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
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e) (2))
(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AlphaNet Solutions, Inc.
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(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
April 16, 2001
To Our Shareholders:
You are most cordially invited to attend the 2001 Annual Meeting of
Shareholders of AlphaNet Solutions, Inc. at 9:00 a.m., local time, on Friday,
May 18, 2001 (the "Meeting") at the offices of the Company, 7 Ridgedale Avenue,
Cedar Knolls, New Jersey.
The Notice of Meeting and Proxy Statement on the following pages
describe the matters to be presented at the Meeting.
It is important that your shares be represented at this Meeting to
assure the presence of a quorum. Whether or not you plan to attend the Meeting,
we hope that you will assure that your shares are represented at the Meeting by
signing, dating and returning your proxy as soon as possible in the enclosed
envelope, which requires no postage if mailed in the United States. Your shares
will be voted in accordance with the instructions on your proxy.
Thank you for your continued support.
Sincerely,
Stan Gang
Chairman & CEO
ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 2001
The Annual Meeting of Shareholders (the "Meeting") of AlphaNet
Solutions, Inc., a New Jersey corporation (the "Company"), will be held at the
offices of the Company, 7 Ridgedale Avenue, Cedar Knolls, New Jersey, on Friday,
May 18, 2001, at 9:00 a.m., local time, for the following purposes:
(1) To elect five directors to serve until the next Annual Meeting of
Shareholders and until their respective successors shall have been
duly elected and qualified;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 2001; and
(3) To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Only holders of record of common stock of the Company at the close of
business on March 30, 2001 are entitled to notice of and to vote at the Meeting,
or any adjournment or adjournments thereof. A complete list of such shareholders
will be open to the examination of any shareholder at the Meeting. The Meeting
may be adjourned from time to time without notice other than by announcement at
the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL
ENSURE A QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH
PROXY GRANTED MAY BE REVOKED BY THE SHAREHOLDER APPOINTING SUCH PROXY AT ANYTIME
BEFORE IT IS VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES
ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE REPRESENTED.
By Order of the Board of Directors,
Jack P. Adler, Secretary
Cedar Knolls, New Jersey
April 16, 2001
THE COMPANY'S 2000 ANNUAL REPORT TO SHAREHOLDERS
ACCOMPANIES THIS PROXY STATEMENT.
ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
----------------------------
PROXY STATEMENT
----------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of AlphaNet Solutions, Inc. (the "Company") of proxies
to be voted at the Annual Meeting of Shareholders of the Company to be held on
Friday, May 18, 2001 (the "Meeting"), at the offices of the Company, 7 Ridgedale
Avenue, Cedar Knolls, New Jersey at 9:00 a.m., local time, and at any
adjournment or adjournments thereof. Only holders of record of common stock of
the Company, $0.01 par value ("Common Stock"), as of the close of business on
March 30, 2001, will be entitled to notice of and to vote at the Meeting and any
adjournment or adjournments thereof. As of that date, there were 6,404,950
shares of Common Stock issued and outstanding and entitled to vote. Each share
of Common Stock is entitled to one vote on any matter presented at the Meeting.
If proxies in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted in the
manner specified therein. If not otherwise specified, the shares of Common Stock
represented by the proxies will be voted: (i) FOR the election of the five
nominees for director named in this Proxy Statement; (ii) FOR the ratification
of the appointment of PricewaterhouseCoopers LLP as the Company's auditors for
the year ending December 31, 2001; and (iii) in the discretion of the persons
named in the enclosed form of proxy, on any other matters which may properly
come before the Meeting or any adjournment or adjournments thereof. Any
shareholder who has submitted a proxy may revoke it at any time before it is
voted by giving notice to the Secretary of the Company or by submitting a duly
executed proxy bearing a later date. The mere presence at the Meeting of the
person appointing a proxy does not, however, revoke the appointment.
The presence, in person or by proxy, of holders of shares of Common
Stock representing a majority of the shares of Common Stock outstanding
constitutes a quorum. The affirmative vote by the holders of a plurality of the
shares of Common Stock represented at the Meeting is required for the election
of directors, provided a quorum is present in person or by proxy. Appointment of
the Company's independent accountants will be ratified upon the affirmative vote
of a majority of the votes cast at the Meeting, provided a quorum is present in
person or by proxy.
Abstentions are included in the shares present at the Meeting for
purposes of determining whether a quorum is present, but are not counted as a
vote cast at the Meeting and thus have no effect on the outcome. Broker
non-votes (when shares are represented at the Meeting by a proxy specifically
conferring only limited authority to vote on certain matters and no authority to
vote on other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted as votes cast for purposes of determining whether a
proposal has been approved and thus have no effect on the outcome.
This Proxy Statement, together with the related proxy card, is being
mailed to the shareholders of the Company on or about April 16, 2001. The Annual
Report to Shareholders of the Company for the year ended December 31, 2000,
including financial statements (the "Annual Report") is being mailed together
with this Proxy Statement to all shareholders of record as of March 30, 2001. In
addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report to permit such record holders to supply such materials to beneficial
owners determined as of March 30, 2001.
Item I
ELECTION OF DIRECTORS
General. At the Meeting, five directors, constituting the entire
Board of Directors, are to be elected to hold office until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. In the event any of the nominees should become unavailable or unable
to serve as a director, the persons named in the accompanying proxy intend to
vote for such other person or persons, as the Board of Directors may designate
as a substitute nominee. The Board of Directors has no reason to believe that
the nominees named will be unable to serve if elected. Each of the nominees has
consented to being named in this Proxy Statement and to serve if elected.
Set forth below is a brief description of each nominee for director,
including name, age and principal occupation or employment during the past five
years.
Nominees for Election as Directors
----------------------------------
STAN GANG
Stan Gang, 66, founded the Company and is currently Chairman of the
Board and Chief Executive Officer of the Company. From 1984 through June 1999,
Mr. Gang served as Chairman of the Board and Chief Executive Officer of the
Company. From June 1999 to March 2001, Mr. Gang was Chairman of the Board of the
Company. Mr. Gang has nearly 40 years of experience in the computer sales and
services industry. Prior to joining the Company, Mr. Gang was employed in
various management capacities by IBM Corporation, MAI Equipment Corporation and
Memorex Telex. Mr. Gang has been a Director of the Company since 1984. Mr. Gang
is the father of Michael Gang, a nominee for Director described below.
MICHAEL GANG
Michael Gang, 34, joined the Company in April 1989 and has been a
National Account Manager/Sector Director of the Company since that time. From
September 1995 through October 1997, he also served as Secretary of the Company.
Mr. Gang has been a Director of the Company since September 1995. Mr. Gang is
the son of Stan Gang, a nominee for Director described above.
IRA COHEN
Ira Cohen, 49, has, since 1988, served as a Managing Director of
Updata Capital, Inc., an investment banking firm focused on mergers and
acquisitions in the information technology industry. Mr. Cohen founded Updata
Software, Inc. and, from 1986 to 1988, served as that company's Chief Financial
Officer. Mr. Cohen is also a director of Datastream Systems, Inc. Mr. Cohen
holds a Bachelor of Science degree in Accounting from the City University of New
York and is a registered Certified Public Accountant in New York and New Jersey.
Mr. Cohen has been a Director of the Company since May 1999.
-2-
THOMAS F. DORAZIO
Thomas F. Dorazio, 43, has, since 1995, been Vice President of
Information Services for the New York State Electric and Gas Corporation
("NYSE&G") and, since 1998, Chairman of the Board of Energy East
Telecommunications, Inc., a wholly-owned subsidiary of Energy East Corporation.
Mr. Dorazio also serves on the Advisory Board of the Syracuse University Center
for Business Information Technologies. Mr. Dorazio has been a Director of the
Company since May 1999.
DOREEN A. WRIGHT
Doreen A. Wright, 44, is a senior technology and operations
executive. Prior to the acquisition of Nabisco by Philip Morris, from 1999 to
2001, Ms. Wright was the Executive Vice President and Chief Information Officer
for Nabisco, Inc. From 1995 to 1998, she was Senior Vice President, Operations &
Systems of Prudential Investments, a division of the Prudential Insurance
Company of America. Ms. Wright currently serves on the Rutgers Business Board of
Advisors and on the Board of Trustees of the American Repertory Ballet. Ms.
Wright has been a Director of the Company since March 2001.
The Board of Directors recommends that shareholders vote "FOR" each
of the nominees for the Board of Directors.
Committees and Meetings of the Board
- ------------------------------------
In 2000, the Board of Directors held 10 meetings, the Audit Committee
held 3 meetings, the Compensation Committee held 0 meetings, and the Options
Committee held 0 meetings. There is no standing nominating committee. Each
director attended 100% of the meetings of the Board of Directors and of the
committees of which he was a member.
Audit Committee. The Audit Committee reviews the results and scope of
the audit and other services provided by the Company's independent accountants.
The current members of the Audit Committee are Messrs. Cohen (Chairperson) and
Dorazio. The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached as Exhibit A to this proxy statement.
Effective June 1, 2001, the Audit Committee will consist of no fewer than three
independent directors, as defined in NASD Rule 4200.
Compensation Committee. The Compensation Committee approves salaries
and certain incentive compensation for management and key employees of the
Company and administers the Employee Stock Purchase Plan. The current members of
the Compensation Committee are Messrs. Dorazio (Chairperson) and (Stanley) Gang.
Options Committee. The Options Committee administers the Company's
1995 Stock Plan. The current members of the Options Committee are Messrs. Cohen
(Chairperson) and Dorazio.
Compensation of Directors
- -------------------------
The Company's non-employee directors currently receive compensation
of $1,500 per meeting for each meeting attended, other than brief telephonic
meetings. In addition, each of the non-employee directors who serve on the
Audit, Option and/or Compensation Committees of the Board of Directors receives
a $500 fee per meeting attended for each regularly-scheduled committee meeting
held on a day or days other than the day of a regularly-scheduled Board of
Directors meeting. The Company also provides reimbursement to directors for
reasonable and necessary expenses incurred in connection with attendance at
meetings of the Board of Directors and its Committees.
-3-
Pursuant to the Company's 1995 Non-Employee Director Stock Option
Plan, non-employee directors also receive fully-vested options to purchase 5,000
shares of Common Stock upon the date first elected a director and an additional
5,000 fully-vested options upon the date of re-election at the annual meeting of
shareholders. Directors who are employees of the Company are eligible to
participate in the Company's 1995 Stock Plan.
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
Age Capacities in Which Served In Current Position Since
--- --------------------------
Stan Gang 66 Chairman of the Board June 1984
Vincent Tinebra 43 President and Chief Operating Officer March 2001
William S. Medve 41 Executive Vice President, Chief Financial April 2000
Officer and Treasurer
Jack P. Adler 47 Executive Vice President, March 1999
Secretary and General Counsel
-4-
For biographical information concerning Mr. Gang, see Item 1
"Election of Directors" beginning on page 2.
VINCENT TINEBRA
Vincent Tinebra, 43, joined the Company in March 2001 as President
and Chief Operating Officer. From 1990 to 2000, Mr. Tinebra was a senior
executive with Inacom Corporation (formerly Vanstar Corporation), where he
served as Senior Vice President, Solution Delivery Field Operations (2000),
Senior Vice President of Professional Services, Eastern Region (1998 to 2000)
and Senior Vice President of Sales (1996 to 1998).
WILLIAM S. MEDVE
William S. Medve, 41, joined the Company in April 2000 as Senior Vice
President, Chief Financial Officer and Treasurer. In March 2001, he was named an
Executive Vice President of the Company. From 1997 to 2000, Mr. Medve was Senior
Vice President, Finance of Microwarehouse, Inc. Prior thereto, from 1994 to
1997, he was Chief Financial Officer of various business units of The Walt
Disney Co.
JACK P. ADLER
Jack P. Adler, 47, joined the Company in March 1999 as Senior Vice
President, Secretary and General Counsel. In March 2001, he was named an
Executive Vice President of the Company. From 1997 to 1999, Mr. Adler was Senior
Vice President, Secretary and General Counsel of EA Engineering, Science and
Technology, Inc. Previously, from 1983 to 1996, he was in-house counsel for
several leading corporations in the telecommunications, computer, and
environmental industries. Mr. Adler is a member of the American and New Jersey
Corporate Counsel Associations and the New Jersey General Counsels Group.
Executive officers of the Company are elected annually by the Board
of Directors and serve until their successors are duly elected and qualify.
-5-
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
shareholders who beneficially own more than 10% of any class of equity
securities of the Company registered pursuant to Section 12 of the Exchange Act
(the "Reporting Persons") to file initial reports of ownership and reports of
changes in ownership with respect to the Company's equity securities with the
Securities and Exchange Commission (the "SEC"). All Reporting Persons are
required by SEC regulation to furnish the Company with copies of all reports
that such Reporting Persons file with the SEC pursuant to Section 16(a).
Based on a review of these filings, the Company believes that all
required filings were timely made.
-6-
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
compensation information for all individuals serving as the Company's Chief
Executive Officer or acting in a similar capacity during the last completed
fiscal year, the other most highly compensated executive officers of the Company
who were serving as executive officers of the Company at the end of the last
fiscal year, and two additional individuals who were no longer serving as
executive officers of the Company at the end of the last fiscal year.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------ -------------------- --------------
Securities All Other
Fiscal Other Annual Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Compensation (6)($) Options (#) (7)($)
- --------------------------------- ------- ------------- -------------- ---------------------- -------------------- --------------
Stan Gang, 2000 250,016 - - - 1,400
Chairman & CEO 1999 250,000 - - - 2,308
1998 250,000 - - - 2,480
Donald A. Deieso (1) 2000 240,000 - - - -
Former President and Chief 1999 128,307 96,000 - 105,000 -
Executive Officer
William S. Medve (2) 2000 136,615 10,000 - 50,000 2,510
Executive Vice President,
Chief Financial Officer and
Treasurer
Jack P. Adler (3) 2000 157,692 10,000 - 20,000 3,400
Executive Vice President, 1999 122,308 45,000 - 20,000 2,529
Secretary and General
Counsel
John Centinaro (4) 2000 131,650 - 48,462 - 3,295
Former Chief Operating Officer 1999 180,000 54,000 - 15,000 2,736
1998 148,590 - - - 3,200
Dennis Samuelson (5) 2000 135,066 - 31,731 - 3,000
Former Senior Vice President 1999 165,000 23,100 - 20,000 3,200
- -Professional Development 1998 153,846 - - - 2,967
(1) Mr. Deieso joined the Company in June 1999 as President and Chief
Executive Officer. He was separated from the Company in March 2001.
(2) Mr. Medve joined the Company in April 2000 as Senior Vice President,
Chief Financial Officer and Treasurer.
(3) Mr. Adler joined the Company in March 1999 as Senior Vice President,
Secretary and General Counsel.
-7-
(4) Mr. Centinaro was separated from the Company in August 2000.
(5) Mr. Samuelson was separated from the Company in October 2000.
(6) The costs of certain benefits are not included because they did not
exceed the lesser of $50,000 or 10% of the total annual salary and
bonus as reported above.
(7) Represents 401(k) contributions made by the Company on behalf of each
named executive officer.
-8-
STOCK OPTION GRANTS IN 2000
The following table sets forth information regarding stock options
granted during the fiscal year ended December 31, 2000 pursuant to the Company's
1995 Stock Plan to each of the named executive officers of the Company.
Potential
Realizable
Value At Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term ($)(1)
------------------
Number of
Securities % of Total Options
Underlying Granted to Exercise or
Options Employees In Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ------------------------ ------------------ ---------------------- ------------------ -------------- ------------- ------------
Stan Gang - - - - - -
Donald A. Deieso - - - - - -
William S. Medve 25,000 10.7 4.50 4/17/10 70,751 179,296
25,000 10.7 3.13 9/26/10 49,211 124,710
Jack P. Adler 20,000 8.6 3.13 9/26/10 39,369 99,768
John Centinaro - - - - - -
Dennis Samuelson - - - - - -
(1) Represents the difference between (i) the market value of the Common
Stock for which the option may be exercised, assuming that the market
value of the Common Stock on the date of grant appreciates in value to
the end of the ten-year option term at rates of 5% and 10% per annum,
respectively, and (ii) the exercise price of the option.
-9-
Option Exercises and Year-End Option Holdings. The following table
sets forth information regarding option exercises during the fiscal year ended
December 31, 2000 as well as fiscal 2000 year-end option holdings for each named
executive officer of the Company.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Securities
Acquired Underlying Unexercised Value of Unerxercised In-The-
on Exercise Value Options At Fiscal Year-End Money Options At Fiscal
Name (#) Realized ($) (#) Year-End ($) (1)
- ----------------------- ------------- ----------------- ---------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
Stan Gang - - - - - -
Donald A. Deieso - - 55,000 50,000 - -
William S. Medve - - 12,500 37,500 - -
Jack P. Adler - - 17,000 23,000 - -
John Centinaro - - 0 0 - -
Dennis Samuelson - - 32,500 32,500 - -
(1) Based on a year-end fair market value of the underlying securities
equal to $1.69 per share.
-10-
Employment Contracts, Termination of Employment and Change-of-Control
Arrangements
The Company has executed indemnification agreements with certain of
its executive officers, pursuant to which the Company has agreed, subject to
certain exceptions, to indemnify each such officer to the fullest extent
permitted by law if such officer becomes subject to an action arising out of the
discharge of his duties as an officer, employee, agent or fiduciary of the
Company
Effective March 12, 2001, the Company entered into a
Change-of-Control Agreement with Vincent Tinebra, President and Chief Operating
Officer. Pursuant to the agreement, Mr. Tinebra is entitled to the continuation
of salary and benefits for one year in the event that a "change-of-control"
results in either the involuntary termination of his employment with the Company
or his voluntary resignation from the Company due to a reduction in salary or
benefits. In addition, in the event of such "change-of-control," all stock
options issued to Mr. Tinebra immediately vest and become exercisable. The
Company entered into similar agreements with Messrs. Medve and Adler on June 8,
2000 and June 8, 1999, respectively. Similar agreements entered into with Mr.
Deieso on June 8, 2000 and with Messrs. Centinaro and Samuelson on June 8, 1999
terminated upon their respective separations from the Company.
Under these agreements, a "change-of-control" is deemed to have
occurred in the event that (i) there is an acquisition (including as a result of
merger) by any "person" (as such term is used in Section 13(d) of the Exchange
Act) or persons "acting in concert" of beneficial ownership, directly or
indirectly, of securities of the Company representing more than 25% of the
combined voting power of the then outstanding securities of the Company entitled
to vote generally in the election of directors of the Company; and (ii) Stanley
Gang ceases to be the Chairman of the Board of the Company.
-11-
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee is comprised of Thomas F. Dorazio
(Chairperson), and Stan Gang. Currently, there are no Compensation Committee
interlocks between the Company and any other entities involving the Company's
executive officers and Board of Directors who serve as executive officers of
such entities.
In connection with the Company's 1996 initial public offering, Stan
Gang agreed to indemnify the Company for any and all losses which the Company
sustained, up to $1,000,000, arising from or relating to the alleged wrongful
conduct of certain former employees of the Company and their current employer
(the "Defendants"). Mr. Gang advanced $675,000 to the Company in furtherance of
this agreement. Pursuant to an amendment to his indemnification agreement
adopted by the Company's Board of Directors in February 2000, upon consummation
of the settlement of the Company's litigation against the Defendants on August
10, 2000, the Company reimbursed Mr.Gang for the $675,000 he previously advanced
to the Company.
Mr. Cohen, a director and member of the Audit and Options Committees,
is a principal of Fallen Angel Capital LLC ("Fallen Angel"), a Delaware limited
liability company which is the general partner of Fallen Angel Equity Fund,
L.P., a Delaware limited partnership which owns more than 10% of the Common
Stock of the Company. In May 2000, the Company's shareholders authorized the
issuance to Fallen Angel of a warrant (the "Warrant") to purchase an aggregate
of 200,000 shares of Common Stock at an exercise price of $5.00 per share,
exercisable for a period of one year commencing on May 19, 2000 and ending on
May 18, 2001. The Warrant was issued in consideration for investment banking
advisory services rendered by Fallen Angel in connection with the Company's
preferred stock investment in nex-i.com Inc., in which Fallen Angel Equity Fund,
L.P. also participated.
In October 2000, the Company's Board of Directors authorized the
execution of an engagement letter with Fallen Angel, pursuant to which Fallen
Angel was engaged on an exclusive basis as a financial advisor to assist the
Company's management and Board of Directors in examining strategic alternatives
to maximize shareholder value. The engagement, which may be terminated by either
party on thirty days' prior notice, provides for the payment of a "success" fee
to Fallen Angel of the aggregate consideration paid in any transaction. The
engagement letter also contains customary expense reimbursement and
indemnification provisions. Mr. Cohen is a principal of Fallen Angel. To date,
no transactions have been consummated pursuant to this engagement.
-12-
Performance Graph
The graph set forth below shows the cumulative total shareholder
return (i.e., price change plus reinvestment of dividends) on the Company's
Common Stock, for the period beginning on March 21, 1996, the date on which the
SEC declared effective the Company's Form S-1 Registration Statement pursuant to
Section 12 of the Exchange Act and ending on December 31, 2000, the last day of
the Company's last completed fiscal year, as compared over such period with: (i)
the Nasdaq Composite Index, and (ii) the Peer Group Index (capitalization
weighted). The stock performance graph assumes that $100 was invested on March
21, 1996. The stock performance shown on the graph below is not indicative of
future price performance.
COMMON STOCK PERFORMANCE GRAPH(1)(2)
Among the Company, the Nasdaq Composite Index
and the Peer Group Index(3)
(Capitalization Weighted)
[GRAPHIC OMITTED]
Cumulative Total Return
-------------- -------------- -------------- -------------- ------------- --------------
3/21/96 12/96 12/97 12/98 12/99 12/00
-------------- -------------- -------------- -------------- ------------- --------------
ALPHANET SOLUTIONS, INC. 100.00 147.97 106.35 34.10 37.58 15.61
NASDAQ STOCK MARKET (U.S.) 100.00 117.82 144.30 203.49 378.18 227.59
PEER GROUP 100.00 123.69 98.10 71.44 70.28 39.72
-13-
(1) Graph assumes $100 invested on March 21, 1996 in the Company's Common
Stock, the Nasdaq Composite Index and the Peer Group Index
(capitalization weighted).
(2) Cumulative total return assumes reinvestment of dividends, if any.
(3) The Company has constructed a Peer Group Index consisting of other
computer systems integrators that also provide information technology
consulting services to their clients, including CompuCom Systems, Inc.,
Datatec Systems, Inc., Government Technology Services, Inc.,
Micros-to-Mainframes, Inc., Pomeroy Computer Resources, Inc., and
TransNet Corporation. The Company believes that these companies most
closely resemble the Company's business mix and that their performance
is representative of the industry.
-14-
Compensation Committee Report on Executive Compensation
- -------------------------------------------------------
The Company's executive compensation policy is designed to attract
and retain highly qualified individuals for its executive positions and to
provide incentives for such executives to achieve maximum Company performance by
aligning the executives' interest with that of shareholders by basing a portion
of compensation on the Company's performance.
The Compensation Committee generally reviews and determines base
salary levels for executive officers of the Company at or about the start of the
fiscal year and determines actual bonuses after the end of the fiscal year based
upon Company and individual performance.
The Company's executive officer compensation program is comprised of
base salary, discretionary annual cash bonuses, stock options, auto allowance,
and various other benefits, including medical insurance and a 401(k) Plan, which
are generally available to all employees of the Company.
Salaries are established in accordance with industry standards
through review of publicly available information concerning the compensation of
officers of comparable companies. Consideration is also given to relative
responsibility, seniority, individual experience and performance. Salary
increases are generally made based on increases in the industry for similar
companies with similar performance profiles and/or attainment of certain
division or Company goals.
Certain senior executives and key managers who have a direct and
measurable ability to impact the Company's financial results are eligible to
participate in the Company's Incentive Plan, subject to approval by the
Compensation Committee. The purpose of the plan is to motivate senior executives
through variable compensation toward the attainment of corporate and individual
goals. Each participant is assigned an incentive target expressed as a
percentage of base salary. The incentive target is based on two independent
categories: corporate earnings per share, and business unit financial
performance objectives.
During 2000, all executive officers, including the Chief Executive
Officer, and certain other corporate officers, were eligible to receive a bonus
equal to 30% of their base salary if the Company achieved significant operating
profitability. Because the Company failed to attain significant operating
profitably and incurred operating losses in 2000, no bonuses were disbursed to
executive officers of the Company, except that Messrs. Medve and Adler were
awarded nominal bonuses in recognition of their successful management of their
respective areas of responsibility and extraordinary efforts on the Company's
behalf.
The stock option program is designed to relate executives' and
certain middle managers' long-term interests to shareholders' long-term
interests. In general, stock option awards are granted on an annual basis if
warranted by the Company's growth and profitability. Stock options are awarded
on the basis of individual performance and/or the achievement of internal
strategic objectives.
-15-
Based on review of available information, the Committee believes that
the former Chief Executive Officer's total annual compensation was reasonable
and appropriate given the size and historical performance of the Company's
business, the Company's position as compared to its peers in the industry, and
the specific challenges faced by the Company during 2000, such as the ongoing
transition of the Company from a computer systems integrator to a professional
and network services firm.
Compensation Committee
Thomas F. Dorazio (Chairperson)
Stan Gang
-16-
Report of the Audit Committee
- -----------------------------
The Audit Committee of the Board of Directors is comprised entirely
of independent outside directors. Consistent with Nasdaq rules, effective June
1, 2001, the Audit Committee will consist of no fewer than three independent
directors, as defined in NASD Rule 4200. Its primary function is to oversee the
Company's system of internal controls, financial reporting practices and audit
function to ensure their quality, integrity and objectivity. The Board of
Directors has adopted and approved a written charter for the Audit Committee
attached as Exhibit A.
For fiscal 2000, the Audit Committee reviewed the overall audit
scope, plans and results of the audit engagement. The Committee also with the
independent auditors to discuss the year's audit. In addition, the Committee
reviewed and discussed the Company's annual financial statements with management
before issuance.
The Audit Committee has discussed with the independent auditors the
matters required to be discussed by SAS 61, Communication with Audit Committees,
of the Auditing Standards Board of the American Institute of Certified Public
Accountants, to the extent applicable. The Audit Committee has also received and
reviewed the written disclosures and confirmation from the independent auditors
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee, of the Independence Standards Board, and has
discussed with the auditors the auditors' independence.
Based on the foregoing review and discussions, and in reliance on
Section 14A:6-14(2) of the New Jersey Business Corporation Act permitting
reliance on the reports prepared by an independent public accountant or
certified public accountant or firm of such accountants, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
Audit Committee
Ira Cohen, Chairman
Thomas F. Dorazio
-17-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are, as of March 30, 2001, approximately 316 holders of record
and approximately 2,574 beneficial owners of the Company's Common Stock. The
following table sets forth certain information, as of March 30, 2001, with
respect to holdings of the Common Stock by (i) each person known by the Company
to beneficially own more than 5% of the total number of shares of Common Stock
outstanding as of such date, (ii) each of the Company's directors, nominees, and
named executive officers, and (iii) all directors and executive officers as a
group.
Name and Address Amount and Nature of
of Beneficial Owner(1) Beneficial Ownership(1) Percent of Class(2)
- ----------------------------------- ----------------------- -------------------
Certain Beneficial Owners:
Stan Gang (3) 1,938,000 29.98%
7 Ridgedale Avenue
Cedar Knolls, NJ 07927
Fallen Angel Equity Fund, L.P. (4) 687,100 10.63%
c/o Fallen Angel Capital, LLC
125 Half Mile Road
Red Bank, NJ 07733
Dimensional Fund Advisors Inc. (5) 411,100 6.36%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Royce & Associates, Inc. (6) 317,200 4.91%
1414 Avenue of the Americas, 9th Floor
New York, NY 10019
Directors, nominees, and named executive officers who are not set forth above:
Michael Gang (7) 52,000 *
Ira Cohen (8) 10,000 *
Thomas F. Dorazio (9) 10,000 *
Doreen A. Wright (10) 5,000 *
William S. Medve (11) 12,500 *
Jack P. Adler (12) 17,000 *
Donald A. Deieso (13) 55,000 *
John Centinaro (14) -0- *
Dennis Samuelson (15) 32,500 *
All directors and executive officers
as a group (10 persons) 2,132,000 32.98%
* Less than one percent
-18-
(1) Except as set forth in the footnotes to this table and subject to
applicable community property law, the persons named in the table have
sole voting and sole investment power with respect to all shares of
Common Stock shown as beneficially owned by such shareholder.
(2) Applicable ownership percentage is based on 6,404,950 shares of Common
Stock outstanding on March 30, 2001, plus presently exercisable stock
options held by each such holder which are exercisable within the 60
days after March 30, 2001.
(3) Does not include 135,000 shares of Common Stock owned by The Gang
Annuity Trust dated January 3, 1994. Mr. Gang disclaims beneficial
ownership of such shares.
(4) Pursuant to an amended Schedule 13D filed with the SEC on August 20,
1999. Does not include 200,000 warrants held by Fallen Angel Capital
LLC.
(5) Pursuant to a Schedule 13G filed with the SEC on February 2, 2001.
(6) Pursuant to a Schedule 13G filed with the SEC on February 7, 2001.
(7) Represents 52,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Excludes 13,000 shares underlying options which become exercisable over
time after such period. In addition, excludes 135,000 shares owned by
The Gang Annuity Trust. Mr. Gang disclaims beneficial ownership of such
shares.
(8) Represents 10,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Does not include 634,000 shares of Common Stock owned by Fallen Angel
Equity Fund, L.P., a Delaware limited partnership, in which Mr. Cohen
is a limited partner. Mr. Cohen disclaims beneficial ownership of such
shares of Common Stock.
(9) Represents 10,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
(10) Represents 5,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001, or within the 60 days after such
date.
(11) Represents 12,500 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Excludes 37,500 shares underlying options which become exercisable over
time after such period.
(12) Represents 17,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Excludes 23,000 shares underlying options which become exercisable over
time after such period.
(13) Represents 55,000 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Excludes 50,000 shares underlying options which become exercisable over
time after such period.
-19-
(14) Represents -0- shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
Excludes -0- shares underlying options which become exercisable over
time after such period.
(15) Represents 32,500 shares of Common Stock underlying options which are
exercisable as of March 30, 2001 or within the 60 days after such date.
-20-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2000, the Company paid, as compensation for services rendered to
the Company and for sales generated, an aggregate of $491,400 to Michael Gang,
the son of Stan Gang, the Company's Chairman of the Board. Michael Gang serves
as National Account Manager/Sector Director for the Company and has served as a
Director of the Company since September 1995 and as Secretary of the Company
from September 1995 to October 1997.
For transactions involving Stan Gang and Ira Cohen, directors of the
Company, see "Compensation Committee Interlocks and Insider Participation."
In 1995, the Board of Directors adopted a policy requiring that any
future transactions between the Company and its officers, directors, principal
shareholders and their affiliates be on terms no less favorable to the Company
than could be obtained from unrelated third parties and that any such
transactions be approved by a majority of the disinterested members of the
Company's Board of Directors.
-21-
Item 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has retained PricewaterhouseCoopers LLP as
independent accountants of the Company for the year ending December 31, 2001.
PricewaterhouseCoopers LLP also served as independent accountants of the Company
for 2000. Neither the accounting firm nor any of its members has any direct or
indirect financial interest in or any connection with the Company in any
capacity other than as independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF
THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2001.
One or more representatives of PricewaterhouseCoopers LLP is expected
to attend the Meeting and to have an opportunity to make a statement and/or
respond to appropriate questions from shareholders.
PRICEWATERHOUSECOOPERS LLP FEE INFORMATION
The fees billed for services rendered for the Company by
PricewaterhouseCoopers LLP for the fiscal year ended December 31, 2000 were as
follows:
Audit Fees $180,000
Financial Information Systems Design and
Implementation Fees $212,000
All Other Fees $107,000
The Audit Committee has considered whether the provision of the
services covered under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" above is compatible with maintaining
the auditor's independence.
-22-
SHAREHOLDERS' PROPOSALS
Shareholders who wish to submit proposals for inclusion in the
Company's proxy statement and form of proxy relating to the 2002 Annual Meeting
of Shareholders must advise the Secretary of the Company of such proposals in
writing by December 17, 2001.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented
for action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other business
should properly come before the Meeting, it is intended that holders of the
proxies will vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors, whose notice of meeting is attached to this Proxy Statement, and the
entire cost of such solicitation will be borne directly by the Company.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, telegram, facsimile and e-mail by directors,
officers and other employees of the Company who will not be specially
compensated for these services. The Company will also request that brokers,
nominees, custodians and other fiduciaries forward soliciting materials to the
beneficial owners of shares held of record by such brokers, nominees, custodians
and other fiduciaries. The Company will reimburse such persons for their
reasonable expenses in connection therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS SHAREHOLDERS OF
RECORD AS OF MARCH 30, 2001, AND TO EACH BENEFICIAL SHAREHOLDER AS OF THAT DATE
UPON WRITTEN REQUEST MADE TO JACK P. ADLER, SECRETARY OF THE COMPANY, 7
RIDGEDALE AVENUE, CEDAR KNOLLS, NEW JERSEY 07927, TELEPHONE NO. (973) 889-3813.
A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD
WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
Jack P. Adler
Secretary
Cedar Knolls, New Jersey
April 16, 2001
-23-
Exhibit A
ALPHANET SOLUTIONS, INC.
Audit Committee Charter
The audit committee of ALPHANET SOLUTIONS, INC. (the "Company") will assist the
board of directors in fulfilling its oversight responsibilities. The audit
committee will review the financial reporting process, system of internal
control, audit process, and the Company's process for monitoring compliance with
laws and regulations. In performing its duties, the committee will maintain
effective working relationships with the board of directors, management, and
external auditors. To effectively perform their role, each committee member will
obtain an understanding of the detailed responsibilities of committee membership
as well as the Company's business, operations and risks.
Effective June 1, 2001, the audit committee will consist of at least three
members of the board of directors and will meet at least once per year. All
members of the committee will be independent directors, one of whom will serve
as chairman of the committee, and each of whom will be able to read and
understand fundamental financial statements, including a company's balance
sheet, income statement and cash flow statement, or will become able to do so
within a reasonable period of time after his or her appointment to the audit
committee. At least one member of the audit committee must have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
In meeting the requirement for the minimum size of the audit committee, one
director who is not independent and is not a current employee or an immediate
family member of an employee may be included if the board of directors, under
exceptional and limited circumstances, determines that membership on the audit
committee by the individual is required by the best interests of the Company and
its shareholders, and the board discloses, in the Company's next annual proxy
statement subsequent to such determination, the nature of the relationship and
the reasons for that determination.
A. With respect internal controls, the committee will:
o Evaluate whether management is setting the appropriate tone
by communicating the importance of internal controls and
ensuring that all individuals possess an understanding of
their respective roles and responsibilities.
o Focus on the extent to which internal and external auditors
review computer systems and applications, the security of
such systems and applications, and the contingency plans for
processing financial information in the event of a systems
breakdown.
o Determine whether internal control recommendations made by
external auditors have been, or are to be, implemented by
management. Ensure that external auditors keep the audit
committee informed about fraud, illegal acts, deficiencies
in internal controls, and other matters specified by the
audit committee.
-24-
B. With respect to financial reporting in general, the committee will:
o Review significant accounting and reporting issues,
including recent professional and regulatory pronouncements,
and understand their impact on financial statements.
o Ask management and the external auditors about significant
risks and exposures and the plans to minimize such risks.
C. With respect to annual financial statements, the committee will:
o Review the annual financial statements and determine whether
they are complete and consistent with the information known
to committee members, and assess whether the financial
statements reflect appropriate accounting principles.
o Pay particular attention to complex and/or unusual
transactions such as restructuring charges and convertible
securities and/or debenture financings.
o Focus on judgmental areas such as those involving valuation
of assets and liabilities, including, accounting for and
disclosure of obsolete or slow moving inventory; loan
losses; warranty, product and environmental liability;
litigation reserves; and other commitments and
contingencies.
o Meet with management, and the external auditors to review
the financial statements and the results of the audit.
o Consider management's handling of proposed audit adjustments
identified by the external auditors.
o Review the MD&A and other sections of the annual report
before its release and consider whether the information is
adequate and consistent with members' knowledge about the
Company and its operations.
o Ensure that the external auditors communicate to the
committee as to items specified by the committee.
o Consider whether the Company's annual financial statements
should be included in the Company's Annual Report on Form
10-K.
-25-
D. With respect to interim financial statements, the committee will:
o Determine how management develops and summarizes quarterly
financial information and the extent of external auditor
involvement.
o Obtain explanations from management and from the internal
and external auditors on whether:
o Actual financial results for the quarter or interim
period varied significantly from budgeted or projected
results.
o Changes in financial ratios and relationships in the
interim financial statements are consistent with
changes in the Company's operations and financing
practices.
o Generally accepted accounting principles have been
consistently applied.
o There are any actual or proposed changes in accounting
or financial reporting practices.
o There are any significant or unusual events or
transactions.
o The Company's financial and operating controls are
functioning effectively.
o The interim financial statements contain adequate and
appropriate disclosures.
o Determine that the Company's external auditors review
the Company's Quarterly Reports on Form 10-Q before
filing.
E. The committee will assess the Company's compliance with laws and
regulations, including:
o Review the effectiveness of the system for monitoring
compliance with laws and regulations and the results of
management's investigation and follow-up (including
disciplinary action) on any fraudulent acts or accounting
irregularities.
o Review significant accounting and reporting issues,
including recent professional and regulatory pronouncements,
and understand their impact on the financial statements.
o Ask management and the internal and external auditors about
significant risks and exposures and the plans to minimize
such risks.
-26-
F. With respect to internal and external audit, the committee will:
o Review the external auditor's proposed audit scope and
approach.
o Review the performance of the external auditors and
recommend to the board of directors the appointment or
discharge of the external auditors.
o Review and confirm the independence of the external auditors
by reviewing the nonaudit services provided and the
auditors' written assertion of their independence in
accordance with professional standards.
o Ensure the receipt from external auditors of a formal,
written statement delineating all relationships between the
auditor and the Company, consistent with Independence
Standards Board Standard 1.
o Engage in a dialogue with the external auditors with respect
to any disclosed relationships or services that may impact
the objectivity and independence of the auditor.
o Take, or recommend that the full board of directors take,
appropriate action to oversee, and ensure the independence
of, the external auditor.
G. The committee will annually provide a report to the board of directors
regarding the above matters.
Audit Committee Membership
As of: July 13, 2000
Ira Cohen, Chairman
Members: Ira Cohen, Thomas F. Dorazio
Charter Date: July 13, 2000
-27-