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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Allin Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO OF ALLIN CORPORATION]
Allin Corporation
381 Mansfield Avenue
Suite 400
Pittsburgh, Pennsylvania 15220-2751
Notice of Annual Meeting of Stockholders
To be held May 10, 2001
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Allin Corporation (the "Company") that will be held on Thursday, May 10, 2001 at
1:00 p.m. EDT, at the Company's headquarters at 381 Mansfield Avenue, Suite 400,
Pittsburgh, Pennsylvania 15220, for the following purposes, as set forth in the
accompanying proxy statement:
1. To elect six directors.
2. To ratify the Board of Director's appointment of Arthur Andersen LLP as
independent public accountants for the Company for the year ending
December 31, 2001.
3. To transact such other business as may properly come before the meeting
and any adjournments or postponements thereof.
The Board of Directors has established the close of business on March 23,
2001, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the annual meeting and any adjournment or
postponement thereof.
YOU ARE URGED TO REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT AND TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
Your proxy may be revoked by you at any time before it has been voted.
You are cordially invited to attend the annual meeting in person if it is
convenient for you to do so.
By order of the Board of Directors,
/s/ Dean C. Praskach
Dean C. Praskach
Secretary
April 4, 2001
Allin Corporation
Proxy Statement
General Information
This proxy statement is provided to the stockholders of Allin Corporation
(the "Company") in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the Annual Meeting of Stockholders of the
Company to be held on Thursday, May 10, 2001, at 1:00 p.m., EDT, at the
Company's headquarters at 381 Mansfield Avenue, Suite 400, Pittsburgh,
Pennsylvania 15220, and any adjournments or postponements thereof. A form of
proxy is enclosed for use at the annual meeting. Proxies properly executed and
returned in a timely manner will be voted at the annual meeting in accordance
with the directions specified therein. If no direction is indicated, they will
be voted for the election of the nominees named herein as directors, for the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent accountants and, on other matters presented for a vote, in
accordance with the judgment of the persons acting under the proxies. The
persons named as proxies were selected by the Board of Directors and are present
members of executive management of the Company.
The Company's executive offices are located at 381 Mansfield Avenue, Suite
400, Pittsburgh, Pennsylvania 15220-2751, and its telephone number is (412) 928-
8800. Proxy materials are first being mailed to stockholders beginning on or
about April 6, 2001.
Shares Outstanding, Voting Rights and Vote Required
Only stockholders of record at the close of business on March 23, 2001 are
entitled to vote at the annual meeting. The only voting stock of the Company
outstanding and entitled to vote at the annual meeting is as follows: its
Common Stock, par value $.01 per share (the "Common Stock"), of which 6,967,339
shares were outstanding as of the close of business on March 23, 2001, and its
Series G Convertible Redeemable Preferred Stock, par value $.01 per share (the
"Series G Preferred Stock"), of which 150 shares were outstanding as of the
close of business on March 23, 2001. The holders of Series G Preferred Stock
are entitled to vote with the holders of Common Stock together as a single class
on all matters submitted for a vote of the holders of Common Stock that do not
require a separate class vote of the holders of Common Stock under the Company's
Certificate of Incorporation or applicable law, regulations or rules of The
Nasdaq Stock Market ("Nasdaq"). Each share of Common Stock issued and
outstanding is entitled to one vote on matters properly submitted at the annual
meeting. Each share of Series G Preferred Stock issued and outstanding is
entitled to 5,295 votes on matters properly submitted at the annual meeting.
The presence, in person or by proxy, of the holders of shares of Common Stock
and Series G Preferred Stock entitled to cast a majority of the votes on the
matters to be presented at the annual meeting is necessary to constitute a
quorum for the transaction of business at the annual meeting. Abstentions and
properly executed broker non-votes are counted for purposes of determining the
presence or absence of a quorum. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner.
Abstentions are counted in tabulating votes cast on proposals presented to
stockholders, whereas broker non-votes are not. Votes cast in person or by
proxy at the annual meeting will be tabulated by the election inspector
appointed for the meeting.
Directors will be elected by a plurality of the votes of the shares present or
represented by proxy at the annual meeting and entitled to vote on the election
of directors. That is, the six nominees receiving the greatest number of votes
will be elected. If a quorum is present, abstentions and broker non-votes will
have no effect on the voting for the election of directors. Approval of the
ratification of the appointment of independent public accountants for 2001
requires the affirmative vote of a majority of the votes cast in person or by
proxy at the annual meeting. If a quorum is present, broker non-votes will have
no effect on the voting for the ratification of the appointment of independent
public accountants. However, abstentions will have the effect of a negative
vote.
Stockholders of record voting by proxy may revoke that proxy at any time
before it is voted at the annual meeting by delivering written notice to the
Secretary of the Company before the vote is taken at the annual meeting, by
delivering a proxy bearing a later date before the vote is taken at the annual
meeting or by attending the annual meeting in person and casting a ballot
contrary to the previously granted proxy. Stockholders whose shares are held in
"street name" by a broker and who have instructed the broker to vote the shares
must follow the directions received from the
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broker as to how to change their vote. Stockholders whose shares are held in
"street name" by a broker and who wish to vote in person at the annual meeting
must first obtain a legal proxy from their broker.
The Board of Directors recommends voting FOR the election of all nominees
named herein to the Board of Directors or for a substitute nominee if any of the
nominees named herein becomes unable or unwilling to serve and FOR the proposal
to ratify the appointment of Arthur Andersen LLP as the Company's independent
public accountants for 2001. Proxies properly executed and returned in a timely
manner will be voted at the annual meeting in accordance with the directions
specified therein. If no direction is indicated, they will be voted FOR the
election of the director nominees named herein, FOR the proposal to ratify the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for 2001 and, on other matters presented for a vote, in accordance
with the judgment of the persons acting under the proxies. The persons named as
proxies were selected by the Board of Directors.
Election of Directors
(Proposal 1)
The Board of Directors of the Company currently consists of six members,
five of whom are non-employee directors. The Chairman and Chief Executive
Officer of the Company is a member of the Board. All directors are elected for
a one-year term and hold office until the next annual meeting of stockholders
following election and until their successors are duly elected and qualified.
All executive officers serve at the discretion of the Board and are elected by
the Board each year.
The persons named below have been designated by the Board of Directors as
nominees for election as directors, for terms expiring at the 2002 Annual
Meeting of Stockholders. All nominees currently serve as directors of the
Company. Ages are given as of March 31, 2001.
Richard W. Talarico, age 45, became Chairman of the Board and Chief Executive
Officer of the Company in July 1996. He has also served as a director of the
Company's subsidiary, Allin Interactive Corporation ("Allin Interactive"), since
October 1994 and as Chairman of the Board and Chief Executive Officer of Allin
Interactive since June 1996. Mr. Talarico has served Allin Interactive in
various other capacities, including Vice President of Finance from October 1994
to October 1995, President from October 1995 to June 1996 and Chief Financial
Officer, Secretary and Treasurer from October 1994 to June 1996. Mr. Talarico
has served as an officer and director of the Company's other subsidiaries since
their inception or acquisition by the Company. Since 1991, Mr. Talarico has
been a partner in The Hawthorne Group (''THG''), where he has been involved in
numerous business ventures and has served in various financial and operating
capacities. THG is a private investment and management company which invests
through affiliates primarily in media and communications companies. Mr.
Talarico also serves as a director of Wexford Health Sources, Inc., Longford
Health Sources, Inc. and Galway Technologies, Inc., which are providers of
health and rehabilitation-related services.
Brian K. Blair, age 38, became a director of the Company in July 1996. Mr.
Blair also served as Chief Operating Officer and Secretary of the Company from
July 1996 until his resignation from these positions in February 1998. Mr.
Blair has served as a director of Allin Interactive since October 1994 and as a
director of the Company's other subsidiaries since their inception or
acquisition by the Company. Mr. Blair also served as Vice President of
Administration and Operations of Allin Interactive from October 1994 until June
1996 and as its President from June 1996 until February 1998. Mr. Blair served
as President of Blair Haven Entertainment, Inc., doing business as Commercial
Downlink, a provider of cable and closed circuit television services, from 1989
to 1998. Mr. Blair currently serves as President of Digital Media Corp., a
video production and satellite communications company. In 1999, Mr. Blair co-
founded Novair Media Corp., a niche market television media company, and serves
as its Chief Executive Officer. Mr. Blair also currently is a director of
Digital Media Corp., Novair Media Corp. and Com-Tek Printing and Graphics, Inc.,
a commercial printing company.
Anthony L. Bucci, age 52, became a director of the Company in August 1998.
Mr. Bucci is Chairman and Chief Executive Officer of MARC USA, Pennsylvania's
largest full-service marketing communications company. Mr. Bucci has served
MARC USA in various capacities since 1970, including as President from September
1988 to February 1997, as Chief Executive Officer since March 1992 and as
Chairman since February 1997. Mr. Bucci has supervised advertising and
marketing for a range of clients, including specialty retailing, financial
services, automotive, fashion, fast food, home centers, general merchandise and
amusement parks.
William C. Kavan, age 50, became a director of the Company in July 1996 and
has served as a director of Allin Interactive since October 1994. Mr. Kavan has
also served as a director of certain of the Company's other subsidiaries
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since their inception or acquisition by the Company. From 1980 to 2000, Mr.
Kavan served as president of Berkely-Arm, Inc. (''Berkely''), the largest
provider of revenue-generating passenger insurance programs for the cruise
industry. Berkely serves 25 cruise line clients, including Carnival, Costa,
Cunard, Epirotiki, NCL, P&O, Princess, Radisson and RCCL. Mr. Kavan currently
serves as a director of thirteen privately held businesses in diverse industries
including restaurants, cleaning, digital photography, consumer products and
insurance.
James S. Kelly, Jr., age 50, became a director of the Company in August
1998. Mr. Kelly founded KCS Computer Services, Inc. ("KCS"), now Allin
Consulting of Pennsylvania, Inc., a subsidiary of the Company ("Allin
Consulting-Pennsylvania"), in 1985 and served as its President and Chief
Executive Officer prior to its acquisition by the Company in August 1998.
Following the acquisition of KCS, the Company appointed Mr. Kelly as a director
of the Company. Mr. Kelly was responsible for setting strategic direction for
KCS, oversight of all KCS operations and direction of its finance and
administration function. Mr. Kelly has been involved in the information
technology field for over 25 years.
Anthony C. Vickers, age 51, became a Director of the Company in November
1999. Mr. Vickers founded IT Services Development ("ITSD") in 1998 and has
served as principal of ITSD since its inception. ITSD is a management
consulting firm that assists clients with projects ranging from strategic
planning to acquisitions and customer satisfaction surveys. From 1996 to 1998,
Mr. Vickers served as Chairman of the Information Technology Services Division
of the Information Technology Association of America ("ITAA"), a technology
industry association. Mr. Vickers currently serves as a director of ITAA. Mr.
Vickers has also been a member of the Advisory Board of Technology Empowerment,
Inc., an emerging off-shore developer of E-business solutions, since September
2000. Mr. Vickers founded Computer People, a public information technology
services organization, in 1972 and served as its chief executive officer and
president until November 1995 and as a director until March 1998. Mr. Vickers
served as a director of PC Tutor Corporation, which provided computer training
services to small and medium-sized businesses from 1998 to 2000. Mr. Vickers
also served as a director of Computer Technology Associates, a provider of
information technology services and E-government solutions to the federal and
state governments, from January to October 2000, and as a member of the advisory
board of Greenbrier & Russel, which specializes in E-business enabling, since
August 1999.
There are no family relationships among the Company's directors and
executive officers. All directors hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Officers serve at the discretion of the Board of Directors.
The Board of Directors Recommends a Vote FOR
The Election of the Above Named Nominees
If you do not wish your shares to be voted for particular nominees, you may
so indicate on the proxy. If, for any reason, any of the nominees shall become
unavailable for election, the individuals named in the enclosed proxy may
exercise their discretion to vote for any substitutes proposed by the Board of
Directors, unless the Board of Directors should decide to reduce the number of
directors to be elected at the annual meeting. At this time, the Board of
Directors knows of no reason why any nominee might be unavailable to serve.
Meetings and Committees of the Board of Directors
The business affairs of the Company are managed under the direction of the
Board of Directors. During 2000, the Company's Board of Directors held six
meetings and took action by unanimous written consent in lieu of meetings five
times. In 2000, no incumbent director attended fewer than 75% of the total
number of Board meetings and meetings of committees upon which he served during
the period for which he served as a director.
The Board of Directors has established two committees, the Audit Committee
and the Compensation Committee. The Board has no standing nominating committee.
The Audit Committee provides oversight of the financial reporting process
and management's responsibility for the integrity, accuracy and objectivity of
financial reports and accounting and financial reporting and practices. The
Audit Committee has the power to recommend the retention of the independent
public accountants for the Company and to consult with such independent
accountants concerning the plan of audit, their report of audit and the adequacy
of internal controls. The Audit Committee met independently four times during
2000.
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The Compensation Committee reviews and makes recommendations to the Board
of Directors concerning the compensation and benefit policies and practices of
the Company. The Compensation Committee is currently composed of two non-
employee directors, Anthony L. Bucci and William C. Kavan. The Compensation
Committee met independently three times during 2000.
Audit Committee Report
The Audit Committee is currently composed of two non-employee directors,
James S. Kelly, Jr. (Chairman) and Brian K. Blair. As set forth in Nasdaq
Marketplace Rule 4350(d)(2), prior to June 14, 2001, the Board of Directors will
add and/or replace members of the Audit Committee to ensure that the committee
will consist of at least three members comprised solely of independent
directors, each of whom must be able to read and understand fundamental
financial statements and one of whom must be financially sophisticated. The
Board has adopted a written charter for the Audit Committee, a copy of which is
included as Annex A to this proxy statement.
The Audit Committee of the Board of Directors assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. In
discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The Audit
Committee discussed with the auditors any relationships that may impact their
objectivity and independence and satisfied itself as to the auditors'
independence. The Audit Committee also discussed with management and the
independent auditors the quality and adequacy of the Company's internal
controls. The Audit Committee reviewed with the independent auditors their
audit plans, audit scope and identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communications with Audit Committees," and discussed and reviewed the results
of the independent auditors' examination of the financial statements.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended December 31, 2000 with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements, and the independent auditors
have the responsibility for the examination of those financial statements.
Based on the above-mentioned review and discussion with management and the
independent auditors, the Audit Committee recommended that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission. The Audit Committee also approved the reappointment of Arthur
Andersen LLP as the Company's independent auditors.
Respectfully Submitted,
James S. Kelly, Jr., Chairman
Brian K. Blair
Executive Officers
Information concerning Mr. Talarico, the Company's Chairman and Chief
Executive Officer, is included above in the biographic summaries of the nominees
for director. Information with regard to the remaining executive officers of
the Company who are not also directors follows:
Timothy P. O'Shea, age 37, became President of the Company in January 1999.
Mr. O'Shea has also served as President of the Company's subsidiaries, Allin
Network Products, Inc. and Allin Holdings Corporation, since January 1999 and
Vice President of the Company's other subsidiaries since January 1999. Prior to
joining the Company, Mr. O'Shea was employed by Actium, a Modis solutions
company providing technology consulting services, from 1991 to 1998. Mr. O'Shea
served Actium in various capacities, including Team Director from 1991 to 1992,
Regional Manager from 1993 to 1996, and Vice President, Regional Development
from 1997 to 1998. Mr. O'Shea was involved in all aspects of new regional
development including the development of regional best practices and standard
regional
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reporting. Mr. O'Shea was instrumental in developing the technology consulting
practices of four regional offices including establishing key business partners,
developing comprehensive business plans, developing and mentoring of regional
teams, transitioning of previous business practices to the Actium advanced
technology business model and promoting sales growth.
Dean C. Praskach, age 43, has held the positions of Chief Financial Officer
of the Company since May 1999, Secretary of the Company since March 1998 and
Treasurer of the Company since July 1997. Mr. Praskach is the Company's
principal financial and accounting officer. Mr. Praskach has also served the
Company as Vice President Finance since July 1997 and Director of Financial
Planning from November 1996 to July 1997. Mr. Praskach served both the Company
and The Hawthorne Group, a private investment and management company, in a
consulting capacity from February 1995 until joining the Company. From
September 1989 through July 1994, he was employed at First Westinghouse Capital
Corporation in various positions, where he was involved in equity and mezzanine
financing of leveraged acquisitions. Mr. Praskach has held the positions of
Vice President-Finance and Treasurer of all of the Company's subsidiaries since
July 1997 or upon acquisition, if later, and was named Secretary of all of the
Company's subsidiaries in March 1998 or upon acquisition, if later.
Executive Compensation
Summary Compensation Table
The following table sets forth information concerning 1998, 1999 and 2000
compensation of the Chief Executive Officer and the other executive officers of
the Company (collectively the "Named Executives"). Information with respect to
1998 compensation is not given for Mr. O'Shea as he did not join the Company and
begin service as an executive officer of the Company until 1999.
Annual Compensation Long Term Compensation
------------------------------------------- ----------------------------------
Name and Principal Position Year Salary ($) Securities Underlying Options (#)
- --------------------------------- ---------- ------------- ----------------------------------
Richard W. Talarico 2000 $175,000 25,000
Chief Executive Officer 1999 $175,000 60,000
1998 $164,583 100,000
Timothy P. O'Shea 2000 $150,000 25,000
President 1999 $140,385 60,000
Dean C. Praskach 2000 $140,625 6,250
Chief Financial Officer, 1999 $127,500 28,750
Treasurer and Secretary 1998 $102,917 23,500
Employment Agreements
During 1998, the Company entered into an employment agreement with Mr.
Talarico, the term of which commenced May 15, 1998 and will continue through May
15, 2001. The annual salary as set forth in the employment agreement is
$175,000, subject to annual merit increases. In the event that the Company
achieves certain performance criteria, the annual base salary was to be
increased to $225,000. The Company met the performance criteria, but Mr.
Talarico has to date declined any change in annual base salary.
The employment agreement contains restrictive covenants prohibiting Mr.
Talarico from competing with the Company or soliciting the Company's employees
or customers for another business during the term of the agreement and for a
period of two years after termination or the end of the employment term.
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The employment agreement provides for option grants to purchase 100,000
shares of the Company's Common Stock upon signing of the agreement and option
grants to purchase an additional 100,000 shares of Common Stock on each of
January 1, 1999 and January 1, 2000, if shares are then available under the
Company's stock plans. In June 1998, Mr. Talarico was granted options to
purchase 100,000 shares of Common Stock in accordance with the terms of the
employment agreement. The exercise price of $4.50 per share was based on market
price at date of grant. In March 1999 and in January 2000, Mr. Talarico was
granted options to purchase 60,000 and 15,000, respectively, shares of Common
Stock. The exercise prices of $3.25 per share for the March 1999 grant and
$4.50 per share for the January 2000 grant were based on market prices at the
dates of grant. The Company's management determined that awards in excess of
60,000 shares in March 1999 and 15,000 shares in January 2000 would not allow an
adequate number of available shares for planned option awards to the Company's
senior managers and other employees. In August 2000 and January 2001, Mr.
Talarico was also granted options to purchase 10,000 and 75,000 shares,
respectively, of Common Stock. The exercise prices of $1.91 per share for the
August 2000 grant and $1.25 per share for the January 2001 grant were based on
market prices at the dates of grant.
Options to acquire shares of Common Stock granted to Mr. Talarico pursuant
to the agreement under the Company's stock plans will vest on the earlier to
occur of May 15, 2001 or, if earlier, on the date of termination of Mr.
Talarico's employment without cause or a change in control of the Company,
defined as a sale of all or substantially all of the Company's assets, a merger
in which the Company is not the surviving corporation or when a person or group,
other than the stockholders of the Company as of June 1, 1998, owns 50% or more
of the outstanding Common Stock. The employment agreement also provides that
Mr. Talarico will be entitled to receive following termination of employment by
the Company without cause or contemporaneously with or within ninety days prior
to the occurrence of a change in control of the Company, semi-monthly severance
payments equal to the semi-monthly base salary payment which he was receiving
immediately prior to such termination until the later of the later of the first
anniversary of the termination or May 15, 2001.
The Company and Mr. Talarico are currently negotiating the terms of a new
employment agreement to replace the agreement currently in effect.
In February 2001, the Company entered into a new employment agreement with
Mr. O'Shea, the term of which commenced as of January 1, 2001 and will continue
through December 31, 2001. Mr. O'Shea's annual salary for the term of the
agreement is $170,000. Mr. O'Shea is also eligible to receive a discretionary
bonus for the annual period ending December 31, 2001 based on performance
parameters and objectives established by the Company's Chief Executive Officer
in consultation with the Board of Directors and Mr. O'Shea. The award of any
bonus for the 2001 fiscal period will be at the sole discretion of the Board of
Directors.
The employment agreement contains restrictive covenants prohibiting Mr.
O'Shea from competing with the Company during the term of the agreement or
soliciting the Company's employees or customers for another business during the
term of the agreement and for a period of one year after termination or the end
of the employment term.
The employment agreement also provides that Mr. O'Shea will be eligible to
participate in the Company's various stock plans, subject to approval of the
Board of Directors. The employment agreement with Mr. O'Shea does not, however,
specify any minimum number of options to be awarded during the term of the
agreement. Options granted to date to Mr. O'Shea will vest, except as noted
below, at a rate of 20% of each award on each of the first five anniversary
dates of the award. Pursuant to the employment agreement, options to acquire
shares of Common Stock granted to Mr. O'Shea under the Company's stock plans
prior to February 13, 2001 will, if not already vested, vest on the date of a
change in control of the Company, defined as a sale of all or substantially all
of the Company's assets, a merger in which the Company is not the surviving
corporation or when a person or group, other than the stockholders of the
Company as of January 1, 2001, owns or controls 40% or more of the outstanding
Common Stock.
In January 2000, August 2000 and January 2001, Mr. O'Shea was granted
options to purchase 15,000, 10,000 and 40,000 shares, respectively, of Common
Stock. The exercise prices of $4.50 per share for the January 2000 grant, $1.91
per share for the August 2000 grant and $1.25 per share for the January 2001
grant were based on market prices at the dates of grant. Options to purchase a
total of 125,000 shares of Common Stock have been granted to Mr. O'Shea prior to
February 13, 2001, including the January 2000, August 2000 and January 2001
grants, and will vest, if not already vested, in accordance with the terms
previously described.
In the event of termination of employment by the Company in conjunction
with or within one year after the occurrence of a change in control of the
Company, Mr. O'Shea will be entitled to receive semi-monthly
7
severance payments equal to the semi-monthly base salary payment which he was
receiving immediately prior to such termination until the first anniversary of
the termination. In this event, Mr. O'Shea will also have the right to convert
each of his vested options to purchase Common Stock granted prior to February
13, 2001 into the right to receive cash in an amount equal to the difference
between the fair market value of the stock on the date the right is exercised
and the exercise price of the option from which the right was converted. The
rights may be exercised at any time prior to the final expiration date of Mr.
O'Shea's options, notwithstanding the expiration of the options based on Mr.
O'Sheas's termination prior to such expiration date. In addition, Mr. O'Shea's
options granted prior to February 13, 2001 will automatically convert into such
rights immediately prior to the day such options would otherwise terminate based
on termination of Mr. O'Shea's employment in connection with a change of control
of the Company.
In June 2000, the Company entered into an employment agreement with Mr.
Praskach, the term of which commenced June 23, 2000 and will continue through
June 23, 2005. The Company and Mr. Praskach amended the employment agreement on
February 13, 2001. Mr. Praskach's current annual salary is $145,000. The
employment agreement permits annual merit increases to salary. Mr. Praskach is
also eligible to receive a discretionary bonus for any annual period subject to
approval by the Board of Directors.
The employment agreement contains restrictive covenants prohibiting Mr.
Praskach from competing with the Company or soliciting the Company's employees
or customers for another business during the term of the agreement and for a
period of eighteen months after termination or the end of the employment term.
Mr. Praskach is eligible to receive stock options as may be awarded from
time to time and under terms similar to options awarded to other employees under
the Company's stock plans. The employment agreement with Mr. Praskach does not,
however, specify any minimum number of options to be awarded during the term of
the agreement. Mr. Praskach was granted options to purchase 6,250 and 30,000
shares of Common Stock in February 2000 and January 2001, respectively. The
exercise prices were based on market prices at the dates of grant and were
$4.00, and $1.25 per share, respectively. Options granted to date to Mr.
Praskach will vest, except as noted below, at a rate of 20% of each award on
each of the first five anniversary dates of the award. Pursuant to the
amendment to the employment agreement, options to acquire shares of Common Stock
granted to Mr. Praskach under the Company's stock plans prior to February 13,
2001 will, if not already vested, vest on the date of a change in control of the
Company, defined as a sale of all or substantially all of the Company's assets,
a merger in which the Company is not the surviving corporation or when a person
or group, other than the stockholders of the Company as of January 1, 2001, owns
or controls 40% or more of the outstanding Common Stock.
The employment agreement also provides that Mr. Praskach will be entitled
to receive for up to one year following termination of employment by the Company
without cause, semi-monthly severance payments equal to the semi-monthly base
salary payment which he was receiving immediately prior to such termination
until the earlier of the first anniversary of the termination or the date on
which Mr. Praskach obtains other full-time employment. In the event of
termination of employment, whether voluntary or involuntary, in conjunction with
or within one year after the occurrence of a change in control of the Company,
Mr. Praskach will also be entitled to receive a bonus equal to his annual base
salary at the time of termination and will have the right to convert each of his
vested options to purchase Common Stock granted prior to February 13, 2001 into
the right to receive cash in an amount equal to the difference between the fair
market value of the stock on the date the right is exercised and the exercise
price of the option from which the right was converted. The rights may be
exercised at any time prior to the final expiration date of Mr. Praskach's
options, notwithstanding the expiration of the options based on Mr. Praskach's
termination prior to such expiration date. In addition, Mr. Praskach's options
granted prior to February 13, 2001 will automatically convert into such rights
immediately prior to the day such options would otherwise terminate based on
termination of Mr. Praskach's employment in connection with a change of control
of the Company.
Stock Plans
In October 1996, the Board of Directors adopted the 1996 Stock Plan, and in
April 1997 the Board of Directors adopted the 1997 Stock Plan which was approved
by the Company's stockholders in May 1997. The Board of Directors subsequently
approved re-issuance of forfeited option grants and restricted shares under the
1996 and 1997 Plans. In September 1998, the Board of Directors adopted the 1998
Stock Plan, which was approved by the Company's stockholders in December 1998.
The Board of Directors subsequently approved re-issuance of forfeited shares
under the 1998 Plan. In February 2000, the Board of Directors adopted the 2000
Stock Plan, which was approved by the Company's stockholders in May 2000. All of
the plans provide for awards of stock options, stock appreciation rights,
restricted shares and restricted units to officers and other employees of the
Company and its subsidiaries and to consultants and advisors (including non-
employee directors) of the Company and its subsidiaries. The plans are
8
administered by the Board of Directors which has broad discretion to determine
the individuals entitled to participate in the plans and to prescribe conditions
(such as the completion of a period of employment with the Company following an
award). The Compensation Committee is responsible for making recommendations to
the Board of Directors concerning executive compensation, including the award of
stock options.
The number of shares that may be awarded under the Company's 1996, 1997,
1998 and 2000 stock plans are 266,000, 300,000, 375,000 and 295,000,
respectively. At December 31, 2000, 46,199, 44,250, 99,340 and 162,250 shares
remained available for future grants under the 1996, 1997, 1998 and 2000 Plans,
respectively.
Option Grants in Last Fiscal Year
The following table provides information concerning stock options granted
to the Named Executives during 2000.
Individual Grants Grant Date Value
--------------------------------------------------- ------------------
Number of % of Total
Securities Options Granted Exercise or Grant Date
Underlying to Employees in Base Price Present Value $
Name Options Granted Fiscal Year ($/sh) Expiration Date (1)
- ------------------------ ------------------ ------------------ ------------- ---------------- ------------------
Richard W. Talarico 15,000 (2) 6.7 % $4.50 1/3/07 $41,700
10,000 (2) 4.5 % $1.91 8/8/07 $14,100
Timothy P. O'Shea 15,000 (3) 6.7 % $4.50 1/3/07 $43,650
10,000 (3) 4.5 % $1.91 8/8/07 $14,100
Dean C. Praskach 6,250 (4) 2.8 % $4.00 2/16/07 $18,188
(1) The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions for 2000
grants to Named Executives.
Risk-free interest rate:
Options granted to Richard W. Talarico (15,000) 5.3 %
Options granted to Richard W. Talarico (10,000) 6.0 %
Options granted to Timothy P. O'Shea (15,000) 5.2 %
Options granted to Timothy P. O'Shea (10,000) 6.0 %
Options granted to Dean C. Praskach 5.2 %
Expected dividend yield 0.0 %
Expected life of options 7 yrs.
Expected volatility rate 69.0 %
No adjustments were made for non-transferability or risk of forfeiture.
(2) Under the terms of the Company's current employment agreement with Mr.
Talarico, these options to acquire shares of Common Stock granted to Mr.
Talarico will vest on the earlier to occur of May 15, 2001 or on the date
of termination of Mr. Talarico's employment without cause or a change in
control of the Company, defined as a sale of all or substantially all of
the Company's assets, a merger in which the Company is not the surviving
corporation or when a person or group, other than the stockholders of the
Company as of June 1, 1998, owns 50% or more of the outstanding Common
Stock.
(3) Under the terms of the Company's current employment agreement with Mr.
O'Shea, these options granted to Mr. O'Shea will vest at a rate of 20% on
each of the first five anniversary dates of the award, or earlier if not
already vested, on the date of a change in control of the Company, defined
as a sale of all or substantially all of the Company's assets, a merger in
which the Company is not the surviving corporation or when a person or
group, other than the stockholders of the Company as of January 1, 2001,
owns or controls 40% or more of the outstanding Common Stock. For more
9
information about the terms of the options held by Mr. O'Shea, see the
discussion under "Employment Agreements" above.
(4) Under the terms of the Company's current employment agreement with Mr.
Praskach, these options granted to Mr. Praskach will vest at a rate of 20%
on each of the first five anniversary dates of the award, or earlier if not
already vested, on the date of a change in control of the Company, defined
as a sale of all or substantially all of the Company's assets, a merger in
which the Company is not the surviving corporation or when a person or
group, other than the stockholders of the Company as of January 1, 2001,
owns or controls 40% or more of the outstanding Common Stock. For more
information about the terms of the options held by Mr. Praskach, see the
discussion under "Employment Agreements" above.
Fiscal Year End Option Values
The following table provides information concerning stock options held by the
Named Executives at December 31, 2000. No options were exercised in 2000.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year End Fiscal Year End (1)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------- --------------- -------------- --------------
Richard W. Talarico 16,800 189,200 --- ---
Timothy P. O'Shea 12,000 73,000 --- ---
Dean C. Praskach 24,850 48,150 --- ---
(1) Based on the December 31, 2000 closing price per share of Common Stock of
$1.25, as reported by Nasdaq, and the various option exercise prices per
share, none of the options held by the Named Executives were in-the-money at
December 31, 2000.
Report of the Compensation Committee of the Board on Executive Compensation
The Compensation Committee is responsible for making recommendations to the
Board of Directors concerning executive compensation, including base salaries,
bonuses and awards of stock options and other forms of incentive compensation.
Anthony L. Bucci and William C. Kavan are currently members of the Compensation
Committee. The Compensation Committee met independently three times during
2000.
The Company's compensation policies are intended to attract and retain
people necessary to grow the business on a long-term basis, to encourage the
creation and appreciation of stockholder value by providing incentives to
employees to act as stockholders accountable for their own actions and the
overall success of the Company, to link compensation levels to business results
and to maintain an appropriate balance between base salary and short-and long-
term compensation.
In determining the compensation of the Company's Chief Executive Officer
and its other executive officers, factors taken into account include the
Company's performance under business conditions prevailing in the Company's
lines of business, contributions made by, or expected to be made by, the
specific executive officer, the business area for which such person is
responsible and the compensation for other executives having similar background
and experience.
The basic elements of each executive officer's 2000 compensation were
salary and incentive compensation in the form of options to purchase shares of
the Company's Common Stock under the Company's stock plans. Executive officers
are also eligible to receive annual bonus payments, which the Compensation
Committee believes should be tied to both short and long-term performance of the
Company as well as financial performance for stockholders. The Compensation
Committee believes that the current level of salary compensation for the
Company's executive officers is below the level of other comparable companies in
similar stages of development. Although the Committee believes that the
performance of the Company improved sufficiently during 2000 to warrant the
payment of bonuses to the Company's executive officers, no bonuses were paid to
the Company's executive officers during 2000. As was the case for bonuses with
respect to 1998 and 1999, the Company's management determined that at the
Company's stage of development, the resources were better utilized elsewhere.
10
It is the Committee's intention to continue to utilize forms of
compensation for the Company's executive officers that favor long-term
incentives so that such executives may benefit from any increase in the value of
the Common Stock along with the Company's other stockholders. The Compensation
Committee believes that stock options provide an additional incentive to
executives to continue in the service of the Company.
Mr. Talarico became Chief Executive Officer of the Company at the time of
its formation in July 1996. His annual base salary was fixed at $175,000 for
2000. Although Mr. Talarico's Employment Agreement entered into in 1998 called
for an increase in his annual base salary to $225,000 at the end of 1999, this
increase was declined by Mr. Talarico at that time due to his belief that at the
Company's stage of development at the end of 1999, the resources were better
utilized elsewhere. Mr. Talarico was granted options to purchase 15,000 shares
of the Company's Common Stock in January 2000, 10,000 shares in August 2000 and
75,000 shares in January 2001. The option awards were granted giving
consideration to Mr. Talarico's contributions to the Company, including making
substantial progress in the effort to refocus the Company toward solutions-
oriented information technology consulting services, greatly expanding the
prospects of the Company's Interactive Media Solutions Area and maintaining the
Company's revenue base at a time when the largest segment of the Company's
revenue was declining substantially due to market conditions. Consistent with
the desire to provide incentive compensation, the options granted to Mr.
Talarico vest on May 15, 2001. Although Mr. Talarico's Employment Agreement
called for option grants covering 100,000 shares on each of January 1, 1999 and
January 1, 2000, the number of options available under the Company's 1996, 1997,
1998 and 2000 Stock Plans was not deemed to be sufficient to allow for these
grants in conjunction with the grants awarded, and planned for award, to the
Company's other employees. Options to purchase a total of 31,250 shares of the
Company's Common Stock were awarded to the other two executive officers of the
Company during 2000 and 70,000 shares were awarded in January 2001. These
options are to vest 20% each year beginning on the first anniversary of the
dates of the respective grants.
Mr. Talarico's overall compensation package was the subject of considerable
deliberation by the Compensation Committee. Mr. Talarico has continually
declined increases in his base salary and cash bonuses to which he was
contractually entitled as well as the full complement of options that were
contractually available to him. The decision to decline these contractual
entitlements was made by Mr. Talarico in the interest of the Company and its
stockholders. These actions have enabled the Company to maintain larger cash
reserves than would have otherwise been available, to utilize cash in other
areas of the business and to maintain a more substantial options program for
middle managers than would have otherwise been available.
All employees of the Company and its subsidiaries, in addition to the
Company's executive officers, are eligible to participate in the Company's 1996
Stock Plan, 1997 Stock Plan, 1998 Stock Plan and 2000 Stock Plan. As of March
28, 2001, 69 employees of the Company and its subsidiaries were participants
under these plans.
Compensation Committee:
Anthony L. Bucci
William C. Kavan
Compensation of Directors
The non-employee directors of the Company had been entitled to receive, at
the conclusion of each year of service, an automatic grant of an immediately
exercisable option to acquire 5,000 shares of Common Stock at an exercise price
per share equal to the closing price of the Common Stock as reported by Nasdaq
for the date on which the options are granted. Coincident with the approval of
the Company's 2000 stock plan in May 2000, the Company's practice has changed
such that at the commencement of each year of service, each non-employee
director will be entitled to receive an option to acquire 5,000 shares of Common
Stock at an exercise price equal to the closing price of the Common Stock on the
date of the grant. The option will vest on the first anniversary of the date of
the grant if the individual is serving as a director on that date. For the
first year following this change in the Company's practice, non-employee
directors received, in conjunction with the anniversary of their service as a
director, an immediately exercisable option grant related to the completed year
of service and an option grant vesting in one year related to the commencement
of the new year of service as a director.
On February 10, 2000, Mr. Blair received an immediately exercisable grant
to acquire 5,000 shares of Common Stock at the exercise price of $4.03 per
share. On September 1, 2000, Messrs. Bucci and Kelly each received immediately
exercisable grants to acquire 5,000 shares of Common Stock and grants to acquire
5,000 shares of Common Stock vesting one year from date of grant at the exercise
price of $2.00 per share. On November 10, 2000,
11
Messrs. Kavan and Vickers each received immediately exercisable grants to
acquire 5,000 shares of Common Stock and grants to acquire 5,000 shares of
Common Stock vesting one year from date of grant at the exercise price of $1.94
per share.
Non-employee directors of the Company receive $2,500 for each Board of
Directors meeting attended and $500 for each separate committee meeting attended
on a date on which no full board meeting is held. Directors of the Company who
are also employees do not receive additional compensation for attendance at
Board and committee meetings, except that all directors are reimbursed for out-
of-pocket expenses in connection with attendance at Board and committee
meetings.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of William C. Kavan and Anthony L.
Bucci.
In March 1998 the Company's subsidiary, Allin Digital Imaging Corp. ("Allin
Digital"), contributed certain assets, including rights to the name PhotoWave,
formerly used in its operations in the retail digital photography market for a
minority, non-controlling equity interest in a new corporation, PhotoWave, Inc.
("PhotoWave"), which thereafter began operations in this market. The value
placed on the Company's initial equity interest, $100,000, approximated the
value of the assets contributed. Mr. Kavan is a shareholder and director of
PhotoWave. Richard W. Talarico, Chairman and Chief Executive Officer of the
Company and a director and executive officer of each of the Company's
subsidiaries, served as a director of PhotoWave from 1998 to 2000. Mr. Henry
Posner, Jr., a beneficial owner of greater than five percent of the Company's
outstanding Common Stock, was also a shareholder of PhotoWave during a portion
of 2000. In June 2000, Allin Digital sold all of the common shares it held in
PhotoWave to Mr. Kavan. Proceeds received from the sale of the PhotoWave stock
were approximately $144,000. Allin Digital recorded a gain of approximately
$137,000 on the sale of the PhotoWave stock.
During the fiscal year ended December 31, 2000, Allin Digital sold
approximately $20,000 of digital photography equipment and supplies to
PhotoWave. The Company believes its sales are on terms substantially similar to
those offered non-affiliated parties. Allin Digital and PhotoWave are also
parties to a commission-based referral agreement under which PhotoWave earns
commissions for referral of customers to Allin Digital. Commissions are based
on a percentage of gross revenue. During the fiscal year ended December 31,
2000, PhotoWave earned approximately $13,000 in commissions under this
agreement.
On December 29, 2000, Messrs. Posner, Kavan, Talarico, Thomas D. Wright,
who beneficially owned greater than five percent of the Common Stock during a
portion of 2000, and Dean C. Praskach, an executive officer of the Company,
purchased 113, 10, 10, 10 and 2 shares, respectively, of Series G Preferred
Stock at a purchase price of $10,000 per share of Series G Preferred Stock. In
conjunction with the purchase of the Series G Preferred Stock, Messrs. Posner,
Kavan, Talarico, Wright and Praskach also received warrants to purchase 645,710,
57,142, 57,142, 57,142 and 11,428 shares, respectively, of Common Stock at $1.75
per share. If the Company does issue any shares of Common Stock upon conversion
of the Series G Preferred Stock or upon exercise of the warrants, the holders of
such shares, including Messrs. Posner, Kavan, Talarico, Wright and Praskach will
have certain rights to require the Company to register the shares for resale
under the Securities Act of 1933, as amended (the "Securities Act"). See the
"Security Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" sections of this proxy for more details.
Each of Messrs. Posner, Kavan Talarico and Wright own shares of Series
D Convertible Redeemable Preferred Stock of the Company (the "Series D Preferred
Stock") and related warrants to purchase shares of Common Stock. Messrs.
Posner, Kavan, Talarico and Wright own 1,500, 750, 300 and 200 shares of Series
D Preferred Ptock, respectively. If the Company does issue any shares of Common
Stock upon conversion of the Series D Preferred Stock or upon exercise of the
warrants, the holders of such shares, including Messrs. Posner, Kavan, Talarico
and Wright will have certain rights to require the Company to register the
shares for resale under the Securities Act. See the "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" sections of
this proxy for more details.
Certain stockholders of the Company, including Messrs. Posner, Talarico,
Kavan, Wright and Brian K. Blair, a director and former officer of the Company,
have certain rights under a registration rights agreement to require the
Company, subject to certain limitations, to register under the Securities Act,
certain of their shares of currently outstanding Common Stock for public
offering and sale.
12
Performance Comparison
The following graph compares the cumulative total return on the Company's
Common Stock, the Nasdaq Stock Market Index and an index of Nasdaq Computer &
Data Processing Services Stocks for the period from November 1, 1996, the first
day of trading of the Company's Common Stock, to December 31, 2000. The graph
and chart assume that $100 was invested on November 1, 1996, in each of the
Company's Common Stock, the Nasdaq Stock Market index and the index of Nasdaq
Computer & Data Processing Services Stocks, with dividends, if any, reinvested.
Closing prices at the end of each period are used. The total stockholder
returns are not necessarily indicative of future returns.
[GRAPH APPEARS HERE]
Nov 1, 1996 Dec 31, 1996 Dec 31, 1997 Dec 31, 1998 Dec 31, 1999 Dec 31, 2000
Allin Corporation $100 $130 $ 26 $ 26 $ 33 $ 8
Common Stock
(1)(3)
The Nasdaq Stock $100 $106 $130 $183 $331 $205
Market Index
(2)(3)
Index of Nasdaq $100 $106 $130 $233 $491 $236
Computer & Data
Processing Services
Stocks (2)(3)
(1) Based on the initial offering price of the Company's Common Stock as of the
effective date of the Company's initial public offering, November 1, 1996,
and the closing price on the last trading day of December 1996, 1997, 1998,
1999 and 2000.
(2) Based on the closing price of the respective index on the last trading day
of October 1996 and December 1996, 1997, 1998, 1999 and 2000.
(3) Return assumes that all dividends are reinvested. The Company has never
paid any dividends on its Common Stock.
13
Security Ownership of Certain Beneficial Owners
The following table presents certain information as of March 20, 2001 as to
the beneficial ownership of the Common Stock of the Company by each person or
entity who is known to the Company to beneficially own more than five percent of
the outstanding Common Stock. Except as indicated, the persons named have sole
voting and investment power with respect to all shares shown as being
beneficially owned by them. The percentages in the table are rounded to the
nearest tenth of a percent.
Amount and Nature of
Name and Address of Stockholder Beneficial Ownership (1) Percent of Class (1)
- ---------------------------------------------- ------------------------- -------------------
Henry Posner, Jr. (2) 3,644,191 39.0%
381 Mansfield Avenue, Suite 500
Pittsburgh, PA 15220
James S. Kelly, Jr. (3) 1,617,816 23.2%
2406 Oak Hurst Court
Murrysville, PA 15668
Emanuel J. Friedman (4) 1,269,258 18.2%
1001 19th Street North
Arlington, VA 22209
Friedman, Billings, Ramsey Group, Inc. and 1,174,258 16.9%
Orkney Holdings, Inc. (5)
1001 19th Street North
Arlington, VA 22209
Les D. Kent (6) 721,980 9.7%
867 El Pintado Road
Danville, CA 94526
Richard W. Talarico (7) 673,073 8.9%
381 Mansfield Avenue, Suite 400
Pittsburgh, PA 15220
William C. Kavan (8) 637,975 8.5%
117 Brixton Road
Garden City, NY 11530
Dimensional Fund Advisors (9) 408,400 5.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(1) The number of shares and the percent of the class in the table and these
notes to the table have been calculated in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
assume, on a stockholder by stockholder basis, that each stockholder has
converted all securities owned by such stockholder that are convertible
into Common Stock at the option of the holder currently or within 60 days
of March 20, 2001, and that no other stockholder so converts. Each share
of Series D Preferred Stock may currently be converted into 276 shares of
Common Stock. Each share of Series F Convertible Redeemable Preferred
Stock (the "Series F Preferred stock") may currently be converted into 508
shares of Common Stock.
14
Each share of Series G Preferred Stock may currently be converted into the
number of shares of Common Stock determined by dividing 10,000 by the
lesser of $1.16348 (85% of the average closing price of the Common Stock as
reported by Nasdaq over the last five trading days prior to December 29,
2000) or 85% of the average closing price of the Common Stock as reported
by Nasdaq over the last five trading days prior to the date of the
conversion, subject to a minimum conversion price of $0.35 per common
share. Since 85% of the average closing price of the Common Stock for the
five trading days preceding March 20, 2001 was $1.3413, conversion is
assumed at a rate of $1.16348 per common share. Warrants issued in August
1998 and December 2000 may be exercised to purchase Common Stock at $4.25
and $1.75 per share, respectively. Information is provided in the footnotes
below for each holder as to the number of shares included in the table for
conversion of securities.
(2) Includes 1,157,087 shares of Common Stock held by Mr. Posner and 102,000
shares held in various trusts and a family foundation of which Mr. Posner
and his wife are trustees and with respect to which shares Mr. Posner
shares voting and investment power. Does not include 1,000 shares owned by
Mr. Posner's wife and 2,000 shares held by trusts of which Mr. Posner's
wife is a trustee. Includes 998,655 shares of Common Stock which may be
acquired by exercise of warrants. Mr. Posner owns 1,500 shares of Series D
Preferred Stock. The number of shares indicated includes 415,225 shares of
Common Stock for conversion of the Series D Preferred Stock. Mr. Posner
owns 113 shares of Series G Preferred Stock. The table includes 971,224
shares of Common Stock for conversion of the Series G Preferred Stock. The
Series G Preferred Stock is convertible into at least 971,224, but no more
than 3,228,571 shares of Common Stock. Assuming that the Series G
Preferred Stock became exercisable for the maximum 3,228,571 shares of
Common Stock, Mr. Posner would be deemed to beneficially own an aggregate
of 50.8% of the Common Stock.
(3) Includes 1,607,816 shares of Common Stock held by Mr. Kelly and 10,000
shares of Common Stock which may be acquired by exercise of options.
(4) As reported on Schedule 13G/A filed with the Securities and Exchange
Commission (the "SEC") on February 15, 2001, Mr. Friedman has sole voting
and dispositive power with respect to 95,000 of these shares. Mr. Friedman
may be deemed to indirectly beneficially own and share voting and
dispositive power with respect to 1,174,258 shares directly owned by
Friedman, Billings, Ramsey Group, Inc. ("FBRG") by virtue of his control
position as Chairman and Chief Executive Officer of FBRG. Mr. Friedman
disclaims beneficial ownership of such shares. The number of shares
assumes that there has been no change in the number of shares beneficially
owned from the number of shares reported as being beneficially owned in the
Schedule 13G/A.
(5) As reported on Schedule 13G/A filed with the SEC on February 15, 2001,
Friedman, Billings, Ramsey Group, Inc. has sole voting and dispositive
power with respect to the shares indicated. Each of Eric F. Billings,
Emanuel J. Friedman, W. Russell Ramsey and Orkney Holdings, Inc., a wholly-
owned subsidiary of FBRG, share voting and dispositive power with respect
to the shares. The number of shares assumes that there has been no change
in the number of shares beneficially owned from the number of shares
reported as being beneficially owned in the Schedule 13G/A.
(6) Includes 213,333 shares of Common Stock held by Mr. Kent. Mr. Kent also
owns 1,000 shares of Series F Preferred Stock. The number of shares
indicated includes 508,647 shares of Common Stock for the conversion of the
Series F Preferred Stock.
(7) Includes 95,347 shares of Common Stock held by Mr. Talarico, 281,000 shares
of Common Stock which may be acquired by exercise of options within sixty
days of March 20, 2001 and 127,732 shares of Common Stock which may be
acquired by exercise of warrants. Mr. Talarico owns 300 shares of Series D
Preferred Stock. The table includes 83,045 shares of Common Stock for
conversion of the Series D Preferred Stock. Mr. Talarico owns 10 shares of
Series G Preferred Stock. The table includes 85,949 shares of Common Stock
for conversion of the Series G Preferred Stock. The Series G Preferred
Stock is convertible into at least 85,949, but no more than 285,714 shares
of Common Stock. Assuming that the Series G Preferred Stock became
exercisable for the maximum 285,714 shares of Common Stock, Mr. Talarico
would be deemed to beneficially own an aggregate of 11.3% of the Common
Stock.
(8) Includes 90,800 shares of Common Stock held by Mr. Kavan, 20,000 shares of
Common Stock which may be acquired by exercise of options and 233,614
shares of Common Stock which may be acquired by exercise of warrants. Mr.
Kavan owns 750 shares of Series D Preferred Stock. The table includes
207,612 shares of Common Stock for conversion of the Series D Preferred
Stock. Mr. Kavan owns 10 shares of Series G Preferred Stock. The table
includes 85,949 shares of Common Stock for conversion of the Series G
Preferred Stock.
15
The Series G Preferred Stock is convertible into at least 85,949, but no
more than 285,714 shares of Common Stock. Assuming that the Series G
Preferred Stock became exercisable for the maximum 285,714 shares of Common
Stock, Mr. Kavan would be deemed to beneficially own an aggregate of 10.9%
of the Common Stock.
(9) As reported on Schedule 13G filed with the SEC on February 2, 2001,
Dimensional Fund Advisors Inc., an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, has sole voting and
investment power over the shares indicated, but Dimensional Fund Advisors
Inc. disclaims beneficial ownership of the shares. The number of shares
assumes that there has been no change in the number of shares beneficially
owned from the number of shares reported as being beneficially owned in the
Schedule 13G.
Thomas D. Wright may be deemed to beneficially own 269,694 shares or 3.7% of
the Company's Common Stock, calculated as discussed in footnote (1) to the
foregoing table. This includes 24,181 shares of Common Stock held by Mr.
Wright, but does not include 174,000 shares held by Mr. Wright's spouse, 5,000
shares in her own name, and 169,000 shares as trustee for various trusts. This
also includes 104,201 shares of Common Stock which may be acquired by exercise
of warrants. Mr. Wright owns 200 shares of Series D Preferred Stock. The
number of shares includes 55,363 shares of Common Stock for conversion of the
Series D Preferred Stock. Mr. Wright owns 10 shares of Series G Preferred
Stock. The number of shares includes 85,949 shares of Common Stock for
conversion of the Series G Preferred Stock. The Series G Preferred Stock is
convertible into at least 85,949, but no more than 285,714 shares of Common
Stock. Assuming that the Series G Preferred Stock became exercisable for the
maximum 285,714 shares of Common Stock, Mr. Wright would be deemed to
beneficially own an aggregate of 6.3% of the Common Stock. Mr. Wright's address
is 381 Mansfield Ave., Suite 500, Pittsburgh, PA 15220.
16
Security Ownership of Management
The following table presents certain information as of March 20, 2001 as to
the beneficial ownership of the Common Stock of the Company by (i) each director
and Named Executive and (ii) all directors and executive officers as a group.
Except as indicated, the persons named have sole voting and investment power
with respect to all shares shown as being beneficially owned by them. The
percentages in the table are rounded to the nearest tenth of a percent.
Amount and
Nature of
Beneficial
Name of Stockholder Ownership (1) Percent of Class (1)
- --------------------------------------------- ----------------- --------------------
Richard W. Talarico (2) 673,073 8.9%
381 Mansfield Avenue, Suite 400
Pittsburgh, PA 15220
Timothy P. O'Shea 27,000 *
381 Mansfield Avenue, Suite 400
Pittsburgh, PA 15220
Dean C. Praskach (3) 55,969 0.8%
381 Mansfield Avenue, Suite 400
Pittsburgh, PA 15220
Brian K. Blair 154,570 2.2%
2498 Monterey Court
Weston, FL 33327
Anthony L. Bucci 13,500 *
4 Station Square
Suite 500
Pittsburgh, PA 15219
William C. Kavan (4) 637,975 8.5%
117 Brixton Road
Garden City, NY 11530
James S. Kelly, Jr. 1,617,816 23.2%
2406 Oak Hurst Court
Murrysville, PA 15668
Anthony C. Vickers 5,000 *
1212 Via Zumaya
Palos Verdes Estates, CA 90274
All directors and executive officers, as a
group (8 persons) 3,184,903 38.8%
* Less than one percent
(1) The number of shares and the percent of the class in the table and these
notes to the table have been calculated in accordance with Rule 13d-3 under
the Exchange Act, and assume, on a stockholder by stockholder basis, that
each stockholder has converted all securities owned by such stockholder
that are convertible into Common Stock at the option of the holder
currently or within 60 days of March
17
20, 2001, and that no other stockholder so converts. The numbers and
percentages of shares owned assume that options that are currently
exercisable or exercisable within sixty days of March 20, 2001 had been
exercised as follows: Mr. Talarico - 281,000 shares; Mr. O'Shea - 27,000
shares; Mr. Praskach - 27,350 shares, Mr. Kavan - 20,000 shares; Messrs.
Blair, Bucci and Kelly - 10,000 shares each; Mr. Vickers - 5,000 shares,
and all directors and executive officers as a group - 390,350 shares. The
number of shares of the Company's outstanding Common Stock held by
directors and executive officers is as follows: Mr. Talarico - 95,347
shares, Mr. Blair - 144,570 shares, Mr. Bucci - 3,500 shares, Mr. Kavan -
90,800 shares and Mr. Kelly - 1,607,816 shares. Each share of Series D
Preferred Stock may currently be converted into 276 shares of Common Stock.
Each share of Series G Preferred Stock may currently be converted into the
number of shares of Common Stock determined by dividing 10,000 by the
lesser of $1.16348 (85% of the average closing price of the Common Stock as
reported by Nasdaq over the last five trading days prior to December 29,
2000) or 85% of the average closing price of the Common Stock as reported
by Nasdaq over the last five trading days prior to the date of the
conversion, subject to a minimum conversion price of $0.35 per common
share. Since 85% of the average closing price of the Common Stock for the
five trading days preceding March 20, 2001 was $1.3413, conversion is
assumed at a rate of $1.16348 per common share. Warrants issued in August
1998 and December 2000 may be exercised to purchase Common Stock at $4.25
and $1.75 per share, respectively. Information is provided in the footnotes
below for each holder as to the number of shares included in the table for
conversion of securities other than options for which information is given
above in this footnote.
(2) Includes 127,732 shares of Common Stock which may be acquired by exercise
of warrants. Mr. Talarico owns 300 shares of Series D Preferred Stock,
representing 10.9% of the Series D Preferred Stock outstanding. The table
includes 83,045 shares of Common Stock for conversion of the Series D
Preferred Stock. Mr. Talarico owns 10 shares of Series G Preferred Stock,
representing 6.7% of the Series G Preferred Stock outstanding. The table
includes 85,949 shares of Common Stock for conversion of the Series G
Preferred Stock. The Series G Preferred Stock is convertible into at least
85,949, but no more than 285,714 shares of Common Stock. Assuming that the
Series G Preferred Stock became exercisable for the maximum 285,714 shares
of Common Stock, Mr. Talarico would be deemed to beneficially own an
aggregate of 11.3% of the Common Stock. Mr. Talarico also owns 588 shares
of the Company's Series C Redeemable Preferred Stock (the "Series C
Preferred Stock"), representing 2.4% of the Series C Preferred Stock
outstanding.
(3) Includes 11,429 shares of Common Stock which may be acquired by exercise of
warrants. Mr. Praskach owns 2 shares of Series G Preferred Stock,
representing 1.3% of the Series G Preferred Stock outstanding. The table
includes 17,190 shares of Common Stock for conversion of the Series G
Preferred Stock. The Series G Preferred Stock is convertible into at least
17,190, but no more than 57,142 shares of Common Stock. Assuming that the
Series G Preferred Stock became exercisable for the maximum 57,142 shares
of Common Stock, Mr. Praskach would be deemed to beneficially own an
aggregate of 1.4% of the Common Stock.
(4) Includes 233,614 shares of Common Stock which may be acquired by exercise
of warrants. Mr. Kavan owns 750 shares of Series D Preferred Stock,
representing 27.3% of the Series D Preferred Stock outstanding. The table
includes 207,612 shares of Common Stock that may be acquired upon
conversion of the Series D Preferred Stock. Mr. Kavan owns 10 shares of
Series G Preferred Stock, representing 6.7% of the Series G Preferred Stock
outstanding. The table includes 85,949 shares of Common Stock for
conversion of the Series G Preferred Stock. The Series G Preferred Stock
is convertible into at least 85,949, but no more than 285,714 shares of
Common Stock. Assuming that the Series G Preferred Stock became
exercisable for the maximum 285,714 shares of Common Stock, Mr. Kavan would
be deemed to beneficially own an aggregate of 10.9% of the Common Stock.
Mr. Kavan also owns 10,000 shares of the Company's Series C Preferred
Stock, representing 40.0% of the Series C Preferred Stock outstanding.
Certain Relationships and Related Transactions
Conversion of Series E Convertible Redeemable Preferred Stock
On August 13, 2000, all of the 1,926 outstanding shares of the Company's
Series E Convertible Redeemable Preferred Stock (the "Series E Preferred
Stock"), along with approximately $14,000 of accrued but unpaid dividends,
automatically converted into 942,141 shares of the Company's Common Stock. The
rate of conversion was $2.06 per common share. All of the Series E Preferred
Stock then outstanding was held by James S. Kelly, Jr., the former majority
shareholder of Allin Consulting-Pennsylvania. Mr. Kelly is a holder of greater
than five percent of the Company's outstanding Common Stock and a director of
the Company. The acquisition of Allin Consulting-Pennsylvania in August 1998
had included a promissory note issued by the Company in the amount of $2,000,000
to Mr. Kelly. Approximately $74,000 of the promissory note principal balance
was offset in 1999 by the Company's payment of certain tax liabilities of Allin
Consulting-Pennsylvania related to pre-acquisition periods. On May 31, 1999,
Mr. Kelly exchanged the promissory note for 1,926 shares of the Company's Series
E Preferred Stock. The Series E
18
Preferred Stock accrued dividends at the rate of 6% of the liquidation value
thereof per annum, which were payable quarterly prior to conversion. Dividends
of approximately $88,000 were paid in 2000.
Arrangements Involving the Former Sole Stockholder of Allin Consulting-
California
Les D. Kent, a holder of greater than five percent of the Company's
outstanding Common Stock and a former President of the Company, holds all of the
1,000 outstanding shares of the Company's Series F Preferred Stock with a
liquidation value of $1,000 per share. The Series F Preferred Stock was issued
on May 31, 1999, in exchange for a reduction in the principal balance of a
promissory note related to the acquisition of Allin Corporation of California
("Allin Consulting-California") of $1,000,000. Mr. Kent was the sole
stockholder of Allin Consulting-California prior to the acquisition. The Series
F Preferred Stock accrues dividends at the rate of 7% of the liquidation value
thereof per annum. Quarterly dividend payments began in April 2000. Dividends
of approximately $53,000 were paid in 2000.
The Company also has an outstanding principal balance of $1,000,000 due to Mr.
Kent on a promissory note related to the Company's acquisition of Allin
Consulting-California. The promissory note provides for interest at the rate of
7% per annum. The principal balance of the promissory note is due April 15,
2005. Interest due under the note from November 1996, when Allin Consulting-
California was acquired, through May 1999 of approximately $390,000 was paid to
Mr. Kent in April 2000. The Company also began quarterly interest payments in
April 2000. Quarterly interest payments during 2000 were approximately $63,000.
In October 2000, Allin Consulting-California sold rights to perform technical
support services under certain contracts to Progent Corporation ("Progent").
Mr. Kent has an ownership interest in Progent. The sale is effective for
services performed subsequent to December 31, 2000. Allin Consulting-California
will receive percentages of certain revenue to be realized by Progent during the
period from January 1, 2001 through December 31, 2005, including fifteen percent
of the contractual backlog for services remaining to be performed for contracts
in place as of December 31, 2000, ten percent of any additional revenue derived
from clients with contracts in place as of December 31, 2000, and five percent
of any revenue earned from certain former clients of Allin Consulting-
California, as specified in the agreement. As of December 31, 2000, the backlog
for services remaining to be performed under the assigned contracts was
approximately $113,000. The agreement also provides for a management fee to
Progent equal to 10% of the revenue earned by Allin Consulting-California during
November and December 2000 under the assigned contracts for Progent's assistance
in managing the technical support services provided during this period. Allin
Consulting-California has recorded expense of approximately $12,000 in respect
of the fiscal year ended December 31, 2000 for the management fees. The Company
believes this sale was on terms as favorable to the Company as could have been
obtained from an unrelated party.
During 2000, Allin Consulting-California also engaged Progent to provide
technical consulting services in connection with certain customer projects. In
respect of the fiscal year ended year ended December 31, 2000, Allin Consulting-
California recorded approximately $36,000 in fees related to Progent's services.
The Company believes Progent's fees are on terms substantially similar to those
that could be obtained from unrelated parties.
In connection with the Company's termination of Les D. Kent as the Company's
President in January 1999, the Company was obligated to make aggregate severance
payments to Mr. Kent in the amount of approximately $217,000. During 2000, the
Company paid approximately $23,000 of the amounts due Mr. Kent, completing
discharge of the severance obligation.
Lease
Effective February 1, 1997, the Company entered into a five-year lease for
office space with Executive Office Associates ("EOA"). The aggregate rental
payment under this lease was approximately $284,000 during the fiscal year ended
December 31, 2000. Henry Posner, Jr. and two of Mr. Posner's sons and his
spouse each own an indirect equity interest in EOA. Mr. Posner is a beneficial
holder of greater than five percent of the Common Stock. As of December 31,
2000, minimum lease commitments were approximately $296,000 for the period from
January 1, 2001 to January 31, 2002. The Company believes that rental payments
under the long-term lease were on terms as favorable to the Company as could
have been obtained from an unrelated party.
Services Provided to Related Parties
During the fiscal year ended December 31, 2000, Allin Consulting-Pennsylvania
provided computer network consulting services to The Hawthorne Group, Inc.
("Hawthorne"). Richard W. Talarico, a director, executive officer and
beneficial owner of greater than five percent of the Company's Common Stock, is
an officer of, and has an
19
ownership interest in, Hawthorne. Mr. Posner and two of Mr. Posner's sons are
shareholders of Hawthorne. Fees charged Hawthorne were approximately $46,000 for
the fiscal year ended December 31, 2000. The Company believes its fees are on
terms substantially similar to those offered unrelated parties.
Proposal to Ratify the Appointment of Independent Public Accountants
(Proposal 2)
The Board of Directors of the Company has selected Arthur Andersen LLP to
serve as the independent public accountants to examine the financial statements
of the Company and its subsidiaries for the year ending December 31, 2001.
Arthur Andersen LLP has been employed to perform this function for the Company
and its predecessor since 1995. A representative of Arthur Andersen LLP is
expected to be present at the annual meeting for the purpose of making a
statement, should he so desire, and to respond to appropriate questions.
If the stockholders should not ratify the appointment, the Audit Committee
of the Board will investigate the reasons for rejection by the stockholders and
the Board of Directors will reconsider the appointment.
Audit Fees
The aggregate fees billed for professional services rendered by Arthur
Andersen LLP for the audit of the Company's annual financial statements for the
year ended December 31, 2000 and the review of the financial statements included
in the Company's quarterly reports on Form 10-Q filed with the Securities and
Exchange Commission during 2000 were approximately $90,450.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP performed no services and billed no fees related to
operating or supervising the operation of the Company's information systems or
local or wide area networks or for designing or implementing the Company's
financial information management systems during 2000.
All Other Fees
The aggregate fees billed for other services rendered to the Company by
Arthur Andersen LLP during 2000 were approximately $80,555, including tax
preparation and advisory services and audit services performed for the Company
related to the proposed acquisition of a company that was subsequently
abandoned.
Auditor Independence
The Audit Committee of the Board of Directors believes that the non-audit
services provided by Arthur Andersen LLP are compatible with maintaining
auditor's independence. None of the time devoted by Arthur Andersen LLP on its
engagement to audit the Company's financial statements for the year ended
December 31, 2000, or any of the other engagements on which it worked during the
calendar year 2000, is attributable to work performed by persons other than
Arthur Andersen LLP employees.
The Board of Directors Recommends a Vote FOR
The Proposal to Ratify the Appointment of Arthur Andersen LLP as
The Company's Independent Accounts for the Year Ending December 31, 2001.
20
Other Information
Director Nominees
The Board of Directors will consider stockholder's recommendations for
nominees for election to the Board of Directors. Generally such nominations
must be submitted in writing to the Secretary of the Company at the Company's
principal offices at least 60 days but not more than 90 days before an annual
meeting, and the notice must provide information as required by the Company's
By-laws. A copy of these By-law requirements will be provided upon request in
writing to the Secretary at the principal offices of the Company. This
requirement does not affect the deadline for submitting stockholder proposals
for inclusion in the proxy statement, nor does it apply to questions a
stockholder may wish to ask at the meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and any person who owns more than
ten percent of the Company's Common Stock to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of the Company's Common Stock and other equity securities.
Such persons are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on the review of the copies of
such reports and written representations that no other reports were required
during or with respect to the year ended December 31, 2000, all such Section
16(a) filing requirements were met.
Annual Report
The Company has enclosed its Annual Report for the year ended December 31,
2000 with this proxy statement, which includes the Company's 2000 Annual Report
to the SEC on Form 10-K, without exhibits. Stockholders are referred to the
report for financial and other information about the Company, but such report is
not incorporated in this proxy statement and is not a part of the proxy
soliciting material.
Stockholder Proposals for the 2002 Annual Meeting
Any proposals of stockholders intended to be presented at the 2002 Annual
Meeting of Stockholders must be received by the Company, 381 Mansfield Avenue,
Suite 400, Pittsburgh, Pennsylvania 15220-2751, no later than December 5, 2001
in order to be included in the proxy materials for such meeting. It is
suggested that a proponent submit any proposal by Certified Mail - Return
Receipt Requested to the Secretary of the Company. Such proposals must meet the
requirements set forth in the rules and regulations of the SEC in order to be
eligible for inclusion in the Company's 2002 proxy materials.
Any stockholder proposal that is not submitted for inclusion in the proxy
materials for the 2002 Annual Meeting of Stockholders, but is instead sought to
be presented directly at the 2002 annual meeting must be submitted in writing to
the Secretary of the Company at the Company's principal offices no later than
February 9, 2002, and the notice must provide information as required by the
Company's By-laws. A copy of these By-law requirements will be provided upon
request in writing to the Secretary at the principal offices of the Company.
Other Matters
The Board does not intend to present, and does not have any reason to
believe that others will present, any item of business at the annual meeting
other than those specifically set forth in the notice of the meeting. However,
if other matters are properly brought before the meeting, the persons named on
the enclosed proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
21
Solicitation of Proxies
All costs and expenses of this solicitation, including the cost of
preparing and mailing this proxy statement will be borne by the Company. In
addition to the use of the mails, certain directors, officers and regular
employees of the Company may solicit proxies personally, or by mail, telephone,
facsimile, or otherwise, but such persons will not be compensated for such
services. Brokerage firms, banks, fiduciaries, voting trustees or other
nominees will be requested to forward the soliciting materials to each
beneficial owner of stock held of record by them, and the Company will reimburse
them for their expenses in doing so. The Company has engaged National City Bank
to coordinate the solicitation of proxies by and through such holders. The
anticipated cost of such services is approximately $2,500 plus reimbursement of
expenses.
By order of the Board of Directors,
/s/ Dean C. Praskach
Dean C. Praskach
Secretary
April 4, 2001
22
ANNEX A
-------
Allin Corporation
Audit Committee Charter
Adopted by the Board of Directors
on June 9, 2000
Function of Audit Committee
There shall be a committee of the Board of Directors of Allin Corporation to be
known as the Audit Committee. The Audit Committee shall provide assistance to
the corporate directors in fulfilling their responsibilities relating to
corporate accounting, reporting practices of the corporation, and the quality
and integrity of the financial reports of the corporation, as well as such other
matters as may from time to time be specifically delegated to the Audit
Committee by the Board of Directors. In performing its duties, it is the
responsibility of the Audit Committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the corporation.
Membership
As soon as practical after the adoption of this Charter, the Audit Committee
shall be composed of at least three directors who are independent of management
of the corporation and are free of any relationship that in the opinion of the
Board of Directors would interfere with their exercise of independent judgment
as a committee member. No member may be an officer or employee of the
corporation. In determining independence, the Board of Directors will observe
the applicable requirements of the Rules of the National Association of
Securities Dealers, Inc. and may give effect to any applicable phase-in period
for compliance provided for in such Rules. In observing such requirements, the
Board of Directors may permit one director who does not meet those requirements,
provided that he or she is not an officer or employee of the corporation or any
of its subsidiaries or an immediate family member of any such officer or
employee, to serve on the Audit Committee if the Board of Directors determines
under exceptional and limited circumstances that his or her membership on the
Audit Committee is required by the best interests of the corporation and its
shareholders.
Each member of the Audit Committee must have the ability to read and understand
fundamental financial statements, including a balance sheet, income statement
and cash flow statement or must be able to do so within a reasonable period of
time after appointment to the Audit Committee. One member, preferably the
chairperson, must have had past employment experience in finance or accounting,
requisite professional certification in accounting or any other comparable
experience or background that results in the individual's financial
sophistication. Such experience may include being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.
Audit Committee appointments shall be nominated and approved annually by the
full Board of Directors. The Audit Committee chairperson shall be selected by
the Audit Committee members.
23
Operating Principles
The Audit Committee shall fulfill its specific responsibilities within the
context of the following overriding principles:
. Communication - The chairperson shall have regular and meaningful contact
throughout the year with senior management, other committee chairpersons and
other key Audit Committee advisors, external and internal auditors, etc., as
applicable, to strengthen the Audit Committee's knowledge of relevant current
and prospective business issues.
. Meetings - The Audit Committee shall meet at least four times annually, or
more frequently as it may determine necessary to comply with its
responsibilities set forth herein.
. Meeting Agenda - Audit Committee meeting agendas shall be the responsibility
of the Audit Committee chairperson with input from Audit Committee members.
It is expected that the chairperson would also ask for management and key
Audit Committee advisors, and perhaps others, to participate in this process.
. Audit Committee Expectations and Information Needs - The Audit Committee
shall communicate Audit Committee expectations and the specific nature,
timing, and extent of Audit Committee information needs to management,
internal auditors, and other external parties, including external auditors.
. Resources and Advisors - The Audit Committee shall be authorized to access
internal and external resources, as the Audit Committee requires, to carry
out its defined responsibilities. The Audit Committee shall have access to
its own counsel and other advisors at the Audit Committee's sole discretion.
. Audit Committee Meeting Attendees - The Audit Committee shall request members
of management, counsel, internal audit, and external auditors, as applicable,
to participate in Audit Committee meetings, as necessary, to carry out the
defined Audit Committee responsibilities. It shall be understood that either
internal and external auditors, or counsel, may, at any time, request a
meeting with the Audit Committee or Audit Committee chairperson with or
without management in attendance. In any case, the Audit Committee shall meet
in executive session separately with internal and external auditors, at least
annually.
. Reporting to the Board of Directors - The Audit Committee, through the Audit
Committee chairperson, shall report periodically, as deemed necessary, but at
least semi-annually, to the full Board. In addition, summarized minutes from
Audit Committee meetings, separately identifying monitoring activities from
approvals, shall be distributed to each Board member prior to the subsequent
Board meeting.
. Audit Committee Self-Assessment - The Audit Committee shall, at least
annually, review, discuss and assess its own performance as well as the Audit
Committee role and responsibilities, seeking input from senior management,
the full Board of Directors and others. Changes in role and/or
responsibilities, if any, shall be recommended to the full Board of Directors
for approval.
. Audit Committee Charter Review - Periodically, as deemed necessary, but at
least annually, the Audit Committee shall review and assess the adequacy of
this Audit Committee Charter. Changes, if any, shall be recommended to the
full Board of Directors for approval.
. Internal Audit Function - In concurrence with the corporation's independent
auditors, given the corporation's present size and in the best financial
interest of the shareholders, all responsibilities herein that refer to the
"internal audit function" will be performed by the corporate controller. The
addition of a separate internal audit function will be reevaluated
periodically depending on the corporation's growth.
Reporting to Shareholders
The Audit Committee shall report annually in the corporation's proxy or
information statement on such matters as may be required by the rules and
regulations of the Securities and Exchange Commission.
24
Committee's Relationship with External and Internal Auditors
The external auditors, in their capacity as independent public accountants,
shall be responsible to the Board of Directors and the Audit Committee as
representatives of the shareholders. These shareholder representatives have
ultimate authority and responsibility to select, evaluate and where appropriate,
replace the external auditors (or to nominate the outside auditor to be proposed
for shareholder approval in any proxy or information statement).
The external auditors shall be viewed as the Audit Committee's representatives
in executing the Audit Committee's oversight of periodic, annual, and other
financial reporting to the shareholders. They shall report all relevant issues
to the Audit Committee responsive to agreed-on Audit Committee expectations.
The Audit Committee should review the work of external auditors in executing
their role of oversight. The Audit Committee shall annually review the
performance (effectiveness, objectivity, and independence) of the external
auditors. In this respect, the Audit Committee shall ensure receipt of a formal
written statement from the external auditors delineating all relationships
between the auditor and the corporation consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees."
Additionally, the Audit Committee shall be responsible for active dialogue with
the auditor with respect to disclosed relationships or services that may impact
auditor objectivity or independence and shall take or recommend to the full
Board of Directors appropriate action to ensure the independence of the external
auditor.
The internal audit function shall be responsible to senior management, but have
a direct reporting responsibility to the Board of Directors through the Audit
Committee.
If either the internal or external auditor identify significant issues relative
to the overall Board of Directors responsibility that, in their judgment, have
been communicated to management, but have not been adequately addressed, they
should be communicated to the Audit Committee chairperson.
Primary Audit Committee Responsibility
The Audit Committee will perform the following and report to the Board of
Directors:
Review and recommend to the directors the independent auditors to be selected to
audit the books of the corporation, its operating groups and subsidiaries.
Meet with the independent auditors and financial management of the corporation
at least twice a year. Prior to the audit each year, the Audit Committee will
review the risk assessment process and scope of the proposed audit for the
current year and the audit procedures to be utilized. At the conclusion of the
audit, the Audit Committee will review the results of such audit including any
comments or recommendations of the independent auditors.
Discuss with the independent auditors the matters to be discussed by Statement
on Auditing Standards No. 61 relating to the conduct of the audit.
Review with the independent auditors the report of their annual audit, or
proposed report of their annual audit, the accompanying management letter, if
any, the reports of their reviews of the corporation's interim financial
statements conducted in accordance with Statement on Auditing Standards No. 71,
and the reports of the results of such other examinations outside the course of
the independent auditors' normal audit procedures that the independent auditors
may from time to time undertake.
Review with the independent auditors and with the corporation's financial and
internal auditing personnel the adequacy and effectiveness of the internal
auditing, accounting and financial controls of the corporation, and elicit any
recommendations that they may have for the improvement of such internal control
procedures or particular areas where new or more detailed control or procedures
are desirable. Particular emphasis should be given to the procedures, which
might be deemed illegal or otherwise improper. Further, the committee
25
should periodically review company policy statements in terms of their
adequately representing a code of conduct.
Review the internal audit function of the corporation including proposed
programs and risk assessment process with the independent auditors, with
particular attention to maintaining the best possible effective balance between
independent and internal auditing resources.
Review prior to each meeting a summary of important findings from completed
internal audits and a progress report on the proposed internal audit plan with
explanations for any deviations from the original plan.
Review with the appropriate officers of the corporation and the independent
auditors the annual and quarterly financial statements of the corporation prior
to public release thereof. Any changes in accounting principles should be
reviewed.
In carrying out its responsibilities, the Audit Committee's policies and
procedures should remain flexible in order that Audit Committee can best react
to changing business conditions and risks to assure the directors and
shareholders that the corporate accounting practices of the corporation are in
accordance with all requirements and are of the highest quality.
26
PROXY ALLIN CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Dean C. Praskach and Timothy P. O'Shea, or either of them, each with power of
substitution, are hereby authorized to vote all stock of Allin Corporation
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Allin Corporation to be held on Thursday, May
10, 2001, and at any postponements or adjournments thereof as follows:
1. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY to
(except as marked to the contrary below) vote for all nominees listed below
[_] [_]
Nominees: Richard W. Talarico, Brian K. Blair, Anthony L. Bucci, William C.
Kavan, James S. Kelly, Jr. and Anthony C. Vickers
A vote FOR all nominees is recommended by the Board of Directors
INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR AN INDIVIDUAL NOMINEE, DRAW A LINE
THROUGH HIS NAME.
2. Ratification of appointment of Independent Public Accounts
FOR [_] AGAINST [_] ABSTAIN [_]
A vote FOR is recommended by the Board of Directors
3. In their discretion, on such other business as may properly come before the
meeting.
CONTINUED ON OTHER SIDE
CONTINUED FROM OTHER SIDE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSAL 2.
Please sign this proxy exactly
as your name appears below. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or in
another representative capacity,
please give full title as such.
If a corporation, please sign in
full corporate name by the
president or other authorized
officer. If a partnership,
please sign in partnership name
by an authorized person.
Date , 2001
------------------
---------------------------------
(Signature)
---------------------------------
(Signature, if held jointly)
Please Mark, Sign, Date, and Return this Proxy Card Promptly Using the Enclosed
Envelope.