SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement
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Virtual Telecom, Inc.
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(Name of Registrant as Specified In Its Charter)
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VIRTUAL TELECOM, INC.
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INFORMATION STATEMENT
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Introduction
The Board of Directors of Virtual Telecom, Inc., a Delaware corporation
(hereafter "Virtual Telecom" or the "Company"), is providing this Information
Statement in connection with a proposed stockholder action by majority written
consent ("Stockholder Action") for purposes of approving an amendment to our
Certificate of Incorporation (the "Amendment") to change our corporate name to
"FirstQuote Inc."
Voting Securities
The effective date of the Stockholder Action is currently set for April 29,
1999. Our Board of Directors has fixed the close of business on March 26, 1999
as the record date for the determination of stockholders who are entitled to
receive this Information Statement and consent to the Stockholder Action. The
approval of the Amendment will require the written consent of the holders of at
least a majority of the outstanding shares of our common stock and preferred
stock, voting together as a group. As of the record date, we had 6,018,309
shares of common stock issued and outstanding held by approximately 316
recordholders. As of the same date, we also had 5,726,001 shares of preferred
stock issued and outstanding held by eight recordholders. We are not holding a
meeting of stockholders in connection with the approval of the Amendment nor are
we soliciting proxies.
We are sending this Information Statement to our stockholders on or about
April 9, 1999
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
The date of this Information Statement is April 8, 1999
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the shares of common stock (including shares of preferred stock
convertible into common stock) as of March 26, 1999 by (i) each person who we
know to be the beneficial owner of more than five percent (5%) of the common
stock, (ii) each of our directors and executive officers and (iii) all directors
and executive officers as a group.
Name and Address Number of Shares Percentage Owned
---------------- ----------------
Neil Gibbons(1) 1,446,770(2) 23.8%
Daniel Huber(1) 1,146,770(2) 18.9%
Mark Benn(1) 0(3) --
William Cordeiro(4) 10,000(5) (6)
Stuart Townsend(7) 185,000(8) 3.0%
Bryan Wood(9) 2,464,257(10) 29.1%
Frank Verschoor(11) 1,351,351(12) 18.3%
Paul Goossens(13) 1,081,081(14) 15.2%
Alta Berkeley V, C.V.(9) 2,464,257(10) 29.1%
NeSBIC CTE Fund BV(11) 1,351,351(12) 18.3%
GIMV(13) 1,081,081(14) 15.2%
All officers and directors as a group 7,685,229(15) 69.5%
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(1) Address is 12, Av. des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland.
(2) Includes 50,000 shares of common stock underlying presently exercisable
options. Does not include options to purchase 40,000 shares of common
stock that are subject to vesting.
(3) Does not include 95,000 shares of common stock underlying options that are
subject to vesting.
(4) Address is 23852 Pacific Coast Highway, Suite 283, Malibu,
California 90265.
(5) Represents shares held by Bartik, Cordeiro Associates, Inc., of which
Mr. Cordeiro is a stockholder.
(6) Less than one percent
(7) Address is Townsend Analytics, Ltd., 100 South Wacker Drive, Suite 1500,
Chicago, Illinois.
(8) Includes 50,000 shares of common stock underlying immediately exercisable
options and 135,000 shares of common stock held by Townsend Analytics, Ltd.
of which Mr. Townsend is President and owner.
(9) Mr. Wood has been nominated to the Board of Directors by the holders of the
Series B Preferred Stock. See, "Description of Securities - Preferred
Stock." Mr. Wood's address is Alta Berkeley Associates, 6 Rue d'Italie,
1211 Geneva 3, Switzerland.
(10) Represents shares of common stock issuable upon conversion of Series B and
Series C Preferred Stock held by Alta Berkeley V, C.V. and two affiliated
funds. Mr. Bryan Wood is a founder of Alta Berkeley Associates which
serves as a manager of the three funds.
(11) Mr. Verschoor has been nominated to the Board of Directors by the holders
of the Series C Preferred Stock. See, "Description of Securities -
Preferred Stock." Mr. Verschoor's address is NeSBIC CTE Fund BV,
Savunnahweg 17, 3542 AW, Utrecht, The Netherlands.
(12) Represents shares of common stock issuable upon conversion of Series C
Preferred Stock held by NeSBIC CTE Fund BV Mr. Verschoor is a director of
NeSBIC CTE Fund BV.
(13) Mr. Goossens has been nominated to the Board of Directors by the holders of
the Series C Preferred Stock. See, "Description of Securities - Preferred
Stock." Mr. Goossen's address is GIMV, Karel Oemsstraat 37, B-3018
Antwerp, Belgium.
(14) Represents shares of common stock issuable upon conversion of Series C
Preferred Stock held by GIMV. Mr. Goossens is a director of GIMV.
(15) Includes 150,000 shares of common stock underlying presently exercisable
options and 4,896,689 shares of common stock issuable upon conversion if
the outstanding shares of Series B and Series C Preferred Stock.
DESCRIPTION OF SECURITIES
Common Stock
Virtual Telecom is authorized to issue 20,000,000 shares of common stock,
$.001 par value per share. As of the record date, 6,018,309 shares were issued
and outstanding and held by 316 recordholders. As of the record date, there are
no outstanding options, warrants or other securities which upon exercise or
conversion entitle their holder to acquire shares of common stock, except as set
forth below.
Holders of shares of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders generally. The approval of
proposals submitted to stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting, except
in the case of certain fundamental matters (such as certain amendments to the
Certificate of Incorporation, and certain mergers and reorganizations), in which
cases Delaware law and our Bylaws require the favorable vote of at least a
majority of all outstanding shares. Stockholders are entitled to receive such
dividends as may be declared from time to time by the Board of Directors out of
funds legally available therefor, and in the event we liquidate, dissolve or
wind up our operations, to share ratably in all assets remaining after payment
of liabilities. The holders of shares of common stock have no preemptive,
conversion, subscription or cumulative voting rights.
Preferred Stock
Virtual Telecom is authorized to issue 10,000,000 shares of preferred
stock, $.001 par value per share. Our Board of Directors is authorized to issue
from time to time, without stockholder authorization, in one or more designated
series classes, any or all of the authorized but unissued shares of preferred
stock with such dividend, redemption, conversion and exchange provisions as may
be provided in the particular series.
As of the record date, there were 5,726,001 shares of preferred stock
outstanding, of which 18,500 shares are issued and outstanding as Series A
Preferred Stock and held of record by one stockholder, 1,923,716 shares are
issued and outstanding as Series B Preferred Stock and held of record by three
stockholders and 3,783,785 shares of Series C Preferred Stock held of record by
seven stockholders. We have the right to reissue the shares of any series of
Preferred Stock upon conversion to common stock. All issued shares of Preferred
stock are fully paid and non-assessable.
Series A Preferred Stock
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Dividends. The holders of the Series A Preferred Stock shall share pari
passu on a per share basis of the distribution in any of our dividends with the
holders of shares of common stock.
Voting Rights. The holders of the Series A Preferred Stock are entitled to
receive notice of, and to vote on, any matter that is the subject of a vote of
the holders of the common stock; provided, however, the holders of the Series A
Preferred Stock and the holders of the common stock, acting together as a group,
shall be entitled to elect five of the nine members of the Board of Directors.
The holders of the Series B Preferred Stock and the Series C Preferred Stock
shall each be entitled to elect two members of the Board of Directors.
Redemption. We may redeem the shares of Series A Preferred Stock, at any
time, upon thirty (30) days' prior written notice to the holder thereof of our
intention to redeem the Series A Preferred Stock at a redemption price of $3.50
per share, plus payment of any unpaid dividends earned thereon through the date
of redemption.
Conversion. A holder of Series A Preferred Stock may convert each share
held at any time into shares of our common stock at a conversion price equal to
$1.75 per share, subject to adjustment in the case of dividends,
reclassifications, stock splits, or in the case we sell shares of common stock
at a price less than the price set forth above.
Liquidation, Dissolution or Winding Up. In the event of liquidation,
dissolution or winding up, whether voluntary or involuntary, the holders of the
Series A Preferred Stock will be entitled to be paid the sum of $3.50 per share,
plus an amount equal to any unpaid dividends before any amount is paid to the
holder of any other series of Preferred Stock, other than the Series B Preferred
Stock or the Series C Preferred Stock, or to the common stock. After payment of
these
amounts to the holders of the Series A Preferred Stock, the remainder of our
assets will be distributed to the holders of the common stock, subject to any
other preferences granted to the holders of any other series of Preferred Stock
as created by the Board of Directors prior to such time.
Variation of Rights. Any amendment to our Certificate of Incorporation
(including any certificates of designation pursuant to a resolution of the Board
of Directors) to delete or vary the rights, powers, privileges, preferences,
designations, qualifications, limitations, restrictions or conditions attaching
to the Series A Preferred Stock must be approved by the affirmative vote of the
holders of a majority of the shares of Series A Preferred Stock then
outstanding, given in person or by proxy whether in writing or at a meeting at
which the holders of the shares of Series A Preferred Stock are entitled to vote
separately as a class.
Series B and Series C Preferred Stock
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Dividends. The holders of the Series B and Series C Preferred Stock shall
share pari passu on a per share basis of the distribution in any dividends by
the Company, with the holders of shares of common stock.
Voting Rights. The holders of the Series B and Series C Preferred Stock are
entitled to receive notice of, and to vote on, any matter that is the subject of
a vote of the holders of the common stock; provided, however, the holders of the
Series A Preferred Stock and the holders of the common stock, acting together as
a group, shall be entitled to elect five of the nine members of the Board of
Directors. The holders of the Series B Preferred Stock and the Series C
Preferred Stock shall each be entitled to elect two members of the Board of
Directors.
Redemption. We may not redeem the shares of Series B and Series C Preferred
Stock.
Conversion. A holder of Series B or Series C Preferred Stock may convert
each share held at any time into shares of our common stock at a conversion
price equal to $1.5595 per share of Series B Preferred Stock and $1.85 per share
of Series C Preferred Stock, subject to adjustment in the case of dividends,
reclassifications, stock splits, or in the case we sell shares of common stock
at a price less than the price set forth above.
Liquidation, Dissolution or Winding Up. In the event of liquidation,
dissolution or winding up, whether voluntary or involuntary, the holders of
shares of the Series B and Series C Preferred Stock will be entitled to be paid
the sum equal to the greater of (i) $1.85 per share, plus any accrued and unpaid
dividends and any amounts payable to holders of the Series B or Series C Shares
pursuant to their right to participate in any further distributions or payments
made to holders of common stock in proportion to their holdings, and (ii) $3.50
per share plus any accrued and unpaid dividends if the event of liquidation,
dissolution or winding up occurs on or before December 31, 2000 and, thereafter,
$5.20 per share plus any accrued and unpaid dividends. After payment of these
amounts to the holders of the Series B and Series C Preferred Stock, the
remainder of our assets will be distributed to the holders of the Series A
Preferred Stock and the common stock.
Right of First Refusal. Pursuant to an Investors' Rights Agreement we
entered into with the purchasers of the Series B and Series C Preferred Stock,
the holders of the Series B and Series C Preferred Stock have the right to
purchase a pro rata share of any issuance of our capital stock or rights,
options or warrants to purchase such capital stock. Certain issuances of
securities are excluded from the right of first refusal, including the issuance
of the shares of common stock in the present offering and securities issued
pursuant to any stock option, stock purchase or stock bonus plan, agreement or
arrangement approved by the Board of Directors. This right of first refusal
expires in January 2006.
Additional Rights. Pursuant to the Investors Rights Agreement mentioned
above, certain actions we may take in the future will require the approval of
the holders of a majority of the outstanding shares of Series B and Series C
Preferred Stock. Those corporate actions requiring such approval include:
. entering into any agreement providing for the merger, liquidation or sale of
all or substantially all of our assets, or engaging in any business activity
which is fundamentally different from our current business;
. any amendments to our Certificate of Incorporation, Certificate of
Designations or Bylaws;
. acquiring the assets of another business if the vale of that acquisition
excess $200,000;
. incurring any indebtedness or extending any credit not in the ordinary
course of our business;
. varying the terms of the employment of any of our highly paid employees or
directors; and
. engaging in any transactions with our affiliates
Variation of Rights. Any amendment to the Certificate of Incorporation of
the Company (including any certificates of designation pursuant to a resolution
of the Board of Directors) must be approved by the affirmative vote of the
holders of a majority of the shares of Series B Preferred Stock and the Series C
Preferred Stock then outstanding, voting together as a group.
Warrants
From October through December 1996, we conducted a private placement in
which we issued 283,781 units, each unit consisting of one share of Series A
Preferred Stock and one warrant. Each warrant originally entitled its holder to
purchase one share of common stock at an exercise price of $7.00 per share until
July 31, 1998, at which time the unexercised warrants were to expire by their
own terms. In December 1997, we adjusted the exercise price of each warrant to
$3.50 per share and extended the expiration date to December 31, 2000. The
warrants are subject to customary anti-dilution provisions. As of the date of
this Information Statement, 281,781 warrants are outstanding.
In June 1997, we conducted a private placement of units at $5.00 per unit.
Each of these units consisted of two shares of common stock and one warrant
which entitles its holder to purchase one share of common stock at an exercise
price of $3.50 per share. These warrants expire on October 29, 1999. In the
private placement, we sold 204,000 units for the gross proceeds of $1,020,000.
In February 1998, we effectively reduced the price of the units from $5.00 per
share to $4.00 per unit and issued an additional 102,000 shares of common stock.
All 204,000 of these warrants are outstanding as of the date of this Information
Statement.
In February 1998, we granted warrants to Ermgassen & Co. Ltd as a finders'
fee in connection with the sale of shares of our Series C Preferred Stock. The
warrants allow Ermgassen & Co. to purchase up to 37,838 shares of common stock
at an exercise price of $1.85 over a five year period. All 37,838 of these
warrants are outstanding as of the date of this Information Statement.
Stock Option Plan
Virtual Telecom has adopted a 1997 Stock Option Plan, which permits us to
grant options to our employees, officers, directors, consultants and independent
contractors. We may issue an aggregate of 1,150,000 shares of common stock
pursuant to the stock option plan. As of the date of this Information
Statement, we have granted under the stock option plan options to purchase an
aggregate of 655,000 shares of common stock, at an exercise price of $2.00 per
share, to our employees, officers, directors and consultants.
Dividends
We do not anticipate the payment of cash dividends on our common stock in
the foreseeable future. See, "Dividend Policy."
Transfer Agent
The Transfer Agent for our common stock is Interwest Transfer Company, 1981
East 4800 South, Salt Lake City, Utah 84117.
CHANGE OF CORPORATE NAME
On February 17, 1999, our Board of Directors declared it advisable and in our
best interests and directed that there be submitted to the stockholders a
proposed amendment to Article I of our Certificate of Incorporation to change
our name from Virtual Telecom, Inc. to FirstQuote Inc. The Board of Directors
has fixed the close of business March 26, 1999 as the record date for the
determination of stockholders who are entitled to receive this Information
Statement. As of March 26, 1999, 6,018,309 shares of Common Stock and 5,726,001
shares of Preferred Stock were issued and outstanding, and approximately
1,673,619 additional shares of Common Stock were reserved for issuance upon
exercise of outstanding options, warrants and convertible notes, including
options, that may be granted in the future under our Stock Option Plan.
Vote Required
The approval of the Amendment will require the written consent of the holders
of at least a majority of the outstanding shares of common stock and preferred
stock, voting together as a group.
By Order of the Board of Directors,
/s/ DANIEL HUBER
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Daniel Huber,
Secretary
Geneva, Switzerland
April 8, 1999