<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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-2.
</TABLE>
All Communications Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(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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<PAGE> 2
ALL COMMUNICATIONS CORPORATION
May 15, 1998
To Our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the Annual Meeting of Stockholders 1998 (the "Annual Meeting") of All
Communications Corporation (the "Company"), which will be held at 9:00 a.m.
local time on Friday, June 19, 1998 at the Holiday Inn, 304 Route 22 West,
Springfield, New Jersey, 07081.
At the Annual Meeting, you will be asked to consider and vote on the
following proposals:
1. To elect one Class I Director for a two year term and two Class II
Directors for a three year term each;
2. To amend the Company's Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 500,000 to 1,500,000;
3. To ratify the appointment of BDO Seidman, LLP, as independent
auditors of the Company for the fiscal year ending December 31, 1998; and;
4. To act upon such other business as may properly come before the
Annual Meeting:
It is important that your shares be represented at the Annual Meeting,
whether or not you are able to attend. Accordingly, you are urged to sign, date
and mail the enclosed proxy promptly.
Sincerely,
RICHARD REISS
Chairman, President and Chief
Executive Officer
<PAGE> 3
ALL COMMUNICATIONS CORPORATION
225 LONG AVENUE
HILLSIDE, NEW JERSEY 07205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 1998
To the Stockholders of All Communications Corporation:
NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders (the "Annual
Meeting") of All Communications Corporation, a New Jersey corporation (the
"Company"), will be held on Friday, June 19, 1998 at 9:00 a.m., local time at
the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081, for the
purpose of considering and acting upon the following:
1. The election of one director to serve a two year term as Class I
Director and the election of two directors to serve a three year term each
as Class II Directors;
2. A proposal to amend the Company's Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance from 500,000 to
1,500,000;
3. Ratification of the appointment of BDO Seidman, LLP as the
Company's independent accountants for the fiscal year ending December 31,
1998; and
4. The transaction of such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 7, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. Accordingly, only holders of Common Stock of
record on such date will be entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
ANDREA GRASSO
Secretary
Hillside, New Jersey
May 15, 1998
It is important that your shares be represented at this meeting in order
that a quorum may be assured. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, YOU ARE URGED TO DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED CARD IN THE
POSTAGE PREPAID ENVELOPE PROVIDED AND TO DO SO IN ADEQUATE TIME FOR YOUR
DIRECTIONS TO BE RECEIVED AND TABULATED PRIOR TO THE SCHEDULED MEETING.
<PAGE> 4
ALL COMMUNICATIONS CORPORATION
225 LONG AVENUE
HILLSIDE, NEW JERSEY 07205
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JUNE 19, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of All Communications
Corporation (the "Company"), a New Jersey corporation, to be voted at the 1998
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Holiday Inn, 304 Route 22 West, Springfield New Jersey, on Friday, June
19, 1998, at 9:00 a.m. local time, or at any postponement or adjournment
thereof. This Proxy Statement, the Notice of Annual Meeting and the accompanying
form of proxy are first being mailed to stockholders on or about May 15, 1998.
Only holders of record of the Company's common stock, no par value ("Common
Stock") at the close of business on May 7, 1998 (the "Record Date") are entitled
to vote on the matters to be presented at the Annual Meeting. The number of
shares of Common Stock outstanding on such date and entitled to vote was
4,910,000. Holders of Common Stock are entitled to one vote on each matter to be
voted upon by the stockholders at the Annual Meeting for each share held.
At the Annual Meeting, stockholders will be asked to consider and vote upon
(1) the election of one director to serve a two year term as Class I Director
and two directors each to serve a three year term as Class II Directors; (2) a
proposal to amend the Company's Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance from 500,000 to 1,500,000; and (3)
the ratification of the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 (the
"Independent Auditors Proposal"). At the Annual Meeting, stockholders may also
be asked to consider and take action with respect to such other matters as may
properly come before the Annual Meeting.
QUORUM AND VOTE REQUIREMENTS
The presence, in person or by proxy, of holders of record of a majority of
the shares of Common Stock issued and outstanding and entitled to vote is
required for a quorum to transact business at the Annual Meeting, but if a
quorum should not be present, the Annual Meeting may be adjourned from time to
time until a quorum is obtained. Proxies submitted with votes withheld for the
election of directors, abstentions and broker non-votes are included in
determining whether a quorum is present. Directors are elected by a plurality of
votes cast. Approval of the proposal to amend the Company's Stock Option Plan
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy, and entitled to vote at the Annual
Meeting. Approval of the Independent Auditors Proposal and all other matters to
properly come before the Meeting requires the affirmative vote of a majority of
the votes cast by holders of Common Stock entitled to vote at the Annual
Meeting. Abstentions have the effect of votes against the proposal to amend the
Company's Stock Option Plan and are not counted in tabulating the number of
votes cast for the Independent Auditors' Proposal and any other matters properly
brought before the Annual Meeting. Votes withhheld have no impact on the
election of Directors except to reduce the number of votes for the nominees.
Broker non-votes are counted only for purposes of determining whether a quorum
is present and, therefore, will not be included in vote totals and will have no
effect on the outcome of the votes on all proposals to be acted upon at the
Annual Meeting.
<PAGE> 5
SOLICITATION AND REVOCATION
All Common Stock represented by properly executed proxies which are
returned and not revoked prior to the time of the Annual Meeting will be voted
in accordance with the instructions, if any, given thereon. If no instructions
are provided in an executed proxy, it will be voted (1) in favor of the nominees
for election as directors named below; (2) FOR the proposal to amend the Stock
Option Plan; (3) FOR the Independent Auditors Proposal, and in accordance with
the proxyholder's discretion as to any other business raised at the Annual
Meeting. Any stockholder who executes a proxy may revoke it at any time before
it is voted by delivering to the Company a written statement revoking such
proxy, by executing and delivering a later dated proxy, or by voting in person
at the Annual Meeting. Attendance at the Annual Meeting by a stockholder who has
executed and delivered a proxy to the Company shall not in and of itself
constitute a revocation of such proxy.
The Company will bear its own cost of the solicitation of proxies. Proxies
will be solicited initially by mail. Further solicitation may be made by
directors, officers and employees of the Company personally, by telephone or
otherwise, but any such person will not be specifically compensated for such
services. The Company also intends to make, through banks, brokers or other
persons, a solicitation of proxies of beneficial holders of the Common Stock.
Upon request, the Company will reimburse brokers, dealers, banks and similar
entities acting as nominees for reasonable expenses incurred in forwarding
copies of the proxy materials relating to the Annual Meeting to the beneficial
owners of Common Stock which such persons hold of record.
PROPOSAL NO. 1. ELECTION OF DIRECTORS
The following table sets forth certain information with respect to the
nominee for Class I Director for a two year term expiring at the 2000 Annual
Meeting of Stockholders and the two nominees for Class II Directors for a three
year term each expiring at the 2001 Annual Meeting of Stockholders for election
to the Company's Board of Directors. The Board of Directors knows of no reason
why any of its nominees will be unable or will refuse to accept election. If any
nominee becomes unable or refuses to accept election, the Board of Directors
will either reduce the number of directors to be elected or select a substitute
nominee. If a substitute nominee is selected, proxies will be voted in favor of
such nominee. All Directors shall be elected by a plurality of the votes cast.
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE DIRECTORS SINCE
- ----------------------------- --- --------- --------
<S> <C> <C> <C>
Richard Reiss............................................... 41 Class I 1991
Chairman of the Board, President and Chief Executive
Officer of the Company since 1991; President and Chairman
of the Board of AllComm Products Corp. since 1997.
Robert B. Kroner............................................ 68 Class II 1991
Director of the Company since 1991; Vice President and
General Counsel since 1997; Director of AllComm Products
Corp. since 1997; Self employed New Jersey Attorney prior
to 1997.
Andrea Grasso............................................... 37 Class II 1996
Secretary of the Company since 1995 and a Director since
1996; Served as Office Administrator of the Company since
1991; Director and Secretary of AllComm Products Corp.
since 1997.
</TABLE>
2
<PAGE> 6
The following table sets forth certain information with respect to the
Company's Class III Directors whose terms of office will continue after the
Annual Meeting.
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE DIRECTORS SINCE
- ----------------------------- --- --------- --------
<S> <C> <C> <C>
Eric Friedman............................................... 49 Class III 1996
Director of the Company since 1996; Vice President and
Treasurer of Chem International Inc. since 1996; Certified
Public Accountant and partner in Shachat and Simson, a
certified public accounting firm prior to 1996.
Peter N. Maluso............................................. 43 Class III 1996
Director of the Company since 1996; Principal at
International Business Machines, Inc., responsible for IBM
Global Services Legacy Transformation Consulting Practice
in Northeastern United States since 1995. From 1988 to
1995, Senior Manager at KPMG Peat Marwick, a certified
public accounting firm.
</TABLE>
RECOMMENDATION AND VOTE
The Board unanimously recommends a vote FOR the election of the Nominees to
the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, the beneficial
ownership of Common Stock of the Company by each director, each of the named
executive officers in the Summary Compensation Table herein, all executive
officers and directors as a group and each person known to the Company to
beneficially own five percent or more of the outstanding shares of the Common
Stock of the Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME OWNED(1) OWNED
---- ------------------- -------------------
<S> <C> <C>
Richard Reiss............................................. 2,805,000(2) 49.4%
Leo Flotron............................................... 279,000(3) 5.6%
Joseph Scotti............................................. 279,000(3) 5.6%
Robert B. Kroner.......................................... 152,500(4) 3.1%
Eric Friedman............................................. 32,500(5) *
Peter N. Maluso........................................... 47,500(6) 1.0%
Andrea Grasso............................................. 25,000 *
All directors and executive officers as a group (8
persons)................................................ 3,692,500(7) 60.9%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated by footnote, the named persons have sole voting
and investment power with respect to the shares of Common Stock beneficially
owned.
(2) Includes 770,000 shares subject to presently exercisable stock options.
(3) Includes 79,000 shares subject to presently exercisable stock options.
(4) Includes 2,500 shares subject to presently exercisable stock options.
(5) Includes 7,500 shares subject to presently exercisable stock options and
12,500 shares subject to presently exercisable warrants.
(6) Includes 7,500 shares subject to presently exercisable stock options.
(7) Includes an aggregate 1,157,500 shares subject to presently exercisable
stock options.
3
<PAGE> 7
DIRECTORS; COMPENSATION OF DIRECTORS
The Board of Directors held eight meetings during 1997, and all directors
attended at least 75% of those meetings of the Board of Directors and all
committees on which they served.
No compensation was paid to any director for his services to the Board of
Directors or any committee.
The Board of Directors has an Audit Committee, whose members are Messrs.
Reiss, Friedman and Maluso. The Audit Committee periodically consults with the
Company's management and independent public accountants on financial matters,
including the Company's internal financial controls and procedures. The Audit
Committee met once in 1997, and all members attended the meeting. The Board of
Directors also has a Compensation Committee, whose members are Messrs. Friedman,
Kroner and Maluso which reviews and makes recommendations concerning salaries,
bonuses and other compensation for officers of the Company. The Compensation
Committee met once in 1997 and all members attended the meeting. The Company's
Stock Option Plan is administered by the Stock Option Plan Committee composed of
Messrs. Friedman and Maluso.
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company but are not
Directors or nominees for Director:
Scott Tansey has been the Company's Vice President of Finance since 1996
and Treasurer since 1997. Mr. Tansey served as Director, Finance and
Administration of Data Transmission Services from 1992 until 1996. He is a
Certified Public Accountant.
Leo Flotron has been a Vice President of Sales and Marketing of the Company
since October 1995 and is primarily responsible for videoconferencing and
network products. From 1988 to 1995, Mr. Flotron held various positions with
Sony Electronics, Inc.
Joseph Scotti has been Vice President of Sales and Marketing of the Company
since August, 1995 and is primarily responsible for all aspects of voice
communications. Mr. Scotti held various positions with Northern Telecom from
1990 to 1995.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of Forms 3, 4 and 5 submitted to the Company during and
with respect to 1997, all statements of beneficial ownership required to be
filed with the Securities and Exchange Commission (the "Commission") were timely
filed, except that Mr. Maluso was late in filing one monthly report for two
transactions.
4
<PAGE> 8
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31, 1997,
1996 and 1995, certain compensation information as to the Chief Executive
Officer and each executive officer of the Company who served as an executive
officer during the fiscal year ended December 31, 1997, and whose salary and
bonus exceeded $100,000 in 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- ----------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard Reiss.......................... 1997 133,000 25,000 850,000 13,434(1)
President and Chief Executive Officer 1996 108,000 50,000 -- --
1995 100,000 31,500 -- --
Leo Flotron............................ 1997 104,000 54,307(2) 95,000 4,800(3)
Vice President 1996 68,640 31,760 -- --
1995 16,500 -- -- --
Joseph Scotti.......................... 1997 104,000 54,307(2) 95,000 4,800(3)
Vice President 1996 68,640 31,760 -- --
1995 36,500 -- -- --
</TABLE>
- ---------------
(1) Includes $9,111 for automobile lease payments and $4,323 for life insurance
premium paid by the Company.
(2) Includes commissions of $34,307.
(3) Includes an automobile allowance of $4,800.
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, the Company entered into an employment agreement
with Richard Reiss, President of the Company. The agreement was to expire
December 31, 2001 and provided for Mr. Reiss to receive an annual base salary as
follows: $138,000 for the fiscal year ending December 31, 1997; $175,000 for the
fiscal year ending December 31, 1998; and $210,000 for the fiscal year ending
December 31, 1999. The annual base salary for Mr. Reiss for the fourth and fifth
years of the employment agreement was to be for amounts recommended by the
Compensation Committee of the Board of Directors, but in no event less than
$210,000 per annum. Effective March 21, 1997, the employment agreement with Mr.
Reiss was amended. In consideration for Mr. Reiss agreeing to extend the term of
the agreement for an additional year, through December 31, 2002, and to a
reduction of his salary, the Company granted Mr. Reiss an option outside of the
Company's stock option plan to purchase up to 750,000 shares of Common Stock,
exercisable at any time through March 20, 2002, at a price of $5.00 per share.
The employment agreement, as amended, provides for Mr. Reiss to receive an
annual base salary as follows: $133,000 for the fiscal year ending December 31,
1997; $170,000 for the fiscal year ending December 31, 1998; and $205,000 for
the fiscal year ending December 31, 1999. The annual base salary for Mr. Reiss
for the fourth, fifth and sixth years of the employment agreement shall be for
amounts recommended by the Compensation Committee, but in no event less than
$205,000 per annum.
Effective January 1, 1997, the Company entered into employment agreements
with Joseph Scotti, Vice President -- Sales and Marketing of Voice Products and
Leo Flotron, Vice President -- Sales and Marketing of Videoconferencing Products
of the Company. The agreements expire on December 31, 1999 and each provide for
the following annual base salary: $104,000 for the fiscal year ending December
31, 1997; $114,000 for the fiscal year ending December 31, 1998; and $124,000
for the fiscal year ending December 31, 1999. Additionally, Messrs. Scotti and
Flotron are each to receive one-half of 1% of net sales of the Company, paid
bi-annually, during the term of their employment agreements.
5
<PAGE> 9
Messrs. Reiss, Scotti and Flotron have agreed to devote their full business
time to the affairs of the Company. The Company has agreed to secure, and pay
the premiums on, a life insurance policy on the life of Mr. Reiss, in the amount
of $1,000,000, with the benefits payable to his estate or designated
beneficiary. The Company has also agreed to provide Mr. Reiss with the use of an
automobile. Mr. Reiss' employment agreement entitles him to participate in all
Company pension and profit-sharing plans and to receive an option to purchase an
aggregate of up to 100,000 shares of Common Stock under the Company's stock
option plan. The Company has agreed to provide each of Messrs. Scotti and
Flotron with an automobile allowance of $400 per month.
The Company has the right to terminate the aforementioned employment
agreements for "cause" as defined in the employment agreements. The Company has
the right to terminate Mr. Reiss without cause, upon not less than 90 days'
prior written notice in the event that Mr. Reiss is unable to perform his
required duties for a period of 120 consecutive days due to "total and permanent
disability," as defined in the employment agreement. In such event, Mr. Reiss
shall be entitled to receive compensation for the remainder of the term of the
employment agreement. The Company may terminate the employment agreements of
Messrs. Scotti and Flotron without cause, upon not less than ten days' prior
written notice in the event that either Mr. Scotti or Mr. Flotron are unable to
perform their required duties for a period of 90 consecutive days due to "total
and permanent disability." In such event the employee shall be entitled to
compensation for the 90-day disability period. Each of the aforementioned
employees may terminate his employment with the Company at any time upon 90
days' prior written notice. In such event, the employee shall only be entitled
to the compensation due through the date of termination. Such employees have
also agreed not to disclose any confidential information of the Company during
the term of employment or thereafter. In addition, these employees have agreed
not to compete with the Company during the term of their employment and for a
period of one year after the date of termination of their employment with the
Company.
OPTION GRANTS DURING THE FISCAL YEAR ENDED DECEMBER 31, 1997
The following table sets forth individual grants of stock options by the
Company pursuant to the Company's Stock Option Plan to the Named Executive
Officers during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE
NAME OPTIONS GRANTED(#) FISCAL YEAR PRICE ($/SH.)(3) EXPIRATION DATE
---- ------------------ --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Richard Reiss(1).......... 74,026 27.7% $3.50 January 15, 2007
Richard Reiss(1).......... 25,974 9.7% 3.85 January 15, 2002
Leo Flotron(2)............ 20,000 7.5% 3.50 March 12, 2002
Joseph Scotti(2).......... 20,000 7.5% 3.50 March 12, 2002
</TABLE>
- ---------------
(1) The date of grant of these options was January 15, 1997, which became
exercisable on January 15, 1998.
(2) The date of grant of these options was March 12, 1997, which became
exercisable on March 12, 1998.
(3) The exercise price of the options is equal to the fair market value of
shares of Common Stock of the Company on the date of grant of the options
except for the 25,974 shares underlying incentive stock options granted to
Mr. Reiss which exercise price is equal to 110% of the fair market value on
the date of grant.
6
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers regarding the exercise of options during the last fiscal year
and unexercised options held at the end of the fiscal year ended December 31,
1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Richard Reiss............................. -- -- 0/850,000 0/0
Leo Flotron............................... -- -- 0/95,000 0/0
Joseph Scotti............................. -- -- 0/95,000 0/0
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases office and warehouse facilities from Vitamin Realty
Associates, L.L.C., a limited liability company, which is 10% owned by Eric
Friedman, a director and shareholder of the Company. This lease is for a five
year term and expires on May 31, 2002. The base rental for the premises during
the term of the lease is $87,040 per annum plus operating expenses. The Company
has an option to renew the lease for an additional five year term.
CHANGE OF AUDITORS
On February 16, 1998, the certified public accounting firm of Schneider
Ehrlich & Wengrover, LLP ("Schneider") resigned as independent accountants of
the Company by mutual agreement with the Company.
On February 16, 1998, the Audit Committee of the Company's Board of
Directors approved the engagement of BDO Seidman, LLP as the Company's principal
accountant to audit the Company's financial statements.
During the Company's fiscal years ended December 31, 1997 and 1996 and the
period from January 1, 1998 to February 16, 1998, there were no disagreements
between the Company and Schneider on any matter of accounting principles or
practices, financial statements disclosure or auditing scope or procedure.
For the Company's fiscal years ended December 31, 1997 and 1996, the
principal accountant's report on the financial statements of the Company did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
For the Company's fiscal years ended December 31, 1997 and 1996, Schneider
did not advise the Company of any of the following:
(i) Internal controls necessary for the Company to develop reliable
financial statements did not exist;
(ii) Information had come to Schneider's attention that led it to no
longer be able to rely on management's representations, or that had made it
unwilling to be associated with the financial statements prepared by
management;
(iii) The need to expand significantly the scope of its audit or that
information had come to its attention that if further investigated may: (1)
materially impact the fairness or reliability of whether a previously
issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements
7
<PAGE> 11
covered by an audit report or (2) cause it to be unwilling to rely on
management's representations or be associated with the Company's financial
statements, or
(iv) information had come to its attention that it had concluded
materially impacted the fairness or reliability of either (1) previously
issued audit report or the underlying financial statements or (2) the
financial statements issued to or to be issued covering the fiscal
period(s) subsequent to the date of the most recent financial statements
covered by an audit report.
PROPOSAL NO. 2. APPROVAL OF AMENDMENT OF STOCK OPTION PLAN
At the Annual Meeting, stockholders will be asked to approve an amendment
to the Company's Stock Option Plan (the "Option Plan") to increase by 1,000,000
the number of shares of Common Stock reserved for issuance under the Option Plan
to an aggregate of 1,500,000 shares. The Board of Directors approved the
amendment on April 23, 1998. The amendments and the Option Plan are summarized
below. A copy of the Option Plan is available upon a stockholder's written
request to the Company, 225 Long Avenue, Hillside, New Jersey, 07205, Attention:
Secretary.
DESCRIPTION OF THE AMENDMENT
The amendment increases by 1,000,000 the number of shares of Common Stock
reserved for issuance under the Option Plan to an aggregate of 1,500,000 shares.
If approved by the stockholders, the amendment shall be effective immediately.
REASONS FOR THE AMENDMENT
The Board of Directors believes that stock options are an important
incentive for attracting, retaining and motivating employees and officers
through the opportunity of equity participation. In the view of the Board of
Directors, stock options uniquely focus the attention of the officers and
employees on the Company's goal of increasing shareholder value, since the
options only provide a reward to the extent that the stock price increases. The
Board of Directors further believes that stock option grants have been a key
element in the Company's growth. The amendment to increase the number of shares
of Common Stock under the Option Plan is intended to enable the Company to
continue to have an adequate number of shares of Common Stock available for
stock options.
As of March 31, 1998, 175,000 shares of Common Stock remained available for
the grant of stock options under the Option Plan. Based on the number of shares
remaining under the Option Plan, and the shares anticipated to be needed for the
granting of options to attract and retain key employees, sufficient shares are
not expected to be available for the grant of stock options without increasing
the number of shares available under the Option Plan.
DESCRIPTION OF THE OPTION PLAN
The Option Plan was adopted by the Board of Directors on December 6, 1996.
The Option Plan provides for the granting of "non-qualified stock options" and
"incentive stock options" to acquire Common Stock (collectively, "Options") to
employees. An aggregate of 1,500,000 shares of Common Stock have been reserved
for issuance under the Option Plan, subject to stockholder approval of the
amendment. In the event that any outstanding options expire or are terminated,
the shares allocable to such expired or terminated Options shall again become
available for the granting of Options. If any shares acquired pursuant to the
exercise of Options are repurchased by the Company, such shares shall again
become available for the granting of Options.
The terms and conditions of individual option agreements may vary, subject
to the following guidelines: (i) the exercise price of Options may not be less
than market value on the date of grant, (ii) the term of all Options shall
expire on the tenth anniversary of the date of grant, and (iii) no Options may
be granted after December 6, 2006.
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The Option Plan is administered by the Stock Option Committee of the Board
of Directors (the "Committee"). The Committee determines, among other things:
(i) which officers and employees of the Company shall be granted Options, (ii)
the number of shares subject to each such Option, (iii) the amount to be paid by
a grantee upon exercise of Options, (iv) the time or times and the conditions
subject to which Options may be exercised, and (v) the form of consideration
that may be used to pay for shares issued upon exercise of such Options.
The Option Plan provides that the maximum number of shares of Common Stock
for which Options may be granted to any employee during any fiscal year of the
Company shall not exceed 100,000 shares of Common Stock.
The Board of Directors has the authority to amend the Option Plan at any
time, provided that stockholder approval is required to (i) increase the limits
provided in Section 8.01 of the Option Plan (except by adjustment under Section
8.03), (ii) change or expand the types of Options that may be granted under the
Option Plan, (iii) change the class of persons eligible to receive options under
the Option Plan, (iv) materially increase either the benefits accruing to
participants under the Option Plan or the cost of the Option Plan to the
Company, (v) effect a change relating to incentive stock options which is
inconsistent with Section 422 of the Code or regulations issued thereunder, or
(vi) make any other change that requires approval of the Company's stockholders
under applicable law.
The Board of Directors may terminate the Option Plan at any time. The
Option Plan will terminate on, and Options may not be granted after, December 6,
2006, unless terminated by the Board of Directors prior thereto. The termination
of the Option Plan will not alter or impair any rights or obligations under any
Options previously granted under the Option Plan.
The Option Plan provides that Options granted thereunder will not be
transferable other than by will or by laws of descent and distribution, and
during an optionee's lifetime, Options will be exercisable only by an optionee.
As of April 1, 1998, Options to purchase an aggregate 325,000 shares of
Common Stock have been granted under the Option Plan. As of April 1, 1998,
Options to purchase 175,000 shares of Common Stock have been granted to all
current executive officers of the Company as a group, including Mr. Reiss,
100,000 shares, Mr. Flotron 20,000 shares and Mr. Scotti, 20,000. As of April 1,
1998, no Options have been granted to any current directors who are not
officers.
The market value of the Common Stock as of the close of business on April
1, 1998, as reflected by the closing price of the Common Stock on the Boston
Stock Exchange, was $2.00 per share and as quoted on the OTC Electronic Bulletin
Board was $1.50 per share (bid) and $1.50 per share (asked).
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of incentive stock options and non-qualified options
are complex. Therefore, the description of tax consequences set forth below is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. The tax consequences
under applicable state and local income tax laws may not be the same as under
the federal income tax laws.
Incentive stock options granted pursuant to the 1996 Option Plan are
intended to qualify as "Incentive Stock Options" within the meaning of Section
422 of the Code. If an optionee makes no disposition of the shares acquired
pursuant to exercise of an incentive stock option within one year after the
transfer of shares to such optionee and within two years from grant of the
option, such optionee will realize no taxable income as a result of the grant or
exercise of such option; any gain or loss that is subsequently realized may be
treated as long-term capital gain or loss, as the case may be. Under these
circumstances, the Company will not be entitled to a deduction for federal
income tax purposes with respect to either the issuance of such incentive stock
options or the transfer of shares upon their exercise.
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If shares subject to incentive stock options are disposed of prior to the
expiration of the above time periods (a "disqualifying disposition"), the
optionee will recognize ordinary income in the year in which the disqualifying
disposition occurs, the amount of which will generally be the lesser of (i) the
excess of market value of the shares on the date of exercise over the option
price, or (ii) the gain recognized on such disposition. Such amount will
ordinarily be deductible by the Company for federal income tax purposes in the
same year, provided that the Company satisfies certain federal income tax
reporting requirements. In addition, the excess, if any, of the amount realized
on a disqualifying disposition over the market value of the shares on the date
of exercise will be treated as capital gain.
Non-qualified options may also be granted under the Option Plan. An
optionee who exercises a non-qualified option will recognize as taxable ordinary
income, at the time of exercise, an amount equal to the excess of the fair
market value of the shares on the date of exercise over the exercise price. Such
amount will ordinarily be deductible by the Company in the same year, provided
that the Company satisfies certain federal income tax withholding requirements
that may be applicable.
The discussion above pertaining to a deduction for the Company is qualified
by the application of Section 162(m) of the Code. Pursuant to Section 162(m),
the maximum allowable deduction for compensation paid or accrued by the Company
with respect to the chief executive officer of the Company or any of the four
most highly compensated officers of the Company (other than the chief executive
officer) is limited to $1 million per year. However, compensation is tax
deductible without regard to such limitations if the compensation satisfies the
"performance-based" requirements of the rules and regulations under Section
162(m). The Option Plan is intended to meet the requirements of Section 162(m).
RECOMMENDATION AND VOTE
The amendment to the Option Plan will be submitted to stockholders for
their approval at the Annual Meeting. The proposal to adopt the amendment to the
Option Plan must be approved by the holders of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE AMENDMENT TO THE STOCK OPTION PLAN.
PROPOSAL NO. 3. RATIFICATION OF
THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of BDO
Seidman, LLP as independent auditors to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending
December 31, 1998, subject to ratification by the stockholders of the Company.
A member of BDO Seidman, LLP is expected to be present at the Annual
Meeting and to be provided with an opportunity to make a statement if such
member desires to do so and to be available to respond to appropriate questions
from stockholders.
RECOMMENDATION AND VOTE
Approval of the Independent Auditors Proposal requires the affirmative vote
of a majority of the votes cast by holders of Common Stock entitled to vote at
the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE INDEPENDENT AUDITORS PROPOSAL.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Company's proxy statement with
respect to the 1999 Annual Meeting of Stockholders must be received by the
Company at its executive offices located at 225 Long Avenue, Hillside, New
Jersey 07205 no later than January 15, 1999.
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<PAGE> 14
OTHER BUSINESS OF THE MEETING
The Company is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, inasmuch as matters of
which management of the Company is not now aware may come before the Annual
Meeting or any adjournment thereof, the proxies confer discretionary authority
with respect to acting thereon, and the persons named in such proxies intend to
vote, act and consent in accordance with their discretion with respect thereto.
ADDITIONAL INFORMATION
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 1997 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THIS
PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER,
ALL COMMUNICATIONS CORPORATION, 225 LONG AVENUE, P.O. BOX 794, HILLSIDE, NEW
JERSEY 07205
By Order of the Board of Directors
RICHARD REISS
Chairman, President and
Chief Executive Officer
May 15, 1998
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<PAGE> 15
ALL COMMUNICATIONS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 19, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kate Shuster and Maureen Rini, and each of them,
with full power of substitution and power to act alone, as proxies to vote all
the shares of Common Stock which the undersigned would be entitled to vote if
personally present and acting at the Annual Meeting of Stockholders of All
Communications Corporation, to be held June 19, 1998, and at any adjournment or
adjournments thereof, on the matters set forth on the reverse side and such
other matters as may properly come before the meeting.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon, date and return in the enclosed
business reply envelope. Joint owners should each sign personally. Corporation
proxies should be signed by an authorized officer. Executors, administrators,
trustees, etc., should so indicate when signing.
Please provide new address, if applicable.
_______________________________
_______________________________
_______________________________
<PAGE> 16
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. Election of Directors: FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
Richard Reiss [ ] [ ] [ ]
Robert B. Kroner
Andrea Grasso
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE(S), MARK THE
"FOR ALL EXCEPT" BOX ABOVE AND STRIKE A LINE THROUGH THE NAME(S) OF THE
NOMINEE(S) YOU DO NOT WISH TO VOTE FOR. YOUR SHARES WILL BE VOTED FOR THE
REMAINING NOMINEE(S).
2. Approval of proposal to amend FOR AGAINST ABSTAIN
All Communications Corporation Stock [ ] [ ] [ ]
Option Plan.
3. Ratification of the selection of FOR AGAINST ABSTAIN
BDO Seidman, LLP as independent [ ] [ ] [ ]
auditors.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Mark box at right if an address change has been noted on the reverse side of
this card.
[ ]
---------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------
Stockholder sign here Co-owner sign here
- --------------------------------------------------------------------------------
<PAGE> 17
ALL COMMUNICATIONS CORPORATION
STOCK OPTION PLAN
SECTION 1. PURPOSE.
All Communications Corporation (The "Company") depends on the
initiative, effort and judgment of its employees for the successful conduct of
its business. The purpose of this Stock Option Plan (The "Plan") is to provide
long-term incentive compensation to certain employees whose performance can make
a substantial contribution to the long-term growth and prosperity of the
Company. The Plan is designed to encourage existing and future employees to
increase the long-term value of the Company to its stockholders by affording
such employees opportunities to become stockholders and thereby to share the
risks and rewards which accompany such status.
SECTION 2. DEFINITIONS.
As used in this Stock Option Plan the following terms have the
meanings stated in this Section 2. The singular includes the plural, and the
masculine gender includes the feminine and neuter genders, and vice versa, as
the context requires. The word "person" includes any natural person and any
corporation, firm, partnership or other form of association.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Committee" means a committee of two or more Non-Employee
Directors.
"Company" means All Communications Corporation.
"Date of Grant" means the date on which the Board acts to make the
award of a Stock Option hereunder, or such later date as it specifies when it
makes the award.
"Director means a member of the Board.
"Disability" means a permanent and total disability as defined in
Section 22 (e) (3) of the Code.
"Employee" shall mean (i) with respect to an Incentive Stock option,
any person including an officer or employee-director
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of the Company, who, at the time an Incentive Stock Option is granted to such
person hereunder, is employed on a full-time basis by any member of the Group,
and (ii) with respect to a Non-Statutory Stock Option, any person employed by or
performing services for any member of the Group, including, without limitation,
employee-directors and officers.
"Exercise Date" means the date on which the Company receives a
notice of the exercise of a Stock Option, which notice meets the requirements of
this Plan.
"Fair Market Value" for purposes of valuing Stock shall be
determined as follows:
(i) If the Stock is principally traded on an exchange or market in
which prices are reported on a bid and asked basis, the mean between the bid and
the asked price for the Stock at the close of trading on the Date of Grant;
(ii) If the Stock is principally traded on a national securities
exchange, the closing price of the Stock on the Date of Grant; and
(iii) If the Stock is neither traded on the over-the-counter market
nor listed on a national securities exchange, such value as the Board, in good
faith, shall determine.
"Group" means the Company, each parent corporation to the Company,
and each of the Company's subsidiaries, as these terms are defined in Section
424 of the Code.
"Incentive Stock Option" means a Stock Option intended to qualify as
an incentive stock option under Section 422 of the Code.
"Non-Employee Director" shall have the meaning given it in Section
16b-3 of the Securities Exchange Act.
"Participant" means an individual to whom a Stock Option has been
awarded hereunder.
"Plan" means this Stock Option Plan of the Company.
"Qualified Person" means a Participant's legal guardian or legal
representative or a deceased Participant's heir or legatee who has a legal right
to or in respect of a Stock Option of that Participant.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as it may be amended from time to time.
"Share" means a share of Stock.
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<PAGE> 19
"Stock" means common stock of the Company having no par value.
"Stock Option" means an Incentive Stock Option or a Non-Statutory
Stock Option.
"Stock Option Agreement" means the form of agreement described in
Section 5.01(d).
SECTION 3. ADMINISTRATION.
3.01. Administrative Body. Subject to Section 3.02, the Plan shall
be administered by the Board. The Board may in its sole discretion, but subject
to Section 3.02, delegate the authority to administer the Plan to the Committee.
If the Committee has been delegated the authority to administer the Plan, all
references to the Board in this Plan (except in this Section 3.01, Section 3.02
and Section 9) shall mean and refer to the Committee.
3.02. Public Company. If any member of the Group has any stock
registered under Section 12 of the Securities Exchange Act, This Section 3.02
shall apply.
(a) The Board shall delegate the authority to administer the Plan to
the Committee.
(b) In the event that compensation of the Participant which when
added to compensation attributable to Stock Options granted to Such Participant
hereunder, will cause such Participant to earn compensation in excess of the
limitations set forth under Section 162 (m), this Subsection (b) shall apply. In
such event, the Board shall delegate the authority to establish the performance
goal under which Stock Options will be awarded hereunder pursuant to Section
4.01 to a Committee comprised solely of two or more "outside directors" as that
term is defined under Treasury Regulation Section 1.162-27 (e) (3).
3.03. Authority. The Board or the Committee, as the case may be,
shall have the sole authority and discretion to:
(a) grant Stock Options under this Plan,
(b) subject to the limitations set forth in Section 5 hereof,
determine the terms and conditions of all Stock Options, including, without
limitation. (i) selecting the Participants who are to be granted Stock Options
hereunder; (ii) designating whether any Stock Option to be granted hereunder is
to be an Incentive Stock Option or a Non-Statutory Stock Option; (iii)
establishing the number of shares of Stock that may be issued under each Stock
Option; (iv) determining the time and the conditions subject to which Stock
Options may be exercised in whole or in
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<PAGE> 20
part; (v) determining the form of the consideration that may be used to purchase
shares of Common Stock upon exercise of any Stock Option (including the
circumstances under which the issued and outstanding shares of Common Stock may
be used by a Participant to exercise a Stock Option); (vi) imposing restrictions
and/or conditions with respect to shares of Common Stock acquired upon exercise
of a Stock Option; (vii) determining the circumstances under which shares of
Common Stock acquired upon exercise of any Stock Option may be subject to
repurchase by the Company; (viii) determining the circumstances and conditions
subject to which shares acquired upon exercise of a Stock Option may be sold or
otherwise transferred, including without limitation, the circumstances and
conditions subject to which a proposed sale of shares of Common Stock acquired
upon exercise of a Stock Option may be subject to the Company's right of first
refusal as well as the terms and conditions of any such right of first refusal;
(ix) establishing a vesting provision for any Stock Option relating to the time
(or the circumstance) when the Stock Option may be exercised by a Participant,
including vesting provisions which may be contingent upon the Company meeting
specified financial goals; (x) accelerating the time when outstanding Stock
Options may be exercised, provided, however, that any Incentive Stock Options
shall be "accelerated" within the meaning of Section 424 (h) of the Code, and
(xi) establishing any other terms, restrictions and/or conditions applicable to
any Stock Option not inconsistent with the provisions of this Plan; provided,
however, that the terms, conditions and restrictions of Stock Options may vary
from Participant to Participant and from award to award.
(c) prescribe the form of agreements awarding and governing the
Stock Options as provided in Section 5.01 (d),
(d) interpret the Plan,
(e) establish any rules or regulations relating to the Plan and
(f) make all other determinations for the proper administration of
the Plan.
The Board's decisions on matters relating to the Plan shall be final
and conclusive on the Group and Participants and their respective successors,
assigns, transferees, heirs and representatives.
SECTION 4. ELIGIBILITY.
4.01. Designation of Individuals Eligible to Participate. Stock
Options may be granted to any Employee. The Board shall have the sole authority
to select the persons to whom Stock Options are to be granted hereunder, and to
determine whether a person is to be granted a Non-Statutory Stock Option or an
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<PAGE> 21
Incentive Stock Option or any combination thereof. No person shall have any
right to participate in the Plan.
4.02. Participants. The Board may consider any factor in determining
the type (Incentive and/or Non-Statutory) and amount of a Participant's Stock
Option, including, but not limited to, (a) the current or anticipated financial
condition of the Group, (b) the contributions by the Participant to the Group
and (c) the other compensation provided to the Participant. The Board's award of
a Stock Option to a person in any year shall not require the Board to award any
Stock Option to that person in any other year.
SECTION 5. TERMS AND CONDITIONS OF STOCK OPTIONS.
5.01. General. All Stock Options shall be subject to the following
conditions:
(a) Except as provided in Section 7.04, each Stock Option shall have
an option price at least equal to the Fair Market Value of the Shares subject to
the option on the Date of Grant, as determined by the Board.
(b) Each Stock Option shall expire on the tenth anniversary (10th)
of the Date of Grant.
(c) Each Stock Option shall be exercisable by the Participant during
his lifetime only by him; shall be transferable by him only by will or under the
laws of descent and distribution and shall be exercisable during its term as
determined by the Board. After a Participant's death or upon a Participant's
legal incapacity, each Stock Option may be exercised only by the Participant's
Qualified Person.
(d) Each Stock Option shall be evidenced by a written option
agreement (the "Stock Option Agreement") identifying the type or types of Stock
Options awarded and stating the price, term and method of exercise of the Stock
Option, the number of Shares as to which the Stock Option is granted, the
disposition of the Stock Option to the extent unexercised upon the termination
of the Participant's employment by the Company, and such other terms and
conditions as the Board considers advisable that are not inconsistent with the
Plan, including, but not limited to, transfer restrictions, rights of first
refusal, forfeiture provisions, representations and warranties of the
Participant and provisions to ensure compliance with all applicable laws,
regulations and rules and compliance with the terms of the Plan. The participant
must execute and deliver the Stock Option Agreement to the Company as a
condition to the effectiveness of the Stock Option. The Board may also determine
to enter into agreements with Participants to reclassify or convert certain
outstanding options, within the terms of the Plan, as Incentive Stock Options or
as Non-Statutory Stock
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<PAGE> 22
Options.
(e) Upon the forfeiture of a Stock Option it may be granted to
another Participant.
5.02. Types of Stock Options. In the discretion of the Board, a
Participant may be awarded Non-Statutory Stock Options, Incentive Stock Options,
or any combination of the foregoing.
5.03. Incentive Stock Options. Incentive Stock Options shall be
subject to the additional requirements set forth at Section 7.
5.04. Other Conditions. At its sole discretion, the Board may impose
additional or other conditions on Stock Options, provided that such conditions
are not inconsistent herewith. The grant of Stock Options and issuance of shares
of Stock pursuant to any Stock Option shall be subject to the condition that if
at any time the Board shall determine, in its discretion, that the registration,
qualification or listing or such Stock Options or shares of Stock under any
state or federal law or upon any securities exchange, or the consent or approval
of any government regulatory authority or evidence of the investment intent of
the Participant, is necessary or desirable as a condition to the granting of
such Stock Option or the Issuance of such shares, such Stock Option or issuance
may not be made, in whole or in part, unless and until such registration,
qualification listing, consent or compliance, or evidence thereof, shall have
been effected or obtained free of any conditions not acceptable to the Board.
Without limiting the foregoing, the Board may impose such restrictions on the
transferability of shares issued pursuant to a Stock Option as may be necessary
to ensure compliance with all applicable securities laws.
SECTION 6. EXERCISE OF STOCK OPTIONS
6.01. (a) General. A Stock Option granted under the Plan may be
exercised by delivery to the Secretary or any Assistant Secretary of the Company
of written notice of election to exercise, signed by the Participant or by his
Qualified Person, specifying the number of shares with respect to which the
Stock Option is being exercised and specifying a date, which shall be a business
day not less than seven (7) nor more than fifteen (15) days after delivery of
such notice to the Company, on which date the Company shall deliver, or cause to
be delivered to the Participant, or to his Qualified Person, a certificate or
certificates for the number of shares specified against receipt of the entire
purchase price therefor. The notice shall be accompanied by full payment of the
purchase price for the Shares (a) in United States dollars in cash or by
certified check, (b) at the discretion of the Board, by delivery of previously
acquired Shares having a Fair Market Value equal on the date of exercise to the
cash exercise price of the
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<PAGE> 23
Stock Option, or (c) at the discretion of the Board, by a combination of (a) and
(b) above.
(b) The Participant shall have no rights of a stockholder with
respect to such Shares until such Shares are issued and delivered as herein
provided.
6.02. Vesting. The right to exercise a Stock Option is limited as
hereinafter provided:
(a) A Stock Option may be exercised as hereinafter provided only to
the extent that it has become vested as provided herein.
(b) A Stock Option shall vest to the extent of one hundred (100%)
percent of the shares of Stock covered by the Stock Option on the first
anniversary of the Date of Grant, provided that the Participant shall have been
continuously employed by a member of the Group from the Date of Grant to such
anniversary thereof as may be applicable.
6.03. Time Limits. (a) A Stock Option shall terminate in all
respects on, and no exercise as to any Shares covered by a Stock Option shall be
honored on or after the expiration of ten (10) years from the Date of Grant
thereof.
(b) Except as provided in Section 7.04, a Stock Option may be
exercised, to the extent it is vested, at any time.
(c) If a Stock Option is not exercised for all shares of Stock as to
which the Stock Option has vested, it shall be exercised only in blocks of 10
shares or more except that for the purpose of purchasing all of the shares as to
which a Stock Option has vested at the time of exercise, the Stock Option may be
exercised for the entire balance of shares as to which such Stock Option has
then vested. The holder of more than one vested and outstanding Stock Option may
exercise such Stock Options concurrently for the purpose of obtaining blocks of
10 shares or more.
(d) If a Participant's employment is terminated for any reason other
than the Participant's death or Disability, any Stock option held by such
Participant, to the extent that such Stock Option or Stock Options have become
vested under Subsection 6.02(b) hereof prior to or on the date of such
termination of Participant's employment, shall be exercisable to the extent so
vested within but only within the period of three (3) months next succeeding
such termination of Participant's employment. Any such Stock Option not
exercised as aforesaid shall terminate.
(e) A Stock Option held by a Participant who dies while in the
employ of a member of the Group or terminates employment
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<PAGE> 24
with a member of the Group by reason of Disability as determined by the Board
shall, to the extent that such Stock Option or Stock Options have become vested
under Subsections 6.02(b) hereof prior to or on the date of such Participant's
death or termination by reason of Disability, be exercisable by him or his
Qualified Person, as the case may be, within but only within the period of one
year next succeeding such Participant's death or termination as aforesaid and
then only to the extent of such vesting. Any such Stock Option not exercised as
aforesaid shall be terminated.
6.04. Other Conditions. (a) Except as provided above, no Stock
Option may be exercised unless the Participant is in the employ of a member of
the Group on the date of delivery to the Company of the Participant's written
notice of election to exercise the Stock Option pursuant to Subsection 6.01 (a)
hereof and unless the Participant shall have been continuously employed by a
member of the Group from the Date of Grant of the Stock Option to the date of
delivery of said written notice. Anything herein to the contrary
notwithstanding, employment shall be deemed to have ceased on the date specified
by the Company whether or not the Participant shall thereafter receive severance
pay or other benefits or render additional services to a member of the Group,
provided nevertheless that for all purposes of the Plan a Participant's
employment by a member of the Group shall be considered as continuing during the
period of any authorized leave of absence unless the authorization provides
otherwise.
(b) It is a condition of the grant, acceptance or exercise of a
Stock Option that no claim or cause of action for loss of any benefits under the
Plan or any individual Stock Option Agreement thereunder shall accrue to the
Participant by reason of any termination of employment whether by reason of
retirement or for any other reason including discharge with or without cause.
(c) Any attempted transfer, assignment, pledge, hypothecation or
other form of change of ownership of a Stock Option otherwise than by will or by
the laws of descent and distribution shall be an invalid transaction. The
Company shall have no obligation to issue shares or to make any payment pursuant
to such invalid transaction, and the Board may in its discretion terminate the
Stock Option which is the subject of such invalid transaction. Any attempted
levy of attachment or like proceeding on such Stock Option shall be null and
void.
SECTION 7. INCENTIVE STOCK OPTION
7.01. Compliance With Code Section 422. It is intended that
Incentive Stock Options granted under the Plan shall constitute Incentive Stock
Options within the meaning of Section 422 of the Code. Each Stock Option
Agreement referred to in Section 5.01(d) and which awards Incentive Stock
Options shall contain or be deemed to contain all provisions required in order
to
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qualify such Stock Options as Incentive Stock Options under Section 422 of the
Code, and the provisions of this Plan shall be interpreted and construed to
effect such treatment under that Section.
7.02. Limitations on Amounts. The aggregate Fair Market Value on the
Date of Grant of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar year
(under all Stock Option Agreements with the Group) shall not exceed ONE HUNDRED
THOUSAND DOLLARS ($100,000).
7.03. Time of Grant. All Incentive Stock Options must be granted
within ten (10) years from the earlier of (i) the date on which this Plan is
adopted by the Board or (ii) the date this Plan is approved by the shareholders
of the Company.
7.04. Special Rule for Ten Percent Shareholders. No incentive Stock
Option shall be granted to any Participant who, at the time the Stock Option is
granted, owns (within the meaning of Section 422 of the Code) stock having more
than 10% of the total combined voting power of all classes of stock of the
Company or any member of the Group, unless the option price is equal to at least
110% of the Fair Market Value of the Shares subject to the Stock Option on the
Date of Grant and the Stock Option is not exercisable later than five years from
the Date of Grant.
SECTION 8. RESERVATION OF SHARES AND CHANGES IN CAPITALIZATION.
8.01. The Company hereby reserves five hundred thousand (500,000)
shares of its authorized but unissued Stock or Treasury Stock for issuance
pursuant to the exercise of Incentive Stock Options or Non-Statutory Stock
Option as the Board shall determine. The maximum number of shares with respect
to which Stock Options may be granted during any twelve (12) month period to a
Participant is one hundred thousand (100,000). The Company may issue either
authorized but unissued Stock or Treasury Stock upon exercise of any Stock
Option. The number of Shares of authorized but unissued Stock reserved for such
issuance shall be reduced by any shares of Treasury Stock issued upon exercise
of any Stock Option. The aggregate number and types of Shares reserved under the
Plan to which Stock Options may be granted to any individual shall be
appropriately adjusted in the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, rights
offering or any other change in capitalization in order to prevent dilution as
provided in Section 8.03.
8.02. Expiration and Cancellation. If a Stock Option granted under
the Plan expires, is terminated or is otherwise cancelled before exercise, that
Stock Option and the related Shares shall apply toward the limits provided in
Section 8.01. If Shares
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issued or awarded under this Plan are forfeited, cancelled, terminated or
reacquired by the Company, those forfeited, cancelled, terminated or reacquired
Shares, shall not apply toward the limits provided in Section 8.01 and shall be
available immediately for the grant of Stock Options.
8.03 Dilution and Other Changes: (a) The Board shall adjust the
number of shares and types of securities subject to Stock Options and the
exercise price of the Stock Options as may be appropriate to prevent the
dilution of Participant's rights or to preserve the Company's position in the
event of a reorganization, recapitalization, stock split, reverse stock split,
stock dividend, exchange or combination of shares, merger, consolidation, rights
offering or any change in capitalization. The determination of the Board as to
any adjustments shall be binding upon the Participants and their legal
representatives.
(b) If at any time prior to the expiration or complete exercise of a
Stock Option, the Company shall be consolidated with, or merged into, any other
corporation, lawful provision shall shall be made as part of the terms of each
such consolidation or merger, so that there may thereafter be purchased upon the
exercise of such Stock Option, in lieu of each share remaining under such Stock
Option, but at the same option price, the same kind and amount of securities or
property (including in such terms, stock of any class or classes or cash) as may
be issuable, distributable or payable upon such consolidation or merger with
respect to each share of stock (of the class called for by such Stock Option) of
the Company outstanding immediately prior to such consolidation or merger;
provided, however, that the Board may require that the exercise of the Stock
Option under the provisions of this Subsection 8.03(b) must be made within a
specified period of time after the effective date of the consolidation or merger
of the Company and provided further that the Stock Option may be exercised only
to the extent it had vested before or on such effective date.
SECTION 9. GENERAL.
9.01. Effective Date. This Plan was adopted by the Board as of
December 6, 1996. The Plan is subject to stockholder approval. If approved by
the stockholders, the Plan will take effect as of December 6, 1996. Unless so
approved within one year of the Plan's adoption by the Board, the Plan shall not
be effective for any purpose and shall be null and void. Before that approval by
the stockholders, the Board may award Stock Options; provided, however, that no
Stock Option may be exercised before that approval. If that approval is not
received within one year, then those previously awarded Stock Options shall be
of no effect and shall be null and void.
9.02. Duration. Unless the Plan is terminated earlier, the Plan
shall terminate 10 years from the date on which
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the Plan is adopted by the Board. No Stock Option or other rights under the Plan
shall be granted thereafter. The Board, without further approval of the
Company's stockholders, may at any time before that date terminate the Plan.
After termination of the Plan, no further Stock Options may be granted under the
Plan. Stock Options granted before any termination shall continue to be
exercisable in accordance with the terms of the Stock Option.
9.03. Notices. Every direction, revocation or notice authorized or
required by the Plan shall be deemed delivered to the Company (1) on the date it
is personally delivered to the Secretary of the Company at its principal
executive offices or (2) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to the Secretary at such offices, and
shall be deemed delivered to an optionee (1) on the date it is personally
delivered to him or her or (2) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to him or her at the
last address shown for him or her on the records of the Company.
9.04. Withholding. Upon the exercise of any Stock Option, the
Company shall have the right to require the optionee to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for shares
of Common Stock. Upon the disposition of any Common Stock acquired by the
exercise of a Stock Option, the Company shall have the right to require the
optionee to remit to the Company an amount sufficient to satisfy all federal,
state and local withholding tax requirements as a condition to the registration
of the transfer of such Common Stock on its books. Whenever under the Plan,
payments are to be made by the Company in cash or by check, such payments shall
be net of any amounts sufficient to satisfy all federal, state and local
withholding tax requirements.
9.05. No Right To Continued Employment. No Participant under the
Plan shall have any right to continue in the employ of the Company or any member
of the Group for any period of time because of his or her participation in the
Plan.
9.06. No Right as Stockholder. No Participant or Qualified Person
shall have the rights of a stockholder with respect to the Shares covered by a
Stock Option unless a stock certificate is issued to that person for the Shares.
No adjustment shall be made for cash dividends or similar rights for which the
record date is before the date on which such stock certificate is issued.
9.07. Amendment of the Plan. The Board may amend the Plan from time
to time in such respects as the Board deems advisable. No such amendment,
however, shall (a) change or impair a Stock Option without the consent of the
Participant or Qualified
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Person holding that Stock Option, or (b) without the prior approval of the
Company stockholders (i) increase the limits provided in Section 8.01 (except by
adjustment under Section 8.03), (ii) change or expand the types of Stock Options
that may be granted under the Plan, (iii) change the class of persons eligible
to receive Stock Options under the Plan, (iv) materially increase either the
benefits accruing to Participants under the Plan or the cost of the Plan to the
Company, (v) effect a change relating to Incentive Stock Option granted
hereunder which is inconsistent with Section 422 of the Code or regulations
issued thereunder, or (vi) make any other change that requires approval of the
Company stockholders under applicable law.
9.08. Fractional Shares. In no event shall a fraction of a Share be
purchased or issued under the Plan without Board approval.
9.09. Application of Funds. The proceeds received by the Company
from the sale of Shares under the Plan shall be used for general corporate
purposes.
9.10. Other Incentives and Plans. Nothing in this Plan shall
prohibit any member of the Group from establishing other employee incentives and
plans.
9.11. Governing Law. The validity and construction of the Plan and
of each Stock Option Agreement shall be governed by the laws of the State of New
Jersey, excluding the conflict-of-laws principles thereof.
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