes
Upon the exercise of any Award granted under the 1994 Plan, the Holder
may be required to remit to the Company an amount sufficient to satisfy all
federal, state and local withholding tax requirements prior to delivery of any
certificate or certificates for shares of Common Stock. Subject to certain
stringent limitations under the 1994 Plan and at the discretion of the Board,
the Holder may satisfy these requirements by electing to have the Company
withhold a portion of the shares to be received upon the exercise of the Award
having a value equal to the amount of the withholding tax due under applicable
federal, state and local laws.
Term and Amendments
Unless terminated by the Board, the 1994 Plan shall continue to remain
effective until such time as no further Awards may be granted and all Awards
granted under the 1994 Plan are no longer outstanding. The Board may at any
time, and from time to time, amend the 1994 Plan, except that no amendment may
be made which would impair the rights of any Holder of an existing Option or
other Award without such Holder's consent.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the 1994 Plan is only a summary of the general rules applicable
to the grant and exercise of Options and does not give specific details or
cover, among other things, state, local and foreign tax treatment of
participation in the 1994 Plan. The information contained in this section is
based on present law and regulations, which are subject to being changed
prospectively or retroactively.
Incentive Options
The Participant will recognize no taxable income upon the grant or
exercise of an Incentive Option. The Company will not qualify for any deduction
in connection with the grant or exercise of Incentive Options. Upon a
disposition of the shares after the later of two years from the date of grant or
one year after the transfer of the shares to the Participant, the Participant
will recognize the difference, if any, between the amount realized and the
exercise price as long-term capital gain or long-term capital loss (as the case
may be) if the shares are capital assets. The excess, if any, of the fair market
value of the shares on the date of exercise of an Incentive Option over the
exercise price will be treated as an item of adjustment for a Participant's
taxable year in which the exercise occurs and may result in an alternative
minimum tax liability for the Participant.
If Common Stock acquired upon the exercise of an Incentive Option is
disposed of prior to the expiration of the holding periods described above, (i)
the Participant will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares;
and (ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to the limitation that the compensation be reasonable. In
the case of a disposition of shares earlier than two years from the date of the
grant or in the same taxable year as the exercise, where the amount realized on
the disposition is less than the fair market value of the shares on the date of
exercise, there will be no adjustment since the amount treated as an item of
adjustment, for alternative minimum tax
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purposes, is limited to the excess of the amount realized on such disposition
over the exercise price, which is the same amount included in regular taxable
income.
Non-qualified Options
With respect to Non-qualified Options (i) upon grant of the option, the
Participant will recognize no income; (ii) upon exercise of the option (if the
shares of Common Stock are not subject to a substantial risk of forfeiture), the
Participant will recognize ordinary compensation income in an amount equal to
the excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price, and the Company will qualify for a deduction
in the same amount, subject to the requirement that the compensation be
reasonable; and (iii) the Company will be required to comply with applicable
Federal income tax withholding requirements with respect to the amount of
ordinary compensation income recognized by the Participant. On a disposition of
the shares, the Participant will recognize gain or loss equal to the difference
between the amount realized and the sum of the exercise price and the ordinary
compensation income recognized. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets and as short-term or long-term
capital gain or loss, depending upon the length of time that the participant
held the shares.
If the shares acquired upon exercise of a Non-qualified Option are
subject to a substantial risk of forfeiture, the Participant will recognize
ordinary income at the time when the substantial risk of forfeiture is removed,
unless such Participant timely files under Code Section 83(b) to elect to be
taxed on the receipt of shares, and the Company will qualify for a corresponding
deduction at such time. The amount of ordinary income will be equal to the
excess of the fair market value of the shares at the time the income is
recognized over the amount (if any) paid for the shares.
Stock Appreciation Rights
Upon the grant of a SAR, the Participant recognizes no taxable income
and the Company receives no deduction. The Participant recognizes ordinary
income and the Company receives a deduction at the time of exercise equal to the
cash and fair market value of Common Stock payable upon such exercise.
PROPOSAL III: APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE NUMBER OF
SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
The Board of Directors of the Company has approved an amendment to the
Certificate of Incorporation increasing the authorized number of shares of
Common Stock from 15,000,000 to 35,000,000 and directing that the amendment be
submitted to the vote of stockholders of the Company at the Meeting.
The authorized capital of the Company under Article Fourth of the
Certificate of Incorporation currently is 16,000,000 shares, consisting of
15,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, without par value. As of June 18, 1996, there were outstanding
[5,512,801] shares of Common Stock. Of the authorized and unissued shares of
Common Stock, there were reserved ___________ shares for issuance upon exercise
of options and warrants.
The Board of Directors believes that it is desirable to have the
additional authorized shares of Common Stock available for possible future
financing and acquisition transactions, stock dividends or splits, employee
benefit plans and other general corporate purposes. Having such
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additional authorized shares of Common Stock available for issuance in the
future would give the Company greater flexibility and allow such shares to be
issued without the expense and delay of a special stockholders' meeting. The
additional shares of Common Stock would be available for issuance without
further action by the stockholders, unless such action is required by applicable
law, rules or regulations. At the date of this Proxy Statement, the Company has
no agreements or commitments to issue additional shares of Common Stock or
Preferred Stock other than upon exercise of outstanding warrants, options and
convertible securities.
Within the limits imposed by applicable law, authorized and unissued
shares of Common Stock and Preferred Stock and shares of Common Stock held in
the treasury of the Company could be issued in one or more transactions, or
shares of one or more new series of Preferred Stock could be issued with terms,
provisions and rights, which would make more difficult and, therefore, less
likely a takeover of the Company. Any issuance of additional shares of Common
Stock or Preferred Stock could have the effect of diluting the earnings per
share and book value per share of existing shares of Common Stock.
If the amendment is authorized, the text of Article Fourth of the
Company's Certificate of Incorporation will read in its entirety as follows:
"FOURTH The total number of shares which the corporation shall
have authority to issue is 36,000,000, which are divided into two
classes consisting of (i) 35,000,000 shares of common stock, par value
$.01 per share, and (ii) 1,000,000 shares of preferred stock, issuable
in series as may be provided from time to time by resolution of the
Board of Directors.
The Board of Directors recommends that you vote "FOR" Proposal III.
INDEPENDENT AUDITORS
KPMG Peat Marwick served as the Company's independent certified public
accountants for the ten months ended December 31, 1995. The Board of Directors
has selected KPMG Peat Marwick as the Company's independent certified public
accountants for the fiscal year ending December 31, 1996.
1996 STOCKHOLDERS PROPOSALS
In order for stockholder proposals for the 1996 Annual Meeting of Stockholders
to be eligible for inclusion in the Company's Proxy Statement, they must be
received by the Company at its principal office in New York, New York by
_______________, 1997.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the Meeting other than the matters referred to in this Proxy
Statement. Should any other matter properly come before the Meeting, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their best judgment.
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SOLICITATION OF PROXIES
The cost of proxy solicitations will be borne by the Company. In addition to
solicitations of proxies by use of the mails, some officers or employees of the
Company, without additional remuneration, may solicit proxies personally or by
telephone. The Company may also request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate, and may
reimburse them for reasonable expenses related thereto. Additional solicitation
of proxies may be made by an independent proxy solicitation firm or other entity
possessing the facilities to engage in such solicitation. If any independent
entity is used for such solicitation, the Company will be required to pay such
firm reasonable fees and reimburse expenses incurred by such firm in the
rendering of such solicitation services.
David S. Tobin
Secretary
Elmont, New York
July 10, 1996
GLOBAL TELECOMMUNICATION SOLUTIONS, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on August 20, 1996
The undersigned Stockholder(s) of GLOBAL TELECOMMUNICATION SOLUTIONS, INC.,
a Delaware corporation ("Company"), hereby appoints Shelly Finkel
and Gary Wasserson, or either of them, with full power of
substitution and to act without the other, as the agents, attorneys and
proxies of the undersigned, to vote the shares standing in the name of the
undersigned at the Annual Meeting of Stockholders of the Company to be held
on August 20, 1996 and at all adjournments thereof. This proxy will be voted
in accordance with the instructions given below. If no instructions are
given, this proxy will be voted FOR all of the following proposals.
1. Election of the following Directors:Alan W. Kaufman and Donald L. Ptalis
FOR |_| WITHHELD |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided)
2. Approval of the amendment to the Company's 1994 Performance Equity Plan:
FOR |_| AGAINST |_| WITHHELD |_|
3. Approval of the amendment to the Company's Certificate of Incorporation:
FOR |_| AGAINST |_| WITHHELD |_|
4. In their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting or any adjournment
thereof.
|_| I plan on attending the Annual Meeting.
Date _____________________________, 1996
------------------------------
Signature
------------------------------
Signature if held jointly
Please sign exactly as name
appears above. When shares
are held by joint tenants,
both should sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please
sign in full corporate name
by President or other
authorized officer. If a
partnership, please
sign in partnership name by
authorized person.
<PAGE>
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