SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GILMAN & CIOCIA, INC.
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(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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GILMAN & CIOCIA, INC.
475 NORTHERN BOULEVARD
GREAT NECK, NY 11021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY __, 1999
To the Stockholders
of Gilman & Ciocia, Inc.
NOTICE IS GIVEN that the 1999 Annual Meeting of Stockholders of Gilman &
Ciocia, Inc., a Delaware corporation (the "Company"), will be held at ________
a.m. local time, on May __, 1999, at____________________________ for the
following purposes:
1. To elect five members of the Company's Board of Directors, to be
divided into three classes: Class A, Class B and Class C;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation, to change the Company's name to Gilman &
Ciocia, Inc., to increase the number of authorized shares of common
stock, $.01 par value per share, from 9,000,000 to 20,000,000 shares
and to establish a classified board of directors;
3. To consider and vote upon a proposal to approve the Company's 1999
Common Stock and Incentive and Non-Qualified Stock Option Plan;
4. To ratify the reappointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
June 30, 1999; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April __, 1999 as
the record date for determining those stockholders entitled to notice of, and to
vote at, the Annual Meeting. You, as a stockholder of the Company, may examine
a list of stockholders entitled to vote at the Annual Meeting at the offices of
the Company situated at 475 Northern Boulevard, Great Neck, NY 11021 during the
ten-day period preceding the Annual Meeting.
By order of the Board of Directors,
Kathryn Travis
Secretary
Great Neck, New York
April__, 1999
- --------------------------------------------------------------------------------
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY FORM AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY FORM MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY, AND VOTE THEIR SHARES IN PERSON. YOUR BOARD RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE NOMINEES FOR DIRECTORS AND FOR THE OTHER PROPOSALS TO
BE CONSIDERED AT THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
GILMAN & CIOCIA, INC.
475 NORTHERN BOULEVARD
GREAT NECK, NY 11021
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY __, 1999
---------------
Gilman & Ciocia, Inc., a Delaware corporation (the "Company") is furnishing
to you this Proxy Statement in connection with the solicitation by the Board of
Directors of proxies from the holders of the Company's common stock, $.01 par
value per share (the "Common Stock"), for use at the 1999 Annual Meeting of
Stockholders of the Company to be held at _____ a.m. local time, on May __,
1999, at _____________________________________________________________
or at any adjournment(s) or postponement(s) of such meeting (the "Meeting").
Notice of the Meeting is enclosed with this proxy statement. The approximate
date that the Company is first mailing this Proxy Statement and the enclosed
form of Proxy to holders of Common Stock is _______ 1999. You, as a
stockholder, should review the information provided herein in conjunction with
the Company's 1998 Annual Report to Stockholders for the fiscal year ended June
30, 1998, which accompanies this Proxy Statement.
INFORMATION CONCERNING PROXY
The Company's Board of Directors is soliciting your proxy. The giving of a
proxy does not preclude your right to vote in person should you desire. If you
execute and deliver a proxy, you may revoke it at any time prior to its use by
(1) giving written notice of such revocation to the Company, care of the
Secretary, Kathryn Travis, 475 Northern Boulevard, Great Neck, NY 11021; (2)
executing and delivering a proxy bearing a later date to the Secretary of the
Company; or (3) appearing at the Meeting and voting in person.
The Company will bear the cost of preparing, assembling and mailing this
Proxy Statement, the Notice of Annual Meeting of Stockholders and the enclosed
proxy. In addition to the use of mail, employees of the Company may solicit
proxies by telephone, telegram or personal interview. The Company's employees
will receive no compensation for soliciting proxies other than their regular
salaries. The Company has also engaged the services of Corporate Stock
Transfer, Inc. to assist in the tabulation of proxies.
PURPOSES OF THE MEETING
At the Meeting, the Company's stockholders will consider and vote upon the
following matters:
1. To elect five members of the Company's Board of Directors, divided
into three classes, Class A, Class B and Class C;
2. A proposal to amend the Company's Certificate of Incorporation to
change the Company's name to Gilman & Ciocia, Inc, to increase the
number of authorized shares of common stock, $.01 par value per share,
from 9,000,000 to 20,000,000 shares, and to establish a classified
board of directors;
3. A proposal to approve the Company's 1999 Common Stock and Incentive
and Non-Qualified Stock Option Plan;
3. To ratify the reappointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
June 30, 1999; and
4. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements.
Unless you indicate contrary instructions on the enclosed proxy, the
officers designated on the enclosed proxy will vote all shares represented by
valid proxies that have not been revoked (in accordance with the procedures set
forth above) (a) for the election of the five nominees for director named
below, and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event that you specify a different choice by means of the
enclosed proxy, the designated proxies will vote your shares in accordance with
the specification you make.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors has set the close of business on April __, 1999 as
the record date (the "Record Date") for determining stockholders of the Company
entitled to notice of and to vote at the Meeting. As of the Record Date,
6,731,875 shares of Common Stock were issued and outstanding, all of which are
entitled to be voted at the Meeting. Each share of Common Stock is entitled to
one vote on all matters at the Meeting, and neither the Company's Certificate of
Incorporation nor its Bylaws provides for cumulative voting rights.
The attendance, in person or by proxy, of the holders of a majority of the
Common Stock shares entitled to vote at the Meeting is necessary to constitute a
quorum. The affirmative vote of a plurality of Common Stock shares present and
voting at the Meeting is required for the election of Directors. The
affirmative vote of a majority of the outstanding shares of Common Stock is
required to amend the Company's Certificate of Incorporation to change the
Company's name to Gilman & Ciocia, Inc., to increase the number of authorized
shares of Common Stock from 9,000,000 to 20,000,000 shares and to establish a
classified board of directors. The affirmative vote of a majority of the
outstanding shares of Common Stock present and entitled to vote at the meeting
is required to pass upon the proposals to ratify and approve the Company's 1999
Common Stock and Incentive and Non-Qualified Stock Option Plan. Abstentions and
broker non-votes (defined in this paragraph) will be counted as present for
determining the presence of a quorum. For determining the vote required for
approval of matters at the Meeting, shares held by stockholders who abstain from
voting will be treated as being "present" and "entitled to vote" on the matter,
and, therefore, an abstention has the same legal effect as a vote against the
matter. However, in the case of a broker non-vote or where a stockholder
withholds authority from his proxy to vote the proxy as to a particular matter,
such shares will not be treated as "present" or "entitled to vote" on the
matter, and, therefore, a broker non-vote or the withholding of a proxy's
authority will have no effect on the outcome of the vote on the matter. A
"broker non-vote" refers to Common Stock shares represented at the Meeting in
person or by proxy by a broker or nominee where such broker or nominee (1) has
not received voting instructions on a particular matter from the beneficial
owners or persons entitled to vote and (2) the broker or nominee does not have
discretionary voting power on such matter.
As of the Record Date, the Company's Directors owned in the aggregate
2,356,029 shares of Common Stock constituting approximately 35.0 % of the
outstanding shares of Common Stock entitled to vote at the Meeting. The
directors have advised the Company that they intend to vote all of their shares
in favor of each of the proposals to be presented at the Meeting.
If you wish to vote shares beneficially owned by you in person at the
Meeting, and such shares are held in a brokerage account, then you must obtain a
proxy from your broker and your broker must obtain a proxy from the trust
company or other registered holder of your shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 1999, to the extent known
to the Company, certain information regarding the ownership of the Company's
Common Stock by (i) each person who is known by the Company to own of record or
beneficially more than five percent of the Company's Common Stock, (ii) each of
the Company's directors and executive officers and (iii) all directors and
executive officers as a group. Except as otherwise indicated, the shareholders
listed in the table have sole voting and investment powers with respect to the
shares indicated.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- --------------------------- --------------------- -----------------
James Ciocia 974,686(1) 14.5%
475 Northern Boulevard
Great Neck, NY 11021
Thomas Povinelli 1,036,116(2) 15.4%
475 Northern Boulevard
Great Neck, NY 11021
Kathryn Travis 365,481(3) 5.4%
475 Northern Boulevard
Great Neck, NY 11021
Seth Akabas 8,966 (4) .1%
245 West 107th Street
New York, NY
Louis Karol 780 .01%
475 Northern Boulevard
Great Neck, NY 11021
Steven Gilbert 761,254(5) 10.5%
475 Northern Boulevard
Great Neck, NY 11021
Stephen Sacher 40,000(6) .6%
475 Northern Boulevard
Great Neck, NY 11021
All directors and officers
as a group (6 persons) 2,426,029 35.7%
(1) Includes 10,000 shares of Common Stock issuable upon the exercise of
options at a price of $2.75.
(2) Includes 10,000 shares of Common Stock issuable upon the exercise of
options at a price of $2.75.
(3) Includes 10,000 shares of Common Stock issuable upon the exercise of
options at a price of $2.75.
(4) Includes 8,081 shares owned by the law firm of Akabas & Cohen of which
Mr. Akabas is a partner.
(5) Includes 246,154 shares owned by the Gilbert Family Limited Partnership
of which Steven Gilbert is a 97% beneficiary. In addition, includes 340,000
shares issuable upon exercise of options at $3.50 per share, 100,000 shares
issuable upon exercise of options at $4.75 per share, and 75,000 shares issuable
upon the exercise at $13.00 per share.
(6) Includes 20,000 shares, and 20,000 shares issuable upon exercise of
currently exercisable options at $7.00, $7.50, per share, respectively.
ITEM I.
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors constituting the
Company's Board of Directors shall be fixed by the Board of Directors, provided
that the number of directors shall not be fewer than one nor more than ten.
Each director elected at the Meeting will serve until his or her term expires
and until his or her successor has been duly elected and qualified. The Board
of Directors of the Company has nominated James Ciocia, Thomas Povinelli,
Kathryn Travis, Seth A. Akabas, and Louis P. Karol for election as directors,
and your proxy will be voted for them absent contrary instructions.
The Board of Directors is divided into three classes: Class A, Class B and
Class C. The term of Class A directors expires at a 1999 Annual Meeting of
Stockholders and afterwards Class A directors elected in 1999 will serve terms
of three years; the nominees for director designated as Class B directors will
serve until the 2000 Annual Meeting of Stockholders and afterwards Class B
directors elected in 2000 will serve terms of three years; and the nominees for
director designated as Class C directors will serve until the 2001 Annual
Meeting of Stockholders and thereafter Class C directors elected in 2001 will
serve terms of three years, and, in each case, until his or her successor shall
be duly elected and qualified or until his or her earlier death, resignation or
removal. Each class comprises a number of directors as equal in number as
possible as the other classes. Each class generally serves three years with
terms of office of the respective classes expiring in successive years. The
Board of Directors has nominated James Ciocia and Louis P. Karol to stand as
Class A directors, and Seth A. Akabas to stand as a Class B director, and
Kathryn Travis and Thomas Povinelli to stand as Class C directors.
Vacancies on the Board of Directors which occur during the year may be
filled by the Board of Directors for the remainder of the full term.
The Board of Directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for director is unable to accept election or if any other unforeseen
contingency arises, proxies will be voted for the remaining nominees, if any,
and for such other person as may be designated by the Board of Directors, unless
it is directed by a proxy to do otherwise.
Information concerning the nominees for election as directors is follows:
James Ciocia, Chief Executive Officer, President and Director
Mr. Ciocia is a principal founder of the Company. He opened the Company's
first office in 1981 and has served in his current capacity since that time. In
addition to serving as the Company's Chief Executive Officer, he prepares tax
returns, serves as a life insurance agent and sells life and other insurance
products to clients of the Company. Mr. Ciocia is a Registered Representative
of Royal Alliance Associates, Inc. an independent securities broker/dealer
registered with the National Association of Securities Dealers. A graduate of
St. John's University with a B.S. degree in accounting, he is a member of the
International Association for Financial Planners.
Thomas Povinelli, Chief Operating Officer, and Director
Mr. Povinelli began his tenure with the Company as an accountant in 1983
and has served as an executive officer since November 1984. In addition to
supervising the opening of all new offices, he prepares tax returns, serves as a
life insurance agent, selling life and other insurance products to clients as
well as effecting transactions in mutual funds shares and other securities. Mr.
Povinelli is a Registered Representative of Royal Alliance Associates, Inc. an
independent securities broker/dealer registered with the National Association of
Securities Dealers. He graduated from Iona College with a B.S. in accounting.
Kathryn Travis, Secretary, Vice President and Director
Ms. Travis began her career with the Company in 1986 as an accountant and
has served as Vice President and a director since November 1989. She prepares
tax returns and manages the company's Great Neck office. She also is a
Registered Representative of Royal Alliance. Ms. Travis graduated from the
College of New Rochelle with a B.A. in mathematics.
Stephen B. Sacher, Chief Financial Officer
Mr. Sacher joined the Company as its Chief Financial Officer in January
1998. Mr. Sacher is a Certified Public Accountant and has been practicing in
the public accounting profession since 1981. He is a graduate of Queens College
of the City University of New York with a B.A. in accounting. He is a member of
the SEC Committee of the New York State Society of Certified Public Accountants
and a Member of the American Institute of Certified Public Accountants.
Seth A. Akabas, Director
Since June 1991, Mr. Akabas has been a partner at the law firm of Akabas &
Cohen. Mr. Akabas is a graduate of Princeton University with a BA degree in
economics and a graduate of Columbia University Schools of Law and Journalism.
Louis P. Karol, Director
Mr. Karol has been a partner of the law firm of Karol, Hausman & Sosnick
and its predecessors for more than the prior five years. Mr. Karol is a
graduate of George Washington University and a graduate of Cardozo Law School
and has received an LLM degree in Taxation from New York University School of
Law. Mr. Karol is a Certified Public Accountant. Mr. Karol is on the Board of
Directors of the Long Island Chapter of the International Association of
Financial Planning.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1998, the Company's Board of
Directors acted twelve times by a unanimous written consent in lieu of a
meeting.
The only two Committees of the Board of Directors are the Audit Committee
composed of Thomas Povinelli, Louis P. Karol and Seth A. Akabas and the Stock
Option Committee, composed of Louis P. Karol and Seth A. Akabas. The Audit
Committee, which met three times during the fiscal year ended June 30, 1998,
reviews and acts or reports to the Board with respect to various auditing and
accounting matters, including the selection of the Company's independent
auditors, the accounting and financial practices and controls of the Company,
audit procedures and findings, and the nature of services performed for the
Company by, and the fees paid to, the independent auditors. The Company has no
executive, nominating, compensation or other committees. The Stock Option
Committee, which did not meet during the fiscal year ended June 30, 1998 except
in connection with all Board Meetings, is responsible for the administration of
the Company's 1993 Common Stock and Incentive and Non-Qualified Stock Option
Plan, 1997 Common Stock and Incentive and Non-Qualified Stock Option Plan and
1999 Common Stock and Incentive Non-Qualified Stock Option Plan.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
EXECUTIVE
OFFICER OR
DIRECTOR
NAME AGE POSITION SINCE
- ---------------------- ----- ------------------------- -----
James Ciocia 42 Chief Executive Officer, 11/81
President and Director
Thomas Povinelli 38 Chief Operating Officer, 11/84
and Director
Kathryn Travis 50 Secretary, Vice President 11/89
and Director
Stephen B. Sacher 39 Chief Financial Officer 1/98
Seth A. Akabas 42 Director 4/95
Louis P. Karol 40 Director 4/95
For further information about the executive officers of the Company, see
"--Nominees" above.
EXECUTIVE COMPENSATION
Summary Compensation Table
----------------------------
Other
Bonus Annual Other
Name and Principal Position Year Salary Compensation Options Underlying
- ---------------------------- ---- ------------------ ----------- -------------- ----------
James Ciocia
Chief Execuritve 1996 $ 267,200 $ 240,000 $ 30,500(1) --
Officer, 1997 $ 251,200 $ 240,000 $ 9,580(2) 10,000
President and Director 1998 $ 190,000 -- $ 12,393(11) --
Thomas Povinelli
Chief Operating Officer, 1996 $ 339,300 $ 145,000 $ 78,600(3) --
and Director 1997 $ 99,951 $ 210,000 $ 9,951(4) 10,000
1998 $ 190,000 -- -- --
Gary Besmer (9)
Vice President and 1996 $ 168,800 $ 3,000 $ 19,000(5) --
Director 1997 $ 92,149 $ 1,000 $ 7,149(6) 10,000
1998 $ 74,782 -- $ 5,908(11) --
Kathryn Travis
Secretary, Vice Pres. 1996 $ 166,200 $ 19,000 $ 49,300(7) -0-
and Director 1997 $ 92,149 $ 3,000 $ 7,149(8) 10,000
1998 $ 135,000 -- $ 10,758(11) --
Stephen B. Sacher
Chief Financial Offcier 1998 $ 36,667 -- $ 125,717(10) 220,000
* Represents commission earned from non-affiliated entities. See Certain Relationships and
Related Transactions
(1) Includes $11,000 for auto expense and $19,500 for forgiveness of loan.
(2) Auto expense.
(3) Includes $18,600 for auto expense and $60,000 for forgiveness of loan.
(4) Auto expense.
(5) Includes $7,000 for auto expense and $12,000 for forgiveness of loan.
(6) Auto expense.
(7) Includes $8,900 for auto expense, $32,300 for forgiveness of loan and $8,100 for
health insurance.
(8) Auto expense.
(9) On May 19, 1998 Mr. Besmer announced that he was retiring from the Company effective
immediately.
(10) Includes professional fees paid to Sacher & Co., PC a company of which Mr. Sacher
is President.
(11) Auto expense.
Mssrs. Ciocia, Povinelli and Besmer and Ms. Travis earned commissions from
the sale of securities and insurance products to the Company's clients as
Registered Representatives of Royal Alliance which are reflected in the table
above.
Key Man Insurance
The Company maintains $2.0 million key-man life insurance policies on both
Thomas Povinelli and James Ciocia.
Directors
Directors of the Company receive no compensation for serving as a director of
the Company.
Option Grants
The following table sets forth information regarding options to purchase
shares of Common Stock granted to the Named Executive Officers during Fiscal
1998.
OPTION GRANTS IN FISCAL 1998
INDIVIDUAL GRANTS
Number of Securities Percent of Total Options/SARS
Underlying Options/ Granted to Employees in Fiscal Base Price
Name SARSs Granted Year ($/sh) Expiration Date
- ----------------------- -------------------- ------------------------------- ------------ ---------------
Stephen B. Sacher--- 20,000 1.1% $ 7.00 1/15/08
Chief Financial Officer
20,000 1.1% $ 7.50 1/15/08
-------------------- ------------------------------- ------------ ---------------
20,000 1.1% $ 8.00 1/15/08
-------------------- ------------------------------- ------------ ---------------
20,000 1.1% $ 8.50 1/15/08
-------------------- ------------------------------- ------------ ---------------
20,000 1.1% $ 9.00 1/15/08
-------------------- ------------------------------- ------------ ---------------
20,000 1.1% $ 9.50 1/15/08
-------------------- ------------------------------- ------------ ---------------
100,000 5.7% $ 20.00 1/15/08
-------------------- ------------------------------- ------------ ---------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securitiies
Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal-YearJune Fiscal Year June 30,
30, 1998 1998(1)
Shares Acquired Upon Value Realized Exercisable/Unexer- Exercisable/Unexer-
Name Exercise cisable cisable
- ----------------- -------------------- -------------- --------------------- ---------------------
James Ciocia -- -- 135,370/-- 0/--
-------------------- -------------- --------------------- ---------------------
Thomas Povinelli -- -- 135,370/-- 0/--
-------------------- -------------- --------------------- ---------------------
Kathryn Travis -- -- 104,039/-- 0/--
-------------------- -------------- --------------------- ---------------------
Stephen B. Sacher -- -- 20,000/200,000 0/0
-------------------- -------------- --------------------- ---------------------
Gary Besmer -- -- --/-- 0/--
- ----------------- -------------------- -------------- --------------------- ---------------------
(1) Based on a year-end fair market value of the underlying securities equal
to $2 1/16.
INDEMNIFICATION
The Company's Certificate of Incorporation eliminates or limits the
personal financial liability of the Company's directors, except where there has
been a breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or knowing violation of the law. In addition, the Company's By-laws
include provisions to indemnify its officers and directors and other persons
against expenses, judgments, fines and amounts paid in settlement in connection
with threatened, pending or completed suits or proceedings against such persons
by reason of serving or having served as officers, directors or in other
capacities, except when they have acted not in good faith, unlawfully or not in
the best interest of the Company.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPA-NY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED
THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.
FIVE YEAR SHAREHOLDER RETURN COMPARISON
PERFORMANCE GRAPH
The graph on the following page sets forth for the five-year period
ended June 30, 1998, the cumulative total shareholder return to the Company's
shareholders, as well as the cumulative total return of the Standard & Poor's
500 Stock Index and the cumulative total return of the Standard & Poor's
Companies in Service (Commercial & Consumer) Index, the published industry index
to which the Company is currently assigned by Standard & Poor's. The performance
graph assumes that $100 was invested at the market close on June 30, 1993. The
Company effected its initial public offering of securities in December 1994 and
therefore no public market for he Company's securities existed prior to such
date. The data for the graph was furnished by Standard & Poor's Compustat Custom
Business Unit, a division of The McGraw-Hill Companies. The Company has been
advised that the Standard & Poor's Service (Commercial & Consumer) Group
consists of five corporations, including the Company.
TOTAL RETURN TO SHAREHOLDERS
INDEXED RETURNS
Years Ending 1998
BASE PERIOD
COMPANY / INDEX 6/30/95 6/30/96 6/30/97 6/30/98
GILMAN & CIOCIA, INC. 100 182.44 61.36 539.87
SERVICE (COMMERCIAL&CONSUMER) 100 125.38 128.38 152.68
S&P 500 INDEX 100 130.21 162.93 229.84
[STOCK PERFORMANCE GRAPH]
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the SEC initial reports of ownership and
reports of changes in ownership of Common Stock. The SEC requires such
officers, directors and greater than 10% stockholders to furnish to the Company
copies of all forms that they file under Section 16(a).
To the Company's knowledge, based solely on review of the copies of such
forms furnished to the Company and representations that no other reports were
required, during the fiscal year ended June 30, 1998, the Company's officers,
directors and greater than 10% stockholders complied with all Section 16(a)
filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) TRANSACTIONS WITH MANAGEMENT
--------------------------------
The four principal stockholders, Messrs. Ciocia, Povinelli, Besmer and Ms.
Travis, personally guaranteed the repayment of the Company's long-term loan of
$500,000 from the State Bank of Long Island, as well as the seasonal loans in
the form of lines of credit. Such stockholders received no consideration for
such guarantees other than their salaries and other compensation.
On July 1, 1995, the Company, Ralph Esposito, who was then its Chief
Financial Officer, Kathryn Travis, an executive officer of the Company, four
individuals who are relatives of the officers and an employee of the Company
formed ATM Partners, LP (the "Partnership"). Such individuals and their initial
investment are as follows: Madeline Esposito, the wife of the former Chief
Financial Officer - $196,000, Anna Saras, the wife of the present Chief
Operating Officer - $198,000, Thomas Povinelli, Sr., father of the present Chief
Operating Officer - $71,000, Tracy Ciocia, wife of the President - $150,000,
and Jospeh Bonocore, an employee - $10,000. The Company's initial investment
was $348,000 and Kathryn Travis= initial investment was $6,000. At June 30,
1997 the Company had 41% interest in the Partnership and recognized income of
approximately $73,000 from the Partnership for Fiscal 1997. During Fiscal 1997
the Partnership began liquidating its investments and distributing its assets to
its partners. During Fiscal 1998, the Partnership was dissolved, and the
Company wrote-off a $100,000 loan to the Partnership.
In April 1998, Texas Capital Securities, Inc. ("Texas Capital") and its
assignee, Harbor Financial, Inc. ("Harbor Financial")instituted a suit in the
U.S. District Court in Austin, Texas, demanding issuance, collectively, of
100,000 warrants to purchase the Company's common stock at $5 1/8 per share
(alleged to have been issuable under an investment banking agreement pursuant to
which Texas Capital was to have provided investment banking services to the
Company), as well as attorney's fees and exemplary damages. The Company
believes, among other defenses, that Texas Capital Securities, Inc. defaulted
under such agreement and provided no material services to the Company. The
Company entered into a settlement with Texas Capital and Harbor Financial
whereby the Company agreed to issue 72,250 Common Stock Warrants to purchase the
Company's shares of Common Stock at $5 1/8 per share to Harbor Financial and
12,750 Common Stock Warrants to purchase the Company's shares of Common Stock at
$5 1/8 per share to Woodward, Primm & Hall, and Thomas Povinelli, the Company's
Chief Operating Officer, agreed to transfer 1,875 shares of the Company's Common
Stock to Woodward, Primm & Hall and 10,625 shares of the Company's Common Stock
to Harbor Financial. The Company reimbursed Mr. Povinelli for the market value
of the common stock that he transferred at its market value on the date of
transfer.
(b) CERTAIN BUSINESS RELATIONSHIPS
-------------------------------------
James Ciocia, Thomas Povinelli, and Kathryn Travis each acts, and Gary
Besmer while he was a director of the Company acted, as a Registered
Representative for Royal Alliance and as an authorized agent for insurance
carriers. Compensation from such activities is reflected in the table under the
headline "Election of Directors-Summary Compensation Table."
From time to time the Company employs the professional services of Sacher &
Co. P.C. The President of Sacher & Co. P.C. is the Chief Financial Officer of
the Company. The amounts paid to Mr. Sacher in this capacity are set forth
above in "Executive Compensation."
(c) INDEBTEDNESS WITH MANAGEMENT
-----------------------------------
The Company loaned the following individuals the following amounts:
$100,000 and $240,000 to James Ciocia, $100,000 and $240,000 to Thomas
Povinelli, $50,000 and $72,000 to Kathryn Travis, $50,000 to Gary Besmer and
$50,000 to Steven Gilbert. These loans are due in fully amortizing biweekly
installments (including interest at 7% annum) through maturity on June 30, 2000,
with the exception of the $240,000 loans to Messrs. Ciocia and Povinelli and the
$72,000 to loan to Kathryn Travis, which have a maturity date of August 1,
2001.
In December 1997, the Company loaned $225,000 each to James Ciocia and
Thomas Povinelli. These loans were non-interest bearing loans, and such
officers /stockholders repaid such loans in March 1998.
The Company has also made two loans to Steven Gilbert, a stockholder of the
Company. The first loan is for $150,000, due in bi-weekly installments through
June 15, 1999. Interest is charged at 9% per annum. The second loan is for
$100,000, due on October 9, 1999. Interest on this loan is charged at 9% per
annum.
In addition, the Company holds notes receivable from Dominic Ciocia, the
brother of the Company's Chief Executive Officer. The notes receivable are for
$50,319 due on June 3, 1999 with interest at 8.5% per annum and for $106,000 due
on June 19, 2000 with interest at 6% per annum.
ITEM II.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO GILMAN & CIOCIA, INC., TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK, AND TO ESTABLISH A CLASSIFIED BOARD OF
DIRECTORS
On April 20, 1999, the Board of Directors unanimously approved an amendment
to the Company's Certificate of Incorporation that will change the Company's
name to Gilman & Ciocia, Inc., increase the number of authorized shares of
Common Stock from 9,000,000 to 20,000,000 and establish a classified board of
directors. The proposed amendment to the Certificate of Incorporation is set
forth in Exhibit A to this Proxy Statement.
The Company's Certificate of Incorporation currently authorizes the Company
to issue 9,100,000 shares of capital stock consisting of 9,000,000 shares of
its Common Stock, $.01 par value per share, and 100,000 shares of Preferred
Stock, $.001 par value per share. The proposed amendment to the Company's
Certificate of Incorporation would increase the number of authorized shares of
Common Stock from 9,000,000 to 20,000,000, thereby increasing the total number
of authorized shares of capital stock of the Company from 9,100,000 to
20,100,000. As of February 28, 1999, 6,731,875 shares of Common Stock were
issued and outstanding and more shares are issuable upon exercise of outstanding
stock options and warrants than shares of Common Stock available for issuance.
If the stockholders approve the proposed amendment, a total of -10,697,125
shares of Common Stock would be authorized and available for future issuance.
None of the outstanding shares of Common Stock has preemptive rights or
cumulative voting rights. The amendment would not change the terms and
conditions of the outstanding Common Stock and the additional shares of Common
Stock proposed to be authorized when issued would be identical to the
outstanding shares of Common Stock. Each certificate representing shares of
outstanding Common Stock immediately prior to the effective date of the
amendment, if it is adopted by stockholders at the Meeting, would remain
outstanding and represent the same number of shares of Common Stock as before
such effective date.
The Board of Directors believes that the adoption of the proposed amendment
is advantageous to the Company and its stockholders. The Company's new name is
consistent with the Company's registered trademark. It would provide additional
authorized shares of Common Stock that could be used from time to time, without
further action or authorization by the stockholders (except as may be required
by law or by any stock exchange on which the Company's securities may then be
listed), for corporate purposes that the Board of Directors may deem desirable,
including, without limitation, stock splits, stock dividends and other
distributions, financings, acquisitions, stock grants, stock options and
employee benefit plans.
The proposed amendment to the Company's Certificate of Incorporation would
divide the Board of Directors into three classes: Class A, Class B and Class C.
The term of Class A directors expires at the 1999 Annual Meeting of Stockholders
and afterwards Class A directors elected in 1999 will serve terms of three
years; the nominees for director designated as Class B directors will serve
until the 2000 Annual Meeting of Stockholders and afterwards Class B directors
elected in 2000 will serve terms of three years; and the nominees for director
designated as Class C directors will serve until the 2001 Annual Meeting of
Stockholders and thereafter Class C directors elected in 2001 will serve terms
of three years, and, in each case, until his or her successor shall be duly
elected and qualified or until his or her earlier death, resignation or removal.
Each class comprises a number of directors as equal in number as possible as the
other classes. Each class generally serves three years with terms of office of
the respective classes expiring in successive years. The Board of Directors
has nominated James Ciocia and Louis P. Karol to stand as Class A directors,
and Seth A. Akabas to stand as a Class B director, and Kathryn Travis and Thomas
Povinelli to stand as Class C directors.
Vacancies on the Board of Directors which occur during the year may be
filled by the Board of Directors for the remainder of the full term.
The Board of Directors believes that the proposed amendment would, if
adopted, promote conditions of continuity and stability in the Board of
Directors and its management and policies, and should enable the Board to
negotiate more effectively with persons attempting to acquire control of the
Company. In addition, the Board of Directors believes that the proposed
amendments will permit it to represent more effectively the interests of all
stockholders in a variety of situations, including in its response to
circumstances created by demands or actions by a substantial stockholder or
stockholder group. For similar reasons, however, the proposed amendments may
deter certain attempts to acquire the Company at prices that may be greater than
the current market price.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO CHANGE THE COMPANY'S NAME TO GILMAN & CIOCIA INC.,
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, AND TO ESTABLISH A
CLASSIFIED BOARD OF DIRECTORS.
ITEM III.
PROPOSAL TO APPROVE THE COMPANY'S 1999 STOCK OPTION PLAN
On April 20, 1999, the Board of Directors of the Company adopted the
Company's 1999 Common Stock and Incentive and Non-Qualified Stock Option Plan
(the "Plan"). The Plan will not become effective, however, unless approved by
the holders of a majority of the shares of Common Stock present or represented
and voting thereon at the Meeting. Exhibit B to this proxy statement contains
the text of the Plan.
The Board of Directors believes that a stock option program would be of
material benefit to the Company and that it would enable the Company to attract
and retain key employees, directors, consultants and other individuals providing
services to the Company and its subsidiaries. The Board of Directors also
believes that the best interests of the Company and its stockholders require
that the Company be able to offer options to present and prospective personnel.
Under the Plan, the Company may grant options to purchase up to 300,000
shares of Common Stock to key employees of the Company and its subsidiaries, and
directors, consultants and other individuals providing services to the Company.
Such options may either qualify as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, or they may not
qualify under such Section ("non-qualified stock options").
The Board of Directors will administer the Plan. The Plan allows the
Board of Directors of the Company to designate a committee of at least two
non-employee directors to administer the Plan for the purpose of complying with
Rule 16(b)(3) under the Securities Exchange Act of 1934, as amended, with
respect to future grants under the Plan. Until such delegation, the Board will
select the persons who are to receive options and the number of shares to be
subject to each option (the administrator of the Plan, whether the Board of
Directors or a committee thereof, is referred to herein as the "Committee"). In
selecting individuals for options and determining the terms, the Board may
consider any factors that it deems relevant, including present and potential
contributions to the success of the Company. Options granted under the Plan
must be exercised within a period fixed by the Board, which may not exceed ten
years from the date of grant. Options may be made exercisable immediately or
in installments, as determined by the Board.
The purchase price of each share for which an Incentive Option is granted
and the number of shares covered by such Option will be within the discretion of
the Committee based upon the value of the grantee's services, the number of
outstanding shares of Common Stock, the market price of such Common Stock, and
such other factors as the Committee determines are relevant; provided however,
that such purchase price may not be less than the par value of the Common Stock.
The purchase price of each share for which an Incentive Option is granted under
the Plan ("Incentive Option Price") shall not be less than the amount which the
Committee determines, in good faith, at the time such Incentive Option is issued
or granted, constitutes 100% of the then Fair Market Value of a Share of Common
Stock.
Grantees under the Plan may not transfer options otherwise than by will or
the laws of descent and distribution. No transfer of an Option by the grantee by
will, by the laws of descent and distribution will bind the Company unless the
Company has been furnished with written notice thereof and a copy of the will
and/or such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of such Option. In the case of an Option, during the
lifetime of the grantee, the Option may only be exercised by the grantee, except
in the case of disability of the grantee resulting in termination of employment,
in which case the Option may be exercised by such grantee's legal
representative.
The Committee will adjust the total number of shares of Common Stock which
may be purchased upon the exercise of Options granted under the Plan for any
increase or decrease in the number of outstanding shares of Common Stock
resulting from a stock dividend, subdivision, combination or reclassification of
shares or any other change in the corporate structure or shares of the Company;
provided, however, in each case, that, with respect to Incentive Options, no
such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code. If the Company
dissolves or liquidates or upon any merger or consolidation, the Committee may
make such adjustment with respect to Options or act as it deems necessary or
appropriate to reflect or in anticipation of such dissolution, liquidation,
merger or consolidation including, without limitation, the substitution of new
options or the termination of existing options.
In December 22, 1997, the board of directors of the Company adopted a
program for issuing options under the Plan to all employees of the Company and
financial planners affiliated with the Company. Under such program, the Company
will grant to each employee and those affiliated financial planners who have
entered into commission sharing agreements with the Company, including officers
and directors, options to purchase 100 shares of Common Stock for each whole
$25,000 of revenues for tax preparation and commissions generated by such
individual for the Company in 1998, 1999 and 2000. Each option will be
exercisable for a period of five years to acquire one share of Common Stock at
the market price on the date of grant of the option. The Company will grant
options following the end of the calendar year. The Company anticipates that it
will grant between 50,000 and 100,000 options per year under this program.
For Federal income tax purposes, an optionee will not recognize any income
upon the grant of a non-qualified stock option or an incentive stock option.
Upon the exercise of a non-qualified stock option, the optionee will
realize ordinary income equal to the excess (if any) of the fair market value of
the shares purchased upon such exercise over the exercise price. The Company
will be allowed a deduction from income in the same amount and at the same time
as the optionee realizes such income. Upon the sale of shares purchased upon
such exercise, the optionee will realize capital gain or loss measured by the
difference between the amount realized on the sale and the fair market value of
the shares at the time of exercise of the option. In the case of options
granted to executive and principal officers, directors and stockholders owning
greater than 10% of the outstanding Common Stock, income will be recognized upon
exercise of a non-qualified option only if the option has been held for at least
six months prior to exercise. If such option is exercised within six months
after the date of grant, then such an officer, director or greater than 10%
stockholder will recognize income six months after the date of grant, unless he
or she files an election under Section 83(b) of the Code to be taxed on the date
of exercise.
In contrast, upon the exercise of an incentive stock option, an optionee
will not realize income, and the Company will not be allowed a deduction. If
the optionee retains the shares issued to him upon exercise of an incentive
stock option for more than one year after the date of issuance of such shares
and two years after the date of grant of the option, then any gain or loss
realized on a subsequent sale of such shares will be treated as long-term
capital gain or loss. If, on the other hand, the optionee sells the shares
issued upon exercise within one year after the date of issuance or within two
years after the date of grant of the option, then the optionee will realize
ordinary income, and the Company will be allowed a deduction from income, to the
extent of the excess of the fair market value of the shares on the date of
exercise or the amount realized on the sale (whichever is less) over the
exercise price. Any excess of the sale price over the fair market value of such
shares on the date of exercise will be treated as capital gain. In addition,
the difference between the fair market value of the shares on the date of
exercise and the exercise price constitutes an item of tax preference for
purposes of calculating an alternative minimum tax, which, under certain
circumstances, could cause tax liability as a result of an exercise.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE FOR
---
APPROVAL OF THE 1999 COMMON STOCK AND INCENTIVE AND NON-QUALIFIED STOCK OPTION
PLAN.
ITEM IV.
PROPOSAL TO RATIFY THE REAPPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Arthur Andersen LLP to
serve as independent certified public accountants for the Company for the fiscal
year ending June 30, 1999. The firm of Arthur Andersen LLP, independent
certified public accountants, has been the Company's auditors since 1997.
Although the Board of Directors is not required to submit its selection of
auditors for ratification at the Meeting the Board of Directors is submitting,
such selection to ascertain the views of stockholders. If the selection is not
ratified, the Board of Directors will reconsider its selection. The Board also
reserves the right to make any change in auditors at any time that it deems
advisable or necessary. One or more representatives of Arthur Andersen LLP are
expected to attend the Meeting and will be given an opportunity to make a
statement and are expected to be available to answer questions from
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE FOR
RATIFICATION OF THE REAPPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING JUNE
30, 1999.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other matters
that may be brought before the Meeting. However, if any such other matters are
properly presented for action, it is the intention of the persons named in the
accompanying form of Proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, a stockholder intending to submit a proposal to be presented
at the 2000 Annual Meeting of Stockholders must deliver a proposal in writing to
the Company's principal executive offices on or before February 1, 2000.
By order of the Board of Directors
Kathryn Travis
Secretary
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GILMAN & CIOCIA, INC.
---------------------
(UNDER SECTION 1309 OF THE GENERAL CORPORATION LAW)
The undersigned, being the respective President and Secretary of
Gilman & Ciocia, Inc., a Delaware corporation (the "Corporation"), pursuant to
Section 1309 of the General Corporation Law of the State of Delaware, do hereby
certify that:
1. The name of the Corporation is Gilman & Ciocia, Inc.
2. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 3, 1993.
3. The Certificate of Incorporation of the Corporation is amended as set
forth below to change the Company's name to "Gilman & Ciocia, Inc." in Article
FIRST, effect an increase in the number of shares of authorized capital stock in
Article FOURTH from 9,100,000 shares of capital stock, consisting of 9,000,000
common stock par value $.01 per share and 100,000 shares of preferred stock par
value $.001 per share, to 20,100,000 shares of capital stock, consisting of
20,000,000 shares of common stock par value $.01 per share and 100,000 shares of
preferred stock par value $.001 per share, and to establish a classified board
of directors in Article SIXTH by deleting Article FIRST and FOURTH and
substituting a new Article FIRST and Article FOURTH and a new Article SIXTH as
follows:
FIRST: Name. The name of the corporation shall be Gilman & Ciocia,
----- ----
Inc. (hereinafter referred to as the "Corporation").
FOURTH: Capital Stock. The total number of shares of capital stock
------ --------------
that this Corporation shall have authority to issue shall be Twenty Million
One Hundred Thousand shares, of which Twenty Million (20,000,000) shares
shall be par value $.01 per share Common Stock, and One Hundred Thousand
(100,000) shall be par value $.001 per share Preferred Stock divided into
such series and designations, and with voting powers, preferences, optional
or other special rights, qualifications or restrictions of each thereof as
shall be set forth in the resolution or resolutions providing for the issue
of such preferred stock adopted by the board of directors of the
Corporation without further consent or approval of the stockholders of the
Corporation, which authority, without further consent or approval of the
stockholders of the Corporation, is hereby granted.
SIXTH: Board of Directors and By-Laws. (e) The Board of Directors
---------------------------------
shall be divided into three classes: Class A, Class B and Class C,
consisting of a number of directors. Each person elected to serve as a
director will be placed into a Class. The term of Class A directors expires
at the Annual Meeting of Stockholders in 1999 and afterwards Class A
directors elected in 1999 will serve terms of three years; the nominees for
director designated as Class B directors will serve until the 2000 Annual
Meeting of Stockholders and afterwards Class B directors elected in 2000
will serve terms of three years; and the nominees for director designated
as Class C directors will serve until the 2001 Annual Meeting of
Stockholders and thereafter Class C directors elected in 2001 will serve
terms of three years, and, in each case, until his or her successor shall
be duly elected and qualified or until his or her earlier death,
resignation or removal. Each class shall comprise a number of directors as
equal in number as possible as the other classes. Each class generally
serves three years with terms of office of the respective classes expiring
in successive years. If the number of directors constituting the Board is
increased, such increase is to be apportioned among the Classes as nearly
equal in number as possible.
4. This Certificate of Amendment to the Certificate of Incorporation of
the Corporation was authorized by the Board of Directors of the Corporation
acting by unanimous written consent in lieu of a meeting dated March 30, 1999
and by the stockholders of the Corporation at a meeting on May __, 1999.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed on its behalf by its President and its Secretary, and each of such
officers has subscribed this Certificate and hereby affirms this Certificate to
be true under the penalties of perjury.
GILMAN & CIOCIA, INC.
By: /s/ James Ciocia
James Ciocia, President
By: /s/ Kathryn Travis
Kathryn Travis, Secretary
EXHIBIT B
1999 COMMON STOCK AND INCENTIVE AND NON QUALIFIED STOCK OPTION PLAN
OF GILMAN & CIOCIA, INC.
1. PURPOSE
The purpose of this Plan, which shall be known as the "1999 Common Stock
and Incentive and Non Qualified Stock Option Plan" (the "Plan"), is to permit
GILMAN & CIOCIA, INC. (the "Company") and its subsidiary corporations, as
defined herein, to attract, retain and reward the best available talent and
encourage the highest level of performance in order to continue to serve the
best interests of the Company and its shareholders. By affording all personnel
the opportunity to acquire proprietary interests in the Company and by providing
them incentives to put forth maximum efforts for the success of the business,
the Plan is expected to contribute to the attainment of those objectives.
Shares of common stock ("Shares") may be directly granted under the Plan.
Options under the Plan may be granted in the form of incentive stock options
("Incentive Options") as provided in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or in the form of nonqualified stock options
("Non-Qualified Options"). Unless otherwise indicated, references in the Plan
to "Options" include Incentive Options and Non-Qualified Options.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board") or, at their discretion, by a stock grant and option committee
(the "Committee"), which shall be appointed by the Board of Directors of the
Company and shall consist of not less than two directors of the Board who shall
serve at the pleasure of the Board. Members of the Committee shall be eligible
to participate in the Plan while a member of the Committee except that the Board
may exclusively appoint two or more disinterested (non-employee) directors to
the Committee pursuant to Rule 16b-3(d)(1) under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Vacancies occurring in
the membership of the Committee shall be filled by appointment by the Board.
The Board or the Committee, as the case may be (hereinafter, the
"Committee" refers to the Board or the Committee, as the case may be, unless
otherwise specified), is authorized, subject to the provisions of the Plan, from
time to time, to establish such rules and regulations and to appoint such agents
as they deem appropriate for carrying out the provisions and purposes of the
Plan. The interpretation and construction by the Committee of any provisions
of, and the determination of any questions arising under, the Plan, any such
rule or regulation, or any stock option agreement granting Shares or Options
under the Plan, shall be final and conclusive and binding on all persons
interested in the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the Committee present at a meeting at which a quorum is present, or
acts approved in writing by all of its members, shall be acts of the Committee.
3. SHARES SUBJECT TO THE PLAN
Subject to the Plan, Shares of the Company's common stock, $.0l par value
("Common Stock"), may be issued, and such Shares may be made available from
either authorized and unissued shares or issued shares held in the treasury of
the Company. The total amount of shares of Common Stock together with all
Options which may be granted under the Plan shall not exceed 300,000 shares.
Such number of shares which may be granted under the Plan is subject to
adjustment in accordance with the provisions of Paragraph 11 hereof.
4. OPTIONS SUBJECT TO THE PLAN
Subject to the Plan, Options may be granted under the Plan for shares of
the Company's Common Stock, $.0l par value, and such shares underlying such
Options may be made available from either authorized and unissued shares or
issued shares held in the treasury of the Company. The total amount of shares
underlying such Options together with all Shares which may be granted under the
Plan shall not exceed 300,000 shares. Such number of shares underlying such
Options which may be granted under the Plan is subject to adjustment in
accordance with the provisions of Paragraph 11 hereof. In the event that any
Option granted under the Plan shall terminate, expire or, with the consent of
the grantee, be canceled as to any shares of Common Stock, without having been
exercised in full, new Options may be granted covering such shares.
5. AWARD OF SHARES AND OPTIONS
Shares under the Plan may be granted to any person, including but not
limited to employees, directors, independent agents and consultants who, the
Committee believes, has contributed, or will contribute to the success of the
Company. In determining the persons to whom Shares shall be granted and the
number of shares issued to such person, the Committee may take into account the
nature of the services rendered by the respective persons, his or her present
and potential contribution to the success of the Company and such other factors
as the Committee, in its sole discretion, shall deem relevant.
Incentive Options and/or Non-Qualified Options under the Plan may be
granted to any person, including but not limited to employees, directors,
independent agents and consultants who, the Committee believes, has contributed,
or will contribute to the success of the Company. Incentive Options under the
Plan may be awarded only to persons who, at the time such Incentive Options are
granted, are employees of the Company or a subsidiary corporation, as defined
herein, including any such employees who may be directors and shareholders
thereof. In determining the persons to whom Options shall be granted and the
number of shares covered by each option, the Committee may take into account the
nature of the services rendered by the respective persons, his or her present
and potential contribution to the success of the Company and such other factors
as the Committee, in its sole discretion, shall deem relevant.
Any Option granted hereunder shall be evidenced by a stock option agreement
authorized by the Committee and executed by a duly authorized officer of the
Company (the "Stock Option Agreement"). Each Agreement shall specify the number
of shares covered by such Option and the purchase price per share and shall
contain such terms and conditions not inconsistent with the Plan as the
Committee shall deem appropriate (which terms and conditions need not be the
same in each Stock Option Agreement and may be changed from time to time). The
date on which an Option shall be granted shall be the date of the Board's or the
Committee's authorization of such grant or such later date as may be determined
by the Committee at the time such grant is authorized, or with respect to
Incentive Options, the date of approval by the shareholders (the "Date of
Grant"). Each Stock Option Agreement may require as conditions of exercise that
the grantee provide such investment representations with respect to, and enter
into such agreements concerning the sale and transfer of, the shares receivable
by the grantee upon exercise, as the Committee deems appropriate. Each Stock
Option Agreement shall provide for the withholding of income taxes and
employment taxes that the Company determines it is required to withhold upon the
exercise of an Option.
Anything herein to the contrary notwithstanding:
(i) The Company may not, in the aggregate, grant Incentive
Options that are first exercisable by any grantee, during any calendar
year, to the extent that the aggregate Fair Market Value (within the
meaning of Section 422 of the Code and the treasury regulations
promulgated thereunder) of the underlying stock (determined at the
time the Incentive Option is granted) of all of the Incentive Options
first exercisable by such grantee during such calendar year (under all
such plans of the grantee's employer corporation and its "parent" and
"subsidiary" corporations, as those terms are defined in Section 424
of the Code) exceeds $100,000.
(ii) The purchase price of each share for which an Incentive
Option is granted and the number of shares covered by such Option
shall be within the discretion of the Committee based upon the value
of the grantee's services, the number of outstanding shares of Common
Stock, the market price of such Common Stock, and such other factors
as the Committee determines are relevant; provided however, that such
purchase price may not be less than the par value of the Common Stock.
The purchase price of each share for which an Incentive Option is
granted under the Plan ("Incentive Option Price") shall not be less
than the amount which the Committee determines, in good faith, at the
time such Incentive Option is issued or granted, constitutes 100% of
the then Fair Market Value of a Share of Common Stock. In the case of
an Incentive Option granted to an individual who, at the time the
Option is granted, owns shares comprising more than 10% of the total
combined voting power of all classes of stock of the Company, the
purchase price of each share underlying each Incentive Option shall
not be less than 110% of the Fair Market Value of a Share of Common
Stock, and the term of such Incentive Option shall not be greater than
five years.
6. TERM OF PLAN
The Plan shall terminate ten years from the earlier of the date of adoption
of the Plan or the date the Plan is approved by the Board, or with respect to
Incentive Options, approved by the shareholders of the Company. No Share or
Option may be granted after such termination. Termination of the Plan, however,
shall not affect the rights of grantees under shares issued or options
theretofore granted to them, and all unexpired options shall continue in force
and operation after termination of the Plan except as they may lapse or
terminate by their own terms and conditions.
7. TERM OF OPTIONS
The period during which any Option granted hereunder may be exercised shall
be determined in each case by the Board or the Committee, as the case may be;
however, anything herein to the contrary notwithstanding, Options granted
hereunder shall only be exercisable during a period not to exceed ten years from
the Date of Grant. Each Option shall be subject to such other conditions
regarding its exercise or non-exercise as the Committee may determine.
8. PURCHASE OF OPTION BY COMPANY
The Stock Option Agreement with respect to any Option at any time granted
under the Plan may contain a provision to the effect that the grantee (or any
persons entitled to act under Paragraph 8 hereof) may, at any time at which the
Fair Market Value of the Company's Common Stock is in excess of the purchase
price of the Option and prior to exercising the Option, in whole or in part,
request that the Company purchase all or any portion of the Option as shall then
be exercisable at a price equal to the difference between (i) an amount equal to
such number of shares multiplied by the Fair Market Value of the Company's
Common Stock on the date of purchase and (ii) an amount equal to the purchase
price multiplied by the number of shares subject to that portion of the Option
in respect of which such request shall be made. The Company shall have no
obligation to make any purchase pursuant to such request, but if it elects to do
so, such portion of the Option as to which the request is made shall be
surrendered to the Company. The purchase price for the portion of the Option to
be so surrendered shall be paid by the Company, at the election of the
Committee, either in cash or in shares of Common Stock (valued as of the date
and in the manner provided above), or in any combination of cash and Common
Stock, which may consist, in whole or in part, of shares of authorized but
unissued Common Stock or shares of Common Stock held in the Company's treasury.
No fractional share of Common Stock shall be issued or transferred and any
fractional share shall be disregarded. Shares covered by that portion of any
Option purchased by the Company pursuant hereto and surrendered to the Company
shall not be available for the granting of further options under the Plan. All
determinations to be made by the Company hereunder shall be made by the
Committee.
9. TERMINATION OF EMPLOYMENT
No Share or Option or any portion thereof granted to an employee under the
Plan shall be exercisable by such grantee at any time following the termination
of employment, except that the Stock Option Agreement with respect to Options
granted by the Board or the Committee may permit an Option to be exercised by
such grantee (or his or her legal representative if the grantee dies or becomes
incompetent) within three months after termination, but only to the extent the
Option was exercisable at the date of termination, and may also provide that in
the event of the death or disability (which, in the case of Incentive Options,
shall mean permanent and total disability as defined in Section 22(e)(3) of the
Code) of the grantee, that the Option may be exercised by such grantee's legal
representative, executor or administrator or by his or her distributees to whom
the Option may have been transferred by will or by the laws of descent and
distribution within a period of not more than one year after such death or
disability, but only to the extent that it was exercisable at the date of the
termination of such grantee's employment. Whether any leave of absence shall
constitute termination of employment for the purposes of any Option granted
under the Plan shall be determined in each case by the Committee in its sole
discretion.
10. PAYMENT FOR SHARES
Payment for Shares of Common Stock issued or Common Stock purchased upon
the exercise of an Option (or any portion thereto granted hereunder) shall be
made in full in cash, or in shares of Common Stock if so provided in the Option
at the time of the issuance of such Share or the exercise of such an Option.
It shall be a condition to the obligation of the Company to issue or
transfer shares of Common Stock upon the issuance of Shares or the exercise of
an Option, that the grantee pay to the Company, upon its demand, such amount as
may be requested by the Company for the purposes of satisfying its liability to
withhold federal, state or local income or other taxes incurred by reason of the
issuance of Shares or the exercise of such Option or the transfer of such shares
pursuant to Paragraph 9 hereof.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The total number of shares of Common Stock which may be purchased upon the
issuance of Shares or the exercise of Options granted under the Plan shall be
appropriately adjusted by the Committee for any increase or decrease in the
number of outstanding shares of Common Stock resulting from a stock dividend,
subdivision, combination or reclassification of shares or any other change in
the corporate structure or shares of the Company; provided, however, in each
case, that, with respect to Incentive Options, no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code. In the event of the dissolution or liquidation
of the Company or upon any merger or consolidation thereof, the Committee may
make such adjustment with respect to Options or take such other action as it
deems necessary or appropriate to reflect or in anticipation of such
dissolution, liquidation, merger or consolidation including, without limitation,
the substitution of new options or the termination of existing options, except
in the case of disability of a grantee with an Option resulting in termination
of employment, in which case the Option may be exercised by such grantee's legal
representative as set forth in Paragraph 9 hereof.
12. NON-TRANSFERABILITY OF SHARES OR OPTIONS
No Option granted to any grantee under the Plan shall be transferred by
such grantee otherwise than by will or the laws of descent and distribution. No
transfer of an Option by the grantee by will, or by the laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of the will and/or
such other evidence as the Company may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or transferees of the terms
and conditions of such Option. In the case of an Option, during the lifetime of
the grantee, the Option may only be exercised by the grantee, except in the case
of disability of the grantee resulting in termination of employment, in which
case the Option may be exercised by such grantee's legal representative as set
forth in Paragraph 9 hereof.
13. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN
The Committee may terminate, and at any time and from time to time, in any
respect, amend or modify the Plan, including the designation of a formula that
determines the amount, price and timing for the granting of Options in
accordance with Rule 16b-3(d)(1), (d)(2) and (e); provided, however, that no
such action of the Committee without approval of the Board, or with respect to
Incentive Options, without approval by the shareholders of the Company, may: (A)
materially increase the benefits accruing to participants under the Plan; (B)
materially increase the amount of Common Stock which may be issued under the
Plan; or (C) materially modify the requirements as to eligibility for
participation in the Plan. No amendment, modification or termination of the
Plan shall in any manner adversely affect any Share or Option theretofore
granted under the Plan without the consent of the grantee; but it shall be
conclusively presumed that any adjustment for changes as provided in Paragraph
11 does not adversely affect any such Share or Option. Anything in the Plan to
the contrary notwithstanding, no term of the Plan relating to Incentive Options
shall be interpreted, amended, or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the Plan or any
Option under Section 422 of the Code.
14. FINALITY OF DETERMINATIONS
Each termination, interpretation, or other action made or taken by the
Committee pursuant to the provisions of the Plan, shall be final and shall be
binding and conclusive for all purposes and upon all persons.
15. EMPLOYMENT
Nothing in the Plan or in any Stock Option Agreement under the Plan, shall
confer on any person the right to become an employee of the Company or on any
employee any right to continue in the employ of the Company or affect in any way
the right of the Company to terminate his or her employment at any time.
16. ADDITIONAL PROVISIONS
It is the intent of the Company that this Plan comply in all respects with
the applicable provisions of Rule 16(b)-3 under the Exchange Act in connection
with the granting of Options to, or other transaction by, any grantee under the
Plan who is subject to Section 16 of the Exchange Act (except for transactions
exempted under alternative Exchange Act Rules or acknowledged in writing to be
non-exempt by such grantee). Accordingly, if any provision of this Plan or any
Stock Option Agreement does not comply with the requirements of Rule 16b-3, as
then applicable to any transaction, such provision will be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such grantee shall avoid liability under Section 16(b). In
addition, the per share price of any Share or Option shall be not less than 50%
of the Fair Market Value of the Company's Common Stock at the date of the
issuance of the Share or the granting of the Option, if such pricing limitation
is required in order to comply with Rule 16b-3 at the time of the issuance of a
Share or the granting of the Option.
Anything herein to the contrary notwithstanding, the Committee may, in its
sole discretion, impose more restrictive conditions on the issuance of the
Shares or the exercise of Options granted pursuant to the Plan; however, any and
all such conditions shall be specified in the Stock Option Agreement limiting
and defining such Option.
17. EFFECTIVE DATE OF PLAN
The Plan shall become effective with respect to Incentive Options on the date it
is approved by the shareholders of the Company, and otherwise, on the date
approved by the Board.
GILMAN & CIOCIA, INC.
ANNUAL MEETING MAY __, 1998
NOMINEES FOR DIRECTOR:
JAMES CIOCIA
THOMAS POVINELLI
KATHRYN TRAVIS
SETH AKABAS
LOUIS KAROL
PROXY VOTING INSTRUCTIONS PLEASE MARK CHOICES IN BLUE OR BLACK INK.
The Board of Directors unanimously recommends a vote FOR the nominees and FOR
proposals (2), (3) and (4).
FOR WITHHOLD FOR ALL EXCEPT
1. Election of Directors. (see list above)
___ ___ ___
To withhold authority for an individual nominee,
check this space and write the nominee's
name in the following space:
FOR AGAINST ABSTAIN
2. Proposal to approve the Company's 1999 Common
Stock and Incentive and Non-Qualified Stock Option ___ ___ ___
Plan.
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's Certificate of
Incorporation to change the Company's name, ___ ___ ___
to increase the number of authorized shares
of common stock, and to create a classified board
of directors.
FOR AGAINST ABSTAIN
4. Proposal to ratify the reappointment of Arthur
Andersen LLP as the Company's independent ___ ___ ___
certified public accountants for the fiscal year ending
June 30, 1999.
FOR AGAINST ABSTAIN
5. To transact such other business as may properly come
before the Annual Meeting and any adjournments or ___ ___ ___
postponements thereof.
YOUR SHARES WILL BE VOTED AS DIRECTED HEREIN. IF SIGNED AND NO DIRECTION IS
GIVEN FOR ANY ITEM, IT WILL BE VOTED AS RECOMMENDED ABOVE.
Please return your executed Check this space Transfer, Republic Plaza, 370
Form as soon as possible only if you wish 17th St., Suite 2350, Denver,
to Corporate Stock to attend and CO 80202-4614
vote at the
meeting. ___
If securities are jointly owned, each should sign.
___________________________ ____
Signature Date
___________________________ ____
Signature of Joint Owner Date
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. BY RETURNING
YOUR VOTING INSTRUCTIONS PROMPTLY, YOU CAN AVOID THE INCONVENIENCE OF RECEIVING
FOLLOW-UP MAILINGS PLUS HELP TO AVOID THE EXPENSES ASSOCIATED WITH SUCH
ADDITIONAL MAILINGS.