<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Allin Communications Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Definitve Proxy Materials are being released to stockholders April 11, 1997.
<PAGE>
[LOGO OF ALLIN COMMUNICATIONS]
Allin Communications Corporation
300 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220-2751
Notice of Annual Meeting of Stockholders
To be held May 8, 1997
Dear Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
Allin Communications Corporation (the "Company") that will be held on Thursday,
May 8, 1997 at 1:00 p.m. EDT, at the Greentree Marriott, 101 Marriott Drive,
Pittsburgh, Pennsylvania 15205, for the following purposes, as set forth in the
accompanying Proxy Statement:
1. To elect seven directors.
2. To consider and vote on a proposal to approve the 1997 Stock Plan of Allin
Communications Corporation.
3. To ratify the Board of Director's appointment of Arthur Andersen LLP as
independent public accountants for the Company for the year ending
December 31, 1997.
4. To transact such other business as may properly come before the meeting and
any adjournments or postponements thereof.
The Board of Directors has established the close of business on March 27,
1997, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the annual meeting and any adjournment or
postponement thereof.
YOU ARE URGED TO REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT AND TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
Your proxy may be revoked by you at any time before it has been voted.
You are cordially invited to attend the annual meeting in person if it is
convenient for you to do so.
By order of the Board of Directors,
/S/ Jon E. VanAmringe
Jon E. VanAmringe
Chief Financial Officer and Assistant Secretary
April 7, 1997
1
<PAGE>
Allin Communications Corporation
Proxy Statement
General Information
This proxy statement is provided to the stockholders of Allin
Communications Corporation (the "Company") in connection with the solicitation
by the Board of Directors of the Company of proxies for use at the Annual
Meeting of Stockholders of the Company to be held on Thursday, May 8, 1997, at
1:00 p.m., EDT, at the Greentree Marriott, 101 Marriott Drive, Pittsburgh,
Pennsylvania, 15205, and any adjournments or postponements thereof. A form of
proxy is enclosed for use at the annual meeting. Proxies properly executed and
returned in a timely manner will be voted at the annual meeting in accordance
with the directions specified therein. If no direction is indicated, they will
be voted for the election the nominees named herein as directors, for the
proposal to approve the 1997 Stock Plan of Allin Communications Corporation (the
"1997 Stock Plan"), for the ratification of the appointment of Arthur Andersen
LLP as the Company's independent accountants and, on other matters presented for
a vote, in accordance with the judgment of the persons acting under the proxies.
The persons named as proxies were selected by the Board of Directors and are
present members of executive management of the Company.
The Company's executive offices are located at 300 Greentree Commons, 381
Mansfield Avenue, Pittsburgh, Pennsylvania 15220-2751, and its telephone number
is (412) 928-8800. Proxy materials are first being mailed to stockholders
beginning on or about April 9, 1997.
Shares Outstanding, Voting Rights and Vote Required
Only stockholders of record at the close of business on March 27, 1997 are
entitled vote at the annual meeting. The only voting stock of the Company
outstanding and entitled to vote at the annual meeting is its common stock, $.01
par value per share (the "Common Stock"), of which 5,184,067 shares were
outstanding as of the close of business on March 27, 1997. Each share of Common
Stock issued and outstanding is entitled to one vote on matters properly
submitted at the annual meeting. Cumulative voting is not permitted under the
Company's Certificate of Incorporation, as amended.
The presence, in person or by proxy, of the holders of a majority of the
total issued and outstanding shares of Common Stock entitled to vote at the
annual meeting is necessary to constitute a quorum for the transaction of
business at the annual meeting. Abstentions and broker non-votes are counted for
purposes determining the presence or absence of a quorum. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Abstentions are counted in tabulating votes cast on proposals presented
to stockholders, whereas broker non-votes are not. Votes cast in person or by
proxy at the annual meeting will be tabulated by the election inspector
appointed for the meeting.
Directors will be elected by a plurality of the votes of the shares present
or represented by proxy at the meeting and entitled to vote on the election of
directors. That is, the nominees receiving the greatest number of votes will be
elected. If a quorum is present, abstentions and broker non-votes will have no
effect on the voting for the election of directors. Approval of the 1997 Stock
Plan requires the affirmative vote of the holders of a majority of the shares
present or represented by proxy at the meeting entitled to vote on such
proposal, and ratification of the appointment of independent public accountants
requires the affirmative vote of a majority of the votes cast. If a quorum is
present, non-votes will have no effect on the voting for the 1997 Stock Plan or
ratification of appointment of independent public accountants; however,
abstentions will have the effect of a negative vote. Stockholders voting by
proxy may revoke that proxy at any time before it is voted at the annual meeting
by delivering written notice to the Secretary of the Company, by delivering a
proxy bearing a later date or by attending the annual meeting in person and
casting a ballot. The Board of Directors recommends voting (1) FOR the election
of the nominees named herein for director, (2) FOR the adoption of the Company's
1997 Stock Plan, and (3) FOR ratification of the appointment of Arthur Andersen
LLP as the Company's independent public accountants for 1997.
2
<PAGE>
Election of Directors
(Proposal 1)
The Board of Directors of the Company currently consists of seven members,
four of whom are non-employee directors. The Chairman and Chief Executive
Officer, President, and Chief Operating Officer of the Company are members of
the Board. All directors are elected for one year terms and hold office until
the next annual meeting of stockholders following election and until their
successors are duly elected and qualified. All executive officers serve at the
discretion of the Board and are elected by the Board each year.
The persons named below have been designated by the Board of Directors as
nominees for election as directors, for terms expiring at the 1998 Annual
Meeting of Stockholders. All nominees currently serve as directors of the
Company. Ages are given as of March 31, 1997.
Richard W. Talarico, age 41, became Chairman of the Board and Chief
Executive Officer of the Company in July 1996. He has served as a director of
SeaVision, Inc., a subsidiary of the Company since August 1996 ("SeaVision"),
since October 1994 and as Chairman of the Board and Chief Executive Officer of
SeaVision since June 1996. Mr. Talarico has served SeaVision in various other
capacities, including Vice President of Finance from October 1994 to October
1995, President from October 1995 to June 1996 and Chief Financial Officer,
Secretary and Treasurer from October 1994 to June 1996. Since 1991, Mr. Talarico
has been a partner in The Hawthorne Group ("THG"), where he has been involved
in numerous business ventures and has served in various financial and operating
capacities. THG is a private investment and management company, which invests
through affiliates primarily in media and communications companies.
R. Daniel Foreman, age 34, became a director and President of the Company
in July 1996. He has served as a director of SeaVision since October 1994 and as
President since June 1996. Mr. Foreman also served as Vice President of
Technology of SeaVision from October 1994 to June 1996. Since May 1989, Mr.
Foreman has served as Executive Vice President of Blair Haven Entertainment,
Inc., which operates under the name Commercial Downlink ("Commercial
Downlink"), a company founded to serve the needs of the satellite
communications industry, where he has been responsible for technology
development and implementation. Since 1992, Mr. Foreman has been Executive Vice
President of ComTek Printing & Graphics Inc., a commercial printing company. He
also serves as President of Digital Media Corp., a company which provides
closed-circuit video to racetracks. Since the formation of SeaVision in June
1994, Mr. Foreman has devoted substantially all of his time to its operations.
Brian K. Blair, age 34, became a director, Chief Operating Officer and
Secretary of the Company in July 1996. Mr. Blair has served as a director of
SeaVision since October 1994. Mr. Blair also served as Vice President of
Administration and Operations of SeaVision from October 1994 until June 1996.
Since May 1989, Mr. Blair has been President of Commercial Downlink where he is
responsible for the day-to-day activity of such company. Mr. Blair also serves
as Secretary and Treasurer of Digital Media Corp. Since the formation of
SeaVision in June 1994, Mr. Blair has devoted substantially all of his time to
its operations.
William C. Kavan, age 46, became a director of the Company in July 1996 and
has served as a director of SeaVision since October 1994. Since 1980, Mr. Kavan
has been president of Berkely-Arm, Inc. ("Berkely"), the largest provider of
revenue generating passenger insurance programs for the cruise industry. Berkely
serves twenty-five cruise line clients, including Carnival, Costa, Cunard,
Epirotiki, NCL, P&O, Princess, Radisson and Royal Caribbean.
Paul J. Pasquarelli, age 45, became a director of the Company in January
1997. Mr. Pasquarelli has been Vice President of Buena Vista Home Video, a Walt
Disney Company, since 1994. From 1992 to 1994, he served as President of Visual
Expressions, Inc., and from 1987 to 1992, as President and Chief Executive
Officer of Video Channels/Rank Retail Services America. Mr. Pasquarelli founded
both of these companies which were engaged in the video entertainment business.
James C. Roddey, age 64, became a director of the Company in July 1996 and
has served as a director of SeaVision since October 1994. Mr. Roddey served as
President of International Sports Marketing, Inc. (now SportsWave, Inc., a
subsidiary of the Company since November 1996 ("SportsWave")) from 1992 to 1996.
He has served as Chairman or as President of various other entities affiliated
with THG, including President of Star Cable Associates, a cable television
operator in various states, since 1991. He served as President of Turner
Communications
3
<PAGE>
Corporation from 1968 to 1971, and as President of Rollins
Communications Corporation from 1971 to 1979. Mr. Roddey currently serves as a
Trustee of the University of Pittsburgh.
Richard S. Trutanic, age 47, became a director of the Company in January
1997. He has been President and Managing Director of The Somerset Group, a
financial advisory firm, since 1990 and senior advisor to Friedman, Billings,
Ramsey & Co., Inc. ("FBR"), an investment banking firm, since 1993. Mr. Trutanic
was, from 1985 to 1990, a director and member of the Executive Committee of
Telecom U.S.A. (formerly SouthernNet, Inc.), a telecommunications company. He is
a Trustee of the New York Life Mainstay Funds and a director of several private
companies. FBR provided investment banking services to the Company in 1996,
including acting as underwriter of the Company's initial public offering. In
connection with such transaction, the Company agreed to appoint Mr. Trutanic as
a director of the Company.
The Board of Directors Recommends a Vote FOR
The Election of the Above Named Nominees
If you do not wish your shares to be voted for particular nominees, you may
so indicate on the proxy. If, for any reason, any of the nominees shall become
unavailable for election, the individuals named in the enclosed proxy may
exercise their discretion to vote for any substitutes proposed by the Board of
Directors, unless the Board of Directors should decide to reduce the number of
directors to be elected at the annual meeting. At this time, the Board of
Directors knows of no reason why any nominee might be unavailable to serve.
Meetings and Committees of the Board of Directors
The business affairs of the Company are managed under the direction of the
Board of Directors. During 1996, the Company's Board of Directors held 2
meetings and took action by unanimous written consent in lieu of meetings 7
times. In 1996, each director attended all of the meetings of the Board of
Directors and meetings held by committees of the Board on which he served.
The Board of Directors has established two committees, the Audit Committee
and the Compensation Committee. The Board has no standing nominating committee.
The Audit Committee provides oversight of the financial reporting process
and management's responsibility for the integrity, accuracy and objectivity of
financial reports and accounting and financial reporting and practices. The
Audit Committee has the power to recommend the retention of the independent
public accountants for the Company and to consult with such independent
accountants concerning the plan of audit, their report of audit and the adequacy
of internal controls. The Audit Committee is currently composed of two
independent, non-employee directors, William C. Kavan and Paul J. Pasquarelli.
The Audit Committee did not meet in 1996.
The Compensation Committee reviews and makes recommendations to the Board
of Directors concerning the compensation and benefit policies and practices of
the Company. The Compensation Committee is currently composed of three non-
employee directors, William C. Kavan, James C. Roddey and Richard S. Trutanic.
The Compensation Committee met 3 times in 1996.
Executive Compensation
The following table sets forth information concerning 1996 compensation of
the Chief Executive Officer and the other executive officers of the Company
(collectively the "Named Executives"). Certain information concerning Messrs.
Talarico, Foreman and Blair is included above in the biographic summaries of the
nominees for director. Information with regard to the remaining non-director
Named Executive follows:
Jon E. VanAmringe, age 48, joined the Company as Chief Financial Officer
and Treasurer in September 1996, and became Assistant Secretary in December
1996. From November 1995 until joining the Company, he served as Vice President
of MED3000 Group, Inc., a physician practice management company involved in the
development and management of integrated health care delivery systems. From 1993
to 1995 he served as Vice President and Chief Financial Officer of Strategic
Advisory Group, Inc., a firm involved in providing consulting and management
services
4
<PAGE>
to physician groups and others in the healthcare industry which later merged
into MED3000 Group, Inc., and as President of Strategic Capital Group, a firm
which provided financial and management services. Mr. VanAmringe served as
Managing Director of Corporate Finance of Mid Atlantic Capital Group from 1989
to 1993 and was employed by Spectrum Control, Inc., a publicly traded electronic
component manufacturer, from 1982 to 1989, most recently as Senior Vice
President and Chief Financial Officer.
Summary Executive Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------- --------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary ($) Compensation ($) Options (#)(2)
- --------------------------- ---- ---------- ---------------- --------------
<S> <C> <C> <C> <C>
Richard W. Talarico 1996 $ 75,000 $ --- 21,000
Chief Executive Officer
R. Daniel Foreman 1996 $124,875 $ --- 21,000
President
Brian K. Blair 1996 $124,875 $15,596 (1) 21,000
Chief Operating Officer
Jon E. VanAmringe 1996 $ 40,833 $ --- 14,000
Chief Financial Officer
</TABLE>
(1) During 1996, Mr. Blair accepted an assignment to manage the Miami, Florida
based operations of SeaVision. The expected duration of the assignment was
a minimum of one year, but was not expected to be a permanent transfer.
Because of the temporary nature of the assignment at a remote office,
SeaVision has leased housing and an automobile for Mr. Blair's usage.
Expenses for housing and automobile were $12,500 and $3,096, respectively.
(2) Common Stock options were awarded under the 1996 Stock Plan approved by the
Board of Directors and in accordance with the terms of the respective
executive's employment agreements. See "--Employment Agreements" and "--
1996 Stock Plan" below.
On March 20, 1997, the Company loaned Mr. Foreman $130,000 in connection
with his relocation from Columbiana, Ohio to Pittsburgh, Pennsylvania, the
location of the headquarters of the Company. This loan is evidenced by a demand
note and carries interest at the rate of PNC Bank Prime Rate plus 1%. The loan
is to be repaid out of the proceeds of the sale of Mr. Foreman's principal
residence.
Employment Agreements
The Company has entered into employment agreements with each of the Named
Executives. Each such employment agreement contains restrictive covenants
prohibiting such officer from competing with the Company for a period of three
years after the end of the employment term in the case of Messrs. Talarico,
Foreman and Blair, and for a period of two years after the end of the employment
term in the case of Mr. VanAmringe. The terms of the employment agreements with
Messrs. Talarico, Foreman and Blair commenced as of August 1, 1996 and will
continue through December 31, 1999. The term of the employment agreement with
Mr. VanAmringe commenced as of September 16, 1996 and will continue through
December 31, 1998. The annual salaries as set forth in the employment agreements
are $150,000 for each of Messrs. Talarico, Foreman and Blair and $140,000 for
Mr. VanAmringe.
Pursuant to the employment agreements, options to acquire shares of Common
Stock granted to Messrs. Talarico, Foreman, Blair and VanAmringe under the
Company's 1996 Stock Plan will, if not already vested, vest on the date of a
change in control of the Company, defined as a sale of all or substantially all
of the Company's assets, a merger in which the Company is not the surviving
corporation or when a person or group, other than the stockholders of SeaVision
as of August 1, 1996, owns 50% or more of the outstanding Common Stock. The
employment agreements also provide that each of Messrs. Talarico, Foreman, Blair
and VanAmringe will be entitled to receive for one year following such person's
termination of employment by the Company without cause or contemporaneously with
the occurrence of a change in control, semi-monthly severance payments equal to
the semi-monthly base salary payment which such person was receiving immediately
prior to such termination. Mr. VanAmringe will be entitled to receive such
payments for only six months if a termination without cause, other than by
change of control, occurs after
5
<PAGE>
December 31, 1997. If Mr. VanAmringe voluntarily resigns prior to December 31,
1997, he will be entitled to receive semi-monthly payments equal to the semi-
monthly base salary payment he was receiving immediately prior to his
resignation for six months or, if earlier, until such time that he begins other
full-time employment.
1996 Stock Plan
In October 1996, the Board of Directors adopted the 1996 Stock Plan, which
provides for awards of stock options, stock appreciation rights, restricted
shares and restricted units to officers and other employees of the Company and
to consultants and advisors (including non-employee directors) of the Company.
An aggregate of 266,000 shares of Common Stock has been reserved for issuance
under the 1996 Stock Plan. The 1996 Stock Plan is administered by the Board of
Directors which has broad discretion to determine the individuals entitled to
participate in the 1996 Stock Plan and to prescribe conditions (such as the
completion of a period of employment with the Company following an award) that
must be satisfied before awards vest. The Board of Directors has delegated
responsibility for certain aspects of the 1997 Stock Plan to the Compensation
Committee.
During the fourth quarter of 1996, the Board of Directors awarded options
to purchase an aggregate of 202,550 shares of Common Stock under the 1996 Stock
Plan. The grant date of the option awards for the Named Executives was the
closing date of the initial public offering and the exercise price equals the
initial public offering price of $15 per share. Messrs. Talarico, Foreman and
Blair individually received options to purchase 21,000 shares of Common Stock,
while Mr. VanAmringe received options to purchase 14,000 shares of Common Stock.
Except under the conditions noted above in the discussion of their employment
agreements, there will be a five-year vesting period for these options with
vesting of 20% of the award at each of the first five anniversaries of the grant
date. All of the options granted under the 1996 Stock Plan will be non-qualified
options for federal income tax purposes.
Upon closing of the Company's initial public offering in November 1996,
Richard S. Trutanic, who subsequently became a non-employee director of the
Company, received an immediately exercisable option to purchase 21,000 shares of
Common Stock at the initial public offering price of $15 per share under the
Company's 1996 Stock Plan.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
The following table provides information concerning stock option grants to the Named Executives during 1996.
Number of Individual Grants Grant Date Value
Securities ----------------- ----------------
Underlying % of Total Options Grant Date
Options Granted to Employees Exercise or Base Expiration Present
Name Granted in Fiscal Year Price ($/Sh) Date Value $ (1)
---- ------- -------------- ------------- ---- -----------
<S> <C> <C> <C> <C> <C>
Richard W. Talarico 21,000 10.4% $15.00 11/6/03 $171,990
R. Daniel Foreman 21,000 10.4% $15.00 11/6/03 $171,990
Brian K. Blair 21,000 10.4% $15.00 11/6/03 $171,990
Jon E. VanAmringe 14,000 6.9% $15.00 11/6/03 $114,660
</TABLE>
(1) The fair value of each option, $8.19, is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions for grants in 1996.
<TABLE>
<CAPTION>
<S> <C>
Risk free interest rate 6.2%
Expected dividend yield 0.0%
Expected life of options 6 yrs.
Expected volatility rate 48.0%
</TABLE>
No adjustments were made for non-transferability or risk of forfeiture.
See "--Employment Agreements" and "--1996 Stock Plan" above for information
concerning the terms of the foregoing options.
6
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information concerning stock options held by
the Named Executives at December 31, 1996. No options were exercised in 1996.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Fiscal Year Options at Fiscal Year
End End (1)
------------------------------------ -------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ---------------- ------------------ ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Talarico --- --- --- 21,000 --- $94,500
R. Daniel Foreman --- --- --- 21,000 --- $94,500
Brian K. Blair --- --- --- 21,000 --- $94,500
Jon E. VanAmringe --- --- --- 14,000 --- $63,000
</TABLE>
(1) Valued based on the December 31, 1996 closing price per share of Common
Stock of $19.50, as reported by the Nasdaq National Market tier of the
Nasdaq Stock Market, less the option exercise price of $15.00 per share.
The Company does not have any long-term incentive or defined benefit plans.
Report of the Compensation Committee of the Board on Executive Compensation
The Compensation Committee is responsible for making recommendations to the
Board of Directors concerning executive compensation, including base salaries,
bonuses and awards of stock options and other forms of incentive compensation.
William C. Kavan, James C. Roddey and Richard S. Trutanic are currently members
of the Compensation Committee.
The Company's compensation policies are intended to attract and retain
people necessary to grow the business on a long-term basis, to encourage the
creation and appreciation of stockholder value by providing incentives to
employees to act as stockholders accountable for their own actions and the
overall success of the Company, to link compensation levels to business results
and to maintain an appropriate balance between base salary and short-and long-
term compensation. As the Company was only formed in July 1996, these policies
are in the implementation stage. Achievement of target performance levels was
not a factor in determining 1996 compensation.
In determining the compensation of the Company's Chief Executive Officer
and its other executive officers, factors taken into account include the
Company's performance under business conditions prevailing in the Company's
lines of business, contributions made by, or expected to be made by, the
specific executive officer, the business area for which such person is
responsible and the compensation for other executives having similar background
and experience. The Compensation Committee believes that such factors and their
application will become more meaningful as the Company continues to log an
operating history.
The two basic elements of each executive officer's 1996 compensation were
salary and incentive compensation awarded in the form of options to purchase
shares of the Company's Common Stock under the Company's 1996 Stock Plan.
Executive officers are also eligible to receive annual bonus payments, which the
Compensation Committee believes should be tied to both short- and long-term
performance of the Company as well as financial performance for stockholders.
Given the limited operating history of the Company, no bonuses were awarded to
executive officers in respect of 1996. The Compensation Committee believes that
the current level of salary compensation for the Company's executive officers is
below the level of other comparable companies in similar stages of development.
It is the Committee's intention to continue to favor forms of compensation for
these executive officers that favor long-term rather than short-term incentives.
Each executive's compensation package is skewed towards incentive forms of
compensation, stock options in 1996, so that such executive may benefit from an
increase in the value of the Common Stock along with the Company's other
stockholders. The Compensation Committee believes that stock options provide an
additional incentive to executives to continue in the service of the Company.
7
<PAGE>
Mr. Talarico became Chief Executive Officer of the Company at the time of
its formation in July 1996. His 1996 salary was $75,000, and in connection with
the consummation of the Company's initial public offering in November 1996, he
was granted an option to purchase 21,000 shares of Common Stock at the initial
public offering price of $15.00 per share. The option award was granted
primarily in consideration of the services provided and to be provided by Mr.
Talarico and his anticipated contributions to the Company. His past business
accomplishments were also considered. Consistent with the desire to provide
incentive compensation, the options granted to Mr. Talarico as well as the other
executive officers of the Company, vest 20% each year beginning on the first
anniversary of the date of the grant.
All employees of the Company and its subsidiaries, in addition to the
Company's executive officers, are eligible to participate in the Company's 1996
Stock Plan and, when effective, the 1997 Stock Plan. As of December 31, 1996,
66 employees of the Company and its subsidiaries were participants under the
1996 Stock Plan.
Compensation Committee:
William C. Kavan, Chairman
James C. Roddey
Richard S. Trutanic
Compensation of Directors
The non-employee directors of the Company are entitled, to receive at the
conclusion of each year of service, an automatic grant of an immediately
exercisable option to acquire 5,000 shares of Common Stock at an exercise price
per share equal to the closing price of the Common Stock as reported by Nasdaq
for the date on which the option is granted. Grants for the initial year of
service will be made under the 1996 Stock Plan, to the extent shares are
available. Non-employee directors of the Company will also be entitled to
receive $2,500 for each Board of Directors meeting attended and $500 for each
separate committee meeting attended on a date on which no full board meeting is
held. Directors of the Company who are also employees will not receive
additional compensation for attendance at Board and committee meetings, except
that all directors will be reimbursed for out-of-pocket expenses in connection
with attendance at Board and committee meetings.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was established by the Board of Directors in
1996 and Messrs. Kavan and Roddey were appointed to the Compensation Committee
at that time. Mr. Roddey served as President of International Sports Marketing,
Inc. from 1992 until its acquisition by the Company in November 1996. Mr.
Richard W. Talarico, Chairman and Chief Executive Officer of the Company, is a
partner in THG and an officer of The Hawthorne Group, Inc. ("Hawthorne"), and,
as such, he and Mr. Roddey are shareholders and/or partners in common in certain
investments and companies. During 1996, Mr. Talarico was a shareholder and
director of The Bantry Group Corporation and its affiliates Longford Health
Sources, Inc., Wexford Health Sources, Inc., and Galway Technologies, Inc.
(collectively the "Bantry") of which Mr. Roddey was a shareholder, director and
an executive officer. Mr. Talarico and Mr. Roddey were each partners in MA
Associates II and shareholders in Hawthorne Group Productions, Inc. and
Production Masters, Inc. ("PMI"), of which Mr. Roddey is an executive officer
and director. Mr. Talarico is neither an officer nor a director of any of these
companies. None of these companies or Bantry has a compensation committee of
its board of directors. Mr. Roddey has indicated an intention to recuse himself
from any vote of the Compensation Committee or the Board of Directors concerning
Mr. Talarico's compensation. In January 1997, Mr. Trutanic was appointed to the
Compensation Committee.
Consulting Agreement
SeaVision and Hawthorne were parties to a Consulting Agreement, entered
into in June 1994 and terminated as of June 30, 1996, which required Hawthorne
to provide SeaVision certain accounting and financial services, including the
preparation of financial models and plans, the design and implementation of
accounting systems and controls and assistance in acquiring third party
financing. Henry Posner, Jr. and Thomas D. Wright, each of whom owns more than
five percent of the outstanding Common Stock, and two of Mr. Posner's sons are
shareholders of Hawthorne, and Messrs. Posner and Wright and Richard W.
Talarico, a director and executive officer of the Company, and James
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<PAGE>
C. Roddey, a director of the Company, were shareholders of Hawthorne Media
Group, Inc. ("HMG"), the original party to the agreement which assigned its
rights and obligations thereunder to Hawthorne. The consulting agreement
provided for the payment of a consulting fee of $18,000 per month. During the
fiscal year ended December 31, 1996, SeaVision paid an aggregate of $126,000 to
Hawthorne and HMG under the consulting agreement.
Transactions Relating to Formation and Organization of the Company
In August 1996, a merger (the "Formation Merger") occurred in which
SeaVision, Inc., a Delaware corporation ("Old SeaVision"), merged with and
into SeaVision Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of the Company, with SeaVision Acquisition Corporation surviving the
Formation Merger and changing its name to SeaVision, Inc. In the Formation
Merger, each share of common stock of Old SeaVision was converted into one share
of Common Stock of the Company. In connection with the Formation Merger, the
then holders of Common Stock of the Company were granted certain registration
rights. See "--Registration Rights."
Stockholder Loans
In each of fiscal years 1994, 1995 and 1996, Henry Posner, Jr., Thomas D.
Wright, Terence M. Graunke, James C. Roddey and Richard W. Talarico (the
"Funding Stockholders") made various Stockholder Loans to SeaVision. Each
Stockholder Loan, represented by a promissory note which required the principal
amount outstanding under the note to be paid in full on the third anniversary of
the date of the note, bore interest at a rate of 15% per annum, compounded
quarterly. Stockholder Loans were made in the following aggregate principal
amounts: Mr. Posner--$4,166,014; Mr. Wright--$1,041,506; Mr. Graunke --$718,800;
Mr. Roddey--$347,165; and Mr. Talarico--$347,165. The portions of the
Stockholder Loans noted above that were made during the fiscal year ended
December 31, 1996 were: Mr. Posner--$1,464,814; Mr. Wright--$366,206; Mr.
Roddey--$131,065; and Mr. Talarico--$122,065. Mr. Graunke owns more than five
percent of the outstanding Common Stock of the Company. Stockholder Loans in an
aggregate amount up to $1.5 million were guaranteed by each of Brian K. Blair,
R. Daniel Foreman and William C. Kavan. Such guarantees were secured by a pledge
of the shares of Common Stock owned by Messrs. Blair, Foreman and Kavan.
On May 31, 1996, the Company used $3.6 million of the $5.0 million then
available under its line of credit from Integra Bank (now National City Bank)
(the ''Integra Loan'') to repay a portion of the principal amount of the
Stockholder Loans, leaving Stockholder Loans in the following aggregate
principal amounts outstanding as of that date: Mr. Posner--$1,800,000; Mr.
Wright--$450,000; Mr. Graunke--$450,000; Mr. Roddey--$150,000; and Mr.Talarico
$150,000. In November 1996, the Company used approximately $1.0 million of the
net proceeds of its intiial public offering to pay the accrued interest on the
Stockholder Loans. The Funding Stockholders converted the principal balances of
the Stockholder Loans in November 1996 (which were identical to the principal
balances as of May 31, 1996 as described above) into shares of Common Stock at a
rate of approximately 8.1 shares of Common Stock for each $100 principal amount
outstanding, or approximately $12.29 per share. The conversion rate was
determined after consultation with the Underwriters of the initial public
offering and is based upon an assumed value of the Company without giving effect
to the initial public offering. Cash payments were made in lieu of the issuance
of fractional shares of Common Stock upon such conversion. The Funding
Stockholders received the following number of shares of Common Stock upon
conversion of the Stockholder Loans: Mr. Posner--146,440 shares; Mr. Wright--
36,610 shares; Mr. Graunke--36,610 shares; Mr. Roddey--12,203 shares and Mr.
Talarico--12,203 shares. The holders of these shares were granted certain
registration rights with respect to these shares. See "--Registration Rights."
On July 19, 1996, William C. Kavan made a loan in the amount of $1.0
million to SeaVision at the interest rate of 8% per annum. Such loan was
converted into 10,000 shares of Series A Convertible Redeemable Preferred Stock,
par value $.01 per share of the Company (the "Convertible Preferred Stock")
following the Formation Merger.
Integra Loan Guarantee
The availability under the Integra Loan was increased to $7.5 million on
October 28, 1996. The Integra Loan is personally guaranteed by each of Messrs.
Posner, Wright, Roddey and Talarico and by Lyndhurst Associates, a Pennsylvania
limited partnership ("Lyndhurst"), for which such guarantors receive a
guarantee fee from time to time based on a percentage of the outstanding
principal balance of the Integra Loan. Such percentage is the difference between
15%, the interest rate on the Stockholder Loans, and the interest rate on the
Integra Loan. Mr. Posner is the
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<PAGE>
Managing General Partner of Lyndhurst. Guarantee fees paid during the fiscal
year ended December 31, 1996 were approximately $120,000.
Sale of Convertible Preferred Stock
On August 16, 1996, the Company issued 10,000 shares of Convertible
Preferred Stock to William C. Kavan in exchange for the extinguishment of a $1.0
million loan to SeaVision. Additionally, on August 16, 1996, the Company sold
approximately 7,059, 1,765, 588 and 588 shares of Convertible Preferred Stock to
Henry Posner, Jr., Thomas D. Wright, Richard W. Talarico and James C. Roddey,
respectively, for an aggregate purchase price of $1.0 million. During the seven-
month period beginning six months after the closing of the initial public
offering (the "Conversion Period"), each holder of Convertible Preferred Stock
will have the right to convert all, but not less than all, of the Convertible
Preferred Stock then owned by such holder into shares of Common Stock at the
rate of approximately 8.1 shares of Common Stock for each share of Convertible
Preferred Stock, or approximately $12.29 per share (as adjusted for stock
dividends, stock splits, reverse stock splits and any other stock combination or
division). Cash payments will be made in lieu of the issuance of any fractional
shares of Common Stock upon any such conversion. If all of the shares of
Convertible Preferred Stock held by Messrs. Posner, Wright, Talarico, Roddey and
Kavan are converted into Common Stock during the Conversion Period, Messrs.
Posner, Wright, Talarico, Roddey and Kavan will receive 57,427, 14,365, 4,785,
4,785 and 81,355 shares, respectively, of Common Stock. The holders of these
shares will have certain registration rights with respect to these shares. See
"Registration Rights."
Registration Rights
If the Company issues shares of Common Stock upon conversion of the
Convertible Preferred Stock (the "Conversion Shares"), the holders of
Conversion Shares will have certain rights to require the Company to register
the Conversion Shares under the Securities Act. Under the terms of the
registration rights agreement relating to the Conversion Shares, the holders of
Conversion Shares and their transferees holding at least the number of
Conversion Shares into which 5,000 shares of Convertible Preferred Stock have
been converted will have the right, until the third anniversary of the last date
on which the Convertible Preferred Stock may be converted into Common Stock (the
"Commencement Date"), to require the Company, on one occasion, to register the
Conversion Shares for public offering and sale on Form S-3 in a "shelf"
registration pursuant to Rule 415 under the Securities Act. If any holder
requests a shelf registration, all Conversion Shares will be registered
thereunder unless a holder requests that all or a portion of his Conversion
Shares be excluded. Holders of a majority of the Conversion Shares will also
have the right on one occasion to elect to have their Conversion Shares which
are registered on the shelf registration statement sold in an underwritten
offering. In addition, the holders of Conversion Shares and their transferees
will have the right to participate in any registration of Common Stock for an
underwritten offering initiated by the Company or any other stockholder of the
Company prior to the third anniversary of the Commencement Date, subject to
certain limitations. The Company will pay all out-of-pocket expenses of any such
registrations, including fees and expenses of one counsel for the holders of
Conversion Shares and their transferees, but not including underwriting
discounts and commissions, and will indemnify the holders of Conversion Shares
and their transferees against certain liabilities under the federal securities
laws, in connection therewith.
The holders of Common Stock following the Formation Merger also have certain
rights under a registration rights agreement to require the Company to register
under the Securities Act such shares and the shares of Common Stock issued upon
conversion of the Stockholder Loans. Such rights are substantially similar to
the rights granted to holders of Conversion Shares. However, holders of such
shares and their transferees holding at least ten percent of the shares covered
are required to cause the Company to register the shares for public offering and
sale on Form S-3 in a shelf registration pursuant to Rule 415 under the
Securities Act.
The holders of Convertible Preferred Stock and the stockholders following
the Formation Merger have agreed not to sell any Conversion Shares or other
shares of Common Stock owned by them and subject to the registration rights
agreements described above for a period of twelve months following the closing
of the Company's initial public offering.
10
<PAGE>
Video Production Payments
During the fiscal year ended December 31, 1996 SeaVision made payments to
Production Masters, Inc. ("PMI") in the amounts of approximately $147,000 for
the production of videos and other visual media for use with the Company's ITV
system. Messrs. Posner, Wright, Roddey and Talarico are shareholders of PMI. The
Company believes that such payments were on terms as favorable to the Company as
could have been obtained from an unaffiliated party. The Company expects to
continue to conduct business with PMI in the future.
Arrangements Involving ISM
The Company acquired all of the issued and outstanding shares of capital
stock of International Sports Marketing, Inc. ("ISM") from the stockholders of
ISM in November 1996. The purchase price paid at the closing of the sale was
$2.4 million in cash. In addition, the stock purchase agreement governing the
sale provides for up to $2.4 million in contingent payments. One-half of the
contingent payments, if any, is to be paid by delivery to the ISM stockholders
of promissory notes bearing interest at seven percent per annum.
Henry Posner, Jr., Thomas D. Wright, Richard W. Talarico and James C.
Roddey were ISM stockholders. At the closing of the acquisition of ISM, Messrs.
Posner, Wright, Talarico and Roddey received cash payments in the amounts of
approximately $1,273,000, $791,000, $48,000 and $120,000, respectively, and will
be entitled to receive contingent payments up to the same approximate amounts
(not including interest payable on any promissory note delivered in respect of
the contingent payments).
ISM and Hawthorne were parties to an oral management arrangement pursuant
to which Hawthorne provided general, administrative, accounting and tax planning
and preparation services to ISM for an aggregate of $5,000 per month. During the
fiscal year ended December 31, 1996, ISM made payments in the aggregate amount
of $60,000 to Hawthorne under this agreement. Payments subsequent to the
acquisition of ISM aggregated $10,000. This arrangement was terminated as of
December 31, 1996.
Joint Promotional Activities
SeaVision, ISM, PMI and other entities affiliated with THG have engaged in
various joint promotional marketing activities and have shared the revenue and
expenses of such activities. Examples of such activity in 1996 are ISM sports
marketing events (prior to the acquisition of ISM) at which SeaVision supplied
digital imaging services. The Company believes that such activities involving
SeaVision or ISM have been conducted on terms as favorable to SeaVision and ISM
as could have been obtained from an unaffiliated party.
Certain Other Relationships and Related Transactions
Agreements with Commercial Downlink and Affiliate
SeaVision and Blair Haven Entertainment, Inc., doing business as Commercial
Downlink ("Commercial Downlink") were parties to an agreement entered into in
June 1994 and terminated as of July 31, 1996, which required Commercial Downlink
to act as a general contractor for the installation of ITV systems on cruise
ships, and to devote its full-time efforts to the business of SeaVision. Brian
K. Blair and R. Daniel Foreman, principals of Commercial Downlink, are executive
officers and directors of the Company. SeaVision reimbursed Commercial Downlink,
at cost, for construction services and materials provided in connection with the
installation of SeaVision systems on cruise ships. SeaVision also paid
Commercial Downlink a monthly management fee. During the fiscal year ended
December 31, 1996, SeaVision paid $92,000 to Commercial Downlink under the
consulting agreement in addition to reimbursing Commercial Downlink $419,000 for
construction services and materials provided in connection with the installation
of ITV systems on cruise ships.
As of August 1, 1996, SeaVision and Commercial Downlink entered into a
sublease agreement relating to facilities in Lisbon, Ohio owned by Com-Tek
Printing & Graphics, Inc. ("Com-Tek"), a majority owned subsidiary of Commercial
Downlink, which included provisions pursuant to which Commercial Downlink would
provide certain
11
<PAGE>
administrative services for an aggregate monthly payment of $3,700. During the
fiscal year ended December 31, 1996, SeaVision paid $19,000 to Commercial
Downlink under the sublease agreement. Such agreement was terminated as of
January 31, 1997. The Company believes that such payments are on terms as
favorable to the Company as could be obtained from an unaffiliated party.
During the fiscal year ended December 31, 1996, SeaVision made payments to
ComTek in the amounts of approximately $143,000 for commercial printing
services. The Company believes that such payments were on terms as favorable to
the Company as could have been obtained from an unaffiliated third party. The
Company expects to continue to conduct business with ComTek in the future.
In 1996, SeaVision made advances in the aggregate amount of $53,730 to
Commercial Downlink. These advances have been repaid.
Legal and Investment Banking Services
During the fiscal year ended December 31, 1996, the Company retained the
law firm of Eckert Seamans Cherin & Mellott, LLC for representation on various
matters. Thomas D. Wright is a member and chairman of the Operations Committee
of such firm.
Richard S. Trutanic, a director of the Company, is a Senior Advisor to FBR,
which during 1996, provided investment banking services to the Company,
including in connection with the Company's initial public offering. Upon the
closing of such offering, Mr. Trutanic received an immediately exercisable
option to purchase 21,000 shares of Common Stock at the initial public offering
price of $15 per share. Services provided by FBR have been on terms and
conditions as are customary and competitive.
Leases
During the fiscal year ended December 31, 1996, ISM (now SportsWave) made
payments pursuant to a lease agreement in the amount of $80,266 to Executive
Office Associates ("EOA") for the lease of office space. Payments subsequent
to the acquisition of ISM aggregated $13,478. Henry Posner, Jr., Thomas D.
Wright and two of Mr. Posner's sons and his spouse each own an indirect equity
interest in EOA. The Company believes that such payments were on terms as
favorable to the Company as could have been obtained from an unaffiliated third
party. The Company does not anticipate continuing the lease agreement beyond
its current expiration date of June 30, 1997.
As of each of May 1, 1996 and September 1, 1996, the Company entered into a
four-month leases for office space with EOA. The aggregate rental payment under
these leases was $77,773. The Company believes that such payment was on terms as
favorable to the Company as could have been obtained from an unaffiliated third
party. The Company intends to continue to lease office space from EOA.
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<PAGE>
Performance Comparison
The following graph compares the cumulative total return on the Company's
Common Stock, the Nasdaq Stock Market Index and an index of Nasdaq
Telecommunications Stocks for the period from November 1, 1996 to December 31,
1996. The Company's Common Stock began trading on November 1, 1996. The graph
and chart assume that $100 was invested on November 1, 1996, in each of the
Company's Common Stock, the Nasdaq Stock Market index and the Nasdaq
Telecommunications Stock index, with dividends, if any, reinvested. Closing
prices at the end of each period are used. The total stockholder returns are
not necessarily indicative of future returns.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
November 1, 1996 December 31,1996
<S> <C> <C>
Allin Communications Corporation Common Stock (1)(3) $100 $130
The Nasdaq Stock Market Index (2)(3) $100 $106
Index of Nasdaq Telecommunications Stocks (2)(3) $100 $104
</TABLE>
(1) Based on the initial offering price of Allin Communications Common Stock as
of the effective date of the Company's initial public offering, November 1,
1996, and the closing price on the last trading day of December 1996.
(2) Based on the closing price of the respective index on the last trading day
of October and December 1996
(3) Return assumes that all dividends are reinvested.
13
<PAGE>
Security Ownership of Management
The following table presents certain information as of March 31, 1997 as to
the beneficial ownership of the Common Stock of the Company by (i) each director
and Named Executive and (ii) all directors and executive officers as a group.
Except as indicated, the persons named have sole voting and investment power
with respect to all shares shown as being beneficially owned by them.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Stockholder Ownership (1) of Class (1)
- ---------------------------------------------------- ------------- ------------
<S> <C> <C>
Richard W. Talarico (2) 97,388 1.88%
R. Daniel Foreman 198,000 3.82%
Brian K. Blair 198,000 3.82%
Jon E. VanAmringe 6,000 0.12%
William C. Kavan (3) 182,155 3.46%
Paul J. Pasquarelli - 0 - 0.00%
James C. Roddey (4) 97,388 1.88%
Richard S. Trutanic (5) 21,000 0.40%
All directors and executive 799,931 15.10%
officers, as a group (8 persons) (2)(3)(4)(5)
</TABLE>
(1) The number of shares and the percent of the class have been calculated
in accordance with Rule 13d-3 under the Securities and Exchange Act of
1934, as amended (the "Exchange Act").
(2) Includes 4,785 shares of Common Stock that may be acquired within 60
days of March 31, 1997 upon the conversion of 588 shares of
Convertible Preferred Stock owned by Mr. Talarico, which shares
represent approximately 2.4% of the Convertible Preferred Stock
currently outstanding.
(3) Includes 81,355 shares of Common Stock that may be acquired within 60
days of March 31, 1997 upon the conversion of 10,000 shares of
Convertible Preferred Stock owned by Mr. Kavan, which shares represent
40.0% of the Convertible Preferred Stock currently outstanding.
(4) Includes 4,785 shares of Common Stock that may be acquired within 60
days of March 31, 1997 upon the conversion of 588 shares of
Convertible Preferred Stock owned by Mr. Roddey, which shares
represent approximately 2.4% of the Convertible Preferred Stock
currently outstanding. Also includes 2,000 shares owned by Mr.
Roddey's wife.
(5) Includes 21,000 shares issuable upon exercise of a currently
exercisable option held by Mr. Trutanic.
14
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table presents certain information as of March 31, 1997
regarding each person or entity who is known to the Company to beneficially own
more than five percent of the outstanding Common Stock of the Company. Except
as indicated, the persons named have sole voting and investment power with
respect to all shares shown as being beneficially owned by them.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name and Address of Stockholder Ownership (1) of Class (1)
------------------------------- -------------- ------------
<S> <C> <C>
Henry Posner, Jr. (2) 1,157,667 22.09%
500 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220
Mellon Bank Corporation (3) 293,000 5.65%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Thomas D. Wright (4) 285,825 5.50%
500 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220
Terence M. Graunke 277,810 5.14%
400 West Erie Street #504
Chicago, Illinois 60610
</TABLE>
(1) The number of shares and the percent of the class have been calculated
in accordance with Rule 13d-3 under the Exchange Act.
(2) Includes 105,000 shares held in various trusts and a family foundation
of which Mr. Posner and/or his wife are trustees, and with respect to
which shares, Mr. Posner shares voting and investment power. Also
includes 57,427 shares of Common Stock that may be acquired within 60
days of March 31, 1997 upon the conversion of shares of Convertible
Preferred Stock owned by Mr. Posner, which shares represent
approximately 28.2% of the Convertible Preferred Stock currently
outstanding.
(3) Includes shares beneficially owned by Mellon Bank, N.A. and The
Dreyfus Corporation as of December 31, 1996, as reported on Schedule
13G filed by Mellon Bank Corporation with the Securities and Exchange
Commission on January 24, 1997. The number of shares shown assumes
that there has been no change in the number of shares beneficially
owned since December 31, 1996.
(4) Includes 5,000 shares owned by Mr. Wright's wife. Also includes
14,365 shares of Common Stock that may be acquired within 60 days of
March 31, 1997 upon the conversion of shares of Convertible Preferred
Stock owned by Mr. Wright, which shares represent approximately 7.1%
of the Convertible Preferred Stock currently outstanding.
15
<PAGE>
Approval of the 1997 Stock Plan of Allin Communications Corporation
(Proposal 2)
The Board of Directors believes that ownership of Common Stock by key
employees serves to provide those employees with a personal financial interest
in the Company's success and enhances the Company's ability to attract, retain
and motivate key employees. On April 1, 1997, the Board of Directors adopted,
subject to stockholder approval, the 1997 Stock Plan of Allin Communications
Corporation (the "1997 Stock Plan"). A copy of the 1997 Stock Plan is set forth
in Annex A to this Proxy Statement, to which reference is made for a full and
complete statement of its terms and conditions. A summary of the principal
features of the 1997 Stock Plan follows.
Summary Description of 1997 Stock Plan
The 1997 Stock Plan provides for awards of stock options, stock
appreciation rights ("SARs"), restricted shares and restricted units to officers
and other employees of the Company and its subsidiaries and to consultants and
advisors (including non-employee directors) of the Company and its subsidiaries.
The Company and its subsidiaries currently employ approximately 100 persons and
there are four non-employee directors of the Company. An aggregate of 300,000
shares of Common Stock have been reserved for issuance under the 1997 Stock
Plan. As of April 1, 1997, such shares would have had a market value of $ 2.55
million, based on the $ 8.50 closing price of the Common Stock as reported by
the Nasdaq Stock Market's National Market on such date. Unless the Board of
Directors provides otherwise, shares covered by expired or terminated options
and forfeited restricted shares or restricted units, shares subject to awards
that are paid in cash or surrendered upon the exercise of an option, and shares
received by the Company upon the exercise of an option will not be available for
subsequent awards under the 1997 Stock Plan.
The 1997 Stock Plan also provides for automatic grants to non-employee
directors of the Company, at the conclusion of each year of service, of an
immediately exercisable option to acquire 5,000 shares of Common Stock at an
exercise price per share equal to the closing price of the Common Stock as
reported by the Nasdaq Stock Market's National Market for the date on which the
option is granted ("Fair Market Value"). Any such grant will not be made with
respect to a year of service if, and to the extent, the same grant has been made
under the 1996 Stock Plan.
The 1997 Stock Plan will be administered by the Board of Directors which
has broad discretion to determine the individuals entitled to participate in the
1997 Stock Plan and to prescribe conditions (such as the completion of a period
of employment with the Company following an award) that must be satisfied before
awards vest. The Board of Directors may delegate to one or more of its members
or to one or more agents such administrative duties as it may deem advisable.
Awards under the 1997 Stock Plan may be made in the form of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and options that are not incentive stock options.
Participants in the 1997 Stock Plan may also receive SARs, which may be awarded
separately from or in tandem with any option granted under the 1997 Stock Plan.
The 1997 Stock Plan also provides for the award of limited SARs in tandem with
options. Limited SARs may be exercised only during the 90 days immediately
following the occurrence of certain events (which may include events associated
with a change in control of the Company) identified by the Board of Directors.
In addition, the Board of Directors may, in its discretion, award restricted
shares or restricted units under the 1997 Stock Plan. No incentive stock option
may be granted under the 1997 Stock Plan more than ten years after April 1,
1997. An award, other than an award of restricted shares, may provide for the
crediting to the account of, or the current payment to, each participant who has
such an award of an amount equal to the cash or stock dividends paid by the
Company upon one share of Common Stock for each restricted unit or share of
Common Stock subject to an option or right, included in such award ("Dividend
Equivalent"). Dividend Equivalents credited to a participant's account are not
subject to forfeiture, except as the Board of Directors may otherwise determine
in respect of any option or right.
Incentive stock options may only be awarded to employees. The term of each
incentive stock option may not be more than ten years (five years in the case of
an incentive stock option granted to an individual who at the time of grant owns
more than 10% of the Common Stock) at an option price of not less than the Fair
Market Value of a share on the date of grant (not less than 110% of the Fair
Market Value of a share on the date of grant in the case of an incentive stock
option granted to an individual who at the time of grant owns more than 10% of
the Common Stock). Non-qualified stock options may be awarded for such term and
at such option exercise price as may be determined by the Board of Directors at
the time of grant.
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<PAGE>
Subject to the provisions of the 1997 Stock Plan, options granted under the
1997 Stock Plan (other than the automatic grant of options to non-employee
directors at the conclusion of each year of service) generally will become 100%
vested at the earliest of the participant's normal retirement age, the
participant's death or total disability or over a five year period commencing
with the date of the grant at the rate of 20% per year. The Board of Directors,
in its discretion, may provide at the date of grant for another time or times of
exercise, or it may accelerate the exercisability of any such option subject to
such terms and conditions as the Board of Directors deems necessary and
appropriate.
Upon exercise of an option under the 1997 Stock Plan, the exercise price
for the purchased shares will be immediately payable in cash, by check or other
instrument acceptable to the Company, or with the consent of the Board of
Directors, in shares of Common Stock valued at Fair Market Value on the date of
exercise, or by a combination of these methods or by surrender of awards under
the 1997 Stock Plan, subject to such terms and conditions as the Board of
Directors may determine. The 1997 Stock Plan also permits the Company to make
loans to such option holders as the Board of Directors, in its discretion, may
determine in connection with the exercise of options granted under the 1997
Stock Plan.
The Board of Directors may elect, in lieu of delivering all or a portion of
the shares of Common Stock as to which an option has been exercised, if the Fair
Market Value of the Common Stock exceeds the exercise price of the option, to
pay to the participant in cash or in shares of Common Stock, or a combination of
cash and Common Stock equal to the excess of (i) the Fair Market Value on the
exercise date of the shares of Common Stock as to which the option has been
exercised over (ii) the option exercise price. In the case of non-qualified
options, the Board may defer payment and credit the amount on the books of the
Company for the account of the optionee.
SARs awarded in tandem with a grant of an option will generally be subject
to the same terms and conditions as the related option and will entitle the
recipient to elect to receive cash, shares of Common Stock, or a combination
thereof in lieu of exercising an option. The terms of a separate SAR will be
determined by the Board of Directors. Subject to the provisions of the 1997
Stock Plan, freestanding SARs granted under the 1997 Stock Plan generally will
become 100% vested at the earliest of the participant's normal retirement age,
the participant's death or total disability or such period of time from the date
of the grant as the Board of Directors may determine. Prior to becoming 100%
vested, each freestanding SAR shall become exercisable at such time and in such
manner as the Board of Directors may determine. The Board of Directors, in its
discretion, may also accelerate the exercisability of any freestanding SAR.
Subject to the provisions of the 1997 Stock Plan and any rules prescribed
by the Board of Directors, upon exercise of an SAR in accordance with its terms
(subject, in the case of a tandem right, to the surrender of the unexercised
portion of the related option or any portion or portions thereof which the
participant from time to time determines to surrender for this purpose), the
participant will be entitled to receive a payment having a value equal to (i)
the excess of the Fair Market Value on the date of exercise of one share over
the option exercise price per share, in the case of a tandem right, or the price
per share specified in the terms of the SAR, in the case of a freestanding SAR,
multiplied by (ii) the number of shares with respect to which the right has been
exercised. The payment shall be made in cash, in shares of Common Stock, or a
combination thereof.
In addition to options and SARs, the 1997 Stock Plan authorizes the award
of restricted shares and restricted units to participants. Such awards may be
made in lieu of or in addition to awards of options and SARs. Awards of both
restricted shares and restricted units may provide for the incremental lapse of
restrictions or for the termination of restrictions upon the occurrence of
certain events (including a change in control of the Company).
Participants receiving restricted shares will be issued a certificate
representing such shares, and will be entitled to exercise full voting rights
with respect thereto, at the time of the award. However, such certificate will
be held in custody by the Company until such time as restrictions imposed by the
Board of Directors with respect to such shares lapse. The recipients of
restricted shares will also be entitled to receive credit for dividends paid by
the Company, subject to the Board of Directors right to defer payment of such
dividends to holders of restricted shares until the lapse of the applicable
restrictions. Cash or stock dividends so withheld by the Board of Directors
shall not be subject to forfeiture. Upon forfeiture of any restricted shares,
such forfeited restricted shares shall be transferred to the Company without any
further action by the participant.
Participants receiving restricted units will have no rights as stockholders
of the Company with respect to the restricted units and will not be issued a
certificate at the time of the award, but will receive a certificate for one
share of Common Stock for each restricted unit or, in the Board's discretion,
cash, upon the lapse of restrictions imposed by the Board.
17
<PAGE>
Options and SARs awarded under the 1997 Stock Plan will not be transferable
except by will or the laws of descent and distribution. Awards of options and
SARs made to employees under the 1997 Stock Plan terminate, to the extent not
previously exercised, upon the involuntary termination of the participant's
employment or within three months of the termination of the participant's
employment with the Company for any other reason (other than the participant's
total disability). In the case of a participant's death or total disability,
such options may be exercised (to the extent exercisable on the date of death or
disability) within one year after the date of the participant's death or
disability. Awards of restricted shares and restricted units as to which the
applicable restrictions have not lapsed (but not cash or stock dividends or
equivalents previously credited to the holder's account) will be forfeited by an
employee upon the termination of his or her employment, other than by reason of
the employee's death or total disability. All restrictions shall lapse or
terminate with respect to all restricted shares or restricted units upon death
or total disability. The conditions under which awards made to non-employees
will terminate will be determined by the Board of Directors, in its discretion.
The Board of Directors may amend the 1997 Stock Plan. However, if required
by applicable law or any other governing rules or regulations, stockholder
approval will be required to (i) increase the aggregate number of shares that
may be issued under the 1997 Stock Plan (other than increases that may result
from a stock dividend or a change in the capitalization of the Company), (ii)
materially increase the benefits accruing to participants under the 1997 Stock
Plan or (iii) materially modify the requirements as to eligibility for
participation in the 1997 Stock Plan.
As awards under the 1997 Stock Plan will be discretionary, the Company cannot
currently determine the recipients and number of awards that will be made
pursuant to the 1997 Stock Plan in 1997 or thereafter. The Company's 1996 Stock
Plan is substantially similar to the 1997 Stock Plan. For purposes of
comparison, the following table sets forth information concerning awards made
under the Company's 1996 Plan during 1996:
<TABLE>
<CAPTION>
Dollar Value on Date Shares Underlying Options Shares of Restricted Stock
Name Of Grant (1) Granted in 1996 Granted in 1996
- ---- --------------------- ------------------------- --------------------------
<S> <C> <C> <C>
Richard W. Talarico (1) $ -0- 21,000 - 0 -
R. Daniel Foreman (1) -0- 21,000 - 0 -
Brian K. Blair (1) -0- 21,000 - 0 -
Jon E. VanAmringe (1) -0- 14,000 - 0 -
All Current Executive Officers -0- 77,000 - 0 -
As a group (1)
All Current Non-Employee -0- 21,000 - 0 -
Directors as a group (1)(2)
All Employees (including $400,020 181,550 26,668
Officers who are not
Executive Officers) as a
Group
</TABLE>
(1) All such options were granted in connection with the closing of the
Company's initial public offering in November 1996 and have an exercise price
equal to the initial public offering price of $15.00 per share. The "Dollar
Value on Date of Grant" for Stock Options is defined as the fair market value of
the Company's Common Stock on the date of grant minus the option exercise price.
For Restricted Stock, the "Dollar Value on Date of Grant" is defined as the fair
market value of the Company's Common Stock on the date of grant.
(2) No automatic grants of options were made to non-employee directors in 1996
under the 1996 Stock Plan. Upon the closing of the Company's initial public
offering, Richard S. Trutanic, who subsequently became a non-employee director
of the Company, received an immediately exercisable option to purchase 21,000
shares of Common Stock having an exercise price equal to the initial public
offering price of $15.00 per share.
18
<PAGE>
During 1996, approximately 78 persons received awards under the 1996 Stock
Plan. The Company does not anticipate that the total number of persons
receiving awards in 1997 under the 1997 Stock Plan and/or the 1996 Stock will be
substantially greater than 78. For additional information concerning the 1996
Stock Plan and grants made thereunder, see "Executive Compensation."
Federal Income Tax Consequences
Incentive Stock Options. When an optionee exercises an incentive stock
option while employed by the Company or one of its subsidiaries or within the
three month (one year for disability or death) period after the termination of
employment, no ordinary income will be recognized by the optionee at that time.
The excess, if any, of the fair market value of the shares acquired upon such
exercise over the option price (the "spread") will be an adjustment to the
taxable income of the optionee for alternative minimum tax purposes. If the
Shares acquired upon exercise are not disposed of prior to the expiration of one
year after the date of exercise and two years after the date of grant of the
option, the excess, if any, of the sales proceeds over the aggregate option
price of such shares will be long term capital gain, and the Company will not be
entitled to any federal income tax deduction with respect to such gain. If the
shares are disposed of prior to the expiration of such periods (a "disqualifying
disposition"), the Spread (up to the amount of the gain on the disposition) will
be ordinary income at the time of such disqualifying disposition, and the
Company will be entitled to a federal income tax deduction in a like amount.
Nonqualified Stock Options. When an optionee exercises a nonqualified
stock option, the difference between the option price and any fair market value
of the shares on the date of exercise will be ordinary income to the optionee,
subject to income tax withholding as wages and will be allowed as a deduction to
the Company for federal income tax purposes. When an optionee disposes of
shares acquired by exercise of the option, any amount received in excess of the
fair market value of the shares on the date of exercise will be treated as long
term or short term capital gain, depending upon the holding period of the
shares. If the amount received is less than the market value of the shares on
the date of exercise, the loss will be treated as long term or short term
capital gain, depending upon the holding period of the shares.
Stock for Stock Exchanges. Additional special rules apply if the exercise
price for an option is paid for in shares previously owned by the optionee
rather than in cash.
The above discussion summarizes the federal income tax consequences of
options granted under the 1997 Stock Plan based on current provisions of the
Code and published rulings of the Internal Revenue Service, which are subject to
change. The summary does not however cover any state or local tax consequences.
The Board of Directors of the Company Recommends a Vote FOR
The Proposal to Adopt the 1997 Stock Plan of Allin Communications Corporation.
19
<PAGE>
Proposal to Ratify the Appointment of Independent Public Accountants
(Proposal 3)
The Board of Directors of the Company has selected Arthur Andersen LLP to
serve as the independent public accountants to examine the financial statements
of the Company and its subsidiaries for the year ending December 31, 1997.
Arthur Andersen LLP has been employed to perform this function for the Company
and its predecessors since 1995. A representative of Arthur Andersen LLP is
expected to be present at the annual meeting for the purpose of making a
statement, should he so desire, and to respond to appropriate questions.
The affirmative vote of a majority of the shares represented and voting on
the proposal is required to ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants. If the stockholders should not ratify
the appointment, the Audit Committee of the Board will investigate the reasons
for rejection by the stockholders and the Board of Directors will reconsider the
appointment.
The Board of Directors Recommends a Vote FOR
The Proposal to Ratify the Appointment of Arthur Andersen LLP as
The Company's Independent Accounts for the year ending December 31, 1997.
Other Information
Director Nominees
The Board of Directors will consider stockholder's recommendations for
nominees for election to the Board of Directors. Generally such nominations
must be submitted in writing to the Secretary of the Company at the Company's
principal offices at least 60 days but not more than 90 days before an annual
meeting, and the notice must provide information as required by the Company's
By-laws. A copy of these By-law requirements will be provided upon request in
writing to the Secretary at the principal offices of the Company. This
requirement does not affect the deadline for submitting stockholder proposals
for inclusion in the proxy statement, nor does it apply to questions a
stockholder may wish to ask at the meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers, any persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of the Common Stock. Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on the review of the copies of
such reports and written representation that no other reports were required,
during the year ended December 31, 1996, all such Section 16(a) filing
requirements were met.
Annual Report
The Company has enclosed its Annual Report for the year ended December 31,
1996 with this proxy statement, which includes the Company's 1996 Annual Report
to the SEC on Form 10K. Stockholders are referred to the report for financial
and other information about the Company, but such report is not incorporated in
this proxy statement and is not a part of the proxy soliciting material.
20
<PAGE>
Stockholder Proposals for the 1998 Annual Meeting
Any proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company, 300 Greentree Commons,
381 Mansfield Avenue, Pittsburgh, Pennsylvania 15220-2751, no later than
December 8, 1997 in order to be included in next year's proxy materials. It is
suggested that a proponent submit any proposal by Certified Mail - Return
Receipt Requested to the Secretary of the Company. Such proposals must meet the
requirements set forth in the rules and regulations of the SEC in order to be
eligible for inclusion in the Company's 1998 proxy materials.
Other Matters
The Board does not intend to present, and does not have any reason to
believe that others will present, any item of business at the annual meeting
other than those specifically set forth in the notice of the meeting. However,
if other matters are properly brought before the meeting, the persons named on
the enclosed proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
Solicitation of Proxies
All costs and expenses of this solicitation, including the cost of
preparing and mailing this proxy statement will be borne by the Company. In
addition to the use of the mails, certain directors, officers and regular
employees of the Company may solicit proxies personally, or by mail, telephone,
telegraph, or otherwise, but such persons will not be compensated for such
services. Brokerage firms, banks, fiduciaries, voting trustees or other
nominees will be requested to forward the soliciting materials to each
beneficial owner of stock held of record by them, and the Company will reimburse
them for their expenses in doing so. The Company has engaged National City Bank
to coordinate the solicitation of proxies by and through such holders for a fee
of approximately $ 1,500 plus expenses.
By order of the Board of Directors,
/s/ Jon E. VanAmringe
Jon E. VanAmringe
Chief Financial Officer and Assistant Secretary
April 7, 1997
21
<PAGE>
Annex A
1997 Stock Plan of Allin Communications Corporation
1. Purpose
-------
Allin Communications Corporation (the "Company") desires to attract and
retain the best available talent and encourage the highest level of performance
by employees and other persons who perform services for the Company in order to
serve the best interests of the Company and its shareholders. By affording
eligible persons the opportunity to acquire proprietary interests in the Company
and by providing them incentives to put forth maximum efforts for the success of
the Company's business, the 1997 Stock Plan of the Company (the "1997 Plan") is
expected to contribute to the attainment of those objectives.
2. Scope and Duration
------------------
Awards under the 1997 Plan may be granted in the form of (i) incentive
stock options ("incentive stock options') as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code'), (ii) non-qualified stock
options ("non-qualified options") (unless otherwise indicated, references in the
1997 Plan to "options" include incentive stock options and non-qualified
options), (iii) shares of the common stock, par value $0.01 per share, of the
Company (the "Common Stock") that are restricted as provided in paragraph 11
("restricted shares"), (iv) units to acquire shares of Common Stock that are
restricted as provided in paragraph 11 ("restricted units") and (v) stock
appreciation rights ("rights") or limited stock appreciation rights ("limited
rights"). The maximum aggregate number of shares of Common Stock as to which
awards may be granted from time to time under the 1997 Plan is 300,000 shares.
The shares available may be in whole or in part, authorized but unissued shares
or issued shares reacquired by the Company, as the Board of Directors of the
Company (the "Board of Directors") shall from time to time determine. Unless
otherwise provided by the Board of Directors, shares covered by expired or
terminated options and forfeited restricted shares or restricted units, shares
subject to awards that are paid in cash or surrendered upon the exercise of an
option, and shares received by the Company upon the exercise of an option will
not be available for subsequent awards under the 1997 Plan. No incentive stock
option shall be granted under the 1997 Plan more than 10 years after April 1,
1997. Otherwise, the Plan will continue until terminated pursuant to paragraph
17.
3. Administration
--------------
The 1997 Plan will be administered by the Board of Directors, which shall
have plenary authority in its discretion, subject to and not inconsistent with
the express provisions of the 1997 Plan, (i) to grant options, to determine the
purchase price of the shares of Common Stock covered by each option, the term of
each option, the persons to whom, and the time or times at which options shall
be granted, and the number of shares to be covered by each option; (ii) to
designate options as incentive stock options or non-qualified options and to
determine which options shall be accompanied by rights and limited rights; (iii)
to grant rights and to determine the terms and conditions applicable to such
rights; (iv) to grant restricted shares and restricted units and to determine
the terms of the restricted period and other conditions applicable to such
shares or units, the persons to whom, and the time or times at which, restricted
shares or restricted units shall be granted and the number of shares or units to
be covered by each grant; (v) to interpret the 1997 Plan; (vi) to prescribe,
amend and rescind rules and regulations relating to the 1997 Plan; (vii) to
determine the terms and provisions of the option and rights agreements (which
need not be identical) and the restricted share and restricted units agreements
(which need not be identical) entered into in connection with awards under the
1997 Plan; and (viii) to make all other determinations deemed necessary or
advisable for the administration of the 1997 Plan. The Board of Directors may
delegate to one or more of its members or to one or more agents such
administrative duties as it may deem advisable, and the Board of Directors or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility or authority the
Board of Directors or such person may have under the 1997 Plan.
The Board of Directors may employ attorneys, consultants, accountants
or other persons. The Board of Directors, the Company and its officers and
directors shall be entitled to rely upon the advice, opinions or valuations
22
<PAGE>
of any such persons. All actions taken and all interpretations and
determinations made by the Board of Directors in good faith shall be final and
binding upon all persons who have received awards, the Company and all other
interested persons. No member or agent of the Board of Directors shall be
personally liable for any action, determination or interpretation taken or made
in good faith with respect to the 1997 Plan or awards made thereunder, and all
members and agents of the Board of Directors shall be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
4. Eligibility; Factors to be Considered in Granting Awards
--------------------------------------------------------
Awards will be limited to (i) officers, executives and others, who are
employees of the Company or its subsidiaries and (ii) any non-employee advisors
or consultants (including non-employee directors) who may provide or who have
provided services to the Company, its predecessors or its subsidiaries;
provided, however, that awards in the form of incentive stock options may be
granted only to employees. In determining the persons to whom awards shall be
granted and the number of shares or units to be covered by each award, the Board
of Directors shall take into account the nature of the employees' duties or the
services provided, their past, present and potential contributions to the
success of the Company and such other factors as it shall deem relevant in
connection with accomplishing the purposes of the 1997 Plan. For each year that
an individual, who is not an employee of the Company, serves as a director, he
or she will receive an immediately exercisable option to acquire 5,000 shares of
Common Stock at an exercise price equal to the Fair Market Value (as defined in
paragraph 5) to the extent that an option to acquire that number of shares is
not granted under another plan of the Company. Awards may be granted singly, in
combination or in tandem and may be made in combination or in tandem with, in
replacement of, or as alternatives to, awards or grants under any other employee
plan maintained by the Company or its present and future subsidiaries. A person
to whom an award has been granted shall be referred to as a "participant." An
award, other than an award of restricted shares, may provide for the crediting
to the account of, or the current payment to, each participant who has such an
award of an amount equal to the cash or stock dividends paid by the Company upon
one share of Common Stock for each restricted unit or share of Common Stock
subject to an option or right, included in such award ("Dividend Equivalent").
Dividend Equivalents credited to a participant's account shall not be subject to
forfeiture, except as the Board of Directors may otherwise determine in respect
of any option or right, and may bear amounts equivalent to interest or cash
dividends as the Board of Directors may determine. A participant who has been
granted an award or awards under the 1997 Plan may be granted an additional
award or awards, subject to such limitations as may be imposed by the Code on
the grant of incentive stock options. The Board of Directors, in its sole
discretion, may grant to a participant who has been granted an award under the
1997 Plan or any other plan maintained by the Company or one of its
subsidiaries, or any predecessors or successors thereto, in exchange for the
surrender and cancellation of such award, a new award in the same or a different
form and containing such terms, including without limitation a price which is
different (either higher or lower) than any price provided in the award so
surrendered and cancelled, as the Board of Directors may deem appropriate.
5. Option Price
------------
Except as provided in paragraph 4 with respect to certain options granted
to directors, the purchase price of the Common Stock covered by each option
shall be determined by the Board of Directors. However, in the case of an award
made to any other participant in the form of an incentive stock option, the
purchase price shall not be less than 100% (or, in the case of an incentive
stock option granted to a "10 percent shareholder," as defined in Code section
422, 110%) of the fair market value of the Common Stock on the date the option
is granted, which shall be the closing price of the Common Stock as reported on
Nasdaq NMS (the "Fair Market Value") for the date on which the option is
granted, or if there are no sales on such date, on the next preceding day on
which there were sales. Such price shall be subject to adjustment as provided
in paragraph 15. The Board of Directors shall determine the date on which an
option is granted, provided that such date is consistent with the Code and any
--------
applicable rules or regulations thereunder. In the absence of such
determination, the date on which the Board of Directors adopts a resolution
granting an option shall be considered the date on which such option is granted,
provided the participant to whom the option is granted is promptly notified of
- --------
the grant and an option agreement is duly executed as of the date of the
resolution. The price so determined shall also be applicable in connection with
the exercise of any related right or limited right.
23
<PAGE>
6. Term of Options, Units and Rights
---------------------------------
The term of each incentive stock option granted under the 1997 Plan shall
not be more than 10 (or, in the case of a "10 percent shareholder," as defined
in Code section 422, 5) years from the date of grant, as the Board of Directors
shall determine, subject to earlier termination as provided in paragraphs 12 and
13. The term of each non-qualified stock option as well as each restricted
unit, right or limited right granted under the 1997 Plan shall be such period of
time as the Board of Directors shall determine, subject to earlier termination
as provided in paragraphs 12 and 13.
7. Exercise of Options; Loans
--------------------------
(a) Subject to the provisions of the 1997 Plan and unless otherwise
provided in the option agreement, an option granted under the 1997 Plan shall
become 100% vested at the earliest of the participant's normal retirement date,
the participant's death or total disability (as defined in paragraph 13) or over
a five (5) year period commencing with the date of grant at the rate of twenty
percent (20%) per year. In its sole discretion, the Board of Directors may, in
any case or cases, prescribe different installments. The Board of Directors may
also, in its sole discretion, accelerate any option at any time or, in any
option agreement, provide for the acceleration of the exercisability of any
option based on the occurrence of any event or satisfaction of any condition
prescribed by the Board of Directors in its sole discretion.
(b) An option may be exercised at any time or from time to time (subject,
in the case of an incentive stock option, to such restrictions as may be imposed
by the Code), as to any or all full shares as to which the option has become
exercisable.
(c) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise; payment may be made in cash,
which may be paid by check or other instrument acceptable to the Company, or,
with the consent of the Board of Directors, in shares of the Common Stock,
valued at the Fair Market Value on the date of exercise, or if there were no
sales on such date, on the next preceding day on which there were sales or (if
permitted by the Board of Directors and subject to such terms and conditions as
it may determine) by surrender of outstanding awards under the 1997 Plan. In
addition, any amount necessary to satisfy applicable federal, state or local tax
requirements shall be paid promptly upon notification of the amount due. The
Board of Directors may permit such amount to be paid in shares of Common Stock
previously owned by the participant, or a portion of the shares of Common Stock
that otherwise would be distributed to such participant upon exercise of the
option, or a combination of cash and shares of such Common Stock.
(d) Except as provided in paragraphs 12 and 13, no option which is an
incentive stock option may be exercised at any time unless the holder thereof is
then an employee of the Company, one of its subsidiaries. For this purpose,
"subsidiary" shall include, as under Treasury Regulations Section 1.421-7(h)(3)
and (4), Example (3), any corporation that is a subsidiary of the Company during
the entire portion of the requisite period of employment during which it is the
employer of the holder.
(e) The Board of Directors, in its sole discretion, may elect, in lieu of
delivering all or a portion of the shares of Common Stock as to which an option
has been exercised, if the Fair Market Value of the Common Stock exceeds the
exercise price of the option (i) to pay the participant in cash or in shares of
Common Stock, or a combination of cash and Common Stock, an amount equal to the
excess of (A) the Fair Market Value on the exercise date of the shares of Common
Stock as to which such option has been exercised, or if there were no sales on
such date, on the next preceding day on which there were sales over (B) the
option price, or (ii) in the case of an option which is a non-qualified option,
to defer payment and to credit the amount of such excess on the Company's books
for the account of the optionee and either (a) to treat the amount in such
account as if it had been invested in the manner from time to time determined by
the Board of Directors, with dividends or other income thereon being deemed to
have been so reinvested or (b) for the Company's convenience, to contribute the
amount credited -to such account to a trust, which may be revocable by the
Company, for investment in the manner from time to time determined by the Board
of Directors and set forth in the instrument creating such trust. The Board of
Director's election pursuant to this subparagraph shall be made by giving
written notice of such election to the participant (or other person exercising
the option). Shares of Common Stock paid pursuant to this subparagraph will be
valued at the Fair Market Value on the exercise date, or if there were no sales
on such date, on the next preceding day on which there were sales.
(f) Subject to any terms and conditions that the Board of Directors may
determine in respect of the exercise of options involving the surrender of
outstanding awards, upon, but not until, the exercise of an option or portion
thereof in accordance with (i) the 1997 Plan, (ii) the option agreement and
(iii) such rules and regulations as may be established
24
<PAGE>
by the Board of Directors, the holder thereof shall have the rights of a
shareholder with respect to the shares issued as a result of such exercise.
(g) The Company may make loans to such option holders as the Board of
Directors, in its discretion, may determine (including a holder who is a
director or officer of the Company) in connection with the exercise of options
granted under the 1997 Plan; provided, however, that the Board of Directors
------------------
shall not authorize the making of any loan where the possession of such
discretion or the making of such loan would result in a "modification" (as
defined in Section 424 of the Code) of any incentive stock option. Such loans
shall be subject to the following terms and conditions and such other terms and
conditions as the Board of Directors shall determine not inconsistent with the
1997 Plan. Such loans shall bear interest at such rates as the Board of
Directors shall determine from time to time, which rates may be below then
current market rates (except in the case of incentive stock options). In no
event may any such loan exceed the fair market value, at the date of exercise,
of the shares covered by the option, or portion thereof, exercised by the
holder. No loan shall have an initial term exceeding five years, but any such
loan may be renewable at the discretion of the Board of Directors. When a loan
shall have been made, shares of Common Stock having a Fair Market Value at least
equal to the principal amount of the loan shall be pledged by the holder to the
Company as security for payment of the unpaid balance of the loan. Every loan
shall comply with all applicable laws, regulations and rules of the Board of
Governors of the Federal Reserve System and any other governmental agency having
jurisdiction.
8. Award and Exercise of Rights
----------------------------
(a) A right may be awarded by the Board of Directors in connection with
any option granted under the 1997 Plan (a "tandem right"), either at the time
the option is granted or thereafter at any time prior to the exercise,
termination or expiration of the option. A right may also be awarded separately
(a "free-standing right"). Each tandem right shall be subject to the same terms
and conditions as the related option and shall be exercisable only to the extent
the option is exercisable.
The term of each freestanding right granted under the 1997 Plan shall be
such period of time as the Board of Directors shall determine. Subject to the
provisions of the 1997 Plan and unless otherwise provided in the agreement
covering a freestanding right granted under the 1997 Plan, such right shall
become 100% vested at the earliest of the participant's normal retirement date,
the participant's death or total disability (as defined in paragraph 13) or such
period of time from the date of grant as the Board of Directors shall determine.
Prior to becoming 100% vested, each freestanding right shall become exercisable
at such time and in such manner as the Board of Directors shall determine. The
Board of Directors may also, in its sole discretion, accelerate the
exercisability of any freestanding right at any time and provide, in the
agreement covering a freestanding right, that the right shall become immediately
exercisable based on the occurrence of any event or satisfaction of any
condition prescribed by the Board of Directors in its sole discretion.
(b) A right shall entitle the participant upon exercise in accordance with
its terms (subject, in the case of a tandem right, to the surrender of the
unexercised portion of the related option or any portion or portions thereof
which the participant from time to time determines to surrender for this
purpose) to receive, subject to the provisions of the 1997 Plan and such rules
and regulations as from time to time may be established by the Board of
Directors, a payment having an aggregate value equal to (A) the excess of the
fair market value on the exercise date of one share over the option price per
share, in the case of a tandem right, or the price per share specified in the
terms of the right, in the case of a freestanding right, times (B) the number of
shares with respect to which the right shall have been exercised. The payment
shall be made in the form of all cash, all shares of Common Stock, or a
combination thereof, as elected by the participant; provided, that the Board of
--------
Directors shall have sole discretion to consent to or disapprove the election of
a participant to receive all or part of a payment in cash (which consent or
disapproval may be given at any time after the election to which it relates).
The price per share specified in a freestanding right shall be determined by the
Board of Directors but in no event shall be less than the average of the daily
closing price for the Common Stock as reported on the Nasdaq NMS during a period
determined by the Board of Directors in its sole discretion that shall consist
of any day on which shares of Common Stock are traded on the Nasdaq NMS (a
"Trading Day") or any number of consecutive Trading Days, not exceeding 30,
during the period of 30 Trading Days ending on the Trading Day immediately
preceding the date the right is granted, provided that, in the absence of a
--------
different determination by the Board of Directors, the price per share shall be
determined on the basis of a period consisting of 30 Trading Days. Such price
shall be subject to adjustment as provided in paragraph 15. The Board of
Directors shall determine the date on which a freestanding right is granted. In
the absence of such determination, the date on which the Board of Directors
adopts a
25
<PAGE>
resolution granting such right shall be considered the date of grant, provided
the participant is promptly notified of the grant and an agreement is duly
executed as of the date of the resolution.
If upon exercise of a right the participant is to receive all or a portion
of the payment in shares of Common Stock, the number of shares received shall be
determined by dividing such portion by the fair market value of a share on the
exercise date. The number of shares received may not exceed the number of
shares covered by any option or portion thereof surrendered. Cash will be paid
in lieu of any fractional share.
No payment will be required from the participant upon exercise of a right,
except that any amount necessary to satisfy applicable federal, state or local
tax requirements shall be withheld or paid promptly upon notification of the
amount due and prior to or concurrently with delivery of cash or a certificate
representing shares. The Board of Directors may permit such amount to be paid
in shares of Common Stock previously owned by the participant, or a portion of
the shares of Common Stock that otherwise would be distributed to such
participant upon exercise of the right, or a combination of cash and shares of
such Common Stock.
(c) For purposes of this paragraph 8, the fair market value of a share on
any particular date shall mean the Fair Market Value of such share on such date,
or if there are no sales on such date, on the next preceding day on which there
were sales; provided that, in the case of rights that relate to an incentive
--------
stock option, not in excess of the maximum amount that would be permissible
under Section 422 of the Code and the Treasury Regulations thereunder without
disqualifying such option as an incentive stock option under Section 422.
(d) Upon exercise of a tandem right, the number of shares subject to
exercise under the related option shall automatically be reduced by the number
of shares represented by the option or portion thereof surrendered.
(e) A right related to an incentive stock option may only be exercised if
the fair market value of a share of Common Stock on the exercise date exceeds
the option price.
(f) Whether payments to participants upon exercise of tandem rights
related to non-qualified options or of freestanding rights are made in cash,
shares of Common Stock or a combination thereof, the Board of Directors shall
have sole discretion as to timing of the payments, whether in one lump sum or in
annual installments or otherwise deferred, which deferred payments may in the
Board of Directors' sole discretion (i) bear amounts equivalent to interest or
cash dividends, (ii) be treated as invested in the manner from time to time
determined by the Board of Directors, with dividends or other income thereon
being deemed to have been so reinvested, or (iii) for the convenience of the
Company, contributed to a trust, which may be revocable by the Company or
subject to the claims of its creditors, for investment in the manner from time
to time determined by the Board of Directors and set forth in the instrument
creating such trust, all as the Board of Directors shall determine.
(g) If a freestanding right is not exercised, or neither a tandem right
nor the related option is exercised, before the end of the day on which the
right ceases to be exercisable and the fair market value of a share on such date
exceeds (i) the option price per share in the case of a tandem right or (ii) the
price per share specified in the terms of the right in the case of a
freestanding right, such right shall be deemed exercised and a payment in the
amount prescribed by subparagraph 8(b), less any applicable taxes, shall be paid
to the participant in cash.
9. Award and Exercise of Limited Rights
------------------------------------
(a) A limited right may be awarded by the Board of Directors in connection
with any option granted under the 1997 Plan with respect to all or some of the
shares of Common Stock covered by such related option. A limited right may be
granted either at the time the option is granted or thereafter at any time prior
to the exercise, termination or expiration of the option. A limited right may
be granted to a participant irrespective of whether such participant is being
granted or has been granted a right under paragraph 8 hereof. A limited right
may be exercised only during the ninety-day period beginning on the occurrence
of an event or condition prescribed by the Board of Directors. In addition,
each limited right shall be exercisable only if, and to the extent that, the
related option is exercisable and, in the case of a limited right granted in
respect of an incentive stock option, only when the fair market value per share
of the Common Stock exceeds the option price per share. Upon exercise of a
limited right, such related option shall cease to be exercisable to the extent
of the shares of Common Stock with respect to which such limited right is
exercised. Upon the exercise or termination of a related option, the limited
right with respect to such related option shall terminate to the extent of the
shares of Common Stock with respect to which the related option was exercised or
terminated.
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<PAGE>
(b) Upon the exercise of limited rights, the holder thereof shall receive
in cash an amount determined in the same manner as for a right granted under
paragraph 8.
(c) Notwithstanding any other provision of the 1997 Plan, tandem rights
granted pursuant to paragraph 8 may not be exercised to the extent that any
limited rights granted with respect to the same option are then exercisable.
Upon exercise of the limited right, the number of shares subject to exercise
under the related option, and the number of tandem rights related thereto, shall
automatically be reduced by the number of shares and rights represented by the
limited right exercised.
10. Non-Transferability of Options and Rights
-----------------------------------------
Options, rights and limited rights granted under the 1997 Plan shall not be
transferable otherwise than by will or the laws of descent and distribution.
Options, rights and limited rights may be exercised during the lifetime of the
participant only by the participant or by the participant's guardian or legal
representative (unless such exercise would disqualify an option as an incentive
stock option).
11. Award and Delivery of Restricted Shares or Restricted Units
-----------------------------------------------------------
(a) At the time an award of restricted shares or restricted units is made,
the Board of Directors shall establish a period of time (the "Restricted
Period") applicable to such award. Each award of restricted shares or
restricted units may have a different Restricted Period. The Board of Directors
may, in its sole discretion, accelerate the Restricted Period or, at the time an
award is made, (i) prescribe conditions for the incremental lapse of
restrictions during the Restricted Period or (ii) provide for the lapse or
termination of restrictions upon the satisfaction of any condition or the
occurrence of any event prescribed by the Board of Directors in its sole
discretion. The Board of Directors may also, in its sole discretion, shorten or
terminate the Restricted Period or waive any conditions for the lapse or
termination of restrictions with respect to all or any portion of the restricted
shares or restricted units. Notwithstanding the foregoing, all restrictions
shall lapse or terminate with respect to all restricted shares or restricted
units upon death or total disability (as defined in paragraph 13).
(b) Upon the grant of an award of restricted shares, a stock certificate
representing a number of shares of Common Stock equal to the number of
restricted shares granted to a participant shall be registered in the
participant's name but shall be held in custody by the Company for the
participant's account. The participant shall generally have the rights and
privileges of a shareholder as to such restricted shares, including the right to
vote such restricted shares, except that, subject to the provisions of paragraph
12, the following restrictions shall apply: (i) the participant shall not be
entitled to delivery of the certificate until the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed by
the Board of Directors; (ii) none of the restricted shares may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of during
the Restricted Period and until the satisfaction of any other conditions
prescribed by the Board of Directors; and (iii) all of the restricted shares
shall be forfeited and all rights of the participant to such restricted shares
shall terminate without further obligation on the part of the Company unless the
participant has remained an employee of or, in the case of a non-employee
participant, continues to perform services for the Company or any of its
subsidiaries until the expiration or termination of the Restricted Period and
the satisfaction of any other conditions prescribed by the Board of Directors
applicable to such restricted shares. At the discretion of the Board of
Directors, cash and stock dividends with respect to the restricted shares may be
either currently paid or withheld by the Company for the participant's account,
and interest may be paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Board of Directors. Cash or stock
dividends so withheld by the Board of Directors shall not be subject to
forfeiture. Upon the forfeiture of any restricted shares, such forfeited
restricted shares shall be transferred to the Company without further action by
the participant. The participant shall have the same rights and privileges, and
be subject to the same restrictions, with respect to any shares received
pursuant to paragraph 15.
(c) Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board of Directors or at
such earlier time as provided for in paragraph 12, the restrictions applicable
to the restricted shares shall lapse and a stock certificate for the number of
shares of Common Stock with respect to which the restrictions have lapsed shall
be delivered, free of all such restrictions, except any that may be imposed by
law, to the participant or the participant's beneficiary or estate, as the case
may be. The Company shall not be required to deliver any fractional share of
Common Stock but will pay, in lieu thereof, the Fair Market Value (determined as
of the date the restrictions lapse or next preceding day on which sales are
traded) of such fractional share to the participant
27
<PAGE>
or the participant's beneficiary or estate, as the case may be. No payment will
be required from the participant upon the issuance or delivery of any restricted
shares, except that any amount necessary to satisfy applicable federal, state or
local tax requirements shall be withheld or paid promptly upon notification of
the amount due and prior to or concurrently with the issuance or delivery of a
certificate representing such shares. The Board of Directors may permit such
amount to be paid in (i) shares of Common Stock previously owned by the
participant, (ii) a portion of the shares of Common Stock that otherwise would
be distributed to such participant upon the lapse of the restrictions applicable
to the restricted shares, or (iii) a combination of cash and shares of such
Common Stock; provided, however, that the Board of Directors shall have sole
-----------------
discretion to consent to or disapprove of any such election (which consent or
disapproval may be given at any time after the election to which it relates).
(d) In the case of an award of restricted units, no shares of Common Stock
shall be issued at the time the award is made, and the Company shall not be
required to set aside a fund for the payment of any such awards. The
participant will have no rights as a shareholder of the Company with respect to
restricted units.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board of Directors or at
such earlier time as provided for in paragraph 12, the Company shall deliver to
the participant or the participant's beneficiary or estate, as the case may be,
one share of Common Stock for each restricted unit with respect to which the
restrictions have lapsed ("vested unit"), and cash equal to any Dividend
Equivalents credited with respect to each such vested unit and any interest
thereon; provided, however, that the Board of Directors may, in its sole
-----------------
discretion, elect to pay cash or part cash and part Common Stock in lieu of
delivering only Common Stock for vested units. If a cash payment is made in
lieu of delivering Common Stock, the amount of such cash payment shall be equal
to the Fair Market Value for the date on which the Restricted Period lapsed with
respect to such vested unit, or if there are no sales on such date, on the next
preceding day on which there were sales. No payment will be required from the
participant upon the award of any restricted units, the crediting or payment of
any Dividend Equivalents, or the delivery of Common Stock or the payment of cash
in respect of vested units, except that any amount necessary to satisfy
applicable federal, state or local tax requirements shall be withheld or paid
promptly upon notification of the amount due. The Board of Directors may permit
such amount to be paid in (i) shares of Common Stock previously owned by the
participant, (ii) a portion of the shares of Common Stock that otherwise would
be distributed to such participant in respect of vested units, or (iii) a
combination of cash and shares of such Common Stock; provided, however, that the
-----------------
Board of Directors shall have sole discretion to consent to or disapprove of any
such election (which consent or disapproval may be given at any time after the
election to which it relates).
(e) The restricted unit award agreement may permit a participant to
request that the payment of vested units (and Dividend Equivalents and the
interest thereon with respect to such vested units) be deferred beyond the
payment date specified in the agreement. The Board of Directors shall, in its
sole discretion, determine whether to permit such deferral and to specify the
terms and conditions, which are not inconsistent with the 1997 Plan, to be
contained in the agreement. In the event of such deferral, the Board of
Directors may determine that interest shall be credited annually on the Dividend
Equivalents, at a rate to be determined by the Board of Directors. The Board of
Directors may also determine to compound such interest.
12. Termination of Employment
-------------------------
(a) If the employment of an employee to whom an option, right or limited
right has been granted under the 1997 Plan shall be involuntarily terminated,
then except as set forth in paragraph 13, such option, right or limited right
may, subject to the provisions of the 1997 Plan, be exercised (to the extent
that the employee was entitled to do so at such involuntary termination of his
employment) at any time within three months after such involuntary termination,
provided, however, that any option, right or limited right held by an employee
- -----------------
whose employment is terminated for cause, as determined by the Board of
Directors in its sole discretion, shall forthwith terminate. If the employment
of an employee to whom an option, right or limited right has been granted under
the 1997 Plan shall terminate for any other reason, then, except as provided in
paragraph 13, such option, right or limited right will immediately terminate;
provided, however, that in the case of an employee whose termination results
from retirement from active employment at or after age 65, such options, rights
and limited rights may be exercised within one year after such termination, but
in no case later than the date on which the option, right or limited right
terminates.
(b) Unless otherwise determined by the Board of Directors, if an employee
to whom restricted shares or restricted units have been granted ceases to be an
employee of the Company or of a subsidiary prior to the end of the Restricted
Period and the satisfaction of any other conditions prescribed by the Board of
Directors for any reason other than death or total disability (as defined in
paragraph 13), the employee shall immediately forfeit all restricted shares
28
<PAGE>
and restricted units as to which the Restricted Period has not then lapsed. If
such employee ceases employment with the Company due to such employee's death or
total disability (as defined in paragraph 13), then all restrictions relating to
the restricted shares or restricted units shall immediately terminate.
(c) Awards granted under the 1997 Plan shall not be affected by any change
of duties or position so long as the holder continues to be an employee of the
Company or any of its subsidiaries. Any option, right, limited right,
restricted share or restricted unit agreement, or any rules and regulations
relating to the 1997 Plan, may contain such provisions as the Board of Directors
shall approve with reference to the determination of the date employment
terminates and the effect of leaves of absence. Any such rules and regulations
with reference to any option agreement shall be consistent with the provisions
of the Code and any applicable rules and regulations thereunder. Nothing in the
1997 Plan or in any award granted pursuant to the 1997 Plan shall confer upon
any employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or any such
subsidiary to terminate such employment at any time.
(d) Notwithstanding anything else in the 1997 Plan to the contrary, if the
company employing an individual to whom an option, right, limited right,
restricted unit or restricted share has been granted under the 1997 Plan ceases
to be a subsidiary of the Company, then the Board of Directors may provide that
service with such employer or its direct or indirect subsidiaries in any
capacity shall be considered employment with the Company for purposes of the
1997 Plan.
13. Death or Total Disability of Employee
-------------------------------------
If an employee to whom an option, right or limited right has been granted
under the 1997 Plan shall die or suffer a "total disability" while employed by
the Company, one of its subsidiaries, such option, right or limited right may be
exercised, to the extent that the employee was entitled to do so at the
termination of employment (including by reason of death or total disability), as
set forth herein or in option agreement (subject to the restrictions set forth
in paragraphs 8 and 9 with respect to persons subject to Section 16(b) of the
Exchange Act) by the employee, the legal guardian of the employee (unless such
exercise would disqualify an option as an incentive stock option), a legatee or
legatees of the employee under the employee's last will, or by the employee's
personal representatives or distributees, whichever is applicable, at any time
within one year after the date of the employee's death or total disability, but
in no case later than the date on which the option, right or limited right
terminates. For purposes hereof, "total disability" is defined as a condition
which permits the employee to receive full benefits under the Company's long
term disability plan. If employee is not eligible to participate in such plan
or no such plan is then maintained, "total disability" means any physical or
mental condition which renders the employee unable to perform his or her duties
to the satisfaction of the Board of Directors and which condition may be
expected to continue for more than six months in the opinion of a physician
selected by the Board of Directors.
14. Awards to Non-employees
-----------------------
Any non-employee of the Company who receives an award under the 1997 Plan
shall be subject to such constraints with respect to exercisability of awards
and forfeiture of awards as the Board of Directors, in its sole discretion, may
prescribe.
15. Adjustment upon Changes in Capitalization, etc.
-----------------------------------------------
Notwithstanding any other provision of the 1997 Plan, the Board of
Directors may at any time make or provide for such adjustments to the 1997 Plan,
to the number and class of shares available thereunder or to any outstanding
options, rights, restricted shares or restricted units as it shall deem
appropriate to prevent dilution or enlargement of rights, including adjustments
in the event of distributions to holders of Common Stock other than a normal
cash dividend, changes in the outstanding Common Stock by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations
or exchanges of shares, separations, reorganizations, liquidations and the like.
In the event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Board of Directors may make such adjustment as
it deems equitable in respect of outstanding options, rights, limited rights and
restricted units, including in the Board of Directors' discretion revision of
outstanding options, rights, limited rights and restricted units so that they
may be exercisable for or payable in the consideration payable in the
acquisition transaction. No adjustment shall be made in respect of an incentive
stock option if such adjustment would disqualify such option as an incentive
stock option under Section 422 of the Code and the Treasury Regulations
thereunder. No adjustment shall
29
<PAGE>
be made in the minimum number of shares with respect to which an option may be
exercised at any time. Any fractional shares resulting from such adjustments to
options, rights, limited rights or restricted units shall be eliminated.
16. Effective Date
--------------
The 1997 Plan shall be effective as of the May 8, 1997. The Board of
Directors may, in its discretion, grant awards under the 1997 Plan, the grant,
exercise or payment of which shall be expressly subject to the conditions that,
to the extent required at the time of grant, exercise or payment, (i) if the
Company deems it necessary or desirable, a Registration Statement under the
Securities Act of 1933 with respect to such shares shall be effective, (ii) to
the extent such awards provide for the delivery of shares of Common Stock of the
Company, such shares shall have been listed on the Nasdaq NMS, subject to notice
of issuance, and (iii) any requisite approval or consent of any governmental
authority of any kind having jurisdiction over awards granted under the 1997
Plan shall be obtained.
17. Termination and Amendment
-------------------------
The Board of Directors of the Company may suspend, terminate, modify or
amend the 1997 Plan, provided that any amendment that would increase the
aggregate number of shares that may be issued under the 1997 Plan, materially
increase the benefits accruing to participants under the 1997 Plan, or
materially modify the requirements as to eligibility for participation in the
1997 Plan shall be subject to the approval of the Company's shareholders to the
extent required by Rule 16b-3, applicable law or any other governing rules or
regulations, except that any such increase or modification that may result from
adjustments authorized by paragraph 15 does not require such approval. If the
1997 Plan is terminated, the terms of the 1997 Plan shall, notwithstanding such
termination, continue to apply to awards granted prior to such termination. In
addition, no suspension, termination, modification or amendment of the 1997 Plan
may, without the consent of the participant to whom an award shall theretofore
have been granted, adversely affect the rights of such participant under such
award.
18. Written Agreements
------------------
Each award of options, rights, limited rights, restricted shares or
restricted units shall be evidenced by a written agreement, executed by the
participant and the Company, which shall contain such restrictions, terms and
conditions as the Board of Directors may require.
19. Effect on Other Stock Plans
---------------------------
The adoption of the 1997 Plan shall have no effect on awards made or to be
made pursuant to other stock plans covering employees or non-employees of the
Company, its subsidiaries, or any predecessors or successors thereto.
30
<PAGE>
ALLIN COMMUNICATIONS CORPORATION
PROXY
This Proxy Is Solicited On Behalf Of The Board of Directors
Jon E. VanAmringe and Brian K. Blair, or either of them, each with power of
substitution, are hereby authorized to vote all stock of Allin Communications
Corporation which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of Allin Communications
Corporation to be held on Thursday May 8, 1997, and at any postponements or
adjournments thereof as follows:
1. Election of Directors: FOR all nominees listed below WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below
Nominees: Richard W. Talarico, R. Daniel Foreman, Brian K. Blair, William C.
Kavan, Paul J. Pasquarelli, James C. Roddey and Richard S. Trutanic
A vote FOR all nominees is recommended by the Board of Directors
Instructions: To withhold authority for an individual nominee, draw a line
through his name.
2. Approval of the 1997 Stock Plan of Allin Communications Corporation
FOR AGAINST ABSTAIN
A vote FOR is recommended by the Board of Dirctors
3. Ratification of appointment of Independent Public Accountants
FOR AGAINST ABSTAIN
A vote FOR is recommended by the Board of Dirctors
(Continued on other side)
<PAGE>
(Continued from other side)
4. In their discretion, on such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSALS 2 AND 3.
Please sign this proxy exactly as your appears below. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or in another representative capacity, please give
full title as such. If a corporation, please sign in full corporate name
by the president or other authorized officer. If a partnership, please
sign in partnership name by an authorized person.
Dated: , 1997
---------------------------
----------------------------------
(Signature)
----------------------------------
(Signature, if held jointly)
Please Mark, Sign, Date, and Return this Proxy Card Promptly
Using the Enclosed Envelope
