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
iled by the Registrant |X|1
iled by a Party other than the Registrant |_|2
heck the appropriate box:
_| Preliminary Proxy Statement
|_| Confidential, for Use of the
Commission Only (as
permitted by Rule 14a-6(e)
(2))
X| Definitive Proxy Statement
_| Definitive Additional Materials
_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AlphaNet Solutions, Inc.
(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.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
ALPHANET SOLUTIONS, INC.
- --------------------------------------------------------------------------------
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
April 16, 1999
To Our Shareholders:
You are most cordially invited to attend the 1999 Annual Meeting of
Shareholders of AlphaNet Solutions, Inc. at 9:00 A.M., local time, on Thursday,
May 20, 1999 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 to 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 have your shares represented by signing, dating and
returning your proxy in the enclosed envelope, which requires no postage if
mailed in the United States, as soon as possible. Your shares will be voted in
accordance with the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
/s/Stan Gang
----------------------------------
Stan Gang
Chairman of the Board, President
and Chief Executive Officer
ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 20, 1999
-------------------------------
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
Thursday, May 20, 1999, 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 approve a proposal to amend the 1995 Non-Employee Director Stock
Option Plan;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 1999; and
(4) To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Holders of Common Stock of record at the close of business on April
13, 1999 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 ANY
TIME 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 VOTED.
By Order of the Board of Directors,
/s/Jack P. Adler
------------------------------------
Jack P. Adler
Secretary
Cedar Knolls, New Jersey
April 16, 1999
The Company's 1998 Annual Report accompanies the Proxy Statement.
ALPHANET SOLUTIONS, INC.
7 Ridgedale Avenue
Cedar Knolls, New Jersey 07927
--------------------------------------------
P R O X Y S T A T E M E N T
--------------------------------------------
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
Thursday, May 20, 1999 (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. Holders of record of Common Stock, $0.01
par value ("Common Stock"), as of the close of business on April 13, 1999, will
be entitled to notice of and to vote at the Meeting and any adjournment or
adjournments thereof. As of that date, there were 6,251,414 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 named below as 1999 Nominees, (ii) FOR the approval of the proposal to
amend the 1995 Non-Employee Director Stock Option Plan (the "Non-Employee
Director Plan"), (iii) FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants for the year ending
December 31, 1999, and (iv) in the discretion of the persons named in the
enclosed form of proxy, on any other proposals 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 written
notice addressed to and received by the Secretary of the Company, by submitting
a duly executed proxy bearing a later date or by electing to vote in person at
the Meeting. 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 having a majority of the votes entitled to be cast at the Meeting shall
constitute 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. All actions
proposed herein other than the election of Directors may be taken upon the
affirmative vote of shareholders possessing a majority of the shares of Common
Stock represented 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, and are counted as a vote
against for purposes of determining whether a proposal is approved. 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 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, 1999. The Annual
Report to Shareholders of the Company for the year ended December 31, 1998,
including financial statements (the "Annual Report"), is being mailed together
with this Proxy Statement to all shareholders of record as of April 13, 1999. 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 so that such record holders could supply such materials to beneficial
owners as of April 13, 1999.
ELECTION OF DIRECTORS
At the Meeting, five Directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Shareholders and until their successors are duly
elected and qualified.
It is the intention of the persons named in the enclosed form of
proxy to vote the shares of Common Stock represented thereby, unless otherwise
specified in the proxy, for the election as Directors of the persons whose
biographies appear below. In the event any of the nominees should become
unavailable or unable to serve as a Director, it is intended that votes will be
cast for a substitute nominee designated by the Board of Directors. 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.
The current members of the Board of Directors are as follows:
Served as a Positions with
Name Age Director since the Company
Stan Gang............................................... 64 1984 Chairman of the Board,
President and
Chief Executive Officer
Michael Gang............................................ 32 1995 Director
Michael R. Bruce (1).................................... 60 1995 Director
Richard Miller (1)...................................... 40 1998 Director
Susan H. Wolford (1).................................... 43 1996 Director
- ----------------
(1) Mr. Bruce, Mr. Miller and Ms. Wolford have advised the Company that they
will not stand for re-election to the Board of Directors. Each of Mr.
Bruce's, Mr. Miller's and Ms. Wolford's term expires at the conclusion of
the Meeting and upon the election of their respective successors.
The following information, which has been provided by the nominees,
sets forth for each of the nominees for election to the Board of Directors,
his/her name, age and principal occupation or employment during the past five
years, the name of the corporation or other organization, if any, in which such
occupation or employment is or was carried on and the period during which such
person has served as a director of the Company.
1999 NOMINEES:
Stan Gang, 64, founded the Company and has served as Chairman of the
Board, President and Chief Executive Officer of the Company since 1984. Mr. Gang
has nearly 40 years of experience in the computer sales and services industry.
Prior to joining the Company, Mr. Gang was employed by IBM Corporation for 10
years in technical capacities, by MAI Equipment Corporation for five years and
Memorex Telex Corporation for 13 years in various management capacities.
Michael Gang, 32, joined the Company in April 1989 as Corporate
Account Manager and has been a Director of the Company since September 1995.
From September 1995 through October 1997 he served as Secretary of the Company.
Ira Cohen, 47, 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 Computer Learning Centers, 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 does not currently serve on the Company's Board of Directors.
Donald A. Deieso, 49, is currently President and CEO of the Galileo
Consulting Group, a management consulting firm focused on global energy and
environmental matters. Previously, from 1997 to 1999, he was President and CEO
of EA Engineering, Science, and Technology, Inc., a leading international energy
and environmental management services firm. From 1989 to 1997, Dr. Deieso held
several senior executive management positions at Air & Water Technologies
Corporation (AWT), then one of the largest environmental and engineering firms
in America, where he was President and CEO of AWT's two principal operating
units. Dr. Deieso holds a Ph.D. degree from Rutgers University. Dr. Deieso does
not currently serve on the Company's Board of Directors.
Thomas F. Dorazio, 41, 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 NYSE&G. Prior thereto,
from 1994 to 1995, Mr. Dorazio served as Executive Assistant to the Executive
Vice President of NYSE&G. Mr. Dorazio does not currently serve on the Company's
Board of Directors.
All Directors hold office until the next annual meeting of
shareholders and until their successors are duly elected and qualified. Other
than Stan Gang and Michael Gang, who are father and son, there are no family
relationships among any of the Directors and executive officers of the Company.
The Board of Directors recommends that shareholders vote FOR each of
the nominees for the Board of Directors.
Committees and Meetings of the Board
- ------------------------------------
The Board of Directors has a Compensation Committee, which approves
salaries and certain incentive compensation for management and key employees of
the Company and which administers the Employee Stock Purchase Plan; an Audit
Committee, which reviews the results and scope of the audit and other services
provided by the Company's independent accountants; and an Option Committee,
which administers the Company's 1995 Stock Plan. The Compensation Committee
currently consists of Stan Gang, Mr. Bruce and Ms. Wolford. The Compensation
Committee held one meeting during 1998. The Audit Committee currently consists
of Stan Gang, Messrs. Bruce and Miller and Ms. Wolford. The Audit Committee held
two meetings during 1998. The Option Committee currently consists of Messrs.
Bruce and Miller and Ms. Wolford. The Option Committee held one meeting during
1998. There were eleven meetings of the Board of Directors during 1998, five of
which were telephonic. Each incumbent Director, other than Mr. Miller, attended
at least 75% of the aggregate of all meetings of the Board of Directors held
during the period in which he or she served as a Director and the total number
of meetings held by all committees on which he or she served during the period,
if applicable.
Compensation of Directors
- -------------------------
Each of the Company's non-employee Directors currently receives
compensation of $1,000 per meeting for each regularly scheduled meeting in which
he or she participates. In addition, each of the non-employee members of the
Board who serve on the Audit, Option and/or Compensation Committee of the Board
receives a $500 fee per meeting for each regularly-scheduled Committee meeting
in which such Committee member participates, as long as such Committee meeting
or meetings is or are held on a day or days other than the day of a
regularly-scheduled Board 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 or its Committees. In addition,
non-Employee Directors also receive stock options pursuant to the Company's
Non-Employee Director Plan and Directors who are also employees are eligible to
participate in the Company's 1995 Stock Plan (the "Plan"). See "Proposal to
Amend the 1995 Non-Employee Director Stock Option Plan" and "Executive
Compensation--1995 Stock Plan."
On August 25, 1995, the Board of Directors and shareholders adopted
the Company's Non-Employee Director Plan, effective September 1, 1995. The
Non-Employee Director Plan provides for the grant of options to purchase a
maximum of 100,000 shares of Common Stock of the Company to non-employee
Directors of the Company. The Non-Employee Director Plan is administered by the
Board of Directors. As of February 26, 1999, options to purchase an aggregate of
68,000 shares of Common Stock had been granted in accordance with the terms of
such plan.
Each person who was a Director of the Company on the effective date
of the Company's initial public offering or became or becomes a Director of the
Company thereafter, and who is not also an employee or officer of the Company
was or shall be granted, on the effective date of such offering or the date on
which he or she became or becomes a Director, whichever is later, an option to
purchase 20,000 shares of Common Stock, at an exercise price per share equal to
the then fair market value of the shares. All options become exercisable in five
equal annual installments commencing one year after the date of grant provided
that the optionee then remains a Director at the time of vesting of the
installments. Each annual vesting installment of options will be reduced
proportionately based on the optionee's actual attendance at Board of Directors'
meetings if the optionee fails to attend at least 80% of such meetings held in
any calendar year. The term of each option will be for a period of ten years
from the date of grant, unless sooner terminated in accordance with the
Non-Employee Director Plan. Options may not be assigned or transferred except by
will or by the laws of descent and distribution, or pursuant to domestic
relations order, and are exercisable to the extent vested at any time prior to
the scheduled expiration date of the option. The Non-Employee Director Plan
terminates on the earlier of August 31, 2005 or at such time as all shares of
Common Stock currently or hereafter reserved for issuance shall have been
issued.
If the Company's proposal to amend the Non-Employee Director Plan is
approved, then in lieu of the foregoing, each non-employee Director shall be
granted options to purchase 5,000 shares of Common Stock upon the date on which
he or she is first elected a Director, and an additional 5,000 shares of Common
Stock upon the date such non-employee Director is re-elected a Director at the
annual meeting of shareholders. Such options will vest immediately upon the date
of grant. See "Proposal to Amend the 1995 Non-Employee Director Stock Option
Plan."
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
Capacities in In Current
Name Age Which Served Position Since
- ---- --- ------------ --------------
Stan Gang.....................................................64 Chairman of the Board, President and June 1984
Chief Executive Officer
John Centinaro................................................43 Chief Operating Officer November 1998
Robert G. Petoia..............................................43 Vice President, Chief Financial Officer January 1998
and Treasurer
Jack P. Adler.................................................45 Vice President, Secretary and General March 1999
Counsel
Dennis Samuelson..............................................42 Senior Vice President - Education and IT November 1997
Staffing Services
John Centinaro joined the Company in February 1992 and, since
November 1998, has served as the Company's Chief Operating Officer. Previously,
from 1997 to 1998, Mr. Centinaro served as Senior Vice President - Operations.
Prior to joining the Company, from 1978 to 1992, Mr. Centinaro was Regional
Business Operations Manager and National Account Service Manager with Memorex
Telex Corporation. Mr. Centinaro is a member of the Association for Field
Service Management.
Robert G. Petoia joined the Company in January 1998 and currently
serves as Vice President, Chief Financial Officer and Treasurer. Prior to
joining the Company, from 1992 to 1997, Mr. Petoia served as Executive Vice
President-Chief Financial Officer for Saybolt, Inc., the U.S. operating company
of The Saybolt Group, an international service organization. From 1987 to 1992,
Mr. Petoia served in various management capacities for certain companies within
The Saybolt Group. Prior to that, from 1981 to 1987, Mr. Petoia served in the
accounting firm of Arthur Andersen LLP. Mr. Petoia is a Certified Public
Accountant.
Jack P. Adler joined the Company in March 1999 and currently serves
as Vice President, Secretary and General Counsel. Prior to joining the Company,
from 1997 to 1999, Mr. Adler served as Senior Vice President, Secretary and
General Counsel of Baltimore-based EA Engineering, Science and Technology, Inc.,
a leading international energy and environmental management services firm. From
1995 to 1996, Mr. Adler was a consultant to Ciba-Geigy Corporation (Novartis
AG). Prior thereto, from 1989 to 1994, Mr. Adler was Senior Vice President and
General Counsel of the Research-Cottrell unit of Air & Water Technologies
Corporation (AWT) and, from 1992 to 1994, Director of Litigation of AWT.
Dennis Samuelson joined the Company in October 1989 and currently
serves as Senior Vice President - Education and IT Staffing Services. Prior to
joining the Company, Mr. Samuelson held various staff management positions with
AT&T and was Manager of the AT&T Information Center which provided programming
and support to AT&T's General Business Systems division. Mr. Samuelson is a
former member of the Novell Advisory Board and a current member of the
Certification Advisory Board of Sylvan Prometric. In addition, he is a former
President and currently is a member of the Board of Directors of the Information
Technology Training Association.
Executive officers of the Company are elected annually by the Board
of Directors and serve until their successors are duly elected and qualified.
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, 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 solely on the Company's review of the copies of such forms
received by the Company and upon written representations of the Company's
Reporting Persons received by the Company, the Company believes that all
Reporting Persons filed all such reports with the SEC pursuant to Section 16(a).
EXECUTIVE COMPENSATION
Summary of Compensation in 1998
- -------------------------------
The following table sets forth information concerning compensation
for services in all capacities awarded to, earned by or paid to (i) the
Company's Chief Executive Officer, (ii) the four most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000 and who were serving as executive officers at the end of 1998, and
(iii) three additional individuals who would have fallen into category (ii) but
for the fact the individuals were not serving as executive officers at the end
of 1998 (collectively, the "Named Executives") during the years ended December
31, 1998, 1997 and 1996.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Other
Annual
Name and Principal Salary Bonus Compensation(1)
Position Year ($) ($) ($)
(a) (b) (c) (d) (e)
- -------------------------------------------- --------- ------- ------ ---------
Stan Gang .................................. 1998 250,000 -- --
Chairman of the Board, President and .... 1997 250,000 -- --
Chief Executive ......................... 1996 250,000 -- --
Officer
John Centinaro ............................. 1998 148,590 -- --
Chief Operating Officer ................. 1997 124,167 40,000 --
1996 85,000 -- --
Robert G. Petoia ........................... 1998 140,000 -- --
Vice President, Chief Financial Officer . 1997 -- -- --
and Treasurer ........................... 1996 -- -- --
Gary S. Finkel (3) ......................... 1998 48,910 -- --
Former Vice President, .................. 1997 140,000 -- --
Chief Financial Officer and Treasurer ... 1996 125,000 15,000 --
Bruce Flitcroft(4) ......................... 1998 129,808 -- --
Former Vice President - Network ......... 1997 200,000 50,000 --
Consulting Services ..................... 1996 162,000 85,000 --
Lawrence Mahon (5) ......................... 1998 155,000 -- --
Former Vice President - National ........ 1997 155,000 10,000 --
Accounts ................................ 1996 155,000 -- --
Dennis Samuelson ........................... 1998 153,846 -- --
Senior Vice President - Education and ... 1997 150,000 40,000 --
IT Staffing Services .................... 1996 150,000 -- --
- -------------------------------------------- ------ ------- ------- -------
Long-Term
Compensation
------------
Awards
------
Securities All
Underlying Other
Name and Principal Options Compensation(2)
Position (#) ($)
(a) (g) (i)
- -------------------------------------------- --------- ---------------
Stan Gang ................................. -- 2,480
Chairman of the Board, President and .... -- 3,000
Chief Executive ......................... -- 3,000
Officer
John Centinaro ............................. -- 3,200
Chief Operating Officer ................. 20,000 2,883
5,000 1,700
Robert G. Petoia ........................... 10,000 2,012
Vice President, Chief Financial Officer . -- --
and Treasurer ........................... -- --
Gary S. Finkel (3) ......................... -- 939
Former Vice President, .................. 11,500 2,954
Chief Financial Officer and Treasurer ... 3,500 1,677
Bruce Flitcroft(4) ......................... -- 2,079
Former Vice President - Network ......... 20,000 3,000
Consulting Services ..................... 10,000 3,000
Lawrence Mahon (5) ......................... -- --
Former Vice President - National ........ 5,000 --
Accounts ................................ 2,500 --
Dennis Samuelson ........................... -- 2,967
Senior Vice President - Education and ... 7,500 3,000
IT Staffing Services .................... 2,500 3,000
- -------------------------------------------- ------- -------
- ---------------------
(1) The costs of certain benefits are not included because they did not exceed,
in the case of each Named Executive, the lesser of $50,000 or 10% of the
total annual salary and bonus as reported above.
(2) Represents 401(k) contributions made by the Company on behalf of the Named
Executive.
(3) Mr. Finkel's employment with the Company ended in January 1998.
(4) Mr. Flitcroft's employment with the Company ended in February 1998.
(5) Mr. Mahon's employment with the Company ended in December 1998.
(6) Excludes 1,000 shares subject to options granted in September 1997, to
Virginia R. Samuelson, an employee of the Company and the wife of Dennis
Samuelson.
(7) Excludes 800 shares subject to options granted in September 1996, to
Virginia R. Samuelson, an employee of the Company and the wife of Dennis
Samuelson.
Stock Option Grants in 1998
The following table sets forth information concerning individual
grants of stock options made pursuant to the Company's 1995 Stock Plan during
1998 to each of the Named Executives. The Company has never granted any stock
appreciation rights.
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------
Percent of
Total
Number of Options
Securities Granted To
Underlying Employees Exercise
Options In Fiscal or Base
Granted(1) Year Price Expiration
Name (#) (%) ($/Sh) Date
(a) (b) (c) (d) (e)
- ------------------------------------ ----------------- ------------------ ---------------- --------------------
Stan Gang .......................... -- -- -- --
John Centinaro ..................... -- -- -- --
Robert G. Petoia ................... 10,000 23.4 4.272 01/14/08
Gary S. Finkel ..................... -- -- -- --
Bruce Flitcroft .................... -- -- -- --
Lawrence Mahon ..................... -- -- -- --
Dennis Samuelson ................... -- -- -- --
- ------------------------------------ ------ ---- ----- --------------------
Potential Realizable
Value At Assumed Annual
Rates of Stock Price
Appreciation For Option
Term (3)
------------------------
Name 5%($) 10%($)
(a) (f) (g)
- ------------------------------------ --------- ------------
Stan Gang .......................... -- --
John Centinaro ..................... -- --
Robert G. Petoia ................... 26,866 68,085
Gary S. Finkel ..................... -- --
Bruce Flitcroft .................... -- --
Lawrence Mahon ..................... -- --
Dennis Samuelson ................... -- --
- ------------------------------------ ------ ------
- -------------
(1) Options are granted pursuant to and in accordance with the Plan. See "1995
Stock Plan."
(2) Reflects the repricing of options to $4.27 per share effective December 15,
1998. (see "Report on Repricing of Options").
(3) 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.
1995 Stock Plan
- ---------------
The Plan was adopted by the Board of Directors and approved by the
shareholders of the Company on August 25, 1995. A total of 747,100 shares of
Common Stock currently are reserved for issuance upon exercise of options
granted or to be granted under the Plan. The Plan is administered by the Option
Committee of the Board of Directors of the Company. Subject to the provisions of
the Plan, the administrator of the Plan has the discretion to determine the
optionees, the type of options to be granted (incentive stock options ("ISOs")
or non-qualified stock options ("NQSOs")), the vesting provisions and the terms
of the option grants. The exercise price of an ISO may not be less than the fair
market value per share of the Common Stock on the date of grant. The exercise
price of a NQSO may not be less than 85% of the fair market value per share of
the Common Stock on the date of grant. In the case of an optionee who
beneficially owns 10% or more of the outstanding capital stock of the Company,
the exercise price of an option may not be less than 110% of the fair market
value per share on the date of grant. The options terminate not more than ten
years from the date of grant, subject to earlier termination on the optionee's
death, disability or termination of employment with the Company. Options are not
assignable or otherwise transferable except by will or the laws of descent and
distribution. The options become exercisable in five equal annual installments
commencing one year after the date of grant provided that the optionee then
remains an employee at the time of vesting of the installments.
Aggregated Option Exercises in 1998 and Year-End Option Values
- --------------------------------------------------------------
The following table sets forth information concerning each exercise
of options during 1998 by each of the Named Executives and the year-end number
and value of unexercised in-the-money options held by each of the Named
Executives.
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options At Options At
Shares Fiscal Fiscal
Acquired On Value Year-End Year-End
Exercise Realized (#) ($)
Name (#) ($) (d) (e)
(a) (b) (c) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ------------------ -------------- ------------------- ----------------- ------------ -------------
Stan Gang............... - - - - - -
John Centinaro.......... - - 12,000 23,000 - -
Robert G. Petoia........ - - - 10,000 - -
Gary S. Finkel (2)...... 4,700 17,569 - - - -
Bruce Flitcroft (3)..... 10,000 47,200 - - - -
Lawrence Mahon.......... - - 7,000 - - -
Dennis Samuelson (4).... - - 14,500 15,500 - -
- ------------------------------ ----------------- --------------- ------------------- ----------------- --------------- -----------
- ----------------
(1) Based on a year-end fair market value of the underlying securities equal to
$3.69 per share.
(2) On April 14, 1998, Mr. Finkel exercised such options at an exercise price of
$9.00 per share.
(3) On March 13, 1998, Mr. Flitcroft exercised such options at an exercise price
of $9.00 per share.
(4) Excludes 1,800 shares subject to options granted to Virginia R. Samuelson,
an employee of the Company and the wife of Dennis Samuelson.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
- ------------
The following executive officers of the Company entered into
three-year employment agreements with the Company, each commencing October 1,
1995. Under the terms of their respective agreements, Messrs. Gang, Centinaro,
Mahon, and Samuelson are entitled to an annual base salary of $250,000,
$140,000, $155,000 and $150,000, respectively, and bonuses, the amounts and
payment of which are within the discretion of the Board of Directors or the
Compensation Committee thereof.
The above-described agreements require each executive to maintain the
confidentiality of Company information and assign inventions to the Company. In
addition, each of such executive officers has agreed that during the term of his
respective agreement and thereafter for a period of up to 18 months, provided
that such executive officer is being compensated at one-half of his annual base
salary under such agreement, such person will not compete with the Company by
engaging in any capacity in any business which is competitive with the business
of the Company.
In addition to the foregoing employment contracts, the Company has
executed indemnification agreements with each of its executive officers and
Directors pursuant to which the Company has agreed to indemnify such parties to
the full extent permitted by law, subject to certain exceptions, if such party
becomes subject to an action because such party is a Director, officer,
employee, agent or fiduciary of the Company. The Company has not entered into
any change-in-control arrangements.
Commencing October 1, 1995, Mr. Flitcroft entered into a three-year
employment agreement with the Company. Under the terms of his employment
agreement for 1997, he was entitled to an annual base salary of $200,000 and
bonuses, the amounts and payments of which were within the discretion of the
Board of Directors or the Compensation Committee thereof. In February 1998, Mr.
Flitcroft ended his relationship with the Company. Certain provisions of the
employment agreement include maintaining the confidentiality of Company
information, and assignment of inventions to the Company. In addition, such
agreement includes non-solicitation of Company employees and non-competition
with the Company for a period of up to 18 months provided that he is being
compensated at one-half of his current annual base salary. The Company notified
Mr. Flitcroft that it required his compliance with the non-solicitation and
non-competition provisions of his employment agreement. However, on June 30,
1998, Mr. Flitcroft filed suit in the Superior Court of New Jersey, Morris
County, against the Company and its Chairman of the Board, President and CEO,
alleging, among other things, breach by the Company of Mr. Flitcroft's
employment agreement (the "Flitcroft Litigation"). The Company believes that Mr.
Flitcroft's claims are without merit and intends to fully and vigorously defend
such claims while pursuing all available remedies. On July 16, 1998, without
knowledge of the suit filed by Mr. Flitcroft, the Company filed suit against Mr.
Flitcroft and Alliant Technologies, Inc., a company believed to be owned and/or
operated by Mr. Flitcroft, alleging, among other things, breach of contract and
conspiracy to usurp corporate assets and opportunities. The Company has directed
arbitration of the claims in dispute in this matter, and such arbitration
proceedings commenced as of March 1999. For a more comprehensive discussion of
the foregoing, see the disclosure under the heading "Legal Proceedings" found in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Effective November 1, 1995, the Company and Mr. Finkel executed a
three-year employment agreement pursuant to which Mr. Finkel was entitled to an
annual base salary for 1997 of $140,000 and a bonus, the amounts and payments of
which were within the discretion of the Board of Directors or the Compensation
Committee thereof. In January 1998 Mr. Finkel's relationship with the Company
ended. The Company entered into a separation agreement with Mr. Finkel, the
provisions of which include maintaining the confidentiality of Company
information, assignment of inventions to the Company, mutual releases and
covenants not to sue, and a one year restrictive covenant against solicitation
of Company employees and competition with the Company. Mr. Finkel's compensation
in 1998 includes separation benefits of $36,615.
With the exception of stock options issued pursuant to the
Non-Employee Director Plan and options to purchase 2,500 shares of Common Stock
previously issued under the 1995 Stock Plan at $4.00 per share, all stock
options were repriced to $4.27 per share effective December 15, 1998. The Option
Committee determined that such repricing was necessary and appropriate given the
recent fluctuation in the Company's stock price. This action was taken in
furtherance of the Company's policy of pending incentives to its employees to
achieve maximum Company performance by aligning such employees' interests with
those of the Company's stockholders.
Set forth below is a chart which explains any such repricing of
options for all Named Executives in the year ended December 31, 1998.
10-Year Option Repricing
------------------------
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining
Options Time of at Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
- ------------------------ ------------ -------------------- ------------------ ------------------- ----------------- ----------------
Stan Gang - - - - - -
John Centinaro 12/31/95 10,000 4.272 9.000 4.272 7.0
9/16/96 5,000 4.272 9.000 4.272 7.8
9/16/97 20,000 4.272 13.563 4.272 8.8
Robert G. Petoia 1/14/98 10,000 4.272 13.250 4.272 9.1
Gary S. Finkel - - - - - -
Bruce Flitcroft - - - - - -
Lawrence Mahon 12/31/95 10,000 4.272 9.000 4.272 7.0
9/16/96 2,500 4.272 9.000 4.272 7.8
9/16/97 5,000 4.272 13.563 4.272 8.8
Dennis Samuelson 12/31/95 20,000 4.272 9.000 4.272 7.0
9/16/96 2,500 4.272 9.000 4.272 7.8
9/16/97 7,500 4.272 13.563 4.272 8.8
- ------------------------ ------------ --------------- ------------------ ------------------- ----------------- -----------------
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee is comprised of Stan Gang, Michael Bruce and
Susan Wolford. The Option Committee is comprised of Messrs. Bruce and Miller and
Ms. Wolford. There are no Compensation Committee or Option 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.
Mr. Gang agreed to indemnify the Company for any and all losses which
the Company may sustain, up to $1.0 million arising from or relating to the
alleged wrongful conduct of two of its former employees and the current employer
of such former employees (the "Defendants"), and to date has paid $675,000 of
his personal funds to the Company in connection with an indemnification
arrangement with the Company. Pursuant to the terms of the agreement between the
Company and Mr. Gang, the Company shall reimburse Mr. Gang in the event and to
the extent that the Company is awarded and collects damages from the Defendants,
receives sums as a result of a settlement between the Company and the
Defendants, or receives proceeds under an insurance policy.
The Company's Board of Directors has authorized the Company to defend
and indemnify Mr. Gang in the Flitcroft Litigation.
Ms. Wolford has been Managing Director of First Union Capital Markets
since August 1997. First Union Capital Markets serves as the Company's financial
advisor. In addition, on June 30, 1997 an affiliate of First Union Capital
Markets, First Union National Bank ("Bank"), executed a Loan and Security
Agreement ("Loan") whereby the Bank expanded the Company's credit facility to
enable the Company to borrow, based upon eligible accounts receivable, up to
$15.0 million for short-term working capital purposes. Under the credit facility
the Company may borrow, subject to certain post-closing conditions and covenants
by the Company, (i) for working capital purposes and (ii) for acquisitions. The
Company entered into the Loan with the Bank prior to Ms. Wolford's employment
with First Union Capital Markets. However, on September 30, 1998, the Company
and the Bank executed an amended Loan, on the same or similar terms as above,
whereby the Bank extended the Company's credit facility for an additional year
through September 30, 1999.
Performance Graph
- -----------------
The following graph compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total return on the Nasdaq
Composite Index and the Peer Group Index (capitalization weighted) for the
period beginning on the date on which the SEC declared effective the Company's
Form 8-A Registration Statement pursuant to Section 12 of the Exchange Act and
ending on the last day of the Company's last completed fiscal year. The stock
performance shown on the graph below is not indicative of future price
performance.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)
Among the Company, the Nasdaq Composite Index
and the Peer Group Index(3)
(Capitalization Weighted)
[GRAPHIC OMITTED]
3/21/96 12/31/96 12/31/97 12/31/98
AlphaNet Solutions, Inc. 100.0 147.98 106.36 34.10
Nasdaq Composite Index 100.0 163.98 103.25 72.75
Peer Group Index (Capitalization Weighted) 100.0 115.56 141.36 199.37
- ---------------------
(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.
(3) The Company has constructed a Peer Group Index consisting of other computer
equipment resellers that also provide information technology consulting
services to their clients, including Compucom Systems, Inc., DataTec
Systems, Inc. (f/k/a Glasgal Communications, Inc.), Government Technology
Services, Inc., Micros-to-Mainframes, Inc., Pomeroy Computer Resources,
Inc., Transnet Corporation and Vanstar Corporation. The Company believes
that these companies most closely resemble the Company's business mix and
that their performance is representative of the industry. Dataflex
Corporation, which was formerly included in the Company's Peer Group Index,
was removed from such index because its stock was not publicly traded as of
12/31/98.
Compensation Committee Report on Executive Compensation
- -------------------------------------------------------
The Compensation Committee has furnished the following report:
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 corporate performance.
Other than Mr. Petoia, each of the Named Executives has executed
employment agreements, which establishes salaries and other terms of employment.
The Compensation and Option Committee, however, generally review and determine
base salary levels for executive officers of the Company at or about the start
of the fiscal year and determine 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, whether established pursuant to contract or otherwise, 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.
Senior executives and key managers who have a direct and measurable
ability to impact the Company's financial results are eligible to participate,
subject to approval by the Compensation Committee, in the Company's Executive
Variable Incentive Plan. 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 his /her base salary. The incentive target is not based upon a
rigid mathematical formula, however, the target incentive is based on two
independent categories: corporate earnings per share, and individual performance
objectives. Each category is equally weighted. Final evaluation of individual
performance and the specific incentive recommendations are subject to management
discretion.
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. Certain stock options are subject to forfeiture in the
event certain performance goals are not met.
Based on review of available information, the Committee believes that
the current Chief Executive Officer's total annual compensation is reasonable
and appropriate given the size, complexity 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 the year, such
as changes in the market for computer products and services and other industry
factors. No specific weight was assigned to any of the criteria relative to the
Chief Executive Officer's compensation.
Compensation Committee Members
Stan Gang
Michael R. Bruce
Susan H. Wolford
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are, as of February 26, 1999 approximately 335 holders of
record and approximately 3,900 beneficial owners of the Company's Common Stock.
The following table sets forth certain information, as of February 26, 1999,
with respect to holdings of the Company's 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 Executives, and (iii) all Directors and executive officers
as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner(1) Beneficial Ownership(1) of Class(2)
(i) Certain Beneficial Owners:
Stan Gang(3)
7 Ridgedale Avenue
Cedar Knolls, NJ 07927............................ 1,938,000 30.5
(ii) Directors, nominees, and Named Executives who are not set forth above:
John Centinaro(4)..................................... 13,844 *
Robert G. Petoia(5)................................... 2,000 *
Gary S. Finkel........................................ - *
Lawrence Mahon (6).................................... 7,000 *
Bruce Flitcroft....................................... - *
Dennis Samuelson (7).................................. 20,375 *
Michael Gang (8)...................................... 9,000 *
Michael R. Bruce (9).................................. 18,681 *
Susan H. Wolford (10)................................. 8,400 *
Richard S. Miller (11)................................ - *
Ira Cohen (12)........................................ - *
Donald A. Deieso...................................... - *
Thomas F. Dorazio..................................... - *
(iii) All Directors and executive officers as a group (14 2,037,000 32.1
persons)(3) (13)................................
- -------------------
* Less than one percent.
(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 6,259,130 shares of
Common Stock outstanding on February 26, 1999 plus presently
exercisable stock options held by each such holder which will become
exercisable within 60 days after on February 26, 1999.
(3) Does not include 135,000 shares of Common Stock owned by The Gang
Annuity Trust dated January 3, 1994. Mr. Gang expressly disclaims
beneficial ownership of such shares.
(4) Represents 12,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999, or within 60 days after such
date and 1,844 shares owned by Mr. Centinaro. Excludes 23,000 shares
underlying options which become exercisable over time after such
period.
(5) Represents 2,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such
date. Excludes 8,000 shares underlying options which become
exercisable over time after such period.
(6) Represents 7,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999, or within 60 days after such
date. These options subsequently expired on March 29, 1999.
(7) Represents 14,500 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such date
and 520 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such date
held by his wife, an employee of the Company. Also, 200 shares are
held as a custodian for minor children and 978 are owned by his wife.
Excludes 15,500 shares underlying options which become exercisable
over time after such period and 1,280 shares underlying options which
become exercisable over time after such period owned by his wife, an
employee of the Company.
(8) Represents 9,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such
date. Excludes 6,000 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 expressly
disclaims beneficial ownership of such shares.
(9) Represents 12,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such date
and 6,000 shares owned by Mr. Bruce and 681 shares owned by his wife.
Excludes 8,000 shares underlying options which become exercisable
over time after such period.
(10) Represents 8,000 shares of Common Stock underlying options which are
exercisable as of February 26, 1999 or within 60 days after such
date, 200 shares owned by Ms. Wolford and 200 shares owned as
custodian for a minor child. Excludes 12,000 shares underlying
options which become exercisable over time after such period.
(11) Excludes 20,000 shares of Common Stock underlying options which will
expire upon the expiration of Mr. Miller's term as a director.
(12) Does not include 300,000 shares of Common Stock owned by Fallen Angel
Equity Fund, LP, a Delaware limited partnership, in which Mr. Cohen
is a limited partner. However, Mr. Cohen disclaims beneficial
ownership of such shares of Common Stock.
(13) Includes 19,700 shares of Common Stock underlying options granted to
executive officers of the Company not individually listed on the
table which are exercisable as of February 26, 1999 or within 60 days
after such date and includes an aggregate of 65,020 shares of Common
Stock underlying options granted to individuals listed above which
are exercisable as of February 26, 1999 or within 60 days after such
date. Excludes 102,580 shares underlying options granted to executive
officers and Directors which become exercisable over time after such
period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1998, the Company paid, as compensation for services rendered to
the Company and for sales generated, an aggregate of $716,259 to Michael Gang,
the son of Stan Gang, the Company's Chairman of the Board, President, and Chief
Executive Officer. Michael Gang serves as a salesperson for the Company. Michael
Gang has served as a Director of the Company since September 1995 and as
Secretary from September 1995 to October 1997.
For transactions involving Stan Gang and Susan H. Wolford, each a
Director of the Company, see "Executive Compensation Compensation Committee
Interlocks and Insider Participation."
In 1995, the Board of Directors of the Company 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.
PROPOSAL TO AMEND THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
General
- -------
The Board of Directors adopted and the Shareholders of the Company
approved on August 25, 1995, the Non-Employee Director Plan. The purpose of the
Non-Employee Director Plan is to provide an inducement to obtain and retain the
services of qualified persons who are not employees or officers of the Company
to serve as members of the Company's Board of Directors. Currently there are
100,000 shares of Common Stock reserved for issuance upon exercise of options
granted under the Non-Employee Director Plan. Shares optioned under the
Non-Employee Director Plan may be either authorized but unissued shares or
previously issued shares reacquired by the Company. Shares of Common Stock
covered by an unexercised portion of any terminated option may again be subject
to options granted under the Non-Employee Director Plan. The Non-Employee
Director Plan is administered by the Option Committee of the Board of Directors.
Under the terms of the Non-Employee Director Plan, each non-employee
Director who was a Board member on the effective date of the Company's initial
public offering of its Common Stock (the "IPO") or who thereafter becomes a
member of the Board shall be automatically granted, on the effective date of the
IPO or the date thereafter that such person becomes a member of the Board, an
option to purchase 20,000 shares of the Common Stock.
The exercise price per share of the Common Stock sold under the
Non-Employee Director Plan will be equal to the "fair market value" of a share
of Common Stock on the applicable grant date (the "Exercise Date"). The fair
market value will be deemed to be (i) the average of the high and low prices of
the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price of the Common Stock on
the Nasdaq National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market.
The Non-Employee Director Plan is intended to comply with certain
requirements of Rule 16b-3 under the Exchange Act. As a result, acquisitions of
shares of Common Stock pursuant to the Non-Employee Director Plan complying with
the requirements of Rule 16b-3 will not be subject to matching and "short-swing
profit recapture" under Section 16(b) of the Exchange Act. Messrs. Bruce and
Miller and Ms. Wolford, each a non-employee Director who is eligible to
participate in the Non-Employee Director Plan, have been appointed to the Option
Committee which administers the Non-Employee Director Plan.
The term of the Non-Employee Director Plan will extend through August
31, 2005, unless terminated earlier by the Board of Directors. The Board of
Directors generally has the right to amend or terminate the Non-Employee
Director Plan without the consent of participants or shareholders, subject to
certain exceptions. The numbers of shares of Common Stock which can be purchased
pursuant to options under the Non-Employee Director Plan are subject to
adjustment in the event of certain recapitalizations of the Company.
Participants' rights pursuant to the Non-Employee Director Plan are not
transferable. Generally, the Company's Board of Directors, without the consent
of Shareholders, can terminate or amend the Non-Employee Director Plan, except
that no such action can adversely affect options previously granted and, without
Shareholder approval, the Board may not: (i) increase the total amount of Common
Stock allocated to the Non-Employee Director Plan (except for permitted capital
adjustments); (ii) change the class of eligible Directors; or (iii) extend the
term of the Non-Employee Director Plan.
Options to be issued under the Non-Employee Director Plan will be
designated as NQSOs which receive no special tax treatment, but are taxed
pursuant to Section 83 of the Code. Under the provisions of that Section, if an
option is granted in connection with the performance of services and has a
"readily ascertainable fair market value" at the time of the grant, the optionee
will be deemed to have received compensation income in the year of grant in an
amount equal to the excess of the fair market value of the option at the time of
grant over the amount, if any, paid by the optionee for the option. However, a
NQSO generally has a "readily ascertainable fair market value" only when the
option is actively traded on an established market and when certain stringent
Internal Revenue Code requirements are met.
If the option does not have a readily ascertainable fair market value
at the time of the grant, the option is not included as compensation income at
that time. Rather, the optionee realizes compensation income only when the
option is exercised, and the optionee has become substantially vested in the
shares transferred. The shares are considered to be substantially vested when
they are either transferable or not subject to a substantial risk of forfeiture.
The amount of income realized is equal to the excess of the fair market value of
the shares at the time the shares become substantially vested over the sum of
the exercise price plus the amount, if any, paid by the optionee for the option.
If a NQSO is exercised through payment of the exercise price by the delivery of
Common Stock, to the extent that the number of shares received by the optionee
exceeds the number of shares surrendered, ordinary income will be realized by
the optionee at that time only in the amount of the fair market value of such
excess shares, and the tax basis of such excess shares will be such fair market
value.
Once a NQSO is subject to tax as compensation income, it is treated
as an investment option or investment shares and becomes subject to the
investment property rules. No gain or loss arises from the exercise of an option
that was taxed at the time of grant. When the optionee disposes of the shares
acquired pursuant to a NQSO, whether taxed at the time of grant or exercise, or
some other terms, the optionee will recognize capital gain or loss equal to the
difference between the amount received for the shares and the optionee's basis
in the shares.
Generally, the optionee's basis in the shares will be the exercise
price plus the optionee's basis in the option. The optionee's basis in the
option is equal to the sum of the compensation income realized at the time of
grant or exercise, whichever is applicable, and the amount, if any, paid by the
optionee for the option. In the compensatory option context, optionees normally
pay nothing for the grant of the option so the basis in the option will usually
be the amount of compensation income realized at the time of grant or exercise.
Thus, the optionee's basis in the shares will generally be equal to the exercise
price of the option plus the amount of compensation income realized by the
optionee plus the amount, if any, paid by the optionee for the option. The
capital gain or loss will be short-term if the shares are disposed of within one
year after the option is exercised, and long-term if the shares are disposed of
more than one year after the option is exercised.
If a NQSO is taxed at the time of grant and expires or lapses without
being exercised, the lapse is deemed to be a sale or exchange of the option on
the day the option expires and the amount of income realized is zero. The
optionee recognizes a capital loss in the amount of the optionee's basis
(compensation income realized at the time of the grant plus the amount, if any,
paid by the optionee for the option) in the option at the time of the lapse. The
loss is short-term or long-term, depending on the optionee's holding period in
the option. If a NQSO is not taxed at the time of grant and expires without
being exercised, the optionee will have no tax consequences unless the optionee
paid for the option. In such case, the optionee would recognize a loss in the
amount of the price paid by the optionee for the option.
The Company is generally entitled to a deductible compensation
expense in an amount equivalent to the amount included as compensation income to
the optionee. This deduction is allowed in the Company's taxable year in which
the income is included as compensation to the optionee. The Company is only
entitled to this deduction if the Company deducts and withholds upon the amount
included in an employee's compensation.
The preceding discussion is based upon federal tax laws and
regulations in effect on the date hereof, which are subject to change, and upon
an interpretation of the relevant sections of the Internal Revenue Code, their
legislative histories and the income tax regulations which interpret similar
provisions of the Internal Revenue Code. Furthermore, the foregoing is only a
general discussion of the federal income tax aspects of the Non-Employee
Director Plan and does not purport to be a complete description of all federal
income tax aspects of the Non-Employee Director Plan. Optionees may also be
subject to state and local taxes in connection with the grant or exercise of
options granted under the Non-Employee Director Plan and the sale or other
disposition of shares acquired upon exercise of the options. Each optionee
receiving a grant of options should consult with his or her personal tax advisor
regarding federal, state and local tax consequences of participating in the
Non-Employee Director Plan.
Previously Granted Options Under the 1995 Non-Employee Director Plan
- --------------------------------------------------------------------
As of February 26, 1999, the Company had granted options to purchase
an aggregate of 68,000 shares of Common Stock under the Non-Employee Director
Plan at an average exercise price of $11.30 per share. As of February 26, 1999,
24,000 options to purchase shares were vested and no options to purchase shares
had been exercised under the Non-Employee Director Plan. The following table
sets forth the options granted under the Non-Employee Director Plan to all, past
and present, non-employee Directors of the Company and each nominee for election
as a Director.
Options Granted Weighted Average
through Exercise Price
Name March 31, 1999 per share Expiration Date
Michael R. Bruce...................................... 20,000 $10.50 03/20/06
Richard S. Miller .................................... 20,000 12.00 05/29/08
David J. Sorin........................................ 8,000 11.375 05/13/99
Susan H. Wolford...................................... 20,000 11.375 05/03/06
Ira Cohen............................................. - - -
Donald A. Deieso...................................... - - -
Thomas F. Dorazio..................................... - - -
As of February 26, 1999, the market value of the Common Stock
underlying the Non-Employee Director Plan was $4.00 per share.
Proposed Amendment
- ------------------
Shareholders are being asked to consider and vote upon a proposed
amendment (the "Amendment") to the Non-Employee Director Plan which will provide
for annual grants, immediately upon the election or re-election of non-employee
directors, of 5,000 fully vested stock options. Options previously issued under
the Non-Employee Director Plan will continue to vest in accordance with the
five-year vesting schedule currently in effect. However, effective upon
shareholder approval of the Amendment, the aforementioned annual grants will
replace the one-time grant of 20,000 stock options currently awarded to
newly-elected non-employee directors. Under the Amendment, any non-employee
director whose term of office is expiring as of May 20, 1999 and who is not
standing for nomination or re-election as a director will, in the discretion of
management, be eligible to receive, on such date, a one-time grant of 10,000
fully vested stock options, exercisable for a period of one year from such date.
The Board of Directors believes that the Amendment provides an
important inducement to recruit and retain the best available directors. The
Board of Directors believes that providing directors with an opportunity to
invest in the Company rewards them appropriately for their efforts on behalf of
the Company. In addition, the Board of Directors believes that the approval of
the Amendment by the shareholders will serve to more closely align the interests
of outside directors with the Company's shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
NON-EMPLOYEE DIRECTOR PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has, subject to shareholder
approval, retained PricewaterhouseCoopers LLP as independent accountants of the
Company for the year ending December 31, 1999. PricewaterhouseCoopers LLP also
served as independent accountants of the Company for 1998. 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, 1999.
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.
SHAREHOLDERS' PROPOSALS
Shareholders who wish to submit proposals for inclusion in the
Company's proxy statement and form of proxy relating to the 1999 Annual Meeting
of Shareholders must advise the Secretary of the Company of such proposals in
writing by December 17, 1999.
OTHER MATTERS
The Board of Directors is not aware of any matter 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 matters
should 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 of the Company, 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 and telegram 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.
ALPHANET SOLUTIONS, INC. WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS
SHAREHOLDERS OF RECORD ON APRIL 13, 1999, AND TO EACH BENEFICIAL SHAREHOLDER ON
THAT DATE UPON WRITTEN REQUEST MADE TO JACK P. ADLER, SECRETARY OF ALPHANET
SOLUTIONS, INC. 7 RIDGEDALE AVENUE, CEDAR KNOLLS, NJ 07927, TELEPHONE No. (973)
267-0088. 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,
/s/Jack P. Adler
------------------------
Jack P. Adler
Secretary
Cedar Knolls, New Jersey
April 16, 1999
Appendix A
AlphaNet Solutions, Inc.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the
1995 Non-Employee Director Stock Option Plan (the "Plan"), is intended to
promote the interests of AlphaNet Solutions, Inc. (the "Company") by providing
an inducement to obtain and retain the services of qualified persons who are not
employees or officers of the Company to serve as members of its Board of
Directors (the "Board"), each such person hereinafter referred to as a
"Non-Employee Director."
2. Available Shares. The total number of shares of Common Stock, par
value $.01 per share, of the Company (the "Common Stock") for which options may
be granted under the Plan shall not exceed 100,000 shares, subject to adjustment
in accordance with Section 10 of the Plan. Shares subject to the Plan are
authorized but unissued shares, or shares that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are surrendered
before exercise or lapse without exercise, in whole or in part, the shares
reserved therefor shall continue to be available under the Plan.
3. Administration. The Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer the Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe the Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of the Plan, as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
4. Automatic Grant of Options. Subject to the availability of shares
under the Plan:
(a) each Non-Employee Director who is a member of the Board on the
effective date of the Company's initial public offering (the "IPO") shall be
automatically granted on the effective date of the IPO, without further action
by the Board, an option to purchase 20,000 shares of the Common Stock;
(b) each Non-Employee Director who first becomes a member of the
Board after the IPO but prior to May 20, 1999 shall be automatically granted, on
the date such person becomes a member of the Board, an option to purchase 20,000
shares of the Common Stock; and
(c) notwithstanding Section 4(a) or Section 4(b) above, each
Non-Employee Director who is elected to the Board on or after May 20, 1999 shall
be granted an option to purchase 5,000 shares of Common Stock upon the date on
which he or she is elected to the Board, and shall be granted an additional
option to purchase 5,000 shares of Common Stock upon each date such Non-Employee
Director is subsequently re-elected a Director at each annual meeting of
shareholders; further, any Non-Employee Director whose term of office is
expiring as of May 20, 1999 and who is not standing for nomination or
re-election as a Director will, in the discretion of management, be eligible to
receive on such date a one-time grant of 10,000 fully vested stock options,
exercisable for a period of one year from such date.
The term "Grant Date" as used hereinafter shall mean, in the case of a
grant under Section 4(a), the effective date of the IPO, or, in the case of a
grant under Section 4(b), the date the optionee becomes a member of the Board,
or, in the case of a grant under Section 4(c), the date the optionee first
becomes a member of the Board and each subsequent date in which the optionee is
re-elected to the Board by the shareholders of the Company.
The options to be granted under this Section 4 shall be the only
options ever to be granted at any such time to such member under the Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to the Plan shall be 100% of the fair market value of such
shares on the Grant Date. The option price will be subject to adjustment in
accordance with the provisions of Section 10 of the Plan. For purposes of the
Plan, "fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior to the
date such option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market. The "fair market value" of the stock
issuable upon exercise of an option granted pursuant to Section 4(a) hereof
shall be deemed to be equal to the initial public offering price per share.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of Section 8 of the Plan, an option granted hereunder shall expire on
the date which is ten (10) years after the Grant Date.
7. (a) Vesting of Shares and Non-Transferability of Options. Options
granted under the Plan shall not be exercisable until they become vested.
Options granted pursuant to Section 4(a) and Section 4(b) the Plan shall vest in
the optionee and thus become exercisable in accordance with the following
schedule, provided that the optionee has continuously served as a member of the
Board through such vesting date, and subject also to Subsection (b) of this
Section 7:
Percentage of Option Shares for which
Option Will be Exercisable Date of Vesting
-------------------------- ---------------
20% One year from Grant Date
40% Two years from Grant Date
60% Three years from Grant Date
80% Four years from Grant Date
100% Five years from Grant Date
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in the Plan.
(b) Options granted pursuant to Section 4(c) above shall be fully
vested and become immediately exercisable upon the Grant Date.
(c) Notwithstanding Subsection (a) or (b) of this Section 7, if an
optionee attends less than 80% of the Board meetings (whether regular or
special) held in any fiscal year (a "Default Year"), then either (i) the
optionee shall forfeit his exercise rights with respect to the option
installment which vested on the preceding annual vesting date or grant date, as
the case may be, in proportion to the percentage of Board meetings actually
attended by such optionee during the Default Year; or (ii) in the event that the
optionee does not own a sufficient number of exercisable options to satisfy the
forfeiture obligation described above, the optionee shall forfeit his right to
receive the next succeeding annual installment of the option, in proportion to
the percentage of Board meetings which the optionee actually attended in the
Default Year. By way of illustration, if an optionee attends only 50% of the
actual meetings of the Board of Directors (whether regular or special) held in
any fiscal year, then the optionee shall forfeit the right to exercise 50% of
the option installment which became exercisable on the preceding annual vesting
date or grant date, as the case may be. If, however, the optionee had already
exercised 75% of the preceding option installment, and did not own any
additional unexercised options available to satisfy the forfeiture obligation,
the optionee would forfeit the remaining 25% of the prior installment, and would
also forfeit the right to receive or exercise 25% of the next succeeding annual
option installment. Attendance at Board meetings may be in person or via
teleconference, or any manner consistent with the Amended and Restated Bylaws of
the Company.
(d) Non-transferability. Any option granted pursuant to the Plan
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event that an optionee ceases to be a member of the Board
by reason of his or her death or permanent disability, any option granted to
such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) at any time prior to the scheduled expiration date of the option.
(b) In the event any optionee: (i) ceases to be a member of the
Board of Directors at the request of the Company; (ii) is removed without cause;
or (iii) otherwise does not stand for nomination or re-election as a Director of
the Company at the request of the Company, then any unexercised options, to the
extent not vested at the date of the applicable event, shall immediately
terminate and become void, and to the extent any such options are vested at such
date, they shall continue to be exercisable for a period of one year from the
date of the applicable event; provided, however, that no portion of any option,
vested or unvested, may be exercised if the optionee is removed from the Board
of Directors for any one of the following reasons: (i) disloyalty, gross
negligence, dishonesty or breach of fiduciary duty to the Company; (ii) the
commission of an act of embezzlement, fraud or deliberate disregard of the rules
or policies of the Company which results in loss, damage or injury to the
Company, whether directly or indirectly; (iii) the unauthorized disclosure of
any trade secret or confidential information of the Company; (iv) the commission
of an act which constitutes unfair competition with the Company or which induces
any customer of the Company to breach a contract with the Company; or (v)
engages in any conduct or activity on behalf of any organization or entity which
is a competitor of the Company (unless such conduct or activity is approved by a
majority of the members of the Board of Directors).
9. Exercise of Option. Subject to the terms and conditions of the Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to AlphaNet Solutions, Inc., 7 Ridgedale
Avenue, Cedar Knolls, New Jersey 07927, Attention: President, or at its then
principal executive offices, stating the number of shares with respect to which
the option is being exercised, accompanied by payment in full for such shares.
Payment may be (a) in United States dollars in cash or by check, (b) in whole or
in part in shares of Common Stock of the Company already owned by the person or
persons exercising the option or shares subject to the option being exercised
(subject to such restrictions and guidelines as the Board may adopt from time to
time) valued at fair market value determined in accordance with the provisions
of Section 5, or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. There shall be no
such exercise at any one time as to fewer than one hundred (100) shares or all
of the remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events. Upon
the occurrence of any of the following events, an optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise, each option granted
under the Plan which is outstanding but unvested as of the effective date of
such event shall become exercisable in full twenty (20) days prior to the
effective date of such event. In the event of a reorganization,
recapitalization, merger, consolidation, or any other change in the corporate
structure or shares of the Company, to the extent permitted by Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, adjustments shall be made in
the number and kind of shares authorized by the Plan and in the number of and
kind of shares covered by, and the option price of, outstanding options under
the Plan, in each case, as necessary to maintain the proportionate interest of
the optionee and preserve, without exceeding, the value of such option.
Notwithstanding the foregoing, no such adjustments shall be made which would,
within the meaning of any applicable provisions of the Internal Revenue Code of
1986, as amended, constitute a modification, extension or renewal of any option
or a grant of additional benefits to the holder of an option.
(c) Issuance of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(d) Adjustments. Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 2 of the Plan that
are subject to options which previously have been or subsequently may be granted
under the Plan shall also be appropriately adjusted to reflect such events. The
Board shall determine the specific adjustments to be made under this Section 10
and its determination shall be conclusive.
11. Restrictions on Issuances of Shares. Notwithstanding the
provisions of Sections 4 and 9 of the Plan, the Company shall have no obligation
to deliver any certificate or certificates upon exercise of an option until one
of the following conditions shall be satisfied:
(a) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares registered under applicable
Federal and state securities laws as now in force or hereafter amended; or
(b) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and that the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation, all regulations required by any stock exchange
upon which the Company's outstanding Common Stock is then listed.
12. Legend on Certificates. The certificate representing shares
issued pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933, as amended, or any state securities laws.
13. Representation of Optionee. If requested by the Company, the
optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with Federal
and state securities laws, including representations and warranties to the
effect that a purchase of shares under the option is made for investment and not
with a view to their distribution (as that term is used in the Securities Act of
1933, as amended).
14. Option Agreement. Each option granted under the provisions of the
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with the Plan as may be determined by the officer
executing it.
15. Termination and Amendment of Plan. The Plan shall terminate on
the earlier to occur of August 31, 2005 or at such time as all shares reserved
for issuance hereunder (including any amendments hereto) shall have been issued.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that the Board may
not, without approval by the affirmative vote of the holders of a majority of
the shares of Common Stock present in person or by proxy and voting on such
matter at a meeting, (a) increase the maximum number of shares for which options
may be granted under the Plan (except by adjustment pursuant to Section 10), (b)
materially modify the requirements as to eligibility to participate in the Plan,
(c) materially increase benefits accruing to option holders under the Plan, or
(d) amend the Plan in any manner which would cause Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, to become inapplicable to the Plan;
and provided further that the provisions of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereto) under the
Securities Act of 1934, as amended (including without limitation, provisions as
to eligibility, amount, price and timing of awards) may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. Termination or any modification or amendment of the Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, as
amended, may require the optionee to pay withholding taxes in respect of amounts
considered to be compensation includible in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the
Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and any applicable Securities and Exchange commission
interpretations thereof. If any provision of the Plan is deemed not to be in
compliance with Rule 16b-3, such provision of the Plan shall be null and void.
18. Governing Law. The validity and construction of the Plan and the
instruments evidencing options shall be governed by the laws of the State of New
Jersey, without giving effect to the principles of conflicts of law thereof.
19. Acceleration and Vesting of Option for Business Combinations.
Upon any merger, consolidation, sale of all (or substantially all) of the assets
of the Company, or a business combination involving the sale or transfer of all
(or substantially all) of the capital stock or assets of the Company in which
the Company is not the surviving entity, or, if it is the surviving entity, does
not survive as an operating going concern in substantially the same line of
business, then the options granted under Section 4(a) or Section 4(b) of the
Plan shall, immediately prior to the consummation of any of the foregoing
events, become fully vested and immediately exercisable by the optionee.