INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ X ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Section 240.14a-12
BestNet Communications Corp.
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(Formerly Wavetech International, 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:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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Page 1
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Page 2
BestNet Communications Corp.
5075 Cascade Road, SE, Suite A
Grand Rapids, MI 49546
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 17, 2003
Dear Shareholder:
Thank you for your ongoing support and demonstrated belief in BestNet
Communications. Please join us at the Annual Shareholders' Meeting at the
Doubletree Suites, Phoenix Gate, 320 North 44th St., Phoenix, Arizona at
10:00 am, Mountain Standard Time. We look forward to your attendance either in
person or by proxy.
At the meeting, holders of common shares of BestNet Communications will be asked
to approve:
o The election of directors of the Company;
o An amendment to the Company's Articles of Incorporation to approve an
increase in the amount of common shares of BestNet stock; and
o The reappointment of Semple & Cooper, LLP, an alliance member BDO
Seidman, LLP, as independent auditors for the Company.
The Board of Directors unanimously recommends that you vote FOR the slate of
Directors. The most important vote will be for the amendment of the Company's
Articles of Incorporation, which the Board strongly urges the shareholders to
vote FOR. Without this vote being affirmed by the shareholders the ability for
the company to accomplish its growth plans will be severely hindered. Lastly,
the Board also recommends that you cast a FOR vote regarding the ratification of
appointment of the independent auditors.
Over the past year, BestNet has made fundamental changes that we firmly believe
will provide lasting value to our shareholders. We have been able to complete a
number of significant achievements that lay a strong foundation for
independence, growth and profitability.
In closing, I encourage you to exercise your right, as a shareholder, to
participate in the upcoming meeting either in person or by voting using the
proxy. On the behalf of your Board of Directors and employees, we appreciate
your participation, support and interest in your Company.
Sincerely,
/s/ Robert A. Blanchard
Chairman and Chief Executive Officer
August 20, 2003
IMPORTANT: IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THIS MEETING.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Page 3
BestNet Communications Corp.
5075 Cascade Road, SE, Suite A
Grand Rapids, MI 49546
------------------------------------------
PROXY STATEMENT
------------------------------------------
This Proxy Statement is being furnished to shareholders of BestNet
Communications Corp., a Nevada corporation ("BestNet" or the "Company"), in
connection with the solicitation of proxies by the Board of Directors for use at
the 2003 Annual Meeting of Shareholders of the Company to be held on September
17, 2003, at 10:00 a.m., Mountain Standard Time, at the Doubletree Suites
Phoenix Gate located at 320 N. 44th Street, Phoenix, Arizona, 85008, and any
adjournment or postponement thereof (the "Annual Meeting"). A copy of the Notice
of the Annual Meeting accompanies this Proxy Statement. This Proxy Statement and
the accompanying form of Proxy Card are being mailed on or about August 20,
2003.
Solicitation And Voting Of Proxies
Only shareholders of record at the close of business on August 11, 2003
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
or any adjournment or postponement thereof. On the Record Date, 29,948,104
shares of common stock, par value $.001 per share (the "Common Stock"), were
issued and outstanding.
Each shareholder present at the Annual Meeting, either in person or by
proxy, will be entitled to one vote for each share of Common Stock held of
record on the Record Date on each matter of business to be considered at the
Annual Meeting. The six (6) nominees receiving a plurality of votes by shares
represented and entitled to vote at the Annual Meeting, if a quorum is present,
will be elected as Directors of the Company.
All valid proxies received before the Annual Meeting and not revoked will
be exercised. All shares represented by proxy will be voted, and where a
shareholder specifies by means of his or her proxy a choice with respect to any
matter to be acted upon, the shares will be voted in accordance with the
specifications so made. If no specification is indicated and authority to vote
is not specifically withheld, the shares will be voted: (i) "for" the election
of the incumbent persons named in the proxy to serve as Directors; (ii) "for"
the amendment of the Company's Articles of Incorporation to increase the number
of authorized shares of Common Stock from 50,000,000 to 100,000,000 shares; and
(iii) "for" the ratification of Semple & Cooper, LLP as the independent auditors
of the Company. Abstentions and broker non-votes will be included in the
determination of the number of shares represented for a quorum and have the same
effect as "no" votes in determining whether the proposals are approved.
The Board of Directors does not know of any matter other than the
election of directors, amendment to the Articles of Incorporation, and the
ratification of independent auditors that is expected to be presented for
consideration at the Annual Meeting. However, if other matters properly come
before the meeting, the persons named in the accompanying proxy intend to vote
thereon in accordance with their judgment.
Page 4
Revocability of Proxies
Proxies may be revoked at any time prior to the time they are voted by: (a)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; or (b) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(c) attending the Annual Meeting and voting in person, provided that the
shareholder notifies the Secretary of the meeting of his or her intention to
vote in person at any time prior to the voting of the proxy. In order to vote
their shares in person at the meeting, shareholders who own their shares in
"street name" must obtain a special proxy card from their broker.
Solicitation
The cost of soliciting proxies, including the cost of preparing and mailing
the Notice and Proxy Statement, will be paid by the Company. Solicitation will
be primarily by mailing this Proxy Statement to all shareholders entitled to
vote at the meeting. Proxies may be solicited by officers and directors of the
Company personally or by telephone or facsimile, without additional
compensation.
ELECTION OF DIRECTORS
(Proposal No. 1)
General Information
The Company's current directors and director nominees include, Robert A.
Blanchard, Paul H. Jachim, Randel S. Moore, James B. Woodcock, Christopher J.
Grant and director nominee Richard Bourke. The Board of Directors nominates
these nominees for election as directors in the election to be held at the
Annual Meeting. Shareholders may also write in and vote for additional nominees
for the Board of Directors.
The Board of Directors intends to vote its proxies for the election of the
five incumbent directors, for a term to expire at the Company's 2004 Annual
Meeting, or until their respective successors are duly elected and qualified.
The six (6) nominees receiving the highest number of votes cast at the Annual
Meeting will be elected.
If any nominee should become unavailable for any reason, which the Board of
Directors does not anticipate, the proxy will be voted for any substitute
nominee or nominees who may be selected by the Board of Directors prior to or at
the Annual Meeting, or, if no substitute is selected by the Board of Directors
prior to or at the Annual Meeting, for a motion to reduce the present membership
of the Board to the number of nominees available.
Page 5
Information Concerning Directors, Nominees And Officers
The following table sets forth the name, age and position of the
officers and directors of the Company:
NAME AGE POSITION
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Robert A. Blanchard 47 Chairman, President, and Chief Executive Officer
Paul H. Jachim 45 Chief Operating and Chief Financial Officer,
Director and Secretary
Randel S. Moore 39 Director
James B. Woodcock 47 Director
Christopher J. Grant 42 Director
Richard Bourke 56 Nominee for Director
Biographical information regarding the Company's directors is set forth
below.
Robert A. Blanchard - Chairman, President & CEO - Prior to joining BestNet,
Robert A. Blanchard was President & COO of ProNet Global, Inc., a privately-held
corporation dedicated to world-wide strategic growth and support of independent
business owners affiliated with Quixtar, a leading e-commerce organization.
Through ProNet, Robert was President/CEO of the e-Alliance, a worldwide
strategic alliance of marketing organizations and strategic partnerships
representing approximately $2 billion in annual sales. Prior to joining ProNet,
Robert was Vice President of Strategy & Business Development for Reliable
Energy, Inc., a management-consulting firm for commercial and industrial users
of natural gas and electricity. Robert also has served as Corporate Director for
US Xchange, LLC, a facilities-based provider of competitive telecommunication
services (CLEC), Director of Administration for W.K. Kellogg Foundation and
Director of North America for Amway Corporation. Robert holds an MBA from
Kellogg Graduate School of Management, Northwestern University and Baccalaureate
from Central Michigan University.
Paul H. Jachim - Chief Operating and Chief Financial Officer - Paul H.
Jachim's background includes extensive and diverse operations experience in
technology, service, industrial and consumer product companies. Most recently,
Mr. Jachim was President and COO of Pacific TelCom, a unified communication
solution provider and co-owner of a communication network across North America.
Prior to joining Pacific TelCom as President and CEO, he led the successful
creation and launch of Spectra Service Inc., a supply chain service subsidiary
of Union Camp Corporation now International Paper, Memphis, TN. From 1995 until
1997, as Director of Service Operations, Mr. Jachim started up a North American
network of supply chain management facilities for Menasha Corporation, Neenah,
WI. Prior to joining Menasha Corporation he held various positions with Procter
& Gamble in Cincinnati, OH. His education consists of a Bachelors Degree in
Engineering and an MBA from Kellogg Graduate School of Management, Northwestern
University.
Randel S. Moore - Mr. Moore has served as Chief Investment Officer of
Network Twenty-One in Duluth, Georgia since 1999. He is responsible for all
corporate business development and corporate investments along with all real
estate and private equity investments for the corporation and founders'
portfolio of Network Twenty-One. From 1989-1999, Randel Moore served as
President and CFO of The Zures Companies, Inc. of San Diego, CA, where he
managed and invested in private equity investments in telecommunications,
technology, manufacturing and real estate. He was also Managing Partner of a
Page 6
Venture Capital Fund and Director for five operating businesses. Mr. Moore has a
B.B.A. in Accounting from University of San Diego and is a registered
representative in general securities and general principal.
Christopher J. Grant - Mr. Grant is the Principal in Christopher J. Grant
Associates, LLC, a full service marketing consulting firm based in Wheaton, Ill.
From 1998 to 2002 he was Senior Vice President for ServiceMaster, Downers Grove,
IL, where he had responsibility for marketing, sales support, communications,
new product development and research development for the Management Services
Unit. Mr. Grant also served from 1994 to 1998 as Vice President of Marketing for
HarperCollins and had full responsibility for marketing, retail, communications
and research initiatives for the Zondervan Publishing Unit. From 1985 to 1994,
he served as Vice President for CTI Publishing of Carol Stream, IL. Mr. Grant
has a Bachelors Degree from Wheaton College and Master Degree in Journalism from
the Medill School of Journalism, Northwestern University.
James B. Woodcock - Mr. Woodcock is President and Founder of Executive
Excellence of Grand Rapids, MI, a strategic consultancy to CEO's, presidents and
business owners, since 2001. From 1999 to 2001 Mr. Woodcock serviced as
President and CEO of Iserv, West Michigan's largest independent ISP, and also
served as Vice President of Sales and Marketing while at Iserv. From 1994 to
1999, Mr. Woodcock held several positions at MCI WorldCom as both National
Account Manager and Senior Global Account Manager, and previously held positions
in telecommunications with Ameritech. Mr. Woodcock has a Bachelors Degree from
Spring Arbor University and currently is on their Board of Trustees.
Richard Bourke - Mr. Bourke was an officer and director of Traffic
Technology, Inc., a public company commercializing patented traffic signal
technology located in Scottsdale, Arizona, from July, 2000 until the end of
2002, when it was merged with CalbaTech, Inc., an early stage life sciences
company located in Irvine, California. He was a director of CalbaTech, Inc.
until April, 2003. Since 1998 he has been founder, Chairman and Chief Executive
Officer of National Integrative Medicine, Inc., a start-up healthcare services
company located in Scottsdale, Arizona. From 1994 to 1997, he was Executive Vice
President and Chief Financial Officer of The Little Gym International, Inc.,
Scottsdale, Arizona, an international provider of children's development
programs. From 1992 through 1993, he was Vice President of Corporate Finance for
Norcross Securities, a registered securities broker-dealer in Phoenix, Arizona.
From 1987 to 1994, he was President of Bourke & Company, a financial consulting
firm. From 1982 to 1987, he was President of the Development Corporation of
Montana, a geographically targeted risk capital firm. From 1982 to 1986, he was
President of Montana Beverages, Ltd., and from 1976 to 1990, he was Vice
President of Air Plastics, Inc. He holds a B.A. from Northwestern University and
an MBA from Columbia University Graduate School of Business.
Board And Committee Meetings
To date, there have been four (4) meetings of the Board of Directors during
fiscal 2003. No director attended less than 75% of the Board meetings while
serving as such Director or less than 75% of all committee meetings on which he
served as a committee member. Following the resignation of Gerald I. Quinn and
Herman Haenert from the board in November 2002, the Board consisted of Robert A.
Blanchard and Paul H. Jachim until January 2003, when three independent
directors were appointed: Randel S. Moore, James B. Woodcock and Christopher J.
Grant.
Page 7
The audit and compensation committees are the standing committees of the
Board of Directors.
In the previously filed proxy statement dated August 8, 2000, members of
the Company's audit committee included Gerald I. Quinn, John P. Clements and
Rosnani Atan. Effective May 28, 2003 the Company's audit committee now consists
of its three independent directors, Randel S. Moore, James B. Woodcock and
Christopher J. Grant. The principal functions of the audit committee include
recommending independent auditors, reviewing with the independent auditors the
scope and results of the audit engagement, establishing and monitoring the
Company's financial policies and control procedures, and reviewing and
monitoring the provision of non-audit services by the Company's auditors. In
addition, the current audit committee is charged with overseeing the Company's
compliance with all Sarbanes-Oxley Act requirements. Due to the transition in
both the Board of Directors and the audit committee, no audit committee meetings
were held during the fiscal year ended August 31, 2002.
The compensation committee, in the previously filed proxy dated August 8,
2000, consisted of Gerald I. Quinn, Alexander Christopher Lang and Rosnani Atan.
Also effective May 28, 2003 the committee was reinstated and comprised of the
Company's three independent directors, Randel S. Moore, James B. Woodcock and
Christopher J. Grant. The compensation committee oversees the design and
implementation of all executive compensation, stock options, bonus plans,
retirement plans and other compensation related issues that the Board of
Directors deems appropriate for consideration. As a result of vacancies caused
by the resignation of certain directors, the compensation committee remained
largely inactive until present. Since June 2002, no changes have been made to
current executive compensation nor have any options included in executive
contracts for fiscal 2002 been granted. Due to the transition in both the Board
of Directors and the compensation committee, no compensation committee meetings
were held during the fiscal year ended August 31, 2002.
Compensation Of Directors
Directors who are employees of the Company receive no additional
compensation for serving as directors. All directors are reimbursed for their
reasonable out-of-pocket expenses incurred in connection with attendance of
Board meetings. During fiscal 2003, the Company has to date spent approximately
$3,000 for expenses incurred in connection with board meeting attendance.
In addition, the Company's 2000 Stock Incentive Plan (the "Plan") provides
that each new director receive an initial grant of options to purchase 20,000
shares of Common Stock upon election to the Board and annual grants of 10,000
options for each year of service thereafter. The annual grant date is the fifth
day after the Company publicly announces its annual operating results for the
preceding fiscal year. Any director who receives an initial grant within 90 days
of the annual grant date is not eligible for the annual grant.
Page 8
In addition, non-employee Board members serving on the audit committee
receive an additional option to purchase 5,000 shares of Common Stock upon their
designation to the audit committee.
Each annual grant of options shall vest and be exercisable 12 months after
the date of grant. Each initial grant shall vest and become exercisable in a
series of three equal and successive installments including the grant date and
12 and 24 month anniversaries, respectively. A condition of vesting is the
director's continuing service on the Board of Directors.
Given recent demands placed on boards of directors with the implementation
of the Sarbanes-Oxley Act, management feels the Company's director compensation
practices are lacking. Upon obtaining adequate resources, management will
implement compensation changes commensurate with the heightened duties placed on
directors.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
As of May 28, 2003, the audit committee now consists of Randel S. Moore,
James B. Woodcock and Christopher J. Grant, and the committee has begun the
process of review and adoption of the audit committee charter. Each member of
the audit committee is "independent," as defined by the listing rules of the
Nasdaq Stock Market. Due to the resignation of Gerald I. Quinn in November 2002,
the remaining directors of the company which included Robert A. Blanchard, Paul
H. Jachim and "independent" Herman Haenert, reviewed and discussed with
management the audited financial statements for August 31, 2002 and discussed
with our independent accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU ss.380). The newly
appointed audit committee will be in a position to do so for statements ending
August 31, 2003. Robert A. Blanchard, Paul H. Jachim and Herman Haenert have
received the written disclosures and the letter from Semple & Cooper, LLP
("Semple") required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees),
and have discussed with Semple its independence. Robert A Blanchard, Paul H.
Jachim and Herman Haenert the remaining corporate directors, comprising the then
Board of Directors, recommended that the Company include the audited financial
statements in its Annual Report on Form 10-K, as amended, for fiscal 2002 for
filing with the Securities and Exchange Commission.
Board of Directors
Robert A. Blanchard
Paul H. Jachim
Herman Haenert
Page 9
DISCLOSURE OF AUDIT AND NON-AUDIT FEES
Audit Fees
The aggregate fees relating to the fiscal 2002 audit and review of our
quarterly financial information totaled $47,309, of which $18,174 was billed
during the fiscal year ended August 31, 2002.
Financial Information Systems Design and Implementation Fees
During fiscal year 2002, the Company did not engage its independent
accountants to perform financial information systems design and implementation.
All Other Fees
During fiscal year 2002, all other fees paid to Semple amounted to $32,935,
which primarily related to tax compliance and the review of other securities
filings during the year.
The Board of Directors did consider whether the provision of any non-audit
services is consistent with maintaining the accountant's independence. The Board
concluded that independence was maintained as the accountants performed only
audit, review and tax accounting services.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, as well as persons beneficially
owning more than 10% of the Company's outstanding Common Stock, to file certain
reports of ownership with the Securities and Exchange Commission (the
"Commission"). Such officers, directors and shareholders are also required by
Commission rules and regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of such forms received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 2002 and 2003, its officers, directors and greater than 10% shareholders
complied with the reporting requirements of Section 16(a), with the exception of
Softalk, Inc. The Company cannot attest to neither the accuracy nor the
timeliness of Softalk, Inc.'s filings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock as of July 28, 2003, by: (i)
each director of the Company, (ii) the Chief Executive Officer of the Company,
and certain other executive officers of the Company, as set forth in the Summary
Compensation Table (collectively, the "Named Executive Officers"), (iii) each
person who is known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding Common Stock, and (iv) all executive officers
and directors as a group.
Page 10
In certain instances, the number of shares listed includes, in addition to
shares owned directly, shares held by the spouse or children of the person, or
by a trust or estate of which the person is a trustee or an executor or in which
the person may have a beneficial interest. The table that follows is based upon
information supplied by executive officers, directors and principal stockholders
and Schedules 13D and 13G filed with the Commission.
Name And Address Of Amount And Nature Of Percent
Beneficial Owner(1) Beneficial Ownership(2)(3) Of Class(%)(3)
- --------------------------------------------------------------------------------
Robert A. Blanchard (5) 75,000 .25
Paul H. Jachim (6) 81,000 .27
Randy S. Moore (7) 6,666 .02
James B. Woodcock (7) 6,666 .02
Chris J. Grant (7) 6,666 .02
Softalk, Inc. 9,892,538 27.46
370 Queens Quay West
Suite 301
Toronto, Ontario M5V 3J3 (4)
Cedar Avenue LLC. 4,032,634 13.27
Anthony Silverman (8) 2,865,591 9.40
Jerry Peterson (9) 1,800,000 5.95
All directors and officers
as a group (5 persons) 174,998 .58
- ------------------
(1) Unless otherwise noted, the address of each holder is 5075 Cascade Road SE,
Suite A, Grand Rapids, MI 49546.
(2) The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission
(the "Commission"), and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has the sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days of July 15, 2003,
through the exercise of any stock option or other right. Such shares of
Common Stock subject to options or rights that are currently exercisable or
exercisable within 60 days of July 15, 2003, are deemed outstanding for
purposes of computing the percentage of the person holding such options or
rights, but are not deemed outstanding for computing the percentage of any
other person.
(3) The amounts and percentages in the table are based upon 29,948,104 shares
of Common Stock outstanding as of July 28, 2003.
(4) Includes five-year warrants to purchase the Company's Common Stock, granted
on October 25, 1999 as follows: 3,246,753 at an exercise price of $3.25 per
share; 1,000,000 at an exercise price of $5.00 per share; 1,000,000 at an
exercise price of $10.00 per share. Includes 425,000 shares subject to
options granted pursuant to the Company's Plan which are currently
exercisable or become exercisable (at per share exercise price of $1.00)
within 60 days of July 28, 2003.
(5) Consists of 75,000 shares subject to options granted pursuant to the
Company's Plan which are currently exercisable or become exercisable (at
per share exercise prices of $0.73 to $2.90) within 60 days of July 28,
2003.
(6) Includes 80,000 shares subject to options granted pursuant to the Company's
Plan which are currently exercisable or become exercisable (at per share
exercise prices of $0.73 to $1.55) within 60 days of July 28, 2003.
(7) Includes 6,666 shares subject to options granted pursuant to the Company's
Plan which are currently exercisable or become exercisable (at per share
exercise price of $0.60) within 60 days of July 28, 2003.
(8) Includes 550,000 shares subject to warrants granted by the Company which
are currently exercisable or become exercisable (at per share exercise
prices of $0.50 to $2.50) within 60 days of July 28, 2003.
(9) Includes 200,000 shares subject to a convertible promissory note. Includes
100,000 shares subject to warrants granted by the Company which are
currently exercisable or become exercisable (at per share exercise price of
$1.50) within 60 days of July 28, 2003.
Page 11
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid for services rendered
to us for the fiscal years ended August 31, 2002, 2001 and 2000 by our other
employees whose aggregate cash compensation exceeded $100,000 (the "Named
Executive Officers"). None of the Company's other employees received
compensation in excess of $100,000 (USD) during the last completed fiscal year.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Annual Restricted Securities
Bonus Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards ($) Options/ Payouts Compensation
Principal Position Year ($) ($) ($) SARs ($) ($) ($)(1)
- ----------------------------- ------- ---------- -------- --------------- ----------- ------------ --------- ----------------
- ----------------------------- ------- ---------- -------- --------------- ----------- ------------ --------- ----------------
Robert A. Blanchard 2002 $190,000 -- -- -- 200,000 -- --
President and CEO (2) (3) 2001 $7,308 -- -- -- 475,000 -- --
-- --
Paul H. Jachim 2002 123,750 -- 560,000 -- --
CFO and COO (4) (5) 2001 -- -- -- -- -- -- --
- -------------------
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of
the total salary and bonus for any of the officers listed.
(2) Mr. Blanchard was appointed President and CEO of the Company on August 20,
2001. Mr. Blanchard's annual salary is $190,000.
(3) On June 19, 2001, Mr. Blanchard was granted options to purchase 500,000
shares, at a per share exercise price of $2.90. These shares vest, if ever,
over a three year period. On February 22, 2002, Mr. Blanchard's option
agreement with the corporation was modified by mutual consent to 475,000
shares at a per share price of $2.90 and 200,000 at a per share price of
$.73. These shares vest, if ever, based on performance, over a three-year
period.
(4) Mr. Jachim was appointed Chief Operating and Chief Financial Officer of the
Company on December 1, 2001. His annual salary is $165,000.
(5) On December 1, 2001, Mr. Jachim was granted options to purchase an
aggregate of 400,000 shares of our common stock at a per share exercise
price of $1.55 per share. These shares vest, if ever, based on performance,
over a three-year period. On February 22, 2002, Mr. Jachim was granted
160,000 options to purchase shares of stock at $.73. These shares vest, if
ever, based on performance, over a three-year period.
OPTION GRANTS IN LAST FISCAL YEAR
The following table lists the grants of stock options during the 2002
fiscal year to the Named Executive Officer.
Number of
Securities Percent Of Total
Underlying Options Granted
Options To Employees In Exercise Or Base
Name Granted (#)(1) Fiscal Year Price ($/Sh) Expiration Date
- ------------------------ -------------------- ------------------------- -------------------- --------------------
Robert A. Blanchard 200,000 17.94% $.73 June 19, 2011
Paul H. Jachim 560,000 50.22% $1.55/$.73 December 1, 2011
Page 12
- --------------------
(1) Except as otherwise indicated, all of the options vest and become
exercisable as follows: based on achievement of business objectives as
approved by the Board of Directors. As a result of the current transition
in BestNet's Board of Directors, a decision on Mr. Blanchard's and Mr.
Jachim's 2002 options was deferred and to date none have been granted.
OPTION EXERCISES
The following table sets forth the number of shares covered by both
exercisable and un-exercisable stock options by the Named Executive Officer
during the 2002 fiscal year and the value of stock options held by such officer,
as of the end of fiscal year 2002.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR VALUES
Value Of
Unexercised
Number of Securities In-The-Money
Underlying Unexercised Options At
Shares Options At FY-End FY-End ($)
Acquired On (#) Exercisable/ Exercisable/
Name Exercise (#) Realized Value ($) Un-exercisable Un-exercisable(1)
- ------------------------------ --------------- ----------------------- ---------------------------- ---------------------
Robert A. Blanchard -0- $-0- 75,000/600,000 $0/$0
Paul H. Jachim -0- $-0- 80,000/480,000 $0/$0
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(1) Calculated based on $0.50, which was the closing sales price of our common
stock as quoted on the OTC Bulletin Board on July 25, 2003, multiplied by
the number of applicable shares in-the-money less the total exercise price.
Amendment Or Repricing Of Options
During fiscal 2002, the Company did not amend or re-price any of its stock
options held by executive officers of the Company.
Employment Contracts
On August 3, 2001, the Company entered into an employment agreement with
Robert A. Blanchard, under which Mr. Blanchard will serve as President and Chief
Executive Officer, for a three-year term expiring on August 20, 2004. Under Mr.
Blanchard's employment agreement, he is to receive a base salary of $190,000,
and is entitled to participate in our stock option plans and our other generally
available benefit programs. Upon execution of the employment agreement, Mr.
Blanchard also was granted options to purchase an aggregate of 500,000 shares of
our common stock subject to the following vesting terms: (a) 25,000 shares were
subject to the achievement of certain specified performance goals set at the
mutual agreement of BestNet and Mr. Blanchard, which were achieved, (b) 25,000
shares were due to vest on January 1, 2002, provided Mr. Blanchard successfully
completed financing transactions initiated by Mr. Blanchard that yielded net
proceeds to BestNet of $3,000,000, and (c) 450,000 shares vest in one-third
increments over a three-year period commencing one year from the date of grant.
Page 13
Mr. Blanchard's employment agreement provides that should we terminate his
employment without cause, or should Mr. Blanchard terminate his employment
agreement for good reason, he will receive his then effective base salary and
other benefits provided by the employment agreement immediately following the
effective date of termination of employment for a period of twelve months. Mr.
Blanchard also will be entitled to exercise any options that were vested as of
the date of termination for a period of six months thereafter. If Mr.
Blanchard's employment is terminated without cause following a change in control
of BestNet (as defined in the employment agreement), he will receive an amount
equal to his then effective annual base salary, which will be payable over a
period of six months following the termination date. If Mr. Blanchard terminates
his employment agreement without good reason, he will not receive any severance
benefits.
Under Mr. Blanchard's employment agreement, he has agreed not to compete
against the Company after the termination of his employment agreement for a
period of twelve months after the effective date of such termination. This
twelve-month non-compete period is extended by the number of days included in
any period of time during which Mr. Blanchard is or was engaged in activities
constituting a breach of the non-compete provisions in his employment agreement.
On December 1, 2001, the Company entered into an employment agreement with
Paul H. Jachim, under which Mr. Jachim will serve as Chief Operating Officer for
a three-year term expiring December 1, 2004. Under Mr. Jachim's employment
agreement, he is to receive an annual base salary of $165,000, and is entitled
to participate in our stock option plans and our other generally available
benefit programs. Upon execution of the employment agreement, Mr. Jachim also
was granted options to purchase an aggregate of 400,000 shares of our common
stock subject to the following vesting terms: (a) 20,000 shares were subject to
the achievement of certain specified performance goals set at the mutual
agreement of BestNet and Mr. Jachim, which were achieved, (b) 20,000 shares were
due to vest on January 1, 2002, provided Mr. Jachim successfully established
network and operations processes and procedures that were, in the opinion of our
President and Chief Executive Officer, sufficient to successfully serve
customers of BestNet, and (c) 360,000 shares vest in one-third increments over a
three-year period commencing one year from the date of grant.
Mr. Jachim's employment agreement provides that should the Company
terminate his employment without cause, or should Mr. Jachim terminate his
employment agreement for good reason, he will receive his then effective base
salary and other benefits provided by the employment agreement immediately
following the effective date of termination of employment for a period of twelve
months. Mr. Jachim also will be entitled to exercise any options that were
vested as of the date of termination for a period of six months thereafter. If
Mr. Jachim's employment is terminated without cause following a change in
control of BestNet (as defined in the employment agreement), he will receive an
amount equal to his then effective annual base salary, which will be payable
over a period of six months following such termination date. If Mr. Jachim
terminates his employment agreement without good reason, he will not receive any
severance benefits.
Under Mr. Jachim's employment agreement, he has agreed not to compete
against the Company after the termination of his employment agreement for a
period of twelve months after the effective date of such termination. This
Page 14
twelve-month non-compete period is extended by the number of days included in
any period of time during which Mr. Jachim is or was engaged in activities
constituting a breach of the non-compete provisions in his employment agreement.
Both Messrs. Blanchard and Jachim were entitled to receive incentive
compensation in the form of stock options for the achievement of certain
performance objectives during Fiscal 2002, but deferred the receipt of such
compensation until such time as compensation could be reviewed by a compensation
committee of the Company's Board of Directors comprised of independent
directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company has developed and implemented compensation policies and
programs to improve the Company's overall financial performance and thus improve
shareholder value by aligning the interests of senior management with those of
its shareholders. The Company's compensation committee, which is now comprised
entirely of independent members of the Company's Board of Directors, has just
been reinstated. No awards of options were made to the Company's executives in
fiscal 2002.
Base Salary and Bonuses
Each Company executive receives a base salary that, when aggregated with
their other incentive-based compensation, is intended to be competitive with
similarly situated executives in the Company's industry. The Company typically
targets base pay at the minimum level necessary to attract highly qualified
executives, which is currently less than market rates. In determining salaries,
the Company takes into account individual experience and performance and
specific needs particular to the Company. The Company did not pay any cash
bonuses in fiscal 2002.
Options
Because the long-term financial success of the Company depends to a
significant degree on its management team, the Company believes that it is
crucial for its management team to have an equity stake in the Company. Thus,
the Company makes option grants to key executives from time to time. In making
option awards, the Company reviews the level of awards granted to executives at
companies in the Company's industry, the awards granted to other executives
within the Company and the individual officer's specific role at the Company.
Although the Company, in some cases, pays base salaries to executives that are
less than market rates, the Company believes that its option awards enable it to
attract and retain highly qualified executives.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSAL TO ELECT THE NOMINEES NAMED IN THE PROXY TO
SERVE AS DIRECTORS
Page 15
AMENDMENT TO THE ARTICLES OF INCORPORATION
(Proposal No. 2)
The Board of Directors has deemed it advisable and recommends that the
stockholders approve an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock from 50,000,000 to
100,000,000 shares. The Board of Directors feels this increase is critical to
the Company. The Board further advises that failure to approve this proposal
could result in the Company's inability to meet current and future obligations,
and may force the Company to seek protection under the bankruptcy laws. Upon
approval of the above amendment by the Company's stockholders, the Company
intends to file an amendment to its Articles of Incorporation with the Secretary
of State of Nevada setting forth such change.
The approval of additional shares of Common Stock will:
o Provide for additional funding for growth by enabling conversion of the
preferred stock and exercise of the warrants associated with the Company's
March 2003 unit offering.
o Enable the Company to seek additional capital to further accelerate
marketing and sales efforts.
o Provide equity for potential strategic acquisitions to further accelerate
growth. The Company has not entered into any agreements to acquire any
third parties.
If Proposal No.2 is approved, the additional shares of Common Stock so
authorized, as well as shares of Common Stock currently authorized but not
issued or outstanding, may be issued from time to time upon authorization of the
Board of Directors of the Company, without further approval by the stockholders,
unless otherwise required by applicable law, and for such consideration as the
Board of Directors may determine and as may be permitted by applicable law.
The increase in authorized shares is not being proposed as a means of
preventing or dissuading a change in control or takeover of the Company.
However, use of these shares for such a purpose is possible. Shares of
authorized but unissued Common Stock, as well as shares of authorized but
unissued serial preferred stock, for example, could be issued in an effort to
dilute the stock ownership and voting power of persons seeking to obtain control
of the Company or could be issued to purchasers who would support the Board of
Directors in opposing a takeover proposal. In addition, the increase in
authorized shares, if approved, may have the effect of discouraging a challenge
for control or making it less likely that such a challenge, if attempted, would
be successful.
The proposed amendment does not change the terms of the Common Stock.
Neither the Articles of Incorporation of the Company nor Nevada law grants
holders of Common Stock any preemptive rights. Adoption of the proposed
amendment to the Articles of Incorporation would not affect the rights of the
holders of currently outstanding shares of Common Stock. The additional shares
Page 16
of Common Stock for which authorization is sought will have the same par value,
the same voting rights, the same rights to dividends and distributions and will
be identical in all other respects to the shares of Common Stock now authorized.
The authorization of additional shares of Common Stock pursuant to this
proposal will have no dilutive effect upon the proportionate voting power of the
present holders of Common Stock of the Company. However, to the extent that
shares are subsequently issued to persons other than the current stockholders
and/or in proportions other than the proportion that presently exists, such
issuance could have a substantial dilutive effect on the current holders of
Common Stock.
Approval of the amendment to the Articles of Incorporation requires the
affirmative vote of a majority of shares of Common Stock outstanding as of the
Record Date.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF THE COMPANY'S COMMON STOCK.
RATIFICATION OF APPOINTMENT OF AUDITORS
(Proposal No. 3)
The Board of Directors has selected Semple as the independent auditors for
the Company, and recommends that the shareholders vote for ratification of such
appointment. Shareholder ratification of the selection of Semple as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Semple for
shareholder ratification as a matter of good corporate practice. The Company has
engaged Semple to serve as the Company's independent auditors for the past
several years. Notwithstanding the selection, the Board in its discretion, may
direct the appointment of a new independent accounting firm at any time during
the year if the Board feels that such a change would be in the best interests of
the Company and its shareholders. A representative of Semple will not be present
at the Annual Meeting nor be available to respond to appropriate questions for
cost reasons.
Ratification of the appointment of Semple as the Company's independent
auditors for the current fiscal year will require the affirmative vote of the
holders of at least a majority of the outstanding Common Stock represented in
person or by proxy at the Annual Meeting. If the holders of at least a majority
of the outstanding Common Stock fail to ratify the appointment of Semple as the
Company's independent auditors, the audit committee will consider such failure
at a subsequent meeting of the audit committee and determine, in its discretion,
what actions it should take, if any.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THIS PROPOSAL.
Page 17
Annual Report
The 2002 Annual Report of the Company, which was mailed to stockholders
with this Proxy, contains financial and other information about the activities
of the Company that is not incorporated into this Proxy Statement, and should
not be considered part of these proxy solicitation materials.
Upon written request, the Company will provide to each shareholder of
record as of the Record Date, for a fee equivalent to the Company's
out-of-pocket expenses, a copy of any Exhibits listed in the Form 10-KSB for the
fiscal year ended August 31, 2002. Any such request should be directed to the
Company's Secretary at the Company's executive offices at 5075 Cascade Road, SE,
Suite A, Grand Rapids, MI 49546. The information contained in the "Compensation
Committee Report on Executive Compensation" and "Report of the Audit Committee
of the Board of Directors" above shall not be deemed "filed" with the Securities
and Exchange Commission or subject to Regulations 14A or 14C or to the
liabilities of Section 18 of the Securities Exchange Act of 1934, and shall not
be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Securities Act of 1934.
Deadline for Receipt of Stockholder Proposals; Discretionary Authority
Any stockholder who intends to present a proposal at the annual meeting of
stockholders for the year ending August 31, 2004 and have it included in the
Company's proxy materials for that meeting must deliver the proposal to the
Company for its consideration no later than April 21, 2004 and must comply with
Rule 14a-8 under the Securities Exchange Act of 1934, as amended. Such proposals
should be addressed to the Corporate Secretary, BestNet Communications Corp.,
5075 Cascade Road, SE, Suite A, Grand Rapids, MI 49546.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as
amended, the Company intends to retain discretionary authority to vote proxies
with respect to stockholder proposals properly presented at the Annual Meeting,
except in circumstances where the proponent complies with the other requirements
set forth in Rule 14a-4. The Company did not receive notice of any stockholder
proposal prior to such deadline; therefore, no stockholder proposal may be
properly presented at the September 17, 2003 Annual Meeting.
Voting By Proxy
In order to ensure that your shares will be represented at the Annual
Meeting, please sign and return the enclosed Proxy in the envelope provided for
that purpose, whether or not you expect to attend. Any shareholder may, without
affecting any vote previously taken, revoke a written proxy by giving notice of
revocation to the Company in writing or by executing and delivering to the
Company a later dated proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Robert A. Blanchard, Chairman and Chief Executive Officer
Grand Rapids, Michigan
August 18, 2003
Page 18
BESTNET COMMUNICATIONS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BESTNET
COMMUNICATION CORP. FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of BestNet Communications Corp., a Nevada
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, dated August 18, 2003, and hereby appoints Robert A.
Blanchard and Paul H. Jachim, and each of them, proxies and attorneys-in-fact,
with full power of substitution, on behalf and in the name of the undersigned,
to represent the undersigned at the Annual Meeting of Shareholders of BestNet
Communication Corp. to be held at the Doubletree Suites Phoenix Gate, 320 North
44th Street, Phoenix, Arizona, 85008 on September 17, 2003 at 10:00 a.m.,
Mountain Standard Time, and at any adjournment(s) or postponement(s) thereof,
and to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present, on the matters set forth below.
1. ELECTION OF DIRECTORS
[ ] FOR the six (6) nominees listed below (except as marked to the
contrary below):
Robert A. Blanchard Richard Bourke Christopher J. Grant
Paul H. Jachim Randy S. Moore James B. Woodcock
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
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The undersigned agrees that the proxy holder is authorized to cumulate
votes in the election of directors and to vote for less than all of the
nominees.
2. PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO 100,000,000
SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF SEMPLE & COOPER, LLP AS THE COMPANY'S INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES NAMED ABOVE AND AS SAID PROXIES DEEM ADVISABLE
ON SUCH MATTERS AS MAY COME BEFORE THE MEETING.
Dated: , 2003
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Please sign exactly as your name appears
above. When shares are held in common or in
joint tenancy, both should sign. When signing
as attorney, as executor, administrator,
trustee or guardian, please give full title
as such. If a corporation, sign in full
corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by an authorized
person.
SIGNATURES:
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Please return in the enclosed, postage-paid envelope.
I Will ________ Will not ______ attend the Annual Meeting.