<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VANSTAR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
VANSTAR CORPORATION
1100 ABERNATHY ROAD, BUILDING 500, SUITE 1200
ATLANTA, GEORGIA 30328
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Vanstar Corporation, a Delaware corporation (the "Company"), will
be held at the Ritz-Carlton Buckhead Hotel, 3434 Peachtree Road, N.E., Atlanta,
Georgia, on Wednesday, September 9, 1998, at 9:00 a.m., local time, for the
following purposes:
1. Elect Directors. To consider and vote upon the election of eight
directors to serve until the next Annual Meeting of Stockholders of the
Company and until their successors are duly elected and qualified.
2. Approve Amendment to 1996 Stock Option/Stock Issuance Plan. To
consider and vote upon an amendment to the Company's 1996 Stock
Option/Stock Issuance Plan, as amended (the "1996 Option Plan"), which
would increase the number of shares subject to grant under the 1996 Option
Plan from 3,300,000 shares to 6,300,000 shares.
3. Approve Amendment to Employee Stock Purchase Plan. To consider and
vote upon an amendment to the Company's Employee Stock Purchase Plan (the
"ESPP") which would increase the number of shares subject to grant under
the ESPP from 1,000,000 shares to 2,000,000 shares.
4. Other Business. To transact such other business as may properly
come before the Meeting or any adjournments thereof.
Only stockholders of record at the close of business on July 24, 1998, are
entitled to receive notice of and to vote at the Meeting.
By Order of the Board of Directors,
William Y. TAUSCHER SIG
William Y. Tauscher
Chairman of the Board
and Chief Executive Officer
Atlanta, Georgia
August 7, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE READ THE
ENCLOSED PROXY STATEMENT AND COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY
IN THE ENVELOPE PROVIDED.
<PAGE> 3
VANSTAR CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 9, 1998
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the stockholders of Vanstar
Corporation, a Delaware corporation ("Vanstar" or the "Company"), in connection
with the solicitation of proxies by the Company's Board of Directors (the
"Board") from holders of the outstanding shares of the Company's common stock,
$.001 par value ("Common Stock"), for use at the Annual Meeting of Stockholders
of the Company to be held on Wednesday, September 9, 1998, at 9:00 a.m., local
time, at the Ritz-Carlton Buckhead Hotel, 3434 Peachtree Road, N.E., Atlanta,
Georgia, and at any adjournments thereof (the "Meeting"). The Meeting is being
held to consider and vote upon (1) the election of eight directors to serve
until the Company's Annual Meeting of Stockholders in 1999 and until their
successors are duly elected and qualified, (2) an amendment (the "Option Plan
Amendment") to the Company's 1996 Stock Option/Stock Issuance Plan, as amended
(the "1996 Option Plan"), which would increase the number of shares of Common
Stock subject to grant under the 1996 Option Plan from 3,300,000 to 6,300,000,
and (3) an amendment (the "ESPP Amendment") to the Company's Employee Stock
Purchase Plan (the "ESPP") which would increase the number of shares of Common
Stock subject to grant under the ESPP from 1,000,000 to 2,000,000.
A copy of the Company's Annual Report containing financial statements for
the fiscal year ended April 30, 1998 ("Fiscal Year 1998") is enclosed herewith.
This Proxy Statement is dated August 7, 1998 and is first being mailed to
stockholders on or about August 13, 1998. The mailing address of the Company's
principal executive offices is 1100 Abernathy Road, Building 500, Suite 1200,
Atlanta, Georgia 30328. The Company's telephone number at such offices is (770)
522-4700.
SOLICITATION AND REVOCABILITY OF PROXIES
All shares represented by duly executed proxies in the form enclosed
herewith that are received in time and not revoked will be voted at the Meeting
as instructed in such proxies. IF NO INSTRUCTIONS ARE GIVEN, THE PERSONS NAMED
IN THE ACCOMPANYING PROXY INTEND TO VOTE "FOR" THE ELECTION OF THE EIGHT
NOMINEES NAMED HEREIN AS DIRECTORS OF THE COMPANY, "FOR" THE OPTION PLAN
AMENDMENT, AND "FOR" THE ESPP AMENDMENT.
A stockholder may revoke a previously executed proxy at any time prior to
its exercise by (1) properly submitting to the Company a duly executed proxy
bearing a later date, (2) giving written notice of revocation to the Secretary
of the Company, or (3) voting in person at the Meeting. All written notices of
revocation or other communications with respect to revocation of proxies should
be addressed as follows: Vanstar Corporation, 1100 Abernathy Road, Building 500,
Suite 1200, Atlanta, Georgia 30328, Attention: H. Christopher Covington,
Secretary.
RECORD DATE, OUTSTANDING VOTING SECURITIES, AND VOTING REQUIREMENTS
The Common Stock is the only outstanding class of voting securities of the
Company. The record date for determining the holders of Common Stock entitled to
vote at the Meeting is the close of business on July 24, 1998 (the "Record
Date"). As of the Record Date, 43,538,822 shares of Common Stock were
outstanding. Each holder of Common Stock on the Record Date is entitled to cast
one vote per share at the Meeting.
Holders of a majority of the shares entitled to vote must be present at the
Meeting, in person or by proxy, so that a quorum will be present for the
transaction of business. The eight nominees receiving the greatest number of
votes cast by the holders of shares of Common Stock represented and entitled to
vote at the
<PAGE> 4
Meeting, at which a quorum must be present, will be elected directors of the
Company. With respect to the election of directors, stockholders may (1) vote
"for" all eight nominees, (2) "withold" authority to vote for all nominees, or
(3) withhold authority to vote for any individual nominee or nominees but vote
for all other nominees. Because directors are elected by a plurality of the
votes cast, votes to withhold authority with respect to one or more nominees
will have no effect on the outcome of the election. Similarly, any "broker
nonvotes" (which occur when shares held by brokers or nominees for beneficial
owners are voted on some matters but not on others) would have no effect on the
outcome of the election of directors, although they would be counted as present
for purposes of determining the existence of a quorum.
With respect to the approval of the Option Plan Amendment and the ESPP
Amendment, stockholders may (1) vote "for," (2) vote "against," or (3) "abstain"
from voting on each such proposal. Under the 1996 Option Plan and the ESPP, the
affirmative vote of the holders of a majority of the votes that may be cast by
all holders of Common Stock is necessary for the approval of those proposals.
Accordingly, any abstentions or broker nonvotes will have the effect of a
negative vote.
ELECTION OF DIRECTORS
At the Meeting, eight persons will be elected to serve as directors until
the Company's next Annual Meeting of Stockholders and until their successors
have been duly elected and qualified as provided in the Company's Restated
Certificate of Incorporation and By-laws. The following persons have been
nominated and, if elected, have consented to serve as directors of the Company.
All nominees are presently members of the Board. Information about each nominee
is set forth below. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF THE
NOMINEES IDENTIFIED BELOW.
John W. Amerman, age 66, became a director of the Company in June 1996. He
has served as Senior Advisor to the CEO of Mattel, Inc., a leading toy
manufacturer ("Mattel"), since 1997. Mr. Amerman served as Chairman and Chief
Executive Officer of Mattel from 1987 to October 1997. Mr. Amerman is also a
director of Unocal Corporation, a worldwide energy resources company; Knoll,
Inc., a global manufacturer of office furnishings; and Aegis Group, plc, a media
buying company. He is also a member of the Board of Governors of the Hugh
O'Brian Youth Foundation and the Board of Overseers of Dartmouth's Amos Tuck
School.
Richard H. Bard, age 50, became a director of the Company in September 1987
and served as Chairman of the Board from July 1989 to December 1991. He has been
a director and Chief Executive Officer of Optical Security Group, Inc., a
technology company, since September 1993, and has served as Chairman of the
Board of that company since April 1995. Since 1991, Mr. Bard also has been Chief
Executive Officer of Bard & Co., Inc., a diversified investment management
company. He also serves as Chairman of the Board of Security Technologies Group,
Inc., a leading provider of commercial security access control systems.
Stewart K.P. Gross, age 39, became a director of the Company in June 1994.
He is a Managing Director of E.M Warburg, Pincus & Co., LLC. Mr. Gross has been
with that firm since July 1987 and has been a Managing Director since January
1993. He is also a director of BEA Systems, Inc., a software provider; TSI
International, Ltd., a provider of software and related services; and several
privately-held companies.
William H. Janeway, age 55, became a director of the Company in June 1994.
He has been a Managing Director and the head of the Venture Capital High
Technology Team of E.M. Warburg, Pincus & Co., LLC since 1988. Mr. Janeway is
also a director of BEA Systems, Inc., Indus International, Inc., Industri-
Matematik International Corp., and VERITAS Software Corporation, software
companies; and several private companies.
John R. Oltman, age 53, became a director of the Company in June 1996. He
was Chairman and Chief Executive Officer of SHL Systemhouse, Inc., a provider of
client/server consulting, systems integration, and technology outsourcing, from
1991 to 1995. Mr. Oltman was Managing Partner (System Integration and
Outsourcing) for Andersen Consulting, Inc. from 1988 to 1991. He is also a
director of IA Corporation, an application software company.
2
<PAGE> 5
William Y. Tauscher, age 48, became Chairman of the Board of the Company in
September 1987 and Chief Executive Officer in September 1988. He was President
from September 1988 to July 1995. Prior to September 1988, Mr. Tauscher was
Chairman of the Board, President and Chief Executive Officer of FoxMeyer
Corporation, a wholesale pharmaceutical distributor and franchisor which he
co-founded in 1978 and a subsidiary of National Intergroup, Inc., a diversified
holding corporation. He is also a director of Safeway Inc., a food and drug
chain.
John L. Vogelstein, age 63, became a director of the Company in January
1991. He has been President of E.M. Warburg, Pincus & Co., LLC or its
predecessor since 1980 and Vice Chairman since 1982, and a Partner of Warburg,
Pincus & Co. since 1971. Mr. Vogelstein is also a director of ADVO, Inc., a
direct mail marketing company; Golden Books Family Entertainment Inc., a
retailer and publisher of children's books; Journal Register Company, a
newspaper publisher; Mattel; and several private companies.
Josh S. Weston, age 69, became a director of the Company in June 1996. He
is Honorary Chairman of Automatic Data Processing, Inc., a computer services
company ("ADP"). Mr. Weston served as Chairman of ADP from 1986 to 1998 and as
Chief Executive Officer from 1982 to 1996. Mr. Weston is also a director of
Public Service Enterprise Group Inc., an electric and gas utility company;
Olsten Corp., a provider of home health care and temporary staffing services;
and Shared Medical Systems, a provider of health information services.
MEETINGS OF THE BOARD AND COMMITTEES
The Board of Directors has established five committees. The Executive
Committee is comprised of the Chairman of the Board and the chairmen of each of
the Audit, Compensation and Stock Option, and Finance Committees (currently
Messrs. Tauscher, Oltman, Janeway, and Weston, respectively). The Executive
Committee serves primarily as an advisory committee to the Company's management
and Board of Directors. The Audit Committee is currently comprised of John
Oltman and Stephen Fillo. Mr. Fillo is currently a director but is not standing
for re-election. The Audit Committee annually recommends to the Board the firm
to be engaged as independent auditors for the Company; reviews the Company's
internal accounting procedures and controls; generally oversees all matters
relating to auditing of the Company; reviews risks and contingent liabilities
affecting the Company; and reviews the Company's financial statements, related
press releases, and related disclosures in the Company's filings with the
Securities and Exchange Commission (the "SEC").
The Compensation and Stock Option Committee (the "Compensation Committee")
is comprised of Messrs. Janeway, Amerman, and Bard and makes recommendations to
the Board of Directors with respect to general compensation and benefit levels,
determines compensation and benefits for the Company's executive officers, and
generally administers the Company's stock option plans. The Finance Committee is
comprised of Messrs. Weston and Janeway. The Finance Committee monitors the
Company's financial position and capital structure and approves the Company's
financing plans and programs; generally exercises the powers of the Board with
regard to financing arrangements; reviews and, as appropriate, recommends
changes to the Company's dividend policy; considers other matters regarding the
Company's financial structure; and approves or makes recommendations regarding
business combinations and similar operating investments. The Strategic Planning
Committee is comprised of Messrs. Bard, Gross, and Weston and was created to
review the various businesses, assets, and affairs of the Company and to
consider potential strategic business transactions involving the Company and
various of its businesses and assets.
For future meetings of stockholders after the Meeting, the Company's
By-laws provide that nominations for directors by stockholders may be made only
by delivering written notice (a "Nomination Notice") to the Secretary of the
Company (1) at least 90 days before any annual meeting to be held on or after
the regular date called for by the Company's By-laws (the second Wednesday in
September), or (2) by the close of business on the 15th day following the giving
of notice of the date of any special meeting or any annual meeting held before
the regular date. Any Nomination Notice must set forth certain background
information about each person being nominated, including the following
information: the person's business and employment experience during the past
five years; any position as a director, officer or 5%-or-more owner of any
3
<PAGE> 6
entity; and whether, in the last five years, the person has been involved in
certain proceedings that may be material to an evaluation of his or her ability
or integrity as a nominee. Any Nomination Notice also must set forth certain
information about the person submitting the Nomination Notice and all persons
acting in concert with him or her, including the class and number of shares of
the Company beneficially owned by such persons.
During Fiscal Year 1998, the Board of Directors met seven times; the
Executive Committee, one time; the Audit Committee, eight times; the
Compensation Committee, four times; and the Strategic Planning Committee, two
times. The Finance Committee held no formal meetings during Fiscal Year 1998.
Each director attended at least 75% of the aggregate total number of meetings of
the Board and the committees of the Board on which he served, except for Mr.
Vogelstein.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, AND MANAGEMENT
The outstanding capital stock of the Company consists of the Common Stock.
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of May 15, 1998 by (1) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock, (2)
each of the Company's directors, (3) each executive officer named in the Summary
Compensation Table below (collectively, the "Named Executive Officers"), and (4)
all directors and executive officers of the Company as a group. The address of
each director and Named Executive Officer is: c/o Vanstar Corporation, 1100
Abernathy Road, Building 500, Suite 1200, Atlanta, Georgia 30328.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE OF
NAME BENEFICIALLY OWNED(1) OUTSTANDING SHARES
- ---- --------------------- ------------------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P.(2)................. 16,482,501 37.9%
466 Lexington Avenue
New York, NY 10017
Capital Research and Management Company.................. 3,113,030(3) 7.0
333 South Hope Street
Los Angeles, CA 90071
Michael A. Roth and Brian J. Stark....................... 2,566,416(4) 5.6
1500 W. Market Street
Mequon, WI 53092
SMALLCAP World Fund...................................... 2,504,342 5.8
333 South Hope Street
Los Angeles, CA 90071
Leon G. Cooperman........................................ 2,200,200(5) 5.1
88 Pine Street, Wall Street Plaza, 31st Floor
New York, NY 10005
William Y. Tauscher...................................... 2,845,258(6) 6.4
Richard H. Bard.......................................... 674,124(7) 1.5
Stephen W. Fillo......................................... 5,000(8) *
Stewart K.P. Gross....................................... 16,482,501(2)(9) 37.9
William H. Janeway....................................... 16,482,501(2)(9) 37.9
John L. Vogelstein....................................... 16,482,501(2)(9) 37.9
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE OF
NAME BENEFICIALLY OWNED(1) OUTSTANDING SHARES
- ---- --------------------- ------------------
<S> <C> <C>
Jay S. Amato............................................. 344,999(10) *
Richard N. Anderson...................................... 75,509(11) *
H. Christopher Covington................................. 89,331(12) *
Ahmad Manshouri.......................................... 76,980(13) *
John W. Amerman.......................................... 22,000(14) *
Josh S. Weston........................................... 26,000(15) *
John R. Oltman........................................... 22,000(14) *
All Directors and Executive Officers as a group (16
persons)............................................... 20,792,702(9)(16) 45.7
</TABLE>
- ---------------
* Less than one percent.
(1) Under applicable SEC rules, a person is deemed to be a "beneficial owner"
of a security if the person has or shares voting or investment power with
respect to that security, or has a right to acquire beneficial ownership
within 60 days. Under those rules, more than one person may be deemed to be
a beneficial owner of the same securities, and a person may be deemed to be
a beneficial owner of securities as to which he disclaims beneficial
ownership.
(2) The sole general partner of Warburg, Pincus Capital Company, L.P. ("WPCC")
is Warburg, Pincus & Co., a New York general partnership ("WP"). E.M.
Warburg Pincus & Co., LLC ("EMW") manages WPCC. The members of EMW are
substantially the same as the partners of WP. Lionel I. Pincus is the
managing partner of WP and the managing member of EMW and may be deemed to
control both WP and EMW. WP, as the sole general partner of WPCC, has a 20%
interest in the profits of WPCC.
(3) According to its Schedule 13G filed with the SEC, Capital Research and
Management Company ("Cap Re") is deemed to be the beneficial owner of these
shares as a result of acting as investment advisor to various registered
investment companies. Cap Re has disclaimed beneficial ownership of these
shares. The shares include 850,200 shares obtainable upon conversion of
6 3/4% Trust Convertible Preferred Securities ("Preferred Securities")
issued by Vanstar Financing Trust, a statutory business trust of which the
Company owns all of the common securities.
(4) According to a Schedule 13G filed with the SEC, these shares include
1,124,961 shares issuable to Reliant Trading ("Reliant"), and 1,441,455
shares issuable to Shepherd Trading Limited ("Shepherd"), upon conversion
of Preferred Securities. Messrs. Roth and Stark share voting and investment
power of these shares by virtue of their positions as members of Staro
Asset Management, L.L.C., the managing partner of Reliant, and as the
investment manager of Shepherd.
(5) According to his Schedule 13G filed with the SEC, Mr. Cooperman is the
Managing Member of Omega Associates, L.L.C. ("Associates"), a Delaware
limited liability company which is the general partner of three Delaware
limited partnerships: Omega Capital Partners, L.P. ("Capital LP"), Omega
Institutional Partners, L.P. ("Institutional LP"), and Omega Capital
Investors, L.P. ("Investors LP"), all of which are private investment
firms. In addition, Mr. Cooperman is the President and majority stockholder
of, and is deemed to control, Omega Advisors, Inc. ("Advisors"), a Delaware
corporation which serves as the investment manager to Omega Overseas
Partners, Ltd. ("Overseas"), a Cayman Islands exempted company. Mr.
Cooperman is the ultimate controlling person of Associates, Capital LP,
Institutional LP, Investors LP, and Advisors. Mr. Cooperman has investment
discretion over portfolio investments of, and is deemed to control,
Overseas. Advisors also serves as a discretionary investment advisor to
certain institutional clients (the "Managed Accounts"). The shares
indicated as beneficially owned include 595,800 shares owned by Capital LP;
53,600 shares owned by Institutional LP; 61,900 shares owned by Investors
LP; 1,016,100 shares owned by Overseas; and 472,800 shares owned by the
Managed Accounts. Mr. Cooperman has shared investment power with respect to
the shares owned by the Managed Accounts.
(6) Includes 849,948 shares that may be acquired upon exercise of options.
5
<PAGE> 8
(7) Includes 372,434 shares that may be acquired upon exercise of options and
warrants. Also includes 45,596 shares owned by the Bard Family Foundation,
of which Mr. Bard is President, and as to which Mr. Bard disclaims
beneficial ownership.
(8) Consists of 5,000 shares that may be acquired upon exercise of options.
Pursuant to an arrangement between WP and Mr. Fillo, Mr. Fillo has an
indirect pecuniary interest in the Common Stock owned by WPCC. Mr. Fillo
disclaims beneficial ownership of all such stock.
(9) Messrs. Gross, Janeway, and Vogelstein, directors of the Company, are
Managing Directors of EMW and general partners of WP. All of the shares
indicated as owned by Messrs. Gross, Janeway, and Vogelstein are owned
beneficially by WPCC and are included because of the affiliation of such
persons with WPCC. Messrs. Gross, Janeway, and Vogelstein disclaim
beneficial ownership of these shares.
(10) Includes 340,000 shares that may be acquired upon exercise of options.
(11) Includes 72,040 shares that may be acquired upon exercise of options.
(12) Includes 83,494 shares that may be acquired upon exercise of options.
(13) Includes 71,000 shares that may be acquired upon exercise of options.
(14) Consists of 22,000 shares that may be acquired upon exercise of options.
(15) Includes 22,000 shares that may be acquired upon exercise of options.
(16) Includes 1,988,916 shares that may be acquired upon exercise of options.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers for Fiscal Year 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- --------------------- ALL OTHER
OTHER ANNUAL SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#)(1) ($)
POSITION---------- ---- --------- --------- --------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William Y. Tauscher....... 1996 550,008 550,008 -- 1,187,434 1,566(2)
Chairman of the Board 1997 579,170 -- -- -- 1,432(2)
and Chief Executive 1998 633,336 -- -- -- 1,566(2)
Officer
Jay S. Amato.............. 1996 312,498 312,293 -- 300,000 2,094(3)
President and Chief 1997 368,332 150,000(4) 82,378(5) 100,000 6,680(6)
Operating Officer 1998 430,000 -- -- 100,000 3,667(7)
Ahmad Manshouri........... 1996 242,834 194,142 -- 75,000 3,921(2)
Senior Vice President 1997 255,336 -- -- 35,000 3,688(8)
and General Manager, 1998 320,004 -- -- 50,000 4,591(9)
Product Operations
Richard N. Anderson....... 1996 219,168 175,258 -- 85,100 2,105(10)
Senior Vice President 1997 248,336 -- -- 35,000 3,827(11)
and General Manager, 1998 286,668 -- -- 42,500 4,488(12)
Sales and Life Cycle
Management
H. Christopher
Covington............... 1996 191,751 114,990 -- 41,425 2,649(13)
Senior Vice President, 1997 210,004 -- -- 20,000 4,436(14)
General Counsel 1998 270,004 -- -- 96,245 4,807(15)
and Secretary
</TABLE>
- ---------------
(1) These shares are subject to purchase upon exercise of stock options granted
under the Company's stock option plans.
(2) Comprised of premiums for insurance policies for which such person is the
beneficiary.
6
<PAGE> 9
(3) Comprised of a $1,500 matching contribution to the Company's 401(k) plan
for the benefit of such person and $594 of premiums for insurance policies
for which such person is the beneficiary.
(4) Includes reimbursement of relocation expenses.
(5) Comprised of reimbursement for the payment of taxes on the amount reported
as bonus for that fiscal year.
(6) Comprised of a $5,769 matching contribution to the Company's 401(k) plan
for the benefit of such person and $911 of premiums for insurance policies
for which such person is the beneficiary.
(7) Comprised of a $2,604 matching contribution to the Company's 401(k) plan
for the benefit of such person and $1,063 of premiums for insurance
policies for which such person is the beneficiary.
(8) Comprised of a $3,057 matching contribution to the Company's 401(k) plan
for the benefit of such person and $631 of premiums for insurance policies
for which such person is the beneficiary.
(9) Comprised of a $3,800 matching contribution to the Company's 401(k) plan
for the benefit of such person and $791 of premiums for insurance policies
for which such person is the beneficiary.
(10) Comprised of a $1,500 matching contribution made to the Company's 401(k)
plan for the benefit of such person and $605 of premiums for insurance
policies for which such person is the beneficiary.
(11) Comprised of a $3,213 matching contribution made to the Company's 401(k)
plan for the benefit of such person and $614 of premiums for insurance
policies for which such person is the beneficiary.
(12) Comprised of a $3,779 matching contribution made to the Company's 401(k)
plan for the benefit of such person and $709 of premiums for insurance
policies for which such person if the beneficiary.
(13) Comprised of $1,500 matching contribution made to the Company's 401(k) plan
for the benefit of such person and $1,149 of premiums for insurance
policies for which such person is the beneficiary.
(14) Comprised of a $3,917 matching contribution to the Company's 401(k) plan
for the benefit of such person and $519 of premiums for insurance policies
for which such person is the beneficiary.
(15) Comprised of a $4,140 matching contribution made to the Company's 401(k)
plan for the benefit of such person and $667 of premiums for insurance
policies for which such person is the beneficiary.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted to each Named Executive Officer during Fiscal Year 1998 pursuant to the
Company's stock option plans.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM($)(1)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE -----------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) EXPIRATION DATE 5%($) 10%($)
- ---- ------------ ---------------- ---------------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
William Y.
Tauscher........... -- -- -- -- -- --
Jay S. Amato......... 100,000(2) 5.7% 9.00 6/10/07 566,005 1,434,368
Ahmad Manshouri...... 50,000(2) 2.8 9.00 6/10/07 283,003 717,184
Richard N.
Anderson........... 42,500(2) 2.4 9.00 6/10/07 240,552 609,606
H. Christopher
Covington.......... 96,245(2) 5.5 9.00 6/10/07 544,752 1,308,508
</TABLE>
- ---------------
(1) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the annual rate shown, compounded annually, from
the date of grant until the end of the 10-year option term. The values are
calculated in accordance with SEC rules and are not intended to reflect the
Company's estimate of future stock price appreciation.
(2) The options vest in 20% increments on the grant date and each of June 10,
1998, 1999, 2000, and 2001, subject to potential acceleration under certain
circumstances in connection with "corporate transactions" or "changes in
control" (as defined in the applicable stock option plan).
7
<PAGE> 10
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth certain information regarding exercises of
Company options during Fiscal Year 1998 and total options held at the end of
Fiscal Year 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS MONEY OPTIONS/SARS AT
SHARES AT FISCAL YEAR-END(#) FISCAL YEAR-END ($)
ACQUIRED ON VALUE ------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
William Y. Tauscher......... -- -- 712,461/474,973 5,158,196/3,438,787
Jay S. Amato................ -- -- 240,000/260,000 1,197,500/1,557,500
Ahmad Manshouri............. -- -- 39,000/91,000 194,688/473,125
Richard N. Anderson......... -- -- 39,520/89,040 208,985/489,158
H. Christopher Covington.... -- -- 51,996/105,494 332,715/490,494
</TABLE>
- ---------------
(1) Represents the difference between the closing price of the Common Stock on
the New York Stock Exchange on April 30, 1998 and the exercise price of the
options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee makes recommendations to the full Board with
respect to general compensation and benefit levels, determines compensation and
benefits for the Company's executive officers, and generally administers the
Company's stock option plans. The Compensation Committee is comprised of Messrs.
Janeway, Amerman, and Bard. None of those individuals is, or was during Fiscal
Year 1998, an officer or employee of the Company or any of its subsidiaries;
however, Mr. Bard was formerly an officer of a subsidiary of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee. The Company's objective is to provide a competitive
compensation program that reflects both Company and individual performance. The
Compensation Committee believes that the Company's current executive
compensation program has been designed and administered in a manner consistent
with the Company's strategic business objectives and provides incentives for
attainment of those objectives. As such, the compensation program requires a
substantial portion of executive officers' compensation to be tied to the
profitability of the Company. Additionally, tying a portion of compensation to
the Company's stock performance enables the Company to align employee interests
more closely with those of its stockholders.
COMPONENTS OF EXECUTIVE COMPENSATION
The executive compensation program consists of two components: (1) annual
compensation, consisting of base salary and annual incentives, and (2) long-term
incentives. Annual compensation is designed to be competitive with pay of
comparison companies within the Company's industry for similar jobs when target
levels of Company performance are achieved. The target levels of annual
compensation and long-term incentives are based on published industry surveys
and proxy reports of comparison companies. Long-term incentive compensation is
achieved through grants of stock options. Guidelines are established for the
number of stock option shares that may be granted at various job levels.
Determination of the number of stock option shares set in those guidelines is
based on the competitive level of stock option grants for those various job
levels reported in the surveys of comparison companies. In Fiscal Year 1998, the
Compensation Committee reviewed industry surveys of compensation levels for
executive officers within the comparison companies for which data is available,
including some of the companies included in the Standard & Poor's Technology
Sector Index, which is included in the cumulative total return graph that
follows this report.
8
<PAGE> 11
ANNUAL COMPENSATION
Base salary is intended to provide an annual salary at a level consistent
with the individual's position and contributions. Any increases in base salary
that are approved by the Compensation Committee generally are awarded following
year-end, based on a subjective review of the results of individual performance
and contributions to the achievement of the Company's objectives, and after
consideration of the level of competitive annual compensation of the comparison
companies. Base salary increases for executive officers shown in the Summary
Compensation Table above, granted during Fiscal Year 1998, reflect both
recognition of individual performance and contributions, and adjustments to
competitive levels.
Annual incentives for executives are determined under the Company's
Management Incentive Plan ("MIP"). Participants include all officers and certain
management employees. The MIP creates a direct link between pay and Company
results by establishing an earnings per share ("EPS") goal for the fiscal year
and predicating incentive opportunity on Company achievement relative to that
goal. The MIP reflects the Compensation Committee's view that a meaningful
portion of annual compensation should be "at risk" for executive officers. Under
the MIP, if minimum levels of performance are not met, no award will be earned,
and the participant will lose the amount at risk. Opportunities to earn up to
two times the target award level under the MIP are established for specified
levels of above-goal performance. For Fiscal Year 1998, EPS results were below
minimum established levels for payment relative to the annual EPS goal and no
annual incentives were earned or paid to any officers, including the CEO.
LONG-TERM INCENTIVES
Long-term incentives focus management's attention on the Company's future
by relating executive pay directly to the Company's long-term performance over a
number of years through grants of stock options. Stock options provide
executives with the opportunity to buy and maintain an equity interest in the
Company and to share in the appreciation of the value of the Common Stock. The
Compensation Committee believes that stock options result in (1) enhancing the
Company's ability to retain, for an extended period of time, those individuals
who are key to the creation of stockholder value and (2) linking the
compensation of executives to the gain to stockholders through appreciation in
the market price of the Common Stock.
The Company has stock option plans (collectively, the "Option Plans") which
provide for the issuance of incentive stock options ("ISOs"), stock options that
are non-qualified for Federal income tax purposes ("NQSOs), and stock
appreciation rights ("SARs"). Under the Option Plans, the exercise price of an
ISO may not be less than 100% of the fair market value of the Common Stock at
the time of grant. The exercise price of NQSO's is determined by the
Compensation Committee at the time of grant. Options typically vest in equal
annual installments over a four- or five-year period.
Following the competitive guidelines established for the number of stock
option shares that may be granted at various job levels, management subjectively
assesses individual performance and contributions toward long-term success of
the business when recommending for approval to the Compensation Committee the
specific numbers of shares for grant to executive officers. As a result, the
actual number of shares subject to options that are granted may be equal to,
above, or below the guideline.
Long-term compensation also is achieved through the ESPP, which allows
participants to purchase stock of the Company through regular payroll
deductions. The ESPP, which is intended to qualify as an "employee stock
purchase plan" under section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), is generally open to voluntary participation by employees
who work more than 20 hours per week.
COMPANY POLICY ON QUALIFYING COMPENSATION
Section 162(m) of the Code generally limits to $1,000,000 the non-excluded
annual compensation paid by publicly-held companies to certain executive
officers. Under that provision, and subject to certain exceptions, the Company
generally may not deduct in any taxable year, non-excluded annual compensation
in excess of $1,000,000 paid to its CEO or any of its four other highest-paid
executive officers.
9
<PAGE> 12
During Fiscal Year 1998, none of the Named Executive Officers received
annual compensation in excess of $1,000,000. Internal Revenue Service
Regulations exempt certain qualified "performance-based compensation" from the
application of the Section 162(m) limitation. The Compensation Committee will
continue to review tax consequences, as well as other relevant considerations,
in connection with compensation decisions.
CEO COMPENSATION
The Compensation Committee determines the compensation of the Company's
Chief Executive Officer in substantially the same manner as the compensation for
other executive officers. Mr. Tauscher's annual base salary was increased on
September 1, 1997 by $50,000. The increase reflects both a subjective review of
the results of individual performance and contributions to the achievement of
the Company's objectives, and consideration of the level of competitive annual
compensation paid to chief executive officers of comparison companies, as
described above. That base salary increase was only the second for Mr. Tauscher
beyond the salary level established in August 1991.
For Fiscal Year 1998, Mr. Tauscher received no annual incentive payment,
which accounts for one-third of his annual compensation opportunity at target
under the MIP. The EPS goal required for payment under the MIP was not achieved
for the full fiscal year; therefore, no payments were earned or paid. Mr.
Tauscher received no stock options during Fiscal Year 1998.
William H. Janeway
John W. Amerman
Richard H. Bard
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no additional
compensation for services rendered as members of the Board or committees
thereof. Directors who are not full-time employees of the Company receive
reimbursement of out-of-pocket expenses for attendance at Board meetings. All
directors who are not full-time employees of the Company, other than those
directors affiliated with EMW, receive an annual fee of $20,000 and a meeting
fee of $1,000 per meeting attended. Each director who receives a $20,000 annual
fee may elect to forego the $20,000 annual payment and instead receive options
to purchase 5,000 shares of Common Stock at a price equal to the market value on
the date of grant.
EXECUTIVE INVOLUNTARY SEVERANCE AGREEMENTS
In May and June of 1998, the Company entered into Executive Involuntary
Severance Agreements ("Agreements") with each of the Named Executive Officers
(other than Mr. Tauscher) and with 27 other officers of the Company (the
"Executives"). Each Agreement has an initial two-year term that is automatically
renewed at the end of that period, and annually thereafter, for additional
one-year periods, absent one year's prior notice from the Company after the
initial two-year term; however, the Agreement is extended through the first
anniversary of any "Change of Control" occurring before the Agreement expires.
"Change of Control" is defined to include the following events: certain
consolidations or mergers in which the Company is not the surviving corporation
or pursuant to which the Common Stock would be converted into other property;
the transfer of substantially all of the Company's assets; implementation of a
plan of liquidation or dissolution approved by the Company's stockholders; the
acquisition by any person or entity of 50.1% or more of the Company's voting
securities; the incumbent board members at the beginning of any two-year period
(and subsequent directors approved by them) ceasing to constitute a majority of
the Board during that period; and any change in control that would be required
to be reported under certain SEC rules.
Each Agreement provides for severance payments in the event that the
applicable Executive's employment is terminated under various circumstances
during the term of the Agreement. If the Executive is terminated for "cause" (as
defined in the Agreements), there is no severance payment. If the Executive is
terminated without cause anytime before a Change of Control, the Executive will
receive either 50% (for Vice Presidents) or 100% (for the President and any
Senior Vice President) of his or her "Compensation" (defined
10
<PAGE> 13
as the Executive's average base salary for the year of termination and the
preceding year, plus the last annual cash bonus payment received by the
Executive, plus the average of the last three annual awards received by the
Executive with respect to other non-stock-related incentive plans). If the
Company terminates an Executive without cause, or if the Executive voluntarily
terminates employment for "good reason," within two years after a Change of
Control, the Executive will receive a multiple of the Executive's Compensation.
The multiples range from 1.0 to 1.5 for Vice Presidents and from 1.5 to 2.5 for
Senior Vice Presidents, and the multiple is 2.99 for the President. "Good
reason" generally includes certain reductions in duties, salary, or benefits;
certain relocations of the Executive's principal place of employment; material
breaches by the Company (or failure of a successor to agree to assume the
Company's obligations) under the Agreement or certain benefit plans; and conduct
by the Company that would cause the Executive to commit fraud or would expose
the Executive to liability). In addition, the Company generally will maintain,
for two years after any termination of the Executive's employment following a
Change of Control, self-insured employee welfare benefit plans in which the
Executive was entitled to participate, provided that the Executive continues to
pay his or her regular contribution under those plans. If the Executive is
barred from participating in any such plans, the Company will arrange to have
individual insurance policies providing substantially similar benefits issued.
If the amount payable to an Executive under an Agreement would result in an
excise tax, the Executive will be entitled to additional amounts to compensate
him or her for the imposition of that tax (including excise taxes applicable to
the receipt of the additional amount).
The Agreements will be binding upon successors and assigns of the Company.
In addition, if the Executive is offered employment with any business entity
that acquires a substantial portion of the assets or businesses of the Company
in a Change of Control, upon terms and in a position not so different from the
Executive's position with the Company as to constitute good reason, then the
Company is entitled to assign the Agreement to that entity, although the Company
will not be relieved of financial responsibility should the acquiring entity
fail to perform its obligations prior to the third anniversary of the Agreement.
11
<PAGE> 14
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following graph compares the cumulative total stockholder returns for
the Common Stock, the Standard & Poor's 500 Index ("S&P 500"), and the Standard
& Poor's Technology Sector Index ("S&P Technology Sector") for the period from
March 11, 1996 (the date on which the Common Stock began trading on the New York
Stock Exchange) through April 30, 1998. The following comparison assumes the
investment on March 11, 1996, of $100 in the Common Stock and on February 29,
1996 in each of the foregoing indices and assumes the reinvestment of all
dividends. The Company has paid no dividends. The data in the graph has been
provided by Research Ltd. The total stockholder returns shown in the graph are
included in response to SEC requirements and are not intended to forecast or be
indicative of future performance.
<TABLE>
<CAPTION>
S&P
Measurement Period Technology
(Fiscal Year Covered) Vanstar S&P 500 Sector
<S> <C> <C> <C>
3/11/96 100 100 100
4/30/96 136 102 105
10/31/96 239 112 116
4/30/97 74 128 145
10/31/97 131 148 170
4/30/98 133 181 209
</TABLE>
LEGAL PROCEEDINGS
On July 3, 1997, a trust claiming to have purchased shares of Common Stock
filed suit in Superior Court of the State of California against, among other
defendants, the Company, WPCC and certain of its affiliates, and the following
current directors and executive officers of the Company: Richard Bard, William
Tauscher, Jay Amato, Richard Anderson, Chris Laney, Ahmad Manshouri, Stewart
Gross, William Janeway, and John Vogelstein. The suit is entitled David T.
O'Neal Trust, dated 4/1/77, v. Vanstar Corporation, et al., Consolidated Case
No. CV767266. On January 21, 1998, the same plaintiff, along with another
plaintiff claiming to have purchased Common Stock, filed suit in the United
States District Court for the Northern District of California. That suit is
captioned David T. O'Neal Trust, dated 4/1/77, et al. v. Vanstar Corporation, et
al., Case No. C-98-0216 MJJ. The complaints in both suits generally allege,
among other things, that the defendants made false or misleading statements or
concealed information regarding the Company and that the plaintiffs, as holders
of Common Stock, suffered damage as a result.
12
<PAGE> 15
The plaintiffs in both suits seek class-action status and purport to
represent a class of purchasers of Common Stock between March 11, 1996 and March
14, 1997. The plaintiffs seek damages in an unspecified amount, together with
other relief. On July 23, 1998, the California Superior Court dismissed the
plaintiffs' complaint in the state court case as to the individual defendants
but not as to the Company. The Company believes that the plaintiff's allegations
in both suits are without merit and intends to defend the suits vigorously.
CERTAIN TRANSACTIONS
The Registry Companies, Inc. ("Registry"), which is owned by William
Tauscher (Vanstar's Chairman and Chief Executive Officer) and his wife, has
provided, and is expected to continue to provide, services to the Company in the
form of verification of information provided by candidates for prospective
employment with the Company. During Fiscal Year 1998, the Company paid a total
of $170,500 to Registry for its services.
From time to time the Company has made loans to officers, primarily in
connection with relocation of those officers required as a result of their
employment with the Company, but under other circumstances, as well. The table
below sets forth certain information relating to loans to executive officers of
the Company that were outstanding in amounts greater than $60,000 in the
aggregate for any individual during Fiscal Year 1998. Principal and interest on
the loans are generally due within 30 days of receipt of the officer's first
bonus payment from the Company or, if earlier, upon the first anniversary of the
loan (in the case of Mr. Covington) or January 3, 2000 (in the case of Mr.
Laney).
<TABLE>
<CAPTION>
LARGEST AGGREGATE
CURRENT AMOUNT OUTSTANDING PRINCIPAL BALANCE
NAME INTEREST RATE DURING THE PERIOD AS OF APRIL 30, 1998
- ---- ------------- ------------------ --------------------
<S> <C> <C> <C>
Kauko Aronaho.................................. 7.6% $106,544 $106,544
H. Christopher Covington....................... 7.6 106,034 106,034
Chris Laney.................................... 7.75 103,897 103,897
</TABLE>
INDEPENDENT AUDITORS
Ernst & Young, LLP ("Ernst & Young") has served as the Company's auditors
since 1989, but the Board has not yet made a formal determination as to the
selection of the Company's independent auditors for the fiscal year ending April
30, 1999. It is expected that a representative of Ernst & Young will be present
at the Meeting and will be available to make a statement (if he or she desires
to do so) and to respond to appropriate questions at the Meeting.
13
<PAGE> 16
APPROVAL OF OPTION PLAN AMENDMENT
GENERAL
On July 23, 1998, the Board adopted the Option Plan Amendment, which is
being proposed to increase the number of shares of Common Stock subject to grant
under the 1996 Option Plan by 3,000,000 shares, from 3,300,000 shares to
6,300,000 shares. Under the 1996 Option Plan, the approval of the holders of a
majority of the votes that may be cast by all holders of Common Stock must be
obtained prior to any amendment becoming effective if such approval is required
by law or is necessary to comply with Section 422 of the Code or related
regulations. Accordingly, the Option Plan Amendment will not become effective
unless it is so approved.
REASON FOR THE OPTION PLAN AMENDMENT
The purpose of the 1996 Option Plan is to promote the Company's interests
by providing a method whereby eligible individuals who provide valuable services
to the Company may be offered incentives and rewards that will encourage them to
acquire a proprietary interest in the Company and continue to render services to
the Company.
As of July 15, 1998, there were options to purchase 2,833,221 shares of
Common Stock outstanding under the 1996 Option Plan and options for an
additional 74,240 shares had been exercised. Accordingly, only 392,539 shares
remained available for issuance under the 1996 Option Plan as of that date. In
addition, when it adopted the 1996 Option Plan, the Board reduced the aggregate
number of shares of Common Stock that could be issued under the Company's other
Option Plans -- the 1988 Stock Option Plan and the 1993 Stock Option/Stock
Issuance Plan -- intending that substantially all future stock option grants
would be made under the 1996 Option Plan. As of July 15, 1998, more than 320,000
shares that remained available for grant under the 1988 Stock Option Plan
expired without being issued and are no longer available for grant. By
increasing the number of shares available for grant to 6,300,000, the Option
Plan Amendment will enable the plan administrator to issue options for
additional shares of Common Stock under the 1996 Option Plan. Future grants
under the 1993 Option Plan may be made, but only to the extent of the shares
remaining reserved thereunder and to the extent that currently outstanding
options thereunder expire or are canceled without being fully exercised, in
which case the underlying shares become available for future grants under the
terms of that plan.
DESCRIPTION OF THE 1996 OPTION PLAN
The 1996 Option Plan was approved by the Board on August 13, 1996 and by
the Company's stockholders on September 13, 1996. It provides for the grant to
directors, officers and employees of, and consultants to, the Company (or its
subsidiaries), of stock options, including both ISOs and NQSOs, and direct
grants of Common Stock. As of May 1998, approximately 6,990 persons were
potentially eligible to participate, and approximately 1,800 persons were
participating, in the 1996 Option Plan.
The 1996 Option Plan is divided into two components: the Option Grant
Program (the "Option Grant Program") and the Stock Issuance Program (the "Stock
Issuance Program"). Under the Option Grant Program, eligible individuals may be
granted options to purchase shares of the Common Stock at an exercise price to
be determined by the plan administrator (except that the exercise price of an
ISO may not be less than 100 percent (or 110 percent in the case of a 10 percent
stockholder) of the fair market value of the Common Stock on the grant date).
Under the Stock Issuance Program, eligible individuals may be issued shares of
Common Stock directly, either through the immediate purchase of such shares at a
price to be determined by the plan administrator or as a bonus tied to the
performance of services or the Company's attainment of financial objectives,
without any cash payment. Such shares may be fully vested when issued or may
vest over time.
The 1996 Option Plan is generally administered by the Compensation
Committee, except that the Compensation Committee has delegated to the Chairman
of the Board and Chief Executive Officer the authority to make option grants and
share issuances to persons other than executive officers of the Company.
14
<PAGE> 17
The plan administrator has authority to determine (1) with respect to the option
grants, which eligible individuals will receive such grants, the number of
shares to be covered by each such grant, the per share exercise price thereof,
the status of the granted option as either an ISO or an NQSO, the time or times
at which the option is to become exercisable, and the maximum term for which the
option may remain outstanding, and (2) with respect to share issuances, the
number of shares to be issued to each participant, the vesting schedule (if any)
applicable to the issued shares, and the consideration to be paid by the
individual for such shares. The plan administrator has the absolute discretion
either to grant options in accordance with the Option Grant Program or to effect
share issuances in accordance with the Stock Issuance Program. Options granted
and stock issued pursuant to the 1996 Option Plan are evidenced by instruments
authorized by the plan administrator.
Options granted under the 1996 Option Plan expire after ten years, unless
terminated earlier or as otherwise determined by the plan administrator at the
time of grant. Options granted under the 1996 Option Plan are nontransferable
and, with certain exceptions in the event of the death or disability of an
optionee, may be exercised only by the optionee during employment. Upon exercise
of an option, payment in full of the purchase price, either in cash, check,
through a special sale and remittance procedure, or in equivalently valued
shares of Common Stock, is required before the option shares are delivered. The
consideration accepted by the Company for shares issued pursuant to the 1996
Option Plan may be cash, checks, promissory notes, or past services rendered to
the Company.
The Board may amend the 1996 Option Plan from time to time, provided that
stockholder approval must be obtained if required to comply with SEC regulations
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or with Section 422 of the Code or the regulations promulgated
by the Treasury Department thereunder. The 1996 Option Plan will terminate on
the earlier of (1) August 13, 2006 or (2) the date on which all shares available
for issuance have been issued, but any such termination would not affect options
previously granted.
Generally, any optionee whose employment with the Company is terminated for
any reason, other than death or permanent disability or a termination for cause,
may exercise his or her option, to the extent exercisable on the effective date
of such termination, at any time within three months after the date of
termination, provided the option has not expired on the date of such exercise.
In the event of termination of employment due to the death or permanent
disability of an optionee, the option generally may be exercised, to the extent
exercisable on the date of termination, by the person to whom the option shall
have passed by will or the laws of descent and distribution or the optionee, as
the case may be, at any time prior to the earlier of 12 months from the date of
death or termination or the option's specified expiration date. In the event of
the termination of an optionee's employment for cause, the option generally
terminates immediately. The plan administrator has discretion, however, to
permit options to continue to vest following a termination of employment and to
extend the period for which an option is exercisable after a termination of
employment.
The following general rules apply to grants and exercises of NQSOs under
the 1996 Option Plan for Federal income tax purposes under existing law, based
upon the assumption that those NQSOs do not have a readily ascertainable fair
market value at the time of grant. The optionee generally will not recognize any
income on the grant of the option. The optionee will recognize ordinary
compensation income at the time of exercise of the option in an amount equal to
the excess of the fair market value of the shares acquired on the date of
exercise, over the exercise price. When the optionee sells the shares, he or she
will recognize capital gain or loss (assuming the shares are held as a capital
asset) in an amount equal to the difference between the fair market value of the
shares on the date of exercise and the sale price. In general, the Company will
be entitled to a tax deduction in the year in which ordinary compensation income
is recognized by the optionee and in the same amount as the ordinary
compensation income recognized by the optionee, subject to applicable tax
withholding requirements.
The following Federal income tax consequences apply to grants and exercises
of ISOs under the 1996 Option Plan under existing law. If the optionee does not
own stock possessing more than 10% of the total voting power of all classes of
stock of the Company (or if the optionee owns stock possessing more than 10% of
the total voting power of all classes of stock of the Company but the option
price is at least 110% of the fair
15
<PAGE> 18
market value of the shares at the date of grant and the option by its terms is
not exercisable more than five years from the date of grant), no taxable income
results to the optionee upon the grant of an ISO or upon the issuance of shares
to him or her upon exercise of the option. No tax deduction is allowed to the
Company upon either the grant or exercise of the option. If shares acquired upon
exercise of an ISO are not disposed of (1) within the two years following the
date the option was granted or (2) within one year following the date the shares
are transferred to the optionee pursuant to the option exercise (the "Holding
Periods"), the difference between the amount realized on any disposition of the
shares thereafter and the exercise price will be treated as long-term capital
gain or loss to the optionee. If shares acquired upon exercise of an ISO are
disposed of before the expiration of either of the Holding Periods, then the
lesser of (1) any excess of the fair market value of the shares at the time of
exercise of the option over the exercise price or (2) the actual gain on
disposition will be treated as compensation to the optionee and will be taxed as
ordinary income in the taxable year in which the disposition occurs. In any
taxable year that an optionee recognizes compensation income on disposition of
an ISO, the Company will generally be entitled to a corresponding deduction,
subject to applicable tax withholding requirements. Any excess of the amount
realized by the optionee on disposition over the sum of (1) the exercise price
and (2) the amount of ordinary income recognized under the above rules may be
either long-term or short-term capital gain, depending upon the time between
receipt and disposition of the shares. An option will not be treated as an ISO
to the extent the aggregate fair market value for which ISOs are exercisable by
an optionee for the first time in a calendar year exceeds $100,000.
Because grants under the 1996 Option Plan are made at the discretion of the
plan administrator, it is currently not possible to determine the grants that
will be made under the 1996 Option Plan, except that, as described under
"Executive Compensation -- Compensation of Directors," directors who are neither
full-time employees of the Company nor affiliated with EMW may elect to receive
options to purchase 5,000 shares of Common Stock in lieu of their annual fee for
services as a director, and any such options could be granted under the 1996
Option Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE OPTION PLAN
AMENDMENT.
APPROVAL OF ESPP AMENDMENT
GENERAL
Effective March 11, 1996, the Company established the ESPP to provide an
opportunity for eligible employees to acquire a proprietary interest in the
Company through the purchase of shares of Common Stock. Eligible employees may
authorize payroll deductions in whole percentages from two to ten percent of
their regular pay. No investments may be made other than through payroll
deduction.
On, July 23, 1998, the Board adopted the ESPP Amendment, which is being
proposed to increase the number of shares of Common Stock subject to issuance
under the ESPP by 1,000,000 shares, from 1,000,000 shares to 2,000,000 shares.
Under the ESPP, approval of the holders of a majority of votes that may be cast
by all holders of shares of Common Stock must be obtained prior to any amendment
to the ESPP becoming effective if such approval is required by law or is
necessary to comply with the regulations promulgated by the SEC under Section
16(b) of the Exchange Act or with the Code or the regulations promulgated by the
Treasury Department thereunder. Accordingly, the ESPP Amendment will not become
effective unless it is so approved.
REASON FOR THE ESPP AMENDMENT
The purpose of the ESPP is to enable the Company to attract, reward,
motivate, and retain eligible employees by providing them with the opportunity
to purchase Common Stock from the Company, on a payroll-deduction basis, at a
discount to market price, and with favorable tax treatment. As of July 15, 1998,
only 203,928 shares remained available for issuance under the ESPP. By
increasing the number of shares available for grant to 2,000,000, the ESPP
Amendment will enable the Company to continue to make shares available for
purchase by employees under the ESPP.
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DESCRIPTION OF THE ESPP
The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. It is administered by the Compensation Committee, which
has authority to interpret the ESPP, to adopt rules and regulations for its
administration, and to make other determinations advisable for administering the
ESPP. All regular employees of the Company and its subsidiaries scheduled to
work more than 20 hours per week and five or more months in a calendar year,
other than any employees who would own or hold options or other rights to
purchase five percent or more of the outstanding Common Stock, are eligible to
participate in the ESPP. As of May 1998, the Company had approximately 6,990
such employees, approximately 1,250 of whom were then participating in the ESPP.
The ESPP is implemented in two six-month offering periods each year. On the
last day of each option period, the amount credited to a participant's account
is applied to the purchase of whole shares of Common Stock; amounts insufficient
to purchase a whole share generally are applied toward the purchase of shares in
the next option period. Common Stock purchased under the ESPP is purchased
directly from the Company. Shares purchased under the ESPP are held in a
brokerage account or, at the participant's request, are issued and mailed to the
participant. Participants may start, stop, or change their participation in the
ESPP at any time in accordance with the ESPP's provisions. All administrative
expenses of the ESPP are paid by the Company. The price per share of Common
Stock purchased for each participant's account is equal to 85% of the closing
price of the Common Stock on the New York Stock Exchange on the date the option
period begins or on the date the option period ends, whichever price is lower.
No interest is paid on funds held in participant's accounts pending investment
in shares of Common Stock, and no participant may be granted a right to purchase
shares under the ESPP (and any other Company plans intending to qualify under
Section 423 of the Code) that would exceed $25,000 in fair market value of
Common Stock in any calendar year.
The amounts of future share purchases under the ESPP are not currently
determinable because purchases are based upon elections made by employees who
choose to participate in the ESPP. Similarly, future purchase prices are not
determinable because the computation of those prices is tied to the fair market
value of the Common Stock.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ESPP
AMENDMENT.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act generally requires the Company's
executive officers and directors and persons who are beneficial owners of more
than ten percent of the Common Stock to file reports of ownership and changes in
ownership of the Company's equity securities with the SEC. Based upon a review
of the copies of forms furnished to the Company and upon written representations
from certain reporting persons, the Company believes that during Fiscal Year
1998, all filing requirements applicable to its executive officers, directors,
and greater-than-ten-percent stockholders were complied with, except that Leslie
Alvarez, formerly Controller and currently a Vice President of the Company,
failed to file a required Form 5 with respect to the previous fiscal year to
report one transaction. That transaction was reported on a subsequent form.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In accordance with SEC rules, proposals by stockholders intended to be
presented at the Company's 1999 Annual Meeting of Stockholders must be received
at the Company's principal executive offices on or before April 9, 1999 in order
to be included in the proxy materials relating to the 1999 Annual Meeting of
Stockholders. To curtail controversy as to the date on which a proposal was
received by the Company, it is suggested that proponents submit their proposals
by certified mail, return receipt requested. Any such proposal must also meet
the other requirements of the SEC rules relating to stockholder proposals. In
addition, the Company's By-laws provide that no proposal may be submitted by a
stockholder for a vote of the Company's stockholders unless the stockholder
submitting the proposal files a written notice setting forth with
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particularity certain information about the stockholder and all persons acting
in concert with him or her, including the following information: (1) such
persons' names and business addresses, (2) such persons' names and addresses as
they appear on the Company's books (if they so appear), and (3) the class and
number of shares of the Company beneficially owned by such persons. The notice
must also describe all material information relating to the proposal and such
other information as the Board reasonably determines is appropriate to enable
the Board and the stockholders to consider the proposal. The notice must be
delivered to the Secretary of the Company (1) at least 90 days before any annual
meeting to be held on or after the second Wednesday in September, or (2) by the
close of business on the 15th day following the giving of notice of the date of
the meeting, if the meeting is a special meeting or an annual meeting held
before the regular date.
OTHER INFORMATION
PROXY SOLICITATION
The Company will bear the cost of soliciting proxies for the Meeting. In
addition to the solicitation of stockholders of record by mail, telephone or
personal contact, the Company contacts brokers, dealers, banks, or voting
trustees or their nominees, who can be identified as record holders of Common
Stock. Such holders, after inquiry by the Company, provide information
concerning quantities of proxy materials and Annual Reports needed to supply
such materials to beneficial owners, and the Company reimburses them for the
expense of mailing proxy materials and Annual Reports to those persons.
MISCELLANEOUS
The Board does not know of any other matter that is expected to be
presented for consideration at the Meeting. If other matters properly come
before the Meeting, however, the persons named in the accompanying proxy (each
of whom is an officer of the Company) will vote thereon in accordance with their
best judgment.
THE COMPANY WILL PROVIDE WITHOUT CHARGE (OTHER THAN FOR EXHIBITS) TO EACH
PERSON BEING SOLICITED BY THIS PROXY STATEMENT, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 1998, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO, AS FILED WITH THE SEC. REQUESTS
SHOULD BE DIRECTED TO VANSTAR CORPORATION, 1100 ABERNATHY ROAD, BUILDING 500,
SUITE 1200, ATLANTA, GEORGIA 30328, ATTENTION: INVESTOR RELATIONS.
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APPENDIX
PROXY
VANSTAR CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 9, 1998
The undersigned hereby appoints Kauko Aronaho and H. Christopher Covington, and
either of them, with individual power of substitution, proxies to vote all
shares of Common Stock of Vanstar Corporation (the "Company") that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
the Company to be held at the Ritz-Carlton Buckhead Hotel, 3434 Peachtree Road,
N.E., Atlanta, Georgia, on September 9, 1998, at 9:00 a.m., local time, and any
adjournments thereof.
SAID PROXIES WILL VOTE ON THE PROPOSALS SET FORTH IN THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT AS SPECIFIED ON THE REVERSE SIDE OF THIS CARD AND
ARE AUTHORIZED TO VOTE IN THEIR DISCRETION AS TO ANY OTHER BUSINESS THAT MAY
COME PROPERLY BEFORE THE MEETING. IF A VOTE IS NOT SPECIFIED, SAID PROXIES WILL
VOTE IN FAVOR OF PROPOSALS 1, 2, AND 3.
PLEASE MARK, SIGN, AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENVELOPE PROVIDED
- FOLD AND DETACH HERE -
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Please mark
your votes as [X]
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3.
FOR WITHHOLD FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. APPROVAL OF AMENDMENT TO 1996 STOCK
OPTION/STOCK ISSUANCE PLAN
Nominees: John W. Amerman John R. Oltman
Richard H. Bard William Y. Tauscher
Stewart K.P. Gross John L. Vogelstein
William H. Janeway Josh S. Weston
FOR AGAINST ABSTAIN
Instruction: To withhold authority to vote for 3. APPROVAL OF AMENDMENT TO EMPLOYEE
any individual nominee(s), list name(s) below. STOCK PURCHASE PLAN
_________________________________________________________
Signature(s)__________________________________________________________________________________________ Date_________________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such.
</TABLE>
- FOLD AND DETACH HERE -
