<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[DecisionOne Logo]
DECISIONONE HOLDINGS CORP.
50 EAST SWEDESFORD ROAD
FRAZER, PENNSYLVANIA 19355
--------------------------------------------------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
DECEMBER 10, 1998
--------------------------------------------------------------
To the Stockholders of
DecisionOne Holdings Corp.:
Notice is hereby given that the 1998 annual meeting of stockholders (the
"Annual Meeting") of DECISIONONE HOLDINGS CORP. (the "Company" or "DecisionOne")
will be held at The Desmond Great Valley Hotel and Conference Center, One
Liberty Boulevard, Malvern, Pennsylvania 19355 on Thursday, December 10, 1998,
at 9:00 a.m., local time, for the following purposes:
1. To elect four directors;
2. To vote upon a proposal to approve the authorization of an additional
250,000 shares of Company common stock for issuance under the
DecisionOne Holdings Corp. 1997 Management Incentive Plan; and
3. 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 23, 1998
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 Desmond
Great Valley Hotel and Conference Center.
By order of the Board of Directors,
Thomas M. Molchan
Corporate Secretary
Frazer, Pennsylvania
October 28, 1998
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
[DecisionOne Logo]
DECISIONONE HOLDINGS CORP.
50 EAST SWEDESFORD ROAD
FRAZER, PENNSYLVANIA 19355
-------------------------------------------------
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
DECEMBER 10, 1998
-------------------------------------------------
This proxy statement and the accompanying form of proxy are being mailed on
or about November 5, 1998 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 1998 annual meeting of stockholders (the "Annual Meeting") to be
held at The Desmond Great Valley Hotel and Conference Center, One Liberty
Boulevard, Malvern, Pennsylvania 19355 on Thursday, December 10, 1998, at 9:00
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 four directors, (2) a proposal to approve the
authorization of an additional 250,000 shares of Company common stock for
issuance under the DecisionOne Holdings Corp. 1997 Management Incentive Plan
(the "Plan"), and (3) such other business as may properly come before the Annual
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 engaged or compensated for such services. The Company
also will request banks, brokers and other nominees, custodians and fiduciaries
to send proxy materials to beneficial owners and will reimburse such persons for
reasonable expenses incurred in that regard.
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 23, 1998
(the "Record Date") are entitled to vote at the Annual Meeting. As of that date,
there were 12,584,219 shares of Common Stock outstanding. Each stockholder
entitled to vote will have one vote for each share of Common Stock owned of
record by such stockholder 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 the 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 specified
and the enclosed proxy card is properly executed and returned, the shares will
be voted FOR the persons nominated by the Board of Directors for election as
directors and FOR the proposal to authorize an additional 250,000 shares of
Common Stock for issuance under the Plan. 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.
<PAGE> 4
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 voting at the meeting, 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 and entitled to vote is required to
authorize additional shares for issuance under the Plan. 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 proposal to authorize additional shares for
issuance under the Plan; abstentions will be considered present and entitled to
vote at the Annual Meeting, but will not be counted as votes cast in the
affirmative. Therefore, an abstention will have the same effect as a negative
vote.
The Company believes that brokers who are member firms of the New York
Stock Exchange and who hold shares in street name for beneficial owners have the
authority to vote those shares with respect to the election of directors 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
authorization of additional shares for issuance under the Plan absent voting
instructions from the beneficial owners. Assuming a quorum is present, failure
by brokers to vote those shares will have no effect on the outcome of the
election of directors, or the proposal to authorize additional shares for
issuance under the Plan.
Your proxy vote is important. 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.
RECAPITALIZATION AND MERGER
On August 7, 1997, the Company consummated a recapitalization and merger
(the "Recapitalization") with an affiliate of DLJ Merchant Banking Partners II,
L.P. ("DLJMB"). Pursuant to the Recapitalization, DLJMB, certain funds
affiliated with DLJMB, certain members of management of the Company and third-
party investors who have entered into an agreement (the "Investors' Agreement")
with DLJMB in respect of the voting and disposition of shares acquired by them
(collectively, the "DLJ Group"), acquired approximately 10.9 million shares, or
87.4% of the outstanding Common Stock, in exchange for approximately $225
million. Such equity proceeds, along with $145.5 million of net proceeds from
the sale of 9 3/4% Senior Subordinated Notes due 2007, $81.6 million of net
proceeds from the sale of units consisting of 11 1/2% Senior Discount Debentures
due 2008 and 148,400 Warrants to purchase 281,960 shares of Common Stock
exercisable at $23 per share, and borrowings of $470.0 million under a $575
million senior secured loan facility, were used to repurchase approximately 26.5
million shares of Common Stock for approximately $609.7 million, cash out
existing options and warrants, repay the Company's then-existing revolving
credit facility, and pay fees and expenses incurred in connection with the
Recapitalization.
2
<PAGE> 5
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS
At the Annual Meeting, four directors, constituting the entire Board of
Directors, are to be elected. The term of office for each director will expire
at the 1999 annual meeting of stockholders, and each director will hold office
until the election and qualification of the director's successor or until the
director's earlier death, removal or resignation.
The Board of Directors has nominated for election as directors the current
members of the Board of Directors. 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 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.
Under the terms of the Investors' Agreement, DLJMB and affiliated funds and
entities have the right to appoint a majority of the members of the Board 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>
Stephen J. Felice.................... 41 Mr. Felice has been the President of the Company since
October 1995, and Chief Executive Officer and a Director
since April 1998. From March 1987 until October 1995,
Mr. Felice served in several capacities for Bell
Atlantic Business Systems Services, Inc. ("BABSS")
(which was acquired by the Company in October 1995) in
March 1987. He served as Vice President and General
Manager, Sales and Operations of BABSS from January 1991
to October 1995 and was responsible for all service
delivery, sales activity, customer management, and
marketing channels with management responsibility over
almost 3,000 employees.
Peter T. Grauer...................... 53 Mr. Grauer has been a Director of the Company since
August 1997 and a Managing Director of DLJ Merchant
Banking II, Inc. since September 1992. From April 1989
to September 1992, he was Co-Chairman of Grauer & Wheat,
Inc., an investment firm specializing in leveraged
buyouts. Prior to April 1989, Mr. Grauer was a Senior
Vice President of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC"). Mr. Grauer is a
director of Doane Products Co., Nebco Evans Holding
Company, AmeriServe Food Distribution, Inc., Total Renal
Care Holdings, Inc. and Thermadyne Holdings Corp.
Lawrence M.v.D. Schloss.............. 44 Mr. Schloss has been a Director of the Company since
August 1997 and the Managing Partner of DLJ Merchant
Banking II, Inc. since November 1995. Prior to November
1995, he was the Chief Operating Officer and Managing
Director of DLJ Merchant Banking, Inc. Mr. Schloss
currently serves as Chairman of the Board of McCulloch
Corporation and as a director of Wilson Greatbatch, Inc.
and Thermadyne Holdings Corp.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
---------------- --- --------------------------------------------------------
<S> <C> <C>
Kirk B. Wortman...................... 36 Mr. Wortman has been a Director of the Company since
August 1997 and a Principal of DLJ Merchant Banking II,
Inc. since February 1997. For the five years prior to
joining DLJ Merchant Banking II, Inc. he worked in the
Leveraged Finance Group within Donaldson, Lufkin &
Jenrette, Inc.'s ("DLJ") Investment Banking Group, most
recently as a Senior Vice President.
</TABLE>
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met on six occasions during fiscal
1998. The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board of Directors does not have a nominating
committee. Each incumbent 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.
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 two times during fiscal 1998. The Audit Committee is currently composed of
two non-employee directors, Messrs. Schloss and Wortman.
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. Grauer, Schloss and Wortman. The Compensation
Committee met eight times during fiscal 1998.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 23, 1998
(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>
DLJ Merchant Banking Partners II, L.P. group(2)(3).......... 11,376,194 88.4%
The Apollo group(3)(4)...................................... 810,117 6.4
The Bain Capital group(3)(5)................................ 810,117 6.4
The THL group(3)(6)......................................... 810,117 6.4
Kenneth Draeger(3)(7)....................................... 176,095 1.4
Stephen J. Felice(3)(8)..................................... 58,214 *
Thomas J. Fitzpatrick(3)(9)................................. 35,137 *
Joseph S. Giordano(3)(10)................................... 20,667 *
Thomas M. Molchan(3)(11).................................... 20,667 *
Dwight T. Wilson(3)(12)..................................... 20,042 *
Peter T. Grauer(13)......................................... -- --
Lawrence M.v.D. Schloss(13)................................. -- --
Kirk B. Wortman(13)......................................... -- --
All current executive officers and directors as a group (10
persons)(3)............................................... 330,822 2.6
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 12,584,219 shares of Common
Stock outstanding as of October 23, 1998. In accordance with the rules of
the Securities and Exchange Commission, options to purchase shares of
Common Stock that are exercisable as of October 23, 1998 or exercisable
within 60 days thereafter are deemed to be outstanding and beneficially
owned by the person holding such options for purpose of computing such
person's percentage ownership, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person. The
persons listed in the table have sole voting or investment power with
respect to the shares listed opposite their name unless noted otherwise.
(2) 7,520,009 shares (approximately 59.8% of the outstanding Common Stock) are
held directly by DLJMB and the following investors related to DLJMB
(collectively, "DLJ Entities"): DLJ Offshore Partners, II, C.V.
("Offshore"), a Netherlands Antilles limited partnership; DLJ Diversified
Partners, L.P. ("Diversified"), a Delaware limited partnership; DLJMB
Funding II, Inc. ("Funding"), a Delaware corporation; DLJ Merchant Banking
Partners II-A, L.P. ("DLJMBPIIA"), a Delaware limited partnership; DLJ
Diversified Partners-A L.P. ("Diversified A"), a Delaware limited
partnership; DLJ Millennium Partners, L.P. ("Millennium"), a Delaware
limited partnership; DLJ Millennium Partners-A, L.P. ("Millennium A"), a
Delaware limited partnership; DLJ EAB Partners, L.P. ("EAB"), a Delaware
limited partnership; UK Investment Plan 1997 Partners ("UK Partners"), a
Delaware partnership; and DLJ First ESC LLC, a Delaware limited liability
company ("DLJ First"). See "Certain Relationships and Related
Transactions." The address of each of DLJMB, Diversified, Funding,
DLJMBPIIA, Diversified A, Millenium, Millenium A, DLJ First and EAB is 277
Park Avenue, New York, New York 10172. The address of Offshore is John B.
Gorsiraweg 14, Willemstad, Curacao, Netherlands, Antilles, The address of
UK Partners is 2121 Avenue of the Stars, Fox Plaza, Suite 3000, Los
Angeles, California 90067.
5
<PAGE> 8
(3) Because of the restrictions on transfer, voting requirements and other
provisions of the Investors' Agreement (See "Certain Relationships and
Related Transactions"), the DLJ Entities are also deemed to beneficially
own (a) the 3,398,970 shares held by the following institutional investors
(collectively, "Institutional Investors") which are parties to the
Investors' Agreement: Apollo Advisors II, L.P. and related entities
("Apollo"), Bain Capital, Inc. and related entities ("Bain Capital"),
Thomas H. Lee Company and related entities ("THL"), certain investment
funds associated with DLJ Capital Corp. ("Sprout") and Ontario Teacher's
Pension Plan Board ("Teachers"); (b) the 327,349 shares held by the
executive officers named in the Summary Compensation Table as further
detailed in Notes (7)-(12) below; and (c) 129,866 shares subject to the
Investors' Agreement held by other members of management of the Company
(together with the executive officers referred to above, the "Management
Shareholders"). Therefore, with the exception of 3,473 shares owned by Mr.
Draeger which are not subject to the Investors' Agreement, the share
amounts set forth opposite the names of the other entities and individuals
in the table are also included in the ownership of the DLJ Entities shown
in the table.
Details concerning the share ownership of Apollo, Bain Capital and THL are
set forth in Notes (4)-(6) below. Sprout holds 475,504 shares
(approximately 3.8% of the outstanding Common Stock) and Teachers holds
493,115 shares (approximately 3.9% of the outstanding Common Stock).
Sprout's shares are held by DLJ Capital Corp. ("DLJCC"), a Delaware
corporation, Sprout Growth II, L.P., a Delaware limited partnership, The
Sprout CEO Fund, L.P., a Delaware limited partnership and one additional
entity managed by the Sprout Group, the venture capital affiliate of DLJ.
DLJCC is a wholly owned subsidiary of DLJ. Sprout Growth II, L.P. has two
general partners: DLJCC is the managing general partner and DLJ Growth
Associates II, L.P. is the general partner. DLJ Growth Associates II, L.P.
is a Delaware limited partnership, whose general partners are a group of
individual employees of DLJCC and DLJ Growth Associates (II), Inc., a
Delaware corporation which is a wholly owned subsidiary of DLJCC. DLJCC is
the managing general partner of The Sprout CEO Fund. The address of Sprout
is 277 Park Avenue, New York, New York 10172.
Teachers is an independent corporation established in 1990 to administer
the benefits and manage the investments of the pension plan for over
200,000 Ontario teachers. The address of Teachers is 5650 Yonge Street, 5th
Floor, North York, Ontario M2M 4H5.
(4) Apollo's shares are held by Apollo Investment Fund III, L.P., a Delaware
limited partnership ("AIF III"), Apollo Overseas Partners III, L.P., a
Delaware limited partnership ("Overseas Partners"), and Apollo (U.K.)
Partners III, L.P., a limited partnership organized under the laws of
England ("Apollo UK Partners") (collectively, "Apollo Entities"). Each of
the Apollo Entities is principally engaged in the business of investment
securities.
Apollo Advisors II, L.P., a Delaware limited partnership ("Advisors"), is
the general partner of AIF III and the managing general partner of Overseas
Partners and Apollo UK Partners. Advisors is principally engaged in the
business of providing advice regarding investments by, and serving as the
general partner of, the Apollo Entities. The address of Apollo is 1301
Avenue of the Americas, 38th Floor, New York, New York 10019.
(5) Bain Capital's shares are held by Bain Capital Fund V, L.P., Bain Capital
Fund, V-B, L.P., BCIP Associates, and BCIP Trust Associates, L.P. Bain
Capital Investors V, Inc. is the general partner of Bain Capital Partners V,
L.P. ("BCP V"), a Delaware limited partnership. BCP V is the general partner
of Bain Capital Fund V, L.P. and Bain Capital Fund V-B, L.P. (the "Bain Fund
Vs"), both of which are Delaware limited partnerships. The Bain Fund Vs'
primary business activity is to make investments in private equity
securities and other interests in business organizations, domestic and
foreign.
BCIP Associates, a general partnership, and BCIP Trust Associates, L.P., a
limited partnership (together the "BCIPs"), are both organized under the
laws of the state of Delaware. The BCIPs' primary business activity is to
make investments in private equity securities and other interests in
domestic and foreign business organizations. The address of Bain Capital is
Two Copley Place, Boston, Massachusetts 02116.
6
<PAGE> 9
(6) THL's shares are held by Thomas H. Lee Equity Fund III, L.P., a Delaware
limited partnership ("Fund III"), Thomas H. Lee Foreign Fund III, L.P., a
Delaware limited partnership ("Foreign Fund"), THL Co-Investors III-A, LLC,
a Massachusetts limited liability company ("Co-Investors A"), the THL Co-
Investors III-B, LLC, a Massachusetts limited liability company
("Co-Investors B"). The general partners of each of Fund III and Foreign
Fund is THL Equity Advisors III Limited Partnership, a Massachusetts limited
partnership ("Equity Advisors"). The general partner of Equity Advisors is
THL Equity Trust III, a Massachusetts business trust, the beneficial owners
of which are affiliates of Thomas H. Lee Company. The manager of each of
Co-Investors A and Co-Investors B. is Thomas H. Lee. The address of THL is
75 State Street, 26th Floor, Boston, Massachusetts 02109.
(7) Consists of 3,473 shares which are not subject to the Investors' Agreement,
96,104 shares which are subject to the Investors' Agreement and 76,518
shares subject to the Investors' Agreement issuable upon exercise of
options exercisable as of October 23, 1998 or within 60 days thereafter
("Option Shares"). Pursuant to the terms of Mr. Draeger's Employment
Agreement, the restrictions on transfer of Common Stock contained in the
Investors' Agreement will no longer apply to Mr. Draeger as of January 1,
1999.
(8) Consists of 12,130 shares, 21,625 Option Shares and 24,459 shares subject
to the Investors Agreement issuable upon exercise of fully-vested options
(the "Rollover Options") resulting from the conversion by certain
Management Shareholders of options outstanding at the time of the
Recapitalization.
(9) Consists of 5,661 shares, 10,875 Option Shares and 18,601 Rollover Options.
(10) Consists of 4,851 shares, 3,750 Option Shares and 12,066 Rollover Options.
(11) Consists of 4,851 shares, 3,750 Option Shares and 12,066 Rollover Options.
(12) Consists of 4,851 shares, 3,125 Option Shares and 12,066 Rollover Options.
(13) Messrs. Schloss, Grauer and Wortman are officers of DLJ Merchant Banking
II, Inc., an affiliate of DLJMB. DLJ Merchant Banking II, Inc. is the
general partner of DLJ Merchant Banking II, L.P. Share data shown for such
individuals excludes shares shown as held by the DLJ Entities, as to which
such individuals disclaim beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Investors' Agreement restricts transfers of the shares of Common Stock
by the Management Shareholders, permits the Management Shareholders to
participate in certain sales of shares of Common Stock by the DLJ Entities,
requires the Management Shareholders to sell shares of Common Stock in certain
circumstances should the DLJ Entities choose to sell any such shares owned by
the DLJ Entities, permits the Management Shareholders and the Institutional
Investors to purchase equity securities proposed to be issued by the Company on
a preemptive basis in the event the DLJ Entities choose to acquire any such
equity securities, and provides for certain registration rights. The Investors'
Agreement also provides that the DLJ Entities have the right to appoint a
majority of the members of the Board of Directors of the Company.
In addition, DLJ Capital Funding, Inc., an affiliate of the DLJ Entities,
received customary fees and reimbursement of expenses in connection with the
arrangement and syndication of the new credit facility entered into by a
subsidiary of the Company in connection with the Recapitalization and as a
lender thereunder. DLJSC, an affiliate of the DLJ Entities, received customary
fees in connection with the underwriting of the Senior Subordinated Notes and
the Debentures issued by the Company in connection with the Recapitalization.
DLJSC received a merger advisory fee of $5.0 million from the Company upon
consummation of the Recapitalization.
The Company has entered into an agreement with DLJSC pursuant to which
DLJSC will act as the Company's exclusive financial advisor for an annual fee of
$500,000. In addition, the Company agrees to engage DLJSC in connection with any
financial transaction (as defined in the agreement) on usual and
7
<PAGE> 10
customary terms for such engagements. The agreement continues until the earlier
of (i) August 6, 2002 or (ii) such time as the DLJ Entities shall own less than
20% of the outstanding Common Stock.
In connection with the Recapitalization, the Company extended non-recourse
loans (the "Loans") to the following executive officers, in the amounts shown,
to fund, in whole or in part, their purchase of shares of Common Stock: Stephen
J. Felice -- $249,979.89; Thomas J. Fitzpatrick -- $116,664.15; Joseph S.
Giordano -- $99,971.35; Thomas M. Molchan -- $99,971.35; and Dwight T.
Wilson -- $99,971.35. Each of the Loans matures on August 7, 2001, with interest
at the rate of 6.39% per annum and principal due and payable at maturity. The
Loans are secured by a pledge of the shares of Common Stock purchased with the
Loans and any shares of Common Stock obtained through the borrower's exercise of
Rollover Options or options issued under the Plan. The loan amounts shown above
represent the amount outstanding as of October 28, 1998 and the largest
aggregate amount of indebtedness outstanding at any time since July 1, 1997.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the current
directors and executive officers of the Company. Officers are appointed until
the next annual meeting of stockholders and until their successors are duly
appointed.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen J. Felice......................... 41 President and Chief Executive Officer and
Director
Thomas J. Fitzpatrick..................... 40 Executive Vice President and Chief Financial
Officer
James S. Burkhardt........................ 49 Senior Vice President -- Sales and Marketing
Dennis M. Callagy......................... 34 Senior Vice President -- Major Account Operations
Joseph S. Giordano........................ 43 Senior Vice President -- Field Operations
Thomas M. Molchan......................... 43 Senior Vice President, General Counsel and
Corporate Secretary
Dwight T. Wilson.......................... 42 Vice President -- Human Resources
Peter T. Grauer........................... 53 Director
Lawrence M.v.D. Schloss................... 44 Director
Kirk B. Wortman........................... 36 Director
</TABLE>
Stephen J. Felice has been the President of the Company since October 1995,
and Chief Executive Officer and a Director since April 1998. From March 1987
until October 1995, Mr. Felice served in several capacities for Bell Atlantic
Business Systems Services, Inc. ("BABSS") (which was acquired by the Company in
October 1995) in March 1987. He served as Vice President and General Manager,
Sales and Operations of BABSS from January 1991 to October 1995 and was
responsible for all service delivery, sales activity, customer management, and
marketing channels with management responsibility over almost 3,000 employees.
Thomas J. Fitzpatrick has been the Executive Vice President and Chief
Financial Officer of the Company since April 1998 and was Vice President and
Chief Financial Officer of the Company from August 1996 through April 1998.
Prior to August 1996 Mr. Fitzpatrick was Vice President of Network Finance at
Bell Atlantic Network Services, Inc. Mr. Fitzpatrick served more than eight
years at BABSS, including over four years as Vice President and Chief Financial
Officer.
James S. Burkhardt has been the Senior Vice President -- Sales and
Marketing of the Company since May 1998. From 1987 through April 1998, he held
the following positions with Lotus Development Corp., a software development
company, which became a subsidiary of International Business Machines
Corporation in 1995: Worldwide Vice President -- Small and Medium Businesses
(February 1998 -- April 1998); Vice President -- North American Sales (January
1996 -- January 1998); Vice President -- Channel Sales and Business Partners
(1994 -- 1995); Director -- United States Corporate Sales (1991 -- 1993); and
New York Region Manager (1987 -- 1990).
8
<PAGE> 11
Dennis M. Callagy has been the Senior Vice President -- Major Account
Operations of the Company since May 1998. From March 1995 through April 1998,
Mr. Callagy was Vice President -- Support Service of CompuCom Systems, Inc., a
computer product and services systems integrator. From May 1989 through March
1995, he served as Director -- Technical Services of Trellis Network Services,
Inc., a network services integrator.
Joseph S. Giordano has been Senior Vice President -- Field Operations of
the Company since October 1995. From October 1993 to October 1995, Mr. Giordano
was Vice President Sales and Service Delivery of BABSS. From January 1991 to
October 1993, he was an Area General Manager of BABSS.
Thomas M. Molchan has been General Counsel and Corporate Secretary of the
Company since October 1995 and was named a Senior Vice President in April 1998.
From December 1986 to October 1995, he was Vice President and General Counsel of
BABSS.
Dwight T. Wilson has been Vice President -- Human Resources of the Company
since October 1995. From April 1994 to October 1995, Mr. Wilson was Vice
President -- Human Resources of BABSS. From October 1990 to March 1994, Mr.
Wilson was Director, Human Resources Policies and Planning of BABSS.
Peter T. Grauer has been a Director of the Company since August 1997 and a
Managing Director of DLJ Merchant Banking II, Inc. since September 1992. From
April 1989 to September 1992, he was Co-Chairman of Grauer & Wheat, Inc., an
investment firm specializing in leveraged buyouts. Prior to April 1989, Mr.
Grauer was a Senior Vice President of Donaldson, Lufkin & Jenrette Securities
Corporation. Mr. Grauer is a director of Doane Products Co., Nebco Evans Holding
Company, AmeriServe Food Distribution, Inc., Total Renal Care Holdings, Inc. and
Thermadyne Holdings Corp.
Lawrence M.v.D. Schloss has been a Director of the Company since August
1997 and the Managing Partner of DLJ Merchant Banking II, Inc. since November
1995. Prior to November 1995, he was the Chief Operating Officer and Managing
Director of DLJ Merchant Banking, Inc. Mr. Schloss currently serves as Chairman
of the Board of McCulloch Corporation and as a director of Wilson Greatbatch,
Inc. and Thermadyne Holdings Corp.
Kirk B. Wortman has been a Director of the Company since August 1997 and a
Principal of DLJ Merchant Banking II, Inc. since February 1997. For the five
years prior to joining DLJ Merchant Banking II, Inc. he worked in the Leveraged
Finance Group within DLJ's Investment Banking Group, most recently as a Senior
Vice President.
9
<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth for the years ended June 30, 1998, 1997 and
1996 certain compensation paid by the Company to its current and former Chief
Executive Officers and the four other most highly paid executive officers of the
Company whose cash compensation exceeded $100,000 for the year ended June 30,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION ---------------
----------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ANNUAL($) OPTIONS/SARS(#)
- --------------------------- ---- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen J. Felice........... 1998 271,000 250,000 -- 173,000
President and 1997 225,000 300,000 -- 9,000
Chief Executive Officer 1996 157,500(1) 130,340(1) -- 100,000
Kenneth Draeger(2).......... 1998 450,000 13,967,281(3) -- 290,000
Former Chairman and Chief 1997 425,000 500,000 -- 50,000
Executive Officer 1996 355,000 484,500 -- 70,000
Thomas J. Fitzpatrick....... 1998 200,800 75,000 -- 100,000
Executive Vice President
and 1997 168,077(4) 155,000(4) 224,908(5) 100,000
Chief Financial Officer 1996 -- -- -- --
Joseph S. Giordano.......... 1998 170,000 40,000 -- 30,000
Senior Vice President -- 1997 140,000 84,150 -- 21,000
Field Operations 1996 91,000(1) 36,150(1) -- 32,000
Thomas M. Molchan........... 1998 159,900 40,000 -- 50,000
Senior Vice President, 1997 139,300 95,000 -- 10,000
General Counsel and
Corporate Secretary 1996 90,020(1) 42,725(1) -- 33,000
Dwight T. Wilson............ 1998 137,400 35,000 -- 25,000
Vice President -- 1997 108,317 65,000 -- 10,000
Human Resources 1996 72,310(1) 20,620(1) -- 25,000
</TABLE>
- ---------------
(1) Messrs. Felice, Giordano, Molchan and Wilson joined the Company and were
named executive officers on October 21, 1995. The salaries and bonuses shown
reflect the amount earned after such date through June 30, 1996.
(2) Mr. Draeger resigned as Chief Executive Officer effective as of April 14,
1998 and as Chairman on September 9, 1998.
(3) Mr. Draeger received a $13,967,281 bonus in connection with the
Recapitalization. The payment was in accordance with the provisions of his
employment agreement of October 1992 with Decision Data Inc., the
predecessor of a wholly owned subsidiary of the Company. The agreement
provided for a bonus in the event of a change of control of the Company,
calculated in accordance with a formula set forth in the agreement.
(4) Mr. Fitzpatrick joined the Company and was named an executive officer on
August 12, 1996. The salary and bonus reflect the amount earned after such
date through June 30, 1997. Of the bonus amount, $30,000 was a one-time
signing bonus.
(5) Of this amount, $223,908 was for relocation assistance. The other $1,000 was
for tax preparation assistance.
10
<PAGE> 13
The following table summarizes stock options granted during fiscal 1998 to
the person named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OF FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL 1998 ($/SH) DATE 5% 10%
---- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Felice...... 14,415(3) 0.8% $ 7.1681 11/28/05 $ 380,568 $ 667,195
10,044(3) 0.5 15.0083 12/04/06 186,423 386,137
173,000 9.1 20.6084 8/06/07 2,242,169 5,682,095
Kenneth Draeger........ 53,901(3) 2.8 0.4480 5/31/03 1,785,250 2,857,016
11,160(3) 0.6 0.4480 7/31/03 369,629 591,534
31,043(3) 1.6 0.4480 1/31/04 1,028,172 1,645,431
290,000 15.2 20.6084 8/06/07 3,758,548 9,524,900
Thomas J.
Fitzpatrick.......... 18,601(3) 1.0 12.5442 9/08/06 391,081 760,942
87,000 4.6 20.6084 8/06/07 1,127,565 2,857,470
13,000 0.7 20.6084 4/26/08 176,779 440,182
Joseph S. Giordano..... 4,134(3) 0.2 7.1681 11/28/05 109,141 191,341
7,932(3) 0.4 15.0083 12/04/06 147,223 304,942
30,000 1.6 20.6084 8/06/07 388,815 985,334
Thomas M. Molchan...... 4,134(3) 0.2 7.1681 11/28/05 109,141 191,341
7,932(3) 0.4 15.0083 12/04/06 147,223 304,942
30,000 1.6 20.6084 8/06/07 388,815 985,334
20,000 1.1 20.6084 4/26/08 271,968 677,204
Dwight T. Wilson....... 4,134(3) 0.2 7.1681 11/28/05 109,141 191,341
7,932(3) 0.4 15.0083 12/04/06 147,223 304,942
25,000 1.3 20.6084 8/06/07 324,013 821,112
</TABLE>
- ---------------
(1) The shares underlying these grants are subject to the terms of the
Investors' Agreement (see "Certain Relationships and Related Transactions").
Except with respect to Mr. Draeger's grant, half of the shares underlying
each grant vests in four equal annual installments commencing on the first
anniversary date of grant. The other half of the shares underlying each
grant vests on the seventh anniversary, but vesting may accelerate over the
first four anniversaries if certain financial goals are met. The shares
underlying unvested options are cancelled upon termination of the optionee's
service with the Company.
Of the shares underlying Mr. Draeger's options, 7.5% vested on the date of
grant (August 7, 1997) and 1.18% vest on the first day of every month
through December 1998. The rest of the grant will be forfeited in January
1999.
(2) Potential Realizable Values are calculated by applying an assumed annual
compounded annual rate of return to the per share price of the Company's
common stock on the date of grant from the date of the grant until the end
of the term of the option. These amounts are reported net of the option
exercise price, but before any taxes associated with exercise or subsequent
sale of the underlying stock. The 5% and 10% assumed rates are mandated by
rules of the Securities and Exchange Commission. The actual value to be
realized by the option holder may be greater or less than the values
estimated in this table.
(3) The optionees rolled over portions of option grants outstanding at the time
of the Recapitalization in lieu of receiving $23.00 per share less the
exercise price. The exercise price for shares underlying each option grant
was reduced from the pre-Recapitalization price so as to maintain the same
ratio between the exercise price and fair market value before and after the
Recapitalization date. The number of shares underlying the option grants was
increased from the pre-Recapitalization number so as to maintain the same
aggregate spread between exercise price and fair market value before and
after the Recapitalization date.
11
<PAGE> 14
The following table summarizes option exercises during fiscal 1998 and the
value at June 30, 1998 of vested and unvested options for each person named in
the Summary Compensation Table. Year-end values are based upon a price of
$20.0625 per share, which was the closing market price of a share of Common
Stock on June 30, 1998, the last trading day of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 30, 1998(1) JUNE 30, 1998
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Felice....... 84,083(2) $ 1,261,261(2) 24,459(3) 173,000 $236,637 --
Kenneth Draeger......... 1,213,273(2) 26,256,546(2) 55,980 234,000 -- --
Thomas J. Fitzpatrick... 83,333(2) 749,998(2) 18,601(3) 100,000 139,848 --
Joseph S. Giordano...... 42,187(2) 511,268(2) 12,066(3) 30,000 93,395 --
Thomas M. Molchan....... 32,187(2) 457,518(2) 12,066(3) 50,000 93,395 --
Dwight T. Wilson........ 24,187(2) 337,518(2) 12,066(3) 25,000 93,395 --
</TABLE>
- ---------------
(1) All shares issued upon exercise of options and all shares underlying
unexercised options are subject to the terms of the Investors' Agreement.
See "Certain Relationships and Related Transactions".
(2) In connection with the Recapitalization, each named officer received $23.00
per share less the exercise price in exchange for the cancellation of
options outstanding on August 7, 1997 with respect to the number of shares
shown in the table, except that Mr. Draeger received such consideration with
respect to the cancellation of options to purchase 1,117,169 shares and
acquired 96,104 shares in December 1997 upon exercise of options.
(3) The number of shares underlying these options were adjusted in connection
with the Recapitalization. These options were rolled over by the optionee at
the time of the Recapitalization in lieu of receiving $23.00 per share less
the exercise price as set forth in note (2) above. The number of options was
increased from the pre-Recapitalization number so as to maintain the same
spread between exercise price and fair market value before and after the
Recapitalization date.
In connection with the Recapitalization, certain members of management were
given the opportunity to convert portions of option grants to fully vested
options to purchase Common Stock under the Management Incentive Plan dated
August 7, 1997 (see "Description of the Plan"). All other outstanding options
granted to employees and directors, whether or not vested, were cancelled, and
the holders of such options either received a cash payment in respect of such
options or converted them into fully vested options to purchase Common Stock.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Draeger entered into an employment agreement with DecisionOne Holdings
Corp. and DecisionOne Corporation (the "Companies") as of August 7, 1997,
pursuant to which he served as the Chairman and Chief Executive Officer of the
Companies. Under the agreement, which had an initial two year term, Mr. Draeger
received a base annual salary of at least $450,000, was eligible to receive an
annual bonus based on the consolidated operating performance of the Company and
was entitled to certain perquisites. Mr. Draeger also received options to
purchase 290,000 shares under the Plan, which vest 7.5% on the date of the grant
and 1.18% on the first day of every month for the 36 months beginning the month
following the date of grant and the remaining 50% of which vest based upon the
achievement of performance goals. Upon a change of control of the Companies in
which the DLJ Group generates an internal rate of return on their investment in
excess of 40%, Mr. Draeger is entitled to a special bonus ranging from
$5,000,000 to $15,000,000. In accordance with the terms of the agreement, Mr.
Draeger receives continued payment of his base salary for a six-month period. In
addition, Mr. Draeger will continue to be provided with health benefits until
the earlier of his reaching the
12
<PAGE> 15
age of 65 or becoming a full time employee at another company. Mr. Draeger is
subject to a perpetual confidentiality covenant, a one-year noncompetition
covenant and a two-year nonsolicitation covenant.
Mr. Draeger resigned as Chief Executive Officer effective as of April 14,
1998 and as Chairman on September 9, 1998. Giving effect to the notice
provisions of the employment agreement, the effective "Date of Termination" as
defined in the employment agreement is December 31, 1998. Pursuant to the terms
of his employment agreement, Mr. Draeger will, as of January 1, 1999, be free of
any restrictions (other than those imposed by law) with respect to the sale,
gift, transfer or other disposition of Common Stock owned by him.
Mr. Felice entered into an employment agreement with the Companies as of
August 7, 1997 pursuant to which he served as the President and Chief Operating
Officer of the Companies. Under the agreement, which has an initial two year
term and provides for automatic one year extensions unless notice is given to
the contrary, Mr. Felice receives a base salary of at least $250,000, is
eligible to receive an annual bonus based on the consolidated operating
performance of the Companies and enjoys certain perquisites. Upon a change of
control of the Companies in which the initial investors generate an internal
rate of return on their initial investment in excess of 40%, Mr. Felice is
entitled to receive a special bonus ranging from $2,500,000 to $7,500,000. Upon
a termination of employment without cause, by Mr. Felice for "good reason" (as
defined in the agreement) or by the Companies' election not to extend the term,
Mr. Felice will receive an amount equal to 150% of his base annual salary and
annual cash bonus received by him with respect to the immediately preceding
fiscal year (125% in the case of a termination for good reason), payable over an
eighteen (or fifteen, as applicable) month period. Upon a termination of
employment by reason of death or disability, Mr. Felice will receive continued
payment of base salary for a one-year period and a prorated bonus for the year
of termination. Following termination of employment, Mr. Felice is subject to a
perpetual confidentiality covenant, a one-year noncompetition covenant and a
two-year nonsolicitation covenant.
Messrs. Burkhardt, Callagy, Fitzpatrick, Giordano, Molchan and Wilson 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
accrued bonus, and the continuation of certain benefits for up to one year in
the event of termination without cause.
COMPENSATION OF DIRECTORS
Directors of the Company currently do not receive any compensation for
their service as directors.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "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 Committee is responsible for setting the performance criteria
for annual cash incentive awards and determining the achievement levels and
payout for the executive officers. Finally, the Committee is responsible for
determining which executives and other key employees, including the CEO, will be
granted stock options and restricted stock and the size of such grants.
In connection with the Recapitalization, the entire membership of the
Committee changed and no current member of the Committee was a member of the
Board at the beginning of the fiscal year ended June 30, 1998.
COMPENSATION POLICIES
The Company's compensation policies for executive officers, as established
by the Board and implemented by the 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.
13
<PAGE> 16
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.
The Committee relies on the Human Resources Department of the Company to analyze
competitive compensation. The Company also engages William M. Mercer, Inc., an
independent compensation consultant, to advise on competitive compensation. The
Committee relies on the analysis to choose the most direct competitors for
executive talent (the "Direct Competitors").
The Company's policy generally is to base compensation for its executive
officers on the median for comparable positions at its Direct Competitors, with
variance based upon individual and corporate performance. Actual 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 total 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.
Executive officers, including the CEO (as discussed separately below),
earned cash incentive awards in fiscal 1998 based upon individual and
Company-wide annual accomplishments measured against pre-established goals. For
Messrs. Fitzpatrick, Molchan, and Wilson, 75% of the target award for each
executive was calculated based on achievement of a specific Adjusted EBITDA
goal. (Adjusted EBITDA represents earnings before interest, income taxes,
depreciation and amortization, adjusted for certain unusual charges and
amortization of repairable parts.) For Mr. Giordano, 40% of the target award was
calculated based on achievement of a specific Adjusted EBITDA goal and 35% of
the target award was calculated based on revenue from service delivery,
operating income, and customer satisfactions ratings. For each of these
executive officers, the remaining 25% of the target award was based on
achievement of individual performance objectives. Performance criteria varied by
executive officer, and each executive officer had different weighting for his
various individual performance objectives.
LONG-TERM COMPENSATION
The Company has granted stock options at irregular intervals at the
discretion of the Committee. The number of options in each grant is not based on
any specific criteria. However, the Committee considered primarily the
executive's position, skills and achievements, and the level and timing of
previously granted stock options. During the fiscal year, each listed executive
officer, including the CEO, received a new grant on August 7, the date of the
Recapitalization. One half of the shares underlying each grant are subject to
time-lapse vesting. The remaining shares are subject to performance-accelerated
vesting. Except for Mr. Draeger's grant (described below), each executive
officer received an option that vests in equal annual increments over four years
(the time-lapse vesting options) and an option that vests on the seventh
anniversary of the grant but may vest over the first four anniversaries if
certain financial goals are achieved (the performance-accelerated vesting
options).
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Subsequent to the beginning of the fiscal year and effective with the
change in majority ownership of the Company, Mr. Draeger, as Chairman and CEO,
and Mr. Felice, as President, signed employment agreements with the Company (see
"Compensation of Executive Officers and Directors -- Employment and Severance
Agreements"). On April 14, 1998, Mr. Draeger resigned as CEO and continued as
Chairman of the Board through the remainder of the fiscal year. He will continue
to receive his base salary through December 31, 1998. Also on April 14, Mr.
Felice became President and CEO and was elected to the Board of Directors.
Mr. Draeger's annual base salary remained at $450,000 throughout the fiscal
year. Mr. Felice's annual base salary was increased to $350,000 by the outside
directors effective with his promotion to CEO on April 15, 1998. The Committee
believes that Mr. Draeger's base salary was comparable to, and Mr. Felice's base
salary is below, the median of competitive base salaries for CEOs of the Direct
Competitors. The
14
<PAGE> 17
Committee will periodically review Mr. Felice's salary to consider raising it
towards the median of competitive base salaries.
Mr. Draeger received a $13,967,281 bonus in connection with the
Recapitalization. The payment was in accordance with the provisions of his
employment agreement of October 1992 with Decision Data Inc., the predecessor of
a wholly owned subsidiary of the Company. The agreement provided for a bonus in
the event of a change of control of the Company, calculated in accordance with a
formula set forth in the agreement. The Committee had no discretion in
determination of this award. The Committee had no discretion in determination of
this award.
The Committee decided to not pay Mr. Draeger a 1998 annual cash incentive
award in light of his departure prior to the fiscal year end. The Committee set
a target for Mr. Felice's annual cash award as CEO equal to the amount
determined by a formula in his employment agreement. The Committee established a
formula for Mr. Felice's 1998 annual cash incentive award, 75% of the target
award based on the Company's Adjusted EBITDA performance, and the remaining 25%
of the target award based on achievement of individual performance objectives.
The Company's Adjusted EBITDA was below the target for fiscal 1998. In making
its determination, the Committee evaluated Mr. Felice's achievement of
individual objectives, including those for revenue and customer satisfaction,
restructuring of the sales and service delivery organizations, and various
non-financial personal and organizational achievements. The Committee did not
assign specific weights to the individual performance objectives. Based on the
Adjusted EBITDA results and its overall assessment, the Committee awarded Mr.
Felice a bonus of $250,000.
The long-term incentive for Mr. Draeger was, and for Mr. Felice is,
provided in the form of stock options. The size of the grants was determined
based on analysis of the value of long-term compensation and the portion of
total grants for CEOs in companies of comparable business, size and complexity
to the Company. Mr. Draeger received accelerated vesting of his options compared
to the other executive officers, as required in his employment agreement. Of Mr.
Draeger's total grant, 7.5% vested immediately and 1.18% vested each month from
September 1997 through December 1998, with the 50% balance vesting over four
years upon the attainment of certain financial goals. No shares underlying the
performance-accelerated options vested in fiscal 1998 for Mr. Draeger or Mr.
Felice. The vesting schedule for Mr. Felice's options is discussed above -- see
"Long-Term Compensation".
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
chief executive officer or any of the four other highest paid executive
officers, excluding (among other things) certain performance-based compensation.
Based on information provided by the Company, the Committee believes that,
through June 30, 1998, this provision has not affected the Company's tax
deductions, but the Committee will continue to monitor the potential impact of
section 162(m) on the Company's ability to deduct executive compensation. The
Committee notes 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.
COMMITTEE MEMBERSHIP
From July 1, 1997 through August 7, 1997, the Committee consisted of Thomas
E. McInerney, Bruce K. Anderson and Michael C. Brooks. From August 7, 1997 to
July 12, 1998, the Committee consisted of Peter T. Grauer and Thomas G. Greig.
From July 16, 1998 to the present, the Committee consists of Messrs. Grauer,
Lawrence M.v.D. Schloss, and Kirk B. Wortman.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Peter T. Grauer, Chairman
Lawrence M.v.D. Schloss
Kirk B. Wortman
15
<PAGE> 18
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. Dividend reinvestment has been assumed and, with respect to the stocks
comprising the Computer Index, the returns have been weighted at each
measurement point to reflect relative stock market capitalization. The graph
commences as of April 4, 1996, the date the Common Stock became publicly-traded.
<TABLE>
<CAPTION>
S&P Computer
Software and
DecisionOne S&P 500 Services Index
<S> <C> <C> <C>
4/4/96 100.000 100.000 100.000
6/28/96 108.571 102.252 111.771
6/30/97 104.000 134.959 185.720
6/30/98 91.714 172.876 287.941
</TABLE>
The graph assumes $100 invested in DecisionOne and the two indices on April 4,
1996.
(PROPOSAL NO. 2)
APPROVAL OF ADDITIONAL SHARES TO BE ISSUED UNDER THE MANAGEMENT INCENTIVE PLAN
At the Annual Meeting, there will be presented to stockholders a proposal
to approve the authorization of additional 250,000 shares of Common Stock for
issuance under the Plan. On July 16, 1998, the Board of Directors of the Company
approved the authorization of additional shares, subject to stockholder
approval.
The Board believes the Plan helps the Company and its subsidiaries attract,
retain and motivate employees of, and others performing services for, the
Company or its subsidiaries. In addition, the Board believes the Plan encourages
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 and because the benefit of stock
options is only received through improved stock performance, the Board believes
stock options align the interests of key employees with other stockholders.
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,
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and the availability of options is helpful to attract experienced management
from businesses which may be acquired by the Company. Currently, 1,698,280
shares are authorized for issuance under the Plan. As of October 1, 1998, stock
options have been exercised with respect to 107,264 shares, and stock options
covering an additional 1,771,774 shares of Common Stock had been granted and
were outstanding. Thus, certain stock option grants during the fiscal year were
made subject to stockholder approval of the authorization to issue additional
shares under the Plan. With the approval of additional shares, 69,242 shares of
Common Stock would be available for future grants under the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
AUTHORIZATION OF ADDITIONAL SHARES FOR ISSUANCE UNDER THE PLAN.
DESCRIPTION OF THE PLAN
GENERAL INFORMATION
The purpose of the Plan is to promote the interests of the Company and its
stockholders by (i) attracting and retaining exceptional executive personnel and
other key employees of the Company and its Subsidiaries, as defined in Section 2
of the Plan; (ii) motivating such employees by means of performance-related
incentives to achieve longer-range performance goals; and (iii) enabling such
employees to participate in the long-term growth and financial success of the
Company. In addition, the Plan shall cover certain "rollover" options resulting
from the Recapitalization (the "Rollover Options"). Awards granted pursuant to
the Plan ("Awards") may be in the form of options and stock appreciation rights.
SHARES SUBJECT TO THE PLAN
Currently, the total number of shares of Common Stock ("Shares") in respect
of which Awards may be granted under the Plan and with respect to which
incentive stock options may be granted under the Plan is 1,698,280. If, after
the effective date of the Plan, any Shares covered by an Award granted under the
Plan or to which such Award relates are forfeited, or if such an Award is
settled for cash or otherwise terminates or is canceled without the delivery of
Shares, then the Shares covered by such Award, or to which such Award relates,
or the number of Shares otherwise counted against the aggregate number of Shares
with respect to which Awards may be granted, to the extent of any such
settlement, forfeiture, termination or cancellation, shall, in the calendar year
in which such settlement, forfeiture, termination or cancellation occurs, again
become Shares with respect to which Awards may be granted unless any dividends
have been paid thereon prior to such settlement, forfeiture, termination or
cancellation. In addition, Shares tendered in satisfaction or partial
satisfaction of the exercise price of any Award or any tax withholding
obligations will again become Shares with respect to which Awards may be
granted. Notwithstanding the foregoing and subject to adjustment as provided in
Section 4(b) of the Plan, no employee of the Company may receive options and/or
stock appreciation rights in any calendar year that relate to more than 375,000
Shares.
Any Shares delivered pursuant to an Award may consist, in whole or in part,
of authorized and unissued Shares or of treasury Shares.
ADMINISTRATION
The Plan is administered by a committee (the "Committee") of the Board of
Directors of the Company (the "Board") designated by the Board to administer the
Plan and composed of not less than the minimum number of persons from time to
time required by Rule 16b-3 of the Securities Exchange Act of 1934 (the "1934
Act") and Section 162(m) of the Internal Revenue Code (the "Code"). Each member
of the Committee is a "Non-Employee Director" and an "Outside Director" within
the meaning of Rule 16b-3 and Section 162(m), respectively.
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ELIGIBILITY
Any employee, including any officer or employee-director of the Company or
any Subsidiary, and any former director of the Company receiving a Rollover
Option, shall be eligible to be designated a Participant. Currently,
approximately 107 employees participate in the Plan.
GRANTS AND AWARDS
The Committee has broad discretion under the Plan in determining Awards,
including but not limited to the number of Shares covered thereby and provisions
regarding grant price, expiration date, exercisability, vesting, forfeiture,
transfer restrictions, payment and the impact, if any, of termination of
employment on the foregoing. Accordingly, it is not possible to determine the
amount or form of any future Award that may be granted to any individual during
the term of the Plan.
Options. Under the Plan, the Committee may grant incentive stock options
(each an "Incentive Stock Option" or "ISO"), non-qualified stock options (each a
"Non-Qualified Stock Option" or "NQSO") or both types of options ("Option", as
used herein, refers to any Incentive Stock Option or Non-Qualified Stock
Option). In the case of Incentive Stock Options, the terms and conditions of
such grants shall be subject to, and comply with, the requirements of Section
422 of the Code, as from time to time amended, and any regulations implementing
such statute. Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify in
the applicable Award agreement or thereafter.
Except as otherwise specifically provided in the Plan and in any option
rollover agreement, the Rollover Options shall continue to be governed by the
terms under which they were originally granted.
Stock Appreciation Rights. Under the Plan, the Committee may grant stock
appreciation rights (each a "Stock Appreciation Right") entitling the holder
thereof to receive an amount equal to the excess of the Fair Market Value of a
Share on the date of exercise of the Stock Appreciation Right over the exercise
price thereof. A Stock Appreciation Right will be settled in such form as the
Committee shall determine. A Stock Appreciation Right may be granted in tandem
with another Award, in addition to another Award or freestanding and unrelated
to another Award. Stock Appreciation Rights granted in tandem with or in
addition to an Award may be granted either at the same time as the Award or at a
later time. Stock Appreciation Rights shall not be exercisable earlier than six
months after the date of grant and shall have an exercise price as determined by
the Committee on the date of grant. The Committee shall determine whether a
Stock Appreciation Right shall be settled in cash, Shares or a combination of
cash and Shares.
EFFECT OF TERMINATION OR SUSPENSION OF EMPLOYMENT OR SERVICE ON OPTIONS AND
STOCK APPRECIATION RIGHTS
Except as the Committee may at any time otherwise provide or as required to
comply with applicable law, if the Participant's employment or service with the
Company or its Subsidiaries is terminated for any reason other than death,
Disability (as defined in Section 2 of the Plan), retirement at age 62 or older
or by the Company for Cause (as defined in Section 2 of the Plan), the
Participant's right to exercise any Option or Stock Appreciation Right shall
terminate, and such Option or Stock Appreciation Right shall expire, on the
earlier of (A) the ninetieth day following such termination of employment or
service or (B) the date such Option or Stock Appreciation Right would have
expired had it not been for the termination of employment or service. The
Participant shall have the right to exercise such Option or Stock Appreciation
Right prior to such expiration to the extent it was exercisable at the date of
such termination of employment or service and shall not have been exercised.
Except as the Committee may at any time otherwise provide or as required to
comply with applicable law, if the Participant's employment or service with the
Company or its Subsidiaries is terminated by reason of death, Disability, or
retirement at age 62 or older, all Time Vesting Options (as defined in an Award
agreement) shall vest and become immediately exercisable and the Participant or
his successor (if employment or service is terminated by death) shall have the
right to exercise any Option or Stock Appreciation Right during the one-year
period following such termination of employment or service, to the
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<PAGE> 21
extent it was exercisable and outstanding at the date of such termination of
employment or service, but in no event shall such option be exercisable later
than the date the Option would have expired had it not been for the termination
of such employment or service.
If the Participant's employment or service with the Company or its
Subsidiaries is terminated by the Company for Cause, all Awards other than the
Rollover Options (whether vested or unvested) shall be forfeited.
In the event of a Participant's termination of employment by reason of
death or Disability, termination of employment by the Company other than for
Cause or termination by a Participant for Good Reason (as defined in Section 2
of the Plan) (and, in the case of the Rollover Options, upon any type of
termination), the Company or its designee shall have the right to purchase all
or a portion of the vested Options and/or Shares acquired upon the exercise of
Options, and the Participant shall have the right to cause the Company to
purchase all or a portion of the vested Options and/or Shares acquired upon the
exercise of Options, at a per share price equal to the Fair Market Value on the
date of purchase, less the exercise price in the case of vested Options.
The Committee, in its sole discretion, may provide in an Award agreement
for the accelerated vesting of an Award in the event of a Change of Control (as
defined in Section 2 of the Plan).
RESTRICTIONS ON TRANSFER
Except to the extent otherwise provided in an Award agreement, no Award
shall be assigned, alienated, pledged, attached, sold or otherwise transferred
or encumbered by a Participant except by will or the laws of descent and
distribution. Shares issued upon exercise of Options are subject to the
provisions of the Investors' Agreement.
AMENDMENTS AND TERMINATION
Under the Plan, the Board may amend, alter, suspend, discontinue or
terminate the Plan or any portion thereof at any time; provided that shareholder
approval must be obtained if such approval is necessary to comply with any tax
or regulatory requirement that the Board deems desirable, including exemptive
relief under Section 16(b) of the 1934 Act. The Committee may amend the Plan in
such manner as may be necessary for the Plan to conform with local rules and
regulations in any jurisdiction outside the United States. Subject to the terms
of the Plan and applicable law, the Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted, prospectively or retroactively; provided that any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would adversely affect the rights Participant or any holder or
beneficiary of any Award theretofore granted shall not be effective without the
consent of the affected Participant, holder or beneficiary. Any provision of the
Plan or any Award agreement to the contrary notwithstanding, in the event of a
Change in Control or an offer to Participants generally relating to the
acquisition of Shares, including through purchase, merger or otherwise, the
Committee may cause any Award to be canceled in consideration of a cash payment
or alternative Award made to the holder of such canceled Award equal in value to
the Fair Market Value of such canceled Award.
RESTRICTIONS ON RESALE
Any person receiving Shares under the Plan who is an "affiliate" of the
Company (as the term "affiliate" is used in Rule 144 promulgated by the
Commission under the Securities Act of 1933 (the "1933 Act")) may resell such
Shares only pursuant to a registration statement filed under the 1933 Act (the
Company having no obligation to file any such registration statement) or within
the restrictions, including the sales volume limitations, imposed by Rule 144
other than the one-year holding period requirement in the Rule. In addition,
certain Participants may be subject to the "short-swing profits" sanction of
Section 16(b) of the 1934 Act.
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FEDERAL INCOME TAX CONSEQUENCES
The federal income tax treatment of options granted 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,
mid-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 mid-term or 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, mid-term or short-term capital
gain, depending upon the length of time the recipient held his or her shares
prior to the disposition.
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 that meet the requirements
of "performance-based compensation." Awards of restricted stock generally will
not qualify as "performance-based compensation."
NEW PLAN BENEFITS
DecisionOne Holdings Corp. 1997 Management Incentive Plan
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
<S> <C>
Non-Executive Officer Employee Group........................ 180,758
</TABLE>
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended June 30, 1998 and has been appointed to serve as the Company's
independent auditors with respect to the
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<PAGE> 23
consolidated financial statements of the Company and its subsidiaries for the
current fiscal year. Representatives of Deloitte & Touche LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock 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. Based solely on its review of the copies of such reports received
by the Company and written representations from certain reporting persons that
certain filings were not required for those persons, the Company believes that
during the year ended June 30, 1998 all filing requirements applicable to its
officers, directors and ten-percent stockholders were satisfied, except as
follows: initial ownership reports were filed late by the Company on behalf of
the following officers and employees: Messrs. Stephen Friedman, John Baldus,
William Beaumont, Mark Davis, Thomas Farrell, Thomas Fogarty, Daniel Harkins,
William Lanam, Michael Rogers, Kirk Scott and Thomas Walker and Ms. Judith
Johnson; and one Form 4 was filed late on behalf of Mr. James Greenwell, the
Company's former Senior Vice President of Sales and Marketing, reporting a sale
transaction after the applicable due date.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholders may submit proposals for inclusion in the proxy statement on
matters appropriate for stockholder action at annual meetings in accordance with
regulations adopted by the SEC. Such proposals must be received by the Company
no later than June 30, 1999 to be considered for inclusion in the proxy
statement and form of proxy relating to the 1999 annual meeting. Stockholders
who intend to submit proposals appropriate for stockholder action at the 1999
annual meeting, but who are not seeking to have the proposal included in the
proxy statement, must submit such proposal so that it is received by the Company
no later than September 22, 1999. 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 stockholder 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, 1998, 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, 1998
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DECISIONONE HOLDINGS CORP.
The undersigned hereby appoints Peter T. Grauer, 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 10, 1998 and any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE.)
FOLD AND DETACH HERE
<PAGE> 25
PLEASE MARK YOUR
VOTES AS INDICATED /X/
IN THIS EXAMPLE:
The Board of Directors recommends a vote FOR all nominees and FOR Item 2.
ITEM 1 - ELECTION OF DIRECTORS
Nominees:
Stephen J. Felice
Peter T. Grauer
Lawrence M.v.D. Schloss
Kirk B. Wortman
FOR WITHHELD
FOR ALL
/ / / /
WITHHELD FOR: (Write that nominee's name in the space provided below).
_______________________________________________________________________________
ITEM 2 - APPROVAL OF ADDITIONAL SHARES FOR ISSUANCE UNDER MANAGEMENT INCENTIVE
PROGRAM
FOR AGAINST ABSTAIN
/ / / / / /
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
