UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
GTC TELECOM CORP.
(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)(4) 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:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] 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:
GTC TELECOM CORP.
3151 Airway Ave., Suite P-3
Costa Mesa, California 92626
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 13, 2001
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders of
GTC Telecom Corp., to be held on Thursday, December 13, 2001 at 9:30 A.M.,
Pacific Time, at the Irvine Marriott John Wayne Airport, 18000 Von Karman Ave.,
Irvine, California 92612, to consider and act upon the following proposals, as
described in the accompanying Proxy Statement:
1. To elect five (5) directors to serve until the next Annual Meeting of
Shareholders and thereafter until their successors are elected and qualified;
2. To approve and ratify the GTC Telecom 2001 Stock Incentive Plan for the
directors, officers and employees of GTC Telecom Corp.
3. To ratify the appointment of Corbin & Wertz LLP as independent auditors
of the Company for the fiscal year ending June 30, 2002; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. The Board of Directors has fixed the close of
business on October 24, 2001, as the record date for Shareholders entitled to
notice of and to vote at this meeting and any adjournments thereof.
By Order of the Board of Directors
Eric C. Clemons, Secretary
October _, 2001
Costa Mesa, California
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY
WILL NOT BE USED IF YOU ARE PRESENT AT THE ANNUAL MEETING AND DESIRE TO VOTE
YOUR SHARES PERSONALLY AT THAT TIME.
GTC TELECOM CORP.
3151 Airway Ave., Suite P-3
Costa Mesa, California 92626
-----------------------------
PROXY STATEMENT
-----------------------------
GENERAL INFORMATION
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The enclosed Proxy is solicited by the Board of Directors of GTC Telecom Corp.
(the "Company" or "GTC") for use in connection with the Annual Meeting of
Shareholders to be held at the Irvine Marriott John Wayne Airport, 18000 Von
Karman Ave., Irvine, California 92612 on Thursday, December 13, 2001, at 9:30
a.m., and at any and all adjournments thereof for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Shareholders.
The persons named as proxies were designated by the Board of Directors (the
"Board") and are officers or directors of the Company. Any Proxy may be revoked
or superseded by executing a later Proxy or by giving notice of revocation in
writing prior to, or at, the Annual Meeting, or by attending the Annual Meeting
and voting in person. Attendance at the meeting will not in and of itself
constitute revocation of the Proxy. All Proxies that are properly completed,
signed and returned to the Company prior to the meeting, and not revoked, will
be voted in accordance with the instructions given in the Proxy. If a choice is
not specified in the Proxy, the Proxy will be voted:
2. 1. FOR election of the director nominees listed below (Proposal 1);
3. 2. FOR approval and ratification of the GTC Telecom 2001 Stock
Incentive Plan for the directors, officers and employees of GTC Telecom Corp.
(Proposal 2)
4. 3. FOR the ratification of the appointment of Corbin & Wertz LLP as
independent auditors of the Company for the fiscal year ending June 30, 2002
(Proposal 3).
Officers of the Company or their designees will tabulate votes cast at the
Annual Meeting. A majority of shares entitled to vote, represented in person or
by proxy, will constitute a quorum at the Annual Meeting. Abstentions and
broker non-votes are each included in the determination of the number of shares
present and voting for the purpose of determining whether a quorum is present,
and each is tabulated separately. In determining whether a proposal has been
approved, abstentions are counted as votes against a proposal and broker
non-votes are not counted.
If any other matters are properly presented at the Annual Meeting for action,
the persons named in the enclosed form of proxy will have discretion to vote on
such matters in accordance with their best judgment. The Company does not know
of any matters other than those set forth above that will be presented at the
Annual Meeting.
This Proxy Statement and the accompanying Proxy are being mailed to shareholders
on or about November 12, 2001. The entire cost of the solicitation of Proxies
will be borne by the Company. It is contemplated that this solicitation will be
primarily by mail. In addition, some of the officers, directors and employees
of the Company may solicit Proxies personally or by telephone, fax, telegraph or
cable. Officers and employees soliciting proxies will not receive any additional
compensation for their services. The Company will reimburse brokers and other
nominees for their reasonable out-of-pocket expenses incurred in forwarding
solicitation material to beneficial owners of shares held of record by such
brokers or nominees.
OUTSTANDING SHARES AND VOTING RIGHTS
The only class of the Company's equity securities currently outstanding is its
Common Stock. Shareholders of record at the close of business on October 24,
2001 are entitled to one vote for each share of Common Stock held by them. As
of October 24, 2001, there were 20,396,622 shares of Common Stock outstanding.
A majority of the shares of the Company's Common Stock present or represented
and entitled to vote at the meeting is required to approve each proposal
presented at the meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors are elected by the shareholders at each annual meeting to hold office
until their respective successors are elected and qualified. Pursuant to the
Bylaws of the Company, the Board of Directors consists of not less than one (1)
nor more than five (5) directors, and the number is presently fixed at five (5)
members. As a result of the acquisition of GenTel Communications, Inc. by the
Company, the Company's prior Board of Directors resigned and appointed S. Paul
Sandhu and Eric Clemons to fill their vacancies. Clay T. Whitehead was
appointed to the Board on September 16, 1998, John M. Eger was appointed to the
Board on October 20, 1999, and Gerald A. DeCiccio was appointed to the Board on
November 3, 2000 to fill vacancies left over from the acquisition of GenTel by
the Company.
Voting for the election of directors is non-cumulative, which means that a
simple majority of the shares voting may elect all of the directors. Each share
of Common Stock is entitled to one vote and, therefore, has a number of votes
equal to the number of authorized directors. Proxies may not be voted for more
than five (5) directors.
Although management of the Company expects that each of the following nominees
will be available to serve as a director, in the event that any of them should
become unavailable prior to the Annual Meeting, management's proxies will be
voted for a nominee or nominees designated by management or will be voted for a
lesser number of directors. If there are other nominees, management's proxies
will be voted so as to elect the greatest number of the following nominees.
Management has no reason to believe that any of its nominees, if elected, will
be unavailable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW.
The nominees for election to the Board of Directors as selected by the Board of
Directors of the Company are set forth below alphabetically:
Eric Clemons
John M. Eger
S. Paul Sandhu
Clay T. Whitehead
Gerald A. DeCiccio
The biographies of nominees, including certain additional information, are set
forth below:
ERIC CLEMONS, 30, has been a director of the Company since August 28, 1998 and
is currently the Company's President and a director of the Company. Mr. Clemons
has been with GTC since its inception. Mr. Clemons has over ten (10) years
experience with sales and marketing organizations. Mr. Clemons most recently
was Vice President of Marketing for Intelligent Electronic Communications
managing a staff of 50 employees. Mr. Clemons has attended The Wharton School
of Business executive management programs. Between 1989 and 1994, Mr. Clemons
was a licensed NASD broker. As a broker, Mr. Clemons was subject to three
claims related to such engagement and subsequently an administrative action by
the NASD related to his work as a licensed broker. Mr. Clemons was found liable
for an award of $4,000 on one of the actions and subsequently in April 1997, was
fined $65,000 and barred from association with any NASD member with the ability
for re-application following a period of two years.
JOHN M. EGER, 61, was appointed to the Board on October 20, 1999. Mr. Eger is a
telecommunications lawyer and former counsel to the international law firm
Morrison and Forester and is currently the holder of the prestigious Lionel Van
Deerlin Endowed Chair of Communications and Public Policy at San Diego State
University. He is also the President and CEO of the World Foundation for Smart
Communities, a non-profit, non-governmental educational program dedicated to
helping communities understand the importance of information technology as a
catalyst for transforming life and work in the 21st Century. Mr. Eger formerly
headed CBS Broadcast International, which he established and was Senior Vice
President of the CBS Broadcast Group. From 1971-1973, Mr. Eger was legal
assistant to the chairman of the Federal Communications Commission, and from
1974-1976 served as Telecommunications Advisor to Presidents Nixon and Ford and
was also the Head of the White House Office of Telecommunications Policy (OTP).
Earlier in his career, Professor Eger served as a data communications specialist
and design director of information systems for the Bell System. From 1976
through 1981, he was a Washington, DC based telecommunications attorney. Other
positions Mr. Eger has held include serving as Chairman of the Board of the San
Diego Processing Corporation, Chairman of San Diego Mayor Susan Golding's City
of the Future Advisory Committee and Chairman of Governor Pete Wilson's
California Commission on Information Technology.
S. PAUL SANDHU, 40, has been a director of the Company since August 28, 1998 and
is currently the Company's Chief Executive Officer and a director of the
Company. Mr. Sandhu has been with GTC since its inception. Mr. Sandhu has over
twelve (12) years experience with start-up and emerging growth companies. Mr.
Sandhu was Co-Founder, President and Co-Owner of Maximum Security ("Maximum"), a
Security and surveillance company he started in 1992. While at Maximum, Mr.
Sandhu actively managed a staff of over 200 employees. In 1997 Mr. Sandhu sold
the business to his partner. Mr. Sandhu graduated from the University of Punjab
in India with a degree in Engineering.
CLAY T. WHITEHEAD, 62, was appointed to the Board on September 16, 1998. Mr.
Whitehead is currently President of Clay Whitehead Associates, a strategic
consulting and business development company which concentrates on the
telecommunications and media industries. Clay Whitehead Associates primarily
works with large companies to develop business projects in the areas of
telecommunications and television. Mr. Whitehead has participated in the
formation, strategy development, regulatory posture, and financing of a number
of telecommunications businesses in the United States and internationally. Mr.
Whitehead has also served as a special assistant to President Nixon, with policy
responsibility for NASA, the Atomic Energy Commission, and the National Science
Foundation. From 1971 to 1974, he was director of the U.S. Office of
Telecommunications Policy. From 1979 to 1983, Mr. Whitehead founded and was
president of Hughes Communications, Inc., a subsidiary of Hughes Aircraft
Company.
GERALD A. DECICCIO, 44, was appointed to the Board on November 3, 2000. Mr.
DeCiccio first joined the Company in January 1999 as Chief Financial Officer.
Mr. DeCiccio has over twenty (20) years experience in the financial and
accounting field. Prior to joining GTC, Mr. DeCiccio was the Vice President of
Finance and Administration for National Telephone & Communications, Inc.,
("NT&C") a $150 million inter-exchange carrier and provider of communications
products and services. While at NT&C, Mr. DeCiccio managed NT&C's finance,
accounting, human resources and legal departments. Between 1995 and 1997, Mr.
DeCiccio was the Corporate Controller for Newport Corporation, a $140 million
multi-national manufacturer / distributor of laser and optics products. Prior
to that, Mr. DeCiccio was the Director of Audit and Quality Systems for Sunrise
Medical, Inc., a $750 million multi-national manufacturer / distributor of
health care products. From 1980 to 1984, Mr. DeCiccio was a Supervising Senior
Accountant for Ernst and Young. Mr. DeCiccio received his Bachelor of Science
in Accounting from Loma Linda University, and his Masters of Science in Finance
and Systems Technology from the University of Southern California. Mr. DeCiccio
is a Certified Public Accountant in the State of California.
The following directors presently serve as directors of the following public
corporations:
Clay T. Whitehead Prudential Funds, a number of Prudential mutual funds;
Crosswalk.com, an internet e-commerce company.
John M. Eger WaveExpress, a joint venture of Sarnoff Labs and Wave
Systems; Verance Corporation, an electronic watermarking and information
management company; and, E-Tel Corp., a manufacturer of internet telephones.
COMPENSATION OF BOARD OF DIRECTORS
For the fiscal years ended 1996, 1997 and 1998, and the six months ended
December 31, 1998, Directors of the Company received no compensation. Beginning
with the third quarter of fiscal year 1999 through December 31, 2000, Directors
received $1,500 and 2,500 options to purchase the Company's common stock per
quarter. Beginning January 1, 2001, the outside directors each receive $4,000
per quarter, $1,000 per major committee meeting as contemplated in the
respective committee charter, $1,000 each for the Chairman of the Audit and
Compensation committees per year of service, 2,500 options per quarter priced at
fair market value on the date of grant, and 2,500 options each per quarter
priced at fair market value on the date of grant for the Chairman of the Audit
and Compensation committees. The shares underlying the options are restricted
(as that term is defined by Rule 144 of the Securities Act of 1933). The inside
directors receive no compensation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held four meetings during the year ended
June 30, 2001. Each director attended each of the meetings, except Mr. Eger who
missed one meeting. The Board does not meet on any pre-determined schedule but
meets on an as needed basis. The Board has an Audit Committee and a
Compensation & Nominating Committee.The Audit Committee held two meetings during
the year ended June 30, 2001. The Audit Committee reviews the internal
accounting procedures of GTC, consults with and reviews the services provided by
GTC's independent accountants, and recommends to the Board the appointment of
the independent auditors for the fiscal year. The Audit Committee of the Board
currently consists of Messrs. Whitehead and Eger who are independent. A copy of
the Audit Committee's charter is attached to this Proxy Statement as Appendix -
A.
The Compensation & Nominating Committee held one meeting during the fiscal year
ended June 30, 2001. The Compensation & Nominating Committee is responsible for
annually reviewing and fixing the salaries and other compensation of the
officers of the Corporation, and deciding upon the grant of stock options to the
officers and other employees of the Corporation. The Compensation & Nominating
Committee is also is responsible for evaluating and recommending to the Board
qualified nominees for election as Directors of the Corporation and considering
other matters pertaining to the size and composition of the Board. The
Compensation & Nominating Committee of the Board currently consists of Messrs.
Whitehead, Eger, and Sandhu. The Committee does not currently have a charter.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of two independent
directors. The responsibilities of the Audit Committee are set forth in the
Audit Committee Charter approved by the Board of Directors, a copy of which is
attached to this Proxy Statement as Appendix A.
We have reviewed and discussed the Company's audited consolidated financial
statements as of and for the fiscal year ended June 30, 2001 with the Company's
management and Corbin & Wertz LLP ("Corbin & Wertz"), the Company's independent
certified public accountants.
We have received and reviewed the written disclosures and the letter from Corbin
& Wertz required by Independence Standard No. 1, Independence Discussions with
Audit Committees, as amended, by the Independence Standards Board, and have
discussed with Corbin & Wertz their objectivity and independence.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standard No. 61, Communications with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
Based on the reviews and discussions referred to above, we recommend to the
Board of Directors that the audited consolidated financial statements referred
to above be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 2001 to be filed with the Securities and Exchange
Commission.
By
-------------------------------
John M. Eger
Chairman
By
-------------------------------
Clay T. Whitehead
Member
PROPOSAL TWO
ADOPTION OF GTC 2001 STOCK INCENTIVE PLAN
BACKGROUND AND PURPOSE
The purpose of the GTC 2001 Stock Incentive Plan (the "Plan") is to provide a
means to attract and retain competent personnel and to provide to participating
officers, directors, employees and consultants long-term incentive for high
levels of performance and for unusual efforts to improve the financial
performance of the Company. The Board believes that it is in the Company's and
its shareholders' best interest to provide to such persons an opportunity to
participate in the appreciation and value of the Common Stock of the Company.
The Plan provides for the grant various types of equity based incentives. The
following description of the primary features of the Plan is qualified in all
respects by reference to the full text of the Plan.
THE PLAN
TYPES OF INCENTIVES. The Plan will provide for the grant of stock options,
stock appreciation rights ("SARs"), restricted stock, and cash and stock
bonuses, on a current or deferred basis, collectively "Awards." The Company may
settle Awards in cash or shares of the Company's Common Stock ("Shares").
Although only stock options are contemplated at this time, the other forms of
Awards give the Company flexibility to structure future incentives.
NUMBER OF SHARES AVAILABLE. The maximum number of Shares that may be issued
under the Plan is 10,000,000 shares of the Company's Common Stock.
The Internal Revenue Code requires a fixed limit on the number of Shares that
may be covered by options and SARs granted to any one individual in any one
calendar year and a fixed limit on the number of Shares that may be covered by
all Awards granted to any one individual in any one calendar year. These limits
are each 1,000,000 shares.
SUBSTANTIAL POWERS OF THE ADMINISTRATOR. Subject to the express terms of the
Plan, the Plan administrator will have broad power to administer, construe, and
interpret the Plan, including the power to:
- determine who receives Awards and the type of Awards they will receive,
- grant Awards, price them and determine the size and other terms of the
grants, and determine appropriate adjustments in connection with a
reorganization, change in control, or certain other events, and
- accelerate the exercisability or vesting of Awards or make other changes
in Awards.
CONSIDERATION FOR AWARDS AND SHARES. Awards may be issued for services rendered
or to be rendered. Shares also may be issued for any lawful consideration,
including cash, other securities or rights. The administrator may authorize
loans from the Company to participants in the amount necessary for participants
to pay the withholding taxes due in connection with the exercise or vesting of
Awards.
GRANT OF AWARDS CONDITIONED ON STOCKHOLDER APPROVAL OF THE PLAN. Any Awards
granted prior to stockholder approval of the Plan would be subject to
stockholder approval of the Plan no later than 12 months following the date the
Board adopts the Plan. An accounting charge to earnings may be triggered to the
extent that Awards are granted before stockholder approval of the Plan (equal to
the fair market value of the Shares on the date of stockholder approval less the
purchase price for the Award).
ELIGIBILITY. All directors, officers and employees of the Company and its
subsidiaries are eligible for Award grants. Only persons actually selected by
the administrator will be granted Awards.
RESTRICTIONS ON TRANSFER. Awards are generally nontransferable (except on
death), subject to exceptions for donative purposes on a case-by-case basis to a
limited number of related persons (e.g., spouse or children), in furtherance of
tax and estate planning objectives.
TERM. No Awards may be granted under the Plan more than 10 years after it is
adopted by the Board. The Board, in its discretion, may terminate the Plan
earlier. Outstanding Awards generally will be unaffected by the Plan's
termination.
PLAN ADMINISTRATION
IN GENERAL. The Plan may be administered by the Board or by a committee
appointed by the Board (the "Committee"). Presumably, the Board would appoint
the Compensation Committee of the Board as the "Committee" or administrator
under the Plan.
PLAN AMENDMENT & APPROVAL. The Board may amend or terminate the Plan at any
time. Plan amendments need not be subject to stockholder approval unless
required by law.
Materially adverse changes to an Award generally (but not always) require the
holder's consent. The Committee may terminate outstanding Awards in certain
extraordinary corporate circumstances, but would generally be required to
provide for an alternative settlement of at least the vested portions of the
Awards.
It is important to note that if an Award is amended after the date it is granted
(to change the vesting schedule, to change the termination of employment
provisions, to reprice the option or otherwise), the amendment may have adverse
accounting consequences.
OPTIONS
DESCRIPTION. Options represent rights to purchase shares at a specified price
(the exercise price) during a specified term not to exceed 10 years. Both
nonqualified stock options ("NQSOs") and incentive stock options (those intended
to be qualified under Section 422 of the Code) ("ISOs") may be granted under the
Plan. NQSOs and ISOs trigger different tax consequences. See Tax Consequences
below.
EXERCISE PRICE. Options typically are issued without consideration other than
for services rendered or (by virtue of the vesting schedule) services to be
rendered. The exercise price of options will be determined by the
administrator, but in the case of ISOs may not be less than 100% of the grant
date fair market value ("FMV") of the Common Stock.
VESTING AND EXERCISE. The administrator determines the vesting schedule and
exercise provisions applicable to each Award.
EFFECT OF TERMINATION OF EMPLOYMENT. Unless the administrator otherwise
provides, options terminate when a participant terminates employment with the
Company, except for options which are then vested and exercisable. Vested
options typically continue to be exercisable for limited periods following the
date of termination (except if the employee is terminated "for cause," in which
case even the vested options will immediately terminate). The following
post-service exercise periods are included:
- 12 months if termination results from death, disability or retirement (3
months in the case of retirement and an incentive stock option);
or
- 3 months if termination occurs for any reason other than death,
disability, retirement, or "for cause."
CHANGE IN CONTROL. A Change in Control Event generally would trigger immediate
acceleration of vesting of all options, unless the Board otherwise provides
prior to the Change in Control Event. Awards which are fully accelerated and
which are not exercised or settled at or prior to a Change in Control Event
which the Company does not survive generally would or could be terminated.
A Change in Control Event is generally defined to include (i) an acquisition by
any person (other than an Excluded Person) of more than [50%] of the voting
securities of the Company, (ii) certain mergers, dispositions, or consolidations
of the Company, or certain sales of substantially all of the Company's assets,
and (iii) a dissolution or liquidation of the Company. The term "Excluded
Person" means the Company, certain entities related to the Company, and any
Company employee benefit plan (or their related successors).
TAX CONSEQUENCES. The grant of an option does not result in taxable income to
the recipient. The holder, on exercise of an NQSO, recognizes ordinary income
equal to the difference between the exercise price of the option and the fair
market value of the Shares when the option is exercised. Any subsequent gain or
loss is taxed to the recipient as a capital gain or loss upon his or her
disposition of the Shares. The Company receives a corresponding tax deduction
at the time of exercise.
On grant or exercise of an ISO, the holder recognizes no income, gain or loss;
and the Company has no deduction. If the shares are held at least two years
after grant and one year after exercise, the holder will not recognize any
income until the Shares are disposed of, at which time the entire gain or loss
(calculated with respect to the original exercise price under the option) will
be taxed as a capital gain or loss. The Company receives no tax deduction. On
exercise of an ISO, the difference between the exercise price of the option and
the fair market value of the Shares when the option is exercised is included in
the holder's income for alternative minimum tax purposes.
ACCOUNTING TREATMENT. Options can be structured to satisfy the criteria for
non-variable plan accounting and thereby avoid charges to the Company's
earnings. Options that have an exercise price of not less than FMV on the date
of grant and are granted to employees or non-employee directors of the Company
or at least a 50% controlled entity should generally satisfy such criteria under
current thinking on this subject. Options to consultants are subject to
different accounting treatment.
STOCK APPRECIATION RIGHTS
DESCRIPTION. SARs constitute rights to receive payment equal to the
appreciation in the price of the Common Stock between the date of grant and the
date of exercise. SARs are usually granted in conjunction with an equal number
of options and would vest and become exercisable on the same schedule, although
stand-alone SARs may be issued under the Plan. If the SAR is issued in
conjunction with an option, exercise of the SAR generally cancels an equal
number of Shares subject to the option. Exercise of an SAR triggers a payment
obligation to the holder. The Company has the discretion to make such payment
in either cash or Shares.
OTHER PROVISIONS. The general terms of Awards summarized under "Options" above
also apply to SARs.
TAX CONSEQUENCES. Holders of SARs are taxed in a manner corresponding to the
tax on options, and deductibility of the compensation to the Company corresponds
to that for options.
ACCOUNTING TREATMENT. The appreciation in the value of SARs over the base price
triggers periodic charges to the Company's earnings for accounting purposes.
RESTRICTED STOCK
DESCRIPTION. A restricted stock Award is an award of a fixed number of Shares
subject to vesting requirements and other restrictions. The administrator
specifies the price, if any, the Participant must pay for the Shares and the
restrictions imposed on the Shares. Generally, if a recipient of a restricted
stock Award terminates employment prior to the time that any applicable
restrictions have lapsed, or if a restricted stock Award otherwise expires prior
to the lapse of any applicable restrictions, the recipient is required to return
the unvested restricted Shares to the Company.
TAX CONSEQUENCES. In general, no income is recognized by the recipient upon the
grant of a restricted stock Award. The recipient will recognize ordinary income
when the restrictions lapse equal to the excess of the fair market value of the
restricted stock at the time the restrictions lapse over the amount which the
recipient paid for the restricted stock. However, a recipient of a restricted
stock award may elect to recognize ordinary income as of the grant date of the
award equal in amount to the excess of the fair market value of the restricted
stock at the time of grant over the amount paid for the restricted stock. The
Company may deduct an amount equal to the income recognized by the recipient at
the time the recipient recognizes the income. Upon a sale of restricted stock
after the restrictions lapse, capital gain or loss will be recognized by the
recipient.
ACCOUNTING TREATMENT. Restricted Stock Awards that vest over a period of time
generally trigger an accounting charge to earnings from the date of grant (equal
to the fair market value of the shares less the purchase price for the Award)
over the expected term. In the ordinary course, no additional compensation
expense is recognized solely in connection with the vesting of the shares.
BONUSES AND OTHER AWARDS
DESCRIPTION. The Plan leaves considerable discretion to the administrator to
grant bonuses in the form of Common Stock and to structure the terms and
conditions of performance-based awards.
A performance-based award is generally an award that becomes payable upon the
attainment of one or more performance criteria established at the time of grant
and set forth in the related Award Agreement. The amount of cash or shares or
other property that may be deliverable pursuant to such an Award is based upon
the degree of attainment over a specified period of such measure(s) of
performance of the Company (or any part thereof) or the Participant as may be
established by the administrator.
TAX CONSEQUENCES. Generally speaking, a recipient of these other Awards will
receive taxable income when they are vested and payable, and the Company will be
entitled to a corresponding tax deduction at that time.
ACCOUNTING TREATMENT. The accounting treatment for these other Awards will
generally not be as favorable as it is for "at market" options. On the other
hand, if properly structured and payable solely in Shares, these Awards can
avoid "variable" accounting, although the Company may incur periodic "amortized"
charges to earnings.
Approval and ratification of the Option Plan will require the affirmative vote
of the holders of a majority of the outstanding shares of the Company's Common
Stock present or represented and voting at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE 2001 STOCK
INCENTIVE PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed Corbin & Wertz, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending June 30, 2002 and seeks ratification of such appointment. In the event of
a negative vote on such ratification, the Board of Directors will reconsider its
appointment. Corbin & Wertz was the Company's independent auditor for the prior
fiscal year ending June 30, 2001.
Representatives of Corbin & Wertz are expected to be present at the Annual
Meeting, will have the opportunity to make a statement, if they desire to do so
and are expected to be available to respond to appropriate questions.
For the fiscal year ended June 30, 2001, the Company's audit fees were as
follows:
(a) Audit Fees: Aggregate fees billed for professional services rendered for the
audit of the Company's fiscal year 2001 annual financial statements and review
of the financial statements in the Company's reports on Form 10-QSB: $81,420.
(b) Financial Information Systems Design and Implementation Fees: None.
(c) All Other Fees: The aggregate fees billed by Corbin & Wertz for all other
professional services provided to the Company (other than the services described
above under "Audit Fees") for the fiscal year ended June 30, 2001 were $30,820.
These fees were primarily for tax services.
The Audit Committee has considered whether the services rendered by the
independent certified public accountants with respect to the foregoing fees are
compatible with maintaining their independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF CORBIN & WERTZ
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30,
2002.
OTHER INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are set forth below, along
with their biographies. See "ELECTION OF DIRECTORS" for the biographies of the
Company's directors.
Name Positions
----------------- -------------------------------------
S. Paul Sandhu Chief Executive Officer, and Director
Eric Clemons President and Director
Gerald A. DeCiccio Chief Financial Officer and Director
Mark Fleming Chief Operating Officer
John M. Eger Director
Clay T. Whitehead Director
MARK FLEMING, 43, joined the Company in October 1998 as Executive Vice
President. Mr. Fleming has eighteen (18) years of business strategy, planning,
and analysis experience within the competitive consumer products / services
industries. For seven years, Mr. Fleming worked in the telecommunications
industry, holding several finance and marketing management positions at MCI.
Some of the key business / operational issues that Mr. Fleming managed while at
MCI included pricing strategy, market positioning, new product development,
sales channel and customer service performance reviews, capital investment
decisions and overall business planning / analysis for Residential Markets and
Local Services divisions. Mr. Fleming received his Bachelor of Arts degree in
Business Administration from Principia College in 1980, and attained his Masters
in Business Administration, with honors from the University of Southern
California in 1986.
EXECUTIVE COMPENSATION
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the fiscal years ended June 30, 2001,
2000 and 1999. Other than as set forth herein, no executive officer's salary
and bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------- AWARDS PAYOUTS
-------------------------------
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING LTIP OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPESATION
POSITION YEAR ($) ($) ($) ($) SARS (#) ($) ($)
---------------------------------------------------------------------------------------------------------------------------
Paul Sandhu 2001
(CEO) (6/30) $ 105,000 -0- 10,000(1) -0- 132,500 -0- 13,000(2)
2000
(6/30) 126,000 -0- -0- -0- 217,500 -0- -0-
1999
(6/30) 85,500 -0- -0- -0- -0- -0- -0-
---------------------------------------------------------------------------------------------------------------------------
Eric Clemons 2001
(President) (6/30) 145,667 13,680 10,000(1) -0- 132,500 -0- 100,000(2)
2000
(6/30) 133,000 -0- -0- -0- 167,500 -0- -0-
1999
(6/30) 90,836 -0- -0- -0- -0- -0- -0-
---------------------------------------------------------------------------------------------------------------------------
Gerald DeCiccio 2001
(CFO) (6/30) 138,000 -0- -0- -0- 177,500 -0- -0-
2000
(6/30) 139,708 -0- -0- -0- 75,000 -0- -0-
1999
(6/30) 54,102 -0- -0- -0- 150,000 -0- -0-
---------------------------------------------------------------------------------------------------------------------------
Mark Fleming 2001
(COO) (6/30) 124,583 -0- -0- -0- 50,000 -0- -0-
2000
(6/30) 121,042 -0- -0- -0- 75,000 -0- -0-
1999
(6/30) 62,083 -0- -0- -0- 100,000 -0- -0-
---------------------------------------------------------------------------------------------------------------------------
(1) Amounts paid for directors fees
(2) Non-business expenses paid on behalf of the officers
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S GRANTED
OPTIONS/SAR'S GRANTED TO EMPLOYEES IN FISCAL EXERCISE OF BASE PRICE
NAME (#) YEAR ($/SH) EXPIRATION DATE
---------------------- ----------------------- ------------------------ ---------------
Paul Sandhu 7,500(1) <1% $ 0.01 1/2/04
125,000(2) 15.8% $ 0.6875 10/5/10
---------------------- ----------------------- ------------------------ ---------------
Eric Clemons 7,500(3) <1% $ 0.01 1/2/04
125,000(2) 15.8% $ 0.6875 10/5/10
---------------------- ----------------------- ------------------------ ---------------
Gerald DeCiccio 125,000(4) 15.8% $ 0.50 11/2/03
2,500(5) <1% $ 0.01 1/2/04
50,000(2) 6.3% $ 0.6875 10/5/10
---------------------- ----------------------- ------------------------ ---------------
Mark Fleming 50,000(2) 6.3% $ 0.6875 10/5/10
---------------------- ----------------------- ------------------------ ---------------
(1) Represents options issued on 1/2/01 pursuant to Mr. Sandhu's Director
Compensation agreement.
(2) Represents options issued on 10/5/00 in accordance with the 1999 Stock
Option Plan.
(3) Represents options issued on 1/2/01 pursuant to Mr. Clemon's Director
Compensation agreement.
(4) Represents options issued on 11/2/00 pursuant to Mr. DeCiccio's Director
Compensation agreement.
(5) Represents options issued on 1/2/01 pursuant to Mr. DeCiccio's Director
Compensation agreement.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN
SECURITIES UNDERLYING THE-MONEY OPTION/SARS
SHARES ACQUIRED ON VALUE OPTIONS/SARS AT FY-END (#) AT FY-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---------------------- ------------------------ -------------------------- --------------------------
Paul Sandhu 0 n/a 65,000 / 285,000 7,250 / 0
Eric Clemons 0 n/a 55,000 / 245,000 7,250 / 0
Gerald DeCiccio 0 n/a 225,834 / 151,666 725 / 0
Mark Fleming 0 n/a 85,000 / 140,000 2,900 / 0
EMPLOYMENT AGREEMENTS
On December 1, 1998, the Company entered into an Employment Agreement with Paul
Sandhu, the Company's President and CEO, whereby the Company will pay Mr. Sandhu
an annual salary of $84,000. Pursuant to the Agreement, Mr. Sandhu's salary
shall increase to $168,000 should the Company either maintain a positive cash
flow for two consecutive months, or the Company successfully completes a Form
SB-2 registered offering of its securities. On January 15, 1999 the Company
voluntarily agreed to increase his salary to $168,000. On September 6, 2001,
the Compensation Committee of the Board agreed to increase his salary to
$184,800. In addition to his annual salary, the Agreement confirmed the prior
issuance of options to purchase 200,000 shares of the Company's Common Stock at
an exercise price of $0.2375 previously granted to Mr. Sandhu pursuant to an
employment agreement between Mr. Sandhu and GenTel dated January 5, 1998. These
options vested upon execution of the Agreement. The Agreement may be canceled
at any time by either the Company or Mr. Sandhu. However, if the Company
terminates the Agreement without cause, as defined in the Agreement, the Company
shall be obligated to pay Mr. Sandhu 25% of his annual salary as severance.
On December 1, 1998, the Company entered into an Employment Agreement with Eric
Clemons, the Company's Chief Operating Officer ("COO"), whereby the Company will
pay Mr. Clemons an annual salary of $76,000. Pursuant to the Agreement, Mr.
Clemons' salary shall increase to $152,000 should the Company either maintain a
positive cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. On January 15,
1999 the Company voluntarily agreed to increase his salary to $152,000. On
September 6, 2001, the Compensation Committee of the Board agreed to increase
his salary to $167,200. In addition to his annual salary, the Agreement
confirmed the prior issuance of options to purchase 100,000 shares of the
Company's Common Stock at an exercise price of $0.2375 previously granted to Mr.
Clemons pursuant to an employment agreement between Mr. Clemons and GenTel dated
January 5, 1998. These options vested upon execution of the Agreement. The
Agreement may be canceled at any time by either the Company or Mr. Clemons.
However, if the Company terminates the Agreement without cause, as defined in
the Agreement, the Company shall be obligated to pay Mr. Clemons 25% of his
annual salary as severance.
On December 1, 1998, the Company entered into an Employment Agreement with
Gerald A. DeCiccio, the Company's Chief Financial Officer, whereby the Company
will pay Mr. DeCiccio an annual salary of $105,000. Pursuant to the Agreement,
Mr. DeCiccio's salary shall increase to $144,000 should the Company either
maintain a positive cash flow for two consecutive months, or the Company
successfully completes a Form SB-2 registered offering of its securities. On
December 23, 1999 the Company voluntarily agreed to increase his salary to
$144,000. On September 6, 2001, the Compensation Committee of the Board agreed
to increase his salary to $158,400. In addition to his annual salary, the
Agreement grants Mr. DeCiccio options to purchase 150,000 shares of the
Company's Common Stock. Twenty-five thousand (25,000) of the options vested six
(6) months from the execution of the Agreement at an exercise price of $.01,
expiring three years from the date of vesting if not exercised. The remaining
125,000 options are scheduled to vest in 1/3 increments each following year
provided that Mr. DeCiccio is employed with the Company. The Agreement may be
canceled at any time by either the Company or Mr. DeCiccio. However, if the
Company terminates the Agreement without cause, as defined in the Agreement, the
Company shall be obligated to pay Mr. DeCiccio 25% of his annual salary as
severance.
On October 14, 1998, the Company entered into an Employment Agreement with Mark
Fleming, the Company's Executive Vice-President, whereby the Company will pay
Mr. Fleming an annual salary of $70,000. Pursuant to the Agreement, Mr.
Fleming's salary shall increase to $107,000 should the Company either maintain a
positive cash flow for two consecutive months, or the Company successfully
completes a Form SB-2 registered offering of its securities. On January 23,
2000 the Company voluntarily agreed to increase his salary to $130,000. On
September 6, 2001, the Compensation Committee of the Board agreed to increase
his salary to $143,000. In addition to his annual salary, the Agreement grants
Mr. Fleming options to purchase 100,000 shares of the Company's Common Stock.
Ten thousand (10,000) of the options vested six (6) months from the execution of
the Agreement at an exercise price of $.01, expiring three years from the date
of vesting if not exercised. The remaining 90,000 options are scheduled to vest
in 1/3 increments each following year provided that Mr. Fleming is employed with
the Company. The Agreement may be canceled at any time by either the Company or
Mr. Fleming. However, if the Company terminates the Agreement without cause, as
defined in the Agreement, the Company shall be obligated to pay Mr. Fleming 25%
of his annual salary as severance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOAN TO COMPANY BY S. PAUL SANDHU
The Company borrows funds from the Company's Chief Executive Officer for working
capital purposes. The borrowings totaling $73,500 and accrue interest at 10%
and are due on demand. As of June 30, 2001, the Company has repaid the
principal balance. No interest was accrued or paid as of June 30, 2001 and
2000.
CANCELLATION OF CERTAIN SHARES OF STOCK HELD BY MANAGEMENT
During fiscal year 2000, Mr. Sandhu and Mr. Clemons canceled 619,848 and
154,962, respectively, shares of the Company's common stock held by each of
them. It was determined that these shares were not cancelled in a timely
matter. As a result, these cancellations are reflected as a reduction in the
outstanding shares as of July 1, 1998.
OPTIONS ISSUED TO DIRECTORS OF THE COMPANY
During fiscal year 2002, the Board issued options to purchase an aggregate of
20,000 shares of the Company's Common Stock, at exercise prices between $0.22
and $0.30 per share (the fair market value of the Company's common stock on the
day of grant), to the outside members of the Board pursuant to their agreement
of director compensation. The options are exercisable through July 2004.
On November 3, 2000, the Company granted options to purchase 125,000 shares of
restricted common stock, at an exercise price of $0.50 per share, to a Gerald A.
DeCiccio, a director of the Company (the fair market value of the Company's
common stock on the date of grant). The options are exercisable through
November 2003. The issuance was an isolated transaction not involving a public
offering pursuant to section 4(2) of the Securities Act of 1933.
On October 5, 2000, the Company's Board granted, pursuant to the Option Plan, an
aggregate of 50,000 Incentive Stock Options (as defined by the Plan),
exercisable at $0.6875 per share (the fair market value of the Company's common
stock on the day of grant) to a member of the Board in his capacity as an
officer of the Company and an aggregate of 300,000 Non-statutory Stock Options
(as defined by the Option Plan), exercisable at $0.6875 per share (the fair
market value of the Company's common stock on the day of grant) to the outside
directors of the Company and to members of the Board in their capacity as
officers of the Company.
During fiscal year 2001, the Board issued options to purchase an aggregate of
52,500 shares of the Company's common stock, at exercise prices between $0.01
and $0.2969 per share, valued at $7,800, to the members of the Board pursuant to
their agreement of director compensation. The options are exercisable through
April 2004.
On May 1, 2000, the Board issued options to purchase an aggregate of 57,500
shares of the Company's common stock, at an exercise price of $0.01, valued at
$71,300 to the members of the Board pursuant to their agreement of director
compensation. The options are exercisable through May 2003.
On May 1, 2000, the Board granted, pursuant to the Option Plan, options to
purchase 100,000 shares of restricted common stock, at an exercise price of
$1.25 per share (the fair market value of the Company's common stock on the day
of grant), to the members of the Board. In addition, options to purchase 75,000
shares of restricted common stock were also granted, at an exercise price of
$1.25 per share (the fair market value of the Company's common stock on the day
of grant), to those members of the Board in their capacity as officers of the
Company. However, in the event that the trading price of the Company's common
stock closes at or above $5.00 per share for a minimum of five (5) consecutive
trading days, the Options shall become fully vested. The options are
exercisable through May 2010.
On October 20, 1999, the Company granted 526,000 options to purchase 526,000
shares of "restricted" (as that term is defined under Rule 144 of the Securities
Act of 1933) common stock, at an exercise price of $1.00 per share (the fair
market value of the Company's common stock on the day of grant), to John M.
Eger, a director of the Company, pursuant to an option agreement entered into
between the Company and Mr. Eger. The issuance was exempt under Section 4(2) of
the Securities Act of 1933. The options are exercisable through October 2002.
On October 18, 1999, the Company's Board of Directors granted, pursuant to the
Option Plan, an aggregate of 300,000 Non-statutory Stock Options (as defined by
the Option Plan), exercisable at $1.10 per share (the fair market value of the
Company's common stock on the day of grant was $2.9375 per share), to those
members of the Board in their capacity as officers of the Company, resulting in
$551,250 of compensation expense to be charged to the Company over the five year
vesting period at $110,250 per year beginning in fiscal year 2001 through fiscal
year 2005.
On October 6, 1999, the Company registered on Form S-8 filed with the Securities
and Exchange Commission, 67,675 shares of Common Stock held by consultants
valued at approximately $270,700; 411,000 options held by employees valued at
approximately $1,184,000; and 750,000 options pursuant to its 1999 Stock Option
Plan.
During fiscal year 2000, Paul Sandhu ("Mr. Sandhu"), the Company's Chief
Executive Officer, Eric Clemons ("Mr. Clemons"), the Company's President, Gerald
DeCiccio, the Company's Chief Financial Officer, and other employees of the
Company, exercised options (previously granted pursuant to their employment
contracts) to purchase a total of 375,000 shares of the Company's common stock
in lieu of salary for $72,250.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 30, 2001, with
respect to each person who is known by the Company to own beneficially 5% or
more of the Company's outstanding Common Stock, the number of shares and the
percentage so owned, as well as the beneficial ownership of Common Stock of the
Company by the directors, the executive officers of the Company and all
directors and executive officers as a group.
COMMON STOCK PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OUTSTANDING OUTSTANDING
----------------------- ----------------------------- ---------- ------------
Paul Sandhu(1)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 3,997,215 19.60%
----------------------- ----------------------------- ---------- ------------
Eric Clemons(2)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 750,522 3.68%
----------------------- ----------------------------- ---------- ------------
Mark Fleming(3)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 135,000 0.66%
----------------------- ----------------------------- ---------- ------------
Gerald A. DeCiccio(4)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 307,500 1.51%
----------------------- ----------------------------- ---------- ------------
John M. Eger(5)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 568,500 2.79%
----------------------- ----------------------------- ---------- ------------
Clay T. Whitehead(6)
3151 Airway Avenue, Suite P-3
Common Stock Costa Mesa, CA 92626. 566,816 2.78%
----------------------- ----------------------------- ---------- ------------
Reet Trust(7)
21520 Yorba Linda,Suite 6227
Common Stock Yorba Linda, CA 92887 2,000,000 9.81%
----------------------- ----------------------------- ---------- -------------
All Directors and
Officers as a
Group (6
Persons in total) 6,325,583 31.01%
----------------------- ----------------------------- ---------- -------------
(1) Includes 120,000 options to acquire shares of Company common stock in
accordance with Mr. Sandhu's director compensation agreement and the Company's
employee benefit plan. Does not include an aggregate of 230,000 unvested
options to acquire shares of Company common stock granted in accordance with the
Company's employee benefit plan.
(2) Includes 100,000 options to acquire shares of Company common stock in
accordance with Mr. Clemons' director compensation agreement and the Company's
employee benefit plan. Does not include an aggregate of 200,000 unvested
options to acquire shares of Company common stock in accordance with the
Company's employee benefit plan.
(3) Includes an aggregate of 135,000 options to acquire shares of Company
common stock in accordance with Mr. Fleming's employment agreement and the
Company's employee benefit plan. Does not include an aggregate of 90,000
unvested options to acquire shares of Company common stock in accordance with
the Company's employee benefit plan.
(4) Includes an aggregate of 287,500 options to acquire shares of Company
common stock in accordance with Mr. DeCiccio's employment and director
compensation agreements and the Company's employee benefit plan. Does not
include an aggregate of 90,000 unvested options to acquire shares of Company
common stock in accordance with the Company's employee benefit plan.
(5) Includes an aggregate of 568,500 options to acquire shares of Company
common stock in accordance with Mr. Eger's director compensation agreement and
the Company's employee benefit plan. Does not include an aggregate of 40,000
unvested options to acquire shares of Company common stock in accordance with
the Company's benefit plan.
(6) Includes an aggregate of 55,000 options to acquire shares of Company
common stock in accordance with Mr. Whitehead's director compensation agreement
and the Company's employee benefit plan. Does not include an aggregate of
40,000 unvested options to acquire shares of Company common stock in accordance
with the Company's benefit plan.
(7) The trustee of the Reet Trust is Teg Sandhu, father of Paul Sandhu.
However, Paul Sandhu disclaims any beneficial ownership to the shares held by
the Reet Trust.
The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Commission and generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on the review of copies of such reports furnished to the Company
and written representations that no other reports were required and to the best
of its knowledge, during the year ended June 30, 2001, all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
ten percent shareholders were complied with.
SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for action at the 2002 Annual
Meeting of Shareholders and presentation in the Company's proxy statement with
respect to such meeting should arrange for such proposal to be delivered to the
Company's offices, 3151 Airway Ave., Suite P-3, Costa Mesa, California 92626,
addressed to Eric Clemons, no later than September 1, 2002 in order to be
considered for inclusion in the Company's proxy statement relating to the
meeting. Matters pertaining to such proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer. The Company anticipates
that its next annual meeting will be held in December 2002.
On May 21, 1998, the Securities and Exchange Commission adopted an amendment to
Rule 14a-4, as promulgated under the Securities and Exchange Act of 1934, as
amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a shareholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
With respect to the Company's 2002 Annual Meeting of Shareholders, if the
Company is not provided notice of a shareholder proposal, which the shareholder
has not previously sought to include in the Company's proxy statement, by
September 1, 2002, the Company will be allowed to use its voting authority as
described above.
OTHER MATTERS
The Company has enclosed with this Proxy Statement a copy of the Company's
Annual Report on Form 10-KSB to Shareholders for the year ended June 30, 2001.
Management knows of no other matters to come before the meeting. If, however,
any other matter properly comes before the meeting, the persons named in the
enclosed Proxy form will vote in accordance with their judgment upon such
matter.
Shareholders who do not expect to attend in person are urged to promptly execute
and return the enclosed Proxy.
By order of the Board of Directors
Eric C. Clemons
Secretary
Costa Mesa, California
October _, 2001
APPENDIX - A
AUDIT COMMITTEE CHARTER
I. COMPOSITION The Audit Committee (the "Committee") of GTC Telecom Corp.
(the "Company") is a standing committee of the Board of Directors (the "Board")
established to assist the Board in fulfilling its statutory, regulatory and
fiduciary responsibilities. The Committee shall consist of at least two
"independent" directors, not employed by the Company. Each director on the
Committee shall have past employment experience in finance or accounting, the
requisite professional certification in accounting or other comparable
experience or background which results in the director's financial
sophistication, including being or having been a CEO or other senior officer
with financial oversight responsibilities. The Board shall appoint the members
of the Committee.
II. AUTHORITY The Committee shall have the authority to retain special
legal, accounting or other consultants to advise the Committee. The Committee
may request any officer or employee of the Company or the Company's outside
counsel or independent public accountants to attend a meeting of the Committee
or to meet with any members of, or consultants to, the Committee.
III. PURPOSE The purpose of the Committee shall be to assist the Board in
fulfilling its oversight responsibilities. The Committee will review the
financial reporting process, systems of internal control, the audit process and
the Company's process for monitoring compliance with the laws, regulations and
the Company's code of conduct. In performing its duties, the Committee will
maintain effective working relationships with the Board, management, and the
internal and external auditors.
IV. MEETINGS The Committee will have at least one scheduled meeting each
fiscal year. In addition, the Committee will meet at other times if deemed
necessary to completely discharge its duties and responsibilities as outlined in
this charter. As part of its job to foster open communication, the Committee
should meet at least annually with management, the internal auditors and the
independent public accountants, in separate executive sessions, to discuss any
matters that the Committee or each of these groups believe should be discussed
privately.
V. RESPONSIBILITIES AND DUTIES The Board delegates to the Committee the
following specific duties and responsibilities in addition to those in the
preceding paragraphs:
DOCUMENTS/REPORTS REVIEW
1. Review and reassess the adequacy of the Audit Committee Charter annually
and submit the Charter to the Board for approval.
2. Review the Company's annual audited financial statements and any reports
or other financial information as the Committee may request, including, without
limitation, any material submitted to any governmental body, or the public,
including any certification, report, opinion or review rendered by the
independent public accountants. Discuss major issues and significant changes
regarding accounting and auditing principles and practices as well as the
adequacy of internal controls that could significantly affect the Company's
financial statements.
3. Review any reports to management prepared by the internal auditing
department, together with management's response. Review with management and the
independent public accountants significant financial reporting issues and
judgments made in connection with the preparation of the Company's financial
statements.
4. Review with management and the independent public accountants the
Company's annual report on Form 10-KSB and the Company's quarterly report on
Form10-QSB prior to its filing or prior to the release of earnings. The chair
of the Committee may represent the entire Committee for purposes of these
reviews.
5. Review the Company's major financial risk exposures and the steps
management has taken to monitor and control such exposures.
INDEPENDENT PUBLIC ACCOUNTANTS
1. Recommend to the Board the selection, or dismissal when appropriate, of
the independent public accountants, which firm is ultimately accountable to the
Board. Consider independence and effectiveness and approve the fees and other
compensation to be paid to the independent public accountants. On an annual
basis, the Committee should review and discuss with the accountants all
significant relationships the accountants have with the Company to confirm the
accountants' independence.
2. Meet with the independent public accountants to review the scope,
accuracy, completeness and overall quality of the annual financial statements.
3. Receive from the independent public accountants the information they are
required to communicate to the Committee under generally accepted auditing
standards, including, without limitation: a) A formal written statement
delineating all relationships between the independent public accountants and the
Company, consistent with Independence Standards Board Standard No. 1, and b)
Engage in a dialogue with the independent public accountants with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent public accountants, and recommend that the Board
take appropriate action to enhance the independence of the independent public
accountants.
FINANCIAL REPORTING PROCESS
1. In consultation with the independent public accountants, review the
integrity of the Company's financial reporting processes, both internal and
external.
2. Meet with management and the independent public accountants to review the
planning and staffing of the audit.
3. Discuss with the independent public accountants the matters required to
be discussed by Statement on Auditing Standards No. 61, as modified or amended,
relating to the conduct of the audit.
4. Review with the independent public accountants any problems or
difficulties the accountants may have encountered and any management letter
provided by the accountants and the Company's response to that letter. Such
review should include: a) Any difficulties encountered in the course of the
audit work, including any restrictions on the scope of activities or access to
required information. b) Any changes required in the planned scope of the audit.
5. The Committee shall make regular reports to the Board of Directors. The
Committee shall also prepare the report required by the rules of the Securities
and Exchange Commission to be included in the Company's annual proxy statement.
VI. OTHER While the Committee has the responsibility and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent public accountants. Nor is it
the duty of the Committee to conduct investigations, unless authorized by the
Board of Directors, to resolve disagreements, if any, between management and the
independent public accountants, or to assure compliance with laws and
regulations.
APPENDIX - B
GTC TELECOM CORP.
2001 STOCK INCENTIVE PLAN
1. THE PLAN.
1.1 PURPOSE . The purpose of this Plan is to promote the success
of the Company and the interests of its stockholders by providing an additional
means through the grant of Awards to attract, motivate, retain and reward key
employees, including officers, whether or not directors, of the Company with
awards and incentives for high levels of individual performance and improved
financial performance of the Company."CORPORATION" meansGTC Telecom Corp.,a
Nevada corporation, and"COMPANY" means the Corporation and its Subsidiaries,
collectively. These terms and other capitalized terms are defined in Section 7.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
1.2.1 COMMITTEE. This Plan will be administered by and all Awards to
Eligible Employees shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by unanimous written consent of its members.
1.2.2 PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan and any express limitations on the delegated
authority of the Committee, the Committee shall have the authority:
(1) to determine eligibility and, from among those persons determined to be
eligible, the particular Eligible Persons who will receive Awards;
(2) to grant Awards to Eligible Persons, determine the price at which
securities will be offered or awarded and the amount of securities to be offered
or awarded to any of such persons, and determine the other specific terms and
conditions of such Awards consistent with the express limits of this Plan, and
establish the installments (if any) in which such Awards will become exercisable
or will vest, or determine that no delayed exercisability or vesting is
required, and establish the events of termination or reversion of such Awards;
(3) to approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
(4) to construe and interpret this Plan and any Award or other
agreements defining the rights and obligations of the Company and Participants
under this Plan, further define the terms used in this Plan, and prescribe,
amend and rescind rules and regulations relating to the administration of this
Plan;
(5) to cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding Awards
held by Eligible Persons, subject to any required consent under Section 6.6;
(6) to accelerate or extend the exercisability or extend the term of
any or all outstanding Awards within the maximum ten-year term of Awards under
Section 1.6; and
(7) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
1.2.3 BINDING DETERMINATIONS/LIABILITY LIMITATION. Any action taken by, or
inaction of, the Corporation, any Subsidiary, the Board or the Committee
relating or pursuant to this Plan and within its authority hereunder or under
applicable law shall be within the absolute discretion of that entity or body
and shall be conclusive and binding upon all persons. Neither the Board nor any
Committee, nor any member thereof or person acting at the direction thereof,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with this Plan (or any Award made
under this Plan), and all such persons shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, attorneys' fees) arising or resulting therefrom
to the fullest extent permitted by law and/or under any directors and officers
liability insurance coverage that may be in effect from time to time.
1.2.4 RELIANCE ON EXPERTS. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including employees of
and professional advisors to the Corporation. No director, officer or agent of
the Company shall be liable for any such action or determination taken or made
or omitted in good faith.
1.2.5 DELEGATION. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.3 PARTICIPATION. Awards may be granted by the Committee only to
those persons that the Committee determines to be Eligible Persons. An Eligible
Person who has been granted an Award may, if otherwise eligible, be granted
additional Awards if the Committee so determines.
1.4 SHARES AVAILABLE FOR AWARDS; SHARE LIMITS.
1.4.1 SHARES AVAILABLE. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan will be shares of the
Corporation's authorized but unissued Common Stock and any shares of its Common
Stock held as treasury shares. The shares may be delivered for any lawful
consideration.
1.4.2 SHARE LIMITS. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards granted under this Plan (the "SHARE LIMIT")
shall be 5,000,000 shares of the Company's Common Stock, par value $0.001. The
maximum number of shares subject to those options and stock appreciation rights
that are granted during any calendar year to any individual shall be limited to
1,000,000 shares and the maximum individual limit on the number of shares in the
aggregate subject to all Awards that are granted during any calendar year to any
individual shall be limited to 1,000,000 shares, in each case subject to the
Share Limit. Each of the four foregoing numerical limits shall be subject to
adjustment as contemplated by this Section 1.4 and Section 6.2.
1.4.3 SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED AWARDS.
No Award may be granted under this Plan unless, on the date of grant, the sum of
(1) the maximum number of shares of Common Stock issuable at any time pursuant
to such Award, plus (2) the number of shares of Common Stock that have
previously been issued pursuant to Awards granted under this Plan, other than
reacquired shares available for reissue consistent with any applicable legal
limitations, plus (3) the maximum number of shares of Common Stock that may be
issued at any time after such date of grant pursuant to Awards that are
outstanding on such date, does not exceed the Share Limit. Shares of Common
Stock that are subject to or underlie Awards that expire or for any reason are
cancelled or terminated, are forfeited, fail to vest, or for any other reason
are not paid or delivered under this Plan, as well as reacquired shares, shall
again, except to the extent prohibited by law, be available for subsequent
Awards under the Plan. Except as limited by law, if an Award is or may be
settled only in cash, such Award need not be counted against any of the limits
under this Section 1.4.
1.5 GRANT OF AWARDS. Subject to the express provisions of this Plan,
the Committee will determine the number of shares of Common Stock subject to
each Award, the price (if any) to be paid for the shares or the Award and, in
the case of performance share awards, in addition to matters addressed in
Section 1.2.2, the specific objectives, goals and performance criteria (such as
an increase in sales, market value, earnings or book value over a base period,
the years of service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
performance share award. Each Award will be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
The Award Agreement will set forth the material terms and conditions of the
Award established by the Committee consistent with the specific provisions of
this Plan.
1.6 AWARD PERIOD. Each Award and all executory rights or obligations
under the related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options or other rights to
acquire Common Stock not later than ten (10) years after the Award Date;
provided, however, that any payment of cash or delivery of stock pursuant to an
Award may be delayed until a future date if specifically authorized by the
Committee; provided further, that each Award will be subject to earlier
termination as provided in or pursuant to Sections 6.2 and 6.3.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
1.7.1 PROVISIONS FOR EXERCISE. Unless the Committee otherwise expressly
provides, no Award will be exercisable or will vest until at least six months
after the initial Award Date, and once exercisable an Award will remain
exercisable until the expiration or earlier termination of the Award.
1.7.2 PROCEDURE. Any exercisable Award will be deemed to be exercised when
the Secretary of the Corporation receives written notice of such exercise from
the Participant (on a form and in such manner as may be required by the
Committee), together with any required payment made in accordance with Section
2.2 and Section 6.5, and delivery of any written statement required pursuant to
Section 6.4.
1.7.3 FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine in
the case of Eligible Persons that cash, other securities, or other property will
be paid or transferred in lieu of any fractional share interests. No fewer than
100 shares may be purchased on exercise of any Award at one time unless the
number purchased is the total number at the time available for purchase under
the Award.
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE. The Corporation may, with
the Committee's approval, accept one or more notes from any Eligible Person in
connection with the exercise or receipt of any outstanding Award; provided that
any such note shall be subject to the following terms and conditions:
(1) The principal of the note shall not exceed the amount required to be
paid to the Corporation upon the exercise or receipt of one or more Awards under
the Plan and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
(2) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed a
period of five years.
(3) The note shall provide for full recourse to the Participant and shall
bear interest at a rate determined by the Committee but not less than the
interest rate necessary to avoid the imputation of interest under the Code.
(4) If the employment of the Participant terminates, the unpaid principal
balance of the note shall become due and payable on the 10th business day after
such termination; provided, however, that if a sale of such shares would cause
such Participant to incur liability under Section 16(b) of the Exchange Act, the
unpaid balance shall become due and payable on the 10th business day after the
first day on which a sale of such shares could have been made without incurring
such liability assuming for these purposes that there are no other transactions
(or deemed transactions in securities of this Corporation) by the Participant
subsequent to such termination.
(5) If required by the Committee or by applicable law, the note shall be
secured by a pledge of any shares or rights financed thereby in compliance with
applicable law.
(6) The terms, repayment provisions, and collateral release provisions of
the note and the pledge securing the note shall conform with applicable rules
and regulations of the Federal Reserve Board as then in effect and
applicable state law.
1.9 NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.
1.9.1 LIMIT ON EXERCISE AND TRANSFER. Unless otherwise expressly provided
in (or pursuant to) this Section 1.9, by applicable law and by the Award
Agreement, as the same may be amended:
(1) all Awards are non-transferable and will not be subject in any manner to
sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or
charge;
(2) Awards will be exercised only by the Participant; and
(3) amounts payable or shares issuable pursuant to an Award will be
delivered only to (or for the account of) the Participant.
1.9.2 EXCEPTIONS. The Committee may permit an Award to be exercised by and
paid only to a person or entity that is a "family member" (as such term is
defined in the General Instructions to Form S-8 Registration Statements under
the Securities Act) of the Participant; provided that the transfer will not
adversely affect the Corporation's eligibility to use Form S-8 to register under
the Securities Act the offering of shares issuable under this Plan by the
Corporation. Any permitted transfer shall be subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being made
for essentially estate and/or tax planning purposes on a gratuitous or donative
basis and without consideration (other than nominal consideration or in exchange
for an interest in a qualified transferee).
Notwithstanding the foregoing or anything in Section 1.9.3 to the contrary,
Incentive Stock Options and Restricted Stock Awards will be subject to any and
all additional transfer restrictions under the Code applicable to such Awards.
1.9.3 FURTHER EXCEPTIONS TO LIMITS ON TRANSFER. The exercise and transfer
restrictions in Section 1.9.1 shall not apply to:
(1) transfers to the Corporation,
(2) the designation of a beneficiary to receive benefits in the event of the
Participant's death or, if the Participant has died, transfers to or exercises
by the Participant's beneficiary, or, in the absence of a validly designated
beneficiary, transfers by will or the laws of descent and distribution,
(3) transfers pursuant to a QDRO if approved or ratified by the Committee,
(4) if the Participant has suffered a disability, permitted transfers or
exercises on behalf of the Participant by the Participant's duly authorized
legal representative, or
(5) the authorization by the Committee of "cashless exercise"
procedures with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of Awards consistent with applicable laws and
the express authorization of the Committee.
2. OPTIONS.
2.1 GRANTS. One or more Options may be granted under this Plan to any
Eligible Person. Each Option granted shall be designated in the applicable
Award Agreement, by the Committee, as either an Incentive Stock Option, subject
to Section 2.3, or a Nonqualified Stock Option.
2.2 OPTION PRICE.
2.2.1 PRICING LIMITS. The purchase price per share of the Common Stock
covered by each Option will be determined by the Committee at the time of grant
of the Award, but in the case of Incentive Stock Options will not be less than
100% (110% in the case of a Participant described in Section 2.3.4) of the Fair
Market Value of the Common Stock on the date of grant and in all cases will not
be less than the par value thereof.
2.2.2 PAYMENT PROVISIONS. The purchase price of any shares of Common Stock
purchased on exercise of an Option granted under this Plan must be paid in full
at the time of each purchase in one or a combination of the following methods:
(1) in cash or by electronic funds transfer;
(2) by check payable to the order of the Corporation;
(3) if authorized by the Committee or specified in the applicable Award
Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8;
(4) by notice and third party payment in such manner as may be authorized by
the Committee; or
(5) by the delivery of shares of Common Stock of the Corporation already
owned by the Participant, provided, however, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an Award by
delivering previously owned shares, and provided further that any shares
delivered that were initially acquired upon exercise of a stock option must have
been owned by the Participant at least six months as of the date of delivery.
Shares of Common Stock used to satisfy the exercise price of an Option will be
valued at their Fair Market Value on the date of exercise. The Corporation will
not be obligated to deliver certificates for the shares unless and until it
receives full payment of the exercise price therefor, and all related
withholding obligations under Section 6.5 and other conditions to the exercise
are satisfied.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
2.3.1 $100,000 LIMIT. To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company or any
parent corporation, such options will be treated as Nonqualified Stock Options.
For this purpose, the fair market value of the stock subject to options will be
determined as of the date the options were awarded. In reducing the number of
options treated as incentive stock options to meet the $100,000 limit, the most
recently granted options will be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
2.3.2 OPTION PERIOD. Each Option and all rights thereunder shall expire no
later than 10 years after the Award Date.
2.3.3 OTHER CODE LIMITS. Incentive Stock Options may only be granted to
Eligible Employees of the Corporation or a Subsidiary that satisfies the other
eligibility requirements of the Code. There will be imposed in any Award
Agreement relating to Incentive Stock Options such other terms and conditions as
from time to time are required in order that the Option be an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.3.4 LIMITS ON 10% HOLDERS. No Incentive Stock Option may be granted to
any person who, at the time the Option is granted, owns (or is deemed to own
under Section 424(d) of the Code) shares of outstanding stock of the Corporation
(or a parent or subsidiary of the Corporation) possessing more than 10% of the
total combined voting power of all classes of stock of that entity, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.3.5 INCENTIVE STOCK OPTION NOTICE OF SALE REQUIREMENT. Any Participant
who exercises an Incentive Stock Option shall give prompt written notice to the
Corporation of any sale or other transfer of the shares acquired on exercise of
the Option if such sale or other transfer occurs within one year after the
exercise date of the Option or within two years after the Award Date.
2.4 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 6.6 and the specific limitations on Awards
contained in this Plan, the Committee from time to time may authorize, generally
or in specific cases only, for the benefit of any Eligible Person any adjustment
in the exercise or purchase price, the vesting schedule, the number of shares
subject to, or the restrictions upon or the term of, an Award granted under this
Plan by cancellation of an outstanding Award and a subsequent regranting of an
Award, by amendment, by substitution of an outstanding Award, by waiver or by
other legally valid means. Such amendment or other action may result among
other changes in an exercise or purchase price that is higher or lower than the
exercise or purchase price of the original or prior Award, provide for a greater
or lesser number of shares subject to the Award, or provide for a longer or
shorter vesting or exercise period.
2.5 EFFECTS OF TERMINATION OF EMPLOYMENT ON OPTIONS.
2.5.1 DISMISSAL FOR CAUSE. Unless otherwise provided in the Award Agreement
and subject to earlier termination pursuant to or as contemplated by Section 1.6
or 6.2, if a Participant's employment by (or other service specified in the
Award Agreement to) the Company is terminated by the Company for Cause, the
Participant's Option will terminate on his or her Severance Date, whether or not
the Option is then vested and/or exercisable.
2.5.2 RESIGNATION OR DISMISSAL. Unless otherwise provided in the Award
Agreement and subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, if a Participant's employment by (or other service specified
in the Award Agreement to) the Company terminates for any reason other than the
Participant's Retirement, Total Disability or death, or a termination by the
Company for Cause:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant will have until the date that is 90 days after his or
her Severance Date to exercise his or her Option to the extent that it is vested
on the Severance Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of 90 day period.
2.5.3 RETIREMENT. Unless otherwise provided in the Award Agreement and
subject to earlier termination pursuant to or as contemplated by Section 1.6 or
6.2, if a Participant's employment by (or other service specified in the Award
Agreement to) the Company terminates due to the Participant's Retirement:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant will have until the date that is 12 months (3 months in
the case of an Incentive Stock Option) after his or her Severance Date to
exercise his or her Option to the extent that it is vested on the Severance
Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of the 12-month (or 3-month, as applicable) period.
2.5.4 DEATH OR TOTAL DISABILITY. Unless otherwise provided in the Award
Agreement and subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, if a Participant's employment by (or other service specified
in the Award Agreement to) the Company terminates due to the Participant's Total
Disability or death:
(1) the Participant's Option will terminate on his or her Severance Date to
the extent that it is not vested on that date;
(2) the Participant (or the Participant's Beneficiary or Personal
Representative, as the case may be) will have until the date that is 12 months
after the Participant's Severance Date to exercise the Participant's Option to
the extent that it is vested on the Severance Date; and
(3) any portion of the Participant's Option that is vested on the Severance
Date will terminate, to the extent not previously exercised, at the close of
business on the last day of the 12-month period.
3. STOCK APPRECIATION RIGHTS (INCLUDING LIMITED STOCK APPRECIATION
RIGHTS).
3.1 GRANTS. In its discretion, the Committee may grant to any Eligible
Person Stock Appreciation Rights either concurrently with the grant of another
Award or in respect of an outstanding Award, in whole or in part, or
independently of any other Award. Any Stock Appreciation Right granted in
connection with an Incentive Stock Option will contain such terms as may be
required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder, unless the holder otherwise agrees.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
3.2.1 EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award will be
exercisable at such time or times, and to the extent, that the related Award
will be exercisable.
3.2.2 EFFECT ON AVAILABLE SHARES. To the extent that a Stock Appreciation
Right is exercised, only the actual number of delivered shares of Common Stock
will be charged against the maximum amount of Common Stock that may be delivered
pursuant to Awards under this Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant will, however, be
reduced by the number of underlying shares as to which the exercise related,
unless the Award Agreement otherwise provides.
3.2.3 STAND-ALONE STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
granted independently of any other Award will be exercisable pursuant to the
terms of the Award Agreement, but in no event earlier than six months after the
Award Date unless the Committee otherwise provides.
3.3 PAYMENT.
3.3.1 AMOUNT. Unless the Committee otherwise provides, upon exercise of a
Stock Appreciation Right and the attendant surrender of an exercisable portion
of any related Award, the Participant will be entitled to receive, subject to
Section 6.5, payment of an amount determined by multiplying:
(1) the difference (which shall not be less than zero) obtained by
subtracting the exercise price per share of Common Stock under the related Award
(if applicable) or the initial share value specified in the Award from the Fair
Market Value of a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by
(2) the number of shares with respect to which the Stock Appreciation
Right shall have been exercised.
3.3.2 FORM OF PAYMENT. The Committee, in its sole discretion, will
determine the form in which payment will be made of the amount determined under
Section 3.3.1, either solely in cash, solely in shares of Common Stock (valued
at Fair Market Value on the date of exercise of the Stock Appreciation Right),
or partly in such shares and partly in cash, provided that the Committee shall
have determined that such exercise and payment are consistent with applicable
law. If the Committee permits the Participant to elect to receive cash or
shares (or a combination thereof) on such exercise, any such election will be
subject to such conditions as the Committee may impose.
3.4 LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant to any
Eligible Person Stock Appreciation Rights exercisable only upon or in respect of
a change in control or any other specified event ("LIMITED SARS") and such
Limited SARs may relate to or operate in tandem or combination with or
substitution for Options, other Stock Appreciation Rights or other Awards (or
any combination thereof), and may be payable in cash or shares based on the
spread between the base price of the Stock Appreciation Right and a price based
upon the Fair Market Value of the Common Stock during a specified period or at a
specified time within a specified period before, after or including the date of
such event.
4. RESTRICTED STOCK AWARDS.
4.1 GRANTS. The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Person. Each Restricted Stock Award
Agreement will specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law) to be
paid by the Participant, the extent (if any) to which and the time (if ever) at
which the Participant will be entitled to dividends, voting and other rights in
respect of the shares prior to vesting, and the restrictions (which may be based
on performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions will not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("RESTRICTED SHARES") will bear a legend making appropriate
reference to the restrictions imposed hereunder and will be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares have lapsed and the shares have vested in accordance
with the provisions of the Award and Section 1.7. Upon issuance of the
Restricted Stock Award, the Participant may be required to provide such further
assurances and documents as the Committee may require to enforce the
restrictions.
4.2 RESTRICTIONS.
4.2.1 PRE-VESTING RESTRAINTS. Except as provided in Section 4.1 and 1.9,
restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until the restrictions on such shares have lapsed
and the shares have become vested.
4.2.2 DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
will be entitled to vote such shares but will not be entitled to dividends on
any of the shares until the shares have vested; provided that such voting rights
will terminate immediately as to any Restricted Shares that cease to be eligible
for vesting. Such dividends shall be retained in a restricted account until the
shares have vested and shall revert to the Corporation if they fail to vest.
4.2.3 CASH PAYMENTS. If the Participant has paid or received cash
(including any dividends) in connection with the Restricted Stock Award, the
Award Agreement will specify whether and to what extent such cash will be
returned (with or without an earnings factor) as to any restricted shares that
cease to be eligible for vesting.
4.3 RETURN TO THE CORPORATION. Unless the Committee otherwise
expressly provides, Restricted Shares that remain subject to restrictions at the
time of termination of employment (or specified services) or are subject to
other conditions to vesting that have not been satisfied by the time specified
in the applicable Award Agreement will not vest and will be returned to the
Corporation in such manner and on such terms as the Committee provides in the
Award Agreement.
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 GRANTS OF PERFORMANCE SHARE AWARDS. The Committee may, in its
discretion, grant Performance Share Awards to Eligible Persons based upon such
factors as the Committee deems relevant in light of the specific type and terms
of the award. An Award Agreement will specify the maximum number of shares of
Common Stock (if any) subject to the Performance Share Award, the consideration
(but not less than the minimum lawful consideration) to be paid for any such
shares as may be issuable to the Participant, the duration of the Award and the
conditions upon which delivery of any shares or cash to the Participant will be
based. The amount of cash or shares or other property that may be deliverable
pursuant to such Award will be based upon the degree of attainment over a
specified period of not more than 10 years (a"performance cycle") as may be
established by the Committee of such measure(s) of the performance of the
Company (or any part thereof) or the Participant as may be established by the
Committee. The Committee may provide for full or partial credit, prior to
completion of such performance cycle or the attainment of the performance
achievement specified in the Award, in the event of the Participant's death,
Retirement, or Total Disability, a Change in Control Event or in such other
circumstances as the Committee (consistent with the second clause of Section
6.10.3, if applicable) may determine.
5.2 SPECIAL PERFORMANCE-BASED SHARE AWARDS. Without limiting the
generality of the foregoing, and in addition to Options and Stock Appreciation
Rights granted at an exercise or base price at least equal to the Fair Market
Value of the underlying shares on the date of grant, other performance-based
awards within the meaning of Section 162(m) of the Code ("PERFORMANCE-BASED
AWARDS"), whether in the form of restricted stock, performance stock, phantom
stock or other rights, the vesting of which depends on the performance of the
Company on a consolidated, segment, subsidiary, division, or station basis with
reference to revenue growth, net earnings (before or after taxes or before or
after taxes, interest, depreciation, and/or amortization), cash flow, return on
equity or on assets or on net investment, or cost containment or reduction, or
any combination thereof (the business criteria) relative to preestablished
performance goals, may be granted under this Plan. The applicable business
criteria and the specific performance goals must be approved by the Committee in
advance of applicable deadlines under the Code and while the performance
relating to such goals remains substantially uncertain. The applicable
performance measurement period may be not less than one nor more than 10 years.
Performance targets may be adjusted to mitigate the unbudgeted impact of
material, unusual or nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time the targets were set. Other types
of performance and non-performance awards may also be granted under the other
provisions of this Plan.
5.2.1 ELIGIBLE CLASS. The eligible class of persons for Awards under this
Section shall be key employees (including officers) of the Company.
5.2.2 MAXIMUM AWARD. In no event shall grants in any calendar year to a
Participant under this Section 5.2 relate to more than 1,000,000 shares, subject
to the Share Limit, or a cash amount of more than $1,000,000.
5.2.3 COMMITTEE CERTIFICATION. Before any Performance-Based Award under
this Section 5.2 is paid, the Committee must certify that the material terms of
the Performance-Based Award were satisfied.
5.2.4 TERMS AND CONDITIONS OF AWARDS. The Committee will have discretion to
determine the restrictions or other limitations of the individual Awards under
this Section 5.2 (including the authority to reduce Awards, payouts or vesting
or to pay no Awards, in its sole discretion, if the Committee preserves such
authority at the time of grant by language to this effect in its authorizing
resolutions or otherwise).
5.2.5 STOCK PAYOUT FEATURES. In lieu of cash payment of an Award, the
Committee may require or allow a portion of the Award to be paid in the form of
stock, Restricted Shares or an Option.
5.3 GRANTS OF STOCK BONUSES. The Committee may grant a Stock Bonus to
any Eligible Person to reward exceptional or special services, contributions or
achievements in the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the Committee.
The number of shares so awarded will be determined by the Committee. The Award
may be granted independently or in lieu of a cash bonus.
5.4 DEFERRED PAYMENTS. The Committee may authorize for the benefit of
any Eligible Person the deferral of any payment of cash or shares that may
become due or of cash otherwise payable under this Plan, and provide for
benefits thereon based upon such deferment, at the election or at the request of
such Participant, subject to the other terms of this Plan. Such deferral will
be subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
6. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
6.1.1 EMPLOYMENT STATUS. Status as an Eligible Person will not be construed
as a commitment that any Award will be granted under this Plan to an Eligible
Person or to Eligible Persons generally.
6.1.2 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any
other documents under this Plan or in any Award) shall confer upon any Eligible
Person or Participant any right to continue in the employ or other service of
the Company, constitute any contract or agreement of employment or other service
or affect an employee's status as an employee at will, nor shall interfere in
any way with the right of the Company to change a person's compensation or other
benefits, or to terminate his or her employment or other service, with or
without cause. Nothing in this Section 6.1.2, however, is intended to adversely
affect any express independent right of such person under a separate employment
or service contract other than an Award Agreement.
6.1.3 PLAN NOT FUNDED. Awards payable under this Plan will be payable in
shares of Common Stock or from the general assets of the Corporation, and
(except as provided in Section 1.4.3) no special or separate reserve, fund or
deposit will be made to assure payment of such Awards. No Participant,
Beneficiary or other person will have any right, title or interest in any fund
or in any specific asset (including shares of Common Stock, except as expressly
otherwise provided) of the Company by reason of any Award hereunder. Neither
the provisions of this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan will create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires
a right to receive payment pursuant to any Award hereunder, such right will be
no greater than the right of any unsecured general creditor of the Company.
6.2 ADJUSTMENTS; ACCELERATION.
6.2.1 ADJUSTMENTS. Upon or in contemplation of any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split; any merger, combination, consolidation, or
other reorganization; any spin-off, split-up, or similar extraordinary dividend
distribution ("spin-off") in respect of the Common Stock (whether in the form of
securities or property); any exchange of Common Stock or other securities of the
Corporation, or any similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; or a sale of all or substantially all the assets of
the Corporation as an entirety ("asset sale"); then the Committee shall, in such
manner, to such extent (if any) and at such time as it deems appropriate and
equitable in the circumstances:
(1) proportionately adjust any or all of (a) the number and type of shares
of Common Stock (or other securities) that thereafter may be made the subject of
Awards (including the specific maxima and numbers of shares set forth elsewhere
in this Plan), (b) the number, amount and type of shares of Common Stock (or
other securities or property) subject to any or all outstanding Awards, (c) the
grant, purchase, or exercise price of any or all outstanding Awards, (d) the
securities, cash or other property deliverable upon exercise of any outstanding
Awards, or (e) (subject to limitations under Section 6.10.3) the performance
standards appropriate to any outstanding Awards, or
(2) make provision for a cash payment or for the assumption, substitution or
exchange of any or all outstanding share-based Awards or the cash, securities or
property deliverable to the holder of any or all outstanding share-based Awards,
based upon the distribution or consideration payable to holders of the Common
Stock upon or in respect of such event.
The Committee may adopt such valuation methodologies for outstanding Awards as
it deems reasonable in the event of a cash or property settlement and, in the
case of Options, Stock Appreciation Rights or similar rights, but without
limitation on other methodologies, may base such settlement solely upon the
excess (if any) of the amount payable upon or in respect of such event over the
exercise or strike price of the Award.
In each case, with respect to Awards of Incentive Stock Options, no adjustment
shall be made in a manner that would cause the Plan to violate Section 422 or
424(a) of the Code or any successor provisions without the written consent of
holders materially adversely affected thereby.
In any of such events, the Committee may take such action prior to such event to
the extent that the Committee deems the action necessary to permit the
Participant to realize the benefits intended to be conveyed with respect to the
underlying shares in the same manner as is or will be available to stockholders
generally.
6.2.2 POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option
or other right to acquire Common Stock under this Plan has been fully
accelerated as required or permitted by Section 6.2.3 but is not exercised prior
to (1) a dissolution of the Company, or (2) an event described in Section 6.2.1
that the Company does not survive, or (3) the consummation of an event described
in Section 6.2.1 involving a Change of Control Event approved by the Board, such
Option or right shall terminate, subject to any provision that has been
expressly made by the Board or the Committee, through a plan of reorganization
or otherwise, for the survival, substitution, assumption, exchange or other
settlement of such Option or right.
6.2.3 ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. Unless prior to a
Change in Control Event the Committee determines that, upon its occurrence,
benefits under any or all Awards will not accelerate or determines that only
certain or limited benefits under any or all Awards will accelerate and the
extent to which they will accelerate, and/or establishes a different time in
respect of such Event for such acceleration, then upon the occurrence of a
Change in Control Event:
(1) each Option and Stock Appreciation Right will become immediately
exercisable,
(2) Restricted Stock will immediately vest free of restrictions, and
(3) each Performance Share Award will become payable to the Participant.
Any discretion with respect to these events shall be limited to the extent
required by applicable accounting requirements in the case of a transaction
intended to be accounted for as a pooling of interests transaction.
The Committee may override the limitations on acceleration in this Section 6.2.3
by express provision in the Award Agreement and may accord any Eligible Person a
right to refuse any acceleration, whether pursuant to the Award Agreement or
otherwise, in such circumstances as the Committee may approve. Any acceleration
of Awards will comply with applicable legal requirements and, if necessary to
accomplish the purposes of the acceleration or if the circumstances require, may
be deemed by the Committee to occur (subject to Section 6.2.4) a limited period
of time not greater than 30 days before the event. Without limiting the
generality of the foregoing, the Committee may deem an acceleration to occur
immediately prior to the applicable event and/or reinstate the original terms of
an Award if an event giving rise to an acceleration does not occur.
6.2.4 POSSIBLE RESCISSION OF ACCELERATION. If the vesting of an Award has
been accelerated expressly in anticipation of an event or upon stockholder
approval of an event and the Committee or the Board later determines that the
event will not occur, the Committee may rescind the effect of the acceleration
as to any then outstanding and unexercised or otherwise unvested Awards.
6.2.5 ACCELERATION UPON TERMINATION OF SERVICE IN ANTICIPATION OF OR
FOLLOWING A CHANGE IN CONTROL.
Early Termination. Unless the Committee otherwise provides prior to a Change in
Control, if any Participant's employment is terminated by the Company for any
reason other than death, Total Disability, Retirement, or for Cause after the
announcement of but within 30 days before consummation of a Change in Control
Event, then upon or immediately prior to the consummation of the Event and
subject to its consummation, any Awards held by the Participant prior to the
Change in Control that were terminated shall be deemed reinstated to the extent
previously vested and Awards previously unvested shall be deemed vested to the
extent that the vesting of other Awards of the same type are accelerated in
connection with the Event, irrespective of the vesting and early termination
provisions of the Participant's Award Agreement. Any such reinstated Awards
shall remain subject to the other adjustment, termination and settlement
provisions of this Section 6.2 in connection with the subject Change in Control
Event or any applicable, subsequent Change in Control Event.
Termination After Change in Control. If any Participant's employment is
terminated by the Company upon or within 30 days after a Change in Control
Event, and the termination is not the result of death, Total Disability,
Retirement or a termination for Cause, then, subject to the other provisions of
this Section 6.2 (including without limitation Section 6.2.2 and Section 6.4),
all outstanding Options held by the Participant shall be deemed fully vested
immediately prior to the Severance Date, irrespective of the vesting provisions
of the Participant's Award Agreement, unless the Award Agreement specifies a
different result in the case of a Change in Control Event.
No Extension Beyond Expiration. Notwithstanding the foregoing, in no event
shall an Award be reinstated or extended beyond its final expiration date.
6.2.6 GOLDEN PARACHUTE LIMITATION. In no event shall an Award be
accelerated under this Plan to an extent or in a manner that would not be fully
deductible by the Company for federal income tax purposes because of Section
280G of the Code, nor will any payment hereunder be accelerated if any portion
of such accelerated payment would not be deductible by the Company because of
Section 280G of the Code. If a holder would be entitled to benefits or payments
hereunder and under any other plan or program that would constitute "parachute
payments" as defined in Section 280G of the Code, then the holder may by written
notice to the Company designate the order in which such parachute payments will
be reduced or modified so that the Company is not denied federal income tax
deductions for any "parachute payments" because of Section 280G of the Code.
Notwithstanding the foregoing, an employment or other agreement with the
Participant may expressly provide for benefits in excess of amounts determined
by applying the foregoing Section 280G limitations.
6.3 EFFECT OF TERMINATION OF SERVICE ON AWARDS.
6.3.1 GENERAL. The Committee shall establish the effect of a termination of
employment or service on the rights and benefits under each Award granted under
this Plan and in so doing may make distinctions based upon the cause of
termination and the nature of the Award. Unless otherwise provided in the
applicable Award Agreement and subject to the other provisions of this Plan: (1)
the provisions of Section 2.6 shall apply to Options, (2) any Stock Appreciation
Right granted concurrently or in tandem with an Option shall be subject to the
same post-termination provisions and exercisability periods as the Option to
which it relates, and (3) Restricted Stock Awards, Performance Share Awards, and
other Stock Appreciation Rights shall, to the extent that they are not vested on
the Participant's Severance Date, terminate and be forfeited on such date.
6.3.2 TERMINATION OF CONSULTING OR AFFILIATE SERVICES. If the Participant
is not an Eligible Employee or director and provides services as an Other
Eligible Person, the Committee shall be the sole judge of whether the
Participant continues to render services to the Company, unless a contract or
the Award otherwise provides. If in these circumstances the Company notifies
the Participant in writing that a termination of services of the Participant for
purposes of this Plan has occurred, then (unless the contract or Award otherwise
expressly provides), the Participant's termination of services for purposes of
Section 2.6, 3, 4.3, 5 and this Section 6.3 shall be the date which is 10 days
after the Company's mailing of the notice or, in the case of a termination for
Cause, the date of the mailing of the notice.
6.3.3 EVENTS NOT DEEMED TERMINATIONS OF SERVICE. Unless Company policy or
the Committee otherwise provides, a Participant's employment or service
relationship shall not be considered terminated solely due to any (1) sick
leave, (2) military leave, or (3) any other leave of absence authorized by the
Company or the Committee; provided that unless reemployment upon the expiration
of such leave is guaranteed by contract or law, such leave is for a period of
not more than 90 days. In the case of any Eligible Employee on an approved
leave of absence, continued vesting of the Award while on leave from the employ
of the Company shall be suspended, unless the Committee otherwise provides or
applicable law otherwise requires. In no event shall an Award be exercised
after the expiration of the term set forth in the Award Agreement.
6.3.4 EFFECT OF CHANGE OF SUBSIDIARY STATUS. For purposes of this Plan and
any Award, if an entity ceases to be a Subsidiary, a termination of employment
or service will be deemed to have occurred with respect to each Eligible Person
in respect of the Subsidiary who does not continue as an Eligible Person in
respect of another entity within the Company.
6.3.5 COMMITTEE DISCRETION. Notwithstanding the foregoing provisions of
this Section 6.3 or anything in Section 2.5 to the contrary, in the event of, or
in anticipation of, a termination of employment with the Company for any reason,
other than discharge for Cause, the Committee may, in its discretion, increase
the portion of the Participant's Award available to the Participant (or the
Participant's Beneficiary or Personal Representative, as the case may be) or,
subject to the provisions of Sections 1.6 and 6.2, extend the exercisability
period upon such terms as the Committee determines and expressly sets forth in
or by amendment to the Award Agreement.
6.4 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of
Awards under this Plan, the offer, issuance and delivery of shares of Common
Stock, the acceptance of promissory notes and/or the payment of money under this
Plan or under Awards, are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and
federal securities law, and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
In addition, any securities delivered under this Plan may be subject to any
special restrictions that the Committee may require to preserve a pooling of
interests under generally accepted accounting principles. The person acquiring
any securities under this Plan will, if requested by the Corporation, provide
such assurances and representations to the Corporation as the Committee may deem
necessary or desirable to assure compliance with all applicable legal and
accounting requirements.
6.5 TAX MATTERS.
6.5.1 PROVISION FOR TAX WITHHOLDING OR OFFSET. Upon any exercise,
vesting, or payment of any Award or upon the disposition of shares of Common
Stock acquired pursuant to the exercise of an Incentive Stock Option prior to
satisfaction of the holding period requirements of Section 422 of the Code, the
Company shall have the right at its option to:
(1) require the Participant (or Personal Representative or Beneficiary, as
the case may be) to pay or provide for payment of the minimum amount of any
taxes which the Company may be required to withhold with respect to such Award
event or payment;
(2) deduct from any amount payable in cash the minimum amount of any taxes
which the Company may be required to withhold with respect to such cash payment;
and/or
(3) in any case where a tax is required to be withheld in connection with
the delivery of shares of Common Stock under this Plan, reduce the number of
shares to be delivered by (or otherwise reacquire) the appropriate number of
shares, valued at their then Fair Market Value, to satisfy such minimum
withholding obligation.
The Committee may in its sole discretion (subject to Section 6.4) grant (either
at the time of grant of the Award or thereafter) to the Participant the right to
elect, pursuant to such rules and subject to such conditions as the Committee
may establish, to have the Corporation utilize the withholding offset under
clause (3) above. In no event shall shares be withheld in excess of the minimum
number required for tax withholding under these provisions.
6.5.2 TAX LOANS. If so provided in the Award Agreement or otherwise
expressly authorized by the Committee, the Company may, to the extent permitted
by law, authorize a short-term loan of not more than nine months to an Eligible
Person in the amount of any taxes that the Company may be required to withhold
with respect to shares of Common Stock received (or disposed of, as the case may
be) pursuant to a transaction described in Section 6.5.1. Such a loan will be
for a term, at a rate of interest and pursuant to such other terms and
conditions as the Committee, under applicable law, may establish and such loan
need not comply with the other provisions of Section 1.8.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
6.6.1 BOARD AUTHORIZATION. The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole or in part. No
Awards may be granted during any suspension of this Plan or after termination of
this Plan, but the Committee will retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
6.6.2 STOCKHOLDER APPROVAL. To the extent then required under Sections 162,
422 or 424 of the Code or any other applicable law, or deemed necessary or
advisable by the Board, any amendment to this Plan shall be subject to
stockholder approval.
6.6.3 AMENDMENTS TO AWARDS. Without limiting any other express authority of
the Committee under (but subject to) the express limits of this Plan, the
Committee by agreement or resolution may waive conditions of or limitations on
Awards to Participants that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and (subject to
the requirements of Section 1.2.2) may make other changes to the terms and
conditions of Awards that do not affect in any manner materially adverse to the
Participant, the Participant's rights and benefits under an Award.
6.6.4 LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of this Plan or change of or affecting any outstanding
Award shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Company under any Award granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 6.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
6.7 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly
authorized by the Committee or this Plan, a Participant shall not be entitled to
any privilege of stock ownership as to any shares of Common Stock not actually
delivered to and held of record by the Participant. No adjustment will be made
for dividends or other rights as a stockholder for which a record date is prior
to such date of delivery.
6.8 EFFECTIVE DATE OF THE PLAN. This Planwill becomeeffective
asJanuary 1, 2002, subject toapproval by the Board and the shareholders of the
Company.
6.9 TERM OF THE PLAN. No Award will be granted under this Plan
afterDecember 31, 2011 (the"termination date"). Unless otherwise expressly
provided in this Plan or in an applicable Award Agreement, any Award granted
prior to the termination date may extend beyond such date, and all authority of
the Committee with respect to Awards hereunder, including the authority to amend
an Award, shall continue during any suspension of this Plan and in respect of
Awards outstanding on the termination date.
6.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
6.10.1 CHOICE OF LAW. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California.
6.10.2 SEVERABILITY. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this Plan shall
continue in effect.
6.10.3 PLAN CONSTRUCTION.
Rule 16b-3. It is the intent of the Corporation that the Awards and
transactions permitted by Awards be interpreted in a manner that, in the case of
Participants who are or may be subject to Section 16 of the Exchange Act,
satisfies the applicable requirements for exemptions under Rule 16b-3. The
exemption will not be available if the authorization of actions by any Committee
of the Board with respect to such Awards does not satisfy the applicable
conditions of Rule 16b-3. Notwithstanding the foregoing, the Corporation shall
have no liability to any Participant for Section 16 consequences of Awards or
events under Awards.
Section 162(m). It is the further intent of the Company that (to the extent the
Company or Awards under this Plan may be or become subject to limitations on
deductibility under Section 162(m) of the Code), Options or Stock Appreciation
Rights granted with an exercise or base price not less than Fair Market Value on
the date of grant and performance-based awards under Section 5.2 of this Plan
that are granted to or held by a person subject to Section 162(m) of the Code
will qualify as performance-based compensation or otherwise be exempt from
deductibility limitations under Section 162(m) of the Code, to the extent that
the authorization of the Award (or the payment thereof, as the case may be)
satisfies any applicable administrative requirements thereof.
6.11 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
6.12 STOCK-BASED AWARDS IN SUBSTITUTION FOR STOCK OPTIONS OR AWARDS GRANTED
BY OTHER CORPORATION. Awards may be granted to Eligible Persons under this Plan
in substitution for employee stock options, Stock Appreciation Rights,
restricted stock or other stock-based awards granted by other entities to
persons who are or who will become Eligible Persons in respect of the Company,
in connection with a distribution, merger or other reorganization by or with the
granting entity or an affiliated entity, or the acquisition by the Company,
directly or indirectly, or all or a substantial part of the stock or assets of
the employing entity.
6.13 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Committee to grant awards or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority.
6.14 NO CORPORATE ACTION RESTRICTION. The existence of the Plan, the Award
Agreements and the Awards granted hereunder shall not limit, affect or restrict
in any way the right or power of the Board or the stockholders of the
Corporation to make or authorize: (1) any adjustment, recapitalization,
reorganization or other change in the Corporation's or any Subsidiary's capital
structure or its business, (2) any merger, amalgamation, consolidation or change
in the ownership of the Corporation or any Subsidiary, (3) any issue of bonds,
debentures, capital, preferred or prior preference stock ahead of or affecting
the Corporation's or any Subsidiary's capital stock or the rights thereof, (4)
any dissolution or liquidation of the Corporation or any Subsidiary, (5) any
sale or transfer of all or any part of the Corporation or any Subsidiary's
assets or business, or (6) any other corporate act or proceeding by the
Corporation or any Subsidiary. No Participant, Beneficiary or any other person
shall have any claim under any Award or Award Agreement against any member of
the Board or the Committee, or the Corporation or any employees, officers or
agents of the Corporation or any Subsidiary, as a result of any such action.
6.15 OTHER COMPANY BENEFIT AND COMPENSATION PROGRAM. Payments and other
benefits received by a Participant under an Award made pursuant to this Plan
shall not be deemed a part of a Participant's compensation for purposes of the
determination of benefits under any other employee welfare or benefit plans or
arrangements, if any, provided by the Corporation or any Subsidiary, except
where the Committee or the Board expressly otherwise provides or authorizes in
writing. Awards under this Plan may be made in addition to, in combination
with, as alternatives to or in payment of grants, awards or commitments under
any other plans or arrangements of the Company or any Subsidiary.
7. DEFINITIONS.
"AWARD" means an award of any Option, Stock Appreciation Right, Restricted
Stock, Stock Bonus, Performance Share Award, dividend equivalent or deferred
payment right or other right or security that would constitute a "derivative
security" under Rule 16a-1(c) of the Exchange Act, or any combination thereof,
whether alternative or cumulative, authorized by and granted under this Plan.
"AWARD AGREEMENT" means any writing setting forth the terms of an Award
that has been authorized by the Committee.
"AWARD DATE" means the date upon which the Committee took the action
granting an Award or such later date as the Committee designates as the Award
Date at the time of grant of the Award.
"BENEFICIARY" means the person, persons, trust or trusts designated by a
Participant or, in the absence of a designation, entitled by will or the laws of
descent and distribution, to receive the benefits specified in the Award
Agreement and under this Plan if the Participant dies and means the
Participant's executor or administrator if no other Beneficiary is designated
and able to act under the circumstances.
"BOARD" means the Board of Directors of the Corporation.
"CAUSE" with respect to a Participant means (unless otherwise expressly
provided in the applicable Award Agreement or another applicable contract with
the Participant) a termination of service based upon a finding by the Company
that the Participant:
(1) has been negligent in the discharge of his or her duties to the Company,
has refused to perform stated or assigned duties or is incompetent in or (other
than by reason of a disability or analogous condition) incapable of performing
those duties; or
(2) has been dishonest or committed or engaged in an act of theft,
embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure
or use of inside information, customer lists, trade secrets or other
confidential information; has breached a fiduciary duty, or willfully and
materially violated any other duty, law, rule, regulation or policy of the
Company or an affiliate; or has been convicted of a felony or misdemeanor (other
than minor traffic violations or similar offenses); or
(3) has materially breached any of the provisions of any agreement with
the Company or an affiliated entity; or
(4) has engaged in unfair competition with, or otherwise acted
intentionally in a manner injurious to the reputation, business or assets of,
the Company or an affiliate; has improperly induced a vendor or customer to
break or terminate any contract with the Company or an affiliate or induced a
principal for whom the Company or an affiliate acts as agent to terminate such
agency relationship.
A termination for Cause shall be deemed to occur (subject to reinstatement upon
a contrary final determination by the Committee) on the date on which the
Company first delivers written notice to the Participant of a finding of
termination for Cause.
"CHANGE IN CONTROL EVENT" means any of the following:
(1) Approval by the stockholders (or, if no stockholder approval is
required, by the Board) of the Corporation of the dissolution or liquidation of
the Corporation, other than in the context of a transaction that does not
constitute a Change in Control Event under clause (2) below.
(2) Consummation of a merger, consolidation, or other reorganization, with
or into, or the sale of all or substantially all of the Corporation's business
and/or assets as an entirety to, one or more entities that are not Subsidiaries
or other affiliates (a "BUSINESS COMBINATION"), unless (a) as a result of the
Business Combination at least 50% of the outstanding securities voting generally
in the election of directors of the surviving or resulting entity or a parent
thereof (the "SUCCESSOR ENTITY") immediately after the reorganization are, or
will be, owned, directly or indirectly, by stockholders of the Corporation
immediately before the Business Combination; and (b) no "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) (excluding the
Successor Entity or an Excluded Person) beneficially owns, directly or
indirectly, more than 50% of the outstanding shares of the combined voting power
of the outstanding voting securities of the Successor Entity, after giving
effect to the Business Combination, except to the extent that such ownership
existed prior to the Business Combination; and (c) at least 50% of the members
of the board of directors of the entity resulting from the Business Combination
were members of the Board at the time of the execution of the initial agreement
or of the action of the Board approving the Business Combination.
(3) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than an Excluded Person becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of the combined voting
power of the Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation, other than as a
result of (a) an acquisition directly from the Company, (b) an acquisition by
the Company, (c) an acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or a Successor Entity, or (d) an
acquisition by any entity pursuant to a transaction which is expressly excluded
under clause (2) above.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITTEE" means the Board or one or more committees appointed by the
Board to administer all or certain aspects of this Plan, each committee to be
comprised solely of one or more directors or such number as may be required
under applicable law. Each member of a Committee in respect of his or her
participation in any decision with respect to an Award intended to satisfy the
requirements of Section 162(m) of the Code must satisfy the requirements of
"outside director" status within the meaning of Section 162(m) of the Code;
provided, however, that the failure to satisfy such requirement shall not affect
the validity of the action of any committee otherwise duly authorized and acting
in the matter. As to Awards, grants or other transactions that are authorized
only by a committee and that are intended to be exempt under Rule 16b-3, the
requirements of Rule 16b-3(d)(1) with respect to committee action must also be
satisfied.
"COMMON STOCK" means the Common Stock, par value $0.001 per share, of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 6.2 of this Plan.
"COMPANY" means, collectively, the Corporation and its Subsidiaries.
"CORPORATION" means GTC Telecom Corp., a Nevada corporation, and its
successors.
"ELIGIBLE EMPLOYEE" means an officer (whether or not a director) or employee of
the Company.
"ELIGIBLE PERSON" means an Eligible Employee or any Other Eligible Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCLUDED PERSON" means (1) any person described in and satisfying the
conditions of Rule 13d-1(b)(1) under the Exchange Act, (2) any person who is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than
10% of the outstanding Shares of Common Stock at the time of adoption of this
Plan (or an affiliate, successor, heir, descendant or related party of or to any
such person), (3) the Company, or (4) an employee benefit plan (or related
trust) sponsored or maintained by the Company or the Successor Entity.
"FAIR MARKET VALUE" on any date means:
(1) if the stock is listed or admitted to trade on a national securities
exchange, the closing price of the stock on the Composite Tape, as published in
the Western Edition of The Wall Street Journal, of the principal national
securities exchange on which the stock is so listed or admitted to trade, on
such date, or, if there is no trading of the stock on such date, then the
closing price of the stock as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares;
(2) if the stock is not listed or admitted to trade on a national securities
exchange, the last price for the stock on such date, as furnished by the
National Association of Securities Dealers, Inc. (the "NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information;
(3) if the stock is not listed or admitted to trade on a national securities
exchange and is not reported on the National Market Reporting System, the mean
between the bid and asked price for the stock on such date, as furnished by the
NASD or a similar organization; or
(4) if the stock is not listed or admitted to trade on a national securities
exchange, is not reported on the National Market Reporting System and if bid and
asked prices for the stock are not furnished by the NASD or a similar
organization, the value as established by the Committee at such time for
purposes of this Plan.
"INCENTIVE STOCK OPTION" means an Option which is intended, as evidenced by
its designation, as an incentive stock option within the meaning of Section 422
of the Code, the award of which contains such provisions (including but not
limited to the receipt of stockholder approval of this Plan, if the Award is
made prior to such approval) and is made under such circumstances and to such
persons as may be necessary to comply with that section.
"NONQUALIFIED STOCK OPTION" means an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an incentive stock option
shall be deemed to be designated a nonqualified stock option under this Plan and
not an incentive stock option under the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board of Directors of the
Corporation who is not an officer or employee of the Company.
"OPTION" means an option to purchase Common Stock granted under this Plan.
The Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option.
"OTHER ELIGIBLE PERSON" means any Non-Employee Director or any
individual consultant or advisor who renders or has rendered bona fide services
(other than services in connection with the offering or sale of securities of
the Company in a capital raising transaction or as a market maker or promoter of
the Company's securities) to the Company, and who is selected to participate in
this Plan by the Committee. An advisor or consultant may be selected as an
Other Eligible Person only if such person's participation in this Plan would not
adversely affect (1) the Corporation's eligibility to use Form S-8 to register
under the Securities Act of 1933, as amended, the offering of shares issuable
under this Plan by the Company or (2) the Corporation's compliance with any
other applicable laws.
"PARTICIPANT" means an Eligible Person who has been granted an Award under
this Plan.
"PERFORMANCE SHARE AWARD" means an Award of a right to receive shares of
Common Stock under Section 5.1, or to receive shares of Common Stock or other
compensation (including cash) under Section 5.2, the issuance or payment of
which is contingent upon, among other conditions, the attainment of performance
objectives specified by the Committee.
"PERSONAL REPRESENTATIVE" means the person or persons who, upon the
disability or incompetence of a Participant, shall have acquired on behalf of
the Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
"PLAN" means this GTC Telecom Corp. 2001 Stock Incentive Plan, as it may be
amended from time to time.
"QDRO" means a qualified domestic relations order.
"RESTRICTED SHARES" or "RESTRICTED STOCK" means shares of Common Stock
awarded to a Participant under this Plan, subject to payment of such
consideration, if any, and such conditions on vesting (which may include, among
others, the passage of time, specified performance objectives or other factors)
and such transfer and other restrictions as are established in or pursuant to
this Plan and the related Award Agreement, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
"RETIREMENT" means retirement with the consent of the Company or from
active service as an employee or officer of the Company on or after attaining
age 55 with 10 or more years of service or after age 65 or, in the case of a
Non-Employee Director, a retirement or resignation as a director after at least
5 years service as a director.
"RULE 16B-3" means Rule 16b-3 as promulgated by the Commission pursuant to
the Exchange Act, as amended from time to time.
"SECTION 16 PERSON" means a person subject to Section 16(a) of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time.
"SEVERANCE DATE" means the date that the Participant's employment by (or other
service specified in the Award Agreement to) the Company terminates for any
reason.
"STOCK APPRECIATION RIGHT" means a right authorized under this Plan to
receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock.
"STOCK BONUS" means an Award of shares of Common Stock granted under this Plan
for no consideration other than past services and without restriction other than
such transfer or other restrictions as the Committee may deem advisable to
assure compliance with law.
"SUBSIDIARY" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
"TOTAL DISABILITY" means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
PROXY
GTC TELECOM CORP.
3151 Airway Ave., Suite P-3, Costa Mesa, California 92626
Proxy for Annual Meeting of Shareholders - December 13, 2001
(THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoint S. PAUL SANDHU and ERIC CLEMONS, and each of
them, as proxy or proxies for the undersigned, with full power of substitution,
who may act by unanimous vote of said proxies or their substitutes as shall be
present at the meeting, or, if only one be present, then the one shall have all
the powers hereunder, to represent and to vote, as designated herein (If no
direction is made, this Proxy will be voted FOR Proposals 1, 2, and 3), all of
the shares of GTC Telecom Corp. (the "Company") standing in the name of the
undersigned, at the Annual Meeting of Shareholders of the Company to be held on
Thursday, December 13, 2001, at 9:30 a.m. at the Irvine Marriott John Wayne
Airport, 18000 Von Karman Ave., Irvine, California 92612, and any adjournment
thereof. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE MARK YOUR VOTES AS INDICATED IN THIS PROXY
The Board of Directors recommends a vote FOR Items 1, 2 & 3.
WITHHELD
FOR FOR
ITEM 1 - ELECTION OF DIRECTORS
NOMINEES:
ERIC C. CLEMONS [ ] [ ]
S. PAUL SANDHU [ ] [ ]
JOHN M. EGER [ ] [ ]
CLAY T. WHITEHEAD [ ] [ ]
GERALD A. DECICCIO [ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided
below)._________________________________________
FOR AGAINST ABSTAIN
ITEM 2 - TO ADOPT THE GTC 2001 STOCK
INCENTIVE PLAN [ ] [ ] [ ]
FOR AGAINST ABSTAIN
ITEM 3 - TO RATIFY THE SELECTION OF CORBIN &
WERTZ LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
Signature(s) ________________________________________ Date _____________
________________________________________
(Print Name)
NOTE: Please sign as name appears hereon. Joint owners should each 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.