<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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Notes:
<PAGE>
LOGO
ALLIN COMMUNICATIONS
Allin Communications Corporation
400 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220-2751
Notice of Annual Meeting of Stockholders
To be held May 7, 1998
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 7, 1998 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 five directors.
2. 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, 1998.
3. 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 23,
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/ Dean C. Praskach
Dean C. Praskach
Secretary
March 31, 1998
<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 7, 1998, 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 of the nominees named herein as directors, 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 400 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 3, 1998.
Shares Outstanding, Voting Rights and Vote Required
Only stockholders of record at the close of business on March 23, 1998 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 5,182,267 shares were
outstanding as of the close of business on March 23, 1998. 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 of 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. 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 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, and (2) FOR ratification
of the appointment of Arthur Andersen LLP as the Company's independent public
accountants for 1998.
2
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Election of Directors
(Proposal 1)
The Board of Directors of the Company currently consists of five members,
four of whom are non-employee directors. The Chairman and Chief Executive
Officer of the Company is a member of the Board. All directors are elected for
a one-year term 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 1999 Annual
Meeting of Stockholders. All nominees currently serve as directors of the
Company. Ages are given as of March 31, 1998.
Richard W. Talarico, age 42, became Chairman of the Board and Chief
Executive Officer of the Company in July 1996. He has served as a director of
Allin Interactive Corporation, a subsidiary of the Company since August 1996
("Allin Interactive Corp"), since October 1994 and as Chairman of the Board and
Chief Executive Officer of Allin Interactive Corp since June 1996. Mr. Talarico
has served Allin Interactive Corp 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. Mr. Talarico has served as an officer and director of
certain of the Company's other subsidiaries since their inception or acquisition
by the Company. 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.
Brian K. Blair, age 35, became a director of the Company in July 1996. Mr.
Blair also served as Chief Operating Officer and Secretary of the Company from
July 1996 until his resignation from these positions in February 1998. Mr.
Blair has served as a director of Allin Interactive Corp since October 1994 and
as a director of the Company's other subsidiaries since their inception or
acquisition by the Company. Mr. Blair also served as Vice President of
Administration and Operations of Allin Interactive Corp from October 1994 until
June 1996 and as its President from June 1996 until February 1998. Mr. Blair
served as a vice president of certain of the Company's other subsidiaries from
their inception or acquisition until February 1998. Since May 1989, Mr. Blair
has been President of Blair Haven Entertainment, Inc., doing business as
Commercial Downlink, ("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.
William C. Kavan, age 47, became a director of the Company in July 1996 and
has served as a director of Allin Interactive Corp since October 1994. Mr.
Kavan has also served as a director of certain of the Company's other
subsidiaries since their inception or acquisition by the Company. 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 46, 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 65, became a director of the Company in July 1996 and
has served as a director of Allin Interactive Corp since October 1994. Mr.
Roddey has also served as a director of certain of the Company's other
subsidiaries since their inception or acquisition by the Company. Mr. Roddey
served as President of International Sports Marketing, Inc. (now SportsWave,
Inc.) 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 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.
There are no family relationships among the directors and executive officers.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers serve at the
discretion of the Board of Directors.
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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 1997, the Company's Board of Directors held six
meetings and took action by unanimous written consent in lieu of meetings five
times. In 1997, no incumbent director attended fewer than 75% of the total
number of Board meetings and meetings of committees upon which he served during
the period for which he served as a director, with the exception of Paul J.
Pasquarelli.
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 (Chairman) and Paul J.
Pasquarelli. The Audit Committee met four times during 1997.
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 two non-
employee directors, James C. Roddey (Chairman) and William C. Kavan. The
Compensation Committee did not meet during 1997.
Executive Officers
Certain information concerning Mr. Talarico is included above in the
biographic summaries of the nominees for director. Information with regard to
the remaining executive officers of the Company who are not also directors
follows:
Les D. Kent, age 34, became President of the Company in March 1998. Mr. Kent
has served as President of Kent Consulting Group ("KCG") and Netright, Inc.
("Netright"), since their inception in 1994 and 1995, respectively. Prior to
the Company's acquisition of KCG and Netright in November 1996, Mr. Kent was the
sole shareholder and a director of these companies. Mr. Kent served as General
Partner and President of Vision Network Systems ("VNS") from 1983 until 1992,
and as President and a director of VNS following its incorporation in 1992 until
1996. VNS performed substantially similar software development and network
solutions consulting services and computer equipment sales as those currently
performed by KCG and Netright, and its operations were substantially assumed by
those corporations upon their inception. Mr. Kent was also appointed as
President or Vice President of certain of the Company's other subsidiaries in
March 1998.
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Dean C. Praskach, age 40, has held the positions of Vice-President Finance and
Treasurer of the Company since July 1997, and was named Secretary of the Company
in March 1998 and is its principal financial and accounting officer. Mr.
Praskach joined the Company as Director of Financial Planning in November of
1996. Mr. Praskach served the Company and THG in a consulting capacity from
February 1995 until joining the Company. From September of 1989 through July of
1994, he was employed at First Westinghouse Capital Corporation in various
positions, where he was involved in equity and mezzanine financing of leveraged
acquisitions. Mr. Praskach has held the positions of Vice-President Finance and
Treasurer of each of the Company's subsidiaries since July 1997, and was named
Secretary of all of the Company's subsidiaries in March 1998.
Executive Compensation
Summary Compensation Table
The following table sets forth information concerning 1996 and 1997
compensation of the Chief Executive Officer and the other executive officers of
the Company whose 1997 salary exceeded $100,000 (collectively the "Named
Executives").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------------------------------- --------------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary ($) Compensation ($) Options (#)
- ----------------------------------- ----------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C> <C>
Richard W. Talarico 1997 $150,000 $ --- ---
Chief Executive Officer 1996 75,000 --- 21,000
R. Daniel Foreman (1) 1997 $150,000 $ --- ---
President 1996 124,875 --- 21,000
Brian K. Blair (1) 1997 $150,000 $37,141 (2) ---
Chief Operating Officer 1996 124,875 15,596 (2) 21,000
</TABLE>
(1) Each of Mr. Foreman and Mr. Blair resigned as an officer of the Company in
February 1998. Mr. Blair continues to serve as a director of the Company.
(2) During 1996, Mr. Blair accepted an assignment to manage the southern
Florida based operations of Allin Interactive Corp. The duration of the
assignment was approximately one year, and the assignment ended in 1997.
Because of the temporary nature of the assignment at a remote office, Allin
Interactive Corp leased housing and an automobile for Mr. Blair's usage and
incurred moving and certain other expenses related to this assignment.
Housing, automobile, moving and other expenses were $27,136, $3,262,
$3,264, and $3,479, respectively, during 1997. Expenses for housing and
automobile were $12,500 and $3,096, respectively, during 1996.
Employment Agreement
The Company has entered into an employment agreement with Mr. Talarico, the
terms of which commenced August 1, 1996 and will continue through December 31,
1999. The annual salary as set forth in the employment agreement is $150,000.
The employment agreement contains restrictive covenants prohibiting Mr. Talarico
from competing with the Company for a period of two years after termination or
the end of the employment term.
Pursuant to the employment agreement, options to acquire shares of Common
Stock granted to Mr. Talarico, 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 Allin Interactive Corp as of August 1,
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1996, owns 50% or more of the outstanding Common Stock. The employment agreement
also provides that Mr. Talarico will be entitled to receive for one year
following 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 he was
receiving immediately prior to such termination.
Stock Plans
In October 1996, the Board of Directors adopted the 1996 Stock Plan, and in
May 1997 the Board of Directors adopted the 1997 Stock Plan which was approved
by the Company's stockholders in 1997. Both plans provide for awards of stock
options, stock appreciation rights, 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. At December 31, 1997, 9,282 and 229,950 shares remained
available for future grants under the 1996 Plan and the 1997 Plan, respectively.
The plans are administered by the Board of Directors which has broad discretion
to determine the individuals entitled to participate in the plans and to
prescribe conditions (such as the completion of a period of employment with the
Company following an award). Although options were awarded under both plans in
1997, none of the Named Executive were granted options in 1997. The
Compensation Committee is responsible for making recommendations to the Board of
Directors concerning executive compensation, including the award of stock
options.
Option Grants in Last Fiscal Year
There were no stock option grants to the Named Executives during 1997.
Fiscal Year End Option Values
The following table provides information concerning stock options held by
the Named Executives at December 31, 1997. No options were exercised in 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-Money
Underlying Unexercised Options at Fiscal
Options at Fiscal Year End Year End (1)
---------------------------------- ----------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------ ----------- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Talarico --- --- 4,200 16,800 --- ---
R. Daniel Foreman (2) --- --- 4,200 16,800 --- ---
Brian K. Blair (2) --- --- 4,200 16,800 --- ---
</TABLE>
(1) Based on the December 31, 1997 closing price per share of Common Stock of
$3.88, as reported by the Nasdaq National Market tier of the Nasdaq Stock
Market, and the option exercise price of $15.00 per share, the options were
not in-the-money at December 31, 1997.
(2) Messrs. Foreman and Blair resigned as officers of the Company in February
1998. Vested options remain exercisable within ninety days of resignation.
Non-vested options were forfeited immediately upon resignation.
The Company does not have any long-term incentive or defined benefit plans.
Separation Agreements
The Company also entered into employment agreements in 1996 with each of
Messrs. Foreman and Blair substantially similar to the employment agreement
entered into with Mr. Talarico. In connection with their resignations as
officers of the Company, the Company entered into separation agreements with
each of Mr. Foreman and Mr. Blair. Under the separation agreements, the Company
is obligated to make aggregate payments to each of Messrs. Foreman and Blair in
the amount of $225,000 plus accrued vacation pay, and to provide certain
consulting services to Messrs. Foreman and Blair. In addition, the Company
agreed to pay $20,000 of Mr. Foreman's relocation expenses and to forgive the
$130,000 principal amount of, and approximately $10,000 of accrued interest on,
a loan made by the Company to Mr. Foreman in 1997. Under the separation
agreement with Mr. Foreman, the Company has agreed that
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Mr. Foreman may compete immediately in certain areas of business utilizing
digital imaging technology. Mr. Blair remains subject to restrictive covenants
prohibiting him from competing with the Company for a period of two years
following his resignation.
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.
James C. Roddey and William C. Kavan are currently members of the Compensation
Committee. Although no formal meeting of the Compensation Committee was held
during 1997, the members of the Compensation Committee participated in each
meeting of the Board of Directors held in 1997 and made recommendations to the
Board concerning executive compensation matters.
The Company is continuing the implementation of compensation policies that
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.
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 basic element of each executive officer's 1997 compensation was salary.
One person, who became an executive officer of the Company in 1997, was awarded
incentive compensation in the form of options to purchase shares of the
Company's Common Stock under the Company's 1997 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. 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. However, given the Company's business results and
performance in 1997, long-term incentive compensation was curtailed, no
adjustments were made to the base salaries of those persons serving as executive
officers at the beginning of 1997, including the Chief Executive Officer, and no
bonuses were awarded to any executive officer.
It is the Committee's intention to continue to favor forms of compensation
for the Company's executive officers that favor long-term rather than short-term
incentives so that such executives may benefit from any 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.
Mr. Talarico became Chief Executive Officer of the Company at the time of
its formation in July 1996. Pursuant to the terms of his employment agreement
with the Company, his 1997 salary was $150,000. No additional form of
compensation was awarded or paid to Mr. Talarico during 1997. 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. 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.
7
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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 1997 Stock Plan. As of December 31, 1997, 67 employees of the
Company and its subsidiaries were participants under these Plans.
Compensation Committee:
James C. Roddey, Chairman
William C. Kavan
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 the
Nasdaq Stock Market for the date on which the option is granted. Grants for the
initial year of service were made under the 1997 Stock Plan. Messrs. Kavan and
Roddey each received grants to acquire 5,000 shares of Common Stock at the
exercise price of $4.50 per share on November 3, 1997. Mr. Pasquarelli received
a grant to acquire 5,000 shares of Common Stock at the exercise price of $4.25
per share on February 6, 1998.
Non-employee directors of the Company 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 do 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 consists of Messrs. Kavan and Roddey. Mr.
Roddey served as President of International Sports Marketing, Inc. from 1992
until its acquisition by the Company in 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 1997, Mr. Talarico was a shareholder and director of The Bantry Group,
Inc. and its affiliates Wexford Health Services, Inc. ("WHS"), Longford Health
Sources, Inc. and Galway Technologies, Inc. (collectively "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
or director 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 excuse himself from any vote of the Compensation Committee or the
Board of Directors concerning Mr. Talarico's compensation. Richard S. Trutanic,
a former director of the Company, also served as a member of the Compensation
Committee for a portion of 1997.
In respect of the fiscal year ended December 31, 1997 the Company made
payments to PMI in the amount of approximately $61,000 for the production of
videos and other visual media for use with the Company's ITV system. Messrs.
Henry Posner Jr., Thomas D. Wright, Roddey and Talarico are shareholders of PMI.
Mr. Posner owns greater than five percent of the Company's outstanding Common
Stock and Mr. Wright owned greater than five percent of the Company's
outstanding Common Stock during 1997. 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.
The Company acquired all of the issued and outstanding shares of capital
stock of International Sports Marketing, Inc., now SportsWave, Inc.
("SportsWave"), from the stockholders of SportsWave 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 former SportsWave stockholders of
promissory notes bearing interest at seven percent per annum. Messrs. Posner,
Wright, Talarico and Roddey were SportsWave stockholders. At the closing of the
acquisition of SportsWave, 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). A
determination of the actual amount of such contingent payments, if any, cannot
be made at this time.
8
<PAGE>
During the fiscal year ended December 31, 1997, Allin Digital Imaging
Corp., a subsidiary of the Company, made payments of approximately $12,000 for
office space under a month-to-month occupancy arrangement with Star Cable
Associates, in which Mr. Roddey has an ownership interest. The arrangement was
terminated in March 1997 and Allin Digital Imaging Corp. personnel now occupy a
portion of the Company's other leased space.
During the fiscal year ended December 31, 1997, KCG provided computer
network consulting services to Hawthorne, Allegheny Media ("AM"), and WHS. Fees
charged Hawthorne, AM and WHS were approximately $28,000, $2,000 and $4,000,
respectively. Mr. Posner, Mr. Wright and two of Mr. Posner's sons are
shareholders of Hawthorne. Mr. Roddey has an ownership interest in AM. Mr.
Roddey is a shareholder, director and executive officer of WHS' parent company,
The Bantry Group, Inc. Mr. Talarico is a shareholder and was a director during
1997 of Bantry. The Company believes its fees are on terms substantially
similar to what is offered non-affiliated parties.
During the fiscal year ended December 31, 1997, Netright sold computer
hardware and components to THG and AM. Amounts charged THG and AM were
approximately $22,000 and $1,000, respectively. The Company believes its
charges are on terms substantially similar to what is offered non-affiliated
parties.
Certain stockholders of the Company, including Messrs. Posner, Wright,
Roddey, Talarico, Terence M. Graunke, an owner of greater than five percent of
the outstanding Common Stock, Brian K. Blair, a director and former officer of
the Company, and R. Daniel Foreman, a former director and officer of the
Company, have certain rights under a registration rights agreement (the
"Registration Rights Agreement") to require the Company, subject to certain
limitations, to register under the Securities Act of 1933, as amended, certain
of their shares of Common Stock for public offering and sale. Les D. Kent,
President of the Company, also has the right, subject to certain limitations, to
have the shares of Common Stock that he received in connection with the
Company's acquisition of KCG included in any registration statement that
includes shares to be registered at the request of stockholders under the
Registration Rights Agreement.
9
<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, the first day of
trading of the Company's Common Stock, to December 31, 1997. 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.
<TABLE>
[GRAPH APPEARS HERE]
PERFORMANCE COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ALLIN COMMUNICATIONS CORPORATION COMMON STOCK,
NASDAQ STOCK MARKET INDEX AND INDEX OF NASDAQ TELECOMMUNICATIONS STOCK
<CAPTION>
ALLIN
COMMUNICATIONS THE NASDAQ INDEX OF NASDAQ
Measurement period CORPORATION STOCK MARKET TELECOMMUNICATIONS
(Fiscal year Covered) COMMON STOCK INDEX STOCK
- --------------------- ------------ ------- -------
<S> <C> <C> <C>
Measurement PT -
11/01/1996 $100 $100 $100
FYE 12/31/1996 $130 $106 $104
FYE 12/31/1997 $ 26 $130 $154
</TABLE>
<TABLE>
<CAPTION>
November 1, 1996 December 31, 1996 December 31, 1997
<S> <C> <C> <C>
Allin Communications Corporation Common Stock (1)(3) $100 $130 $ 26
The Nasdaq Stock Market Index (2)(3) $100 $106 $130
Index of Nasdaq Telecommunications Stocks (2)(3) $100 $104 $154
</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 and
1997.
(2) Based on the closing price of the respective index on the last trading day
of October 1996 and December 1996 and 1997.
(3) Return assumes that all dividends are reinvested. The Company has never
paid any dividends on its Common Stock.
10
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table presents certain information as of March 17, 1998
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) 1,144,740 22.09%
500 Greentree Commons
381 Mansfield Avenue
Pittsburgh, Pennsylvania 15220
Friedman, Billings, Ramsey Group, Inc.(3) 401,000 7.74%
1001 19th Street North
Arlington, Virginia 22209
Continental Casualty Company (4) 340,000 6.56%
CNA Plaza
Chicago, Illinois 60685
Kindy French (5) 325,000 6.27%
2120 Leroy Place N.W.
Washington, D. C. 20008
Terence M. Graunke 263,392 5.08%
400 West Erie Street #504
Chicago, Illinois 60610
Les D. Kent (6) 263,333 5.08%
60 98th Avenue
Oakland, California 94603
</TABLE>
(1) The number of shares and the percent of the class have been calculated
in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(2) Includes 102,000 shares held in various trusts and a family foundation
of which Mr. Posner and his wife are trustees, and with respect to
which shares, Mr. Posner shares voting and investment power. Does not
include 1,000 shares owned by Mr. Posner's wife and 2,000 shares held
by trusts of which Mr. Posner's wife is a trustee.
(3) As reported on Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on February 17, 1998, the shares indicated are
beneficially owned by each of Friedman, Billings, Ramsey Group, Inc.,
Eric F. Billings, Emanuel J. Friedman, and W. Russell Ramsey. The
number of shares shown assumes that there has been no change in the
number of shares reported as beneficially owned.
(4) The shares indicated are under shared voting power and shared
dispositive power among Continental Casualty Company, CNA Financial
Corporation and Loews Corporation as reported on Schedule 13G filed by
such entities with the SEC on February 13, 1998. Per the report,
under Illinois law, assets owned by Continental Casualty Company, an
Illinois insurance company, are solely under the control of the board
of directors of the insurer and that the characterization of shared
dispositive power with the parent holding company is made solely as a
consequence of SEC interpretations regarding control of the
subsidiary. CNA Financial Corporation and Loews Corporation
specifically disclaim beneficial ownership of the shares. The number
of shares shown assumes that there has been no change in the number of
shares reported as beneficially owned.
11
<PAGE>
(5) Information as to the number of shares owned by Ms. French has been
obtained from the Schedule 13D filed with the SEC by Ms. French on February
27, 1998. The number of shares shown assumes there has been no change in
the number of shares reported as beneficially owned. Ms. French is the
wife of Emanuel J. Friedman, the Chairman of Friedman, Billings, Ramsey
Group, Inc., a beneficial owner of more than five percent of the
outstanding Common Stock of the Company. See Note (3) above.
(6) Mr. Kent was appointed President of the Company in March 1998 and has
served as President of subsidiaries KCG and Netright both prior to and
since their acquisition by the Company in November 1996.
Security Ownership of Management
The following table presents certain information as of March 17, 1998 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 99,303 1.91%
Allin Communications
400 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
R. Daniel Foreman 177,200 3.42%
1554 Alaqua Drive
Sewickley, PA 15143
Brian K. Blair 177,200 3.42%
Com-Tek
13320 State Route 7
P.O. Box 2777
East Liverpool, OH 43920
William C. Kavan 105,800 2.04%
The Berkely Group
100 Garden City Plaza
PO Box 9366
Garden City, NY 11530
Paul J. Pasquarelli 5,000 0.10%
Buena Vista Home Video
200 Corporate Center Drive
Suite 340
Coraopolis, PA 15108
James C. Roddey (2) 97,603 1.88%
Allegheny Media
200 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
All directors and executive
officers, as a group (7 persons) (3) 749,239 14.39%
</TABLE>
12
<PAGE>
(1) The number of shares and the percent of the class have been calculated
in accordance with Rule 13d-3 under the Exchange Act. The numbers
shown include shares covered by options that are currently exercisable
or are exercisable within sixty days of March 17, 1998. The numbers
and percentages of shares owned assume that such options had been
exercised as follows: Messrs. Talarico, Foreman and Blair - 4,200
shares each; Messrs. Kavan, Pasquarelli and Roddey 5,000 shares each;
and all directors and executive officers as a group 24,400 shares.
(2) Includes 2,000 shares owned by Mr. Roddey's wife.
(3) The Group does not include Mr. Foreman who was no longer a director or
executive officer of the Company on March 17, 1998.
Certain Relationships and Related Transactions
Transactions with Commercial Downlink
In respect of the fiscal year ended December 31, 1997, Commercial Downlink
charged Allin Interactive Corp, at cost, for certain services, materials, travel
costs and other expenses incurred by it on behalf of Allin Interactive Corp's
operations. Brian K. Blair and R. Daniel Foreman, executive officers and
directors of the Company during 1997, are principals of Commercial Downlink.
Such charges were approximately $123,000 during the fiscal year ended December
31, 1997. The practice of Commercial Downlink incurring costs on behalf of
Allin Interactive Corp was discontinued in 1997. During 1997, the Company also
made payments of $3,700 to Commercial Downlink under a sublease agreement
relating to facilities in Lisbon, Ohio owned by Com-Tek Printing and Graphics,
Inc. ("Com-Tek"), a majority owned subsidiary of Commercial Downlink. Such
agreement was terminated as of January 31, 1997. The Company believes such
payments were on terms as favorable to the Company as could be obtained from an
unaffiliated party.
The Company made payments of approximately $51,000 to Com-Tek for
commercial printing services in respect of the fiscal year ended December 31,
1997. The Company believes such payments are on terms as favorable to the
Company as could be obtained from an unaffiliated party.
Purchase of Equipment
During the fiscal year ended December 31, 1997, Allin Interactive Corp made
payments of $49,000 for the purchase of certain video production and broadcast
equipment from Western Reserve Cable. Messrs. Foreman and Blair are principals
of Western Reserve Cable. The Company believes such payments are on terms as
favorable to the Company as could be obtained from an unaffiliated party.
Arrangements Involving KCG
In November 1996, the Company acquired Kent Consulting Group, Inc. ("KCG")
through a merger. The consideration included $2.0 million in cash and $3.2
million in the Company's Common Stock. In addition, the merger agreement
governing the acquisition provides for up to $2.8 million in contingent payments
to Les D. Kent, based on KCG's average annual operating income (as defined in
the merger agreement) for the years 1997, 1998 and 1999. A determination of the
actual amount of the contingent payments, if any, cannot be made at this time.
Mr. Kent, appointed President of the Company in March 1998, was the sole KCG
stockholder prior to the merger.
Leases
Effective February 1, 1997, the Company entered into a five-year lease for
office space with Executive Office Associates ("EOA"). The aggregate rental
payment under this lease was approximately $188,000 during the fiscal year ended
December 31, 1997. Henry Posner, Jr., Thomas D. Wright and two of Mr. Posner's
sons and his spouse each own an indirect equity interest in EOA. Mr. Posner
owns greater than five percent of the Company's outstanding Common Stock and Mr.
Wright owned greater than five percent of the Company's outstanding Common Stock
during 1997. In late 1997, an agreement was reached among the Company, EOA, and
a non-affiliated party for sublet of a portion of the space that would end the
Company's obligations with respect to that portion for the remainder of the
lease term. As of December 31, 1997, minimum lease commitments were
approximately $1,509,000 for the period from January 1, 1998 to January 31,
2002. Early in 1997, rental payments of approximately $70,000 were made to
13
<PAGE>
West Point Realty ("WPR"), as agent for EOA under a temporary occupancy
arrangement which was superceded by the long-term lease described above. A
portion of the amount paid to WPR was applicable rent due under the long-term
lease and was credited as such. Mr. Wright is a shareholder of WPR. The Company
believes that rental payments prior to and under the long-term lease were on
terms as favorable to the Company as could have been obtained from an
unaffiliated party.
During the fiscal year ended December 31, 1997, SportsWave made payments
pursuant to a lease agreement in the amount of approximately $8,000 to EOA and
approximately $27,000 to WPR for the lease of office space. The Company believes
that such payments were on terms as favorable to the Company as could have been
obtained from an unaffiliated party. The lease agreement expired June 30, 1997.
SportsWave personnel now occupy a portion of the Company's other leased space.
During the fiscal year ended December 31, 1997, KCG made payments of
approximately $65,000 to Les D. Kent for the lease of office space. Mr. Kent
was appointed the Company's President in March 1998. Mr. Kent also served as
KCG's President during 1997. Such agreement is currently on a month-to-month
basis.
Loan to Officer and Director; Separation Agreements
During March 1997, the Company made a loan in the amount of $130,000 to R.
Daniel Foreman, at the time President and a director of the Company. The loan
bore interest at prime plus one percent from origination to December 1, 1997,
its original due date, and prime plus three percent thereafter. At December 31,
1997, the $130,000 principal amount and approximately $10,000 in accrued
interest was outstanding. Mr. Foreman resigned as a director and officer of the
Company in February, 1998. Under terms of a separation agreement, the loan and
approximately $10,000 of accrued interest have been forgiven. See Executive
Compensation - Separation Agreements. Because the loan forgiveness represents
significant information regarding the fair value of the asset at the financial
statement date, the Company has recorded a writeoff of the loan and interest
receivable balances as of December 31, 1997.
In February 1998, the Company also entered into a separation agreement with
Brian K. Blair. See Executive Compensation - Separation Agreements. Mr. Blair
continues to serve as a director of the Company.
Minority Investment in Corporation
Subsequent to December 31, 1997, the Company has contributed certain
assets, including rights to the name PhotoWave, formerly used in its operations
in the retail digital photography market for a minority, non-controlling equity
interest in a new corporation, which will pursue operations in this market. Mr.
Foreman and Mr. Henry Posner, Jr., have equity interests in the new corporation.
The value placed on the Company's equity interest, $100,000, approximates the
value of the assets contributed.
14
<PAGE>
Proposal to Ratify the Appointment of Independent Public Accountants
(Proposal 2)
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, 1998.
Arthur Andersen LLP has been employed to perform this function for the Company
and its predecessor 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, 1998.
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 Exchange Act of 1934 requires that the Company's
directors and executive officers, and any persons who own more than ten percent
of the Company's Common Stock, file with the 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 or with respect to the year ended December 31, 1997, all such Section
16(a) filing requirements were met.
Annual Report
The Company has enclosed its Annual Report for the year ended December 31,
1997 with this proxy statement, which includes the Company's 1997 Annual Report
to the SEC on Form 10-K, without exhibits. 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.
15
<PAGE>
Stockholder Proposals for the 1999 Annual Meeting
Any proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company, 400 Greentree Commons,
381 Mansfield Avenue, Pittsburgh, Pennsylvania 15220-2751, no later than
December 1, 1998 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 1999 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. The
anticipated cost of such services is approximately $1,500 plus reimbursement of
expenses.
By order of the Board of Directors,
/s/ Dean C. Praskach
Dean C. Praskach
Secretary
March 31, 1998
16
<PAGE>
ALLIN COMMUNICATIONS CORPORATION
PROXY
This Proxy Is Solicited On Behalf Of The Board of Directors
Dean C. Praskach and Les D. Kent, 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 7, 1998, and at any postponements or
adjournments thereof as follows:
1. Election of Directors: FOR all nominees listed below [_]
(except as marked to the contrary below)
WITHHOLD AUTHORITY to
vote for all nominees listed below [_]
Nominees: Richard W. Talarico, Brian K. Blair, William C. Kavan,
Paul J. Pasquarelli and James C. Roddey
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. Ratification of appointment of Independent Public Accountants
FOR [_] AGAINST [_] ABSTAIN [_]
A vote FOR is recommended by the Board of Directors
(Continued on other side)
<PAGE>
(Continued from other side)
3. 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 PROPOSAL 2.
Please sign this proxy exactly as your name
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:
_____________________________________, 1998
(Signature)
(Signature, if held jointly)
Please Mark, Sign, Date, and Return this Proxy Card Promptly Using the Enclosed
Envelope.
