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:
|_| Preliminary proxy statement |_| Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
- ------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:*
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials: N/A
|_| 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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- ----------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
----------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
---------------------
June 30, 1998
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Global Telecommunication Solutions, Inc. ("Company"), will be held
at the Adams Mark Hotel, City Avenue and Monument Road, Philadelphia,
Pennsylvania 19131, on Tuesday, June 30, 1998, at 10:00 a.m., for the following
purposes, all as more fully described in the attached Proxy Statement:
(i) To elect two Class I Directors, each to serve for the ensuing
three-year period until his respective successor is elected and
qualified;
(ii) To approve an amendment to the Company's 1994 Performance Equity Plan
("1994 Plan") to (i) 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 500,000 shares to
1,500,000 shares and (ii) revise Section 4.2 of the 1994 Plan, which
currently provides for an annual automatic grant of options to
purchase 3,334 shares of Common Stock to each director, to (a) apply
to only non-employee directors and (b) increase the number of options
granted annually to each non-employee director from 3,334 shares to
10,000 shares; and
(iii)To transact such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on May 22, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual 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
Annual 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 Annual Meeting or any adjournment thereof. The prompt return of the
proxy will be of assistance in preparing for the Annual 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 Annual Meeting.
By Order of the Board of Directors
David S. Tobin
Secretary
Philadelphia, Pennsylvania
June 5, 1998
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
---------------------
This Proxy Statement and the accompanying form of proxy is furnished to
stockholders of Global Telecommunication Solutions, Inc. ("Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company ("Board") for use in voting at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Adams Mark Hotel, City Avenue and Monument
Road, Philadelphia, Pennsylvania 19131, on Tuesday, June 30, 1998, at 10:00
a.m., and at any and all adjournments thereof. Any proxy given pursuant to this
solicitation may be revoked by the person giving it by giving notice to the
Secretary of the Company in person, or by written notification actually received
by the Secretary, at any time prior to its being exercised. Unless otherwise
specified in the proxy, shares represented by proxies will be voted "FOR" the
election of the nominees below under Proposal I, "FOR" the approval of the
amendment to the 1994 Performance Equity Plan ("1994 Plan") as described below
under Proposal II, and, in the discretion of the proxies named on the proxy card
with respect to any other matters property brought before the Annual Meeting and
any adjournments thereof.
The Company's executive offices are located at 5697 Rising Sun Avenue,
Philadelphia, Pennsylvania 19120. On or about June 5, 1998, this Proxy Statement
and the accompanying form of proxy, together with the Company's Annual Report to
Stockholders for the year ended December 31, 1997, including financial
statements, are to be mailed to each stockholder of record at the close of
business on May 22, 1998.
VOTING SECURITIES
The Board of Directors has fixed the close of business on May 22, 1998 as
the record date for the determination of stockholders of the Company who are
entitled to receive notice of, and to vote at, the Annual Meeting. Only
stockholders of record at the close of business on that date will be entitled to
vote at the Annual Meeting or any and all adjournments thereof. As of May 22,
1998, the Company had issued and outstanding 5,991,772 shares of Common Stock,
the Company's only class of voting securities outstanding. Each stockholder of
the Company will be entitled to one vote for each share of Common Stock
registered in his or her name on the record date. The presence, in person or by
proxy, of a majority of all of the outstanding shares of Common Stock will
constitute a quorum at the Annual Meeting. Proxies relating to "street name"
shares that are returned to the Company but marked by brokers as "not voted"
will be treated as shares present for purposes of determining the presence of a
quorum on all matters but will not be treated as shares entitled to vote on the
matter as to which authority to vote is withheld by the broker ("broker
non-votes"). The election of directors requires a plurality vote of those shares
voted at the Annual Meeting with respect to the election of directors.
"Plurality" means that the individuals who receive the highest number of votes
cast "FOR" are elected as directors. Consequently, any shares not voted "FOR" a
particular nominee (whether as a result of a direction to withhold authority or
a broker non-vote), will not be counted in such nominee's favor. All other
matters to be voted on, including the amendment to the 1994 Plan, will be
decided by the affirmative vote of a majority of the shares present or
represented at the Annual Meeting and entitled to vote. On any such matter, an
abstention will have the same effect as a negative vote, but because shares held
by brokers will not be considered entitled to vote on matters as to which the
brokers withhold authority, a broker non-vote will have no effect on the vote.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 22, 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 and
nominee, (iii) the Company's Chief Executive Officer and the two other most
highly compensated executive officers whose individual compensation exceeded
$100,000 during the year ended December 31, 1997 (collectively, the "Named
Executive Officers"), and (iv) all directors and executive officers as a group.
The information is determined in accordance with Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Exchange Act") based upon
information furnished by the persons listed or contained in filings made by them
with the Securities and Exchange Commission ("Commission"). Unless otherwise
indicated, the address of the persons listed below is c/o Global
Telecommunication Solutions, Inc., 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120.
<TABLE>
<CAPTION>
Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent
- ------------------------------------ ---------- -------
<S> <C> <C>
Robert Bogin.............................................................. 103,334(2) 1.7%
Randolph Cherkas.......................................................... 433,387 7.2%
Shelly Finkel............................................................. 371,246(3) 6.1%
c/o Shelly Finkel Management, Inc.
60 East 42nd Street, Suite 464
New York, New York 10165
Alan W. Kaufman........................................................... 16,670(4) *
Donald L. Ptalis.......................................................... 15,766(5) *
J. Mark Rubenstein........................................................ 401,284 6.7%
Jack N. Tobin............................................................. 10,001(6) *
Cory Eisner............................................................... 23,168(7) *
c/o Global Telecommunication Solutions, Inc.
2 Expressway Plaza
Roslyn Heights, New York 11577
David S. Tobin............................................................ 61,248(8) 1.0%
Michael Hoppman........................................................... 12,500(9) *
Barry Rubenstein.......................................................... 1,464,785(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
Gary J. Wasserson......................................................... 126,843(12) 2.1%
534 Righters Mill Road
Penn Valley, Pennsylvania 19072
All executive officers and directors as a group 1,448,604(13) 22.8%
(10 persons)........................................................
</TABLE>
- -----------------------------------
* 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 May 22, 1998 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 May
22, 1998 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.
3
<PAGE>
(2) Represents shares of Common Stock underlying currently exercisable options.
(3) Includes (i) 16,667 shares of Common Stock underlying warrants ("December
1996 Warrants") issued by the Company in connection with a private
placement consummated in December 1996 ("December 1996 Private Placement"),
(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 warrants which are of the same class as those issued in
connection with the Company's initial public offering ("IPO") in December
1994 and currently quoted on the Nasdaq SmallCap Market ("Public
Warrants"). Does not include 50,000 shares of Common Stock issuable upon
exercise of options which become exercisable in January 1999.
(4) Includes 1,667 shares of Common Stock underlying Public Warrants and 13,334
shares of Common Stock issuable upon exercise of currently exercisable
options.
(5) Includes 5,398 shares of Common Stock issuable upon conversion of $50,000
principal amount of certain debentures ("Convertible Debentures") issued by
Global Link Telecom Corporation ("Global Link"), a wholly-owned subsidiary
of the Company, and guaranteed by the Company, 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.
(6) Represents shares of Common Stock issuable upon exercise of currently
exercisable options.
(7) 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.
(8) 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.
(9) Represents shares of Common Stock underlying currently exercisable options.
Does not include 37,500 shares of Common Stock underlying options, 10,000
of which vest in August 1998 and 1999, 12,500 of which vest in May 1999 and
5,000 of which vest in August 2000.
(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 Partners, L.P. ("Wheatley") and Wheatley Foreign
Partners, L.P. ("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
4
<PAGE>
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 56,668 shares of Common Stock issuable upon exercise of currently
exercisable options.
(13) Includes those shares of Common Stock deemed to be included in the
respective beneficial ownership of Messrs. Bogin, Finkel, Kaufman, Ptalis,
Jack Tobin, Eisner, David Tobin and Hoppman as described in notes 2, 3, 4,
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.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act 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 Commission 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 Commission
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, 1997, all filings under Section
16(a) were made as required.
PROPOSAL I: ELECTION OF CLASS I DIRECTORS
The Board is divided into three classes, each of which generally 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 (Class I Directors), currently
consisting of Shelly Finkel and Robert Bogin, will expire at the Annual Meeting;
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 annual
meeting of stockholders to be held in 1999; and the term of the third class of
directors (Class III 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 serves from the
date of his election until the end of his term and until his successor is
elected and qualified. In connection with a voting agreement entered into in
connection with the acquisition of Global Link (the "Global Link Merger")
described in "Certain Relationships and Related Transactions -- The Global Link
Merger," certain stockholders of the Company ("GTS Major Stockholders") and
certain former stockholders of Global Link ("Global Link Major Stockholders"),
all of whom are now stockholders of the Company, have the right to designate
nominees to the Board. Mr. Finkel is the designee ("GTS Designee") of the GTS
Major Stockholders and Robert Bogin is the designee ("Global Link Designee") of
the Global Link Major Stockholders. The GTS Major Stockholders, holding in the
aggregate 400,580 shares of Common Stock, each have agreed to vote all of his
shares of Common Stock for the election of the Global Link Designee and each of
the Global Link Major Stockholders, holding, in the aggregate 227,488 shares of
Common Stock, each have agreed to vote all of his shares of Common Stock for the
GTS Designee.
Information About the Nominees
Two persons will be elected at the Annual Meeting to serve as Class I
Directors for a term of three years. The Board has nominated Shelly Finkel and
Robert Bogin as candidates for election. Unless authority is withheld, the
proxies solicited by the Board will be voted "FOR" the election of these
nominees. In case either of these nominees becomes unavailable for election to
the Board, 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.
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 is 53 years old. 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.
5
<PAGE>
Robert Bogin has been the President of the Company since August 1997 and a
director of the Company since January 1998. Mr. Bogin is 47 years old. 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.
Information About the Other Directors and Executive Officers
Class II Directors
Alan W. Kaufman has been a director of the Company since November 1994. Mr.
Kaufman is 59 years old. 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. Mr.
Ptalis is 55 years old. 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.
Class III Directors
Jack N. Tobin has been a director of the Company since March 1996. Mr.
Tobin is 56 years old. 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.
Randolph Cherkas has been the Company's Chief Operating Officer since
February 1998 and a director of the Company since April 1998. Mr. Cherkas is 36
years old. 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.
J. Mark Rubenstein has been Vice President--Wholesale Sales of the Company
since February 1998 and a director of the Company since April 1998. Mr.
Rubenstein is 43 years old. 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.
Other Executive Officers
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 Telephone
Company, Inc. ("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.
6
<PAGE>
Michael Hoppman has been the Company's Vice President, Chief Financial
Officer and Treasurer since September 1997 and Assistant Secretary since April
1998. From 1990 to August 1997, Mr. Hoppman was employed by The Score Board,
Inc., a manufacturer, wholesaler and marketer 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.
Board Meetings, Committees and Compensation
The Board met twice during the year ended December 31, 1997 and acted
by unanimous written consent numerous times throughout the year.
The Board currently maintains an Audit Committee, which currently is
composed of 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 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 controls and internal auditing activities and (v) making
recommendations to the Board with respect to significant changes in accounting
policies and procedures. The Audit Committee met once during the year ended
December 31, 1997.
The Board currently maintains a Compensation Committee, which currently is
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. The Compensation Committee met once during the
year ended December 31, 1997.
The members of the Board do not receive any cash compensation for serving
as directors, however, the Company reimburses directors for travel and related
expenses incurred to attend Board meetings. On March 31st of each year during
the term of the 1994 Plan, assuming that 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 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. On April 17, 1998, the Board approved an amendment to the
1994 Plan to revise the section of the 1994 Plan that provides for the annual
automatic grant of options to directors described above to (i) apply to only
non-employee directors and (ii) increase the number of options granted annually
to each non-employee director from 3,334 shares to 10,000 shares. The amendment
to the 1994 Plan is subject to stockholder approval at the Annual Meeting. See
"Proposal II: Approval of an Amendment to the 1994 Performance Equity Plan."
7
<PAGE>
Executive Compensation
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to the Company's Chief
Executive Officer and each of the other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose compensation
exceeded $100,000 in the year ended December 31, 1997:
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
Name and Principal Options
Position During Period Fiscal Year Salary ($) (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) The Named Executive Officers routinely receive other benefits from the
Company, the amounts of which are customary in the industry. The Company
has concluded, after reasonable inquiry, that the aggregate amounts of such
benefits during the year ended December 31, 1997 did not exceed the lesser
of $50,000 or 10% of the compensation set forth above as to any named
individual.
(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 (a) $50,000, $25,000 of which was
paid upon execution of the amendment to Mr. Wasserson's employment
agreement and $25,000 was paid on December 31, 1997 and (b) $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 $6.4375 per share.
(3) Represents immediately exercisable options to purchase 3,334 shares of
Common Stock granted pursuant to the 1994 Plan, which provides for stock
option grants of 3,334 shares to be made to each director of the Company on
March 31st of each year. See "1994 Performance Equity Plan."
8
<PAGE>
The following table summarizes the number of shares and the terms of stock
options granted to the Named Executive Officers in 1997:
OPTION/SHARE GRANTS DURING YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Individual Grants
% of Total
Options/Shares Market
Options/ Granted to Exercise Price on
Name and Position Shares Employees in Price Date of Expiration
During Period Granted Fiscal Year ($/Share) Grant ($) Date
- ------------------------------- -------- ------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Gary Wasserson...................... 3,334(1) 10.1% 11.125 11.125 3/2007
Chief Executive Officer 50,000 6.4375 6.4375 11/2002
David S. Tobin...................... 75,000 14.2% 6.4375 6.4375 1/2 1/1/2003
Vice President--Business 1/2 1/1/2004
Affairs, General Counsel
and Secretary
Cory Eisner......................... 25,000 4.7% 6.4375 6.4375 1/3 1/1/2003
Vice President--Enhanced 1/3 1/1/2004
Services 1/3 1/1/2005
- ------------------------------------ ---------------- -------------------- ------------- --------------- ----------------
</TABLE>
(1) Represents immediately exercisable options to purchase 3,334 shares of
Common Stock granted pursuant to the terms of the 1994 Plan, which provides
for stock option grants of 3,334 shares to be made to each director of the
Company on March 31st of each year. See "1994 Performance Equity Plan."
The following table summarizes the number of exercisable and unexercisable
options held by the Named Executive Officers at December 31, 1997, and their
value at that date if such options were in-the-money.
AGGREGATE YEAR-END OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money
Name and Position During Period at December 31, 1997 Options at December 31, 1997 ($)(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.
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
9
<PAGE>
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. If Mr. Finkel is terminated without cause, he will continue to receive
his salary through the remainder of his employment term and will be paid a cash
bonus equal to the last cash bonus paid to him. If Mr. Finkel is terminated
without cause after (i) the Company is sold or otherwise acquired, or (ii)
certain persons acquire in one or more transactions beneficial ownership of more
than 35% of the voting securities of the Company (in either event, a "Change of
Control"), he will receive his salary through the remainder of his employment
term and a cash bonus equal to the last bonus paid to him 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. 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) 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 Mr. Bogin is terminated without cause prior to a Change of
Control, he will continue to receive his salary through the remainder of his
term of employment. 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 annual cash
bonus (in addition to any other bonuses that may be granted by the Board) equal
to the difference between $175,000 and Mr. Tobin's salary at the year's end. 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. If Mr. Tobin is terminated without
cause after a Change of Control, he will receive his salary through the
remainder of his employment term and a cash bonus equal to the last bonus paid
to him 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. 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 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."
10
<PAGE>
In July 1997, the Company entered into a one-year consulting agreement with
Pennsylvania Merchant Group ("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 issued to Penn Merchant warrants to purchase
100,000 shares of Common Stock which are currently exercisable at $7.00 per
share. Such options 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 (a)
$50,000, $25,000 of which was paid upon execution of the amendment to Mr.
Wasserson's employment agreement and $25,000 was paid on December 31, 1997 and
(b) $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.
1994 Performance Equity Plan
In October 1994, the Board 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. On April 17, 1998, the Board approved an amendment to the 1994 Plan
to increase the number of shares authorized for grant from 500,000 shares to
1,500,000 shares, subject to stockholder approval at the Annual Meeting. See
"Proposal II: Amendment to the 1994 Performance Equity Plan." 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, 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 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 currently may be granted to a director of the
Company under the 1994 Plan. On April 17, 1998, the Board approved an amendment
to the 1994 Plan to revise the section of the 1994 Plan that provides for the
annual automatic grant of options to directors described above to (i) apply to
only non-employee directors and (ii) increase the number of options granted
annually to each non-employee director from 3,334 shares to 10,000 shares. The
amendment to the 1994 Plan is subject to stockholder approval at the Annual
Meeting. See "Proposal II: Approval of an Amendment to the 1994 Performance
Equity Plan."
As of December 31, 1997, options to purchase 387,856 shares of Common Stock
were outstanding under the 1994 Plan, which includes 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, 1997 and 1998, the Company granted to each
director of the Company immediately exercisable ten-year options to purchase
3,334 shares of Common Stock for $17.625, $15.75, $11.125 and $7.3125 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
11
<PAGE>
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 1994 Plan,
the Company granted options to purchase an aggregate of 132,500 shares of Common
Stock to certain of its employees. In January 1998, the Company reduced the
exercise prices of an aggregate of 146,007 options outstanding under the 1994
Plan to $6.563 per share, including all of the options granted to Messrs.
Rubenstein and Oxenhorn. See "Option Repricing."
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.
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 and 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 Public Warrants to purchase an aggregate of 250,000 shares of
Common Stock. 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
12
<PAGE>
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, which are
currently exercisable at $7.00 per share, in consideration for 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.
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.
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. The principal executive offices of the Company are leased from
JilJac Realty Company, a general partnership owned by Mr. Wasserson. The lease
expires in January 2000 and provides for an annual rent of $55,566 during 1998
and $58,344 during 1999. See "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
"Consultants."
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."
13
<PAGE>
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 to the Company 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
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
14
<PAGE>
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 "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 400,580 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 227,488 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. Mr. Cherkas' employment agreement provides for a term through
December 31, 2000 and for a base salary of $180,000 per annum, subject to annual
increases and bonuses as the Board may, in its discretion, determine.
Additionally, the Company has appointed Mr. Cherkas to serve as a director of
the Company and agreed to nominate him to serve as a director at each annual
meeting of stockholders for so long as he remains an executive officer of the
Company.
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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. Mr. Liguori's employment agreement provides for
a term through December 31, 2000 and for a base salary of $80,000 per annum,
subject to annual increases as the Board 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. Mr. Rubenstein's employment agreement
provides for a term through December 2001 and a base salary of $150,000 per
annum, subject to annual increases and bonuses as the Board 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%.
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PROPOSAL II: APPROVAL OF AN AMENDMENT TO THE 1994 PERFORMANCE EQUITY PLAN
In October 1994, the Board adopted, and the stockholders 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 or
which may be granted thereunder. In August 1996, the Company amended the 1994
Plan to increase the number of shares available thereunder from 550,000 shares
to 1,500,000 shares, which increase was approved by the Company's stockholders
at the Annual Meeting of Stockholders held on August 20, 1996. In March 1997,
the Company effected a one-for-three reverse stock split, which reduced the
number of shares available under the 1994 Plan to 500,000 shares. On April 17,
1998, the Board approved a further amendment to the 1994 Plan to increase the
number of shares of Common Stock available thereunder from 500,000 shares to
1,500,000 shares, subject to approval by the Company's stockholders at the
Annual Meeting. As of May 22, 1998, there are outstanding options granted under
the 1994 Plan to purchase an aggregate of 451,022 shares of Common Stock.
Without giving effect to the proposed amendment, there are 48,978 shares of
Common Stock currently available for future grant under the 1994 Plan. The Board
believes that the increase in the shares available for issuance upon exercise of
options granted or which may be granted under 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.
On April 17, 1998, the Board approved an amendment to the 1994 Plan to
revise Section 4.2 of the 1994 Plan, which currently provides for an annual
automatic grant of options to purchase 3,334 shares of Common Stock to each
director, to (i) apply to only non-employee directors and (ii) increase the
number of options granted annually to each non-employee director from 3,334
shares to 10,000 shares. When the 1994 Plan initially was adopted by the Board
and approved by the stockholders in October 1994, it provided that the only
awards which may be granted to directors would be an annual automatic grant of
options to purchase 10,000 shares of Common Stock ("Director Option Grant"). In
March 1997, the Company effected a one-for-three reverse stock split, which
reduced the Director Option Grant from 10,000 shares to 3,334 shares. Since the
reverse stock split, the Company has consummated a public offering and several
acquisitions, which have caused the number of shares of Common Stock outstanding
to increase from 1,854,544 shares to 5,991,772 shares. Accordingly, the Board
believes that increasing the Director Option Grant to the pre-split amount of
10,000 shares is justifiable in order for the Company to continue to attract and
retain non-employee directors. In addition, the Board believes that the Director
Option Grant is not a sufficient incentive for employees of the Company who also
serve as directors. However, because the Director Option Grant is currently the
only award which may be granted to directors under the 1994 Plan, the Company
only has been able to grant employee directors options outside the 1994 Plan.
The Board has determined that it would be better to have the ability to grant
employee directors options under the 1994 Plan and, accordingly, seeks
stockholder approval to revise Section 4.2 of the 1994 to apply to only
non-employee directors.
Summary of the 1994 Plan
Administration
The 1994 Plan is administered by the Board or, at its discretion, by the
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 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
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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 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 Common Stock, as a class. 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, consultants and sales representatives who are
deemed to have rendered or to be able to render significant services to the
Company and who 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").
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 3,334
shares of 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. Currently, these are the
only Awards which may be granted to a director of the Company under the 1994
Plan. As amended, the section of the 1994 Plan relating to the automatic annual
grant of options to directors would (i) apply to only non-employee directors and
(ii) provide for an annual automatic grant of options to purchase 10,000 shares
of Common Stock to each non-employee director. Accordingly, the Company would be
able to grant employee directors options to purchase shares of Common Stock
under the 1994 Plan at any time throughout the year and in any amount as
determined by the Board.
Holding Period
Any equity security issued under the 1994 Plan must be held for at least
six months from the date of the grant of the related Award.
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 ("Nonqualified 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 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). 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 of the date of the grant
(or within five 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
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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 is 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 or termination may be exercised for the lesser of three months
after retirement or termination 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
Non-qualified Options, SARs may be granted either at or after the time of the
grant of such Non-qualified 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 stockholders 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 (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 the 1994 Plan and the respective agreements
respecting such Options and awards.
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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 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
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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.
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INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent certified public
accountants for the year ended December 31, 1997. The Board has selected KPMG
Peat Marwick LLP as the Company's independent certified public accountants for
the fiscal year ending December 31, 1998. A representative of KPMG Peat Marwick
LLP will have the opportunity to address the stockholders if such representative
so desires and is expected to be present at the Annual Meeting. The
representative will be available to respond to appropriate questions from
stockholders.
1999 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1999 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 Philadelphia,
Pennsylvania by February 5, 1999.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
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
Philadelphia, Pennsylvania
June 5, 1998
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GLOBAL TELECOMMUNICATION SOLUTIONS, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on June 30, 1998
P The undersigned stockholder(s) of GLOBAL TELECOMMUNICATION SOLUTIONS,
INC., a Delaware corporation ("Company"), hereby appoints Shelly
Finkel and David S. Tobin, or either of them, with full power of
P 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
O Company to be held on June 30, 1998 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
X of the following proposals.
Y 1. Election of the following Class I Directors: Shelly Finkel and Robert
Bogin.
FOR |_| WITHHELD |_|
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write the nominee's name in the space provided)
2. Approval of an amendment to the Company's 1994 Performance Equity
Plan:
FOR |_| AGAINST |_| ABSTAIN |_|
3. 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.
Dated _______________________, 1998
-----------------------------------
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.
