U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
(MarkOne)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to _____________________
Commission file number 1-13478
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
______________________________________________
(Name of small business issuer in Its charter)
Delaware 13-3698386
________________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5697 Rising Sun Avenue, Philadelphia, PA 19120
_________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
(215) 342-7700
_____________________________________________
(Issuer's Telephone Number, Including Area Code)
The Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Annual Report on Form 10- KSB for the year ended
December 31, 1997 as set forth in the pages attached hereto:
Item 9. Directors and Executive Officers of the Registrant
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers, key employees and directors of the
Company are as follows:
Name Age Position
Shelly Finkel(1) 53 Chairman of the Board
Robert Bogin 47 President and Director
Randolph Cherkas 36 Chief Operating Officer and Director
David S. Tobin 33 Vice President--Business Affairs, General Counsel
and Secretary
Michael Hoppman 36 Chief Financial Officer, Treasurer and Assistant
Secretary
Cory Eisner 42 Vice President--Enhanced Services
Mary Berger 38 Vice President--Support Services
J. Mark Rubenstein 43 Vice President--Wholesale Sales and Director
Alan W. Kaufman(1)(2) 59 Director
Donald L. Ptalis(2) 55 Director
Jack N. Tobin(1) 56 Director
- -----------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
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.
Robert Bogin has been the President of the Company since August 1997.
From October 1996 to July 1997, Mr. Bogin served as President of RMI, Inc., a
real estate investment corporation which he founded. From November 1988 to
October 1996, Mr. Bogin initially served as Executive Vice President--Chief
Financial Officer, then as President and Chief Executive Officer of Capitol
Multimedia, Inc., an international software company specializing in the
creation, production and licensing of entertainment and educational CD-ROM
multimedia titles for the consumer market.
Randolph Cherkas has been the Company's Chief Operating Officer since
February 1998 and a director of the Company since April 1998. In February 1994,
Mr. Cherkas founded Networks Around the World, Inc. ("NATW") and served as its
President until February 1998, when NATW was acquired by the Company (the "NATW
Merger"). From July 1993 to February 1994, Mr. Cherkas served as Account
Executive for Network Equipment Technologies, a company which designs and sells
network solutions to Fortune 500 companies. From July 1984 to July 1993, Mr.
Cherkas served as an account executive for IBM.
David S. Tobin has been the Vice President--Business Affairs of the
Company since November 1997, 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 and general corporate matters. 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 N.
Tobin, a director of the Company.
Michael Hoppman has been the Company's Chief Financial Officer and
Treasurer since September 1997. From 1990 to August 1997, Mr. Hoppman was
employed by The Score Board, Inc., a manufacturer, wholesaler and marketer
2
<PAGE>
of baseball trading cards, prepaid phone cards and sports and entertainment
memorabilia, most recently as Vice President and Chief Financial Officer.
Cory Eisner has been the Company's Vice President--Enhanced Services
since October 1994. From 1977 to October 1994, Mr. Eisner was employed by Phone
Programs, Inc., a telepromotions agency specializing in interactive phone
services, most recently as Executive Vice President of Sales.
Mary Berger has been the Company's Vice President--Support Services
since March 1996 and has held the same position with Global Link Telecom
Corporation ("Global Link"), a company acquired by the Company in February 1996
(the "Global Link Merger"), since February 1995. From 1992 to February 1995, Ms.
Berger held the same position at PTC Services, a division of Peoples Telephone
Company ("Peoples"), where she developed customer support, technical support and
management information system services.
J. Mark Rubenstein has been Vice President--Wholesale Sales of the
Company since February 1998 and a director of the Company since April 1998. In
September 1995, Mr. Rubenstein founded Centerpiece Communications, Inc. ("CCI")
and served as its President until February 1998, when CCI was acquired by the
Company (the "CCI Merger"). From June 1994 to December 1995, Mr. Rubenstein was
a financial planner and a registered representative of Raymond James &
Associates, Inc. From 1992 to June 1994, Mr. Rubenstein served as President of
Qualified Insurance Advisors, Inc., a company which he founded.
Alan W. Kaufman has been a director of the Company since November 1994.
Mr. Kaufman has been a director since August 1997 and President and Chief
Executive Officer since October 1997 of CrossZ Software Corporation, a developer
and marketer of business intelligence software. From April 1986 to December
1996, Mr. Kaufman held various positions, including Vice President of Marketing
and Vice President of Sales and Marketing, and most recently Executive Vice
President of Sales, at Cheyenne Software, Inc. Mr. Kaufman was the founding
President of the New York Software Industry Association.
Donald L. Ptalis has been a director of the Company since March 1996.
Since April 1997, Mr. Ptalis has served as President of PCI, Inc., a computer
consulting company which he founded. From January 1995 to April 1997, Mr. Ptalis
was 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.
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 that 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.
From November 1989 to November 1996, Mr. Tobin chaired the full committee or
subcommittee which regulates telecommunications companies operating within the
state. Jack Tobin is the father of David S. Tobin, Vice President--Business
Affairs, General Counsel and Secretary of the Company.
Board of Directors
The Board of Directors of the Company is divided into three classes,
each of which serves for a term of three years, with only one class of directors
being elected in each year. The term of the first class of directors, currently
consisting of Shelly Finkel and Robert Bogin, will expire at the annual meeting
of stockholders to be held in 1998; the term of the second class of directors,
currently consisting of Alan W. Kaufman and Donald L. Ptalis, will expire at the
annual meeting of stockholders to be held in 1999; and the term of the third
class of directors, currently consisting of Jack N. Tobin, Randolph Cherkas and
J. Mark Rubenstein, will expire at the annual meeting of stockholders to be held
in 2000. In each case, each director will hold office until the next annual
meeting of stockholders at which his class of directors is to be elected or
until his successor is duly qualified and appointed. Executive officers serve at
the discretion of the Board.
3
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The members of the Company's Board of Directors do not receive any cash
compensation for serving as directors. On March 31st of each calendar year, each
person who is then a director of the Company is granted immediately exercisable
ten-year options to purchase 3,334 shares of Common Stock at the fair market
value thereof at the time of grant. See "Executive Compensation--1994
Performance Equity Plan."
The Company has appointed a Compensation Committee and an Audit
Committee of the Board of Directors. The Compensation Committee, consisting of
Shelly Finkel, Alan W. Kaufman and Jack N. Tobin, reviews the salaries and other
compensation of the Company's executive officers. The role of the Audit
Committee, consisting of Alan W. Kaufman and Donald L. Ptalis is to review (i)
the scope of Company's annual audit and other services provided by the Company's
independent auditors and (ii) the audit results and the auditors'
recommendations regarding policies, systems and controls.
Indemnification and Exculpation Provisions
The Company's Certificate of Incorporation provides for indemnification
of officers and directors to the fullest extent permitted by Delaware law. In
addition, under the Company's Certificate of Incorporation, no director shall be
liable personally to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director; provided that the Certificate of
Incorporation does not eliminate the liability of a director for (i) any breach
of the director's duty of loyalty to the Company or its stockholders; (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) acts or omissions in respect of certain unlawful
dividend payments or stock redemptions or repurchases; or (iv) any transaction
from which such director derives improper personal benefit.
Compliance with Section 16 of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's directors and officers and persons who
beneficially own more than ten percent of the Company's Common Stock to file
with the Securities and Exchange Commission ("Commission"), Nasdaq and the
Boston Stock Exchange initial reports of ownership and reports of changes in
ownership of Common Stock in the Company. Officers, directors and greater-
than-ten percent shareholders are required by Commission regulation to furnish
the Company with copies of all Section 16(a) reports they filed. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representation that no other reports were
required, during the fiscal year ended December 31, 1997, such persons complied
with all Section 16(a) filing requirements.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of
the Company's Chief Executive Officer and the two other most highly compensated
executive officers (collectively, the "Named Executive Officers") for 1995, 1996
and 1997.
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(1)
----------------------------- Annual Long-Term
Compensation Compensation
------------- ----------------
Name and Principal Options
Position During Period Fiscal Year Salary ($) (No. of Shares)
- ---------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
Gary Wasserson(2)..................................... 1997 205,769 50,000
Chief Executive Officer 3,334(3)
1996 125,000 3,334(3)
1995 -- --
- ------------------------------------------------------ ----------------- --------------------- --------------
David S. Tobin........................................ 1997 175,923 75,000
Vice President--Business Affairs, General Counsel 1996 116,667 29,303
and Secretary 1995 -- --
- ------------------------------------------------------ ----------------- --------------------- --------------
Cory Eisner........................................... 1997 122,779 25,000
Vice President--Enhanced Services 1996 155,000 5,000
1995 93,750 3,334
- ------------------------------------------------------ ----------------- --------------------- --------------
</TABLE>
(1) No other executive officer received aggregate compensation equal to or
exceeding $100,000 during 1995, 1996 or 1997. None of Messrs.
Wasserson, Tobin or Eisner received noncash compensation benefits
having a value exceeding 10% of his cash compensation during 1995, 1996
or 1997.
(2) In September 1997, the Company amended Mr. Wasserson's employment
agreement, pursuant to which Mr. Wasserson agreed to serve as the
Company's Chief Executive Officer only until December 31, 1997 and then
to be engaged as a consultant until December 31, 1998. In consideration
thereof, the Company agreed to (i) pay Mr. Wasserson $150,000 in equal
monthly installments during the consulting period, (ii) forgive
$100,000 of debt owed by Mr. Wasserson so long as he does not violate
the terms of the agreement and (iii) granted him immediately
exercisable options to purchase 50,000 shares of Common Stock until
November 2002 at an exercise price of $6.4375 per share.
(3) Represents immediately exercisable options to purchase 3,334 shares of
Common Stock granted pursuant to the Company's 1994 Performance Equity
Plan, which provides for stock option grants of 3,334 shares to be made
to each director of the Company on March 31st of each year. See "--1994
Performance Equity Plan."
The following table summarizes the number of shares and the terms of
stock options granted to the Named Executive Officers in 1997:
<TABLE>
<CAPTION>
OPTION/SHARE GRANTS DURING YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------
Individual Grants
% of Total
Options/Shares Market
Options/ Granted to Exercise Price on
Name and Position Shares Employees in Price Date of Expiration
During Period Granted Fiscal Year ($/Share) Grant ($) Date
- ------------- --------- ------------- -------- --------- ----
<S> <C> <C> <C> <C> <C>
Gary Wasserson...................... 3,334(1) 10.1% 11.125 11.125 3/2007
Chief Executive Officer 50,000 6.4375 6.4375 11/2002
David S. Tobin...................... 75,000 14.2% 6.4375 6.4 1/2 1/1/98
Vice President--Business 1/2 1/1/99
Affairs, General Counsel
and Secretary
Cory Eisner......................... 25,000 4.7% 6.4375 6.4 1/3 1/1/98
Vice President--Enhanced 1/3 1/1/99
Services 1/3 1/1/00
- ------------------------------------ ---------------- -------------------- ------------- ---------------
</TABLE>
5
<PAGE>
(1) Represents immediately exercisable options to purchase 3,334 shares of
Common Stock granted pursuant to the terms of the 1994 Plan, which
provides for stock option grants of 3,334 shares to be made to each
director of the Company on March 31st of each year. See "--1994
Performance Equity Plan."
The following table summarizes the number of exercisable and
unexercisable options held by the Named Executive Officers at December 31, 1997,
and their value at that date if such options were in-the-money.
<TABLE>
<CAPTION>
AGGREGATE YEAR-END OPTION VALUES AT DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Options Value of Unexercised In-the-Money
Name and Position During Period at December 31, 1997 Options at December 31, 1997 ($)(1)
- ---------------------------------------- ---------------------------------------- -------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------ -------------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
Gary Wasserson.......................... 56,668 0 -- --
Chief Executive Officer
David S. Tobin.......................... 18,192 86,111 -- --
Vice President--Business Affairs,
General Counsel and Secretary
Cory Eisner............................. 14,167 27,501 -- --
Vice President--Enhanced Services
- ---------------------------------------- ------------------ -------------------- ------------------ -----------------------
</TABLE>
(1) Represents the difference between the aggregate market value at
December 31, 1997 of the Common Stock underlying the options (based on
a last sale price of $6.25 on that date) and the options' aggregate
exercise price.
1994 Performance Equity Plan
In October 1994, the Board of Directors of the Company adopted, and the
stockholders approved, the 1994 Plan. The 1994 Plan currently authorizes the
granting of awards of up to 500,000 shares of Common Stock to the Company's key
employees, officers, directors and consultants. Awards consist of stock options
(both nonqualified options and options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended),
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards, as described in the 1994 Plan. The 1994 Plan is
administered by the Board of Directors, which determines the persons 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.
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 3,334 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.
Each stock option may be granted at a price determined by the Board of
Directors, not to 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 qualified
stock options granted to a holder of 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. 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 (excluding certain
stockholders of the Company) acquires beneficial ownership of more than 25% of
the Company's outstanding shares of Common Stock.
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As of December 31, 1997, options to purchase 387,856 shares of Common
Stock were outstanding under the 1994 Plan. At December 31, 1997, options
outstanding under the 1994 Plan include options to purchase 116,668 shares
currently held by executive officers, at exercise prices ranging from $6.4375 to
$17.25 per share. In addition, pursuant to the terms of the 1994 Plan, on March
31, 1995, 1996 and 1997, the Company granted to each director of the Company
immediately exercisable ten-year options to purchase 3,334 shares for $17.625,
$15.75 and $11.125 per share, respectively. In February 1995, in connection with
their respective consulting agreements with the Company, Barry Rubenstein and
Eli Oxenhorn, stockholders of the Company, each were granted options under the
1994 Plan to purchase 33,334 shares of Common Stock at an exercise price of
$14.25 per share. These options vested in February 1996 and remain exercisable
until February 2001. In January 1997, in connection with the extension of their
respective consulting agreements, Messrs. Rubenstein and Oxenhorn were each
granted options under the 1994 Plan to purchase 25,000 shares of Common Stock at
an exercise price of $9.00 per share. These options vested in February 1997 and
remain exercisable until February 2002. In November 1997, pursuant to the terms
of the Plan, the Company granted options to purchase an aggregate of 132,500
shares of Common Stock to certain of its employees. The exercise prices of all
of the foregoing options are equal to the fair market value of the Common Stock
on the date of grant.
Other Options and Warrants
In March 1995, in connection with the employment of a former executive
officer of the Company, the Company granted options to purchase 33,334 shares of
Common Stock at an exercise price of $15.00 per share. These options originally
vested 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 May
1997, in connection with such officer's resignation as President and a director
of the Company, the Company accelerated the vesting of options to purchase
11,111 shares of Common Stock.
In January 1996, the Company issued five-year warrants to Whale
Securities Co., L.P. ("Whale") and two of its designees to purchase an aggregate
of 66,667 shares at an exercise price of $15.375 per share in consideration of
consulting services provided to the Company.
In February 1996, in connection with his employment with the Company,
Gary J. Wasserson, the Company's former Chief Executive Officer, was granted
options to purchase 41,667 shares of Common Stock at an exercise price of
$18.375 per share. These options expired in accordance with their terms on
December 31, 1997. See "--Consultants."
Also in February 1996, in connection with his employment with the
Company, David S. Tobin, Vice President-- Business Affairs, General Counsel and
Secretary, was granted options to purchase 16,667 shares of Common Stock at an
exercise price of $18.375 per share. 11,110 shares are currently exercisable and
the remaining 5,556 shares will vest in February 1999. In January 1998, the
Company reduced the exercise price of these options to $6.563 per share. See
"--Option Repricing."
In connection with the Global Link Merger, options to purchase 145,000
shares of common stock of Global Link were converted into options to purchase
36,645 shares of Common Stock, at exercise prices ranging from $0.396 to $7.92
per share. In January 1998, the Company reduced the exercise price of certain of
these options from $7.92 to $6.563 per share. See "--Option Repricing." In
addition, warrants issued in connection with the issuance of convertible
debentures ("Convertible Debentures") were converted into warrants to purchase
7,085 shares of Common Stock at an exercise price of $13.64 per share.
In May 1996, the Company consummated a $3,000,000 private offering
("May 1996 Private Placement") in which it sold 30 Units ("Units"), each Unit
consisting of 6,667 shares of Common Stock and warrants ("May 1996 Warrants") to
purchase 13,334 shares of Common Stock. Whale served as the placement agent in
connection with the May 1996 Private Placement and received an option to
purchase three Units (an aggregate of 20,000 shares of Common Stock and May 1996
Warrants to purchase 40,000 shares of Common Stock), which Units are identical
to the Units sold in the May 1996 Private Placement, at an exercise price of
$100,000 per Unit, exercisable until May 10, 2001.
7
<PAGE>
In December 1996, the Company consummated the December 1996 Private
Placement, a private offering from which the Company derived gross proceeds of
$3,000,000 through the sale of December 1996 Notes in the aggregate principal
amount of $3,000,000 and 1,000,000 December 1996 Warrants. Whale was paid a
finder's fee in connection with the December 1996 Private Placement of 50,000
December 1996 Warrants. Additionally, Graubard Mollen & Miller, the Company's
general counsel, received $50,000 of December 1996 Notes and 16,667 December
1996 Warrants in payment of certain legal fees and expenses.
In April 1997, Wheatley Partners, L.P. ("Wheatley") and Wheatley
Foreign Partners, L.P. ("Wheatley Foreign") exercised an aggregate of 333,334
December 1996 Warrants at an exercise price of $7.50 per share, resulting in
$2,500,000 of gross proceeds to the Company. In consideration for exercising
such December 1996 Warrants, the Company issued to Wheatley and Wheatley Foreign
publicly-traded warrants to purchase an aggregate of 250,000 shares of Common
Stock ("Public Warrants"). See "Certain Relationships and Related
Transactions--General."
In July 1997, in connection with his employment with the Company,
Robert Bogin, the Company's President, was granted options to purchase 100,000
shares of Common Stock at an exercise price of $6.563 per share, 50% of which
are currently exercisable and 50% of which vest in January 1999. See
"--Employment Agreements."
Also in July 1997, the Company issued warrants to Pennsylvania Merchant
Group ("Penn Merchant") to purchase 100,000 shares of Common Stock at an
exercise price of $7.00 per share in consideration of Penn Merchant rendering
consulting services to the Company. See "--Consultants."
In November 1997, the Company granted options to purchase an aggregate
of 205,000 shares of Common Stock to certain of its employees, including (i)
options to purchase 100,000 shares of Common Stock at an exercise price of
$6.4375 per share to Shelly Finkel, the Company's Chairman of the Board, 50% of
which are currently exercisable and 50% of which become exercisable in January
1999 and (ii) options to purchase 25,000 shares of Common Stock at an exercise
price of $6.4375 per share to Michael Hoppman, the Company's Chief Financial
Officer, 10,000 of which vest in each of August 1998 and 1999, and 5,000 of
which vest in August 2000.
In January 1998, the Company granted options to JEB Partners to
purchase 60,000 shares of Common Stock at an exercise price of $6.125 per share
in consideration of JEB Partners rendering consulting services to the Company.
Such options are currently exercisable and will remain exercisable until January
2003. See "--Consultants."
In April 1998, the Company completed a private offering ("April 1998
Private Placement"), from which the Company received net proceeds of
approximately $1,100,000 through the sale of $1,250,000 promissory notes ("April
1998 Notes") and warrants to purchase 178,571 shares of Common Stock ("April
1998 Warrants"). The April 1998 Warrants are exercisable at a price equal to the
lesser of: (i) $7.00 or (ii) the price per share at which the Company issues
Common Stock in a transaction with aggregate gross proceeds of $4,000,000. The
April 1998 Warrants are exercisable until April 2001.
In April 1998, the Company issued to an investor, who agreed to
purchase up to $2,000,000 of Common Stock or other securities at a discount to
the market price of such securities ("2,000,000 Commitment"), warrants to
purchase 100,000 shares of Common Stock at an exercise price of $7.50 per share.
The warrants are immediately exercisable and will remain exercisable until April
13, 2001. In connection with introducing this investor to the Company, the
Company granted to each of Messrs. Barry Rubenstein, a principal stockholder of
the Company, and Eli Oxenhorn options to purchase 50,000 shares of Common Stock
at an exercise price of $7.125 per share. The options become exercisable in
September 1998 and will remain exercisable until April 1, 2003.
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<PAGE>
Option Repricing
In January 1998, the Company reduced the exercise prices of 196,683
outstanding options to purchase Common Stock from exercise prices ranging from
$7.88 to $18.38, to $6.563, the fair market value of the Common Stock on the
date of such repricing.
Employment Agreements
The Company has entered into employment agreements with each of Shelly
Finkel, its Chairman of the Board, Robert Bogin, its President, David S. Tobin,
its Vice President--Business Affairs, General Counsel and Secretary, and Cory
Eisner, its Vice President--Enhanced Services. Additionally, in connection with
the NATW Merger, the Company entered into employment agreements with Randolph
Cherkas, its Chief Operating Officer and Gary Liguori, its Director of Wholesale
Sales. See Certain Relationships and Related Transactions--The NATW Merger." In
connection with the CCI Merger, the Company entered into an employment agreement
with J. Mark Rubenstein, its Vice President--Wholesale Sales. See "Certain
Relationships and Related Transactions--The CCI Merger."
Mr. Finkel's employment agreement provides for a term through December
31, 2000, and requires him to devote at least 50% of his business time to the
management and operations of the Company. The agreement provides for a base
salary of $150,000 per annum, plus an annual cash bonus at the discretion of the
Board of Directors. If Mr. Finkel is terminated without cause, he will continue
to receive his salary through the remainder of his term of employment, and will
be paid a cash bonus equal to the last cash bonus paid to him. If on or prior to
June 30, 1998, (i) the Company is sold or otherwise acquired, or (ii) a party
that owns no more than 5% of the voting securities of the Company acquires in
one or more transactions beneficial ownership of more than 35% of such
securities (a "Change of Control"), Mr. Finkel will receive all salary payments
in a single lump sum payment. The agreement prohibits Mr. Finkel from competing
with the Company during the term of his employment and for two years thereafter.
Mr. Bogin's employment agreement provides for a term through December
31, 1999, and for a base salary of $200,000 per annum, plus an annual cash bonus
at the discretion of the Board of Directors. If Mr. Bogin is terminated without
cause after a Change of Control (i) between January 1, 1998 and December 31,
1998, he will receive his salary due through such period and a cash bonus equal
to 50% of his annual salary, or (ii) if he is terminated between January 1, 1999
and December 31, 1999, he will receive his salary due through such period plus a
cash bonus equal to 100% of his annual salary. If the Company terminates Mr.
Bogin without cause but prior to the date of any Change of Control, he will
continue to receive his salary through the remainder of the term of the
agreement. The agreement prohibits Mr. Bogin from competing with the Company
during the term of his employment and for one year thereafter.
Mr. Tobin's employment agreement provides for a term through December
31, 2000 and for a base annual salary of $150,000 per annum, plus an additional
annual cash bonus at the discretion of the Board of Directors. If Mr. Tobin is
terminated without cause, he will continue to receive his salary through the
remainder of his term of employment, and will be paid a cash bonus equal to the
last cash bonus paid to him. Upon a Change of Control, Mr. Tobin is to receive
all salary payments in a single lump sum payment. The agreement prohibits Mr.
Tobin from competing with the Company during the term of his employment and for
two years thereafter.
Mr. Eisner's employment agreement provides for a term through December
31, 1999 and for a base salary of $125,000 per annum, plus a cash or stock bonus
at the discretion of the Board of Directors. If Mr. Eisner is terminated without
cause, he will receive his salary through the later of December 31, 1999 or the
one-year anniversary date of the termination (the "Compensation Period"). The
agreement prohibits Mr. Eisner from competing with the Company during the
Compensation Period.
Consultants
In February 1995, the Company entered into two-year consulting
agreements with each of Barry Rubenstein, a principal stockholder of the
Company, and Eli Oxenhorn. In January 1997, such agreements were extended
through February 1999. Pursuant to the terms of their respective consulting
agreements, Messrs. Rubenstein and Oxenhorn are to render consulting services
for a maximum of eight hours per month with a principal focus on potential
mergers, acquisitions and other business combinations and business development
activities. Each of Messrs. Rubenstein and Oxenhorn have agreed to certain
noncompetition provisions and to refer to the Company any opportunity presented
9
<PAGE>
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. In February 1995, the Company granted to each of
Messrs. Rubenstein and Oxenhorn, in consideration for the specified consulting
services, options to purchase 33,334 shares of Common Stock at an exercise price
$14.25 per share, which options became exercisable in February 1996 and remain
exercisable until February 2001. In January 1997, in connection with the
extension of their respective consulting agreements, each of Messrs. Rubenstein
and Oxenhorn were granted options to purchase 25,000 shares of Common Stock at
an exercise price of $9.00 per share. These options became exercisable in
February 1997 and remain exercisable until February 2002. In January 1998, the
Company reduced the exercise prices of all of the options granted to Messrs.
Rubenstein and Oxenhorn to $6.563 per share. See "--Option Repricing."
In July 1997, the Company entered into a one-year consulting agreement
with Penn Merchant, pursuant to which Penn Merchant agreed to provide financial
public relations consulting services to the Company. In consideration for
providing such services, the Company agreed to pay Penn Merchant $25,000 per
month and to issue warrants to purchase 100,000 shares of Common Stock at an
exercise price of $7.00 per share. Such options are currently exercisable and
will remain exercisable until January 2001.
In September 1997, the Company amended the employment agreement of Gary
Wasserson, the Company's former Chief Executive Officer, pursuant to which Mr.
Wasserson agreed to serve as the Company's Chief Executive Officer only until
December 31, 1997 and then to be engaged as a consultant until December 31,
1998. In consideration thereof, the Company agreed to (i) pay Mr. Wasserson
$150,000 in equal monthly installments during the consulting period, (ii)
forgive $100,000 of debt owed by Mr. Wasserson so long as Mr. Wasserson does not
violate the terms of the agreement and (iii) granted him immediately exercisable
options to purchase 50,000 shares of Common Stock until November 2002 at an
exercise price of $6.4375 per share.
In January 1998, the Company entered into a one-year consulting
agreement with JEB Partners, pursuant to which JEB Partners agreed to provide
investor relations consulting services to the Company. In consideration for
providing such services, the Company agreed to issue JEB Partners warrants to
purchase 60,000 shares of Common Stock at an exercise price of $6.125 per share.
Such options are currently exercisable and will remain exercisable until January
2003.
10
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 1998,
with respect to (i) those persons or groups known to the Company to beneficially
own more than 5% of the outstanding shares of Common Stock, (ii) each director
of the Company, (iii) each Named Executive Officer and (iv) all directors and
executive officers as a group. The information is determined in accordance with
Rule 13d-3 promulgated under the Exchange Act based upon information furnished
by the persons listed or contained in filings made by them with the Commission.
Unless otherwise indicated, each person in the table has sole voting and
investment power as to the shares shown.
Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent
- ------------------------------------ ---------- -------
Shelly Finkel..................................... 369,246(2) 6.0%
c/o Shelly Finkel Management, Inc.
60 East 42nd Street, Suite 464
New York, New York 10165
Robert Bogin...................................... 53,334(3) *
c/o Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Randolph Cherkas.................................. 433,387 7.2%
c/o Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Gary J. Wasserson................................. 126,843(4) 2.1%
534 Righters Mill Road
Penn Valley, Pennsylvania 19072
Alan W. Kaufman................................... 16,670(5) *
1150 Park Avenue #9A
New York, New York 10177
Jack N. Tobin..................................... 10,001(6) *
7759 Highlands Circle
Margate, Florida 33063
Donald L. Ptalis.................................. 15,766(7) *
16 Ross Avenue
Emerson, New Jersey 07630
J. Mark Rubenstein................................ 401,284 6.7%
c/o Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Cory Eisner....................................... 23,168(8) *
c/o Global Telecommunication Solutions, Inc.
2 Expressway Plaza
Roslyn Heights, New York 11577
David S. Tobin.................................... 61,248(9) 1.0%
c/o Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
11
<PAGE>
Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent
- ------------------------------------ ---------- -------
Barry Rubenstein............................... 1,464,780(10) 21.7%
68 Wheatley Road
Brookville, New York 11545
Wheatley Partners LLC.......................... 916,667(11) 13.9%
80 Cuttermill Road
Great Neck, New York 11021
All executive officers and directors as a group
(10 persons)............................. 1,384,104(12) 22.0%
- -----------------------------------
* 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 (i) 16,667 shares of Common Stock underlying December 1996
Warrants, (ii) 73,334 shares of Common Stock issuable upon exercise of
currently exercisable options and (iii) an aggregate of 30,873 shares
of Common Stock underlying Public Warrants. Does not include 50,000
shares of Common Stock issuable upon exercise of options which become
exercisable in January 1999.
(3) Represents shares of Common Stock underlying currently exercisable
options. Does not include 50,000 shares of Common Stock underlying
options which become exercisable in July 1998.
(4) Represents 70,175 shares of Common Stock which are owned jointly by Mr.
Wasserson and his spouse and 56,668 shares of Common Stock issuable
upon exercise of currently exercisable options.
(5) Includes 1,667 shares of Common Stock underlying Public Warrants and
13,334 shares of Common Stock issuable upon exercise of currently
exercisable options.
(6) Represents shares of Common Stock issuable upon exercise of currently
exercisable options.
(7) Includes 5,398 shares of Common Stock issuable upon conversion of
$50,000 principal amount of Convertible Debentures, 127 shares of
Common Stock issuable upon exercise of warrants issued in connection
with the Convertible Debentures and 10,001 shares of Common Stock
issuable upon exercise of currently exercisable options.
(8) Includes 334 shares of Common Stock underlying Public Warrants and
22,502 shares of Common Stock issuable upon exercise of options. Does
not include 17,499 shares of Common Stock underlying options, 833 of
which vest in October 1998, 8,333 of which vest in January 1999 and
8,333 of which vest in January 2000.
(9) Represents shares of Common Stock underlying currently exercisable
options. Does not include 43,055 shares of Common Stock underlying
options, 37,500 of which vest in January 1999, and 5,555 of which vest
in February 1999.
12
<PAGE>
(10) Includes 10,334 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 26,667 shares of Common Stock owned by
Marilyn Rubenstein, Mr. Rubenstein's spouse. Mr. Rubenstein disclaims
beneficial ownership over all of such shares. Also includes 151,667
shares of Common Stock (including 13,334 shares of Common Stock
underlying Public Warrants and 66,667 shares underlying December 1996
Warrants) owned by Woodland Partners, a New York general partnership of
which Mr. Rubenstein is a partner. Also includes 108,334 shares of
Common Stock (including 33,334 shares of Common Stock underlying
December 1996 Warrants) owned by the Woodland Venture Fund, a New York
limited partnership of which Mr. Rubenstein is a general partner. Also
includes 33,334 shares of Common Stock underlying December 1996
Warrants owned by Seneca Ventures, a New York limited partnership of
which Mr. Rubenstein is a general partner. Also includes 313,333 and
20,000 shares of Common Stock underlying December 1996 Warrants owned
by Wheatley and Wheatley Foreign, respectively. Also includes 235,000
and 15,000 shares of Common Stock underlying Public Warrants owned by
Wheatley and Wheatley Foreign, respectively. Mr. Rubenstein is a member
and officer of Wheatley Partners LLC, a Delaware limited liability
company which is the general partner of Wheatley, and also a general
partner of Wheatley Foreign. Mr. Rubenstein disclaims beneficial
ownership of the securities owned by Woodland Partners, Woodland
Venture Fund, Seneca Ventures, Wheatley and Wheatley Foreign except to
the extent of his equity interest therein. Also includes 10,000 shares
of Common Stock owned by the Rubenstein Family LP, a New York limited
partnership of which Mr. Rubenstein is a general partner. Also includes
68,057 shares of Common Stock owned individually by Barry Rubenstein,
63,333 shares of Common Stock held in his IRA Rollover account, 18,057
shares of Common Stock underlying Public Warrants and 58,334 shares
issuable upon exercise of currently exercisable options. Does not
include 50,000 shares of Common Stock underlying options which become
exercisable in September 1998.
(11) Includes 313,333 and 20,000 shares of Common Stock underlying December
1996 Warrants owned by Wheatley and Wheatley Foreign, respectively.
Also includes 235,000 and 15,000 shares of Common Stock underlying
Public Warrants owned by Wheatley and Wheatley Foreign, respectively.
Such entities are controlled by Wheatley Partners LLC, a Delaware
limited liability company which is the general partner of Wheatley and
a general partner of Wheatley Foreign. The members and officers of
Wheatley Partners LLC are Barry Rubenstein, Irwin Lieber, Barry
Fingerhut, Seth Lieber, Jonathan Lieber and Matthew Smith.
(12) Includes those shares of Common Stock deemed to be included in the
respective beneficial ownership of Messrs. Finkel, Bogin, Kaufman, Jack
Tobin, Ptalis, Eisner and David Tobin as described in notes 2, 3, 5, 6,
7, 8 and 9 above. Also includes shares of Common Stock owned by
Randolph Cherkas and J. Mark Rubenstein, directors of the Company. Does
not include 25,000 shares of Common Stock underlying options granted to
Michael Hoppman, the Company's Chief Financial Officer, 10,000 of which
vest in each of August 1998 and 1999 and 5,000 of which vest in August
2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
In March 1994, Gary J. Wasserson purchased all of his shares of common
stock of Global Link with a promissory note in the aggregate principal amount of
$100,000 bearing interest at a rate of five percent per annum. Although the
promissory note became due and payable on March 31, 1997 (on which date there
was $15,000 of accrued and unpaid interest on the note), the Board of Directors
extended the payment of such note until March 31, 1998. However, in connection
with the amendment to Mr. Wasserson's employment agreement in September 1997,
the Company agreed to forgive this debt so long as he does not violate the terms
of the amendment. See "Executive Compensation--Consultants."
In February 1995, the Company entered into consulting agreements with
each of Barry Rubenstein and Eli Oxenhorn, which were extended in January 1997.
See "Executive Compensation--Consultants."
The principal executive offices of the Company are leased from JilJac
Realty Company, a general partnership owned by Gary J. Wasserson, the Company's
former Chief Executive Officer and currently a consultant to the Company.
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<PAGE>
In February 1996, the Company and two groups of stockholders entered
into a voting agreement, pursuant to which, until February 28, 1999, the Company
is obligated to nominate four persons designated by one group of stockholders
and three persons appointed by a second group of stockholders for election to
the Board of Directors at the various stockholders meetings, so long as each
group of stockholders continues to hold an aggregate of 183,334 shares of Common
Stock. Further, these two groups of stockholders have agreed to vote for the
other group's designees as directors of the Company. See "--The Global Link
Merger."
In May 1996, the Company consummated the May 1996 Private Placement.
Among the purchasers in the May 1996 Private Placement were a limited
partnership in which Mr. Barry Rubenstein is a general partner (which purchased
6,667 shares of Common Stock and May 1996 Warrants to purchase 13,334 shares of
Common Stock) and Mr. Oxenhorn (who purchased 6,667 shares of Common Stock and
May 1996 Warrants to purchase 13,334 shares of Common Stock).
In December 1996, the Company consummated the December 1996 Private
Placement. Among the purchasers in the December 1996 Private Placement were
Shelly Finkel, Chairman of the Board of the Company (who purchased $50,000 of
December 1996 Notes and 16,667 December 1996 Warrants), and limited partnerships
in which Mr. Rubenstein is either a general partner or an officer and member of
a limited liability company that is a general partner (which purchased
$2,400,000 of December 1996 Notes and 800,000 December 1996 Warrants).
In March 1997, the Company entered into an agreement with Wheatley,
pursuant to which Wheatley agreed that if the Company does not consummate a
financing resulting in gross proceeds to the Company of at least $2,500,000 by
June 1, 1997, then Wheatley and Wheatley Foreign would exercise an aggregate of
at least 333,334 of the December 1996 Warrants that they received in the
December 1996 Private Placement, which would result in the Company's receipt of
gross proceeds of at least $2,500,000. In April 1997, the Company requested that
Wheatley and Wheatley Foreign exercise 333,334 December 1996 Warrants prior to
June 1, 1997 and, in consideration of such exercise, the Company issued to
Wheatley and Wheatley Foreign Public Warrants to purchase an aggregate of
250,000 shares of Common Stock.
In April 1998, limited partnerships in which Mr. Barry Rubenstein is
either a general partner or an officer and member of a limited liability company
that is a general partner agreed to allow the Company to defer repayment of an
aggregate of $2,400,000 of the December 1996 Notes from November 1998 to January
1999.
In April 1998, in connection with introducing the Company to the
investor making the 2,000,000 Commitment, the Company granted to each of Messrs.
Barry Rubenstein and Eli Oxenhorn options to purchase 50,000 shares of Common
Stock at an exercise price of $7.125 per share. The options become exercisable
in September 1998 and will remain exercisable until April 1, 2003.
The Company believes that each of the foregoing transactions were on
terms no less favorable to the Company than those which could have been obtained
from unaffiliated third parties. The terms of the foregoing transactions were
determined without arms' length negotiations and could create, or appear to
create, potential conflicts of interest which may not necessarily be resolved in
the Company's favor. 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 Merger
On January 18, 1996, the Company, Link Acquisition Corp., a wholly
owned subsidiary of the Company ("Merger Sub"), and Global Link executed an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Merger
Sub was merged with and into Global Link and Global Link became a wholly owned
subsidiary of the Company. The Global Link Merger was consummated on February
29, 1996 (the "Merger Date"). The purchase price paid for Global Link was
approximately $11,400,000, and the assumption of liabilities.
In connection with the Global Link 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 572,773 shares of the Company's Common
Stock. Outstanding options to purchase an aggregate of 145,000 Global Link
Shares were automatically converted into the right to purchase an aggregate of
36,645 shares of Common Stock.
In addition, the holders of $2,800,000 aggregate principal amount of
Convertible Debentures executed a securities purchase agreement, pursuant to
which such holders consented to the Global Link Merger and waived certain
14
<PAGE>
rights. $1,400,000 of the Convertible Debentures are due and payable on June 23,
1999 and $1,400,000 of the Convertible Debentures are due and payable on
September 14, 1999. The Convertible Debentures are secured by a first lien on
all assets of Global Link. The Convertible Debentures bear interest at 6% per
annum, payable on May 31st and November 30th of each year. At the option of the
holders, the Convertible Debentures are immediately due and payable upon a
change in control of Global Link. The Company has guaranteed the payment of
principal and interest owed under the Convertible Debentures. The principal
amount of the Convertible 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 $9.264 per share. The Company may force the conversion of
the Convertible 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 at a price equal to or greater than $12.00 per
share; (ii) the Conversion Shares are the subject of an effective registration
statement under the Securities 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 has been at least $10.50
for 30 days prior to the consummation of the offering referred to in (i); and
(v) the lock-up agreements of the Convertible Debenture holders are terminated.
Global Link may prepay the Convertible Debentures, subject to the holders' right
of conversion, if the Conversion Shares are registered under the Securities Act
or an exemption therefrom is available, the Common Stock is listed on a national
securities exchange or quoted on Nasdaq and the lock-up agreements of the
holders of the Convertible Debentures are terminated.
On the Merger Date, the Company entered into an employment agreement
with each of Gary J. Wasserson and David S. Tobin, who were the Chief Executive
Officer and General Counsel, respectively, of Global Link, and then became the
Chief Executive Officer and General Counsel and Secretary of the Company,
respectively. See "Executive Compensation--Employment Agreements" and
"--Consultants."
In connection with the Global Link Merger, a group consisting of Shelly
Finkel, James Koplik, Paul Silverstein and Joseph Clark (collectively, the "GTS
Major Stockholders"), who hold an aggregate of 398,580 shares of Common Stock,
and another group consisting of Gary J. Wasserson, Jody Frank, Bernard Frank,
Edward Marx, Joel D. Hornstein and members of their respective immediate
families (collectively, the "Global Link Major Stockholders"), who hold an
aggregate of 194,375 shares of Common Stock, entered into a 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 Global Link
three designees ("Global Link Designees") selected by the Global Link Major
Stockholders and four designees ("GTS Designees") selected by the GTS Major
Stockholders. Paul Silverstein and Joseph Clark have given Shelly Finkel the
right to select the GTS Designees on their behalf. 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 voting agreement expires on February 28, 1999.
The NATW Merger
On February 6, 1998, the Company, Networks Acquisition Corp., a wholly
owned subsidiary of the Company, NATW, Randolph Cherkas and Gary Liguori (the
"Stockholders") executed a Merger and Reorganization Agreement ("Merger
Agreement"), pursuant to which NATW was merged with and into Networks
Acquisition Corp. On February 10, 1998 ("Closing Date"), a Certificate of Merger
was filed with the Secretary of State of the State of New Jersey.
The Company paid a purchase price comprised of (i) $2,000,000 in cash,
(ii) an aggregate of 505,618 shares of Common Stock and (iii) $1,000,000 of
promissory notes ("NATW Notes"), secured by substantially all of the assets of
NATW. The NATW Notes accrue interest at the rate of 6% per annum and are payable
as follows: (i) one-half of principal and interest accrued thereon on November
1, 1998 and (ii) four equal payments of $125,000, plus interest accrued thereon,
on April 1, 1999, July 1, 1999, October 1, 1999 and January 1, 2000. In
addition, the Company may be required to pay an additional $2,000,000 in
consideration to one of the Stockholders if certain financial objectives are
achieved. Subsequent to the NATW Merger, this Stockholder agreed to defer
$500,000 payable in 1998 if such objectives are achieved to January 1999. The
Stockholders also agreed to defer $500,000 originally payable in 1998 under the
NATW Notes to January 1999.
On the Closing Date, the Company entered into an employment agreement
with Mr. Cherkas, the President of NATW, who was appointed Chief Operating
Officer of the Company. The employment agreement is for a term
15
<PAGE>
through December 31, 2000. Mr. Cherkas is to receive an annual base salary of
$180,000, subject to annual increases and bonuses as the Board of Directors may,
in its discretion, determine. Additionally, the Company has appointed Mr.
Cherkas to serve as a member of the Board of Directors and agreed to nominate
him for membership thereafter at each annual meeting of stockholders for so long
as he remains an executive officer of the Company.
On the Closing Date, the Company entered into an employment agreement
with Mr. Liguori, the Vice President of NATW, who was appointed the Director of
Wholesale Sales of the Company. The employment agreement is for a term through
December 31, 2000. Mr. Liguori is to receive an annual base salary of $80,000,
subject to annual increases as the Board of Directors in its discretion may
determine. Additionally, Mr. Liguori and the Chief Operating Officer will
mutually determine a bonus plan for Mr. Liguori within 30 days after the Closing
Date.
Pursuant to the Merger Agreement, the Company granted "piggy-back"
registration rights to the Stockholders. Notwithstanding the foregoing, each
stockholder receiving any shares of Common Stock executed a "lock-up" agreement
(i) prohibiting his sale of such shares for a period of one year after the
Closing Date and (ii) limiting the number of shares he can sell to 25% of the
shares of Common Stock acquired in connection with the NATW Merger during any
calendar quarter during the one year period thereafter.
The CCI Merger
On February 6, 1998, the Company, CCI Acquisition Corp., a wholly-owned
subsidiary of the Company , CCI and J. Mark Rubenstein executed a Merger and
Reorganization Agreement ("Merger Agreement"), pursuant to which CCI was merged
with and into CCI Acquisition Corp. On February 6, 1998, a Certificate of Merger
was filed with the Secretary of State of the State of New Jersey.
The Company paid a purchase price comprised of (i) $1,500,000 in cash,
(ii) 401,284 shares of Common Stock and (iii) a $1,000,000 promissory note ("CCI
Note"), secured by substantially all of the assets of CCI. The CCI Note accrues
interest at the rate of 8% per annum and is payable as follows: (i) $250,000
plus interest accrued thereon on October 31, 1998, (ii) $250,000 plus interest
accrued thereon on January 1, 1999 and (iii) four equal payments of $125,000,
plus interest accrued thereon, on April 1, 1999, July 1, 1999, October 1, 1999
and January 1, 2000. Subsequent to the CCI Merger, Mr. Rubenstein agreed to
defer $250,000 originally payable in 1998 under the CCI Note to January 1999.
Furthermore, Mr. Rubenstein entered into an agreement with Shelly Finkel,
Chairman of the Board of the Company, pursuant to which Mr. Rubenstein was
granted tag along rights to sell his shares of Common Stock in the event Mr.
Finkel sells shares of Common Stock owned by him under certain circumstances.
On the Closing Date, the Company entered into an employment agreement
with Mr. Rubenstein, the President of CCI, who was appointed the Vice
President--Wholesale Sales of the Company. The employment agreement is for a
term through December 2001. Mr. Rubenstein is to receive an annual base salary
of $150,000, subject to annual increases and bonuses as the Board of Directors
of the Company may, in its discretion, determine. The Company also agreed to
appoint Mr. Rubenstein to serve on the Board of Directors of CCI Acquisition
Corp. for so long as Mr. Rubenstein is employed by the Company or any of its
affiliates.
Pursuant to the Merger Agreement, the Company agreed to file a
registration statement with the Commission to register the shares of Common
Stock issued to Mr. Rubenstein in connection with the CCI Merger on or before
November 1, 1998, or to include all such shares in a registration statement
which has been filed but not declared effective if allowable under the
Securities Act and the rules promulgated thereunder, so that such shares may be
sold by Mr. Rubenstein. Additionally, the Company agreed to use its best efforts
to cause such registration statement to be declared effective by the Commission
no later than January 31, 1999 and once declared effective, to keep it effective
until all securities registered thereby are either sold or can be sold under
Rule 144(k) under the Securities Act. Notwithstanding the foregoing, Mr.
Rubenstein executed a "lock-up" agreement (i) prohibiting his sale of such
shares for a period of one year after the Closing Date and (ii) limiting the
number of such shares which he may sell in any calendar quarter during the
second year thereafter to 25% of the shares of Common Stock; provided, however,
in the event Mr. Rubenstein fails to sell the complete 25% during any calendar
quarter, he will be entitled to sell, during the next calendar quarter, the
lesser of the following percentage of the shares of Common Stock acquired by him
in the CCI Merger: (i) the sum of (A) 25% and (B) the difference between 25% and
that percentage sold during the immediately preceding calendar quarter; and (ii)
40%.
16
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: April 29, 1998 GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
-------------------------------------------
Shelly Finkel, Chairman of the Board of
Directors
In accordance with Section 13 or 15(d) of the Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
/s/ Shelly Finkel Chairman of the Board April 29, 1998
- ----------------------------- of Directors
Shelly Finkel
/s/ Robert Bogin President and Director April 29, 1998
- -----------------------------
Robert Bogin
Chief Operating Officer April 29, 1998
- ----------------------------- and Director
Randolph Cherkas
/s/ Alan W. Kaufman Director April 29, 1998
- -----------------------------
Alan W. Kaufman
/s/ Jack N. Tobin Director April 29, 1998
- -----------------------------
Jack N. Tobin
/s/ Donald L. Ptalis Director April 29, 1998
- ----------------------------
Donald L. Ptalis
/s/ J. Mark Rubenstein Director April 29, 1998
- ----------------------------
J. Mark Rubenstein
/s/ Michael Hoppman Chief Financial Officer April 29, 1998
- ---------------------------- (and principal accounting
Michael Hoppman officer)
