<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 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:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ALLIN]
ALLIN CORPORATION
400 GREENTREE COMMONS
381 MANSFIELD AVENUE
PITTSBURGH, PENNSYLVANIA 15220-2751
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1999
Dear Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
Allin Corporation (the "Company") that will be held on Thursday, May 13, 1999 at
1:00 p.m. EDT, at the Company's headquarters at 400 Greentree Commons, 381
Mansfield Avenue, Pittsburgh, Pennsylvania 15220, for the following purposes, as
set forth in the accompanying Proxy Statement:
1. To elect six 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, 1999.
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 30,
1999, 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
April 12, 1999
<PAGE>
ALLIN CORPORATION
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is provided to the stockholders of Allin 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 13, 1999, at 1:00 p.m., EDT, at the
Company's headquarters at 400 Greentree Commons, 381 Mansfield Avenue,
Pittsburgh, Pennsylvania 15220, 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 15, 1999.
SHARES OUTSTANDING, VOTING RIGHTS AND VOTE REQUIRED
Only stockholders of record at the close of business on March 30, 1999 are
entitled to 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 5,988,063 shares were
outstanding as of the close of business on March 30, 1999. 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 1999.
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors of the Company currently consists of six members,
five 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 2000 Annual
Meeting of Stockholders. All nominees currently serve as directors of the
Company. Ages are given as of March 31, 1999.
Richard W. Talarico, age 43, 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, the Company's predecessor and now a subsidiary of
the Company ("Allin Interactive"), since October 1994 and as Chairman of the
Board and Chief Executive Officer of Allin Interactive since June 1996. Mr.
Talarico has served Allin Interactive 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 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, where he has been involved in numerous business ventures and
has served in various financial and operating capacities. The Hawthorne Group is
a private investment and management company which invests through affiliates
primarily in media and communications companies.
Brian K. Blair, age 36, 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 February 1998. Mr. Blair has served as a director of Allin
Interactive 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 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, a provider of cable
and closed-circuit television services, 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., a video production company.
Anthony L. Bucci, age 50, became a director of the Company in August 1998.
Mr. Bucci is Chairman and Chief Executive Officer of MARC Advertising,
Pennsylvania's largest full-service marketing communications company. Mr. Bucci
has served MARC Advertising in various capacities since 1970, including as
President from September 1988 to February 1997, as Chief Executive Officer since
March 1992 and as Chairman since February 1997. Mr. Bucci has supervised
advertising and marketing for a range of clients, including specialty retailing,
financial services, automotive, fashion, fast food, home centers, general
merchandise and amusement parks.
William C. Kavan, age 48, became a director of the Company in July 1996 and
has served as a director of Allin Interactive 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
25 cruise line clients, including Carnival, Costa, Cunard, Epirotiki, NCL, P&O,
Princess, Radisson and RCCL.
James S. Kelly, Jr., age 48, became a director of the Company in August
1998. Mr. Kelly founded KCS Computer Services, Inc. ("KCS") in 1985 and served
as its President and Chief Executive Officer prior to its acquisition by the
Company in August 1998. In connection with the acquisition of KCS, the Company
had agreed to appoint Mr. Kelly as a director of the Company upon completion of
the acquisition. Mr. Kelly was responsible for setting strategic direction for
KCS, oversight of all KCS operations and direction of its finance and
administration function. Mr. Kelly has been involved in the information
technology field for over 25 years.
James C. Roddey, age 66, became a director of the Company in July 1996 and
has served as a director of Allin Interactive 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.), a
sports marketing company, from 1992 to 1996. He has served as Chairman or as
President of various other entities affiliated with The Hawthorne Group,
including President of Star Cable Associates, a
3
<PAGE>
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 Company's 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.
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 1998, the Company's Board of Directors held nine
meetings and took action by unanimous written consent in lieu of meetings four
times. In 1998, 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.
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, James S. Kelly, Jr. (Chairman) and Brian K.
Blair. The Audit Committee met three times during 1998.
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, Anthony L. Bucci and William C. Kavan. The Compensation
Committee met two times during 1998.
EXECUTIVE OFFICERS
Information concerning Mr. Talarico, the Company's Chairman and Chief
Executive Officer, 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:
Timothy P. O'Shea, age 35, became President of the Company in January 1999.
Prior to joining the Company, Mr. O'Shea was employed by Actium, a modis
solutions company providing technology consulting services, from 1991 to 1998.
Mr. O'Shea served Actium in various capacities, including Team Director from
1991 to 1992, Regional Manager from 1993 to 1996, and Vice President, Regional
Development from 1997 to 1998, where Mr. O'Shea was involved in all aspects of
new regional development including the development of regional best practices
and standard regional reporting. Mr. O'Shea was instrumental in developing the
technology consulting practices of four regional offices including establishing
key business partners, developing comprehensive business plans, developing and
mentoring of regional teams, transitioning of previous business practices to the
Actium advanced technology business model and promoting sales growth.
4
<PAGE>
Dean C. Praskach, age 41, has held the positions of Vice President-Finance
and Treasurer of the Company since July 1997, 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 1996.
Mr. Praskach served both the Company and The Hawthorne Group in a consulting
capacity from February 1995 until joining the Company. From September 1989
through July 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 all of the Company's subsidiaries since July 1997 or
upon acquisition, if later, and was named Secretary of all of the Company's
subsidiaries in March 1998 or upon acquisition, if later.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning 1996, 1997 and 1998
compensation of the Chief Executive Officer and the other executive officers of
the Company whose 1998 salary exceeded $100,000 (collectively the "Named
Executives"). Information with respect to 1996 and 1997 compensation is not
given for Mr. Kent as he did not begin service as an executive officer of the
Company until 1998. Information with respect to 1996 compensation is not given
for Mr. Praskach as he did not begin service as an executive officer of the
Company until 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES UNDERLYING
---------------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) OPTIONS (#)
--------------------------- ---- ---------- ----------
<S> <C> <C> <C>
Richard W. Talarico 1998 $164,583 100,000
Chief Executive Officer 1997 150,000 ---
1996 75,000 21,000
Les D. Kent (1) 1998 $160,000 60,000
President
Dean C. Praskach 1998 $102,917 23,500
Vice President-Finance, 1997 91,217 9,500
Treasurer and Secretary
</TABLE>
(1) Mr. Kent's employment was terminated by the Company in January 1999. The
compensation information provided for Mr. Kent does not include a bonus
earned in 1997 but paid in 1998.
EMPLOYMENT AGREEMENTS
During 1998, the Company entered into a new employment agreement with Mr.
Talarico, the term of which commenced May 15, 1998 and will continue through May
15, 2001. The annual salary as set forth in the employment agreement is
$175,000, subject to annual merit increases. In the event that the Company
achieves certain performance criteria, the annual base salary is to be increased
to $225,000. Mr. Talarico is eligible to receive a discretionary bonus with any
annual bonus program to be established by the Compensation Committee and
approved by the Board of Directors. Any bonus awarded shall not exceed Mr.
Talarico's annual base salary for 1998 or 1999 and one and one-half times annual
base salary for 2000.
The employment agreement contains restrictive covenants prohibiting Mr.
Talarico from competing with the Company or soliciting the Company's employees
or customers for another business during the term of the agreement and for a
period of two years after termination or the end of the employment term.
5
<PAGE>
In June 1998, Mr. Talarico was granted options to purchase 100,000 shares
of the Company's common stock in accordance with the terms of the new employment
agreement. The exercise price of $4.50 per share was based on the market price
on the date of the grant. The employment agreement provides for additional
option grants to purchase an additional 100,000 shares of the Company's common
stock on each of January 1, 1999 and January 1, 2000, if shares are then
available under the Company's Stock Plans. Mr. Talarico was awarded options to
purchase 60,000 shares of the Company's common stock on March 1, 1999. The
Company's management determined that an award in excess of 60,000 shares would
not allow an adequate number of available shares for planned option awards to
the Company's senior managers and other employees.
Options to acquire shares of Common Stock granted to Mr. Talarico pursuant
to the agreement under the Company's stock plans will vest on May 15, 2001 or,
if earlier, on the date of termination without cause or 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 the Company as of June 1, 1998,
owns 50% or more of the outstanding Common Stock. The employment agreement also
provides that Mr. Talarico will be entitled to receive following termination of
employment by the Company without cause or contemporaneously with or within
ninety days prior to the occurrence of a change in control of the Company, semi-
monthly severance payments equal to the semi-monthly base salary payment which
he was receiving immediately prior to such termination until the later of the
first anniversary of the termination or May 15, 2001.
The Company entered into an employment agreement with Mr. Praskach, the
term of which commenced November 1, 1997 and will continue through October 31,
2000. Mr. Praskach's current annual salary is $125,000. The employment
agreement permits annual merit increases to salary. Mr. Praskach is also
eligible to receive a discretionary bonus for any annual period subject to
approval by the Board of Directors.
The employment agreement contains restrictive covenants prohibiting Mr.
Praskach from competing with the Company or soliciting the Company's employees
or customers for another business during the term of the agreement and for a
period of eighteen months after termination or the end of the employment term.
Mr. Praskach is eligible to receive stock options as may be awarded from
time to time and under terms similar to options awarded to other employees under
the Company's stock plans. The employment agreement with Mr. Praskach does not,
however, specify any minimum number of options to be awarded during the term of
the agreement. Options granted to date to Mr. Praskach will vest, except as
noted below, at a rate of 20% of each award on each of the first five
anniversary dates of the award.
Pursuant to the employment agreement, the options to acquire shares of
Common Stock granted to Mr. Praskach under the Company's 1996 and 1997 Stock
Plans 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 the Company as of November 1,
1997, owns 40% or more of the outstanding Common Stock. The employment
agreement also provides that Mr. Praskach will be entitled to receive for up to
one year following termination of employment by the Company without cause or
contemporaneously with the occurrence of a change in control of the Company,
semi-monthly severance payments equal to the semi-monthly base salary payment
which he was receiving immediately prior to such termination until the earlier
of the first anniversary of the termination or the date on which Mr. Praskach
obtains other full-time employment.
TERMINATION OF SERVICES UNDER EMPLOYMENT AGREEMENT
The Company elected to terminate the services of Les D. Kent, its former
President, on January 12, 1999. Under the terms of the Company's employment
agreement with Mr. Kent, which became effective as of August 15, 1998, severance
payments of $200,000 will be made in equal monthly installments of $16,667 over
a one year period ending in January 2000. In 1998, Mr. Kent received options to
purchase 60,000 shares of the Company's common stock under the terms of the
Company's 1996 Stock Plan. Such award was made with an exercise price in excess
of market price as of the date of the option grant. The options awarded were to
have vested at a rate of 20% on each of the first five anniversaries of the
effective date of the employment agreement or on December 31, 2001 if the
employment agreement was not renewed. However, under the terms of the
employment agreement, the options vested immediately upon termination.
The employment agreement contains restrictive covenants which prohibit Mr.
Kent from competing with the Company or soliciting the Company's employees or
customers for another business for a period of two years after termination.
6
<PAGE>
STOCK PLANS
In October 1996, the Board of Directors adopted the 1996 Stock Plan, and in
April 1997 the Board of Directors adopted the 1997 Stock Plan which was approved
by the Company's stockholders in May 1997. The Board of Directors subsequently
approved re-issuance of forfeited shares under the 1996 and 1997 Plans. In
September 1998, the Board of Directors adopted the 1998 Stock Plan, which was
approved the Company's stockholders in December 1998. All of the 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. 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). The Compensation
Committee is responsible for making recommendations to the Board of Directors
concerning executive compensation, including the award of stock options.
At December 31, 1998, 5,392 and 9,000 shares remained available for future
grants under the 1996 Plan and the 1997 Plan, respectively. No awards were made
under the 1998 Stock Plan in 1998, therefore, at December 31, 1998, all 375,000
shares approved for issuance under the 1998 Stock Plan remained available for
future grants.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
to the Named Executives during 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
----------------- ----------------
NUMBER OF % OF TOTAL
--------- ----------
SECURITIES OPTIONS GRANTED EXERCISE OR
---------- --------------- -----------
UNDERLYING TO EMPLOYEES IN BASE PRICE GRANT DATE PRESENT
---------- --------------- ---------- ------------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) EXPIRATION DATE VALUE $ (1)
---- --------------- ------------ ------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Richard W. Talarico 100,000 (2) 27.8 % $4.50 6/1/05 $253,000
Les D. Kent 60,000 (3) 16.7 % $4.63 11/6/05 $134,400
Dean C. Praskach 23,500 (4) 6.5 % $4.38 6/25/05 $ 57,575
</TABLE>
(1) The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions for 1998
grants to Named Executives.
<TABLE>
<S>
Risk-free interest rate: <C>
Options granted to Richard W. Talarico 5.6 %
Options granted to Les D. Kent 4.9 %
Options granted to Dean C. Praskach 5.5 %
Expected dividend yield 0.0 %
Expected life of options 7 yrs.
Expected volatility rate 46.0 %
</TABLE>
No adjustments were made for non-transferability or risk of forfeiture.
(2) These options to acquire shares of Common Stock granted to Mr. Talarico
will vest on the earlier to occur of May 15, 2001 or on the date of
termination of Mr. Talarico's employment without cause or 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 the
Company as of June 1, 1998, owns 50% or more of the outstanding Common
Stock.
7
<PAGE>
(3) These options vested January 12, 1999 upon termination of services in
accordance with terms of the Company's employment agreement with Mr. Kent.
The options awarded were originally to have vested at a rate of 20% on each
of the first five anniversaries of the effective date of the employment
agreement or on December 31, 2001, if the employment agreement was not
renewed.
(4) These options granted to Mr. Praskach will vest at a rate of 20% on each of
the first five anniversary dates of the award, or earlier if not already
vested, 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 the Company as of November 1, 1997, owns 40% or
more of the outstanding Common Stock.
FISCAL YEAR END OPTION VALUES
The following table provides information concerning stock options held by
the Named Executives at December 31, 1998. No options were exercised in 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
-------------------------------- ----------------------------
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL YEAR
----------------------------- ---------------------------
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 --- --- 8,400 112,600 --- ---
Les D. Kent (2) --- --- --- 60,000 --- ---
Dean C. Praskach --- --- 3,900 34,100 --- ---
</TABLE>
(1) Based on the December 31, 1998 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 various option exercise prices per share, the options were
not in-the-money at December 31, 1998.
(2) The Company terminated Mr. Kent's services on January 12, 1999 in accordance
with the terms of its employment agreement with Mr. Kent. The options
awarded to Mr. Kent vested immediately upon termination.
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.
Anthony L. Bucci and William C. Kavan are currently members of the Compensation
Committee. The Compensation Committee met two times during 1998.
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.
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 basic elements of each executive officer's 1998 compensation were
salary and incentive compensation in the form of options to purchase shares of
the Company's Common Stock under the Company's Stock Plans. 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. Although the Committee believes
8
<PAGE>
that the performance of the Company improved sufficiently during 1998 to warrant
the payment of bonuses to the Company's executive officers, no bonuses were paid
to the Company's executive officers during 1998. The Company's management
determined that at the Company's stage of development during 1998, the resources
were better utilized elsewhere.
It is the Committee's intention to continue to utilize forms of
compensation for the Company's executive officers that favor long-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 new employment
agreement with the Company, his annual base salary was increased from $150,000
to $175,000 in June of 1998. Mr. Talarico was also granted options to purchase
100,000 shares of the Company's Common Stock in June of 1998. The increase in
salary and the option award were granted giving consideration to Mr. Talarico's
contributions to stabilizing the Company's cash position during the latter part
of 1997, refocusing the Company toward information technology consulting
services and for positioning the Company for positive operating income in the
middle of 1998. Consistent with the desire to provide incentive compensation,
the options granted to Mr. Talarico vest on May 15, 2001. Options to purchase a
total of 83,500 shares of the Company's Common Stock were awarded to the other
two executive officers of the Company during 1998. The options were to vest 20%
each year beginning on the first anniversary of the date of the grant. However,
the option to purchase 60,000 shares granted to the Company's then President
vested immediately upon termination of the President's employment in January
1999.
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, 1997 Stock Plan and 1998 Stock Plan. As of March 31, 1998, 179
employees of the Company and its subsidiaries were participants under these
Plans.
Compensation Committee:
Anthony L. Bucci
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. Messrs. Kavan
and Roddey each received grants to acquire 5,000 shares of Common Stock at the
exercise price of $4.25 per share on November 10, 1998. Paul J. Pasquarelli, a
former director, 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 are 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 William C. Kavan and Anthony L.
Bucci. James C. Roddey also served on the Compensation Committee during a
portion of 1998. Mr. Richard W. Talarico, Chairman and Chief Executive Officer
of the Company and a director and executive officer of each of the Company's
subsidiaries, is a partner in The Hawthorne Group 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 1998, 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. Mr. Talarico and Mr. Roddey were each
shareholders of DirecTeam Merchandising, LLC, of which Mr. Talarico is an
officer. None of these companies has a compensation
9
<PAGE>
committee of its board of directors. Mr. Roddey has indicated an intention to
excuse himself from any vote of the Board of Directors concerning Mr. Talarico's
compensation.
In respect of the fiscal year ended December 31, 1998, the Company made
payments to PMI in the amount of approximately $13,000, for the production of
videos and other visual media for use with the Company's interactive television
system. Messrs. Henry Posner Jr., Thomas D. Wright, Roddey and Talarico are
shareholders of PMI. Messrs. Posner and Wright are each beneficial owners of
greater than five percent of the Company's outstanding Common Stock. The
Company believes that such transactions between it and PMI 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"), 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 provided for up to $2.4 million in contingent payments.
Messrs. Posner, Wright, Talarico and Roddey were SportsWave stockholders prior
to the Company's acquisition. 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 would have been 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). In connection with the
Company's sale of SportsWave, on October 6, 1998, the Company paid $318,200,
$197,800, $12,000 and $30,000 to Messrs. Posner, Wright, Talarico and Roddey,
respectively, and $42,000 to the other former SportsWave stockholders in full
settlement of any claims to contingent earn-out payments that may have been due
in the future.
During the fiscal year ended December 31, 1998, Allin Corporation of
California, a subsidiary of the Company, provided computer network consulting
services to Hawthorne, Allegheny Media ("AM"), and WHS. Fees charged Hawthorne,
AM and WHS were approximately $9,000, $1,000 and $12,000, respectively, for the
fiscal year ended December 31, 1998. Mr. Posner, Mr. Wright and two of Mr.
Posner's sons are shareholders of Hawthorne. Mr. Roddey and Mr. Wright have
ownership interests in AM. Mr. Posner has an ownership interest in a company
which is a shareholder of 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 of Bantry during 1998. Messrs. Posner and
Wright also have ownership interests in Bantry. The Company believes its fees
are on terms substantially similar to those offered non-affiliated parties.
During the fiscal year ended December 31, 1998, Allin Network Products,
Inc., a subsidiary of the Company, sold computer hardware and components to The
Hawthorne Group and WHS. Amounts charged The Hawthorne Group and WHS for the
fiscal year ended December 31, 1998 were approximately $2,000 and $29,000,
respectively. The Company believes its charges are on terms substantially
similar to those offered non-affiliated parties.
During the fiscal year ended December 31, 1998, AM utilized a portion of
the Company's office space under a short-term occupancy arrangement. Occupancy
charges were approximately $2,000.
Certain stockholders of the Company, including Messrs. Posner, Wright,
Roddey, Talarico, and Brian K. Blair, a director and former officer of the
Company, have certain rights under a registration rights agreement to require
the Company, subject to certain limitations, to register under the Securities
Act of 1933, as amended ("the "Securities Act"), certain of their shares of
Common Stock for public offering and sale.
In August of 1998, each of Messrs. Talarico, Kavan, Roddey, Posner and
Wright purchased shares of the Company's Series B Preferred Stock and related
warrants. Messrs. Talarico, Kavan, Roddey, Posner and Wright purchased 300,
750, 100, 1,400 and 200 shares of Series B Preferred Stock, respectively. In
August 1998, the Company received $300,000, $750,000, $100,000, $1,400,000 and
$200,000 from Messrs. Talarico, Kavan, Roddey, Posner and Wright, respectively
for the Series B Preferred Stock and related warrants. If the Company does
issue any shares of Common Stock upon conversion of the Series B Preferred Stock
or upon exercise of the warrants, the holders of such shares will have certain
rights to require the Company to register the shares for resale under the
Securities Act.
10
<PAGE>
PERFORMANCE COMPARISON
The following graph compares the cumulative total return on the Company's
Common Stock, the Nasdaq Stock Market Index, an index of Nasdaq Computer & Data
Processing Services Stocks 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, 1998. 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, the index of Nasdaq Computer & Data Processing Services
Stocks and the index of Nasdaq Telecommunications Stocks, 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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NOV 1, 1996 DEC 31, 1996 DEC 31, 1997 DEC 31, 1998
<S> <C> <C> <C> <C>
Allin Corporation Common Stock (1)(3) $100 $130 $ 26 $ 26
The Nasdaq Stock Market Index (2)(3) $100 $106 $130 $183
Index of Nasdaq Computer & Data Processing
Services Stocks (2)(3) $100 $106 $130 $233
Index of Nasdaq Telecommunications Stocks (2)(3)(4) $100 $104 $155 $253
</TABLE>
(1) Based on the initial offering price of Allin Corporation 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, 1997
and 1998.
(2) Based on the closing price of the respective index on the last trading day
of October 1996 and December 1996, 1997 and 1998.
(3) Return assumes that all dividends are reinvested. The Company has never
paid any dividends on its Common Stock.
(4) Beginning with this proxy statement the Company is changing the comparative
performance data to include the index of Nasdaq Computer & Data Processing
Services Stocks. The index of Nasdaq Telecommunications Stocks is also
presented as it was last year, but the Company does not expect to include
such data in its proxy statement relating to the 2000 Annual Meeting of
Shareholders. This change is being made to reflect the Company's change of
strategic focus from media and communications to information technology
consulting services.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table presents certain information as of March 12, 1999 as to
the beneficial ownership of the Common Stock of the Company by 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. The percentages in the table are rounded to
the nearest tenth of a percent.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF STOCKHOLDER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
- ------------------------------- ------------------------ ---------------------
<S> <C> <C>
Henry Posner, Jr. (2) 2,001,211 29.2%
500 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
Emanuel J. Friedman (3) 1,122,554 18.7%
1001 19th Street North
Arlington, VA 22209
James S. Kelly, Jr. (4) 724,675 12.1%
100 Trotwood Drive
Monroeville, PA 15146
William C. Kavan (5) 569,624 8.8%
100 Garden City Plaza
Garden City, NY 11530
Friedman, Billings, Ramsey Group, Inc. and 521,554 8.7%
Orkney Holdings, Inc. (6)
1001 19th Street North
Arlington, VA 22209
Dimensional Fund Advisors (7) 396,300 6.6%
1299 Ocean Avenue, 11/th/ Floor
Santa Monica, CA 90401
Continental Casualty Company (8) 340,000 5.7%
CNA Plaza
Chicago, IL 60685
Kindy French (9) 325,000 5.4%
1001 19/th/ Street North
Arlington, VA 22209
Les D. Kent (10) 323,333 5.3%
2235 Melvin Road
Oakland, CA 94602
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF STOCKHOLDER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
- ------------------------------- ------------------------ --------------------
<S> <C> <C>
Thomas D. Wright (11) 298,813 4.9%
500 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
Richard W. Talarico (12) 287,032 4.6%
400 Greentree Commons
381 Mansfield Ave
Pittsburgh, PA 15220
</TABLE>
_______________________
(1) The number of shares and the percent of the class in the table and these
notes to the table have been calculated in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
assume, on a stockholder by stockholder basis, that each stockholder has
converted all securities owned by such stockholder that are convertible
into Common Stock at the option of the holder currently or within 60 days
of March 12, 1999, and that no other stockholder so converts. The number of
shares of Common Stock that may be acquired upon conversion of the
Company's Series B Preferred Stock and exercise of the related warrants are
also included in the table. Series B Preferred Stock is convertible into
the Company's Common Stock at a rate of 85% of the closing market price on
the date prior to conversion, subject to a minimum conversion rate of $2.00
per common share and a maximum conversion rate of $3.6125 per common share.
The number of shares included for conversion of the Series B Preferred
Stock is calculated based on a conversion rate of $2.62625 per common
share, which equals 85% of the closing sale price of the Company's Common
Stock on March 12, 1999 as reported on the Nasdaq National Market tier of
The Nasdaq Stock Market. Information is provided in the footnotes below
for each holder of Series B Preferred Stock as to the number of shares
included in the table for conversion of Series B Preferred Stock and the
minimum and maximum number of shares of Common Stock that could be acquired
upon conversion.
(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. Includes 329,412 shares of Common Stock
which may be acquired by exercise of warrants. Mr. Posner owns 1,400
shares of Series B Preferred Stock. The table includes 527,059 shares of
Common Stock for conversion of the Series B Preferred Stock. The Series B
Preferred Stock is convertible into at least 387,543, but no more than
700,000, shares of Common Stock. Assuming that the Series B Preferred
Stock became convertible into the maximum 700,000 shares of Common Stock,
Mr. Posner would be deemed to beneficially own an aggregate of 2,174,152
shares of Common Stock representing approximately 31.0% of the Common Stock
outstanding.
(3) As reported on Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on February 17, 1999, 601,000 of the shares
indicated are beneficially owned by Mr. Friedman, certain of his family
members and a private family foundation for which Mr. Friedman serves as
trustee. Mr. Friedman has sole voting and dispositive power for these
shares. Mr. Friedman may be deemed to indirectly beneficially own and
share voting and dispositive power with respect to 521,554 shares directly
owned by Friedman, Billings, Ramsey Group, Inc. ("FBRG") by virtue of his
control position as Chairman and Chief Executive Officer of FBRG. Mr.
Friedman disclaims beneficial ownership of such shares. Mr. Friedman is
the husband of Kindy French, a beneficial owner of more than five percent
of the outstanding Common Stock of the Company. The number of shares shown
assumes there has been no change in the number of shares beneficially owned
from the number of shares reported as being beneficially owned in the
Schedule 13G.
(4) Does not include shares which may be issued upon conversion of a note
payable of the Company to Mr. Kelly in the principal amount of $2,000,000
because the note is not convertible within sixty days of March 12, 1999.
(5) Includes 10,000 shares of Common Stock which may be acquired by exercise
of options and 176,471 shares of Common Stock which may be acquired by
exercise of warrants. Mr. Kavan owns 750 shares of the Series B Preferred
13
<PAGE>
Stock. The table includes 282,353 shares of Common Stock for conversion of
the Series B Preferred Stock. The Series B Preferred Stock is convertible
into at least 207,612, but no more than 375,000, shares of Common Stock.
Assuming that the Series B Preferred Stock became convertible into the
maximum 375,000 shares of Common Stock, Mr. Kavan would be deemed to
beneficially own an aggregate of 662,271 shares of Common Stock
representing approximately 10.1% of the Common Stock outstanding.
(6) As reported on Schedule 13G filed with the SEC on February 17, 1999, each
of Friedman, Billings, Ramsey Group, Inc. and Orkney Holdings, Inc., a
wholly owned subsidiary of FBRG, have sole voting and dispositive power
with respect to the shares indicated. The Schedule 13G reports that each
of Eric F. Billings, Emanuel J. Friedman, and W. Russell Ramsey share
voting and dispositive power with respect to the shares. The number of
shares shown assumes that there has been no change in the number of shares
beneficially owned from the number of shares reported as being beneficially
owned in the Schedule 13G..
(7) As reported on Schedule 13G filed with the SEC on February 11, 1999,
Dimensional Fund Advisors, Inc., an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, has sole voting and
investment power over the shares indicated, but Dimensional Fund Advisors,
Inc. disclaims beneficial ownership of the shares. The number of shares
assumes that there has been no change in the number of shares beneficially
owned from the number of shares reported as being beneficially owned in the
Schedule 13G.
(8) 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. The report states that, 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. As reported by Nasdaq-Online on March 12, 1999
there has been no change in the number of shares beneficially owned from
the number of shares reported as being beneficially owned in the Schedule
13G. The number of shares shown assumes that there has been no change in
the number of shares owned since this date.
(9) Information as to the number of shares owned by Ms. French has been
obtained from the Schedule 13G filed with the SEC by Ms. French on February
16, 1999. The number of shares shown assumes there has been no change in
the number of shares beneficially owned from the number of shares reported
as being beneficially owned in the Schedule 13G. Ms. French is the wife of
Emanuel J. Friedman, the Chairman of FBRG. Both Mr. Friedman and FBRG are
beneficial owners of more than five percent of the outstanding Common Stock
of the Company. See Notes (3) and (6) above.
(10) Includes vested options to acquire 60,000 shares of the Company's Common
Stock.
(11) Does not include 45,000 shares held by Mr. Wright's spouse, 5,000 shares in
her own name and 40,000 shares as trustee for various trusts. Includes
47,059 shares of Common Stock which may be acquired by exercise of
warrants. Mr. Wright owns 200 shares of Series B Preferred Stock. The
table includes 75,294 shares of Common Stock for conversion of the Series B
Preferred Stock. The Series B Preferred Stock is convertible into at least
55,363, but no more than 100,000, shares of Common Stock. Assuming that
the Series B Preferred Stock became convertible into the maximum 100,000
shares of Common Stock, Mr. Wright would be deemed to beneficially own an
aggregate of 323,519 shares of Common Stock representing approximately 5.3%
of the Common Stock outstanding.
(12) Includes 8,400 shares of Common Stock which may be acquired by exercise of
options and 70,588 shares of Common Stock which may be acquired by exercise
of warrants. Mr. Talarico owns 300 shares of the Series B Preferred Stock.
The table includes 112,941 shares of Common Stock for conversion of Series
B Preferred Stock. The Series B Preferred Stock is convertible into at
least 83,044, but no more than 150,000, shares of Common Stock. Assuming
that the Series B Preferred Stock became convertible into the maximum
150,000 shares of Common Stock, Mr. Talarico would be deemed to
beneficially own an aggregate of 324,091 shares of Common Stock
representing approximately 5.2% of the Common Stock outstanding.
14
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table presents certain information as of March 12, 1999 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. The
percentages in the table are rounded to the nearest tenth of a percent.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Stockholder Beneficial Ownership (1) Percent of Class (1)
------------------- ------------------------ --------------------
<S> <C> <C>
Richard W. Talarico (2) 287,032 4.6%
Allin Corporation
400 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
Les D. Kent (3) 323,333 5.3%
2235 Melvin Road
Oakland, CA 94602
Dean C. Praskach 3,900 *
Allin Corporation
400 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
Brian K. Blair 177,200 3.0%
Com-Tek
13220 State Route 7
P.O. Box 2777
East Liverpool, OH 43920
Anthony L. Bucci --- *
Marc Advertising
Four Station Square,
Suite 500
Pittsburgh, PA 15219
William C. Kavan (4) 569,624 8.8%
100 Garden City Plaza
PO Box 9366
Garden City, NY 11530
James S. Kelly, Jr. (5) 724,675 12.1%
100 Trotwood Drive
Monroeville, PA 15146
James C. Roddey (6) 163,779 2.7%
200 Greentree Commons
381 Mansfield Avenue
Pittsburgh, PA 15220
All directors and executive officers, as
a group (8 persons) (3) 1,926,210 28.6%
</TABLE>
_______________________
15
<PAGE>
* Less than one percent
(1) The number of shares and the percent of the class in the table and these
notes to the table have been calculated in accordance with Rule 13d-3 under
the Exchange Act, and assume, on a stockholder by stockholder basis, that
each stockholder has converted all securities owned by such stockholder
that are convertible into Common Stock at the option of the holder
currently or within 60 days of March 12, 1999, and that no other
stockholder so converts. The numbers and percentages of shares owned
assume that options that are currently exercisable or exercisable within
sixty days of March 12, 1999 had been exercised, as follows: Mr. Talarico
- 8,400 shares; Mr. Kent - 60,000 shares; Mr. Praskach - 3,900 shares,
Messrs. Kavan and Roddey - 10,000 shares each; and all directors and
executive officers as a group - 32,300 shares (not including the options
held by Mr. Kent). The number of shares of Common Stock that may be
acquired upon conversion of the Company's Series B Preferred Stock and
exercise of the related warrants are also included in the table. Series B
Preferred Stock is convertible into the Company's Common Stock at a rate of
85% of the closing market price on the date prior to conversion, subject to
a minimum conversion rate of $2.00 per common share and a maximum
conversion rate of $3.6125 per common share. The number of shares included
for conversion of the Series B Preferred Stock is calculated based on a
conversion rate of $2.62625 per common share, which equals 85% of the
closing sale price of the Company's Common Stock on March 12, 1999 as
reported on the Nasdaq National Market tier of The Nasdaq Stock Market.
Information is provided in the footnotes below for each holder of Series B
Preferred Stock as to the number of shares included in the table for
conversion of Series B Preferred Stock and the minimum and maximum number
of shares of Common Stock that could be acquired upon conversion.
(2) Includes 70,588 shares of Common Stock which may be acquired by exercise of
warrants. Mr.Talarico owns 300 shares of Series B Preferred Stock,
representing 10.9% of the Series B Preferred Stock outstanding. The table
includes 112,941 shares of Common Stock for conversion of the Series B
Preferred Stock. The Series B Preferred Stock is convertible into at least
83,044, but no more than 150,000, shares of Common Stock. Assuming that
the Series B Preferred Stock became convertible into the maximum 150,000
shares of Common Stock, Mr. Talarico would be deemed to beneficially own an
aggregate of 324,091 shares of Common Stock representing approximately 5.2%
of the Common Stock outstanding. Mr. Talarico also owns 588 shares of the
Company's Series A Preferred Stock, representing 2.4% of the Series A
Preferred Stock outstanding.
(3) Mr. Kent is no longer an executive officer of the Company.
(4) Includes 176,471 shares of Common Stock which may be acquired by exercise
of warrants. Mr. Kavan owns 750 shares of Series B Preferred Stock,
representing 27.3% of the Series B Preferred Stock outstanding. The table
includes 282,353 shares of Common Stock for conversion of the Series B
Preferred Stock. The Series B Preferred Stock is convertible into at least
207,612, but no more than 375,000, shares of Common Stock. Assuming that
the Series B Preferred Stock became convertible into the maximum 375,000
shares of Common Stock, Mr. Kavan would be deemed to beneficially own an
aggregate of 662,271 shares of Common Stock representing approximately
10.1% of the Common Stock outstanding. Mr. Kavan also owns 10,000 shares
of the Company's Series A Preferred Stock, representing 40.0% of the Series
A Preferred Stock outstanding.
(5) Does not include shares which may be issued upon conversion of a note
payable of the Company to Mr. Kelly in the principal amount of $2,000,000
because the note is not convertible within sixty days of March 12, 1999.
(6) Includes 2,000 shares owned by Mr. Roddey's wife and 23,529 shares of
Common Stock which may be acquired by exercise of warrants. Mr. Roddey
owns 100 shares of Series B Preferred Stock, representing 3.6% of the
Series B Preferred Stock outstanding. The table includes 37,647 shares of
Common Stock for conversion of the Series B Preferred Stock. The Series B
Preferred Stock is convertible into at least 27,681, but no more than
50,000, shares of Common Stock. Assuming that the Series B Preferred Stock
became convertible into the maximum 50,000 shares of Common Stock, Mr.
Roddey would be deemed to beneficially own an aggregate of 176,132 shares
of Common Stock representing approximately 2.90% of the Common Stock
outstanding. Mr. Roddey also owns 588 shares of the Company's Series A
Preferred Stock, representing 2.4% of the Series A Preferred Stock
outstanding.
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ARRANGEMENTS INVOLVING ALLIN CONSULTING-PENNSYLVANIA
The acquisition of Allin Consulting of Pennsylvania, Inc. in August 1998
included two promissory notes issued by the Company in the amounts of $6.2 and
$2.0 million, respectively, to James S. Kelly, Jr., the former majority
shareholder of Allin Consulting of Pennsylvania, Inc. Mr. Kelly is a holder of
greater than five percent of the Company's outstanding common stock and a
director of the Company. The secured promissory note for $6.2 million bore
interest at 5% per annum and was paid in its entirety in October 1998. The
secured promissory note for $2.0 million bears interest at 6% per annum and
matures August 13, 2000. The $2.0 million secured promissory note will be
convertible into shares of the Company's common stock if not repaid on or before
maturity.
ARRANGEMENTS INVOLVING ALLIN CONSULTING-CALIFORNIA AND ALLIN NETWORK
In November 1996, the Company acquired Allin Corporation of California.
The consideration included $2.0 million in cash and $3.2 million in the
Company's Common Stock. In addition, the agreement governing the acquisition
provided for up to $2.8 million in contingent payments. In November 1998, the
Company and Les D. Kent, a holder of greater than five percent of the Company's
outstanding Common Stock and the then President of the Company, reached
agreement on an amendment to modify the terms of a promissory note for the
contingent payments. Under the amendment, the amount of the payment due to Mr.
Kent has been fixed at $2,000,000. The amended note provides for principal
payments of $1,000,000 plus any accrued interest due on April 15, 2000 and
October 15, 2000. The Company may, however, defer payment of principal at its
option until April 15, 2005. The amended note provides for interest at the rate
of 7% per annum from the acquisition date of November 6, 1996. Mr. Kent was the
sole stockholder of Allin Corporation of California prior to the acquisition.
Allin Network made payments of approximately $27,000 under a note payable
due Les D. Kent during the fiscal year ended December 31, 1998.
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 $295,000 during the fiscal year ended
December 31, 1998. Henry Posner, Jr., Thomas D. Wright and two of Mr. Posner's
sons and his spouse each own an indirect equity interest in EOA. Messrs. Posner
and Wright are beneficial holders of greater than five percent of the Company's
outstanding Common Stock. In late 1997 and early 1998, agreements were 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, 1998, minimum lease
commitments were approximately $843,000 for the period from January 1, 1998 to
January 31, 2002. The Company believes that rental payments 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, 1998, Allin Corporation of
California made payments of approximately $65,000 to Les D. Kent for the lease
of office space under a month-to-month lease arrangement. The Company believes
that rental payments under the lease were on terms as favorable to the Company
as could have been obtained from an unaffiliated party.
LOAN TO OFFICER AND DIRECTOR
During March 1997, the Company made a loan in the amount of $130,000 to R.
Daniel Foreman, then the 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. 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 were forgiven. The Company also made payments to Mr. Foreman in the
aggregate amount of $225,000, plus accrued vacation pay, pursuant to the
separation agreement.
17
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MINORITY INVESTMENT IN CORPORATION
In March 1998, the Company 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, Rhino Communications Corporation ("RCC"), which thereafter began
operations in this market. Mr. Foreman, a former officer and director of the
Company, is a minority owner of RCC. Henry Posner, Jr. and William C. Kavan, a
holder of greater than five percent of the Company's outstanding Common Stock
and a director of the Company, also have an equity interest in RCC. The value
placed on the Company's initial equity interest, $100,000, approximated the
value of the assets contributed.
SEPARATION AGREEMENTS
In connection with his resignation as an executive officer of the Company
in February 1998, the Company entered into a separation agreement with Brian K.
Blair. Under the separation agreement, the Company was obligated to make
aggregate payments to Mr. Blair in the amount of $225,000 plus accrued vacation
pay, and to provide certain consulting services to Mr. Blair. Mr. Blair remains
subject to restrictive covenants prohibiting him from competing with the Company
for a period of two years following his resignation. Mr. Blair has continued as
a director of the Company. During 1998, the Company paid approximately $212,000
of the amounts due Mr. Blair under the separation agreement.
In January 1999, the Company elected to terminate the services of its then
President, Les D. Kent. Mr. Kent will receive severance payments in accordance
with the terms of his employment agreement. See "Executive Compensation -
Termination of Services Under Employment Agreement".
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, 1999.
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, 1999.
18
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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 requires the Company's directors and
executive officers and any person who owns more than ten percent of the
Company's Common Stock to file with the SEC initial reports of ownership and
reports of changes in ownership of the Company's Common Stock and other equity
securities. 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 representations that no other reports were required
during or with respect to the year ended December 31, 1998, all such Section
16(a) filing requirements were met.
ANNUAL REPORT
The Company has enclosed its Annual Report for the year ended December 31,
1998 with this proxy statement, which includes the Company's 1998 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.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company, 400 Greentree Commons,
381 Mansfield Avenue, Pittsburgh, Pennsylvania 15220-2751, no later than
December 14, 1999 in order to be included in the proxy materials for such
meeting. 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 2000 proxy materials.
All other stockholder proposals to be presented at the 2000 Annual Meeting of
Stockholders must be submitted in writing to the Secretary of the Company at the
Company's principal offices no later than February 14, 2000, 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.
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.
19
<PAGE>
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,
facsimile, 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
April 12, 1999
20
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ALLIN CORPORATION
PROXY
This Proxy Is Solicited On Behalf Of The Board of Directors
Dean C. Praskach and Timothy P. O'Shea, or either of them, each with power
of substitution, are hereby authorized to vote all stock of Allin Corporation
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Allin Corporation to be held on Thursday,
May 13, 1999, 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, Brian K. Blair, Anthony L. Bucci, William C.
Kavan, James S. Kelly, Jr. 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
3.In their discretion, on such other business as may properly come before the
meeting.
(Continued on other side)
<PAGE>
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: ............... , 1999
.............................
(Signature)
.............................
(Signature, if held jointly)
Please Mark, Sign, Date, and Return this Proxy Card Promptly Using the
Enclosed Envelope.
