Unassociated Document
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
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
x |
Preliminary
Proxy Statement
|
o |
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
o |
Definitive
Proxy Statement
|
o |
Definitive
Additional Materials
|
o |
Soliciting
Material Pursuant to §240.14a-12
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ALLIANCE
DISTRIBUTORS HOLDING INC.
(Name
of
Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate box):
o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction applies: |
2)
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Aggregate
number of securities to which transaction applies: |
3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
4)
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Proposed
maximum aggregate value of transaction: |
5)
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Total
fee paid: |
o |
Fee
paid previously with preliminary
materials.
|
o
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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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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ALLIANCE
DISTRIBUTORS HOLDING INC.
NOTICE
OF AN ANNUAL MEETING OF SHAREHOLDERS
Notice
is
hereby given that the Annual Meeting of Shareholders of Alliance Distributors
Holding Inc. (the "Company") will be held at Alliance Distributors Holdings
Inc., 1160 Commerce Avenue, Bronx, New York, 10462 at 11:00A.M. on February
1,
2007 for the following purposes as set forth in the accompanying Proxy
Statement:
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1.
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To
elect five directors to serve for the term set forth in the accompanying
proxy statement;
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2.
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To
ratify the selection and appointment by the Company's Board of Directors
of Mahoney
Cohen & Company, CPA, P.C.,
as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2006;
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3.
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To
adopt the Alliance Distributors Holding Inc. 2006 Stock Plan; and
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4.
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To
transact such other business as may properly come before the meeting
or
any adjournments thereof.
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Holders
of record of the Company's Common Stock and the Company’s Series A Convertible
Non Redeemable Preferred Stock at the close of business on December 19, 2006
will be entitled to vote at the meeting.
By
Order
of the Board of Directors
STEPHEN
AGRESS,
Secretary
ALLIANCE
DISTRIBUTORS HOLDING INC.
1160
Commerce Avenue
Bronx,
New York 10462
____________________
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON FEBRUARY 1, 2007
PROXY
STATEMENT
This
Proxy Statement is furnished in connection with the solicitation by the Board
of
Directors of proxies to be voted at the Annual Meeting of Shareholders of
Alliance Distributors Holding Inc. (the “Company”) to be held at Alliance
Distributors Holdings Inc., 1160 Commerce Avenue, Bronx, New York, 10462 at
11:00A.M. on February 1, 2007, and at any adjournments thereof. The shares
represented by proxies that are received in the enclosed form and properly
filled out will be voted in accordance with the specifications made thereon.
In
the absence of specific instructions, proxies will be voted in accordance with
the recommendations made herein with respect to the proposals described in
this
Proxy Statement. This Proxy Statement and the accompanying materials are being
mailed on or about December 29, 2006.
Record
Date
Shareholders
of record at the close of business on December 19, 2006, are entitled to notice
of and to vote at the Annual Meeting or any adjournments thereof (“Record
Date”).
As
of the
Record Date there were issued and outstanding 48,721,065 shares of Common Stock
and 261,663 Series A Convertible Non Redeemable Preferred Stock (the “Series A
Preferred Shares”) convertible into 4,163,058 shares of common stock for a total
of 52,884,123 shares eligible to vote. Each share of common stock entitles
the
holder thereof to one vote on each matter that may come before a meeting of
the
shareholders. Each Series A Preferred Share is convertible into 15.91 shares
of
common stock, votes with the common stock as one class on as converted basis,
and otherwise ranks equally with the common stock on a pari passu as converted
basis.
Quorum
The
presence at the meeting, in person or represented by proxy, of a majority of
the
outstanding shares entitled to vote at the meeting will constitute a quorum
for
the transaction of business. If a share is deemed present at the meeting for
any
matter, it will be deemed present for all matters. Proxies submitted which
contain abstentions or broker non-votes will be deemed present at the meeting
in
determining the presence of a quorum.
Right
to Revoke Proxies
Proxies
may be revoked by shareholders by written notice received by the Secretary
of
the Company at the address set forth above, at any time prior to the exercise
thereof.
PROPOSAL
1
ELECTION
OF DIRECTORS
It
is the
intention of the persons named in the enclosed form of proxy, unless such proxy
specifies otherwise, to nominate and to vote the shares represented by such
proxy for the election of the nominees listed below to hold office until the
next Annual Meeting of Shareholders and until their respective successors shall
have been duly elected and qualified. The Company has no reason to believe
that
any of the nominees will become unavailable to serve as directors for any reason
before the Annual Meeting. However, in the event that any of them shall become
unavailable, the person designated as proxy reserves the right to substitute
another person of his/her choice when voting at the Annual Meeting. Certain
information regarding each nominee is set forth in the table and text below.
The
number of shares, if any, beneficially owned by each nominee is listed below
under "Security Ownership of Certain Beneficial Owners and
Management."
The
directors serve for a term of one year and until their successors are duly
elected and qualified. The Board of Directors held 5 meetings in the fiscal
year
ended December 31, 2005. During the fiscal year ended December 31, 2005, except
for Andre Muller who only attended 60% of the Board meetings, each member of
the
Board of Directors attended at least 75% or more of the Board meetings and
meetings of each Committee of the Board on which the Director serves. The
Company does not have a policy requiring incumbent directors and director
nominees to attend the Company’s annual meeting of shareholders. The Company did
not hold an annual meeting for fiscal year 2005.
There
are
no family relationships among directors, nominees or executive officers. There
are no arrangements or understandings between any director, nominee or executive
officer and any other person pursuant to which any director, nominee or
executive officer was selected as such.
All
of
the nominees are currently serving as directors. The name, age and term of
office as director of each nominee for election as director and his or her
present position(s) with the Company and other principal affiliations are set
forth below.
Director
Independence
The
Board
of Directors has determined that each of Humbert B. Powell, III, Thomas Vitiello
and Steven
H.
Nathan is
an
“independent director” as defined in Rule 4200(a)(15) of the listing standards
of the National Association of Securities Dealers.
Officers
of the Company serve at the pleasure of the Board of Directors subject to any
contracts of employment.
NAME
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POSITION
HELD WITH THE COMPANY
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AGE
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DATE
FIRST ELECTED OR APPOINTED
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Jay
Gelman
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Chief
Executive Officer, Chairman of the Board of Directors and Assistant
Secretary
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45
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Chief
Executive Officer on June 29, 2004; Director and Chairman of the
Board on
October 14, 2004; Assistant Secretary on November 11,
2004;
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Andre
Muller
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Chief
Operating Officer, President and Director
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41
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Chief
Operating Officer and President on June 29, 2004; Director on October
14,
2004; Secretary November 11, 2004 to November 30, 2006
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Stephen
Agress
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Executive
Vice President, Chief Financial Officer and Secretary
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45
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Executive
Vice President and Chief Financial Officer on October 3, 2006;
Secretary on November 30, 2006
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Humbert
B. Powell, III
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Director
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68
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Director
and Chairman of the Board of Directors from July 1, 2002 until October
14,
2004 and currently a Director
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Thomas
Vitiello
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Director
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45
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Director
on October 14, 2004
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Steven
H. Nathan
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Director
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56
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Director
on March 14, 2005
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JAY
GELMAN
Jay
Gelman in 1989 co-founded L & J Marketing, Inc. d/b/a Alliance Distributors,
a regional video game software and hardware distributor based in College Point,
NY. He served as President, until December of 1997 when Alliance was sold to
Take Two Interactive Software, Inc. From 1998 until 2003, Mr. Gelman was
employed by Track Data Corporation (NASDAQ: TRAC) where he served as a director
and as Executive Vice President. In 2003, Mr. Gelman co-founded Alliance
Partners (name later changed to AllianceCorner Distributors Inc.), and served
as
its President and Chief Executive Officer. Since the acquisition by the Company
of AllianceCorner Distributors Inc. on June 29, 2004, Mr. Gelman has served
as
Chief Executive Officer of the Company and is also currently the Chairman of
the
Board of Directors.
ANDRE
MULLER
For
more
than five years prior to 2003 Andre Muller was employed as a General Manager
by
Take Two Interactive Software, Inc. In 2003, Mr. Muller co-founded Alliance
Partners (name later changed to AllianceCorner Distributors Inc.), and served
as
its Chief Operating Officer. Since the acquisition by the Company of
AllianceCorner Distributors Inc. on June 29, 2004, Mr. Muller has served as
Chief Operating Officer and President of the Company and is also currently
a
director.
STEPHEN
AGRESS
Stephen
Agress was the Vice President - Finance and Chief Accounting Officer of Innodata
Isogen, Inc. (“Innodata”) from March 1998 to September 30, 2006, and served as
its principal financial officer from May 2001 to December 2005. He served as
Innodata’s Corporate Controller from August 1995 until May 2004. Mr. Agress is a
certified public accountant and was a senior audit manager in the TRADE Retail
& Distribution Services Group at Deloitte & Touche LLP prior to his
joining Innodata in 1995.
HUMBERT
B. POWELL, III
Humbert
B. Powell, III has been a Managing Director at Sanders Morris Harris, a regional
investment-banking firm headquartered in Houston, Texas, with a branch in New
York City, since November 1996. He is a trustee of Salem-Teikyo University.
Mr.
Powell served as chief executive officer of the Company from June 20, 2002
until
July 1, 2002.
THOMAS
VITIELLO
For
more
than five years, Mr. Vitiello has been the president of VIT Trading, Inc.,
a
trader in precious metals. He graduated from NYU with a BS in Finance in
1985.
STEVEN
H.
NATHAN
Steven
H.
Nathan has since 1997 served as President of Progressive Planning, Inc. a tax
and financial consulting firm in Jericho, New York. From 1993 through 1997
he
was Vice President and Chief Financial Officer of L & J Marketing, Inc.
d/b/a Alliance Distributors, a regional video game software and hardware
distributor based in College Point, New York. He held similar positions from
1984 to 1993 with Wren/AP Distributors.
Officers
of the Company serve at the pleasure of the Board of Directors subject to any
contracts of employment.
EXECUTIVE
COMPENSATION
The
following table sets forth the compensation paid or accrued by the Company
during
the periods indicated for (i) the chief executive officer during fiscal year
2005 and (ii) certain other persons that served as executive officers in fiscal
year 2005 whose total annual salary and bonus was in excess of
$100,000.
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Name
and Position
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Annual
Compensation
Salary
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Long-term Compensation Securities
Underlying
Options
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Jay
Gelman,Chairman of the
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2005
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1,100,000
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Board
of Directors and Chief
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2004
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(*)
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Executive
Officer
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Andre
Muller, President, Chief
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2005
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1,100,000
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Operating
Officer and Director
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2004
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(*)
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Barbara
A. Ras, Chief Financial
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2005
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100,000
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and
Principal Accounting
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Officer
(**)
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(*) |
For
the period from June 29, 2004 through December 31, 2004
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(**) |
Resigned
September 13, 2006
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The
following table sets forth certain information as to the stock options granted
by the Company to its Chief Executive Officer, Chief Operating Officer and
Chief
Financial Officer/Principal Financial and Accounting Officer as of December
31,
2005.
Option
Grants in Last Fiscal Year
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Name
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Number
of securities underlying options granted
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Percent
of total options granted to employees in fiscal
year
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Exercise
Price
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Expiration
date
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Potential
Realizable Value of Assumed Annual Rates of Stock Price Appreciation
for
Option Term
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5%
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10%
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Jay
Gelman
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1,100,000
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17.1
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%
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Jan.
15, 2015
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Andre
Muller
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1,100,000
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17.1
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%
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Jan.
15, 2015
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Barbara
A. Ras
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100,000
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1.6
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%
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Apr.
14, 2015
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The
following table sets forth certain information as to the aggregated stock option
exercises in fiscal 2005 by its Chief Executive Officer, Chief Operating Officer
and Chief Financial Officer/Principal Financial and Accounting Officer and
option values as of December 31, 2005.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
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Number
of securities underlying unexercised options at
December
31, 2005
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Value
of unexercised in-the-money options at
December
31, 2005
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Name
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Shares
acquired on
exercise
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Value
Realized
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Exercisable
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Unexercisable
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Exercisable
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Unexercisable
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Jay
Gelman
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—
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275,000
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825,000
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Andre
Muller
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275,000
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825,000
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Barbara
A. Ras
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16,667
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83,333
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Director
Compensation
Each
non-managing director is entitled to a $1,500 fee for each of four regularly
scheduled meetings during each year.
Employment
Contracts
The
Company has no contractual employment obligations with any of the executive
officers other than with Stephen Agress. The Company’s employment obligations
pursuant to an employment contract with Jay Gelman expired in accordance with
its terms on June 30, 2006.
On
October 3, 2006, the Company entered into a two year employment agreement with
Stephen Agress to serve as Executive Vice President and Chief Financial Officer.
The Agreement provides for annual base compensation of $210,000 per annum.
The
Agreement also provides for insurance and other fringe benefits, and contains
confidentiality and non-compete and non-interference provisions. The Company
may
terminate the Mr. Agress’ employment under the agreement without Cause (as
defined) at any time, provided that, in such case, the Company shall, as
severance, continue to pay to Mr. Agress an amount equal to his then base salary
in normal payroll installments, subject to withholding, for six months or if
less until September 30, 2008. In addition, the Company shall pay Mr. Agress’
cost of COBRA for the period during which severance is payable as
aforesaid.
On
July
26, 2004, Jay Gelman signed an employment agreement for two years with annual
compensation of $300,000 per year for the first year and $350,000 for the second
year, and at the discretion of the Board of Directors, bonuses equal to his
salary. In addition, the employment agreement provided for a monthly car
allowance in the amount of $750 per month. In the event of a termination of
Mr.
Gelman's employment by the Company other than for Cause, as defined under the
employment agreement, or by Mr. Gelman for Good Reason, as defined under the
employment agreement, Mr. Gelman was entitled to a lump sum payment equal to
three times his base salary for the period from the date of termination through
June 30, 2006. The employment agreement also contains a 12-month non-compete
provision effective following termination, except for termination by the Company
other than for Cause, or Good Reason by Mr. Gelman, and contains customary
confidentiality provisions.
Compensation
Committee Interlocks and Insider Participation
The
Company does not have a Compensation Committee or any other committee of the
Board of Directors performing equivalent functions. Decisions regarding
compensation of executive officers of the Company are made by the Board of
Directors. Jay Gelman, Chief Executive Officer and Chairman of the Board,
participated in deliberations of the Board during the fiscal year ended December
31, 2005 concerning executive officer compensation, except that he abstained
from deliberations and voting regarding his own compensation.
No
member
of the Company's Board of Directors is an executive officer of a company whose
compensation committee or board of directors includes an executive officer
of
the Company.
NOMINATING
COMMITTEE
The
Company does not have a standing Nominating Committee or a Nominating Committee
Charter. Due to the size of the Company and the resulting efficiency of a Board
of Directors that is also limited in size, as well as the lack of turnover
in
the Company’s Board of Directors, the Board of Directors has determined that it
is not necessary or appropriate at this time to establish a separate Nominating
Committee. Potential candidates are discussed by the entire Board of Directors,
and director nominees are selected by Board of Director resolution subject
to
the recommendation of a majority of the independent directors. All of the
nominees recommended for election to the Board of Directors at the Annual
Meeting are directors standing for re-election. Although the Board of Directors
has not established any minimum qualifications for director candidates, when
considering potential director candidates, the Board considers the candidate's
character, judgment, diversity, skills, including financial literacy, and
experience in the context of the needs of the Company and the Board of
Directors. In fiscal year 2005, the Company did not pay any fees to any third
party to assist in identifying or evaluating potential nominees.
The
Board
of Directors will consider director candidates recommended by the Company’s
shareholders in a similar manner as those recommended by members of management
or other directors, provided the shareholder submitting such nomination has
provided such recommendation on a timely basis as described in "Proposals of
Shareholders" and “Notice Required to Bring Business Before an Annual Meeting”
below. To date, the Company has not received any recommended nominees from
any
non-management shareholder or group of shareholders that beneficially owns
more
than five percent of its voting stock.
BOARD
OF DIRECTORS’ REPORT ON EXECUTIVE COMPENSATION
The
following Board of Directors’ report on executive compensation and the
performance graph included elsewhere in this proxy statement do not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this report or the performance graph by reference therein.
As
required by the rules established by the Securities and Exchange Commission,
the
Board of Directors has prepared the following report on the compensation
policies of the Board of Directors applicable to the Company’s executive
officers.
The
Company’s executive compensation policies and programs are designed to retain
talented executives and motivate them to achieve business objectives that will
enhance stockholder value.
The
following is the Board’s compensation policy for persons who do not have
employment agreements with the Company: See discussion above for information
on
employment agreements for Mr. Gelman and Mr. Agress.
The
Board
of Directors (the "Board") is responsible for determining the annual salary,
short-term and long-term incentive compensation, stock awards and other
compensation of the executive officers. In its deliberations regarding
compensation of executive officers, including the chief executive officer,
the
Board considered the following factors: (a) Company performance, both separately
and in relation to similar companies, (b) the individual performance, experience
and scope of responsibilities of each executive officer, (c) compensation and
stock award information disclosed in the proxy statements of other companies,
(d) historical compensation levels and stock awards at the Company, (e) the
overall competitive environment for executives and the level of compensation
necessary to attract and retain executive talent and (f) the recommendations
of
management. The assessments were not subject to specific weightings or
formulas.
The
Company’s compensation program for executives consists of three
elements:
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- |
periodic
grants of stock options.
|
Base
Salary
The
salaries for the executive officers are designed to retain qualified and
dedicated executive officers. The Board of Directors reviews salary
recommendations made by the Company’s Chief Executive Officer (other than for
executive officers covered by employment agreements), and evaluates individual
responsibility levels, performance and length of service.
Annual
Bonus
Bonus
compensation provides the Company with a means of rewarding performance based
upon the attainment of corporate profitability during the year. No executive
officer received a bonus for fiscal year ended 2005.
Stock
Options
See
“Option Grants in Last Fiscal Year” table for information on stock option grants
awarded to executive officers in 2005.
Chief
Executive Officer’s Compensation
The
Chief
Executive Officer’s base compensation for the fiscal year ending 2005 was
determined in accordance with the terms set forth in his employment agreement.
The Chief Executive Officer’s short-term and long-term incentive compensation,
stock awards and other compensation are determined on the basis of the same
factors utilized to compensate other executives.
See
“Option Grants in Last Fiscal Year” table for information on stock option grants
awarded to the Chief Executive Officer in 2005.
The
Chief
Executive Officer did not receive an annual bonus in 2005.
By:
The
Board of Directors
Jay
Gelman
Andre
Muller
Humbert
B. Powell, III
Thomas
Vitiello
Steven
H.
Nathan
AUDIT
COMMITTEE
The
Company has a separately designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. Serving on the
Committee are Steven H. Nathan and Thomas Vitiello. The Board of Directors
has
determined that it has an audit committee financial expert serving on the audit
committee, Steven H. Nathan. Mr. Nathan is an independent director as defined
in
Item 7(d)(3)(iv) of Schedule 14A. The function of the Audit Committee is to
make
recommendations concerning the selection each year of an independent registered
public accounting firm, to review the effectiveness of the Company's internal
accounting methods and procedures, to consider whether the principal
accountant’s provision of non-audit services is compatible with maintaining the
principal accountant’s independence and to determine through discussions with
the independent registered public accounting firm whether any instructions
or
limitations have been placed upon them in connection with the scope of their
audit or its implementation. The Audit Committee met one time during the fiscal
year ended December 31, 2005. The Board of Directors has determined that the
members of the Audit Committee are "independent" as defined in NASDAQ Stock
Market’s Marketplace Rule 4200.
REPORT
OF THE AUDIT COMMITTEE
The
following report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange
Act
of 1934, except to the extent the Company specifically incorporates this Report
by reference therein.
The
responsibilities of the Audit Committee, which are set forth in the Audit
Committee Charter, include providing oversight to the Company's financial
reporting process through periodic meetings with the Company’s independent
registered public accounting firm and management to review accounting, auditing,
internal controls and financial reporting matters. The Audit Committee is also
responsible for the appointment, compensation and oversight of the Company’s
independent registered public accounting firm. The management of the Company
is
responsible for the preparation and integrity of the financial reporting
information and related systems of internal controls. The Audit Committee,
in
carrying out its role, relies on the Company's senior management, including
senior financial management, and its independent registered public accounting
firm. A copy of the Audit Committee Charter is included as Exhibit A to this
Proxy Statement.
The
Audit
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate
to
each of the matters assigned to it under the Audit Committee’s charter. To carry
out its responsibilities, the Audit Committee met one time during fiscal year
2005.
The
primary purpose of the Audit Committee is to assist the Board of Directors
in
fulfilling its oversight responsibilities relating to the quality and integrity
of the Company’s financial reports and financial reporting processes and systems
of internal controls. Management of the Company has primary responsibility
for
the Company’s financial statements and the overall reporting process, including
maintenance of the Company’s system of internal controls. The Company retains an
independent registered public accounting firm who is responsible for conducting
an independent audit of the Company’s financial statements, in accordance with
standards of the Public Company Accounting Oversight Board (United States),
and
issuing a report thereon.
In
performing its duties, the Audit Committee has reviewed and discussed the
audited financial statements with management and the Company’s independent
registered public accounting firm. The Audit Committee has also discussed with
the Company's independent registered public accounting firm, the matters
required to be discussed by Statement of Auditing Standards ("SAS") No. 61,
"Communications with Audit Committee." SAS No. 61 requires an independent
registered public accounting firm to provide the Audit Committee with additional
information regarding the scope and results of their audit of the Company’s
financial statements, including with respect to (i) their responsibility under
auditing standards generally accepted in the United States of America, (ii)
significant accounting policies, (iii) management judgments and estimates,
(iv)
any significant audit adjustments, (v) any disagreements with management, and
(vi) any difficulties encountered in performing the audit. In addition, the
Audit Committee received written disclosures and the letter from the independent
registered public accounting firm required by Independence Standards Board
Statement No. 1, "Independence Discussions with Audit Committees." The
independent registered public accounting firm has discussed its independence
with the Audit Committee, and has confirmed to us that, in its professional
judgment, it is independent of the Company within the meaning of the federal
securities laws.
On
the
basis of the foregoing reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included
in
the Company’s Annual Report on Form 10-KSB for the fiscal year ended December
31, 2005, for filing with the Securities and Exchange Commission. The Audit
Committee has also recommended, subject to shareholder approval, the selection
of the Company's independent registered public accounting firm.
AUDIT
COMMITTEE
Steven
H.
Nathan
Thomas
Vitiello
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
The
Company believes that during the period from January 1, 2005 through December
31, 2005 all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied
with.
PERFORMANCE
GRAPH
The
following graph compares the cumulative total return on a hypothetical
investment made on July 1, 2004 through December 31, 2005 (assuming reinvestment
of dividends) in (a) the Company's Common Stock; (b) all NASDAQ stocks and
(c)
the Industry Index for SIC Code 5045, Wholesale-Computers and Peripheral
Equipment and Software. The graph shows how a $100 investment would increase
or
decrease in value over time, based on dividends (stock or cash) and increases
or
decreases in the market price of the stock and each of the indexes.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of November 15, 2006 information regarding the
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act
of 1934) of the Company's Common Stock based upon the most recent information
available to the Company for (i) each person known by the Company to own
beneficially more than five (5%) percent of the Company's outstanding Common
Stock, (ii) each of the Company's officers and directors and (iii) all officers
and directors of the Company as a group. Unless otherwise indicated, each
stockholder's address is c/o the Company, 1160 Commerce Avenue, Bronx, New
York
10462.
Beneficial
ownership is determined in accordance with the rules of the SEC, and for
calculating the shares and percentage beneficially owned by each Selling
Security Holder includes any securities which the person has the right to
acquire within 60 days of the date of this Schedule 14A through the conversion
or exercise of any security or right. The terms of the Series A Convertible
Non
Redeemable Preferred Stock ("Series A Preferred Shares") restrict each holder's
right to convert the Series A Preferred Shares to the extent that beneficial
ownership of such holder and its affiliates would exceed 4.999% or 9.999% of
the
shares of Common Stock that would be outstanding after giving effect to such
conversion. For convenience, the table and the footnotes are presented as if
these restrictions did not apply. For purposes of the table and the footnotes
below, there are deemed outstanding 52,884,123 shares of common stock,
consisting of 48,721,065 shares of common stock currently issued and outstanding
and 4,163,058 shares of common stock issuable on conversion of 261,663 Series
A
Preferred Shares. Each Series A Preferred Share converts into 15.91 shares
of
common stock.
|
|
Shares
Owned Beneficially
|
|
Name
and Address of
|
|
Amount
and Nature
|
|
|
|
Beneficial
Owner
|
|
|
|
Percent
of Class
|
|
|
|
|
|
|
|
Directors
and Executive Officers:
|
|
|
|
|
|
Jay
Gelman (1)
|
|
|
17,523,654
|
|
|
32.7
|
%
|
Andre
Muller (2)
|
|
|
8,960,004
|
|
|
16.7
|
%
|
Stephen
Agress (3)
|
|
|
8,333
|
|
|
*
|
|
Humbert
B. Powell, III (4)
|
|
|
122,728
|
|
|
*
|
|
Thomas
Vitiello (5)
|
|
|
100,000
|
|
|
*
|
|
Steven
H. Nathan (5)
|
|
|
100,000
|
|
|
*
|
|
All
Executive Officers and Directors
|
|
|
|
|
|
|
|
As
a Group (6 persons) (6)
|
|
|
26,814,719
|
|
|
49.1
|
%
|
|
|
|
|
|
|
|
|
Known
Beneficial Holders of More Than 5%:
|
|
|
|
|
|
|
|
Francis
Vegliante (7)
|
|
|
4,959,988
|
|
|
9.3
|
%
|
Nathan
A. Low (8)
|
|
|
6,106,648
|
|
|
11.3
|
%
|
Theseus
Fund, L.P.
|
|
|
|
|
|
|
|
f/k/a
Minotaur Fund LLP (9)
|
|
|
5,000,000
|
|
|
9.5
|
%
|
Jim
Corfman (10)
|
|
|
5,500,000
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
1. |
Consists
of Mr. Gelman’s record and beneficial ownership of 8,226,671 shares of
common stock, currently exercisable options to purchase 733,333 shares
of
Common Stock, and 5,883,976 shares of common stock and 168,427 Series
A
Preferred Shares convertible into 2,679,674 shares of common stock
that
are subject to a voting proxy. Of the total number of shares of common
stock subject to a voting proxy, Theseus Fund, L.P. (f/k/a Minotaur
Fund
LLP) granted to Mr. Gelman a proxy to vote 1,071,335 shares of common
stock.
|
2. |
Consists
of Mr. Muller’s record and beneficial ownership of 8,226,671 shares of
common stock and currently exercisable options to purchase 733,333
shares
of Common Stock.
|
3. |
Consists
of currently exercisable options to purchase 8,333 shares of Common
Stock.
|
4. |
Consists
of Mr. Powell’s record and beneficial ownership of 22,728 shares of common
stock and currently exercisable options to purchase 100,000 shares
of
Common Stock.
|
5. |
Consists
of currently exercisable options to purchase 100,000 shares of Common
Stock.
|
6. |
Includes
currently exercisable options to purchase 1,774,999 shares of Common
Stock. Also includes 5,883,976 shares of common stock and 168,427
Series A
Preferred Shares convertible into 2,679,674 shares of common stock
that
are subject to a voting proxy held by Mr. Jay
Gelman.
|
7. |
Consists
of Mr. Vegliante’s record and beneficial ownership of 4,226,655 shares of
common stock and currently exercisable options to purchase 733,333
shares
of Common Stock.
|
8. |
The
address of Mr. Low is c/o Sunrise Securities Corp., 641 Lexington
Avenue
N.Y., N.Y. 10022. Mr. Low has sole dispositive and voting power in
Sunrise
Securities Corp. Mr. Low's wife has sole voting and investment power
in
the shares owned by Nathan A. Low Family Trust. Mr. Low has shared
voting
and investment power in Level Counter LLC, which has sole investment
and
voting power in the shares owned by Sunrise Equity Partners. Mr.
Low has
shared voting and investment power in the shares owned by Sunrise
Foundation Trust. Mr. Low disclaims beneficial ownership of the shares
owned by Nathan A. Low Family Trust, Sunrise Equity Partners and
Sunrise
Foundation Trust. These 6,106,648 shares consist of 572,400 shares
of
common stock owned by Sunrise Equity Partners, 245,794 shares of
common
stock owned by Sunrise Securities Corp., 756,346 shares of common
stock
due to the deemed conversion of 47,539 Series A Convertible Non Redeemable
Preferred Stock ("Series A Preferred Shares") owned by Nathan A.
Low,
388,315 shares of common stock due to the deemed conversion of 24,407
Series A Preferred Shares owned by Nathan A. Low Family Trust, 2,290,515
shares of common stock due to the deemed conversion of 143,967 Series
A
Preferred Shares owned by Nathan A. Low Roth IRA, 346,504 shares
of common
stock due to the deemed conversion of 21,779 Series A Preferred Shares
owned by Sunrise Foundation Trust, 366 shares of common stock due
to the
deemed conversion of 23 Series A Preferred Shares owned by Sunrise
Securities Corp. and 282,307 shares of common stock due to the deemed
conversion of 17,744 shares of common stock owned by Sunrise Equity
Partners. Further includes 800,527 shares of common stock issuable
upon
exercise of 800,527 warrants owned by Nathan A. Low, 200,132 shares
of
common stock issuable upon exercise of 200,132 warrants owned by
Sunrise
Foundation Trust and 223,442 shares of common stock issuable upon
exercise
of 223,442 warrants owned by Sunrise Securities Corp.
|
9. |
The
address of Theseus Fund, L.P f/k/a Minotaur Fund LLP is 131 Olive
Hill
Lane, Woodside, CA 94062. See footnote 1 for information relating
to the
voting proxy granted to Jay Gelman by Theseus Fund, L.P. f/k/a Minotaur
Fund LLP.
|
10. |
Mr.
Corfman
is the direct beneficial owner of 500,000 shares of common stock
and the
indirect beneficial owner of 5,000,000 shares of common stock beneficially
owned by Theseus
Fund, L.P f/k/a Minotaur Fund LLP. Mr. Corfman’s business address is 131
Olive Hill Lane, Woodside, CA 94062.
|
The
following table sets forth, as of November 15, 2006, information regarding
the
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act
of 1934) of the Company's Series A Non Redeemable Convertible Preferred Stock
("Series A Preferred Shares") based upon the most recent information available
to the Company for (i) each person known by the Company to own beneficially
more
than five (5%) percent of the Company's outstanding Series A Preferred Shares,
(ii) each of the Company's officers and directors and (iii) all officers and
directors of the Company as a group.
Beneficial
ownership is determined in accordance with the rules of the SEC, and for
calculating the shares and percentage beneficially owned by each Selling
Security Holder includes any securities which the person has the right to
acquire within 60 days of the date of this Information Statement through the
conversion or exercise of any security or right. The terms of the Series A
Preferred Shares restrict each holder's right to convert the Series A Preferred
Shares to the extent that beneficial ownership of such holder and its affiliates
would exceed 4.999% or 9.999% of the shares of Common Stock that would be
outstanding after giving effect to such conversion.
|
|
Shares
Owned Beneficially
|
|
|
|
Series
A Convertible
Non
Redeemable Preferred Shares
|
|
Name
and address of beneficial owner
|
|
Amount
of beneficial ownership
|
|
Percent
of
Class
|
|
|
|
|
|
|
|
Jay
Gelman (11)
|
|
|
168,427
|
|
|
64.4
|
%
|
All
executive officers and directors as a group (11)
|
|
|
168,427
|
|
|
64.4
|
%
|
Nathan
A. Low (12) (13)
c/o
Sunrise Securities Corp., 641 Lexington Avenue N.Y., N.Y.
10022
|
|
|
255,459
|
|
|
97.6
|
%
|
Nathan
A. Low Roth IRA (14)
c/o
Sunrise Securities Corp.
641
Lexington Avenue
N.Y.,
N.Y. 10022
|
|
|
143,967
|
|
|
55.0
|
%
|
Nathan
A. Low Family Trust (15)
c/o
Sunrise Securities Corp.
641
Lexington Avenue
N.Y.,
N.Y. 10022
|
|
|
24,407
|
|
|
9.3
|
%
|
Sunrise
Equity Partners
c/o
Sunrise Securities Corp.
641
Lexington Avenue
N.Y.,
N.Y. 10022
|
|
|
17,744
|
|
|
6.8
|
%
|
Sunrise
Foundation Trust
c/o
Sunrise Securities Corp.
641
Lexington Avenue
N.Y.,
N.Y. 10022
|
|
|
21,779
|
|
|
8.3
|
%
|
Level
Counter LLC (16)
641
Lexington Avenue
25th
Floor
N.Y.,
N.Y. 10022
|
|
|
17,744
|
|
|
6.8
|
%
|
Amnon
Mandelbaum (17)
641
Lexington Avenue
25th
Floor
N.Y.,
N.Y. 10022
|
|
|
17,744
|
|
|
6.8
|
%
|
Marilyn
Adler (18)
641
Lexington Avenue
25th
Floor
N.Y.,
N.Y. 10022
|
|
|
17,744
|
|
|
6.8
|
%
|
11. |
Consists
of 24,407 Series A Preferred Shares subject to a voting proxy granted
to
Jay Gelman by the Nathan A. Low Family Trust, 143,967 Series A Preferred
Shares subject to a voting proxy granted to Jay Gelman by the Nathan
A.
Low Roth IRA and 53 Series A Preferred Shares subject to a voting
proxy
granted to Jay Gelman by Northumberland Holdings, LTD.
|
12. |
Mr.
Low has sole dispositive and voting power in Sunrise Securities Corp.
Mr.
Low's wife has sole voting and investment power in the shares owned
by
Nathan A. Low Family Trust. Mr. Low has shared voting and investment
power
in Level Counter LLC, which has sole investment and voting power
in the
shares owned by Sunrise Equity Partners. Mr. Low has shared voting
and
investment power in the shares owned by Sunrise Foundation Trust.
Mr. Low
disclaims beneficial ownership of the shares owned by Nathan A. Low
Family
Trust, Sunrise Equity Partners and Sunrise Foundation
Trust.
|
13. |
Consists
of 47,539 Series A Preferred Shares owned by Nathan A. Low, 143,967
Series
A Preferred Shares owned by Nathan A. Low Roth IRA, 102,744 Series
A
Preferred Shares owned by Sunrise Equity Partners, 24,407 Series
A
Preferred Shares owned by Nathan A. Low Family Trust, 21,779 Series
A
Preferred Shares owned by Sunrise Foundation Trust and 23 Series
A
Preferred Shares owned by Sunrise Securities Corp.
|
14. |
See
footnote 11 for information relating to the voting proxy granted
to Jay
Gelman by the Nathan A. Low Roth IRA.
|
15. |
See
footnote 11 for information relating to the voting proxy granted
to Jay
Gelman by the Nathan A. Low Family Trust.
|
16. |
Level
Counter LLC has sole investment and voting power in the shares owned
by
Sunrise Equity Partners. Level Counter LLC disclaims beneficial ownership
of these shares.
|
17. |
Mr.
Mandelbaum has shared voting and investment power in Level Counter
LLC,
which has sole investment and voting power in the shares owned by
Sunrise
Equity Partners. Mr. Mandelbaum disclaims beneficial ownership of
the
shares owned by Sunrise Equity
Partners.
|
18. |
Consists
of shares owned by Level Counter LLC. Ms. Adler has shared voting
and
investment power in Level Counter LLC, which has sole investment
and
voting power in the shares owned by Sunrise Equity Partners. Ms.
Adler
disclaims beneficial ownership of the shares owned by Sunrise Equity
Partners.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
None
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
General
Our
Board
of Directors has appointed Mahoney Cohen & Company, CPA, P.C. as its
independent registered public accounting firm to audit and review the financial
statements of our Company for the fiscal year ending December 31, 2006, subject
to ratification by the shareholders.
In
the
event that the shareholders fail to ratify this reappointment, other independent
registered public accounting firms will be considered upon recommendation of
the
Audit Committee. Even if this reappointment is ratified, our Board of Directors,
in its discretion, may direct the appointment of a new independent registered
public accounting firm at any time during the year, if the Board believes that
such a change would be in the best interest of our Company and its
shareholders.
A
representative of Mahoney Cohen & Company, CPA, P.C. is expected to be
present at the annual meeting, will have an opportunity to make a statement
if
he desires to do so, and will be available to respond to appropriate questions.
Information
Concerning Fees Paid to Independent Registered Public Accounting Firms for
the
fiscal years ended December 31, 2005 and 2004.
Set
forth
below is certain information concerning fees by Mahoney Cohen & Company ,
CPA, P.C. in respect of services provided for 2005 and 2004. The Audit Committee
has determined that the provision of all services is compatible with maintaining
the independence of Mahoney Cohen & Company, CPA, P.C.
Audit
Fees.
Mahoney
Cohen & Company, CPA, P.C. billed us approximately $119,000 for professional
services rendered for (1) the audit of the annual financial statements for
2005,
(2) the reviews of the financial statements included in reports on Form 10-QSB
for periods within 2005 and (3) related regulatory filings for periods within
2005; and approximately $161,000 for professional services rendered for (1)
the
audit of the annual financial statements for 2004, (2) the reviews of the
financial statements included in reports on Form 10-QSB for periods within
2004
and (3) related regulatory filings for periods within 2004.
Audit
Related Fees.
Mahoney
Cohen & Company CPA, P.C. did not provide any audit related services in 2005
and 2004, respectively.
Tax
Fees.
Mahoney
Cohen & Company, CPA, P.C. did not provide any tax services in 2005 and
2004, respectively.
Tax
and Other Fees.
In 2005,
Mahoney Cohen & Company, CPA, P.C. billed us approximately $14,000 for
services in connection with our potential acquisition of Foto Electric Supply
Co., Inc. The potential acquisition subsequently terminated in accordance with
its terms. In 2004, Mahoney Cohen & Company, CPA, P.C. did not provide any
other services.
Audit
Committee Pre-Approval Policies and Procedures.
The
Audit
Committee is directly and solely responsible for oversight, engagement and
termination of any independent registered public accounting firm employed by
the
Company for the purpose of preparing or issuing an audit report or related
work.
The
Committee (i) meets with the independent registered public accounting firm
prior
to the audit and discusses the planning and staffing of the audit; (ii) approves
in advance the engagement of the independent registered public accounting firm
for all audit services and non-audit services and approves the fees and other
terms of any such engagement; (iii) obtains periodically from the independent
registered public accounting firm a formal written statement of the matters
required to be discussed by Independent Standards Board Statement No. 1, and,
in
particular, describing all relationships between the auditor and the Company;
(iv) discusses with the independent registered public accounting firm any
disclosed relationships or services that may impact auditor objectivity and
independence; and (v) conducts periodic meetings with the independent registered
public accounting firm regarding maters required to be discussed under
Statements on Auditing Standards No. 61, as amended.
Changes
in Registrant's Certifying Accountant
Reference
is made to the section titled “Business Background” below for a discussion
relating to the business background of the Company.
(a) |
Previous
independent accountants
|
(i) Effective
July 7, 2004, the Company, then Essential Reality, Inc., dismissed Stonefield
Josephson, Inc. as its independent accountants;
(ii) This
firm's
reports on the financial statements of Essential Reality, Inc. for both fiscal
years ended December 31, 2003 and 2002 were modified as to uncertainty that
Essential Reality, Inc. will continue as a going concern; other than this,
the
accountant's report on the financial statements for those periods neither
contained an adverse opinion or a disclaimer of opinion, nor was qualified
or
modified as to uncertainty, audit scope, or accounting principles;
(iii) In
connection
with its audits for the two most recent fiscal years and through July 7, 2004,
there have been no disagreements with Stonefield Josephson, Inc. on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Stonefield Josephson would have caused them to make reference
to
the subject matter of the disagreement in connection with their
reports;
(iv) During
the
two most recent fiscal years and through July 7, 2004, there have been no
reportable events as defined in Item 304 (a)(1)(v) of Regulation S-K; and (v)
Essential Reality, Inc. requested that Stonefield Josephson, Inc. furnish it
with a letter addressed to the SEC stating whether it agrees with the above
statements. A copy of such letter is attached as Exhibit 16.1 to Essential
Reality, Inc.’s Form 8-K filed on July 14, 2004.
(b) |
New
independent accountants
|
Essential
Reality, Inc. engaged Mahoney Cohen & Company, CPA, P.C. as its new
independent accountants as of July 7, 2004. During the two most recent fiscal
years and through July 7, 2004, Essential Reality, Inc. has not consulted with
Mahoney Cohen & Company, CPA, P.C. regarding (i) the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on Essential Reality, Inc.’s
Consolidated financial statements, and no written report of oral advice was
provided to Essential Reality, Inc. reaching a decision as to an accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K,
or a
reportable event, as that term is defined in Item 304 (a)(1)(iv) of Regulation
S-K. Mahoney Cohen & Company, CPA, P.C. was appointed as the independent
accountant of Alliance Corner Distributors, Inc on January 4, 2004.
The
Board of Directors unanimously recommends that you vote FOR such ratification
designated as Proposal 2 on the enclosed proxy card.
PROPOSAL
3
APPROVAL
OF THE ALLIANCE DISTRIBUTORS HOLDING INC. 2006 STOCK PLAN
Subject
to approval by shareholders, the Directors have adopted a plan that will enable
us to grant equity and equity-linked awards to our Directors, officers,
employees and other persons who provide services to the Company. This plan
is
called the "Alliance Distributors Holding Inc. 2006 Stock Plan," and is
sometimes referred to in this Proxy Statement as the “Plan.”
The
Plan
is intended to allow us to provide incentives that will (1) strengthen the
desire of highly competent persons to provides services to us and (2) further
stimulate their efforts on our behalf.
Additional
Information Concerning the Plan
The
following is a summary of certain key provisions of the Plan. A copy of the
Plan
is included as Exhibit B to this Proxy Statement.
Shares
Available. The maximum number of shares of common stock that may be delivered
under the Plan is 10,000,000, subject to adjustment for certain specified
changes to the Company's capital structure. Some awards under the Plan may
link
future payments to the awardee to the future value of a specified number of
shares of common stock. The number of shares used for reference purposes in
connection with these awards will be considered "delivered" for purposes of
computing the maximum number of shares that may be delivered under the Plan.
If
an award under the Plan terminates without the shares subject thereto being
delivered, the shares subject to such award will thereafter be available for
further awards under the Plan.
The
maximum number of shares of common stock that may be subject to awards of any
combination that may be granted during any fiscal year of the Company to any
one
individual is 10,000,000, subject to adjustment for certain specified changes
to
the Company's capital structure.
Eligibility.
All directors, officers and other employees and other persons who provide
services to the Company are eligible to participate in the Plan.
Administration.
The administrator of the Plan will be the board or any other committee which
the
board designates to serve as the administrator of the Plan. The board or
committee serving as administrator (the "Committee") will, among other things,
have the authority to: construe the Plan and any award under the Plan; select
the directors and officers to whom awards may be granted and the time or times
at which awards will be granted; determine the number of shares of common stock
to be covered by or used for reference purposes for any award; determine and
modify from time to time the terms, conditions, and restrictions of any award;
approve the form of written instrument evidencing any award; accelerate or
otherwise change the time or times at which an award becomes vested or when
an
award may be exercised or becomes payable; waive, in whole or in part, any
restriction or condition with respect to any award; and modify, extend or renew
outstanding awards, or accept the surrender of outstanding awards and substitute
new awards.
The
Committee has not yet made any awards under the Plan. Because the granting
of
awards is in the sole discretion of the Committee, the nature and magnitude
of
future awards cannot currently be determined.
Types
of
Awards. The types of awards that may be made under the Plan are stock options,
stock appreciation rights, restricted stock awards, and stock units. The
Committee will fix the terms of each award, including, to the extent relevant,
the following: (1) exercise price for options, base price for stock appreciation
rights, and purchase price, if any, for restricted stock awards, (2) vesting
requirements and other conditions to exercise, (3) term and termination, (4)
effect, if any, of change of control and (5) method of exercise and of any
required payment by the recipient. Additional information concerning the types
of awards that may be made is set forth below.
Stock
Options. The Committee may grant options that are qualified as "incentive stock
options" under Section 422 of the Internal Revenue Code ("ISOs") and options
that are not so qualified ("non-qualified options"). ISOs are subject to certain
special limitations, including the following: (1) the exercise price per share
may not be less than 100% of the fair market value per share of our common
stock
as of the grant date (110% of such fair market value, if the recipient owns
more
than 10% of the total combined voting power of all classes of our outstanding
shares), (2) the term may not exceed 10 years (5 years, if the recipient owns
more than 10% of the total combined voting power of all classes of our
outstanding shares), and (3) the recipient must be an employee of our
Company.
Stock
Appreciation Rights. A stock appreciation right gives the holder the opportunity
to benefit from the appreciation of our common stock over a specified base
price
determined by the Committee. Upon exercise of a stock appreciation right, the
holder has the right to receive in respect of each share subject thereto a
payment equal to the excess, if any, of: (1) the fair market value of a share
of
our common stock as of the exercise date over (2) the specified base price.
At
the discretion of the Committee, any required payment may be made in cash,
shares of our common stock, or both.
Restricted
Stock Awards. A restricted stock award entitles the recipient to acquire shares
of our common stock for no consideration or for the consideration specified
by
the Committee. The shares will be subject to such vesting periods and other
restrictions and conditions as the Committee determines.
Stock
Units. A stock unit is a bookkeeping account to which there is credited the
fair
market value of a share of our common stock. The value of the account is
subsequently adjusted to reflect changes in the fair market value. Upon exercise
of a stock unit, the holder is entitled to receive the value of the account.
At
the discretion of the Committee, any required payment may be made in cash,
shares of our common stock, or both.
The
Committee may issue awards subject to the satisfaction of specified performance
goals. For this purpose, the performance goals may be based on any one or more
of the following performance criteria: cash flow; cash flow from operations;
earnings (including, but not limited to, earnings before interest, taxes,
depreciation and amortization); earnings per share, diluted or basic; earnings
per share from continuing operations; net asset turnover; inventory turnover;
capital expenditures; debt; debt reduction; working capital; return on
investment; return on sales; net or gross sales; market share; economic value
added; cost of capital; change in assets; expense reduction levels;
productivity; delivery performance; safety record; stock price; return on
equity; total stockholder return; return on capital; return on assets or net
assets; revenue; income or net income; operating income or net operating income;
operating profit or net operating profit; gross margin, operating margin or
profit margin; and completion of acquisitions, business expansion, product
diversification, new or expanded market penetration and other non-financial
operating and management performance objectives.
Certain
Corporate Transactions
If
certain corporate transactions specified in the Plan occur, the Committee shall
adjust the Plan and awards as it deems necessary or appropriate to prevent
enlargement or dilution of rights, including, without limitation, (1) the number
of shares of stock that can be granted; (2) the number and kind of shares or
other securities subject to any then outstanding awards and (3) the exercise
price, base price, or purchase price applicable to outstanding awards under
the
Plan. The Committee may cancel outstanding awards, but not outstanding stock
or
restricted stock awards, in connection with any merger or consolidation of
our
Company or any sale or transfer of all or part of our assets or business, or
any
similar event. The Committee may determine to pay no compensation whatsoever
for
any canceled awards that are not in-the-money (as defined below) or for any
canceled awards to the extent not vested. The Company is required to provide
payment in cash or other property for the in-the-money value of the vested
portion of awards that are in-the-money and that are canceled as aforesaid.
Awards are in-the-money only to the extent of their then realizable market
value, without taking into account the potential future increase in the value
of
the award (whether under Black-Scholes-type formulas or otherwise).
Any
adjustment of ISOs shall be made only to the extent not constituting a
"modification" within the meaning of Code section 424(h)(3). Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Code section 162(m), such adjustments shall be made only to the extent that
the
Administrator determines that such adjustments may be made without causing
the
Company to be denied a tax deduction on account of Code section 162(m).
Amendment.
The Board may amend, alter, suspend, discontinue, or terminate the Plan or
any
portion thereof at any time; provided that no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement applicable to the Plan (including as necessary to prevent the
Corporation from being denied a tax deduction on account of Code section
162(m)); and provided further that any such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any Participant
or
any holder or beneficiary of any Award theretofore granted shall not to that
extent be effective without the consent of the affected Participant, holder
or
beneficiary.
Term
of
Plan. No award may be granted under the Plan after the close of business on
the
day immediately preceding the tenth anniversary of the adoption of the Plan.
However, all awards made prior to such time will remain in effect in accordance
with their terms.
Certain
Federal Income Tax Considerations; Matters Relating to Code section 162(m).
Under Code section 162(m), we are generally precluded from deducting
compensation in excess of $1 million per year paid to our chief executive
officer and our next four highest paid executive officers. For purposes of
this
limitation, there is excluded from compensation any payments that an executive
receives that constitutes performance-based compensation (which must meet
certain requirements specified by the Code). Some or all of the awards that
may
be granted under the new Plan you are being asked to approve may not constitute
performance-based compensation and, accordingly, compensation realized in
respect of awards may be subject to the Code section 162(m) limitation.
Consequently, the granting of awards under the Plan, either alone or in
conjunction with other compensation, could cause us to have non-deductible
compensation expense. To the extent any awards are granted by the Committee
with
the intent that they qualify as performance-based compensation under Code
section 162(m), the awards will be implemented by the Committee in a manner
designed to preserve such awards as performance-based compensation, including,
but not limited to, the determination and designation of any applicable
performance goals that must be satisfied to earn such awards.
Summary
of Federal Income Tax Consequences of Stock Options Granted Under the Plan
The
following summary is intended only as a general guide as to the federal income
tax consequences under current law with respect to the grant of options under
the Plan and does not attempt to describe all possible federal tax consequences
of such participation. Furthermore, the tax consequences of options and other
awards granted under the Plan are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
Non-Qualified
Options. No income generally will be recognized by a participant upon the grant
of a non-qualified option. Upon exercise, the participant will generally have
ordinary income in the amount equal to the excess of the fair market value
of
the shares acquired over the exercise price. The income recognized by an
employee participant will be subject to tax withholding. Upon a later sale
of
such shares, the participant will have capital gain or loss in an amount equal
to the difference between the amount realized on such sale and the tax basis
of
the shares sold. The Company generally will be entitled to a tax deduction
in
the same amount as the ordinary income recognized by the participant with
respect to shares acquired upon exercise of the non-qualified
option.
Incentive
Stock Options. No income will be recognized by a participant upon the grant
of
an incentive stock option. Further, except as otherwise provided below, the
participant generally will recognize no income at the time of exercise (although
a participant may have income for purposes of alternative minimum tax
calculations) and we generally will not be allowed a deduction for federal
income tax purposes in connection with the grant or exercise of an option.
If
the participant holds the acquired shares two years from the date of grant
and
one year from the date of exercise the entire gain (or loss) realized when
the
participant eventually disposes of the stock is generally treated as long term
capital gain (or loss). If the shares are disposed of before such holding period
requirements are satisfied, the participant will recognize ordinary income
in an
amount equal to the lesser of the difference between (1) the exercise price
and
the fair market value of the shares on the date of exercise or (2) the exercise
price and the sales proceeds. Any remaining gain or loss will be treated as
capital gain or loss. The Company generally will be entitled to a federal income
tax deduction equal to the amount of any ordinary income recognized by the
participant.
If
an
award under the Plan constitutes nonqualified deferred compensation that is
subject to Code section 409A, certain requirements must be met (e.g., rules
regarding deferral elections, distributions and accelerations of benefits).
If
the requirements are not satisfied, the participant may have to include an
amount in income currently (or, if later, when no longer subject to a
substantial risk of forfeiture), and may be subject to an additional tax equal
to 20% of the amount included in income plus interest from the date of deferral
(at the IRS underpayment rate plus 1%). Incentive stock options are generally
exempted from the requirements of Code section 409A and non-qualified options
are generally exempted if certain requirements are satisfied (e.g., if the
exercise price can never be less than the fair market value of the stock on
the
date of grant).
The
Board of Directors unanimously recommends that you vote FOR such ratification
designated as Proposal 3 on the enclosed proxy card.
VOTING
REQUIRED
Election
of Directors: Directors will be elected at the meeting by a plurality of
the votes cast by Common Stockholders and Series A Preferred Shares. On this
matter, abstentions will have no effect on the voting.
Ratification
of Appointment of Mahoney Cohen & Company, CPA, P.C: The ratification
of the reappointment of Mahoney
Cohen & Company, CPA, P.C. as
the
Company’s independent registered public accounting firm to audit the financial
statements of our Company for the fiscal year ending December 31,
2006
requires
the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on the matter.
Abstentions will have the same effect as a vote against such ratification,
whereas broker non-votes and shares not represented at the meeting will not
be
counted for purposes of determining whether such ratification has been
approved.
Adoption
of Alliance
Distributors Holding Inc. 2006 Stock Plan: The
adoption of the Alliance
Distributors Holding Inc. 2006 Stock Plan requires
the affirmative vote of a majority of all outstanding shares entitled to vote
for approval. Because this proposal requires the affirmative vote of a majority
of all outstanding shares entitled to vote for approval, an abstention will
have
the same legal effect as a vote against such proposal.
OTHER
MATTERS
Expense
Of Solicitation
The
cost
of soliciting proxies, which also includes the preparation, printing and mailing
of this Proxy Statement, will be borne by the Company. Solicitation will be
made
by the Company primarily through the mail, but regular employees of the Company
may solicit proxies personally, by telephone or telegram. The Company has no
contract or arrangement with any party in connection with the solicitation
of
proxies. The Company will request brokers and nominees to obtain voting
instructions of beneficial owners of stock registered in their names and will
reimburse them for any expenses incurred in connection therewith.
Shareholder
Communications With the Board of Directors
Generally,
shareholders who have questions or concerns regarding the Company should contact
our Investor Relations department at Alliance Distributors Holding Inc., 1160
Commerce Avenue, Bronx, New York 1046. However, shareholders may communicate
with the Board of Directors by sending a letter to Board of Directors of
Alliance Distributors Holding Inc., c/o Corporate Secretary, 1160 Commerce
Avenue, Bronx, New York 10462. Any communications must contain a clear notation
indicating that it is a "Shareholder--Board Communication" or a
"Shareholder--Director Communication" and must identify the author as a
shareholder. The office of the Corporate Secretary will receive the
correspondence and forward appropriate correspondence to the Chairman of the
Board or to any individual director or directors to whom the communication
is
directed. The Company reserves the right not to forward to the Board of
Directors any communication that is hostile, threatening, illegal, does not
reasonably relate to the Company or its business, or is similarly inappropriate.
The office of the Corporate Secretary has authority to discard or disregard
any
inappropriate communication or to take any other action that it deems to be
appropriate with respect to any inappropriate communications
Proposals
Of Shareholders
Notice
Required to Include Proposals in Our Proxy Statement
We
will
review for inclusion in next year’s proxy statement shareholder proposals
received by August 31, 2007. All proposals must meet the requirements set forth
in the rules and regulations of the SEC in order to be eligible for inclusion
in
the proxy statement. Proposals should be sent to Alliance Distributors Holding
Inc., c/o Corporate Secretary, 1160 Commerce Avenue, Bronx, New York
10462.
Notice
Required to Bring Business Before an Annual Meeting
Our
by-laws establish an advance notice procedure for shareholders to make
nominations of candidates for election of director or to bring other business
before an annual meeting. Under these procedures, a shareholder that proposes
to
nominate a candidate for director or propose other business at the fiscal year
2007 annual meeting of shareholders, must give us written notice of such
nomination or proposal not less than 60 days and not more than 90 days prior
to
the scheduled date of the meeting (or, if less than 70 days’ notice or prior
public disclosure of the date of the meeting is given, then not later than
the
15th
day
following the earlier of (i) the date such notice was mailed or (ii) the day
such public disclosure was made). Such notice must provide certain information
as specified in our by-laws and must be received at our principal executive
offices by the deadline specified above.
Annual
Report; Exhibits To Annual Report on Form 10-KSB
A
copy of
our Annual Report for the 2005 fiscal year has been mailed concurrently with
this Proxy statement to all stockholders entitled to notice of and to vote
at
the Annual Meeting. A COPY OF OUR FORM 10-KSB FOR FISCAL YEAR ENDED 2005 IS
AVAILABLE UPON REQUEST, WITHOUT CHARGE. WE WILL FURNISH ANY EXHIBIT TO THE
FORM
10-KSB UPON THE PAYMENT OF A REASONABLE FEE WHICH FEE SHALL BE LIMITED TO OUR
REASONABLE EXPENSES IN FURNISHING ANY SUCH EXHIBIT.
ANY
REQUEST SHOULD BE DIRECTED TO OUR CORPORATE SECRETARY AT Alliance Distributors
Holding Inc., c/o Corporate Secretary, 1160 Commerce Avenue, Bronx, New York
10462.
Other
Matters
The
Board
of Directors of our Company does not know of any matter to be presented for
action at the meeting other than the proposals described herein. If any other
matters not described herein should properly come before the meeting for
stockholder action, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in respect thereof in accordance with the
board
of directors’ recommendations.
PLEASE
DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
Dated: December
1, 2006
By
Order
of the Board of Directors
Stephen
Agress, Secretary
EXHIBIT
A
ALLIANCE
DISTRIBUTORS HOLDING INC.
AUDIT
COMMITTEE CHARTER
The
principal purpose of the Audit Committee is to oversee the integrity of the
Company's accounting and financial reporting processes and the audits of the
Company's financial statements. In particular, the Audit Committee shall oversee
(a) the integrity of the Company's financial statements and financial reporting
process and the Company's systems of internal accounting and financial controls,
(b) the Company's compliance with legal and regulatory requirements, (c) the
engagement of the independent auditors and the evaluation of the independent
auditors' qualifications, independence and performance, and (d) the fulfillment
of the other responsibilities set out herein and as the Board of Directors
may
from time to time prescribe. The Audit Committee shall also prepare the report
required by the Securities and Exchange Commission (the "Commission") to be
included in the Company's annual proxy statement. The term "independent
auditors" means the auditors that perform the audits of the Company that are
required under the Securities Exchange Act of 1934 (the "Exchange Act") or
the
rules of the Commission thereunder.
The
Audit
Committee shall meet as often as it deems necessary or advisable, but not less
frequently than four times annually. The Audit Committee shall meet periodically
with the Company's management and its independent auditors in separate or joint
sessions as deemed appropriate by the Audit Committee. The Audit Committee
may
request any officer or employee of the Company or the Company's outside counsel
or independent auditors to attend any meeting of the Audit Committee or to
meet
with any members of, or consultants to, the Audit Committee.
The
Audit
Committee shall be appointed by the Board. During the period of time the
Company’s common stock trades on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Audit Committee shall be comprised of not fewer than three
members of the Company's Board, each of whom shall meet the independence and
other requirements of the Nasdaq National Market. The Audit Committee shall
at
all times meet the independence and other requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), the rules and regulations of the
Commission regarding audit committees, and the rules and regulations of any
other relevant body, including those regarding independence and
experience.
All
members of the Audit Committee shall be able to read and understand fundamental
financial statements. At least one member of the Audit Committee shall be an
audit committee financial expert as defined by the Commission, and at least
one
member of the Audit Committee shall satisfy any applicable financial
sophistication or financial expert requirements of the Nasdaq National
Market.
The
Company's independent auditors are ultimately accountable to the Audit Committee
in its capacity as a committee of the Company's Board of Directors (the
"Board"), and the independent auditors shall report directly to the Audit
Committee. The Audit Committee shall have sole and direct authority and
responsibility to select, hire, oversee, evaluate, approve the compensation
of,
and, where appropriate, replace the Company's independent auditors.
In
discharging its oversight role, the Audit Committee is granted the power to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain and
determine funding for, at the Company's expense, independent legal counsel,
additional independent auditors or other experts and advisors for this purpose.
The Company shall provide the Audit Committee with appropriate funding to
perform its duties, including payment of the Company's independent auditors
and
any experts or advisors retained by the Audit Committee.
V. |
KEY
FUNCTIONS AND RESPONSIBILITIES
|
The
following functions shall be the common recurring activities of the Audit
Committee in carrying out its duties. The functions and responsibilities are
set
forth as a guide and may be varied from time to time by the Audit Committee
as
appropriate under the circumstances.
The
Audit
Committee, to the extent it deems necessary or appropriate, shall:
FINANCIAL
STATEMENT AND DISCLOSURE MATTERS
1.
Review
and discuss with management and the Company's independent auditors the Company's
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form
10-KSB.
2.
Review
and discuss with management and the Company's independent auditors the Company's
quarterly financial statements prior to the filing of its Form 10-QSB, including
the results of the independent auditors' review of the quarterly financial
statements.
3.
Discuss with management and the Company's independent auditors significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in
the
Company's selection or application of accounting principles, the quality and
adequacy of the Company's internal controls and any special steps adopted in
light of material deficiencies in such controls.
4.
Review
with the auditors and management significant issues that arise regarding
accounting principles and financial statement presentation, including the
adoption of new, or material changes to existing, critical accounting policies
or to the application of those policies, the potential effect of alternative
accounting policies available under GAAP, the potential impact of regulatory
and
accounting initiatives and any other significant reporting issues and
judgments.
5.
Review
and discuss with management the Company's financial results to be included
in
its earnings press releases, including any "pro forma" or "adjusted" non-GAAP
information (such function may be performed by the Chairperson of the Audit
Committee on behalf of the Audit Committee in the case of quarterly financial
results).
6.
Review
disclosures made to the Audit Committee by the Company's CEO and CFO during
their certification and disclosure process for reports on Form 10-KSB and Form
10-QSB about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management
or
other employees who have a significant role in the Company's internal
controls.
OVERSIGHT
OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITORS
7.
Pre-approve all auditing services, including the annual audit plan, and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Company or for the Audit Committee or Board by the Company's
independent auditors. However, as permitted pursuant to Section 10A(i)(3) of
the
Act, authority for such pre-approval may be delegated to one or more Audit
Committee members, provided that all approvals of audit and non-audit services
pursuant to this delegated authority be presented to the full Audit Committee
at
its next meeting.
8.
Meet
with the independent auditors prior to the audit to discuss the planning and
staffing of the audit. Without management present, discuss with the Company's
independent auditors significant matters relating to the conduct of audits
and
attestation reports on management's assessment of internal control
over
financial reporting, including any difficulties encountered in the course of
audit work, any restrictions on the scope of activities or access to requested
information, any significant disagreements with management and the adequacy
of
the Company's internal control over financial reporting and disclosure controls
and procedures. Discuss with the independent auditors matters relating to the
report of the Audit Committee that is required by Commission rules to be
included in the Company's annual proxy statement.
9.
Obtain
from the Company's independent auditors annually a formal written statement
delineating all relationships between the independent auditors and the Company;
discuss with the independent auditors any such disclosed relationships and
their
impact on the independent auditors' independence; and take or recommend that
the
Board take appropriate action regarding the independence of the independent
auditors. Ensure the rotation of the audit partners as required by law, and
monitor the Company's hiring of employees or former employees of the independent
auditors to ensure compliance with applicable law.
10.
Obtain and review an annual report by the Company's independent auditors
describing the firm's internal quality-control procedures and any material
issues raised by the most recent internal quality-control review, or peer review
of the firm, or by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal with any
issues.
11.
Evaluate the qualifications, performance and independence of the Company's
independent auditors, including considering whether the independent auditors'
quality controls are adequate and the provision of permitted non-audit services
is compatible with maintaining the independent auditors' independence. The
Audit
Committee shall present its conclusions with respect to the independent auditors
to the Board at least once each year.
COMPLIANCE
OVERSIGHT RESPONSIBILITIES
12.
At
the conclusion of each audit, obtain from the Company's independent auditors
assurance that during the course of the audit, the auditors did not become
aware
that an occurrence or a likely occurrence of an illegal act obligates the
independent auditors under Section 10A(b) of the Exchange Act to assure that
the
Audit Committee is adequately informed of such occurrence.
13.
Approve or reject proposed related party transactions pursuant to requirements
of the Exchange Act or NASDAQ.
14.
Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or
auditing matters, and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
15.
Discuss with the Company's General Counsel and outside counsel any legal matters
that may have a material impact on the financial statements or the Company's
compliance policies.
CHARTER
16.
Review and reassess the adequacy of this charter once each year and, if
appropriate, make recommendations to the Board as to changes to this charter
as
the Audit Committee may deem necessary or advisable.
17.
Publish this charter in the proxy materials relating to Annual Meetings of
Stockholders at least once every three years in accordance with SEC
regulations.
OTHER
18.
Discuss with management and the Board policies with respect to risk assessment
and risk management, and review and discuss with management, the Board and
the
Company's independent auditors any annual reports by management on the Company's
internal control over financial reporting that are required by Commission rules
and any related attestation reports that are required from the independent
auditors pursuant to Commission rules.
VI. |
LIMITATION
OF AUDIT COMMITTEE'S ROLE
|
The
Audit
Committee's role is one of oversight. While the Audit Committee has the
responsibilities and powers set forth in this Charter, it is not the duty
of the
Audit Committee to plan or conduct audits or to determine that the Company's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of management and the Company's
independent auditors.
EXHIBIT
B
ALLIANCE
DISTRIBUTORS HOLDING INC. 2006 STOCK PLAN
ARTICLE
I
General
1.1. Purpose.
The purpose of the Alliance Distributors Holding Inc. 2006 Stock Plan,
(the
“Plan”), is to provide additional incentive to officers, directors, employees
and others who render services to Alliance Distributors Holding Inc. (the
“Corporation”) and any present or future Subsidiary. It is intended that Awards
granted under the Plan strengthen the desire of such persons to join and
remain
in the employ of the Corporation, or otherwise render services to the
Corporation, and stimulate their efforts on behalf of the
Corporation.
1.2. Term.
No
Award shall be granted under the Plan after the close of business on the
day
immediately preceding the 10-year anniversary of the adoption of the plan.
Subject to other applicable provisions of the Plan, all Awards made under
the
Plan prior to such termination of the Plan shall remain in effect until
such
Awards have been satisfied or terminated in accordance with the Plan and
the
terms of such Awards.
1.3. Shares
Subject to the Plan. Subject to adjustments as provided in Article IX,
the
number of shares of Stock that may be delivered, purchased or used for
reference
purposes (with respect to SARs or Stock Units) with respect to Awards granted
under the Plan shall be 10,000,000 shares of Common Stock of Alliance
Distributors Holding Inc., (“Stock”). If any Award, or portion of an Award,
under the Plan expires or terminates unexercised, becomes unexercisable
or is
forfeited or otherwise terminated, surrendered or canceled as to any shares
without the delivery of shares of Stock or other consideration, the shares
subject to such Award shall thereafter be available for further Awards
under the
Plan.
1.4. Subject
to adjustments as provided in Article IX, the maximum number of shares
of Stock
subject to Awards of any combination that may be granted during any one
fiscal
year of the Corporation to any one individual shall be limited to 10,000,000
shares; provided that such number shall be adjusted pursuant to Article
IX, and
shares shall otherwise be counted against such number, only in a manner
which
will not cause Awards granted under the Plan to fail to qualify as
"performance-based compensation" under Code section 162(m).
ARTICLE
II
Definitions
For
purposes of the Plan, the following terms shall be defined as set forth
below.
2.1. Administrator
means the Board, the Special Stock Committee or any other committee which
is
designated by the Board as the "Administrator."
2.2. Award
means any Stock Options (including ISOs and NSOs), SARs (including free-standing
and tandem SARs), Restricted Stock Awards, Stock Units, or any combination
of
the foregoing granted pursuant to the Plan, except, however, when the term
is
being used under the Plan with respect to a particular category of grant
in
which case it shall only refer to that particular category of
grant.
2.3. Board
means the Board of Directors of the Corporation.
2.5 Fair
Market Value means, as of any date,
2.5.1 if
the
Stock is not traded on any over-the-counter market or on a national securities
exchange, the fair market value determined by the Board in good faith using
a
reasonable valuation method;
2.5.2 if
the
Stock is traded in the over-the-counter market, based on most recent closing
price for the Stock on the date the calculation thereof shall be made;
or
2.5.3 if
the
Stock is listed on a national securities exchange, based on the most recent
closing price for the Stock of the Corporation on such exchange.
2.6. Grant
Agreement means the agreement between the Corporation and the Participant
pursuant to which the Corporation authorizes an Award hereunder. Each Grant
Agreement entered into between the Corporation and a Participant with respect
to
an Award granted under the Plan shall contain such provisions, consistent
with
the provisions of the Plan, as may be established by the
Administrator.
2.7. Grant
Date means the date on which the Administrator formally acts to grant an
Award
to a Participant or such other date as the Administrator shall so designate
at
the time of taking such formal action.
2.8. ISO
means
any Stock Option designated and qualified as an "incentive stock option"
as
defined in Code section 422.
2.9. NSO
means
any Option that is not an ISO.
2.10. Option
means any option to purchase shares of Stock granted under Article
V.
2.11. Parent
means a corporation, whether now or hereafter existing, within the meaning
of
the definition of "Parent Corporation" provided in Code section 424(e),
or any
successor to such definition.
2.12. Participant
means any person to whom any Award is granted pursuant to the Plan.
2.13. Performance
Goals means any
one
or more of the following performance criteria, either individually,
alternatively or in any combination, and subject to such modifications
or
variations as specified by the Administrator, applied to either the Corporation
as a whole or to a business unit or Subsidiary, either individually,
alternatively or in any combination, and measured over a period of time
including any portion of a year, annually or cumulatively over a period
of
years, on an absolute basis or relative to a pre-established target, to
previous
years' results or to a designated comparison group, in each case as specified
by
the Administrator: cash flow; cash flow from operations; earnings
(including, but not limited to, earnings before interest, taxes, depreciation
and amortization); earnings per share, diluted or basic; earnings per share
from
continuing operations; net asset turnover; inventory turnover; capital
expenditures; debt; debt reduction; working capital; return on investment;
return on sales; net or gross sales; market share; economic value added;
cost of
capital; change in assets; expense reduction levels; productivity; delivery
performance; safety record; stock price; return on equity; total
stockholder return; return on capital; return on assets or net
assets; revenue; income or net income; operating income or net
operating income; operating profit or net operating profit; gross
margin, operating margin or profit margin; and completion of acquisitions,
business expansion, product diversification, new or expanded market penetration
and other non-financial operating and management performance objectives.
To the
extent consistent with Code section 162(m) and the regulations promulgated
thereunder and unless otherwise determined by the Administrator at the
time the
Performance Goals are established, the Administrator shall, in applying
the
Performance Goals, exclude the adverse affect of any of the following events
that occur during a performance period: the impairment of tangible or intangible
assets; litigation or claim judgments or settlements; changes in tax law,
accounting principles or other such laws or provisions affecting reported
results; business combinations, reorganizations and/or restructuring programs
that have been approved by the Board; reductions in force and early retirement
incentives; and any extraordinary, unusual, infrequent or non-recurring
items
separately identified in the financial statements and/or notes thereto
in
accordance with generally accepted accounting principles.
2.14. Restricted
Stock Award means any Award of shares of restricted Stock granted pursuant
to
Article VII of the Plan.
2.15. SAR
means
a stock appreciation right, as awarded under Article VI.
2.16. Stock
means the voting common stock of the Corporation, subject to adjustments
pursuant to the Plan.
2.17. Stock
Unit means credits to a bookkeeping reserve account solely for accounting
purposes, where the amount of the credit shall equal the Fair Market Value
of a
share of Stock on the Grant Date (unless the Administrator provides otherwise
in
the Grant Agreement) and which shall be subsequently increased or decreased
to
reflect the Fair Market Value of a share of Stock. Stock Units do not require
segregation of any of the Corporation's assets. Stock Units are awarded
under
Article VII.
2.18. Subsidiary
means any corporation or other entity (other than the Corporation) in any
unbroken chain of corporations or other entities, beginning with the
Corporation, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
ARTICLE
III
Administration
3.1. General.
The Plan shall be administered by the Administrator. The Administrator's
determinations under the Plan (including without limitation determinations
of
the persons to receive Awards, the form, amount and timing of such Awards,
the
terms and provisions of such Awards and the agreements evidencing same)
need not
be uniform and may be made by the Administrator selectively among persons
who
receive, or are eligible to receive, Awards under the Plan, whether or
not such
persons are similarly situated.
3.2. Duties.
The Administrator shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations, agreements, guidelines
and instruments for the administration of the Plan and for the conduct
of its
business as the Administrator deems necessary or advisable, all within
the
Administrator's sole and absolute discretion. The Administrator shall have
full
power and authority to take all other actions necessary to carry out the
purpose
and intent of the Plan, including, but not limited to, the authority
to:
3.2.1. Construe
the Plan and any Award under the Plan;
3.2.2. Subject
to Section 4.1, select the persons to whom Awards may be granted and the
time or
times at which Awards shall be granted;
3.2.3. Determine
the number of shares of Stock to be covered by or used for reference purposes
for any Award;
3.2.4. Determine
and modify from time to time the terms and conditions, including restrictions,
of any Award (including provisions that would allow for cashless exercise
of
Awards and/or reduction in the exercise price of outstanding Awards) and
to
approve the form of written instrument evidencing Awards;
3.2.6. Impose
limitations on Awards, including limitations on transfer and repurchase
provisions; and
3.2.7. Modify,
extend or renew outstanding Awards, or accept the surrender of outstanding
Awards and substitute new Awards.
ARTICLE
IV
Eligibility
and Participation
4.1. Eligibility.
The persons eligible to participate in the Plan are officers, directors,
employees of the Corporation or its Subsidiaries and others who render
services
to the Corporation or its subsidiaries.
ARTICLE
V
Stock
Options
5.1. General.
Subject to the other applicable provisions of the Plan, the Administrator
may
from time to time grant to eligible Participants Awards of ISOs or NSOs.
The ISO
or NSO Awards granted shall be subject to the following terms and
conditions.
5.2. Grant
of
Option. The grant of an Option shall be evidenced by a Grant Agreement,
executed
by the Corporation and the Participant, describing the number of shares
of Stock
subject to the Option, whether the Option is an ISO or NSO, the Exercise
Price
of the Option, the vesting period for the Option and such other terms and
conditions that the Administrator deems, in it sole discretion, to be
appropriate, provided that such terms and conditions are not inconsistent
with
the Plan.
5.3. Exercise
Price. The price per share payable upon the exercise of each Option (the
"Exercise Price") shall be determined by the Administrator and set forth
in the
Grant Agreement; provided, however, that in the case of ISOs the Exercise
Price
shall not be less than 100% of the Fair Market Value of the shares on the
Grant
Date. Notwithstanding the immediately preceding sentence, the Exercise
Price of
any ISO granted to a Participant who owns, within the meaning of Code section
422(b)(6), after application of the attribution rules in Code section 424(d),
more than ten percent (10%) of the total combined voting power of all classes
of
shares of the Corporation, or Subsidiary corporations, shall not be less
than
110% of the Fair Market Value of the Stock on the Grant Date
5.4. Payment.
Options may be exercised in whole or in part by payment of the Exercise
Price of
the shares to be acquired in accordance with the provisions of the Grant
Agreement, and/or such rules and regulations as the Administrator may prescribe,
and/or such determinations, orders, or decisions as the Administrator may
make.
5.6. Reload
Options. The terms of an Option may provide for the automatic grant of
a new
Option Award when the Exercise Price of the Option and/or any related tax
withholding obligation is paid by tendering shares of Stock.
5.7. Restrictions
on ISOs. ISO Awards granted under the Plan shall comply in all respects
with
Code section 422 and, as such, shall meet the following additional
requirements:
5.7.1. Grant
Date. An ISO must be granted within ten (10) years of the earlier of the
Plan's
adoption by the Board of Directors or approval by the Corporation's shareholders
but will be an NSO and not an ISO if the Plan is not approved by shareholders
within twelve months from the grant of the option.
5.7.2. Term.
The
term of an ISO shall not exceed ten (10) years. Notwithstanding the immediately
preceding sentence, the term of any ISO granted to a Participant who owns,
within the meaning of Code section 422(b)(6), after application of the
attribution rules in Code section 424(d), more than ten percent (10%) of
the
total combined voting power of all classes of shares of the Corporation,
or
Subsidiary corporations, shall not exceed five (5) years.
5.7.3. Maximum
Grant. The aggregate Fair Market Value (determined as of the Grant Date)
of
shares of Stock with respect to which all ISOs first become exercisable
by any
Participant in any calendar year under this or any other plan of the Corporation
and Subsidiary corporations may not exceed $100,000 or such other amount
as may
be permitted from time to time under Code section 422. To the extent that
such
aggregate Fair Market Value shall exceed $100,000, or other applicable
amount,
such Options shall be treated as NSOs. In such case, the Corporation may
designate the shares of Stock that are to be treated as stock acquired
pursuant
to the exercise of an ISO by issuing a separate certificate for such shares
and
identifying the certificate as ISO shares in the stock transfer records
of the
Corporation.
5.7.4. Participant.
ISOs shall only be issued to employees of the Corporation, or Subsidiary
of the
Corporation.
5.7.6. Designation.
No option shall be an ISO unless so designated by the Administrator at
the time
of grant or in the Grant Agreement evidencing such Option.
5.7.7. Period
of
Exercise. Any Option which is an ISO shall in all events lapse unless exercised
by the Participant:
(i) prior
to
the 89th
day
after the date on which employment terminated, if termination was other
than by
reason of death; and
(ii) within
a
twelve-month period next succeeding the death of the Participant if termination
is by reason of death.
5.8. Exercisability.
Options shall be exercisable as provided in the Grant Agreement.
5.9. Transferability.
ISOs shall be non-transferable. Except as provided in the Grant Agreement,
NSOs
shall not be assignable or transferable by the Participant, except by will,
or
by the laws of descent and distribution.
5.10. Code
Section 162(m). With respect to any Options intended to qualify as
"performance-based compensation" under Code section 162(m), this Article
V
(including the substance of the Performance Goals, the timing of establishment
of the Performance Goals, the adjustment of the Performance Goals and
determination of the Award) shall be implemented by the Administrator in
a
manner designed to preserve such Awards as such "performance-based
compensation."
ARTICLE
VI
Stock
Appreciation Rights
6.1. Award
of
SARs. Subject to the other applicable provisions of the Plan, the Administrator
may at any time and from time to time grant SARs to eligible Participants,
either on a free-standing basis (without regard to or in addition to the
grant
of an Option) or on a tandem basis (related to the grant of an underlying
Option).
6.2. Restrictions
on Tandem SARs. ISOs may not be surrendered in connection with the exercise
of a
tandem SAR unless the Fair Market Value of the Stock subject to the ISO
is
greater than the Exercise Price for such ISO. SARs granted in tandem with
Options shall be exercisable only to the same extent and subject to the
same
conditions as the related Options are exercisable. The Administrator may,
in its
discretion, prescribe additional conditions to the exercise of any such
tandem
SAR.
6.3 Base
Price. The base price per share of each SAR (the "Base Price") shall be
determined by the Administrator and set forth in the Grant
Agreement.
6.3. Amount
of
Payment Upon Exercise of SARs. A SAR shall entitle the Participant to receive,
subject to the provisions of the Plan and the Grant Agreement, a payment
having
an aggregate value equal to the product of (i) the excess of (A) the Fair
Market
Value on the exercise date of one share of Stock over (B) the Base Price
per
share specified in the Grant Agreement, times (ii) the number of shares
specified by the SAR, or portion thereof, which is exercised. In the case
of
exercise of a tandem SAR, such payment shall be made in exchange for the
surrender of the unexercised related Option (or any portions thereof which
the
Participant from time to time determines to surrender for this
purpose).
6.4. Form
of
Payment Upon Exercise of SARs. Payment by the Corporation of the amount
receivable upon any exercise of a SAR may be made by the delivery of Stock
or
cash, or any combination of Stock and cash, as determined in the sole discretion
of the Administrator.
6.6 Code
Section 162(m). With respect to any SARs intended to qualify as
"performance-based compensation" under Code section 162(m), this Article
VI
(including the substance of the Performance Goals, the timing of establishment
of the Performance Goals, the adjustment of the Performance Goals and
determination of the Award) shall be implemented by the Administrator in
a
manner designed to preserve such Awards as such "performance-based
compensation."
ARTICLE
VII
Restricted
Stock and Stock Units
7.1. Grants.
Subject to the other applicable provisions of the Plan, the Administrator
may
grant Restricted Stock or Stock Units to Participants in such amounts and
for
such consideration as may be required by law, as it determines. Such Awards
shall be made pursuant to a Grant Agreement.
7.2. Terms
and
Conditions. A Restricted Stock Award entitles the recipient to acquire
shares of
Stock and a Stock Unit Award entitles the recipient to be paid the Fair
Market
Value of the Stock on the exercise date. Stock Units may be settled in
Stock,
cash or a combination thereof, as determined by the Administrator. Restricted
Stock Awards and Stock Unit Awards are subject to vesting periods and other
restrictions and conditions as the Administrator may include in the Grant
Agreement.
7.3. Restricted
Stock.
7.3.1. The
Grant
Agreement for each Restricted Stock Award shall specify the applicable
restrictions on such shares of Stock, the duration of such restrictions,
and the
times and/or Performance Goals upon which such restrictions shall lapse
with
respect to all or a specified number of shares of Stock that are part of
the
Award. Notwithstanding the foregoing, the Administrator may reduce or shorten
the duration of any restriction applicable to any shares of Stock awarded
to any
Participant under the Plan.
7.3.2. Share
certificates with respect to restricted shares of Stock may be issued at
the
time of grant of the Restricted Stock Award, subject to forfeiture if the
restrictions do not lapse, or upon lapse of the restrictions. If share
certificates are issued at the time of grant of the Restricted Stock Award,
the
certificates shall bear an appropriate legend with respect to the restrictions
applicable to such Restricted Stock Award (as described in Section 11.1)
or,
alternatively, the Participant may be required to deposit the certificates
with
the Corporation during the period of any restriction thereon and to execute
a
blank stock power or other instrument of transfer.
7.3.3. The
extent of the Participant's rights as a shareholder with respect to the
Restricted Stock shall be specified in the Grant Agreement.
7.4.1. The
grant
of Stock Units shall be evidenced by a Grant Agreement that states the
number of
Stock Units evidenced thereby and the terms and conditions of such Stock
Units,
including, but not limited to, any Performance Goals, if any, that must
be
satisfied before a Participant earns such Stock Units.
7.4.2. Stock
Units may be exercised in the manner described in the Grant
Agreement.
7.4.3. The
extent of the Participant's rights as a shareholder with respect to the
Stock
Units shall be specified in the Grant Agreement.
7.5. Transferability.
Unvested Restricted Stock Awards or Stock Units may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Grant Agreement.
7.6 Code
Section 162(m). With respect to any Restricted Stock Awards or Stock Units
intended to qualify as "performance-based compensation" under Code section
162(m), this Article VII (including the substance of the Performance Goals,
the
timing of establishment of the Performance Goals, the adjustment of the
Performance Goals and determination of the Award) shall be implemented
by the
Administrator in a manner designed to preserve such Awards as such
"performance-based compensation."
ARTICLE
VIII
8.1 Tax
Withholding
8.1.1. Subject
to subparagraph 8.1.2., as a condition to taking any action otherwise required
under the Plan or any Grant Agreement, the Corporation shall have the right
to
require assurance that the Participant will remit to the Corporation when
required an amount sufficient to satisfy federal, state and local tax
withholding requirements. The Administrator may permit such withholding
obligations to be satisfied through cash payment by the Participant, through
the
surrender of shares of Stock which the Participant already owns or through
the
surrender of shares of Stock to which the Participant is otherwise entitled
under the Plan or through any other method determined by the
Administrator.
8.1.2. If
a
Participant makes a disposition of shares of Stock acquired upon the exercise
of
an ISO within either two (2) years after the Option was granted or one
(1) year
after its exercise by the Participant, the Participant shall promptly notify
the
Corporation or respond to an inquiry by the Corporation concerning a disposition
and the Corporation shall have the right to require the Participant to
pay to
the Corporation an amount sufficient to satisfy federal, state and local
tax
withholding requirements.
ARTICLE
IX
Corporate
Transactions
9.1. Adjustments
Due to Special Circumstances.
9.1.1. In
the
event of any change in the capital structure or business of the Corporation
by
reason of any stock dividend or extraordinary dividend, stock split or
reverse
stock split, recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, non-cash distributions with respect
to its
outstanding Stock, reclassification of the Corporation's capital stock,
any sale
or transfer of all or part of the Corporation's assets or business, or
any
similar
change
affecting the Corporation's capital structure or business or the capital
structure of any business of any subsidiary, as determined by the Administrator,
if the Administrator determines that an adjustment is equitable, then the
Administrator shall adjust the Plan and Awards as it deems necessary or
appropriate to prevent enlargement or dilution of rights, including, without
limitation, in: (i) the number of shares of Stock that can be granted or
used
for reference purposes pursuant to the Plan; (ii) the number and kind of
shares
or other securities subject to any then outstanding Awards under the Plan;
and
(iii) the exercise price, base price, or purchase price applicable to
outstanding Awards under the Plan. The adjustment by the Administrator
shall be
final, binding and conclusive.
9.1.2. The
Administrator may cancel outstanding Awards, but not outstanding Stock
or
Restricted Stock Awards, in connection with any merger, consolidation of
the
Corporation, or any sale or transfer of all or part of the Corporation's
assets
or business, or any similar event. The Administrator may determine to pay
no
compensation whatsoever for any canceled Awards that are not in-the-money
(as
hereinafter defined) or for any canceled Awards to the extent not vested.
The
Corporation shall provide payment in cash or other property for the in-the-money
value of the vested portion of Awards that are in-the-money and that are
canceled as aforesaid. Awards are "in-the-money" only to the extent of
their
then realizable market value, without taking into account the potential
future
increase in the value of the Award (whether under Black-Scholes-type formulas
or
otherwise). The opinion by the Administrator of the in-the-money value
of any
Award shall be final, binding and conclusive.
9.1.3. Any
adjustment of ISOs under this Section 9.1 shall be made only to the extent
not
constituting a "modification" within the meaning of Code section 424(h)(3).
Further, with respect to Awards intended to qualify as "performance-based
compensation" under Code section 162(m), such adjustments shall be made
only to
the extent that the Administrator determines that such adjustments may
be made
without causing the Company to be denied a tax deduction on account of
Code
section 162(m).
9.2. Substitution
of Options. In the event that, by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation,
the
Board shall authorize the issuance or assumption of a stock option or stock
options in a transaction to which Code section 424(a) applies, then,
notwithstanding any other provision of the Plan, the Administrator may
grant
options upon such terms and conditions as it may deem appropriate for the
purpose of assumption of the old option, or substitution of a new option
for the
old option, in conformity with the provisions of Code section 424(a) and
the
rules and regulations thereunder, as they may be amended from time to
time.
ARTICLE
X
Amendment
and Termination
Amendment
and Termination. The Board may amend, alter, suspend, discontinue, or terminate
the Plan or any portion thereof at any time; provided that no such amendment,
alteration, suspension, discontinuation or termination shall be made without
shareholder approval if such approval is necessary to comply with any tax
or
regulatory requirement applicable to the Plan (including as necessary to
prevent
the Corporation from being denied a tax deduction on account of Code section
162(m)); and provided further that any such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any Participant
or
any holder or beneficiary of any Award theretofore granted shall not to
that
extent be effective without the consent of the affected Participant, holder
or
beneficiary.
ARTICLE
XI
Miscellaneous
11.1. Restrictive
Legends. The Corporation may at any time place legends referencing any
restrictions described in the Grant Agreement and any applicable federal
or
state securities law restrictions on all certificates representing shares
of
Stock underlying an Award.
11.2. Compliance
with Governmental Regulations. Notwithstanding any provision of the Plan
or the
terms of any Grant Agreement entered into pursuant to the Plan, the Corporation
shall not be required to issue any shares hereunder prior to registration
of the
shares subject to the Plan under the Securities Act of 1933, as amended,
or the
Securities Exchange Act of 1934, as amended, if such registration shall
be
necessary, or before compliance by the Corporation or any Participant with
any
other provisions of either of those acts or of regulations or rulings of
the
Securities and Exchange Commission thereunder, or before compliance with
other
federal and state laws and regulations and rulings thereunder, including
the
rules of any applicable securities exchange or quotation system.
11.3. No
Guarantee of Employment. Participation in this Plan shall not be construed
to
confer upon any Participant the legal right to be retained in the employ
of the
Corporation or give any person any right to any payment whatsoever, except
to
the extent of the benefits provided for hereunder.
11.4. Governing
Law. The provisions of this Plan shall be governed by, construed and
administered in accordance with applicable federal law; provided, however,
that
to the extent not in conflict with federal law, this Plan shall be governed
by,
construed and administered under the laws of New York, other than its laws
respecting choice of law.
11.5. Severability.
If any provision of the Plan shall be held invalid, the remainder of this
Plan
shall not be affected thereby and the remainder of the Plan shall continue
in
force.
PROXY
ALLIANCE
DISTRIBUTORS HOLDIINGS INC.
ANNUAL
MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned Stockholder of Common Stock and of Series A Convertible Preferred
Stock of Alliance Distributors Holdings Inc. (the "Company") hereby appoints
Jay
Gelman and Stephen Agress, and each of them, as proxies of the undersigned,
with
full power of substitution, to vote and otherwise represent all of the shares
of
the undersigned in the Company at said meeting and at any adjournments thereof
with the same effect as if the undersigned were present and voting the shares.
The shares represented by this proxy shall be voted on the following matters
and, in their discretion, upon any other business which may properly come
before
said meeting.
1.
Election of Directors:
|
|
|
|
o For
all nominees listed below
|
o Withhold
authority
|
(except
as indicated)
|
to
vote for all
|
|
nominees
listed below
|
To
withhold authority for any individual nominee, strike through that nominee's
name in the list below.
Jay Gelman |
Humbert
B.
Powell, III |
Steven
H. Nathan |
Andre
Muller |
Thomas
Vitiello |
|
|
|
|
2.
Ratification of the selection of Mahoney Cohen & Company, CPA, P.C. as the
Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2006:
3.
Approval of the 2006 Stock Plan:
THE
SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOR OF EACH OF THE ABOVE NOMINEES,
FOR SELECTION OF
MAHONEY COHEN & COMPANY, CPA, P.C. AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM, FOR
APPROVAL OF THE 2006 STOCK PLAN, AND FOR SUCH OTHER MATTERS AS MAY PROPERLY
COME
BEFORE THE MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
Dated:
____________________________
Signature(s)
of Stockholder ______________
(Title,
if appropriate) __________________
This
proxy should be signed by the Stockholder(s) exactly as his or her name appears
hereon. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, each owner should sign.
If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
TO
ASSURE
YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE THIS
PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.