<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File No. 0-27042
AlphaNet Solutions, Inc.
----------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-2554535
- ------------------------------ ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7 Ridgedale Ave., Cedar Knolls, New Jersey 07927
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(201) 267-0088
-----------------------------
(Registrant's Telephone Number,
Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes: X No: ______
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of September 30, 1996:
Class Number of Shares
----- ----------------
Common Stock, $.01 par value 5,100,000
<PAGE> 2
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets
as of December 31, 1995
and September 30, 1996 (unaudited) . . . . . . . . . . . 2
Consolidated Statements of Income
for the Three Months and Nine Months Ended
September 30, 1995 and 1996 (unaudited) . . . . . . . . 3
Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months Ended
September 30, 1996 (unaudited) . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30, 1995 and 1996 (unaudited) . . . . . . . . 5
Notes to Consolidated Financial Statements (unaudited) . 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition. . . . . . 9
Results of Operations . . . . . . . . . . . . . . . . . 10
Liquidity and Capital Resources . . . . . . . . . . . . 13
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 16
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- 1 -
<PAGE> 4
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 1,223 $ 4,818
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . 13,885 22,519
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946 3,279
Current portion of loan receivable -- shareholder . . . . . . . . . 160 --
Prepaid expenses and other current assets . . . . . . . . . . . . . 425 1,227
------------ -------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 16,639 31,843
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 1,378 2,430
Loan receivable -- shareholder . . . . . . . . . . . . . . . . . . . . . 253 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 1,057
------------ -------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,770 $ 35,330
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 285 $ --
Current portion of capital lease obligations . . . . . . . . . . . . 91 97
Accounts payable and accrued expenses . . . . . . . . . . . . . . . 11,230 17,671
------------ -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 11,606 17,768
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 --
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . 139 73
------------ -------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 12,196 17,841
------------ -------------
Shareholders' equity:
Preferred stock -- $0.01 par value; authorized
3,000,000 shares, none issued . . . . . . . . . . . . . . . . . . . -- --
Common stock -- $0.01 par value; authorized
15,000,000 shares, 3,400,000 and 5,100,000
shares issued and outstanding . . . . . . . . . . . . . . . . . . . 34 51
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 156 15,878
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 6,384 1,560
------------ -------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 6,574 17,489
------------ -------------
Total liabilities and shareholders' equity . . . . . . . . . . . . $ 18,770 $ 35,330
============ =============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 5
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------------- ---------------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
Product sales . . . . . . . . . . . . . $15,535 $25,466 $45,198 $60,334
Services and support . . . . . . . . . 2,979 5,113 8,185 13,786
--------- --------- --------- ---------
18,514 30,579 53,383 74,120
--------- --------- --------- ---------
Cost of sales:
Product sales . . . . . . . . . . . . . 13,677 22,482 39,276 53,389
Services and support . . . . . . . . . 2,319 3,996 6,518 11,126
--------- --------- --------- ---------
15,996 26,478 45,794 64,515
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . 2,518 4,101 7,589 9,605
--------- --------- --------- ---------
Operating expenses:
Selling expenses . . . . . . . . . . . 1,084 1,919 3,343 4,681
General and administrative expenses . . 379 598 1,269 1,576
--------- --------- --------- ---------
1,463 2,517 4,612 6,257
--------- --------- --------- ---------
Operating income . . . . . . . . . . . . . 1,055 1,584 2,977 3,348
--------- --------- --------- ---------
Other income (expense):
Interest income . . . . . . . . . . . . 15 74 42 194
Interest expense . . . . . . . . . . . (31) (15) (116) (70)
--------- --------- --------- ---------
(16) 59 (74) 124
--------- --------- --------- ---------
Income before income taxes . . . . . . . . 1,039 1,643 2,903 3,472
Provision for income taxes . . . . . . . . 31 674 87 994
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . . $1,008 $969 $2,816 $ 2,478
========= ========= ========= =========
Pro forma data:
Income before income taxes . . . . . . $1,039 $1,643 $2,903 $3,472
Provision for income taxes . . . . . . 419 674 1,171 1,415
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . $620 $969 $1,732 $2,057
========= ========= ========= =========
Net income per share . . . . . . . . . $0.15 $0.19 $0.43 $0.43
========= ========= ========= =========
Weighted average number
of common shares and
common shares equivalent . . . . . . . 3,988 5,100 3,988 4,739
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 6
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ---------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 . . . . . . . . . . . . . $34 $156 $6,384 $ 6,574
Net proceeds from issuance of
1,700,000 shares of Common Stock . . . . . . . . 17 15,722 -- 15,739
Payment of dividends . . . . . . . . . . . . . . . . -- -- (1,147) (1,147)
Distribution of S Corporation earnings . . . . . . . -- -- (6,155) (6,155)
Net income . . . . . . . . . . . . . . . . . . . . . -- -- 2,478 2,478
--- ------- ------ -------
Balance at September 30, 1996 . . . . . . . . . . . . $51 $15,878 $1,560 $17,489
=== ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 7
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,816 $2,478
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 125 383
Increase (decrease) from changes in:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . (453) (8,634)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 930 (2,333)
Prepaid expenses and other current assets . . . . . . . . . . (131) (802)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 11 391
Accounts payable and accrued expenses . . . . . . . . . . . . (217) 6,441
----------- -----------
Net cash provided by (used in) operating activities . . . . . . 3,081 (2,076)
----------- -----------
Cash flows from investing activities:
Property and equipment expenditures . . . . . . . . . . . . . . . (462) (1,412)
Receipt of loan repayments - shareholder . . . . . . . . . . . . . 120 413
Purchase of assets - Lior . . . . . . . . . . . . . . . . . . . . -- (971)
----------- -----------
Net cash used in investing activities . . . . . . . . . . . . . (342) (1,970)
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock . . . . . . . . . . . . -- 15,739
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . (213) (736)
Repayment of capital lease obligations . . . . . . . . . . . . . . (39) (60)
Net payments of notes payable-bank . . . . . . . . . . . . . . . . (488) --
Repayment of loan payable - shareholder . . . . . . . . . . . . . (719) --
Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . (1,030) (1,147)
Distribution of S Corporation earnings . . . . . . . . . . . . . . -- (6,155)
Cost of anticipated common stock offering . . . . . . . . . . . . (103) --
----------- -----------
Net cash (used in) provided by financing activities . . . . . . (2,592) 7,641
----------- -----------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . 147 3,595
Cash and cash equivalents, beginning of period . . . . . . . . . . . 63 1,223
----------- -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . $210 $4,818
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 8
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 1 -- Basis of Presentation:
The information presented for September 30, 1995 and 1996, and for the
three-month and nine-month periods then ended, is unaudited, but, in the
opinion of the Company's management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for the fair
presentation of the Company's financial position as of September 30, 1996 and
the results of its operations and its cash flows for the three-month and
nine-month periods ended September 30, 1995 and 1996. The consolidated
financial statements included herein have been prepared in accordance with
generally accepted accounting principles and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1995,
which were included as part of the Company's Registration Statement on Form S-1
(Registration No. 33-97922), as declared effective by the Securities and
Exchange Commission on March 20, 1996.
Results for the interim period are not necessarily indicative of
results that may be expected for the entire year.
Certain amounts in the 1995 financial statements have been
reclassified to conform to the 1996 presentation. Such reclassifications are
not material.
Note 2 -- Income Taxes:
Prior to its initial public offering of Common Stock, the Company had
elected to be treated as a Subchapter S Corporation for income tax purposes.
The Subchapter S status was terminated effective March 19, 1996. Accordingly,
net deferred tax assets have been recorded on the September 30, 1996 balance
sheet with a corresponding tax benefit for the nine-month period ended
September 30, 1996.
For informational purposes, the accompanying consolidated statements
of income include a pro forma adjustment for income taxes which would have been
recorded if the Company had not been an S corporation, based on the tax laws in
effect during the respective periods.
Note 3 -- Pro Forma Net Income Per Share:
Pro forma net income per share is computed using the weighted average
number of common shares and common shares equivalent outstanding during the
periods. Common shares equivalent consists of the Company's common shares
issuable upon the exercise of stock options. The weighted average number of
common shares and common shares equivalent outstanding have been adjusted for
the number of shares that the Company would need to issue to fund the S
Corporation Distribution to its then current shareholders less the outstanding
loan to a then current shareholder.
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<PAGE> 9
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 4 -- Initial Public Offering:
On March 26, 1996, the Company consummated an initial public offering
of 2,100,000 shares of its Common Stock at a price of $10.50 per share, of
which 1,600,000 shares were issued and sold by the Company and 500,000 shares
were sold by a selling shareholder of the Company. The Company did not receive
any proceeds from the sale of shares sold by the selling shareholder. On April
19, 1996, the underwriters of the Company's initial public offering notified
the Company of their intent to exercise, in part, their over-allotment option
to purchase shares of the Company's Common Stock. As a result, the Company
issued and sold an additional 100,000 shares of its Common Stock at the initial
public offering price of $10.50 per share. The option lapsed as to its
unexercised portion. The aggregate net proceeds to the Company, after expenses
and underwriting discounts and commissions, were approximately $15,739.
Note 5 -- Related Party Transactions:
On September 28, 1995, the Board of Directors voted to distribute to
its shareholders the previously taxed and undistributed earnings of the Company
as of the effective date of the Company's termination of its S Corporation
status, which termination occurred on March 19, 1996. The amount of such
distribution was $5,782 and represented substantially all of the previously
taxed and undistributed earnings less the outstanding loan to a current
shareholder.
In connection with certain litigation arising from the alleged
wrongful conduct of two former employees of the Company, Stan Gang, the
Company's President, Chief Executive Officer and principal shareholder, paid
the Company $675 to indemnify the Company for any and all losses which the
Company may sustain relating to such litigation, and such amount is included in
accounts payable and accrued expenses on the September 30, 1996 balance sheet.
Mr. Gang has agreed to indemnify the Company for an additional $325 in
connection therewith. The Company shall reimburse Mr. Gang in the event and to
the extent that the Company, as plaintiff in such litigation, is awarded and
collects damages from the defendants in such litigation, receives sums as a
result of a settlement between the Company and such defendants, or receives
proceeds under an insurance policy.
If losses are sustained by the Company as a result of such litigation,
amounts under the indemnification agreement will be released from accrued
expenses and recorded as capital contributions. Although Mr. Gang has
indemnified the Company with respect to damages up to $1,000, any unrecorded
losses sustained by the Company, including the Company's inability to recover
certain net assets related to this matter, will nonetheless result in charges
to the Company's results of operations. Amounts indemnified by Mr. Gang will
be recorded as a contribution of capital to the Company.
For information relating to the transaction between Mr. Gang and the
Company with respect to the acquisition of certain assets of Lior, Inc., see
Note 6 -- Acquisition.
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<PAGE> 10
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Note 6 --Acquisition and Related Pro Forma Financial Information:
On July 24, 1996, the Company consummated the acquisition of certain
assets of Lior, Inc. ("Lior"), a MicroAge affiliate located in Paramus, New
Jersey. The Company purchased the entire customer list and outstanding
purchase orders of Lior for an aggregate purchase price of up to $1,000, of
which $900 was paid at closing and $100 may be due in January 1997 if certain
former Lior salespersons remain employed by the Company through such date. The
Company funded the purchase price from proceeds raised in its initial public
offering. In determining the purchase price, the Company considered, among
other factors, the past and projected revenues generated from such customers
and the value of the acquired purchase orders. The Company did not assume any
liabilities of Lior, other than the obligations to perform under the acquired
purchase orders and certain service contracts. The Company acquired such
assets from Stan Gang, the Company's President and Chief Executive Officer, who
had purchased such assets for the same consideration from Lior on July 18, 1996
pending approval of the transaction by the Company's Board of Directors. In
connection with such transaction, effective July 1, 1996, 26 former employees
of Lior, including 7 sales persons and 8 technical personnel, joined the
Company.
The following pro forma statements of income for the nine-month periods
ended September 30, 1995 and 1996 are based on the historical financial state-
ments of the Company and Lior, adjusted to give effect to the acquisition of
certain assets of Lior by the Company, and assume that the acquisition occurred
as of the first day of the applicable period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1995 1996
---- ----
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . $71,590 $88,826
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 62,338 77,747
--------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . . . . 9,252 11,079
Operating expenses . . . . . . . . . . . . . . . . . . . 6,274 7,714
--------- ---------
Operating income . . . . . . . . . . . . . . . . . . . . 2,978 3,365
Other income (expense), net . . . . . . . . . . . . . . . (392) (136)
--------- ---------
Income before
pro forma income taxes . . . . . . . . . . . . . . . . 2,586 3,229
Pro forma provision
for income taxes . . . . . . . . . . . . . . . . . . . 1,044 1,316
--------- ---------
Pro forma net income . . . . . . . . . . . . . . . . . . $1,542 $1,913
========= =========
Pro forma net income per share . . . . . . . . . . . . . $0.39 $0.40
========= =========
Weighted average number of common
shares and common shares equivalent (in thousands) . . . . . . . . . 3,988 4,739
========= =========
</TABLE>
The pro forma financial information does not purport to present what
the Company's results of operations would actually have been if the acquisition
of the Lior assets had occurred on the assumed date, as specified above, or to
project the Company's results of operations for any future period.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
GENERAL
The Company was formed in 1984 as a reseller of computer hardware and software
products, and to date most of its revenues have been derived from product
sales. The Company has entered into distribution agreements with MicroAge
Computer Centers, Inc. ("MicroAge") and Ingram Alliance Reseller Company
("Ingram"), two of the nation's largest aggregators, to acquire most of its
products for resale. The distribution agreements with MicroAge and Ingram
give the Company access to products on an as-needed basis (thereby reducing
the Company's need to carry large inventories), electronic ordering capability,
product configuration and testing, warehousing and delivery. The Company also
has partnered with many industry-leading vendors of information technology
equipment, including Cisco, Compaq, Hewlett-Packard, IBM, Lotus, Microsoft
and Novell, to resell such products and provide enhanced service offerings.
In 1990, the Company began developing its systems integration
capabilities to expand the scope of its service offerings. At that time,
the Company also made the strategic decision to focus its sales, services
and support efforts directly to Fortune 1000 and other large and mid-sized
companies located in the New York-to-Philadelphia corridor. The Company
believes that there is a growing trend on the part of such companies to
outsource information technology functions.
The Company's primary strategy is to combine the technical expertise
of its service personnel with the strong product procurement and marketing
capabilities of its reseller business to provide comprehensive information
technology solutions to new and existing clients. The Company believes that
its ability to provide a broad range of technical services, coupled with its
traditional strength in satisfying its clients' computer product requirements
and its long-term relationships with large clients, positions the Company to
grow the services component of its business, while further strengthening its
product sales. The Company believes that its ability to be a single-source
provider of information technology products and services and support enables it
to earn margins higher than it would earn if it sold products only. In
general, the Company anticipates that an increasing percentage of its gross
profit in the future will be derived from the services and support component of
its business. However, in the near term, the Company believes that product
sales will continue to generate a significantly larger percentage of the
Company's gross profit, particularly due to the Company's recent acquisition of
the Lior customer list. See Note 6 to Notes to Financial Statements. Many of
such customers historically had purchased primarily computer products from
Lior. The Company believes that it may be
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<PAGE> 12
able to leverage the product sales component of the Lior business to increase
sales of services and support to such customers, although no assurance can be
given with respect thereto. See Item 5 -- "Other Information."
This Form 10-Q contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. In particular, the
Company has disclosed certain information regarding the mix of its product and
service revenue in the future. The primary factors which would impact such
shift to an increased percentage of services revenue include the Company's
ability to increasingly provide services to its existing customers that
primarily purchase computer products from the Company while also expanding the
services provided to new customers. In addition, the Company must be able to
hire, train and retain qualified managerial, technical and sales personnel with
services experience in a very competitive environment for such personnel.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 Compared to Three Months Ended September
30, 1996
Revenue. Total revenue increased by 65.2%, or $12,065,000, from
$18,514,000 in the third quarter of 1995 to $30,579,000 in the third quarter of
1996. Product sales revenue increased by 63.9%, or $9,931,000, from
$15,535,000 in the third quarter of 1995 to $25,466,000 in the third quarter of
1996. The increase is primarily attributed to increased demand from the
Company's established customer base and new product business resulting from the
Company's acquisition of certain assets of Lior in July 1996. Service and
support revenue increased by 71.6%, or $2,134,000, from $2,979,000 in the third
quarter of 1995 to $5,113,000 in the third quarter of 1996. This increase is
attributable primarily to increased demand for the Company's services and
support, including increased demand for the Company's systems engineering,
customer engineering, education and cabling services. During such period,
certain customers which previously had purchased only products from the Company
also engaged the Company for services and support. In the third quarter of
1996, sales to Nabisco Foods Group, the Company's largest customer, accounted
for more than 10% of the Company's total revenue. There can be no assurance
that such customer will continue to place orders with the Company or engage the
Company to perform services and support functions at existing levels.
Gross profit. The Company's cost of sales includes primarily, in the
case of product sales revenue, the cost to the Company of products acquired for
resale, and in the case of services and support revenue, salaries and related
employee benefits and payroll taxes. The Company's gross profit increased by
62.9%, or $1,583,000, from $2,518,000 in the third quarter of 1995 to
$4,101,000 in the third quarter of 1996. Gross profit margin decreased
slightly from 13.6% of total revenue in the third quarter of 1995 to 13.4% of
total revenue in the corresponding 1996 quarter. Such decrease was due to a
decline in gross profit margin attributable to product sales coupled with a
decline in gross profit margin attributable to services and support revenue.
Gross
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<PAGE> 13
profit margin attributable to product sales decreased from 12.0% in the third
quarter of 1995 to 11.7% in the third quarter of 1996. Although gross profit
margin attributable to product sales was relatively flat for this quarter, the
Company, like many computer product vendors, continues to experience downward
pricing pressure on product sales which often results in margin deterioration
on such sales. Gross profit margin attributable to services and support
revenue decreased slightly from 22.2% of services and support revenue in the
third quarter of 1995 to 21.8% in the third quarter of 1996.
Selling expenses. Selling expenses consist primarily of personnel costs,
including sales commissions earned by Company personnel involved in the sales
and marketing of computer products and professional services. These personnel
include direct sales, sales support and marketing personnel. Selling expenses
also include costs of advertising and promotion. Selling expenses increased by
77.0%, or $835,000, from $1,084,000 in the third quarter of 1995 to $1,919,000
in the third quarter of 1996, and increased from 5.9% of total revenue in the
third quarter of 1995 to 6.3% of total revenue in the third quarter of 1996.
The increase in selling expenses in absolute dollars was attributable primarily
to increased salesperson commissions and other support costs, the increase in
sales and marketing efforts associated with its services and support offerings
and to costs incurred and associated with the Company's expansion into the
Philadelphia market. The increase as a percentage of revenue was due primarily
to the expenses incurred in connection with the increased sales and marketing
efforts and expansion into the Philadelphia market.
General and administrative expenses. General and administrative
expenses consist primarily of salaries and occupancy costs for administrative,
executive and finance personnel. General and administrative expenses increased
by 57.8%, or $219,000, from $379,000 in the third quarter of 1995 to $598,000
in the third quarter of 1996, but remained constant at 2.0% of total revenue,
respectively. The increase in general and administrative expenses in absolute
dollars was due primarily to increases in personnel expenses, professional fees
and corporate insurance premiums.
Income taxes. Prior to March 19, 1996, the Company was treated as an
S Corporation for income tax purposes. Therefore, for all of the third quarter
of 1995, the Company was exempt from Federal income taxes and certain state
income taxes. As a result, the Company's effective income tax rates were 3.0%
in the third quarter of 1995 and 41.0% in the third quarter of 1996. For
informational purposes, based upon the tax laws in effect during 1995, pro
forma income taxes have been disclosed for income taxes which would have been
recorded if the Company had not been an S Corporation in the third quarter of
1995.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended September
30, 1996
Revenue. Total revenue increased by 38.8%, or $20,737,000, from
$53,383,000 in the first nine months of 1995 to $74,120,000 in the first nine
months of 1996. Product sales revenue
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<PAGE> 14
increased by 33.5%, or $15,136,000, from $45,198,000 in the first nine months
of 1995 to $60,334,000 in the first nine months of 1996. The increase is
primarily attributed to increased demand from the Company's established
customer base and, to a lesser extent, new product business resulting from the
Company's acquisition of certain assets of Lior in July 1996. Service and
support revenue increased by 68.4%, or $5,601,000, from $8,185,000 in the first
nine months of 1995 to $13,786,000 in the corresponding period of 1996. This
increase is attributable primarily to increased demand for the Company's
services and support, including increased demand for the Company's systems
engineering, customer engineering, education and cabling services. During such
period, certain customers which previously had purchased only products from the
Company also engaged the Company for services and support. In the 1996 period,
sales to Nabisco Foods Group, the Company's largest customer, accounted for
more than 10% of the Company's total revenue. There can be no assurance that
such customer will continue to place orders with the Company or engage the
Company to perform services and support functions at existing levels.
Gross profit. The Company's cost of sales includes primarily, in the
case of product sales revenue, the cost to the Company of products acquired for
resale, and in the case of services and support revenue, salaries and related
employee benefits and payroll taxes. The Company's gross profit increased by
26.6%, or $2,016,000, from $7,589,000 in the first nine months of 1995 to
$9,605,000 in the corresponding 1996 period. Gross profit margin decreased,
however, from 14.2% of total revenue in the 1995 period to 13.0% in the nine
months ended September 30, 1996. Such decrease was due to a decline in gross
profit margin attributable to product sales coupled with a decline in gross
profit margin attributable to services and support revenue. Gross profit
margin attributable to product sales decreased from 13.1% in the first nine
months of 1995 to 11.5% in the corresponding 1996 period. Although pricing on
computer products often fluctuates from quarter to quarter, the decrease in
such gross profit margin during the 1996 period was attributed primarily to
continued downward pricing pressure on sales of computer products, which
typically results in margin deterioration on such sales. Gross profit margin
attributable to services and support revenue decreased from 20.4% of services
and support revenue in the first nine months of 1995 to 19.3% in the first nine
months of 1996. The decrease in such gross profit margin was attributable
primarily to the fact that services and support revenue increased at a slower
rate than related costs, as the Company accelerated hiring and training of
technical professionals and experienced lower utilization and incurred higher
expenses related to its learning centers during the second quarter of 1996.
Selling expenses. Selling expenses consist primarily of personnel
costs, including sales commissions earned by Company personnel involved in the
sales and marketing of computer products and professional services. These
personnel include direct sales, sales support and marketing personnel. Selling
expenses also include costs of advertising and promotion. Selling expenses
increased by 40.0%, or $1,338,000, from $3,343,000 in the first nine months of
1995 to $4,681,000 in the corresponding 1996 period, but remained constant at
6.3% of total revenue in the first nine months of 1995 and 1996. The increase
in selling expenses in absolute dollars was attributable primarily to increased
salesperson commissions and other support costs, the increase in sales and
marketing efforts associated with its services and support offerings and to
costs incurred and associated with the Company's expansion into the
Philadelphia market.
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<PAGE> 15
General and administrative expenses. General and administrative
expenses consist primarily of salaries and occupancy costs for administrative,
executive and finance personnel. General and administrative expenses increased
by 24.2%, or $307,000, from $1,269,000 in the first nine months of 1995 to
$1,576,000 in the corresponding 1996 period, but decreased from 2.4% to 2.1% of
total revenue, respectively. The increase in general and administrative
expenses in absolute dollars was due primarily to increases in personnel
expenses, professional fees and corporate insurance premiums. The decrease as
a percentage of revenue is due to the substantial increase in revenue.
Income taxes. Prior to March 19, 1996, the Company was treated as an
S Corporation for income tax purposes. Therefore, for all of the 1995 period,
the Company was exempt from Federal income taxes and certain state income
taxes. In addition, the Company received a $210,000 benefit for income taxes in
the first quarter of 1996 to reflect the recording of net deferred tax assets
as of March 31, 1996 which resulted from the Company's termination of its S
Corporation status. As a result, the Company's effective income tax rates were
3.0% in the first nine months of 1995 and 28.6% in the first nine months of
1996. For informational purposes, based upon the tax laws in effect prior to
the Company's termination of S Corporation status, pro forma income taxes have
been disclosed for income taxes which would have been recorded if the Company
had not been an S Corporation during such period.
LIQUIDITY AND CAPITAL RESOURCES
In March and April 1996, the Company consummated an initial public
offering of 2,200,000 shares of its Common Stock at a price of $10.50 per
share. Of the 2,200,000 shares, 1,700,000 shares (including 100,000 shares
issued and sold by the Company upon the exercise of the underwriters'
over-allotment option) were issued and sold by the Company and 500,000 shares
were sold by a shareholder of the Company. The Company did not receive any of
the proceeds from the sale of shares by the selling shareholder. The net
proceeds to the Company were $15,739,000.
Since its inception, the Company has funded its operations primarily
from cash generated by operations and, to a lesser extent, such cash has been
augmented with funds from borrowings under the Company's revolving credit
facility. Net cash used in operations was $2,076,000 for the first nine months
of 1996 and consisted primarily of an increase in accounts receivable of
$8,634,000, an increase in inventories of $2,333,000 and an increase in prepaid
expenses and other current assets of $802,000. The increase in accounts
receivable is attributable primarily to higher sales. The aging of the
Company's accounts receivable remained relatively constant when compared to the
accounts receivable aging at December 31, 1995. The increase in inventories is
primarily attributable to the purchase of computer equipment subject to firm
purchase orders. Such equipment is configured by the Company and then shipped
to customers. The increase in prepaid expenses and other current assets is
primarily attributable to an increase in amounts due
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<PAGE> 16
from vendors. These increases were partially offset by a $6,441,000 increase
in accounts payable and accrued expenses and net income of $2,478,000.
The Company's working capital was $14,075,000 at September 30, 1996
compared to $5,033,000 at December 31, 1995.
Net cash used in investing activities in the first nine months of 1996
was $1,970,000, consisting of $1,412,000 of expenditures for property and
equipment and $971,000 in payment of the purchase price of the assets acquired
from Lior and related transaction costs, which expenditures were partially
offset by the receipt of a $413,000 loan repayment from a current shareholder.
Capital expenditures consisted primarily of purchases of computer equipment
utilized in-house and for the continued development of the Company's Technical
Support Center. Although the Company currently has no material commitments for
capital expenditures outstanding, the Company anticipates further capital
expenditures for the continued development of its Technical Support Center, the
continued upgrading of its internal computer systems and for further expansion
of its Learning Centers.
Net cash provided by financing activities in the first nine months of
1996 was $7,641,000, which consisted of the net proceeds from the issuance of
Common Stock of $15,739,000, partially offset by a $6,155,000 distribution of
previously undistributed S Corporation earnings, payments of dividends of
$1,147,000, repayment of long-term debt of $736,000 and payment of capital
lease obligations of $60,000.
The Company has entered into a master lease agreement with First
Fidelity Leasing Group, Inc., under which the Company may lease up to $500,000
of equipment. Such agreement provides for equipment to be leased for
three-year terms with transfer of ownership of the equipment to the Company at
the end of the applicable equipment lease term. At September 30, 1996, capital
lease obligations outstanding under these equipment leases, which expire in
1998, aggregated $170,000.
The Company has a revolving credit facility with First Union National
Bank (formerly First Fidelity Bank, N.A.) pursuant to which it may borrow up to
a maximum of $7,000,000 at the bank's prime rate less 0.25% or at LIBOR plus
1.5%, increasing to $9,000,000 during the period from October 1 through March
31 of each calendar year at the bank's prime rate plus 1.0%. Obligations under
such credit facility are payable within 90 days following notice of termination
by the bank, or expiration of such facility on May 30, 1997, whichever is
earlier, and are collateralized by substantially all the assets of the Company.
There were no outstanding borrowings under the revolving credit facility as of
September 30, 1996. The credit facility contains, among other provisions,
covenants relating to the Company's payment of cash dividends.
The Company purchases certain inventory and equipment through
financing arrangements with Deutsche Financial Services, IBM Credit Corporation
and Finova Capital
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<PAGE> 17
Corporation and expects to continue these relationships. At September 30,
1996, there were outstanding balances of $5,494,000, $3,630,000 and $30,000,
respectively, under such arrangements. Obligations under such financing
arrangements are collateralized by substantially all of the assets of the
Company. Deutsche Financial Services and IBM Credit Corporation have entered
into an intercreditor agreement with respect to their relative interests.
As of December 31, 1995, the Company had a $1,425,000 term loan from
First Fidelity Bank, N.A., of which approximately $736,000 was outstanding.
The Company prepaid the entire outstanding balance of such term loan with a
portion of the net proceeds from its initial public offering.
The Company believes that the net proceeds of the initial public
offering, together with available funds, existing credit facilities and the
cash flow expected to be generated from operations, will be adequate to satisfy
its current and planned operations for at least the next 24 months.
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<PAGE> 18
PART II.OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
ASSET ACQUISITION.
On July 24, 1996, the Company consummated the acquisition of certain
assets of Lior, Inc. ("Lior"), a MicroAge affiliate located in Paramus,
New Jersey. The Company purchased the entire customer list and outstanding
purchase orders of Lior for an aggregate purchase price of up to $1,000,000,
of which $900,000 was paid at closing and $100,000 may be due in January 1997
if certain former Lior salespersons remain employed by the Company through such
date. The Company funded the purchase price from proceeds raised in its initial
public offering. In determining the purchase price, the Company considered,
among other factors, the past and projected revenues generated from such
customers and the value of the acquired purchase orders. The Company did not
assume any liabilities of Lior, other than the obligations to perform under the
acquired purchase orders and certain service contracts. The Company acquired
such assets from Stan Gang, the Company's President and Chief Executive
Officer, who had purchased such assets for the same consideration from Lior on
July 18, 1996 pending approval of the transaction by the Company's Board of
Directors. In connection with such transaction, effective July 1, 1996, 26
former employees of Lior, including 7 sales persons and 8 technical personnel,
joined the Company.
NEW SUBSIDIARY.
On August 28, 1996, the Company incorporated NETtemps, Inc., a New
Jersey corporation ("NETtemps"), a wholly-owned subsidiary of the Company.
NETtemps specializes in the recruitment and placement of technical
professionals for temporary consulting assignments and permanent positions.
CHIEF OPERATING OFFICER.
On October 14, 1996, the Company hired Sophien Bennaceur, former Chief
Information Officer of SAP America, Inc., to be its Executive Vice President
and Chief Operating Officer. The Company entered into a one-year employment
agreement with Mr. Bennaceur with an annual salary of $200,000. Such agreement
is terminable at will by either party.
PHILADELPHIA AREA BRANCH OFFICE LEASE.
In October 1996, the Company entered into a lease for approximately
5,400 square feet of office space in King of Prussia, Pennsylvania which will
serve as the Company's Philadelphia branch office for its management and sales
personnel and a new learning center. Such lease is for a five-year term and
commences January 1, 1997 or upon substantial completion of the premises.
Minimum rent payments over the term of the lease are approximately $370,000 in
the aggregate plus related overhead expenditures.
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<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Modification Agreement dated as of May 31, 1996 of
Loan and Security Agreement dated August 5, 1987 by
and between the Company and First Union National Bank
(formerly First Fidelity Bank), as amended and
modified from time to time.
10.2 Employment Agreement dated October 14, 1996 between
the Company and Sophien Bennaceur.
10.3 Indemnification Agreement dated October 14, 1996
between the Company and Sophien Bennaceur.
11 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended September 30, 1996, the Company filed, on
August 5, 1996, a Current Report on Form 8-K ("Form 8-K") with the Securities
and Exchange Commission relating to the Company's acquisition of certain assets
of Lior, Inc. ("Lior"). See Item 5. Other Information.
Subsequent to the end of the quarter, on October 7, 1996, the Company
filed an amendment to such Form 8-K, providing audited financial statements of
Lior and pro forma financial information relating to the foregoing acquisition.
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<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AlphaNet Solutions, Inc.
DATE: November 13, 1996 By: /s/ Stan Gang
------------------------------
Stan Gang,
President and Chief
Executive Officer
(Principal Executive
Officer)
DATE: November 13, 1996 By:/s/ Gary S. Finkel
------------------------------
Gary S. Finkel,
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE> 1
EXHIBIT 10.1
THIS MODIFICATION AGREEMENT, dated as of
May 31, 1996, by and between FIRST UNION
NATIONAL BANK (formerly known as FIRST
FIDELITY BANK, NATIONAL ASSOCIATION), a
national banking association organized
under Acts of Congress, with a place of
business at 550 Broad Street, Newark,
New Jersey 07102, hereinafter called
"Bank", and ALPHANET SOLUTIONS, INC., a
New Jersey corporation, with its chief
executive office at 7 Ridgedale Avenue,
Cedar Knolls, New Jersey 07927,
hereinafter called "Borrower".
RECITALS
WHEREAS, Borrower and First Fidelity Bank, National Association, New
Jersey ("FFBNANJ") entered into a Loan and Security Agreement dated August 5,
1987 as modified by Modification Agreements dated February 24, 1989, May 23,
1990, July 31, 1991, June 30, 1992, March 17, 1993, July 14, 1993, June 29,
1994, December 14, 1994 and May 24, 1995, and by letter agreements dated as of
April 20, 1994, March 2, 1995 and as of December 19, 1995 (said agreement as so
modified the "Loan Agreement"); and
WHEREAS, Bank is the successor by consolidation to FFBNANJ pursuant to
authorization under 12 U.S.C. Section 215; and
WHEREAS, said Loan Agreement, inter alia, sets forth the terms and
conditions of a revolving credit facility by Bank to Borrower through May 31,
1996 of up to Seven Million Dollars for the period April 1 through September 30,
and up to Nine Million Dollars for the period October 1 through March 31; and
WHEREAS, Borrower has applied to Bank for an extension through May 30,
1997 of the term of said revolving credit facility and for a modification to the
interest rates on Advances under the revolving credit facility, and for
modifications to certain of the other terms and conditions set forth in the Loan
Agreement;
WHEREAS, Bank has approved the application of the Borrower on the terms
and condition set forth herein.
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<PAGE> 2
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto adopt the above recitals and agree as
follows:
1. Capitalized terms not defined herein but defined in the Loan Agreement
shall have the same meanings ascribed to such terms in the Loan Agreement.
2. Paragraphs 1.30, 1.37, 1.42, 1.46, 1.48 and 1.53 of the Loan Agreement
(the definitions of Eligible Loan Value of Eligible Accounts, Bank Affiliate,
Interest Period, Libor Margin, Payment Date and Second Tier Base Rate Margin)
are hereby modified to read as follows:
1.30 "ELIGIBLE LOAN VALUE OF ELIGIBLE ACCOUNTS" means up to
seventy-five (75%) percent of the face amount of Eligible
Accounts, less returns and discounts, offsets, contra
balances, credits or allowances of any nature, at any time
issued, owing, granted or outstanding.
1.37 "BANK AFFILIATE" means First Union Corporation and any of its
direct and indirect affiliates and subsidiaries.
1.42 "INTEREST PERIOD" means with respect to each LIBOR Loan, the
period commencing on the date such Advance commences to be a
LIBOR Loan as elected by the Borrower and ending one, two, or
three months thereafter as Borrower may elect in the
applicable interest rate request and thereafter, each period
commencing on the last day of the immediately preceding
Interest Period and ending one, two, or three months
thereafter as selected by the Borrower, but in no event after
the Expiration Date; subject, however, to the following
provisions: (i) if any Interest Period would otherwise end on
a day which is not a New York business day, that Interest
Period shall be extended to the next succeeding New York
business day unless the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding New York business day; and (ii) any Interest Period
that begins on the last New
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<PAGE> 3
York business day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the
last New York business day of a calendar month and (iii) if
the Borrower selects an Interest Period which would end after
the Expiration Date, the duration of such Interest Period
shall be shortened to one or two months such that the end of
such Interest Period shall occur prior to or of even date with
the Expiration Date.
1.46 "LIBOR MARGIN" means for each Interest Period applicable to
LIBOR Loans, a rate per annum equal to one and one half
percent (1 1/2%).
1.48 "PAYMENT DATE" means (A) with respect to Prime Rate Loans and
Second Tier Loans the first day of each month, and (B) with
respect to LIBOR Loans the last day of the Interest Period.
1.53 "SECOND TIER PRIME RATE MARGIN" means a rate per annum equal
to one percent (1%).
3. Article I of the Loan Agreement is hereby modified to add paragraphs
1.58 through 1.65 as follows:
1.58 "EXPIRATION DATE" means the earlier of (a) May 30, 1997 or
such later date as the term of the revolving credit facility
under paragraph 2.1 hereof may be extended to in accordance
with paragraph 8.11 hereof or (b) the date of termination of
the revolving credit facility upon the occurrence of an Event
of Default.
1.59 "LIBOR" means, with respect to each day during each Interest
Period, the rate (rounded to the next higher 1/100 of 1%) for
U.S. dollar deposits of a one, two, or three month maturity
equivalent to the period selected by the Borrower as the
Interest Period as reported on Telerate page 3750 as of 11:00
a.m., London time, on the second London business day before
the relevant Interest Period begins (or if not so reported,
then as determined by the Bank from another recognized source
or interbank quotation), adjusted for reserves by dividing
that rate by 1.00 minus the LIBOR Reserve. Notwithstanding the
foregoing, if the Borrower has hedged the LIBOR-based rate by
entering into an interest rate agreement with Bank, LIBOR
shall be rounded five
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<PAGE> 4
decimal places in accordance with the 1991 Definitions
published by the International Swaps and Derivatives
Association, Inc.
1.60 "LIBOR RESERVE" means the maximum percentage reserve
requirement (rounded to the next higher 1/100 of 1% and
expressed as a decimal) in effect for any day during the
Interest Period under the Federal Reserve Board's Regulation D
for Eurocurrency liabilities as defined therein.
1.61 "LOAN DOCUMENTS" means this Agreement, all notes, mortgages or
other documents executed and delivered by Borrower or any
Obligor hereunder, and any amendments, renewals, modifications
or supplements thereto, or substitutions therefore from time
to time.
1.62 "LONDON BUSINESS DAY" means a day on which commercial banks
are open for dealings in U.S. Dollar deposits in the London
(England, U.K.) interbank market.
1.63 "PRIME RATE" means the rate of interest established by Bank
from time to time as its reference rate in making loans but
which does not reflect the rate of interest charged to any
particular person and is not tied to any external rate of
interest or index. The rate of interest charged hereunder
shall change automatically and immediately as of the date of
each change in the Prime Rate without notice to Borrower.
1.64 "PRIME RATE LOANS" means each Advance on which interest
thereon is in accordance with the terms of this Agreement
based on the Prime Rate.
1.65 "PRIME RATE MARGIN" means a rate per annum equal to one
quarter of one (1/4%).
4. Paragraph 2.1 of the Article II of the Loan Agreement is hereby
modified to read as follows:
2.1 REVOLVING CREDIT FACILITY (A) So long as no Default nor Event
of Default exists, Bank may, from time to time hereafter,
through the Expiration Date, lend to the Borrower such amounts
as the Bank may determine or issue standby letters of credit,
in form satisfactory to Bank, based upon the Eligible Loan
Value of Eligible
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<PAGE> 5
Accounts as may exist from time to time and as reported by
Borrower to Bank in a borrowing base report in the form of
exhibit 2.1 annexed hereto which is to be submitted with each
request for an Advance hereunder by a Notice of Borrowing
under Revolving Credit in the form of exhibit 2.1(A) annexed
hereto, but not to exceed the Revolving Credit Borrowing Base
and provided that the aggregate outstanding balance of standby
letters of credit shall not exceed Two Million Five Hundred
Thousand ($2,500,000.00) Dollars. The Borrower shall repay,
and shall pay interest on, the aggregate unpaid principal
amount of all Advances in accordance with the provisions of
this paragraph 2.1. Bank shall have the right, from time to
time, in the good faith exercise of its discretion, upon
notice to Borrower, to alter the percentage of the Eligible
Loan Value of Eligible Accounts. Each month Bank may render to
Borrower a statement of the status of the loans provided for
herein, which Borrower hereby agrees shall be deemed to be an
account stated and correct and acceptable to and binding on
Borrower unless Bank shall receive a corrected statement of
exceptions from Borrower within thirty (30) days after the
monthly statements have been rendered to Borrower. For each
standby letter of credit issued hereunder which is security
for the obligations of Borrower to a third party with respect
to the "floor planning" or similar financing of Inventory,
Borrower shall pay to Bank a fee of one (1%) percent on a per
annum basis of the principal amount of each such standby
letter of credit. For all other standby letters of credit
issued hereunder Borrower shall pay to Bank a fee of two (2%)
percent on a per annum basis of the principal amount of each
such standby letter of credit. For each standby letter of
credit to be issued hereunder Borrower shall execute and
deliver to Bank the Bank's standard standby letter of credit
agreement and application. All such loans and financial
accommodations shall be payable on the Expiration Date or as
otherwise set forth in this Agreement.
(B) Interest on Advances.
-5-
<PAGE> 6
(i) The Borrower agrees to notify the Bank
orally or in writing at least two (2)
Business Days (with respect to LIBOR Loans)
prior to each date it requests interest on
the Advances, or a portion thereof, to be
based on LIBOR. Each such notice shall be
irrevocable and confirmed immediately by
delivery to the Bank of a LIBOR rate
request. Each LIBOR rate request shall
specify:
(a) the date from which interest is to
accrue based on LIBOR, which shall
be a London Business Day;
(b) the aggregate amount of Advances on
which interest is to be based on
LIBOR; and
(c) the duration of the Interest period
applicable thereto.
(ii) No more than three (3) Interest Periods with
respect to LIBOR Loans shall be outstanding
at any time.
(iii) All LIBOR Loans shall be in the principal
amount of Two Hundred Fifty Thousand and
00/100 ($250,000.00) Dollars or an integral
multiple thereof.
(iv) The Borrower may not elect to have interest
on the Second Tier Loans to be based on
Libor.
(v) On all Advances as to which Borrower has
not, in accordance with the foregoing,
selected to have interest based on LIBOR,
interest shall be based on the Prime Rate as
set forth in subparagraph (C)(i) below.
(C) Interest Rate and Payment Dates.
(i) (a) Each Prime Rate Loan, other than Second
Tier Loans, shall bear interest on the daily
outstanding principal amount thereof for
each day such Prime Rate Loan is outstanding
at a rate per annum equal to Prime Rate in
effect from time to time minus the Prime
Rate
-6-
<PAGE> 7
Margin. Such interest shall be payable in
arrears on each Payment Date; (b) All Second
Tier Loans shall bear interest on the daily
outstanding principal amount thereof for
each day such Second Tier Loans are
outstanding at a rate per annum equal to the
Prime Rate in affect from time to time plus
the Second Tier Prime Rate Margin. Such
interest shall be payable in arrears on each
Payment Date.
(ii) Each LIBOR Loan shall bear interest for each
Interest Period applicable thereto, on the
daily outstanding principal amount thereof,
at a rate per annum equal to LIBOR plus the
LIBOR Margin. Interest shall be payable in
arrears for each Interest Period on each
Payment Date.
(iii) If all or a portion of the principal amount
of any LIBOR Loan shall not be paid at the
end of the applicable interest period or not
continued as Libor Loan as set forth below,
such Advance shall be converted to a Prime
Rate Loan at the end of the Interest Period
therefor.
(D) Conversion and Continuation Options.
(i) The Borrower may elect from time to time to
convert a LIBOR Loan to a Prime Rate Loan by
giving the Bank at least one (1) Business
Day's prior irrevocable notice of such
election, provided that conversion of a
LIBOR Loan to a Prime Rate Loan shall only
be made on the last day of an Interest
Period with respect thereto. The Borrower
may elect from time to time to convert a
Prime Rate Loan to a LIBOR Loan, in each
case by giving the Bank at least two (2)
Business Days' prior irrevocable notice of
such election. Each notice to be given by
the Borrower pursuant to this paragraph,
-7-
<PAGE> 8
shall be confirmed by delivery to the Bank
of a written notice, which shall specify:
(a) the date on which such rate
conversion shall take effect;
(b) the aggregate amount of the
Advances to be converted on such
date;
(c) whether the Advances to be
converted are LIBOR Loans, or Prime
Rate Loans;
(d) whether the Advances, after
conversion, will be LIBOR Loans or
Prime Rate Loans; and
(e) in the case of a LIBOR Loan, the
duration of the Interest Period
applicable thereto.
All or any part of the outstanding principal of a LIBOR Loan,
or a Prime Rate Loan, may be converted as provided herein,
provided that partial conversions shall be in an aggregate
principal amount of a minimum of Two Hundred Fifty Thousand
($250,000.00) Dollars or an integral multiple thereof.
(ii) A LIBOR Loan may be continued as such upon
the expiration of an Interest Period with
respect thereto by compliance by the
Borrower with the notice provisions
contained in this paragraph, provided that a
LIBOR Loan may not be continued as such when
any Event of Default has occurred and is
continuing, but shall be automatically
converted to a Prime Rate Loan on the last
day of the subject Interest Period.
(iii) If the Borrower shall fail to give notice to
convert or continue a LIBOR Loan in the
manner required by paragraphs (i) or (ii)
above, the Borrower shall be deemed to have
elected to convert the LIBOR Loan to a Prime
Rate Loan on the last day of the Interest
Period applicable thereto.
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<PAGE> 9
(E) Computation of Interest. Interest on the Advances and
fees and other amounts calculated on the basis of a
rate per annum shall be computed on the basis of
actual days elapsed over a 360-day year. The rate of
interest on Prime Rate Loans shall change when and as
the Prime Rate changes without notice to Borrower.
(F) Prepayment. Prime Rate Loans may be prepaid in whole
or in part, in multiples of $25,000.00, at any time
without premium or penalty. Libor Loans may be
prepaid, in whole or in part, without premium or
penalty only on the last day of an Interest Period;
provided, however, that any partial prepayments shall
be in a principal amount of not less than
$250,000.00, or multiples thereof. Any prepayment
shall include accrued and unpaid interest to the date
of prepayment on the principal amount prepaid and all
other sums due and payable hereunder. All payments
received on the Advances may be applied in such order
as the Bank in its sole discretion shall determine.
(G) Indemnification. The Borrower shall indemnify the
Bank against the Bank's loss or expense in employing
deposits as a consequence of (i) the Borrower's
failure to make any payment when due under the
Advances, or (ii) any prepayment of a LIBOR Loan on a
date other than the last day of the applicable
Interest Period ("INDEMNIFIED LOSS OR EXPENSE").
(H) Additional Costs. If, at any time, a new, or a
revision in any existing law or interpretation or
administration (including reversals) thereof by any
government authority, central bank or comparable
agency imposes, increases or modifies any reserve or
similar requirement against assets, deposits or
credit extended by the Bank, or subjects the Bank to
any tax, duty or other
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<PAGE> 10
charge (except tax on the Bank's net income), and any
of the foregoing increases the cost to the Bank of
maintaining its commitment or reduce the amount of
any sum received or receivable by the Bank under the
Advances, within 15 days after demand by the Bank,
the Borrower agrees to pay the Bank such additional
amounts as will compensate the Bank for such
increased costs or reductions ("ADDITIONAL COSTS").
(I) Match Funding. The amount of such (i) Indemnified
Loss or Expense, or (ii) Additional Costs outlined
above shall be determined, in the Bank's sole
discretion, based upon the assumption that the Bank
funded 100% of that portion of the Advances to which
the LIBOR-based rate applies in the applicable London
interbank market.
(J) Unavailability of Interest Rate. If, at any time, (i)
the Bank shall determine that, by reason of
circumstances affecting foreign exchange and
interbank markets generally, LIBOR deposits in the
applicable amounts are not being offered to the Bank;
or (ii) a new, or a revision in any existing law or
interpretation or administration (including
reversals) thereof by any government authority,
central bank or comparable agency shall make it
unlawful or impossible for the Bank to honor its
obligations under the Advances, then (A) the Bank's
obligation, if any, to make or maintain a LIBOR Loan
shall be suspended, and (B) the applicable
LIBOR-Based Rate shall, for the remainder of the term
of the Advance, immediately be converted to the Prime
Rate minus the Prime Rate Margin
(K) Commitment Fee. On the first Business Day after the
end of each calendar quarter hereafter, Borrower
shall pay to Bank a commitment fee equal to one
eighth of one (1/8%) percent on a per annum basis, of
the amount by which
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<PAGE> 11
the daily average outstanding balance of the loans
and letters of credit under this paragraph 2.1 are
less than the maximum dollar amount in effect from
time to time of the revolving credit facility under
this paragraph 2.1.
5. Subparagraph 5.9(c) of Article IV of the Loan Agreement is hereby
modified to read as follows: "(c) Any mandatory prepayment
under (a) above shall be applied first to Second Tier Loans,
second to Prime Rate Loans, and third to LIBOR Loans, and as
to LIBOR Loans, if more than one (1) Interest Period is in
effect, then to such LIBOR Loans in the order of the Interest
Periods with the shortest remaining number of days.
6. Paragraph 5.13 of the Loan Agreement is hereby modified to read as
follows:
5.13 AUDIT AND OTHER REPORTS (A) Borrower agrees that within one
hundred twenty (120) days of the end of each fiscal year, it
will furnish Bank with detailed audited financial statements,
including a balance sheet, profit and loss statement, cash
flow statement and surplus reconciliation, certified on an
unqualified basis, by an independent certified public
accountant satisfactory to Bank and a copy of the borrower
10-K filing as of such year end; (B) Borrower will also
furnish quarterly similar statements uncertified except for a
certification by an officer of Borrower as to their
correctness and a copy of the Borrower's 10-Q filing as of
such quarter end within sixty (60) days of the end of each
fiscal quarter. All such statements shall be on a consolidated
and consolidating basis and in accordance with GAAP; (C)
simultaneous with the submission of the statements required
under "A" and "B" above, Borrower shall cause to be submitted
to Bank a certificate of the chief financial officer of
Borrower in the form of exhibit 5.13 annexed hereto setting
forth the calculations of the financial tests described in
paragraph 5.17 hereof and stating whether or not, to the best
of said officer's knowledge, after diligent inquiry a Default
or Event of Default exists, and if such exists, specify the
nature thereof and the steps Borrower is taking to remedy
same; (D) promptly after the furnishing thereof to third
parties, Borrower shall furnish to Bank copies of any
statements, reports, proxy material, registration
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<PAGE> 12
statement and prospectus furnished to any holder of any
securities of Borrower or filed with any regulatory agency or
agencies; (E) promptly, but no later than five (5) days after
a responsible officer of Borrower shall become aware of (i) a
Default or Event of Default hereunder, (ii) a Reportable Event
or "prohibited transaction" as such term is defined in ERISA,
(iii) litigation against Borrower or any Subsidiary in excess
of $25,000.00 not fully covered by insurance (iv) changes in
the executive management of Borrower or (v) the termination or
threatened termination of or claim of breach by Borrower or
any Subsidiary of any material contract, agreement or
obligation, or of any claim of patent infringement, Borrower
shall furnish to Bank a written notice specifying the
existence thereof and the action Borrower or any Subsidiary is
taking or proposes to take with respect thereto; (F) Borrower
will furnish to Bank prompt written notice if: (i) any
indebtedness of Borrower or any Subsidiary is declared or
shall become due and payable prior to its stated maturity, or
called and not paid when due or (ii) a default shall have
occurred under any note or the holder of any such note, or
other evidence of Indebtedness, certificate of security
evidencing any such indebtedness or any obligee with respect
to any Indebtedness of Borrower or any Subsidiary has the
right to declare any such Indebtedness due and payable prior
to its stated maturity as a result of such default; (G)
Borrower also agrees to furnish to Bank (i) with reasonable
promptness a copy of any "management letter" or similar report
furnished to it by its accountants and such other data and
information concerning it and its Subsidiaries as from time to
time may be requested by Bank and (ii) a copy of its federal
tax return promptly, but no later than five (5) days, after
the filing of same.
7. Paragraph 5.26 of the Loan Agreement is hereby modified to read as
follows:
5.26 "REPORTS OF COLLATERAL" If as of the end of any month there
are any outstanding loans or standby letters of credit issued
under paragraph 2.1 hereof, Borrower shall within fifteen (15)
days of the end of each such month furnish to Bank
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<PAGE> 13
an aging of its Accounts, an aging of its accounts payable and
an inventory report and certificate, each in form satisfactory
to Bank.
8. Paragraph 8.11 of the Loan Agreement is hereby modified to read as
follows:
8.11 "EXPIRATION DATE" The revolving credit facility provided for
in paragraph 2.1 hereof shall have a term through May 31, 1997
or such later date as the Bank may agree to in writing. All
such loans and financial accommodations shall be payable on
the Expiration Date or as otherwise set forth in this
Agreement. If, on the Expiration Date, there are any
outstanding Bank Letters of Credit, Borrower shall, in
addition to paying and satisfying in full the outstanding
loans under paragraph 2.1, pay to Bank an amount equal to the
aggregate outstanding balance of all such Bank Letters of
Credit and which shall automatically be subject to a lien in
favor of Bank to secure all Liabilities to Bank including with
respect to said Bank Letters of Credit. Any sums paid to Bank
shall be applied first to the Liabilities of Borrower to Bank
other than with respect to said Bank Letters of Credit, in
such order as Bank may determine, and last to the Liabilities
with respect to the Bank Letters of Credit. Notwithstanding
the expiration of the term, the rights of Bank hereunder and
the obligations of Borrower hereunder, including and
Liabilities with respect to loans and other financial
accommodations made after the Expiration Date, further
including but not limited to the grant of security interests
in and liens on the Collateral as set forth in Article III
hereof, shall remain in full force and effect until all of the
Liabilities of Borrower to Bank and each Bank Affiliate are
satisfied in full.
9. Article VIII of the Loan Agreement is hereby modified to add paragraphs
8.17 through 8.21.
8.17 "INTEREST LIMITATION" It is the intention of Bank and Borrower
to conform strictly to the laws of the State of New Jersey or
the laws of such other jurisdiction which may be found to
apply to the subject transaction relating to the maximum rate
of interest which may be lawfully contracted for or charged.
Nothing contained in this Agreement or any other Loan Document
shall be construed to mean that Borrower has
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<PAGE> 14
contracted to pay or is obligated to pay any sum or sums to
Bank in excess of those which may lawfully be charged or
contracted for under applicable law of the State of New Jersey
or other applicable law. If any provision of this Agreement or
any of the other Loan Documents shall require payment of any
sum or sums of interest in excess of the maximum permitted
rate which may be lawfully contracted for or charged, then
Borrower and Bank agree that such result is as a consequence
of their inadvertence and/or mistake, and the interest charge
for which Borrower is liable under this instrument shall be
recomputed for the sole and limited purpose of determining the
extent of the obligations and liabilities of Borrower to Bank
so that the interest charges for which Borrower is liable
shall not exceed the maximum permitted rate which is
determined to be applicable. Additionally, any sums of
interest which are collected by Bank from Borrower or other
source in connection with the loan evidenced hereby which are
in excess of the maximum permitted rate shall, for the sole
and limited purpose of determining the extent of the
obligations and liabilities of Borrower to Bank, be credited
against the amount of principal for which Borrower is liable
to Bank after giving effect to any recomputation and
adjustment required pursuant to the foregoing provisions of
this section, or if such outstanding principal balance and
interest are paid in full, any such excess shall be remitted
by Bank to Borrower.
8.18 'INDEMNIFICATION' Borrower hereby agrees to and does hereby
indemnify, protect, defend and save harmless Bank and any
member, officer, director, official, agent, employee and
attorney of Bank, and its respective heirs, successors and
assigns (collectively, the "Indemnified Parties"), from and
against any and all losses, damages, expenses or liabilities
of any kind or nature and from any suits, claims or demands,
including reasonable counsel fees incurred in investigating or
defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way
connected with the Loan Documents and the transactions
contemplated therein or the Collateral (unless caused by the
gross negligence or willful misconduct
-14-
<PAGE> 15
of the Indemnified Parties) including, without limitation: (i)
losses, damages, expenses or liabilities sustained by Bank in
connection with any environmental cleanup or other remedy
required or mandated by any environmental law; (ii) any untrue
statement of a material fact contained in information
submitted to Bank by Borrower and/or any Obligor or the
omission of any material fact necessary to be stated therein
in order to make such statement not misleading or incomplete;
(iii) the failure of Borrower and/or any Obligor to perform
any obligations herein required to be performed by Borrower
and/or any Obligor; and (iv) the ownership, construction,
occupancy, operations, use and maintenance of any of
Borrower's and/or the Obligor's properties. The provisions of
this paragraph shall survive termination of this Agreement and
the other Loan Documents.
8.19 SEVERABILITY AND CONSISTENCY The illegality, unenforceability
or inconsistency of any provisions of this Agreement or any
instrument or agreement required hereunder shall not in any
way affect or impair the legality, enforceability or
consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan
Documents are intended to be consistent. However, in the event
of any inconsistencies among any of the Loan Documents, such
inconsistency shall not affect the validity or enforceability
of Loan Document. The Borrower agrees that in the event of any
inconsistency or ambiguity in any of the Loan Documents, the
Loan Documents shall not be construed against any one party
but shall be interpreted consistent with the Bank's policies
and procedures.
8.20 INTEGRATION; NO THIRD PARTY BENEFICIARY This Agreement and the
other Loan Documents constitute the sole agreement of the
parties with respect to the subject matter hereof and thereof
and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof. The Borrower
and the Bank do not intend any of the benefits of this
Agreement to inure to any third party, and no third party
shall have any status, right, or entitlement under this
Agreement.
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<PAGE> 16
8.21 JUDICIAL PROCEEDINGS; WAIVERS THE BORROWER AND THE BANK
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING,
WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE
BANK OR THE BORROWER OR ANY SUCCESSOR OR ASSIGN OF THE BANK OR
THE BORROWER, OR ON WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH
RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY A COURT AND
NOT BY A JURY AND EACH PARTY WAIVES THE RIGHT TO TRIAL BY
JURY; (ii) EACH WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; AND (ii) THIS
SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
AND THE BANK WOULD NOT EXECUTE THIS AGREEMENT IF THE WAIVERS
SET FORTH IN THIS SECTION WERE NOT A PART OF THIS AGREEMENT.
10. Borrower acknowledges that as of the date hereof there is owing by
Borrower to Bank on account of the revolving credit facility provided for in
paragraph 2.1 of the Loan Agreement the principal sum of $zero plus interest,
which sum is owing without defense, set off or counterclaim, and Bank has, under
said paragraph 2.1, issued on behalf of Borrower standby letters of credit in
the aggregate outstanding sum of $2,030,142.51.
11. Borrower represents that:
(a) each and every representation heretofore made by Borrower in the
Loan Agreement is true and correct as of the date of this Modification
Agreement,
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<PAGE> 17
(b) no consent or approval of, or exemption by any person is required
to authorize, or is otherwise required in connection with the execution and
delivery of this Modification Agreement and the other loan documents provided
for herein, which has not been obtained and which remains in full force and
effect,
(c) Borrower has the power to execute, deliver and carry out this
Modification Agreement and all documents executed in connection herewith, and
this Modification Agreement and such other documents are valid, binding and
enforceable as against Borrower in accordance with their terms,
(d) no material adverse change in the financial condition of Borrower
has occurred since the date of the most recent financial statements of Borrower
dated March 31, 1996 submitted to Bank, and the information contained in said
statements and reports is true and correctly reflects the financial condition of
Borrower as of the dates of the statements and reports, and such statements and
reports have been prepared in accordance with GAAP and do not contain any
material misstatement of fact or omit to state any facts necessary to make the
statements contained therein not misleading, and
(e) No Default or Event of Default exists under the Loan Agreement.
12. Borrower hereby confirms the security interests and liens granted by
Borrower to Bank in and to the Collateral in accordance with the Loan Agreement
and other Loan Documents as security for its Liabilities to Bank.
13. Borrower agrees to pay any and all expenses, including reasonable
counsel fees and disbursements, incurred by Bank in connection with the
preparation and execution of this Modification Agreement and all other documents
executed in connection herewith.
14. This Modification Agreement is intended to supplement and modify the
Loan and Security Agreement dated August 5, 1987 as modified between FFBNANJ and
Borrower and the rights and obligations of the parties under said Loan and
Security Agreement and all other Loan Documents shall not in any way be vacated,
modified or terminated except as herein provided. All terms and conditions
contained in each and every agreement or promissory note or other evidence of
indebtedness of Borrower to Bank are incorporated herein by reference. If there
is a conflict between
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<PAGE> 18
any of the provisions heretofore entered into and the provisions of this
Modification Agreement, then the provisions of this Modification Agreement shall
govern.
15. This Modification Agreement shall be construed in accordance with the
substantive laws of the State of New Jersey without regard to conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Modification
Agreement to be executed and delivered as of the day and year first above
written.
ALPHANET SOLUTIONS, INC.
BY: /s/ GARY FINKEL
---------------------------
NAME: Gary Finkel
TITLE: Vice President and
Chief Financial Officer
FIRST UNION NATIONAL BANK
BY: /s/ CHRISTOPHER M. MCLAUGHLIN
---------------------------------
NAME: Christopher M. McLaughlin
TITLE: Vice President
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 14th day of October, 1996 (the
"Effective Date") by and between AlphaNet Solutions, Inc. a New Jersey
corporation with its principal place of business at 7 Ridgedale Avenue, Cedar
Knolls, New Jersey 07927 (the "Company"), and Sophien Bennaceur (the
"Employee").
WITNESSETH:
WHEREAS, the Company desires to secure the employment of the Employee
in accordance with the provisions of this Agreement; and
WHEREAS, the Employee desires and is willing to accept employment with
the Company in accordance herewith.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Term. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to serve the Company pursuant to the terms and conditions
of this Agreement as Executive Vice President and Chief Operating Officer of the
Company, or in a position at least commensurate therewith in all material
respects, for a term commencing on the Effective Date hereof and expiring on the
first anniversary thereof, provided that the Employee is elected to such office,
or a comparable or higher office, at each annual meeting of the Board of
Directors of the Company (the "Board of Directors") during the term of this
Agreement. If the Employee shall not be so elected at any such annual meeting of
the Board of Directors, the Employee's
<PAGE> 2
employment hereunder shall forthwith terminate and the Company shall be
obligated to compensate the Employee in accordance with Section 6(a) of this
Agreement.
2. Positions and Duties. The Employee's duties hereunder shall be those
which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the office of
Executive Vice President and Chief Operating Officer of a company comparable to
the Company. The Employee will hold, in addition to the offices of Executive
Vice President and Chief Operating Officer of the Company, such other executive
offices in the Company and its subsidiaries to which he may be elected,
appointed or assigned by the Board of Directors from time to time and will
discharge such executive duties in connection therewith. During the employment
period, the Employee's position (including status, offices and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned immediately preceding the Effective Date. The Employee
shall devote his full working time, energy and skill (reasonable absences for
vacations and illness excepted), to the business of the Company as is necessary
in order to perform such duties faithfully, competently and diligently;
provided, however, that notwithstanding any provision in this Agreement to the
contrary, the Employee shall not be precluded from devoting reasonable periods
of time required for serving as a member of boards of companies or organizations
which have been approved by the Board of Directors so long as such memberships
or activities do not interfere with the performance of the Employee's duties
hereunder.
- 2 -
<PAGE> 3
3. Compensation. During the term of this Agreement, the Employee shall
receive, for all services rendered to the Company hereunder, the following
(hereinafter referred to as "Compensation"):
(a) Base Salary. For the term hereof, the Employee shall be
paid an annual base salary equal to two hundred thousand dollars ($200,000). The
Employee's annual base salary shall be payable in equal installments in
accordance with the Company's general salary payment policies but no less
frequently than monthly.
(b) Bonuses. The Employee shall be eligible for and may
receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board of Directors or, if formed, the Compensation Committee
thereof.
(c) Incentive Compensation. The Employee shall be eligible for
awards from the Company's incentive compensation plans, including without
limitation any stock option plans, applicable to high level executive officers
of the Company or to key employees of the Company or its subsidiaries, in
accordance with the terms thereof and on a basis commensurate with his position
and responsibilities.
(d) Benefits. The Employee and his "dependents," as that term
may be defined under the applicable benefit plan(s) of the Company, shall be
included, to the extent eligible thereunder, in any and all plans, programs and
policies which provide benefits for employees and their dependents. Such plans,
programs and policies may include health care insurance, long-term disability
plans, life insurance, supplemental disability insurance, supplemental life
insurance, holidays and other similar or comparable benefits made available to
the Company's employees.
- 3 -
<PAGE> 4
(e) Expenses. Subject to and in accordance with the Company's
policies and procedures, the Employee hereby is authorized to incur, and, upon
presentation of itemized accounts, shall be reimbursed by the Company for, any
and all reasonable and necessary business-related expenses, which expenses are
incurred by the Employee on behalf of the Company or any of its subsidiaries. In
addition to the foregoing, the Company shall reimburse the Employee for a
maximum of $15,000 in relocation expenses, including food, lodging, travel and
moving expenses incurred by Employee during the term of this Agreement.
4. Absences. The Employee shall be entitled to vacations, absences
because of illness or other incapacity, and such other absences, whether for
holiday, personal time, or for any other purpose, as set forth in the Company's
employment manual or current procedures and policies, as the case may be, as
same may be amended from time-to-time.
5. Termination. In addition to the events of termination and expiration
of this Agreement provided for in Section 1 hereof, the Employee's employment
hereunder may be terminated only as follows:
(a) Without Cause. The Company may terminate the Employee's
employment hereunder without cause and for any reason upon action by the Board
of Directors and upon no less than fourteen (14) days prior written notice to
Employee. The Employee may terminate employment hereunder without cause and for
any reason upon not less than fourteen (14) days prior written notice to the
Company. Employee acknowledges that the employment relationship defined herein
is an employment-at-will relationship.
(b) For Cause, by the Company. The Company may terminate the
Employee's employment hereunder for cause immediately and with prompt notice to
the Employee, which
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<PAGE> 5
cause shall be determined in good faith solely by the Board of Directors.
"Cause" for termination shall include, but is not limited to, the following
conduct of the Employee:
(1) Material breach of any provision of this Agreement by the
Employee, which breach shall not have been cured by the Employee within ten (10)
days of receipt of written notice of said breach;
(2) Misconduct as an employee of the Company, including but
not limited to: misappropriating any funds or property of the Company;
attempting to willfully obtain any personal profit from any transaction in which
the Employee has an interest which is adverse to the interests of the Company;
or any other act or omission which substantially impairs the Company's ability
to conduct its ordinary business in its usual manner;
(3) Unreasonable neglect or refusal to perform the duties
assigned to the Employee under or pursuant to this Agreement;
(4) Conviction of a felony; or
(5) Any other act or omission which subjects the Company or
any of its subsidiaries to substantial public disrespect, scandal or ridicule.
(c) For Good Reason by Employee. The Employee may terminate employment
hereunder for good reason immediately and with prompt notice to the Company.
"Good reason" for termination by the Employee shall include, but is not limited
to, the following conduct of the Company:
(1) Material breach of any provision of this Agreement by the
Company, which breach shall not have been cured by the Company within thirty
(30) days of receipt of written notice of said breach;
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<PAGE> 6
(2) Failure to maintain the Employee in a position
commensurate with that referred to in Section 2 of this Agreement; or
(3) The assignment to the Employee of any duties
inconsistent with the Employee's position, authority, duties or responsibilities
as contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution of such position, authority, duties or
responsibilities, excluding for this purpose any isolated action not taken in
bad faith and which is promptly remedied by the Company after receipt of notice
thereof given by the Employee.
(d) Death. The period of active employment of the Employee
hereunder shall terminate automatically in the event of his death.
(e) Disability. In the event that the Employee shall be unable
to perform duties hereunder for a period of ninety (90) consecutive calendar
days by reason of disability as a result of illness, accident or other physical
or mental incapacity or disability, the Company may, in its discretion, by
giving written notice to the Employee, terminate the Employee's employment
hereunder as long as the Employee is still disabled on the effective date of
such termination.
(f) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the Employee and the Company.
6. Compensation in the Event of Termination. In the event that the
Employee's employment pursuant to this Agreement terminates prior to the end of
the term of this Agreement because he is not reelected pursuant to Section 1 or
for a reason provided in Section 5 hereof, the Company shall pay the Employee
compensation as set forth below:
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<PAGE> 7
(a) Employee not Elected by Board of Directors; By Employee
for Good Reason; By Company Without Cause. In the event that the Employee's
employment hereunder is terminated: (i) because the Employee is not elected to
the office of Chairman of the Board, President and Chief Executive Officer of
the Company, or in a position at least commensurate therewith in all material
respects, at any annual meeting of the Company's Board of Directors during the
term of this Agreement, as contemplated by Section 1 hereof; (ii) by the
Employee for good reason pursuant to Section 5(c) hereof; or (iii) by the
Company without cause, then the Company shall continue to pay or provide, as
applicable, the following compensation to the Employee:
(1) Six months of Employee's annual base salary as
set forth in Section 3(a) hereof; and
(2) Continuing coverage, but only to the extent
required by law, for the Employee and his eligible dependents under all of the
Company's benefit plans, programs and policies in effect as of the date of
termination.
Such compensation shall continue to be paid or
provided, as applicable, in the same manner as before termination, and for a
period of time ending on the date when the term of this Agreement would
otherwise have expired in accordance with Section 1 of this Agreement. The
Employee shall not be required to mitigate the amount of any payment provided
for in this Section 6(a) by seeking employment or otherwise, nor shall any
amounts received from employment or otherwise by the Employee offset in any
manner the obligations of the Company hereunder.
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<PAGE> 8
(b) By Company Upon Termination of Agreement Due to Employee's
Death or Disability. In the event of the Employee's death or if the Company
shall terminate the Employee's employment hereunder for disability pursuant to
Section 5(e) hereof, the base salary payable hereunder shall continue to be paid
at the then current rate for three (3) months after the termination of
employment to the Employee or his personal representative, as applicable.
(c) By Company For Cause or By Employee Without Good Reason.
In the event that (i) the Company shall terminate the Employee's employment
hereunder for cause pursuant to Section 5(b) hereof or (ii) the Employee shall
terminate employment hereunder without "good reason" as provided in Section 5(c)
hereof, the Company shall not be obligated to pay the Employee any compensation
except for salary and other Compensation which may have been earned and are due
and payable but which have not been paid as of the date of termination.
7. Effect of Termination. In the event of expiration or early
termination of this Agreement as provided herein, neither the Company nor the
Employee shall have any remaining duties or obligations hereunder except that:
(a) The Company shall:
(1) Pay the Employee's accrued salary and any
other accrued benefits under Section 3 hereof;
(2) Reimburse the Employee for expenses already
incurred in accordance with Section 3(e) hereof;
(3) To the extent required by law, pay or
otherwise provide for any benefits, payments or continuation or conversion
rights in accordance with the provisions of any benefit plan of which the
Employee or any of his dependents is or was a participant; and
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<PAGE> 9
(4) Pay the Employee or his beneficiaries any
compensation due pursuant to Section 6 hereof; and
(b) The Employee shall remain bound by the terms of Section 8
hereof and Exhibit A attached hereto.
8. Restrictive Covenant. (a) The Employee acknowledges and agrees that
he has access to secret and confidential information of the Company and its
subsidiaries and that the following restrictive covenant is necessary to protect
the interests and continued success of the Company. Except as otherwise
expressly consented to in writing by the Company, until the termination of the
Employee's employment (for any reason and whether such employment was under this
Agreement or otherwise) and thereafter for the period of time, not to exceed
eighteen (18) months, for which the Employee is being compensated at an annual
rate of at least 50% of the last annual base salary received by the Employee
under Section 3(a) hereof (the "Restricted Period"), the Employee shall not,
directly or indirectly, acting as an employee, owner, shareholder, partner,
joint venturer, officer, director, agent, salesperson, consultant, advisor,
investor or principal of any corporation or other business entity:
(i) engage, in any state or territory of the United States of
America where the Company is doing business (determined as of the date the
Employee's employment with the Company terminates), in direct or indirect
competition with the business conducted by the Company or activities which the
Company plans to conduct with one year (determined as of the date the Employee's
employment with the Company terminates);
(ii) request or otherwise attempt to induce or influence,
directly or indirectly, any present customer or supplier, or prospective
customer or supplier, of the Company, or other
- 9 -
<PAGE> 10
persons sharing a business relationship with the Company, to cancel, limit or
postpone their business with the Company, or otherwise take action which might
be to the material disadvantage of the Company; or
(iii) hire or solicit for employment, directly or indirectly,
or induce or actively attempt to influence, any Employee of the Company or any
Affiliate, as such term is defined in the Securities Act of 1933, as amended, to
terminate his or her employment or discontinue such person's consultant,
contractor or other business association with the Company.
(b) If the Employee violates any of the restrictions contained
in Section 8(a) above, the Restrictive Period shall be increased by the period
of time from the commencement of any such violation until the time such
violation shall be cured by the Employee to the satisfaction of the Company, and
the Company may withhold any and all payments, except salary, otherwise due and
owing to the Employee under this Agreement.
(c) In the event that either the geographical area or the
Restrictive Period set forth in Section 8(a) of this Agreement is deemed to be
unreasonably restrictive in any court proceeding, the court may reduce such
geographical area and Restrictive Period to the extent which it deems reasonable
under the circumstances.
(d) Nothing in this Section 8, whether express or implied,
shall prevent the Employee from being a holder of securities of a company whose
securities are registered under Section 12 of the Securities Exchange Act of
1934, as amended; provided, however, that the Employee holds of record and
beneficially less than two percent (2%) of the votes eligible to be cast
generally by holders of securities of such company for the election of
directors.
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<PAGE> 11
(e) The Employee, as a condition of his continued employment,
acknowledges and agrees that he has reviewed and will continue to be bound by
all of the provisions set forth in Exhibit A attached hereto, which is
incorporated herein by reference and made a part hereof as though fully set
forth herein, during the term of this Agreement, and any time hereafter.
(f) Employee acknowledges and agrees that in the event of a
breach or threatened breach of the provisions of this Section 8 by Employee the
Company may suffer irreparable harm and therefore, the Company shall be
entitled, to the extent permissible by law, immediately to cease to pay or
provide the Employee any compensation being, or to be, paid or provided to him
pursuant to Sections 3 or 6 of this Agreement, and also to obtain immediate
injunctive relief restraining the Employee from conduct in breach or threatened
breach of the covenants contained in this Section 8. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
9. Resolution of Differences Over Breaches of Agreement. Except as
otherwise provided herein, any controversy or claim arising out of, or relating
to, this Agreement, or the breach hereof, shall be reviewed in the first
instance in accordance with the Company's internal review procedures, if any,
with recourse thereafter--for temporary or preliminary injunctive relief
only--to the courts having jurisdiction thereof, and if any relief other than
injunctive relief is sought, then to arbitration in Morris County, New Jersey in
accordance with the rules of the American Arbitration Association, and judgment
upon the award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof.
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<PAGE> 12
10. Waiver. The waiver by a party hereto of any breach by the other
party hereto of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by a party hereto.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company, and the Company shall be
obligated to require any successor to expressly assume its obligations
hereunder. This Agreement shall inure to the benefit of and be enforceable by
the Employee or his legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. The Employee may not
assign any of his duties, responsibilities, obligations or positions hereunder
to any person and any such purported assignment by him shall be void and of no
force and effect.
12. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing, and if personally delivered or when
sent by first class certified or registered mail, postage prepaid, return
receipt requested--in the case of the Employee, to his residence address as set
forth below, and in the case of the Company, to the address of its principal
place of business as set forth below, in care of the Board of Directors--or to
such other person or at such other address with respect to each party as such
party shall notify the other in writing.
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<PAGE> 13
13. Construction of Agreement.
(a) Governing Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the internal laws of the
State of New Jersey without reference to its principles regarding conflicts of
law.
(b) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(c) Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part of this Agreement.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties concerning the Employee's employment and all promises,
representations, understandings, arrangements and prior agreements on such
subject are merged herein and superseded hereby. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or discharged
except by an agreement in writing signed by the party against whom enforcement
of any amendment, modification, repeal, waiver, extension or discharge is
sought. No person acting other than pursuant to a resolution of the Board of
Directors shall have authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of this Agreement or
anything in reference thereto or to exercise any of the Company's rights to
terminate or to fail to extend this Agreement.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and attested by its duly authorized officers, and the Employee has set
his hand, all as of the day and year first above written.
AlphaNet Solutions, Inc.,
By: /s/ STAN GANG
------------------------------
Name: Stan Gang
Title: President and Chief
Executive Officer
(Principal Executive
Officer)
EMPLOYEE
/s/ SOPHIEN BENNACEUR
---------------------------------
Sophien Bennaceur
Address: 7 Ridgedale Ave.
-------------------------
Cedar Knolls
-------------------------
New Jersey 07927
-------------------------
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<PAGE> 15
EXHIBIT A
ALPHANET SOLUTIONS, INC.
EMPLOYEE'S
INVENTION ASSIGNMENT AND CONFIDENTIALITY
AGREEMENT
In consideration of my employment or continued employment by AlphaNet
Solutions, Inc., a New Jersey corporation or any subsidiary or parent
corporation thereof (the "Company"), I hereby represent and agree as follows:
1. I understand that the Company is engaged in a continuous program
consisting of the sale and marketing of computer products and services, systems
integration services, and related business products and services and that I may
have access to or acquire information with respect to Confidential Information
(as defined below), including hardware and apparatus, processes and methods,
scientific, technical and/or business innovations.
2. Disclosure of Innovations. I agree to disclose in writing to the
Company all inventions, improvements and other innovations of any kind that I
may make, conceive, develop or reduce to practice, alone or jointly with others,
during the term of my employment with the Company, whether or not they are
related to my work for the Company and whether or not they are eligible for
patent, copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations shall include, but are not limited to,
discoveries, research, inventions, formulas, techniques, processes, know-how,
marketing plans, new product plans, production processes, advertising, packaging
and marketing techniques and improvements to computer hardware or software.
3. Assignment of Ownership of Innovations. I agree that all Innovations
will be the sole and exclusive property of the Company and I hereby assign all
of my rights, title or interest in the Innovations and in all related patents,
copyrights, trademarks, trade secrets, rights of priority and other proprietary
rights to the Company. At the Company's request and expense, during and after
the period of my employment with the Company, I will assist and cooperate with
the Company in all respects and will execute documents, and, subject to my
reasonable availability, give testimony and take further acts requested by the
Company to obtain, maintain, perfect and enforce for the Company patent,
copyright, trademark, trade secret and other legal protection for the
Innovations. I hereby appoint the President and Chief Executive Officer of the
Company as my attorney-in-fact to execute documents on my behalf for this
purpose.
4. Protection of Confidential Information of the Company. I understand
that my work as an employee of the Company creates a relationship of trust and
confidence between myself and the Company. During and after the period of my
employment with the Company, I will not use or disclose or allow anyone else to
use or disclose any "Confidential Information" (as defined below) relating to
the Company, its products, suppliers or customers except as may
- A1 -
<PAGE> 16
be necessary in the performance of my work for the Company or as may be
authorized in advance by appropriate officers of the Company. "Confidential
Information" shall include innovations, business strategies, financial
information, forecasts, personnel information, customer lists, trade secrets and
any other non-public technical or business information, whether in writing or
given to me orally, which I know or have reason to know the Company would like
to treat as confidential for any purpose, such as maintaining a competitive
advantage or avoiding undesirable publicity. I will keep Confidential
Information secret and will not allow any unauthorized use of the same, whether
or not any document containing it is marked as confidential. These restrictions,
however, will not apply to Confidential Information that has become known to the
public generally through no fault or breach of mine or that the Company
regularly gives to third parties without restriction on use or disclosure. Upon
termination of my work with the Company, I will promptly deliver to the Company
all documents and materials of any nature pertaining to my work with the Company
and I will not take with me any documents or materials or copies thereof
containing any Confidential Information.
5. Non-Solicitation. I understand that my work as an employee of the
Company creates a relationship of trust and confidence between myself and the
Company. During and after the period of my employment with the Company, I will
not request or otherwise attempt to induce or influence, directly or indirectly,
any present customer or supplier, or prospective customer or supplier, of the
Company, or other persons sharing a business relationship with the Company to
cancel, to limit or postpone their business with the Company, or otherwise take
action which might be to the material disadvantage of the Company. During and
after the period of my employment with the Company, I will not hire or solicit
for employment, directly or indirectly, or induce or actively attempt to
influence, any Employee of the Company or any Affiliate of the Company, as such
term is defined in the Securities Act of 1933, as amended, to terminate his or
her employment or discontinue such person's consultant, contractor or other
business association with the Company.
6. Other Agreements. I represent that my performance of all the terms
of this Agreement and my duties as an employee of the Company will not breach
any invention assignment agreement, confidential information agreement,
non-competition agreement or other agreement with any former employer or other
party. I represent that I have not and will not bring with me to the Company or
use in the performance of my duties for the Company any documents or materials
of a former employer that are not generally available to the public.
7. Disclosure of this Agreement. I hereby authorize the Company to
notify others, including but not limited to customers of the Company and any of
my future employers, of the terms of this Agreement and my responsibilities
hereunder.
8. Injunctive Relief. I understand that in the event of a breach or
threatened breach of this Agreement by me the Company may suffer irreparable
harm and monetary damages alone would not adequately compensate the Company. The
Company will therefore be entitled to injunctive relief to enforce this
Agreement.
- A2 -
<PAGE> 17
9. Enforcement and Severability. I acknowledge that each of the
provisions in this Agreement are separate and independent covenants. I agree
that if any court shall determine that any provision of this Agreement is
unenforceable with respect to its term or scope such provision shall nonetheless
be enforceable by any such court upon such modified term or scope as may be
determined by such court to be reasonable and enforceable. The remainder of this
Agreement shall not be affected by the unenforceability or court ordered
modification of a specific provision.
10. Governing Law. I agree that this Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
11. Superseding Agreement. I understand and agree that this Agreement
contains the entire agreement of the parties with respect to subject matter
hereof and supersedes all previous agreements and understandings between the
parties with respect to its subject matter.
12. Acknowledgments. I acknowledge that I have read this agreement, was
given the opportunity to ask questions and sufficient time to consult an
attorney and I have either consulted an attorney or affirmatively decided not to
consult an attorney. I understand that this agreement does not alter the terms
of an executed Employment Agreement with the Company, or in the absence of an
Employment Agreement, this Agreement does not alter my status as an employee at
will and that my employment may be terminated at any time, with or without
cause. I also understand that my obligations under this Agreement survive the
termination of my employment with the Company.
*.*.*.*.*.*.*.*.*.*
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<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written below.
Date: October 14, 1996 /s/ Sophien Bennaceur
------------------------------------
Name of Employee: Sophien Bennaceur
AlphaNet Solutions, Inc.
Date: October 14, 1996 By: /s/ Stan Gang
--------------------------------
Name: Stan Gang
Title: President and Chief
Executive Officer
(Principal Executive
Officer)
- A4 -
<PAGE> 1
EXHIBIT 10.3
ALPHANET SOLUTIONS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of October 14,
1996, by and between AlphaNet Solutions, Inc., a New Jersey corporation (the
"Company"), and Sophien Bennaceur ("Indemnitee").
WHEREAS, Indemnitee is an officer of the Company and performs a
valuable service in such capacity for the Company;
WHEREAS, the Company and Indemnitee recognize the difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to continue to provide services to the
Company as an officer and director, wishes to provide for the indemnification
and advancing of expenses to Indemnitee to the maximum extent permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Indemnification of Expenses. The Company shall indemnify Indemnitee
to the fullest extent permitted by law if Indemnitee was or is or becomes a
party to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, any threatened, pending or completed
action, suit, proceeding or alternative dispute resolution mechanism, or any
hearing, inquiry or investigation that Indemnitee in good faith believes might
lead to the institution of any such action, suit, proceeding or alternative
dispute resolution mechanism, whether civil, criminal, administrative,
investigative or other (collectively hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
<PAGE> 2
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action or inaction on the part of Indemnitee while serving in such
capacity (hereinafter an "Indemnifiable Event") against any and all expenses
(including attorneys' fees and all other costs, expenses and obligations
incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a witness in
or participate in, any such Claim), judgments, fines, penalties and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of such Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement (collectively,
hereinafter "Expenses"), including all interest, assessments and other charges
paid or payable in connection with or in respect of such Expenses. Such payment
of Expenses shall be made by the Company as soon as practicable but in any event
no later than thirty (30) days after written demand by Indemnitee therefor is
presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the obligations
of the Company under Section l(a) shall be subject to the condition that the
Reviewing Party (as described in Section 10(e) hereof) shall not have determined
(in a written opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(c) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of the
Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an "Expense Advance") shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section l(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents
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<PAGE> 3
to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control) then with respect to all matters thereafter
arising concerning the rights of Indemnitee to payments of Expenses and Expense
Advances under this Agreement or any other agreement or under the Company's
Certificate of Incorporation or Bylaws as now or hereafter in effect, the
Company shall seek legal advice only from Independent Legal Counsel (as defined
in Section 10(d) hereof) selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld). Such counsel, among other
things, shall render its written opinion to the Company and Indemnitee as to
whether and to what extent Indemnitee would be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the Independent
Legal Counsel referred to above and to fully indemnify such counsel against any
and all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other provision
of this Agreement other than Section 9 hereof, to the extent that Indemnitee has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any Claim referred to in
Section (1)(a) hereof or in the defense of any claim, issue or matter therein,
Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in
connection therewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
(5) days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified under this Agreement, give the
Company notice in writing as soon as practicable of any Claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim, by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption
- 3 -
<PAGE> 4
that Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. In addition, neither the failure of the Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by the Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under applicable law, shall be a defense to Indemnitee's
claim or create a presumption that Indemnitee has not met any particular
standard of conduct or did not have any particular belief. In connection with
any determination by the Reviewing Party or otherwise as to whether the
Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be
on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to pay the Expenses of any Claim, the Company, if appropriate, shall
be entitled to assume the defense of such Claim with counsel approved by
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall
have the right to employ Indemnitee's counsel in any such Claim at Indemnitee's
expense and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee's counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a New Jersey corporation to indemnify
a member of its board of directors or an officer, employee, agent or fiduciary,
it is the
- 4 -
<PAGE> 5
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits afforded by such change. In the event of any change in any
applicable law, statute or rule which narrows the right of a New Jersey
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, such change, to the extent not otherwise required
by such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the New Jersey Business Corporation
Act, or otherwise. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though Indemnitee may have ceased to serve in such
capacity.
4. NO DUPLICATION OF PAYMENTS.
The Company shall not be liable under this Agreement to make any
payment in connection with any Claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance policy,
Certificate of Incorporation, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder.
5. PARTIAL INDEMNIFICATION.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of Expenses in the
investigation, defense, appeal or settlement of any civil or criminal Claim, but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such Expenses to which
Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT.
Both the Company and Indemnitee acknowledge that in certain instances,
Federal law or applicable public policy may prohibit the Company from
indemnifying its directors, officers, employees, agents or fiduciaries under
this Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
- 5 -
<PAGE> 6
7. LIABILITY INSURANCE.
To the extent the Company maintains liability insurance applicable to
directors, officers, employees, agents or fiduciaries, Indemnitee shall be
covered by such policies in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
8. EXCEPTIONS.
Any other provision herein to the contrary notwithstanding, the Company
shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for acts,
omissions or transactions from which Indemnitee may not be relieved of liability
under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (1) with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such suit, or (iii) as
otherwise required under Section 14A:3-5 of the New Jersey Business Corporation
Act, regardless of whether Indemnitee ultimately is determined to be entitled to
such indemnification, advance expense payment or insurance recovery, as the case
may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale, or sale and
purchase, by Indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor statute.
9. PERIOD OF LIMITATIONS.
No legal action shall be brought and no cause of action shall be
asserted by or in the right of the Company against Indemnitee, Indemnitee's
estate, spouse, heirs, executors or personal or legal representatives after the
expiration of two years from the date of accrual of such cause of
- 6 -
<PAGE> 7
action, and any claim or cause of action of the Company shall be extinguished
and deemed released unless asserted by the timely filing of a legal action
within such two-year period; provided, however, that if any shorter period of
limitations is otherwise applicable to any such cause of action, such shorter
period shall govern.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee, agent or fiduciary of the Company
which imposes duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit plan, its
participants or its beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing more than 20% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
- 7 -
<PAGE> 8
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all or substantially all of the
Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years (other than
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean any
appropriate person or body consisting of a member or members of the Company's
Board of Directors or any other person or body appointed by the Board of
Directors who is not a party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean any
securities of the Company that vote generally in the election of directors.
11. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, and any heirs, and personal and legal representatives of the
Indemnitee. The Company shall require and cause any successor (whether direct or
indirect by purchase, merger, consolidation or otherwise) to all, substantially
all, or a substantial part, of the business and/or assets of the Company, by
written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director of the Company or of any other
enterprise at the Company's request.
- 8 -
<PAGE> 9
13. ATTORNEYS' FEES.
In the event that any action is instituted by Indemnitee under this
Agreement or under any liability insurance policies maintained by the Company to
enforce or interpret any of the terms hereof or thereof, Indemnitee shall be
entitled to be paid all Expenses incurred by Indemnitee with respect to such
action, regardless of whether Indemnitee is ultimately successful in such
action, and shall be entitled to the advancement of Expenses with respect to
such action, unless as a part of such action the court of competent jurisdiction
over such action determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in
defense of such action (including costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), and shall be
entitled to the advancement Expenses with respect to such action, unless as a
part of such action the court having jurisdiction over such action determines
that each of Indemnitee's material defenses to such action were made in bad
faith or were frivolous.
14. NOTICE.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by
hand and receipted for by the party addressee, on the date of such receipt, or
(ii) if mailed by domestic certified or registered mail with postage prepaid, on
the third business day after the date postmarked. Addresses for notice to either
party are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
15. CONSENT TO JURISDICTION.
The Company and Indemnitee each hereby irrevocably consent to the
jurisdiction of the courts of the State of New Jersey for all purposes in
connection with any action or proceeding which arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
commenced, prosecuted and continued only in the Superior Court of the State of
New Jersey in and for Morris County, which shall be the exclusive and only
proper forum for adjudicating such a claim.
16. SEVERABILITY.
The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
- 9 -
<PAGE> 10
fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. CHOICE OF LAW.
This Agreement shall be governed by and its provisions construed and
enforced in accordance with the laws of the State of New Jersey, as applied to
contracts between New Jersey residents, entered into and to be performed
entirely within the State of New Jersey, without regard to the conflict of laws
principles thereof.
18. SUBROGATION.
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company effectively to
bring suit to enforce such rights.
19. AMENDMENT AND TERMINATION.
No amendment, modification, termination or cancellation of this
Agreement shall be effective unless it is in writing signed by both the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
20. INTEGRATION AND ENTIRE AGREEMENT.
This Agreement sets forth the entire understanding between the parties
hereto and supersedes and merges all previous written and oral negotiations,
commitments, understandings and agreements relating to the subject matter hereof
between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT.
Nothing contained in this Agreement shall be construed as giving
Indemnitee any right to be retained in the employ of the Company or any of its
subsidiaries.
*****
- 10 -
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AlphaNet Solutions, Inc.
By: /s/ Stan Gang
-------------------------------------
Stan Gang, Chairman of the Board,
President and Chief Executive Officer
AGREED TO AND ACCEPTED
INDEMNITEE:
/s/ Sophien Bennaceur
- ------------------------------
Sophien Bennaceur
7 Ridgedale Ave.
- ------------------------------
(Street Address)
Cedar Knolls, New Jersey 07927
- ------------------------------
(City, State and Zip)
- 11 -
<PAGE> 1
EXHIBIT 11
ALPHANET SOLUTIONS, INC. AND SUBSIDIARY
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT 30, NINE MONTHS ENDED SEPT 30,
--------------------------- --------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pro forma net income . . . . . . . . . $620 $969 $1,732 $2,057
======== ======== ======== ========
Weighted average number of
common shares and common
shares equivalent:
Common shares . . . . . . . . . . . . 3,400 5,100 3,400 4,554
Shares necessary to fund
S Corporation Distribution . . . . . . 551 -- 551 173
Cheap stock (treasury stock method) . 37 -- 37 12
-------- -------- -------- --------
3,988 5,100 3,988 4,739
-------- -------- -------- --------
Pro forma net income per share . . . . $0.15 $0.19 $0.43 $0.43
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED INTERIM FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,818
<SECURITIES> 0
<RECEIVABLES> 22,766
<ALLOWANCES> 247
<INVENTORY> 3,279
<CURRENT-ASSETS> 31,843
<PP&E> 3,226
<DEPRECIATION> 796
<TOTAL-ASSETS> 35,330
<CURRENT-LIABILITIES> 17,768
<BONDS> 73
0
0
<COMMON> 51
<OTHER-SE> 17,438
<TOTAL-LIABILITY-AND-EQUITY> 35,330
<SALES> 60,334
<TOTAL-REVENUES> 74,120
<CGS> 53,389
<TOTAL-COSTS> 64,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70
<INCOME-PRETAX> 3,472
<INCOME-TAX> 1,415<F1>
<INCOME-CONTINUING> 2,057<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,057<F1>
<EPS-PRIMARY> 0.43<F1>
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES A PRO FORMA ADJUSTMENT TO INCLUDE INCOME TAXES WHICH WOULD HAVE BEEN
INCURRED IF THE COMPANY HAD NOT BEEN AN S CORPORATION FOR SUCH PERIOD.
</FN>
</TABLE>
