<PAGE> 1
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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
DecisionOne Holdings Corp.
- --------------------------------------------------------------------------------
(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): No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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
LOGO
DECISIONONE HOLDINGS CORP.
50 EAST SWEDESFORD ROAD
FRAZER, PENNSYLVANIA 19355
--------------------------------------------------------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
DECEMBER 5, 1996
--------------------------------------------------------------
To the Stockholders of
DecisionOne Holdings Corp.:
Notice is hereby given that the 1996 annual meeting of stockholders (the
"Annual Meeting") of DECISIONONE HOLDINGS CORP. (the "Company" or "DecisionOne")
will be held at The Rittenhouse Hotel, 210 West Rittenhouse Square,
Philadelphia, Pennsylvania 19103 on Thursday, December 5, 1996, at 10:00 a.m.,
local time, for the following purposes:
1. To elect five directors;
2. To approve and adopt the Amended and Restated DecisionOne Holdings Corp.
Stock Option and Restricted Stock Purchase Plan;
3. To ratify the selection of Deloitte & Touche LLP as the Company's
auditors for the fiscal year ending June 30, 1997; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only stockholders of record as of the close of business on October 18, 1996
will be entitled to notice of the Annual Meeting and to vote at the Annual
Meeting and any adjournments thereof. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection by any stockholder, for any
purpose relevant to the Annual Meeting, during the Annual Meeting and during
normal business hours for ten days prior to the Annual Meeting at the offices of
Deloitte & Touche LLP, 1700 Market Street, 24th Floor, Philadelphia,
Pennsylvania 19103.
By order of the Board of Directors,
Thomas M. Molchan
Secretary
Frazer, Pennsylvania
October 28, 1996
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO
DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 3
LOGO
DECISIONONE HOLDINGS CORP.
50 EAST SWEDESFORD ROAD
FRAZER, PENNSYLVANIA 19355
-------------------------------------------------
PROXY STATEMENT
FOR
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
DECEMBER 5, 1996
-------------------------------------------------
This proxy statement and the accompanying form of proxy are being mailed on
or about November 4, 1996 to the stockholders of DecisionOne Holdings Corp. (the
"Company" or "DecisionOne"). These materials are being furnished in connection
with the solicitation by the Board of Directors of the Company of proxies to be
voted at the 1996 Annual Meeting of Stockholders (the "Annual Meeting") to be
held at The Rittenhouse Hotel, 210 West Rittenhouse Square, Philadelphia,
Pennsylvania 19103 on Thursday, December 5, 1996, at 10:00 a.m., local time, and
at any adjournments thereof.
At the Annual Meeting, stockholders of the Company will be asked to vote
upon (1) the election of five directors, (2) the approval and adoption of the
Amended and Restated DecisionOne Holdings Corp. Stock Option and Restricted
Stock Purchase Plan (the "Plan") and (3) the ratification of the selection of
Deloitte & Touche LLP as the Company's auditors for fiscal 1997, and such other
business as may properly come before the meeting and any adjournments thereof.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of the Company
who will not be specially compensated for such services. The Company also will
request banks and brokers to solicit proxies from their customers, where
appropriate, and will reimburse such persons for reasonable expenses incurred in
that regard.
The Company's annual report to stockholders for the year ended June 30,
1996, including financial statements, is being mailed to stockholders with this
proxy statement but does not constitute a part of this proxy statement.
VOTING AT THE MEETING
Holders of shares of the Company's common stock, $.01 par value per share
(the "Common Stock"), of record at the close of business on October 18, 1996
(the "Record Date") are entitled to vote at the Annual Meeting. As of that date,
there were 27,466,035 shares of Common Stock outstanding. Each stockholder
entitled to vote shall have the right to one vote for each share of Common Stock
outstanding in such stockholder's name on the books of the Company as of the
close of business on the Record Date.
The Company presently has no other class of stock outstanding and entitled
to be voted at the Annual Meeting. The presence in person or by proxy of
stockholders entitled to cast a majority of all votes entitled to be cast at the
Annual Meeting will constitute a quorum.
Shares cannot be voted at the Annual Meeting unless the holder of record is
present in person or by proxy. The enclosed form of proxy is a means by which a
stockholder may authorize the voting of his, her or its shares at the Annual
Meeting. The shares of Common Stock represented by each properly executed proxy
will be voted at the Annual Meeting in accordance with each stockholder's
directions. Stockholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy card. If no choice has been
<PAGE> 4
specified and the enclosed proxy card is properly executed and returned, the
shares will be voted as recommended by the Board of Directors. If any other
matters are properly presented to the Annual Meeting for action, the proxy
holders will vote the proxies (which confer discretionary authority to vote on
such matters) in accordance with their best judgment.
Execution of the accompanying proxy will not affect a stockholder's right
to attend the Annual Meeting and vote in person. Any stockholder giving a proxy
has the right to revoke it by giving written or oral notice of revocation to the
Secretary of the Company, or by delivering a subsequently executed proxy, at any
time before the proxy is voted.
Assuming that a quorum is present, the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote is required for the election of directors,
and the affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting is required to approve and adopt the
Plan and to ratify the selection of the Company's auditors for fiscal 1997. With
regard to the election of directors, votes may be cast in favor or withheld;
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions may be specified on the proposals to approve and adopt the
Plan and to ratify the selection of the Company's auditors for fiscal 1997;
abstentions will be considered present and entitled to vote at the Annual
Meeting, but will not be counted as votes cast in the affirmative and will have
the effect of a negative vote because such proposals require the affirmative
vote of a majority of the shares present in person or represented by proxy at
the Annual Meeting and entitled to vote.
The Company believes that brokers who are member firms of the New York
Stock Exchange and who hold shares in street name for customers have the
authority to vote those shares with respect to the election of directors and the
ratification of the selection of the Company's auditors, if they have not
received instructions from the beneficial owner. The Company does not believe
that brokers have the authority to vote those shares with respect to the
approval and adoption of the Plan. Assuming a quorum is present, failure by
brokers to attend the meeting by proxy and vote those shares will have no effect
on the outcome of the election of directors, as the directors are to be elected
by a plurality of the votes cast, or in the case of the other proposals, which
require the affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote.
Your proxy vote is important. Accordingly, please complete, sign and return
the accompanying proxy card whether or not you plan to attend the Annual
Meeting. If you plan to attend the Annual Meeting to vote in person and your
shares are registered with the Company's transfer agent in the name of a broker
or bank, you must secure a proxy from your broker or bank assigning voting
rights to you for your shares of Common Stock.
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of such number of directors
as is fixed from time to time by resolutions adopted by the Board. At the Annual
Meeting, five directors are to be elected. The term of office for each director
will expire at the 1997 annual meeting of stockholders, and each director will
hold office until the election and qualification of his successor or until the
director's earlier death, removal or resignation.
The Board of Directors has nominated for election as directors of the
Company Messrs. Draeger, Anderson, Brooks, McInerney and Weinbach. All nominees
are presently directors of the Company whose terms expire at the Annual Meeting.
One of the current directors of the Company, Don E. Ackerman, has decided not to
stand for re-election.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the stockholders, the persons named in the proxies will
vote the shares represented thereby for the election of such nominees. The Board
of Directors believes all nominees will be able to serve as directors; if this
should not be
2
<PAGE> 5
the case, however, the proxies may be voted for one or more substitute nominees
to be designated by the Board of Directors or the Board may decide to reduce the
number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
----------------------------------
NOMINEES FOR ELECTION
----------------------------------
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS
DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Kenneth Draeger............... 56 Mr. Draeger has been a director of the Company since
1992. He has served as the Chief Executive Officer of
the Company since July 1992 and Chairman of the Company
since November 1995. Prior to joining the Company, Mr.
Draeger was President of Agfa/Compugraphics, a
manufacturer of electronic pre-press equipment. Mr.
Draeger is also a director of Galileo Electro-optics
Corporation.
Bruce K. Anderson............. 56 Mr. Anderson has been a director of the Company since
1988. He has been a General Partner of certain
partnerships affiliated with Welsh, Carson, Anderson &
Stowe ("WCAS"), a venture capital firm, since 1979. Mr.
Anderson is also a director of SEER Technologies, Inc.
and Broadway & Seymour.
Michael C. Brooks............. 51 Mr. Brooks has been a director of the Company since
1988. He has been a General Partner of J. H. Whitney &
Co. ("Whitney"), a venture capital firm, since January
1985 and currently serves as Managing Partner. Mr.
Brooks is also a director of SunGard Data Systems, Inc.
Thomas E. McInerney........... 55 Mr. McInerney has been a director of the Company since
1988. From 1994 to 1995, he served as Chairman of the
Company. Mr. McInerney has been a General Partner of
certain WCAS affiliated partnerships since 1991. Mr.
McInerney is also a director of Bisys Group, Inc. and
Aurora Electronics, Inc.
Arthur F. Weinbach............ 53 Mr. Weinbach has been a director of the Company since
1996. He is President and Chief Executive Officer and a
Director of Automatic Data Processing, Inc. ("ADP"), a
provider of computing services. Since 1981, he has
served in various executive and managerial positions
with ADP, including over nine years as Chief Financial
Officer and six years as a member of ADP's Board of
Directors. Prior to joining ADP, Mr. Weinbach was a
Partner with Touche Ross & Co., a predecessor of
Deloitte & Touche LLP.
</TABLE>
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met on three occasions during fiscal
1996. The Delaware General Corporation Law provides that the board of directors,
by resolution adopted by a majority of the entire board, may designate one or
more committees, each of which shall consist of one or more directors. In May
1996, after the Company's initial public offering of Common Stock ("IPO"), the
Board of Directors established an Executive Committee, an Audit Committee, a
Compensation Committee, and a Stock Option Committee.
3
<PAGE> 6
Each director attended at least 75% of the meetings of the Board of Directors
held during the period for which he was a director and the meetings of the
committee or committees on which he served during such period.
Executive Committee. The Executive Committee may exercise all of the
powers of the Board in the management of the business and affairs of the Company
which may lawfully be delegated to it, provided that (i) the Committee shall act
only when, because of time criticality, it is impractical to call a meeting of
the full Board; (ii) the Committee is not empowered to act on matters which are
within the responsibilities of the Audit Committee or the Compensation
Committee; and (iii) with respect to acquisitions of the stock or assets of
another company, the Committee's authority is limited to transactions with a
purchase price of $20 million or less. The current members of the Executive
Committee are Messrs. Draeger, Anderson, and Brooks. The Executive Committee did
not meet during fiscal 1996.
Audit Committee. The Audit Committee is responsible for providing general
oversight with respect to the accounting principles employed in DecisionOne's
financial reporting. The Audit Committee meets periodically with the Company's
principal financial and accounting officers and independent public accountants
to review the scope of auditing procedures and the Company's policies relating
to internal auditing and accounting procedures and controls. The Audit Committee
met once during fiscal 1996. The Audit Committee is currently composed of two
non-employee directors, Messrs. Brooks and Weinbach.
Compensation Committee. The Compensation Committee determines the annual
salary and bonus and reviews the amount of remuneration in stock options of the
Company's senior executives; reviews the operation of the Company's executive
compensation programs; and establishes and periodically reviews policies in the
area of management benefits. None of the members of the Compensation Committee
may be officers or employees of the Company. The current members of the
Compensation Committee are Messrs. Ackerman and McInerney. The Compensation
Committee met once during fiscal 1996; prior to its formation in May 1996, the
Board as a whole (with the Chairman and Chief Executive Officer excluded from
discussions regarding his compensation) fulfilled the functions of the
Compensation Committee.
Stock Option Committee. The Stock Option Committee has the responsibility
for administering and interpreting the Plan, including the granting of options
thereunder. The Stock Option Committee is currently composed of two non-employee
directors, Messrs. Anderson and Brooks. The Stock Option Committee met once
during fiscal 1996.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 18, 1996
(except as otherwise noted) regarding the ownership of Common Stock (i) by each
person known by the Company to be the beneficial owner of more than five percent
of the Company's outstanding Common Stock, (ii) by each director of the Company,
(iii) by each executive officer of the Company named in the Summary Compensation
Table included elsewhere in this proxy statement and (iv) by all current
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED(1) OF CLASS(1)
- ----------------------------------------------------------------- ------------------- -----------
<S> <C> <C>
Welsh Carson Anderson & Stowe
320 Park Avenue, Suite 2500
New York, New York 10022(2).................................... 10,704,626 39.0%
J.H. Whitney & Co.
177 Broad Street
Stamford, Connecticut 06901(3)................................. 6,224,511 22.7
Kenneth Draeger(4)(5)............................................ 1,251,310 4.4
Stephen J. Felice(5)............................................. 25,000 *
R. Peter Zimmermann(5)(6)........................................ 311,711 1.1
James J. Greenwell(5)(7)......................................... 112,500 *
Thomas M. Molchan(5)............................................. 8,250 *
Don E. Ackerman(8)............................................... 719,392 2.6
Bruce K. Anderson(9)............................................. 10,726,311 39.1
Michael C. Brooks(10)............................................ 6,224,511 22.7
Thomas E. McInerney(11).......................................... 10,750,694 39.1
Arthur F. Weinbach(12)........................................... 2,000 *
All current executive officers and directors as a group (13
persons)....................................................... 19,441,803 70.6
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 27,466,035 shares of Common
Stock outstanding as of October 18, 1996, together with applicable options
for such stockholders. In accordance with the rules of the Securities and
Exchange Commission, shares of Common Stock that are exercisable as of
October 18, 1996 or exercisable within 60 days thereafter are deemed to be
outstanding and beneficially owned by the person holding such option for
purpose of computing such person's percentage ownership, but are not
treated as outstanding for the purpose of computing the percentage of any
other person. The nature of ownership consists of sole voting or investment
power unless otherwise noted.
(2) Includes the following: 5,155,947 shares of Common Stock owned by Welsh,
Carson, Anderson & Stowe IV, a limited partnership of which the general
partner is a partnership comprised of Patrick J. Welsh ("Welsh"), Russell
L. Carson ("Carson"), Bruce K. Anderson ("Anderson"), Richard H. Stowe
("Stowe"), Andrew M. Paul ("Paul") and Thomas E. McInerney ("McInerney");
2,914,857 shares of Common Stock owned by WCAS Capital Partners, a limited
partnership of which the general partner is a partnership comprised of
Welsh, Carson, Anderson, Stowe, Paul and McInerney; 2,266,410 shares of
Common Stock owned by Welsh, Carson, Anderson & Stowe VI, L.P., a limited
partnership of which the general partner is a partnership comprised of
Welsh, Carson, Anderson, Stowe, McInerney, Paul, Laura M. VanBuren
("VanBuren"), James B. Hoover, Robert A. Minicucci and Anthony J. de
Nicola; 297,606 shares of Common Stock issuable upon exercise of a
currently exercisable warrant issued to WCAS Capital Partners II, a limited
partnership of which the general partner is a partnership comprised of
Welsh, Carson, Anderson, Stowe, Paul and McInerney; 51,176 shares of Common
Stock owned by WCAS Information Partners, a limited partnership of which
the general partner is a
5
<PAGE> 8
partnership comprised of Anderson and McInerney; and 18,630 shares of
Common Stock owned by WCAS Venture Partners, a limited partnership of which
the general partner is a partnership comprised of Welsh, Carson, Anderson,
Stowe, McInerney, Paul and VanBuren. The Company believes that the general
partners of each fund share voting and investment power in respect of such
shares.
(3) Includes the following: 4,932,272 shares of Common Stock owned directly by
Whitney; 1,121,095 shares of Common Stock owned by Whitney 1990 Equity Fund
L.P. of which Whitney is a general partner; and 171,144 shares of Common
Stock issuable upon exercise of currently exercisable warrants owned by
Whitney Subordinated Debt Fund, L.P. of which Whitney is a general partner.
Mr. Brooks is a general partner of Whitney. The Company believes that the
general partners of Whitney share voting and investment power in respect of
such shares.
(4) Includes 1,052,310 options that are exercisable as of October 18, 1996 or
within 60 days thereafter.
(5) In connection with the acquisition of Bell Atlantic Business Systems
Services, Inc. ("BABSS") and the resulting reorganization of the Company's
management, the following current executive officers of the Company
received stock option grants, at an exercise price of $8.00 per share, on
November 29, 1995: Kenneth Draeger received an option to purchase 70,000
shares of Common Stock; Stephen J. Felice received an option to purchase
100,000 shares of Common Stock; R. Peter Zimmermann received an option to
purchase 15,000 shares of Common Stock; James J. Greenwell received an
option to purchase 10,000 shares of Common Stock; Thomas M. Molchan
received an option to purchase 33,000 shares of Common Stock; Joseph S.
Giordano received an option to purchase 32,000 shares of Common Stock; and
Dwight T. Wilson received an option to purchase 25,000 shares of Common
Stock. These options vest in four equal annual increments commencing on
November 29, 1996. Of these grants, the amounts shown in the table for
Messrs. Draeger, Felice, Greenwell, and Molchan include 17,500; 25,000;
2,500; and 8,250 options, respectively, that are exercisable as of October
18, 1996 or within 60 days thereafter.
(6) Includes 241,711 options that are exercisable as of October 18, 1996 and
through November 2, 1996 (the date of Mr. Zimmermann's resignation).
(7) Includes 96,500 options that are exercisable as of October 18, 1996 or
within 60 days thereafter.
(8) Includes 66,667 options that are exercisable as of October 18, 1996.
(9) Includes 21,685 shares of Common Stock owned directly by Anderson and
10,704,626 shares of Common Stock beneficially owned by certain WCAS
entities of which Anderson is a general partner. See footnote (2).
(10) Includes shares of Common Stock beneficially owned by certain Whitney
entities of which Mr. Brooks is a general partner. See footnote (3).
(11) Includes 46,068 shares of Common Stock owned directly by McInerney and
10,704,626 shares of Common Stock beneficially owned by certain WCAS
entities of which McInerney is a general partner. See footnote (2).
(12) Includes an option for 1,000 shares granted to Mr. Weinbach on May 2, 1996,
vesting immediately, subject to stockholder approval.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a contract with an approximate annual value of
$150,000 for cleaning services at its Frazer and Horsham, Pennsylvania
facilities with a company controlled by the brother of R. Peter Zimmermann, the
Company's former Executive Vice President. The Company believes that the terms
of this contract are comparable to those that could be obtained with an
unrelated third party providing the same services. See also "Compensation
Committee Interlocks and Insider Participation."
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth for the years ended June 30, 1996 and 1995
certain compensation paid by the Company to its Chief Executive Officer and the
four other most highly paid executive officers of the Company whose cash
compensation exceeded $100,000 for the year ended June 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION ---------------------
--------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS OPTIONS/SARS
- -------------------------------------------- ---- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Kenneth Draeger............................. 1996 $355,000 $484,500(2) 70,000
Chief Executive Officer 1995 250,625 375,000 --
Stephen J. Felice........................... 1996 157,500(3) 130,340(3) 100,000
President 1995 -- -- --
R. Peter Zimmermann(4)...................... 1996 168,500 87,800 15,000
Executive Vice President 1995 156,000 124,000 --
James J. Greenwell.......................... 1996 131,000 58,460 10,000
Senior Vice President -- Sales and 129,500 90,000 40,000
Marketing 1995
Thomas M. Molchan........................... 1996 90,020(3) 42,725(3) 33,000
General Counsel and Corporate Secretary 1995 -- -- --
</TABLE>
- ---------------
(1) In addition to the above named executive officers, Thomas J. Fitzpatrick,
Vice President and Chief Financial Officer, is currently an executive
officer of the Company and would have been included in the above table had
he been named an executive officer prior to June 30, 1996. Mr. Fitzpatrick's
base salary is $190,000 plus a bonus based on the achievement of certain
performance goals to be determined by the Compensation Committee of the
Board of Directors.
(2) $357,000 of this bonus has been paid. The remaining $127,500 is contingent
upon the Company's stock performance during fiscal 1997. Upon completion of
ten consecutive trading days where the share price of Common Stock closes at
or above $18.00, the deferred bonus amount will be paid. Should the share
price performance requirement not be met by June 30, 1997, the deferred
bonus amount will not be paid.
(3) Messrs. Felice and Molchan joined the Company and were named executive
officers on October 21, 1995. The salaries and bonuses shown reflect the
amount earned after such date.
(4) Mr. Zimmermann has resigned from the Company as of November 2, 1996.
The following table summarizes stock options granted during fiscal 1996 to
the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME(2) GRANTED 1996 PRICE DATE 5% 10%
- ------------------------- ------- ---------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Draeger.......... 70,000(3) 8.8% $8.000 11/28/05 $352,181 $ 892,496
Stephen J. Felice........ 100,000(3) 12.5 8.000 11/28/05 503,116 1,274,994
R. Peter Zimmermann...... 15,000(3) 1.9 8.000 11/28/05 75,467 191,249
James J. Greenwell....... 10,000(3) 1.3 8.000 11/28/05 50,312 127,499
Thomas M. Molchan........ 33,000(3) 4.1 8.000 11/28/05 166,028 420,748
</TABLE>
- ---------------
(1) Potential Realizable Values are based on an assumption that the share price
of the Common Stock starts equal to the exercise price shown for each
particular option grant and appreciates at the annual rate shown (compounded
annually) from the date of the grant until the end of the term of the
option. These
7
<PAGE> 10
amounts are reported net of the option exercise price, but before any taxes
associated with exercise or subsequent sale of the underlying stock. The
actual value, if any, an optionholder may realize will be a function of the
extent to which the share price exceeds the exercise price on the date the
option is exercised and also will depend on the optionholder's continued
employment through the vesting period. The actual value to be realized by
the optionholder may be greater or less than the values estimated in this
table.
(2) In connection with being named an executive officer of the Company, Thomas
J. Fitzpatrick received an option to purchase 100,000 shares of Common
Stock, at an exercise price of $22.125 per share, on August 13, 1996. These
options were canceled on September 9, 1996. Mr. Fitzpatrick received another
option to purchase 100,000 shares of Common Stock, at an exercise price of
$14.00 per share, on September 9, 1996. These options vest in four equal
annual installments commencing on the first anniversary of the grant.
(3) Options vest in four equal annual installments commencing on the first
anniversary of the date of grant. Unvested options are subject to
termination upon termination of the optionee's service with the Company.
The following table summarizes option exercises during fiscal 1996 and the
value of vested and unvested options for the persons named in the Summary
Compensation Table at June 30, 1996. Year-end values are based upon a price of
$23.75 per share, which was the closing market price of a share of Common Stock
on June 28, 1996, the last trading day of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT JUNE 30, 1996 JUNE 30,1996
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Draeger........... 174,000 $4,045,500 886,902 300,378 $20,620,472 $ 6,458,789
Stephen J. Felice......... -- -- -- 100,000 -- 1,575,000
R. Peter Zimmermann....... 20,000 465,000 257,951 69,049 5,997,361 1,492,889
James J. Greenwell........ -- -- 96,667 73,333 2,192,485 1,465,016
Thomas M. Molchan......... -- -- -- 33,000 -- 519,750
</TABLE>
The Company does not currently grant any long-term incentives, other than
stock options, to its executives or other employees, nor does it sponsor any
defined benefit or actuarial plans at this time.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Draeger entered into an employment agreement with Decision Data Inc.,
the predecessor of a wholly owned subsidiary of the Company, in October 1992.
The employment agreement, which is terminable at will by either party, provides
for a base salary of not less than $250,000 plus an annual bonus awarded
pursuant to a target formula developed by the Board of Directors. The employment
agreement also provides for a bonus to be paid to Mr. Draeger in the event of a
change of control of the Company, ranging from $300,000 if the Equity Value (as
defined in the employment agreement) of the transaction is at least $40.0
million, to an amount equal to $2.0 million plus 2% of any excess in Equity
Value over $100.0 million for transactions with an Equity Value in excess of
$100.0 million. In addition, severance benefits are payable to Mr. Draeger in
the event that his employment is terminated, other than for cause (as defined in
the agreement), death or disability, for a period of 18 months following such
termination in a monthly amount equal to one-twelfth of his annual salary. Mr.
Draeger has agreed not to compete with the Company for a one year period after
termination of his employment for any reason.
Messrs. Felice, Zimmermann and Greenwell have severance arrangements with
the Company which in various instances provide for a severance payment of up to
one times base annual salary, a pro-rata portion of
8
<PAGE> 11
accrued bonus, and the continuation of certain benefits for up to one year in
the event of termination without cause.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $10,000 as well as
$1,500 for attendance at any meeting of the Board of Directors or any meeting of
the Executive Committee, Audit Committee or Compensation Committee, except
telephonic meetings and committee meetings held on the same date as a Board
meeting.
Under the terms of the Plan, as amended in 1996, each non-employee director
is entitled to receive a one-time grant of options to purchase 4,000 shares of
Common Stock vesting 25% a year over four years. In addition, the Plan provides
for a one-time grant of options to purchase 1,000 shares of Common Stock to each
non-employee director elected on or after May 2, 1996, vesting immediately.
These grants are subject to stockholder approval of the 1996 amendments to the
Plan (see Proposal No. 2).
The following Compensation Committee Report and the Comparative Stock
Performance Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
JOINT REPORT OF THE COMPENSATION AND
STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION
On May 2, 1996, after the Company's IPO, the Board of Directors created the
Compensation Committee and the Stock Option Committee (the "Committees") of the
Board to have the responsibility for implementing and administering the
Company's compensation policies and programs for its executive officers. Prior
to May 2, 1996, the responsibilities of the Committees were performed by the
Board as a whole.
The Compensation Committee is responsible for setting the base salaries and
the total compensation levels of the Chief Executive Officer (the "CEO") and the
other executive officers of the Company. In addition, the Compensation Committee
is responsible for setting the performance criteria for annual cash incentive
awards and determining the achievement levels and payout for the executive
officers. The Stock Option Committee is responsible for determining which
executives, including the CEO, will be granted stock options and restricted
stock and the size of such grants.
COMPENSATION POLICIES
The Company's compensation policies for executive officers, as established
by the Board prior to the IPO and continued by the Compensation Committee, are
designed to (a) provide competitive compensation packages that will attract and
retain superior executive talent, (b) link a significant portion of compensation
to financial results, so as to reward successful performance, and (c) provide
long-term equity compensation, to further align the interests of executive
officers with those of stockholders and further reward successful performance.
The principal components of the Company's executive officer compensation program
are base salary, annual cash incentive awards, and grants of stock options.
ANNUAL COMPENSATION
The primary factor used to set cash compensation for the Company's
executive officers is an analysis of competitive executive compensation based
upon general business compensation surveys as well as more specific compensation
surveys of companies of comparable business, size and complexity to the Company.
Prior to the IPO, the Board relied on analyses of published compensation surveys
by the Human Resources Department of the Company to analyze competitive
compensation with respect to executive compensation. Subsequent to the IPO, the
Company engaged William M. Mercer, Inc., an independent compensation consultant,
to analyze competitive compensation. The Compensation Committee relied on the
consultant's
9
<PAGE> 12
analysis to choose the most direct competitors for executive talent, which are
not the same companies that are included in the S&P Computer Software and
Services Index (See Performance Graph). Thus, the compensation peer group is not
the same as the companies in the index used in the Performance Graph included in
this Proxy Statement.
The Company's policy is to pay its executive officers at competitive cash
compensation medians for comparable positions. Base salaries of individual
executive officers vary depending upon a subjective assessment of individual
factors such as the executive's position, skills, achievements and historical
compensation levels. Incentive awards are designed to give competitive cash
compensation if performance targets are met, more than competitive compensation
if performance targets are exceeded, and less than competitive compensation if
performance targets are not met. Previously granted stock options are not
considered in setting cash compensation levels.
The Board met in November 1995 to review current market data based on the
increased size and complexity of the Company and the increased span of
responsibility for each executive officer, including the CEO, in light of the
BABSS acquisition, and to review and approve base salaries, incentive pay and
performance targets for the period October 21, 1995, the date of the acquisition
of BABSS, through the remainder of fiscal 1996. For the executive officers who
were formerly employed by BABSS, the Board used their base salary rates while
employed by BABSS as a factor in determining their base salaries in their new
positions with the Company. Annual incentive targets were set for the executive
officers, excluding the CEO, based on each officer's level and position,
consisting of financial targets and individual performance goals.
Executive officers, excluding the CEO (as discussed separately below),
earned cash incentive awards for fiscal 1996 performance based upon individual
annual accomplishments measured against the pre-established goals. Seventy-five
percent (75%) of the target award for each executive was calculated based on
achievement of specified operating income goals. The remaining 25% of the target
award was based on achievement of individual performance objectives by each
executive officer. The individual performance objectives included: integration
goals for the merged companies; the achievement of the IPO; targets for revenue
growth, operating cash flow, and savings from financing activities; goals for
customer satisfaction and productivity; development of marketing plans;
development of an advanced information systems architecture; the design and
implementation of incentive plans; and the design and implementation of
compliance and audit programs. Not each performance criterion applied to each
executive officer, and each officer had different weighting for his individual
performance objectives. Executive officers, excluding the CEO, received
one-eighth of their annual incentive award target in quarterly payments for each
quarter in which the Company met or exceeded its year-to-date operating income
target. These payments were deducted from the final incentive payment for fiscal
1996.
LONG-TERM COMPENSATION
The Company has granted stock options at irregular intervals at the
discretion of the Board, prior to the IPO, and at the discretion of the Stock
Option Committee, subsequent to the IPO. The number of options in each grant is
not based on any specific criteria. However, the Board and the Stock Option
Committee considered primarily the executive's position, skills and
achievements, and the level and timing of previously granted stock options.
Stock options were granted to each executive officer, including to the CEO (as
discussed below), by the Board at its November 1995 meeting.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Draeger's annual base salary was raised to $400,000 by the outside
directors at the time of the BABSS acquisition to reflect his increased
responsibilities. Based upon the analysis by the outside directors at the time
of the increase and subsequent analysis by the Compensation Committee, the
Compensation Committee is of the opinion that Mr. Draeger's base salary is
comparable to the median of competitive base salaries for executives from
companies of similar annual revenues, operating earnings and growth potential.
There was no pre-set formula by which the amount of Mr. Draeger's 1996
annual cash incentive award was determined. However, the Compensation Committee
considered the financial performance of the
10
<PAGE> 13
Company during the fiscal year and the median of competitive cash compensation
for executives with companies of similar annual revenues. It noted in particular
that the Company's actual operating income exceeded the operating income target.
In recognition of these factors, the Compensation Committee awarded an annual
incentive award to Mr. Draeger of $357,000.
The Compensation Committee also considered Mr. Draeger's pivotal role in
the acquisition of BABSS and the Company's IPO. The Compensation Committee
believes the best measure of success for these two accomplishments is sustained
shareholder value. Accordingly, an award of $127,500 will be paid to Mr. Draeger
contingent upon completion of ten consecutive trading days, between September 3,
1996 and the end of the fiscal year (June 30, 1997), during which the Company's
share price closes at $18.00 or higher. Should the fiscal year conclude without
achievement of this required share price performance, this award will expire
unpaid. It is the intent of the Compensation Committee that these two
aforementioned awards, totaling $484,500, constitute the annual incentive award
for fiscal 1996. This award is separate and apart from any award to be paid for
the Company's fiscal 1997 financial and operational performance and Mr.
Draeger's other achievements during fiscal 1997.
Long-term incentive compensation for Mr. Draeger is provided in the form of
stock options. In recognition of the Company's growth and Mr. Draeger's
leadership in achieving the Company's growth and profitability over the term of
his employment, the outside directors granted him, at the November 1995 meeting,
options to acquire a total of 70,000 shares, vesting in equal annual increments
over four years and exercisable at $8.00 per share, which the Board determined
was the fair market value at such date.
DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162(m) of the Internal Revenue Code generally denies a federal
income tax deduction for certain compensation exceeding $1,000,000 paid to the
CEO or any of the four other highest paid executive officers, excluding (among
other things) certain performance-based compensation. Through June 30, 1996,
this provision has not affected the Company's tax deductions, but the Committees
will continue to monitor the potential impact of section 162(m) on the Company's
ability to deduct executive compensation. The Committees note that the Company's
compensation plan contains provisions relating to stock options that are
designed to preserve the deductibility of income realized upon exercise of stock
options.
This Report has been provided by the Compensation and Stock Option
Committees of the Board of Directors.
<TABLE>
<S> <C>
Compensation Committee of Stock Option Committee of
the Board of Directors: the Board of Directors:
Thomas E. McInerney, Chairman Michael C. Brooks, Chairman
Don E. Ackerman Bruce K. Anderson
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Ackerman, a director of the Company, is Chairman of the Board and a
holder of less than two percent of the outstanding common stock of Genicom
Corporation ("Genicom"). From time to time, the Company purchases spare parts
from Genicom to service printers sold by Genicom. The Company believes that its
transactions with Genicom are on terms no less favorable to the Company than
similar transactions with unaffiliated third parties. Purchases from Genicom for
the fiscal year ended June 30, 1996 were approximately $1.5 million.
In connection with the financing of the Company's acquisition of BABSS, the
Company issued 181,145 shares, 109,532 shares, 848 shares and 1,695 shares of
Series C Preferred Stock (subsequently converted into 3,751,486 shares of Common
Stock in connection with the IPO) to certain partnerships associated with WCAS,
Whitney, Mr. McInerney and Mr. Anderson, respectively, in each case at a price
of $100 per share. In addition, the Company issued to a partnership associated
with WCAS and a partnership associated with Whitney, respectively, warrants to
purchase 297,606 and 171,144 shares of Common Stock, at an exercise price of
$.10 per share, for a cash purchase price of $7.25333 per warrant. Finally, the
Company sold $19.1
11
<PAGE> 14
million and $10.9 million aggregate principal amount of 10.101% subordinated
notes due 2001 (the "Notes") to a partnership associated with WCAS and a
partnership associated with Whitney, respectively. The Notes were repaid with
proceeds from the Company's IPO. Messrs. Anderson and McInerney are general
partners of certain WCAS entities and Mr. Brooks is a general partner of
Whitney.
In December 1995, the Company paid Whitney $125,000 representing the
payment of past due amounts for financial consulting services rendered by
Whitney to the Company in a prior transaction. Mr. Brooks is a general partner
of Whitney.
Mr. McInerney previously served as Chairman of the Company from 1994 to
1995.
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return of (i) the
Standard & Poor's 500 Stock Index (the "S&P Index"), and (ii) the Standard &
Poor's Computer Software & Services Index (the "Computer Index"), assuming an
investment of $100 on April 4, 1996 in each of the Common Stock of the Company,
the stocks comprising the S&P Index and the stocks comprising the Computer
Index, and further assuming reinvestment of dividends. The graph commences as of
April 4, 1996, the date the Common Stock became publicly-traded.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DECISIONONE S&P COMPUTER S&P 500
<S> <C> <C> <C>
4-APR 100 100 100
30-APR 115.429 106.5 99.742
31-MAY 132.571 109.106 102.022
28-JUN 107.571 111.771 102.252
</TABLE>
The graph assumes $100 invested in DecisionOne and the two indices on April 4,
1996.
(PROPOSAL NO. 2)
AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN
At the Annual Meeting, there will be presented to stockholders a proposal
to approve and adopt the Plan. On May 2, 1996, the Board of Directors of the
Company and its Compensation and Stock Option Committees amended and restated
the Company's Stock Option and Restricted Stock Purchase Plan (the "Old Plan")
by adopting the Plan, subject to stockholder approval at the Annual Meeting. The
amendment and restatement will not be effective unless and until stockholder
approval is obtained.
As proposed to be amended and restated, the Plan adds provisions to the Old
Plan (i) providing for the grant of nonqualified stock options to non-employee
directors of the Company; (ii) increasing the number of
12
<PAGE> 15
shares authorized for issuance under the Old Plan by 2,000,000 shares to a total
of 5,350,000 shares; and (iii) complying with section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") and Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Board believes the Plan helps the Company and its subsidiaries attract,
retain and motivate employees of, and others employed by or performing services
for, the Company or its subsidiaries and to encourage such persons to devote
their best efforts to the business and financial success of the Company. By
providing key employees with the opportunity to acquire an equity interest in
the Company over time, the Board believes stock options serve to align the
interests of key employees closely with other stockholders. Similarly, the Board
believes the provision of options to non-employee directors is necessary to
attract and retain qualified outside directors.
Since stock options are the only form of long-term incentive currently
offered to the Company's key employees, an adequate reserve of shares is
necessary to enable the Company to make periodic grants in the future to retain
its key employees. In addition, acquisitions have played a key role in the
Company's growth, and the availability of options is critical to attract
experienced management from businesses which may be acquired by the Company. For
example, in connection with the acquisition of BABSS, the Board of Directors
granted an aggregate of 476,000 options to key managers of BABSS. For the above
reasons, the Board believes it is necessary to increase the number of shares
authorized for issuance under the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL AND
ADOPTION OF THE PLAN.
THE PLAN IS SET FORTH AS EXHIBIT A TO THIS PROXY STATEMENT. THE DESCRIPTION
OF THE PLAN CONTAINED HEREIN DESCRIBES THE PLAN INCLUDING ALL AMENDMENTS AND
RESTATEMENTS OF THE OLD PLAN DESCRIBED ABOVE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO EXHIBIT A.
------------------------
DESCRIPTION OF THE PLAN
------------------------
GENERAL
The Old Plan was originally adopted by the Board of Directors on September
15, 1988, and was subsequently approved by the stockholders of the Company.
Following the amendment and restatement of the Old Plan by the Board of
Directors on May 2, 1996, the Plan provides for (i) grants of incentive stock
options ("ISOs") to employees of the Company or its subsidiaries, (ii)
nonqualified stock options ("NQSOs") to employees, non-employee directors or any
person employed by or performing consulting services (other than consulting
services in connection with a capital transaction) for the Company or its
subsidiaries, and (iii) grants of rights to purchase restricted stock of the
Company ("Awards") to employees of the Company or its subsidiaries. If the
Company has additional subsidiaries in the future, the Plan will apply to
employees of, and certain consultants and advisors to, such subsidiaries. Shares
of Common Stock to be issued under the Plan are covered by a registration
statement on Form S-8 which was filed with the Securities and Exchange
Commission (the "SEC") in May 1996.
The Plan authorizes up to 5,350,000 shares for issuance pursuant to its
terms. Shares issued under the Plan may be authorized but unissued Common Stock
or may be Common Stock held in, or acquired for, the treasury of the Company. If
and to the extent outstanding options are terminated or expire, the shares
allocable to the unexercised portion of such options may again be subject to an
option or Award granted under the Plan. As of October 18, 1996, stock options
have been exercised and Awards have been made with respect to 472,400 shares,
and stock options covering an additional 2,691,220 shares of Common Stock had
been granted and were outstanding. If the Plan is not approved and adopted by
stockholders, only 186,380 shares of Common Stock would be available for future
grants under the Old Plan.
ADMINISTRATION
The Plan is administered and interpreted by the Stock Option Committee
which consists of not less than two persons appointed by the Board of Directors
from among its members, all of whom are "outside directors"
13
<PAGE> 16
as defined in section 162(m) of the Code and related Treasury regulations. The
Stock Option Committee has the sole authority to select (i) persons to whom ISOs
and NQSOs (collectively, "Options") or Awards may be granted under the Plan,
(ii) the type, size and other terms and conditions of each Option or Award,
(iii) the time when the grant of Options or Awards will be made and (iv) any
other matters arising under the Plan. The Stock Option Committee has full power
and authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules and regulations for implementing
the Plan and for conduct of its business as it deems necessary or advisable, in
its sole discretion.
GRANTS
The Committee may grant (i) stock options intended to qualify as ISOs,
within the meaning of section 422 of the Code, (ii) NQSOs, (iii) Awards, or (iv)
any combination of ISOs or NQSOs. Non-employee directors may receive only NQSOs.
ELIGIBILITY
All employees (including officers and directors) of the Company
(approximately 5,600 employees as of June 30, 1996) are eligible to participate
in the Plan. Non-employee directors may be granted only NQSOs under the formula
grants provided in the Plan. It is not possible to specify in advance the number
of consultants who may be eligible for NQSOs or Awards under the Plan. In any
calendar year under the term of the Plan, no individual may receive Options or
Awards for more than an aggregate of 2,680,000 shares of Common Stock.
Subject to the terms of the Plan, the Stock Option Committee is responsible
for designating the employees of, and others employed by or performing services
for, the Company and its subsidiaries who may participate in the Plan. The Stock
Option Committee is authorized to select the persons to receive Options or
Awards from among those eligible and to determine the number of shares of Common
Stock that are subject to each Option or Award.
TERMS AND CONDITIONS OF STOCK OPTIONS
Option Price. The Stock Option Committee fixes the option price per share
(other than NQSOs granted to non-employee directors) at the date of grant. The
option price of any ISO granted under the Plan may not be less than the "fair
market value" of the underlying shares of Common Stock on the date of grant.
However, if the recipient of an ISO is a person who holds more than 10% of the
combined voting power of all classes of outstanding stock of the Company, the
option price per share of an ISO must be at least 110% of the fair market value
of a share of Common Stock on the date of grant. To the extent that the
aggregate fair market value of shares of Common Stock, determined on the date of
grant, with respect to which ISOs granted under the Plan and any other plan
become exercisable for the first time by a recipient thereof during any calendar
year exceeds $100,000, such ISOs, to the extent of such excess, will be treated
as NQSOs. The option price of any NQSOs, other than those granted to
non-employee directors, may be more than, less than or equal to, the fair market
value of the underlying shares of Common Stock on the date of grant. The option
price of NQSOs granted to non-employee directors shall be the fair market value
of the underlying shares of Common Stock on the date of grant. Currently, the
measure of fair market value of a share of Common Stock on a particular date is
the closing sale price of such share as reported on the Nasdaq National Market
on that date. On October 18, 1996, the closing price of the Company's Common
Stock, as reported on the Nasdaq National Market, was $15.00 per share.
Term and Exercisability of Option. The Stock Option Committee determines
the term of each option (other than NQSOs granted to non-employee directors),
which may not exceed ten years from the date of grant or, if the recipient of an
ISO is a person who holds more than 10% of the combined voting power of all
classes of outstanding stock of the Company, five years from the date of grant.
The term of NQSOs granted to non-employee directors is ten years subject to
earlier termination in the event of termination, disability or death. The
exercisability of Options (other than NQSOs granted to non-employee directors as
described below) will be as determined by the Stock Option Committee, in its
sole discretion, and specified in a grant
14
<PAGE> 17
letter. The Stock Option Committee, in its sole discretion, may accelerate the
exercisability of any Option (other than NQSOs granted to non-employee
directors).
Termination of ISO as a Result of Termination of Employment, Disability or
Death. In the sole discretion of the Stock Option Committee, the terms of any
ISO may include provisions that (i) cease vesting thereof on, and terminate the
option one month after, the date on which the recipient thereof ceases to be
employed by the Company or any parent or subsidiary of the Company for any
reason other than as a result of his death or "disability" (within the meaning
of section 22(e)(3) of the Code) and (ii) cease vesting thereof on, and
terminate the option one year after, the date on which the recipient thereof
ceases to be employed by the Company or any parent or subsidiary of the Company
by reason of his "disability" (within the meaning of section 22(e)(3) of the
Code) or his death.
NQSOs Granted to Non-employee Directors. Under the Plan, non-employee
directors will automatically receive grants of NQSOs. According to the formula
grants each non-employee director who is a member of the Board of Directors on
May 2, 1996 or who first becomes a member of the Board of Directors thereafter
will receive an NQSO grant to purchase 4,000 shares of Common Stock ("Initial
Grant"). Initial Grant options will become exercisable with respect to 25% of
the shares on the first anniversary of the date of grant and an additional 25%
on each anniversary thereafter. In addition, each non-employee director who
first becomes a member of the Board of Directors on or after May 2, 1996 will
receive an NQSO grant to purchase 1,000 shares of Common Stock ("Additional
Grant"). Additional Grant options are fully exercisable as of the date of grant.
NQSOs granted to non-employee directors (i) cease vesting on, and terminate
one month after, the date on which the recipient thereof ceases to be a director
of the Company for any reason other than as a result of his death or
"disability" (within the meaning of section 22(e)(3) of the Code) and (ii) cease
vesting on, and terminate one year after, the date on which the recipient
thereof ceases to be a director of the Company by reason of his "disability"
(within the meaning of section 22(e)(3) of the Code) or his death.
TERMS AND CONDITIONS OF STOCK AWARDS
Award Price. The Stock Option Committee may issue or transfer shares of
Common Stock under an Award pursuant to the Plan. The amount to be paid by a
recipient of an Award to acquire the shares of Common Stock pursuant to an Award
shall be fixed by the Stock Option Committee and may be less than, equal to or
greater than the fair market value of the shares of Common Stock subject to the
Award on the date of the Award. The number of shares of Common Stock granted to
each grantee is determined by the Stock Option Committee, subject to the maximum
limit described above. The Award will contain such vesting provisions, transfer
restrictions and other restrictions and conditions as the Stock Option Committee
may determine in its sole discretion.
Adjustment Provisions. Subject to the change of control provisions
described below, in the event of a stock split, stock dividend, combination or
exchange of shares, merger, consolidation, reorganization, recapitalization or
similar transaction, the Board may appropriately adjust: (i) the number of
shares of Common Stock (and the option price per share) subject to the
unexercised portion of any outstanding Option, (ii) the number of shares of
Common Stock to be acquired pursuant to an Award which have not become vested,
and (iii) the number of shares of Common Stock for which Options or Awards may
be granted under the Plan.
CHANGE OF CONTROL PROVISIONS
In the event of (i) an offer to holders of Common Stock generally relating
to the acquisition of their shares including, without limitation, through
purchase, merger or otherwise, or (ii) any transaction generally relating to the
acquisition of substantially all of the assets or business of the Company, the
Board of Directors may, in its sole discretion, make such adjustments as it
deems equitable in respect of outstanding Options or Awards including, without
limitation, the revision or cancellation of any outstanding Options or Awards.
15
<PAGE> 18
AMENDMENTS
The Board of Directors may amend or terminate the Plan at any time;
provided, however, that the Board of Directors may not amend the Plan to (i)
increase (except for increases due to the adjustments discussed above) the
aggregate number of shares of Common Stock for which Options and/or Awards may
be granted hereunder, (ii) decrease the minimum exercise price specified by the
Plan in respect of ISOs, (iii) change the class of employees eligible to receive
ISOs under the Plan, (iv) increase the individual limit of shares of Common
Stock for which Options and/or Awards may be granted to any single individual
under the Plan, or (v) make any amendment that requires stockholder approval
pursuant to Rule 16b-3 of the Exchange Act or section 162(m) of the Code without
stockholder approval. The Plan will terminate on September 15, 1998 unless
terminated earlier by the Board of Directors or extended by the Board of
Directors with approval of the stockholders. A termination or amendment of the
Plan that occurs after a grant is made will not result in the termination or
amendment of such grant.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax treatment of grants and Awards under the Plan under
present tax law is described generally below. Local and state tax authorities
may also tax incentive compensation awarded under the Plan.
Non-Qualified Stock Options. There are no federal income tax consequences
to a recipient or to the Company upon the grant of an NQSO under the Plan. Upon
the exercise of an NQSO, a recipient thereof will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the shares of Common Stock at the time of exercise over the exercise price of
the NQSO, and the Company generally will be entitled to a corresponding federal
income tax deduction. Upon the sale of shares of Common Stock acquired by the
exercise of an NQSO, a recipient will have a capital gain or loss (long-term or
short-term depending upon the length of time the shares were held) in an amount
equal to the difference between the amount realized upon the sale and the
recipient's adjusted tax basis in such shares (the exercise price plus the
amount of ordinary income recognized by the recipient at the time of exercise of
the NQSO).
Incentive Stock Options. A recipient of an ISO will not recognize taxable
income for purposes of the regular income tax, upon either the grant or exercise
of the ISO. However, for purposes of the alternative minimum tax imposed under
the Code, in the year in which an ISO is exercised, the amount by which the fair
market value of the shares of Common Stock acquired upon exercise exceeds the
option price will be treated as an item of adjustment and included in the
computation of the recipient's alternative minimum taxable income in the year of
exercise. An ISO recipient who disposes of the shares of Common Stock acquired
upon exercise of an ISO after two years from the date the ISO was granted and
after one year from the date such shares were transferred to him or her will
recognize long-term capital gain or loss in the amount of the difference between
the amount realized on the sale and the option price (or the recipient's other
tax basis in such shares), and the Company will not be entitled to any tax
deduction by reason of the grant or exercise of the ISO. As a general rule, if
an ISO recipient disposes of the shares of Common Stock acquired upon exercise
of an ISO before satisfying both holding period requirements (a "disqualifying
disposition"), his or her gain recognized on such a disposition will be taxed as
ordinary income to the extent of the difference between the fair market value of
such shares on the date of exercise and the option price, and the Company will
be entitled to a deduction in that amount. The gain, if any, in excess of the
amount recognized as ordinary income on such a disqualifying disposition will be
long-term or short-term capital gain, depending upon the length of time the
recipient held his or her shares prior to the disposition.
Awards. A recipient of an Award normally will not recognize taxable income
upon the grant of an Award, and the Company will not be entitled to a deduction,
until such Common Stock is transferable by such recipient or is no longer
subject to a substantial risk of forfeiture for federal tax purposes, whichever
occurs earlier. When the shares of Common Stock received in an Award are either
transferable or are no longer subject to substantial risk of forfeiture, the
recipient thereof will recognize ordinary compensation income in an amount equal
to the fair market value of such shares (less any amounts paid for such shares)
at that time and the Company will be entitled to a deduction in the same amount.
A recipient of an Award may, however, elect to recognize ordinary compensation
income in the year the Award is granted in an amount equal to the
16
<PAGE> 19
fair market value of the shares (less any amounts paid for such shares) at that
time, determined without regard to the restrictions. In such event, the Company
generally will be entitled to a corresponding deduction in the same year. Any
gain or loss recognized by the Award recipient upon subsequent disposition of
the shares of Common Stock will be a capital gain or loss. If, after making the
election, any shares of Common Stock subject to an Award are forfeited, the
recipient thereof is not entitled to any tax deduction or tax refund as a result
of the forfeiture (other than with respect to any amounts paid by the recipient
for such shares).
Section 162(m). Under section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
include amounts received upon the exercise of options granted under the Plan and
the value of shares of Common Stock received when the shares of restricted stock
or other Awards became transferable (or such other time when income is
recognized). An exception does exist, however, for "performance-based
compensation," including amounts received upon the exercise of stock options
pursuant to a plan approved by stockholders that meets certain requirements. The
Plan is intended to make grants of options thereunder meet the requirements of
"performance-based compensation." Awards of restricted stock generally will not
qualify as "performance-based compensation."
NEW PLAN BENEFITS
Non-executive directors as a group received 21,000 options under the Plan
subject to stockholder approval. The Stock Option Committee has not yet
determined allocation of the additional 2,000,000 shares of Common Stock to be
reserved for issuance under the Plan pursuant to the amendment and restatement
of the Old Plan.
(PROPOSAL NO. 3)
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
public accountants, to be the Company's auditors for fiscal 1997. Although not
required to do so, the Board has determined that it would be desirable to
request ratification of this appointment by the holders of shares of Common
Stock of the Company. If such ratification is not received, the Board will
reconsider the appointment. Representatives of Deloitte & Touche LLP are
expected to be available at the Annual Meeting to respond to appropriate
questions and to make a statement if they so desire.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting is required for the ratification of
this selection.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR APPROVAL OF THIS PROPOSAL.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly comes
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such reports received by the Company and written
representations from certain reporting persons that no Forms 5 were required for
those persons, the Company believes that during the year ended June 30, 1996 all
filing requirements applicable to its officers, directors and ten-percent
stockholders were satisfied,
17
<PAGE> 20
except that the Forms 3 filed by the Company on behalf of Messrs. Draeger,
Ackerman, Weinbach, Felice, Zimmermann, Giordano, Greenwell, Molchan and Wilson
were not filed on a timely basis.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the SEC. To
be considered for inclusion in the proxy statement and form of proxy relating to
the 1997 annual meeting, such proposals must be received by the Company no later
than June 30, 1997. Proposals should be directed to the attention of the
Secretary of the Company.
ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge to each person whose proxy is being
solicited, upon the written request of such person, a copy of the Company's
annual report on Form 10-K for the year ended June 30, 1996, including the
financial statements, but excluding exhibits. Requests for copies of such report
should be directed to the Company, Attention: Investor Relations.
By order of the Board of Directors,
Thomas M. Molchan
Corporate Secretary
Frazer, Pennsylvania
October 28, 1996
18
<PAGE> 21
EXHIBIT A
DECISIONONE HOLDINGS CORP.
AMENDED AND RESTATED
STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN
Section 1. Purpose. The purpose of the DecisionOne Holdings Corp. Stock
Option and Restricted Stock Purchase Plan (the "Plan") is to promote the
interests of DecisionOne Holdings Corp., a Delaware corporation (the "Company")
and any Subsidiary thereof, and its stockholders by providing an opportunity to
selected employees, officers and directors of the Company or any Subsidiary
thereof as of the date of the adoption of this Plan or at any time thereafter to
purchase Common Stock of the Company. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate such employees and persons and to
encourage such employees and persons to devote their best efforts to the
business and financial success of the Company. It is intended that this purpose
will be effected by the granting of "non-qualified stock options" and/or
"incentive stock options" to acquire the Common Stock of the Company and/or by
the granting of rights to purchase the Common Stock of the Company on a
"restricted stock" basis. Under this Plan, the Committee shall have the
authority (in its sole discretion) to grant "incentive stock options" within the
meaning of Section 422(b) of the Code, "non-qualified stock options" as
described in Treasury Regulation Section 1.83-7 or any successor regulation
thereto, or "restricted stock" awards.
Section 2. Definitions. For purposes of this Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context.
2.1. "Award" shall mean an award of the right to purchase Common Stock
granted under the provisions of Section 7 of the Plan.
2.2. "Board of Directors" shall mean the Board of Directors of the Company.
2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4. "Committee" shall mean the committee of the Board of Directors
referred to in Section 5 hereof.
2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company.
2.6. "Employee" shall mean (i) with respect to an ISO, any person including
an officer or director of the Company, who, at the time an ISO is granted to
such person hereunder, is employed by the Company or any Subsidiary of the
Company, and (ii) with respect to a Non-Qualified Option and/or an Award shall
mean any person employed by, or performing consulting services (other than
consulting services in connection with a capital transaction) for the Company or
any Subsidiary of the Company, including, without limitation, directors and
officers.
2.7. "ISO" shall mean an Option granted to an Employee under the Plan which
constitutes and shall be treated as an "incentive stock option" as defined in
Section 422(b) of the Code.
2.7A "Non-Employee Directors" shall mean members of the Board of Directors
who are not employed in any capacity by the Company or any Subsidiary of the
Company.
2.8. "Non-Qualified Option" shall mean an Option granted to a Participant
pursuant to the Plan which is intended to be, and qualifies as, a "non-qualified
stock option" as described in Treasury Regulation Section 1.83-7 and which shall
not constitute nor be treated as an ISO.
2.9. "Option" shall mean any ISO or Non-Qualified Option granted to a
Participant pursuant to this Plan.
2.10. "Participant" shall mean any Employee or Non-Employee Director to
whom an Award and/or an Option is granted under this Plan.
2.11. "Parent of the Company" shall have the meaning set forth in Section
424(e) of the Code.
A-1
<PAGE> 22
2.12. "Subsidiary of the Company" shall have the meaning set forth in
Section 424(f) of the Code.
Section 3. Eligibility. Awards and/or Options may be granted to any
Employee and any Non-Employee Director. The Committee shall have the sole
authority to select the persons to whom Awards and/or Options are to be granted
hereunder and to determine whether a person is to be granted a Non-Qualified
Option, an ISO or an Award or any combination thereof, except that Non-Employee
Directors shall be eligible only to receive Non-Qualified Options pursuant to
Section 6.3 hereof. No person other than Non-Employee Directors shall have any
right to receive grants or to participate in the Plan. Any person selected by
the Committee for participation during any one period will not by virtue of such
participation have the right to be selected as a Participant for any other
period.
Section 4. Common Stock Subject to the Plan.
4.1. The total number of shares of Common Stock for which Options and/or
Awards may be granted under this Plan shall not exceed in the aggregate five
million three hundred and fifty thousand (5,350,000) shares of Common Stock. The
maximum aggregate number of shares of Common Stock that shall be subject to
Options and/or Awards under this Plan to any single individual during any
calendar year shall be 80% of the aggregate number of shares specified in the
preceding sentence.
4.2. The shares of Common Stock that may be subject to Options and/or
Awards granted under this Plan may be either authorized and unissued shares or
shares reacquired at any time and now or hereafter held as treasury stock as the
Committee may determine. In the event that any outstanding Option expires or is
terminated for any reason, the shares allocable to the unexercised portion of
such Option may again be subject to an Option and/or Award granted under this
Plan. If any shares of Common Stock acquired pursuant to an Award or the
exercise of an Option shall have been repurchased by the Company, then such
shares shall again become available for issuance pursuant to the Plan.
4.3. Special ISO Limitations.
(a) The aggregate fair market value (determined as of the date an ISO is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of
the Company) shall not exceed $100,000; provided, however that in the event the
foregoing limit is exceeded, the Options, to the extent of such excess, shall be
treated as Non-Qualified Options.
(b) No ISO shall be granted to an Employee who, at the time the ISO is
granted, owns (actually or constructively under the provisions of Section 424(d)
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, unless the option price is at least 110% of the fair market value
(determined as of the time the ISO is granted) of the shares of Common Stock
subject to the ISO and the ISO by its terms is not exercisable more than five
years from the date it is granted.
4.4. Notwithstanding any other provision of the Plan, the provisions of
Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any
Non-Qualified Option or Award granted under the Plan.
Section 5. Administration of the Plan.
5.1. The Plan shall be administered and interpreted by a committee
consisting of not less than two persons appointed by the Board of Directors of
the Company from among its members, all of whom are "disinterested persons"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 (the
"Exchange Act") and "outside directors," as defined under section 162(m) of the
Code and related Treasury regulations.
5.2. (a) Options. Subject to the provisions of Section 6.3, the Committee
shall have the sole authority and discretion under this Plan (i) to select the
Participants who are to be granted Options hereunder; (ii) to designate whether
any Option to be granted hereunder is to be an ISO or a Non-Qualified Option;
(iii) to establish the number of shares of Common Stock that may be issued under
each Option; (iv) to determine the time and the conditions subject to which
Options may be exercised in whole or in part; (v) to determine the
A-2
<PAGE> 23
form of the consideration that may be used to purchase shares of Common Stock
upon exercise of any Option (including the circumstances under which the
Company's issued and outstanding shares of Common Stock may be used by a
Participant to exercise an Option); (vi) to impose restrictions and/or
conditions with respect to shares of Common Stock acquired upon exercise of an
Option; (vii) to determine the circumstances under which shares of Common Stock
acquired upon exercise of any Option may be subject to repurchase by the
Company; (viii) to determine the circumstances and conditions subject to which
shares acquired upon exercise of an Option may be sold or otherwise transferred,
including without limitation, the circumstances and conditions subject to which
a proposed sale of shares of Common Stock acquired upon exercise of an Option
may be subject to the Company's right of first refusal (as well as the terms and
conditions of any such right of first refusal); (ix) to establish vesting
provisions for any Option relating to the time (or the circumstance) when the
Option may be exercised by a Participant, including vesting provisions which may
be contingent upon the Company meeting specified financial goals; (x) to
accelerate the time when outstanding Options may be exercised, provided,
however, that any ISOs shall be "accelerated" within the meaning of Section
424(h) of the Code, and (xi) to establish any other terms, restrictions and/or
conditions applicable to any Option not inconsistent with the provisions of this
Plan
(b) Award. The Committee shall have the sole authority and discretion
under this Plan (i) to select the Participants (other than Non-Employee
Directors) who are to be granted Awards hereunder; (ii) to determine the amount
to be paid by a Participant to acquire shares of Common Stock pursuant to an
Award, which amount may be equal to, more than, or less than 100% of the fair
market value of such shares on the date the Award is granted; (iii) to determine
the time or times and the conditions subject to which Awards may be made; (iv)
to determine the time or times and the conditions subject to which the shares of
Common Stock subject to an Award are to become vested and no longer subject to
repurchase by the Company; (v) to establish transfer restrictions and the terms
and conditions on which any such transfer restrictions with respect to an Award
shall lapse; (vi) to establish vesting provisions with respect to any shares of
Common Stock subject to an Award, including vesting provisions which may be
contingent upon the Company meeting specified financial goals; (vii) to
determine the circumstances under which shares of Common Stock acquired pursuant
to an Award may be subject to repurchase by the Company; (viii) to determine the
time or times and the conditions subject to which any shares of Common Stock
subject to an Award may be repurchased by the Company (as well as the terms and
conditions of any such repurchase); (ix) to determine the circumstances and
conditions subject to which a proposed sale of shares of Common Stock subject to
an Award may be subject to the Company's right of first refusal (as well as the
terms and conditions of any such right or first refusal); (x) to determine the
form of consideration that may be used to purchase shares of Common Stock
pursuant to an Award (including the circumstance under which the Company's
issued and outstanding shares of Common Stock may be used by a Participant to
purchase the Common Stock subject to an Award); (xi) to accelerate time at which
any or all restrictions imposed with respect to any shares of Common Stock
subject to an Award will lapse or otherwise remove any or all such restrictions;
and (xii) to establish any other terms, restrictions and/or conditions
applicable to any Award not inconsistent with the provisions of this Plan.
5.3. Subject to Section 6.3, the Committee shall be authorized to interpret
the Plan and may, from time to time, adopt such rules and regulations, not
inconsistent with the provisions of the Plan, as it may deem advisable to carry
out the purpose of this Plan.
5.4. The interpretation and construction by the Committee of any provisions
of the Plan, any Option and/or Award granted hereunder or any agreement
evidencing any such Option and/or Award shall be final and conclusive upon all
parties.
5.5. Subject to Section 6.3, members of the Committee, who are either
eligible for Options hereunder, or to whom Options have been granted hereunder,
may vote on any matter affecting the administration of the Plan or the granting
of Options under the Plan; provided, however, that no director (or member of the
Committee) shall vote upon the granting of an Option to himself, but any such
director may be counted in determining the existence of a quorum at any meeting
of the Committee at which the Plan is administered or action taken with respect
to the granting of any Option.
A-3
<PAGE> 24
5.6. All expenses and liabilities incurred by the Committee in the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants or other persons in connection with
the administration of the Plan. The Company, and its officers and directors,
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. No member of the Committee shall be liable for any action,
determination or interpretation taken or made in good faith with respect to the
Plan or any Option and/or Award granted hereunder.
5.7 Satisfaction of Option Price. The Optionee shall pay the option price
in (i) cash, (ii) with the consent of the Committee in its sole discretion, by
delivering shares of Common Stock already owned by the Optionee and having a
fair market value (as defined in Section 6.1(a)) equal to the option price,
(iii) with the consent of the Committee in its sole discretion, with the
proceeds of a promissory note payable by the Optionee to the Company, but only
in accordance with the provisions of a Loan Program established by the Company,
or any successor program as in effect from time to time, (A) in a principal
amount of up to 100% of the payment due upon the exercise of the Stock Option,
or such applicable lower percentage as may be specified by the Committee
pursuant to the Loan Program, and (B) bearing interest at a rate not less than
the applicable Federal rate prescribed by Section 1274 of the Code, or such
higher rate as may be specified by the Committee pursuant to the Loan Program,
(iv) by such other mode of payment as may be approved by the Committee including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board, or (v) through any combination of (i), (ii),
(iii), (iv) or (v). The Optionee shall pay the option price and the amount of
withholding tax due, if any, at the time of exercise. Shares of Common Stock
shall not be issued or transferred upon exercise of a Stock Option until the
option price is fully paid.
Section 6. Terms and Conditions of Options.
6.1. ISOs. The terms and conditions of each ISO granted under the Plan
shall be specified by the Committee and shall be set forth in an ISO agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each ISO shall be such that each ISO issued
hereunder shall constitute and shall be treated as an "incentive stock option"
as defined in Section 422 of the Code. The terms and conditions of any ISO
granted hereunder need not be identical to those of any other ISO granted
hereunder.
The terms and conditions of each ISO shall include the following:
(a) The option price shall be fixed by the Committee but shall in no event
be less than 100% (or 110% in the case of an Employee referred to in Section
4.3(b) hereof) of the fair market value of the shares of Common Stock subject to
the ISO on the date the ISO is granted. For purposes of this Plan, the fair
market value per share of Common Stock as of any day shall mean the average of
the closing prices of sales of shares of Common Stock on all national securities
exchanges on which the Common Stock may at the time be listed or, if there shall
have been no sales on any such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day the
Common Stock shall not be so listed, the average of the closing bid and asked
prices quoted in the NASDAQ system on such day, or, if on any day the Common
Stock shall not be quoted in the NASDAQ systems, the average of the high and low
bid and asked prices on such day in the over-the-counter market as reported by
National Quotation Bureau Incorporated, or any similar successor organization.
If at any time the Common Stock is not listed on any national securities
exchange or quoted in the NASDAQ system or the over-the-counter market, the fair
market value of the shares of Common Stock subject to an Option on the date the
ISO is granted shall be the fair market value thereof determined in good faith
by the Board of Directors.
(b) ISOs, by their terms, shall not be transferable otherwise than by will
or the laws of descent and distribution, and, during an Optionee's lifetime, an
ISO shall be exercisable only by the Optionee.
(c) The Committee shall fix the term of all ISOs granted pursuant to the
Plan including the date on which such ISO shall expire and terminate, provided,
however, that such term shall in no event exceed ten years from the date on
which such ISO is granted (or, in the case of an ISO granted to an Employee
referred to in Section 4.3(b) hereof, such term shall in no event exceed five
years from the date on which such ISO is
A-4
<PAGE> 25
granted). Each ISO shall be exercisable in such amount or amounts, under such
conditions and at such times or intervals or in such installments as shall be
determined by the Committee in its sole discretion.
(d) In the event that the Company or any Parent or Subsidiary of the
Company is required to withhold any Federal, state or local taxes in respect of
any compensation income realized by the Participant as a result of any
"disqualifying disposition" of any shares of Common Stock acquired upon exercise
of an ISO granted hereunder, the Company shall deduct from any payments of any
kind otherwise due to such Participant the aggregate amount of such Federal,
state or local taxes required to be so withheld or, if such payment are
insufficient to satisfy such federal, state or local taxes, such Participant
will be required to pay to the Company, or make arrangements satisfactory to the
Company regarding payment to the Company of, the aggregate amount of any such
taxes. A Participant may use issued and outstanding Common Stock for the payment
of taxes. All matters with respect to the total amount of taxes to be withheld
in respect of any such compensation income shall be determined by the Committee
in its sole discretion.
(e) In the sole discretion of the Committee the terms and conditions of any
ISO may (but need not) include any of the following provisions:
(i) In the event a Participant shall cease to be employed by the
Company or any Parent or Subsidiary of the Company for any reason other
than as a result of his death or "disability" (within the meaning of
Section 22(e)(3) of the Code), the unexercised portion of any ISO held by
such Participant at that time may only be exercised within one month after
the date on which the Participant ceased to be so employed, and only to the
extent that the Participant could have otherwise exercised such ISO as of
the date on which he ceased to be so employed.
(ii) In the event a Participant shall cease to be employed by the
Company or any Parent or Subsidiary of the Company by reason of his
"disability" (within the meaning of Section 22(e)(3) of the Code), the
unexercised portion of any ISO held by such Participant at that time may
only be exercised within one year after the date on which the Participant
ceased to be so employed, and only to the extent that the Participant could
have otherwise exercised such ISO as of the date on which he ceased to be
so employed.
(iii) In the event a Participant shall die while in the employ of the
Company or a Parent or Subsidiary of the Company (or within a period of one
month after ceasing to be an Employee for any reason other than such
"disability" or within a period of one year after ceasing to be an Employee
by reason of such "disability"), the unexercised portion of any ISO held by
such Participant at the time of his death may only be exercised within one
year after the date of such Participant's death, and only to the extent
that the Participant could have otherwise exercised such ISO at the time of
his death. In such event, such ISO may be exercised by the executor or
administrator of the Participant's estate or by any persons who shall have
acquired the ISO directly from the Participant by bequest or inheritance.
6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified
Option granted under the Plan, other than grants to Non-Employee Directors
pursuant to Section 6.3, shall be specified by the Committee, in its sole
discretion, and shall be set forth in a written option agreement between the
Company and the Participant in such form as the Committee shall approve. The
terms and conditions of each Option will be such that each Option issued
hereunder shall not constitute nor be treated as an "incentive stock option" as
defined in Section 422 of the Code and will be a "non-qualified stock option"
for federal income tax purposes. The terms and conditions of any Option granted
hereunder need not be identical to those of any other Option granted hereunder.
The terms and conditions of each Non-Qualified Option Agreement shall
include the following:
(a) The option (exercise) price shall be fixed by the Committee and may be
equal to, more than or less than 100% of the fair market value of the shares of
Common Stock subject to the Non-Qualified Option on the date such Non-Qualified
Option is granted.
(b) The Committee shall fix the term of all Non-Qualified Options granted
pursuant to this Section (including the date on which such Non-Qualified Option
shall expire and terminate). Such term may be more
A-5
<PAGE> 26
than ten years from the date on which such Non-Qualified Option is granted. Each
Non-Qualified Option shall be exercisable in such amount or amounts, under such
conditions, and at such times or intervals or in such installments as shall be
determined by the Committee in its sole discretion.
(c) Non-Qualified Options shall not be transferable otherwise than by will
or the laws of descent and distribution, and during a Participant's lifetime a
Non-Qualified Option shall be exercisable only by the Participant.
(d) In the event that the Company is required to withhold any Federal,
state or local taxes in respect of any compensation income realized by the
Participant in respect of a Non-Qualified Option granted hereunder or in respect
of any shares of Common Stock acquired upon exercise of a Non-Qualified Option,
the Company shall deduct from any payment of any kind otherwise due to such
Participant the aggregate amount of such Federal, state or local taxes required
to be so withheld or, if such payments are insufficient to satisfy such federal,
state or local taxes, or if no such payments are due to become due to such
Participant, then, such Participant will be required to pay to the Company, or
make other arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. All matters with respect to
the total amount of taxes to be withheld in respect of any such compensation
income shall be determined by the Committee in its sole discretion.
6.3 Option Grants to Non-Employee Directors. A Non-Employee Director shall
be entitled to receive Non-Qualified Options only in accordance with this
Section 6.3.
(a) Initial Grant. Each Non-Employee Director who is a member of the Board
of Directors on May 2, 1996 and each Non-Employee Director who first becomes a
member of the Board of Directors thereafter will receive a grant of a
Non-Qualified Option to purchase 4,000 shares of Common Stock.
(b) Additional Grant. Each Non-Employee Director who first becomes a
member of the Board of Directors on or after May 2, 1996 will receive a grant of
a Non-Qualified Option to purchase 1,000 shares of Common Stock immediately upon
his or her becoming a member of the Board of Directors.
(c) Option Exercise Price. Options granted under this Section 6.3 shall
have a per share exercise price equal to the fair market value (as defined in
Section 6.1(a) of the Plan) of a share of Common Stock on the date of grant.
(d) Option Term and Exercisability. The term of each Option granted
pursuant to this Section 6.3 shall be ten years. Options granted under Section
6.3(a) shall be exercisable as follows: 25% on the first anniversary of the date
of grant and an additional 25% on each of the following three anniversaries
thereof. Options granted under Section 6.3(b) shall be fully exercisable as of
the date of grant.
(e) Administration. The provisions of this Section 6.3 are intended to
operate automatically and not require administration. However, to the extent
that administrative determinations are required, the provisions of this Section
6.3 shall be made by the members of the Board of Directors who are not eligible
to receive grants under this Section 6.3, but in no event shall such
determinations affect the eligibility of optionees, the determination of the
exercise price, the timing of the grants or the number of shares subject to
Options granted hereunder or otherwise cause the Plan, insofar as it relates to
Non-Employee Directors, to fail to satisfy the conditions of Rule 16b-3(c)(ii)
under the Exchange Act.
(f) Applicability of Plan Provisions. All Options granted pursuant to this
Section 6.3 shall be subject to the terms of Section 6.1(e) provided, however,
that the Committee shall not have the discretion to modify such terms.
Furthermore, except as otherwise provided in the Plan (including this Section
6.3), the Non-Qualified Options granted to Non-Employee Directors shall be
subject to the provisions of this Plan applicable to Non-Qualified Options
granted to other persons provided however that (i) with respect to the
provisions of Section 6.2, the Committee shall not have the discretion to modify
the terms of such provisions in the Option agreement and (ii) if an event
described in Section 8(a) occurs, adjustments, as described in that Section,
shall be made automatically.
A-6
<PAGE> 27
(g) Amendment. Notwithstanding any other provision of the Plan, this
Section 6.3 may not be amended more than once every six months, other than to
comply with changes in the law including the Code or the regulations thereunder.
Section 7. Terms and Conditions of Awards.
The terms and conditions of each Award granted under the Plan shall be
specified by the Committee, in its sole discretion, and shall be set forth in a
written agreement between the Participant and the Company, in such form as the
Committee shall approve. The terms and provisions of any Award granted hereunder
need not be identical to those of any other Award granted hereunder.
The terms and conditions of each Award shall include the following:
(a) The amount to be paid by a Participant to acquire the shares of Common
Stock pursuant to an Award shall be fixed by the Committee and may be equal to,
more than or less than 100% of the fair market value of the shares of Common
Stock subject to the Award on the date the Award is granted.
(b) Each Award shall contain such vesting provisions, such transfer
restrictions and such other restrictions and conditions as the Committee, in its
sole discretion, may determine, including, without limitation, the circumstances
under which the Company shall have the right and option to repurchase shares of
Common Stock acquired pursuant to an Award.
(c) Stock certificates representing Common Stock acquired pursuant to an
Award shall bear a legend referring to the restriction imposed on such Stock and
such other matters as the Board of Directors may determine.
(d) In the event that the Company is required to withhold any Federal,
state or local taxes in respect of any compensation income realized by the
Participant in respect of an Award granted hereunder, or in respect of any
shares acquired pursuant to an Award, or in respect of the vesting of any such
shares of Common Stock, then the Company shall deduct from any payments of any
kind otherwise due to such Participant the aggregate amount of such Federal,
state of local taxes required to be so withheld or, if such payments are
insufficient to satisfy such Federal, state or local taxes, or if no such
payments are due or to become due to such Participant, then, such Participant
will be required to pay to the Company, or make other arrangements satisfactory
to the Company regarding payment to the Company of, the aggregate amount of any
such taxes. All matters with respect to the total amount of taxes to be withheld
in respect of any such compensation income shall be determined by the Board of
Directors in its sole discretion.
Section 8. Adjustments. (a) Subject to the provisions of paragraph (b)
below, in the event that after the adoption of the Plan by the Board of
Directors, the outstanding shares of the Company's Common Stock shall be
increased or decreased or changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation through reorganization, merger or consolidation, recapitalization,
reclassification, stock split, split-up, combination or exchange of shares or
declaration or any dividends payable in Common Stock, the Board of Directors
shall appropriately adjust: (i) the number of shares of Common Stock (and the
option price per share) subject to the unexercised portion of any outstanding
Option (to the nearest possible full share), provided, however, that the
limitations of Section 424 of the Code shall apply with respect to adjustments
made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant
to an Award which have not become vested, and (iii) the number of shares of
Common Stock for which Options and/or Awards may be granted under this Plan, as
set forth in Section 4.1 hereof, and such adjustments shall be effective and
binding for all purposes of this Plan.
(b) Notwithstanding the foregoing, in the event of (i) an offer to holders
of Common Stock generally relating to the acquisition of their shares including,
without limitation, through purchase, merger or otherwise, or (ii) any
transaction generally relating to the acquisition of substantially all of the
assets or business of the Company, the Board of Directors may, in its sole
discretion, make such adjustments as it deems equitable in respect of
outstanding Options and/or Awards including, without limitation, the revision or
cancellation of any outstanding Options and/or Awards. Any such determination by
the Board of Directors shall be effective and binding for all purposes of this
Plan.
A-7
<PAGE> 28
Section 9. Effect of the Plan on Employment Relationship.
Neither this Plan nor any Option and/or Award granted hereunder to a
Participant shall be construed as conferring upon such Participant any right to
continue in the employ of the Company or the service of the Company or any
Subsidiary as the case may be, or limit in any respect the right of the Company
or any Subsidiary to terminate such Participant's employment or other
relationship with the Company of any Subsidiary, as the case may be, at any
time.
Section 10. Amendment of the Plan. The Board of Directors may amend the
Plan from time to time as it deems desirable; provided, however, that, without
the approval of the holders of a majority of the outstanding stock of the
Company entitled to vote thereon at a meeting, the Board of Directors may not
amend the Plan to (i) increase (except for increases due to the adjustments in
accordance with Section 8 hereof) the aggregate number of shares of Common Stock
for which Options and/or Awards may be granted hereunder, (ii) decrease the
minimum exercise price specified by the Plan in respect of ISOs, (iii) change
the class of Employees eligible to receive ISOs under the Plan, (iv) increase
the individual limit of shares of Common Stock for which Options and/or Awards
may be granted to any single individual under the Plan, or (v) make any
amendment that requires shareholder approval pursuant to Rule 16b-3 of the
Exchange Act or 162(m) of the Code.
Section 11. Termination of the Plan. The Board of Directors may terminate
the Plan at any time. Unless the Plan shall theretofore have been terminated by
the Board of Directors, the Plan shall terminate ten years after the date of its
initial adoption by the Board of Directors. No Option and/or Award may be
granted hereunder after termination of the Plan. The termination or amendment of
the Plan shall not alter or impair any rights or obligations under any Option
and/or Award theretofore granted under the Plan.
Section 12. Effective Date
(a) Effective Date of the Plan. Subject to the approval of the Company's
shareholders, this Plan shall be effective as of September 15, 1988, as amended
and restated effective May 2, 1996.
(b) Effectiveness of Section 16 and Section 162(m) Provisions. The
provisions of the Plan that refer to, or are applicable to persons subject to,
Section 16 of the Exchange Act or Rule 16b-3 thereunder or Section 162(m) of the
Code shall not be effective, prior to the effective date of the Exchange Act
Registration Statement, and shall remain effective thereafter for so long as the
Common Stock remains registered pursuant to Section 12 of the Exchange Act.
A-8
<PAGE> 29
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DECISIONONE HOLDINGS CORP.
The undersigned hereby appoints Kenneth Draeger, Stephen J. Felice and Thomas
M. Molchan as proxies, each with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote, as
designated on the reverse side, all the shares of Common Stock of DecisionOne
Holdings Corp. held of record by the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders of
the Company to be held on Thursday, December 5, 1996 and any adjournment
thereof.
THE SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE
MEETING, IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS
SPECIFIED IN ITEMS 1, 2 AND 3. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING.
(Continued, and to be marked, dated and signed, on the reverse side.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 30
<TABLE>
<S> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND Please mark
THE MATTERS SET FORTH BELOW. your votes as /X/
indicated in
his example.
</TABLE>
<TABLE>
<S> <C> <C>
Item 1 -- ELECTION OF DIRECTORS Nominees: Bruce K. Anderson, Michael C.
Brooks, Kenneth Draeger, Thomas E.
FOR WITHHOLD McInerney, Arthur F. Weinbach
FOR ALL
WITHHOLD FOR: (write the name of the nominee(s) in the space provided below.
/ / / / _____________________________________________
Item 2 -- APPROVAL OF AMENDED Item 3 -- RATIFICATION OF SELECTION
STOCK OPTION PLAN OF INDEPENDENT AUDITORS
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN CHECK BOX IF YOU
PLAN TO ATTEND THE / /
/ / / / / / / / / / / / ANNUAL MEETNG
Signature Signature Date
----------------------------------------- ----------------------------------------- ----------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such.
- ---------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
</TABLE>
