UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
XLConnect Solutions, Inc.
- ----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
John E. Royer, Jr., General Counsel
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(Name of Person(s) Filing Proxy Statement)
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:
_________________________________________________
[_] 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>
<PAGE>
XLCONNECT SOLUTIONS, INC.
411 Eagleview Boulevard
Exton, PA 19341
(610) 458-5500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON JUNE 25, 1997
To the Shareholders:
The Annual Meeting of Shareholders of XLConnect Solutions, Inc. (the
"Company") will be held at the Hotel duPont, Eleventh and Market Streets,
Wilmington, Delaware 19801, on Wednesday, June 25, 1997 at 10:00 a.m.
(Eastern time), for the following purposes:
1. To elect six directors, constituting the entire Board of
Directors of the Company;
2. To consider and act upon a proposal by the Board of Directors to
ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for its fiscal year ending December 31,
1997; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on April 30, 1997 are
entitled to notice of and to vote at the meeting and any adjournment
thereof.
It is important that as many shareholders as practicable be
represented at the meeting. Consequently, whether or not you now expect to
attend the meeting in person, please complete, date and sign the enclosed
proxy card and return it as soon as possible to the Company in the
accompanying envelope, which requires no postage if mailed in the United
States.
THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IF YOU ATTEND THE MEETING. YOU MAY REVOKE THE PROXY AT ANY TIME BEFORE THE
AUTHORITY GRANTED THEREIN IS EXERCISED.
By Order of the Board of Directors
Stephanie D. Cohen
Secretary
May 23, 1997
<PAGE>
<PAGE>
XLCONNECT SOLUTIONS, INC.
411 Eagleview Boulevard
Exton, PA 19341
PROXY STATEMENT
Annual Meeting of Shareholders - June 25, 1997
This Proxy Statement is furnished to the shareholders of XLConnect
Solutions, Inc. (the "Company") in connection with the solicitation on
behalf of the Board of Directors of proxies to be voted at the Annual
Meeting of Shareholders of the Company ("Annual Meeting"). The Annual
Meeting will be held on Wednesday, June 25, 1997 at 10:00 a.m., Eastern
time, at the Hotel duPont, Eleventh and Market Streets, Wilmington,
Delaware 19801. The executive offices of the Company are located at 411
Eagleview Boulevard, Exton, Pennsylvania 19341.
This Proxy Statement, the accompanying form of proxy card and the
Company's Annual Report to Shareholders were first mailed to the Company's
shareholders on or about May 27, 1997.
All shares represented by properly executed proxies will be voted in
accordance with directions on the proxies. If no direction is indicated,
the shares will be voted at the Annual Meeting FOR the election of the
named nominees for directors and FOR the ratification of the appointment of
KPMG Peat Marwick LLP as independent auditors for the Company for its
fiscal year ending December 31, 1997. A shareholder executing and
returning a proxy may revoke it at any time before it is exercised by
written notice to the Secretary of the Company or by voting in person at
the Annual Meeting.
The Board of Directors does not know of any matters to be brought
before the Annual Meeting other than the items set forth in the foregoing
Notice. The enclosed proxy card confers discretionary authority to the
Board-appointed persons named therein to vote on any other matter that is
properly presented for action at the Annual Meeting.
Cost of solicitation of proxies by the Board of Directors is to be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telecopier transmission by
the directors, officers and employees of the Company. Arrangements may
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of stock held of record by such persons, and the Company may
reimburse such custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred by them in connection therewith.
YOU ARE HEREBY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS TO COMPLETE,
SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH IS
POSTAGE-PAID IF MAILED IN THE UNITED STATES.
<PAGE>
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Voting Procedures
Only holders of record of shares of Common Stock of the Company at the
close of business on April 30, 1997 will be entitled to vote at the Annual
Meeting. On that date, 16,655,000 shares of Common Stock, the only
outstanding voting securities of the Company, were issued and outstanding.
Each share of Common Stock is entitled to one vote. Shareholders of record
may vote on a matter by marking the appropriate box on the proxy card. A
majority of the voting power of the outstanding shares of capital stock of
the Company, represented in person or by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Directors will be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the
election of directors. Action on the other matters scheduled to come
before the Annual Meeting will be authorized by the affirmative vote of the
majority of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on such matters. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining
the presence of a quorum but as unvoted for purposes of determining the
approval of any matter submitted to the shareholders for a vote. If a
broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not
be considered as present and entitled to vote with respect to that matter.
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth, as of April 30, 1997, certain information
regarding the beneficial ownership of the Company's Common Stock by each
shareholder known to the Company to be the beneficial owner of more than 5%
of the Common Stock, each of the Company's directors and named executive
officers, and all directors and executive officers as a group.
Name and Address of Shares Beneficially Owned (1)
Beneficial Owner Number Percent
- ---------------------------------------------------------------------------
Intelligent Electronics, Inc. 13,325,000 80.0%
411 Eagleview Boulevard
Exton, PA 19341
Putnam Investments, Inc. (2) 1,014,802 6.1%
One P.O. Box Square
Boston, MA 02109
Richard D. Sanford (3) 100,000 *
Timothy W. Wallace -- *
Stephanie D. Cohen -- *
Jeffrey A. Blain 325 *
James P. Joyce -- *
Barry M. Abelson (3) 8,425 *
J.B. Doherty 8,425 *
William E. Johnson (3) 33,425 *
John A. Porter (3) 8,425 *
All executive officers and directors 162,004 1.0%
As a group (11 persons) (3)
- ---------------------------------------------------------------------------
* represents less than 1% of the outstanding shares of Common Stock.
(1) For purposes of this table, a person is deemed to be the "beneficial
owner" of any shares that such person has the right to acquire within
60 days, including upon the exercise of stock options. For purposes
of computing the percentage of outstanding shares held by each person
named above on a given date, any security that such person has the
right to acquire within 60 days is deemed to be outstanding, but is
not deemed to be outstanding for the purpose of computing the
percentage of ownership of any other person. None of the options to
purchase shares of Common Stock held by any directors or executive
officers of the Company are exercisable within 60 days of April 30,
1997.
(2) As reported in a Schedule 13G filed with the Securities and Exchange
Commission (the "Commission") on January 31, 1997.
(3) Mr. Sanford is the Chairman and Chief Executive Officer of Intelligent
Electronics, Inc. ("IE") and Messrs. Abelson, Johnson and Porter are
currently members of the Board of Directors of IE. Such persons may
be deemed to share beneficial ownership of the shares of Common Stock
owned by IE; however, each disclaims beneficial ownership of such
shares, except to the extent of his respective beneficial interest in
IE.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and
persons who own more than ten percent of the outstanding shares of Common
Stock, to file with the Commission initial reports of ownership and reports
of changes in ownership of the Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders
are required under regulations promulgated by the Commission to furnish the
Company with copies of all Section 16(a) forms which they file. To the
Company's knowledge, based solely on a review of copies of such reports
furnished to the Company, during the fiscal year ended December 31, 1996,
all Section 16(a) filing requirements were satisfied.
<PAGE>
NOMINATION AND ELECTION OF DIRECTORS
(Proposal No. 1)
At the Annual Meeting, all six of the current members of the Board of
Directors will be elected to hold office until the next annual meeting of
the shareholders and until their successors are elected and have qualified.
Unless the proxy received pursuant to this solicitation contains contrary
instructions, the persons appointed therein shall vote all proxies received
by them for the election of the six nominees named below.
Each nominee has consented to be named in this Proxy Statement and to
serve if elected. In the event that any nominee should decline or become
unavailable to stand for election for any presently unforeseen reason, the
persons appointed in the form of proxy will vote for such other person as
may be designated by the present Board of Directors. The information
contained in this Proxy Statement concerning the nominees and their
security holdings has been furnished by them to the Company.
The Board of Directors recommends a vote FOR the nominees named below.
Nominees
Set forth below is the name, age, position with the Company and
biographical information concerning each nominee, as of April 30, 1997.
Name Age Position with the Company
- -----------------------------------------------------------------------
Richard D. Sanford (1) 53 Chairman of the Board
Timothy W. Wallace 39 President,Chief Operating
Officer and Director
Barry M. Abelson (1) 50 Director
J.B. Doherty (1)(2)(3) 53 Director
William E. Johnson (1)(2)(3) 55 Director
John A. Porter (1)(2)(3) 52 Director
- -----------------------------------------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation and Benefits Committee
(3) Member of the Nominating Committee
Richard D. Sanford has been the Company's Chairman of the Board since
its formation in January 1996. He has been the Chairman and Chief
Executive Officer of IE since he founded IE in 1982.
Timothy W. Wallace joined the Company upon its formation as Executive
Vice President, Field Operations. He was promoted to President in December
1996 and elected to the Board of Directors in February 1997. Between 1991
and March 1996, Mr. Wallace served in various management positions with The
Future Now, Inc. ("TFN"), the predecessor to the Company's business and a
wholly-owned subsidiary of IE, rising from Assistant Vice President, to
Vice President, Strategic Planning and Development, to Vice President,
Professional Services in 1995. Prior to joining TFN, Mr. Wallace was
employed by Arthur Andersen & Co. as a managing director of business
systems consulting.
Barry M. Abelson has been a director of the Company since its
formation in January 1996 and of IE since January 1989. Since May 1992,
Mr. Abelson has been a partner of the law firm of Pepper, Hamilton &
Scheetz LLP, Philadelphia, Pennsylvania, which provides legal services to
the Company and to IE. From 1978 to April 1992, Mr. Abelson was a partner
of the law firm of Braemer Abelson & Hitchner, Philadelphia, Pennsylvania
(and its predecessor firms). Mr. Abelson is also a member of the Board of
Directors of Covenant Bank for Savings.
J.B. Doherty has been a director of the Company since June 1996.
Since 1992, Mr. Doherty has been the Chairman and President of Private
Equity Management Company, a venture capital fund manager, and Managing
General Partner of TDH III Partners, L.P. and TDH II Limited (the latter
since 1983), venture capital funds. In addition, between 1983 and 1992,
Mr. Doherty was a general partner of K.S. Sweet Associates, a venture
capital management and real estate company.
William E. Johnson has been a director of the Company since March 1996
and of IE since November 1994. He has been President of William E. Johnson
Associates, a private investment company, since 1993. From 1986 to 1992,
Mr. Johnson served as Chairman and CEO of Scientific-Atlanta, Inc., a
manufacturer of telecommunications instruments and equipment.
John A. Porter has been a director of the Company since March 1996 and
of IE since May 1994. From May 1995 to the present, Mr. Porter has served
as Chairman of the Board of Directors and Chief Executive Officer of
Industrial Electric Manufacturing, Inc., a manufacturer of electrical
power distribution products. Mr. Porter also serves as Chairman of the
Board of Directors of Phillips & Brooks/Gladwin, Inc., a manufacturer of
pay telephone enclosures and equipment. Mr. Porter had been Vice Chairman
of WorldCom, Inc. (formerly LDDS/Metro Media Communications), a long distance
telecommunications carrier, from September 1993 until December 31, 1996
and Chairman from 1988 until September 1993 and has been a director of
WorldCom since 1988. Mr. Porter was President and sole shareholder of P.M.
Restaurant Group, Inc., which filed for protection under Chapter 11 of the
U.S. Bankruptcy Code in March 1995, subsequent to which Mr. Porter sold
his shares. Mr. Porter also serves on the Board of Directors of Uniroyal
Technology Corporation.
General Information About Board of Directors
The Board of Directors held 5 meetings during 1996 and took action by
unanimous written consent in lieu of a formal meeting on 8 occasions. Each
director attended in person or by telephonic conference each Board meeting
held during 1996 while such person was a member of the Board, except for
the absence of one director at one meeting.
The Board of Directors has an Audit Committee, a Compensation and
Benefits Committee and a Nominating Committee.
The Audit Committee, composed of Messrs. Sanford, Abelson, Doherty,
Johnson and Porter, met once during 1996. Its principal functions include
making recommendations to the Board regarding the annual selection of
independent auditors and review of the recommendations of the independent
auditors as a result of their audit of the Company.
The Compensation and Benefits Committee, composed of Messrs. Doherty,
Johnson and Porter, met three times during 1996. Its principal function is
to exercise the power of the Board in determining the compensation of the
officers of the company and to administer the Company's 1996 Long-Term
Incentive Plan.
The Nominating Committee, composed of Mr. Doherty, as Chairman, and
Messrs. Johnson and Porter, was formed in December 1996 and did not meet
during 1996. Its principal function is to exercise the power of the Board
in making determinations with respect to the nomination of potential new
members to the Board of Directors. The Nominating Committee has not yet
determined whether it will consider candidate nominees for election as
director who are recommended by shareholders, and if so, the procedures to
be followed by shareholders in submitting such recommendations.
Employee directors are not compensated for their services as members
of the Board. Compensation of outside directors is determined by action of
the Compensation and Benefits Committee or the entire Board after receiving
the recommendations of the Chief Executive Officer. Currently, non-
employee directors are not paid any cash compensation. Each non-employee
director receives the grant of an option to purchase 25,000 shares of
Common Stock on the later to occur of October 17, 1996 and the date that
such director is first appointed or elected to the Board. In addition,
each non-employee director is entitled to receive an annual grant of an
option to purchase 5,000 shares of Common Stock upon each re-election to
the Board by the Company's shareholders, provided such re-election occurs
at least six months after his initial election or appointment. All of such
options vest 25% per year over a four-year period, have an exercise price
equal to fair market value of the Common Stock on the date of grant and
expire ten years after the date of grant if not earlier exercised or
canceled.
<PAGE>
<PAGE>
EXECUTIVE OFFICERS
It is expected that the Board will elect executive officers annually
following each Annual Meeting of the Shareholders. Executive officers of
the Company as of April 30, 1997 are as follows:
Name Age Position with the Company
- -----------------------------------------------------------------------
Timothy W. Wallace 39 President, Chief Operating
Officer and member of the
Board of Directors
Stephanie D. Cohen 35 Executive Vice President,
Chief Financial Officer and
Secretary
Jeffrey A. Blain 37 Senior Vice President,
Central/Southwest
James P. Joyce 36 Senior Vice President,
Great Lakes/West
Brad E. Eskind 37 Vice President, East
John E. Royer, Jr. 34 Vice President, General
Counsel and Assistant
Secretary
Timothy W. Wallace joined the Company upon its formation as Executive
Vice President, Field Operations. He was promoted to President in December
1996 and elected to the Board of Directors in February 1997. Between 1991
and March 1996, Mr. Wallace served in various management positions with
TFN, rising from Assistant Vice President, to Vice President, Strategic
Planning and Development, to Vice President, Professional Services in 1995.
Prior to joining TFN, Mr. Wallace was employed by Arthur Andersen & Co. as
a managing director of business systems consulting.
Stephanie D. Cohen joined the Company upon its formation as its Chief
Financial Officer and Executive Vice President, Finance. Prior to that
time, she had served in various management positions with IE since 1987,
most recently as Vice President, Investor Relations from March 1991 to May
1993, Vice President, Secretary and Treasurer from May 1993 to May 1996 and
Chief Financial Officer of TFN from August 1995 to May 1996.
Jeffrey A. Blain joined the Company upon its formation as Vice
President, Central/Southwest. In January 1997, Mr. Blain was named
Senior Vice President, Central/Southwest. Between 1983 and 1996, Mr.
Blain served in various management positions with TFN that included Sales
Manager, Branch Manager, Regional Vice President, Vice President of
Corporate Services and, most recently, Area Vice President.
James P. Joyce joined the Company upon its formation as Vice
President, Great Lakes/West. In January 1997, Mr. Joyce was named
Senior Vice President, Great Lakes/West. Prior to the formation of
the Company, Mr. Joyce held the positions of Area Vice President and Area
Sales Manager for TFN between October 1994 and January 1996. Between
December 1991 and October 1994, Mr. Joyce served in various management
positions with LDI Computer Systems, Inc.
Brad E. Eskind joined the Company in June 1996 as Vice President,
East. Between 1981 and that time, Mr. Eskind held various Sales
and Executive Management positions with IBM. Most recently, he served as
IBM Professional Services' Consulting and Systems Integration Executive in
the Southern Area.
John E. Royer, Jr. joined the Company in September 1996 as Vice
President and General Counsel. Between September 1988 and September 1996,
Mr. Royer practiced law with the firm of Pepper, Hamilton & Scheetz LLP in
the Corporate and Securities practice group.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company for 1996 and by IE and TFN for 1995 to the Chief Executive Officer
and each of the five other most highly compensated executive officers of
the Company (including its predecessor business):
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
- --------------------------------------------------------------------------------------------------------------------------
Other Annual All Other
Name and Salary Bonus Compensation Options/ Compensation (2)
Principal Position Year ($) ($) ($) SARs (#) ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <S>
Richard G. Ellenberger 1996 $282,692 $125,000 $183,177 525,000 -
Chief Executive Officer (3)
Timothy W. Wallace 1996 $199,039 $140,153 $ 55,720 260,000 $4,225
President; Chief 1995 $150,000 $ 96,600 - - $2,287
Operating Officer (4)
John J. Chidester, III 1996 $161,538 $ 72,917 - 215,000 -
Vice President - Sales
and Marketing (5)
Stephanie D. Cohen 1996 $162,885 $ 37,500 215,000 $4,750
Chief Financial Officer 1995 $130,000 - - - $3,900
Executive Vice President-
Finance; Secretary
James P. Joyce 1996 $146,154 $ 49,987 - 90,000 $3,774
Senior Vice President 1995 $ 94,616 $ 75,830 - - 1,379
Jeffrey A. Blain 1996 $148,077 $ 48,532 - 90,000 $3,932
Senior Vice President 1995 $125,000 $ 37,151 - - $1,494
</TABLE>
- ---------------------------------------------------------------------------
(1) Includes perquisites and other personal benefits paid for by the
Company, such as automobile payments, long-term disability and life
insurance premiums and relocation expenses, in amounts that exceed the
lesser of $50,000 or 10% of annual salary and bonus for any of the
named executive officers.
(2) Represents allocations to accounts of executive officers under the
Company's Retirement Savings Plan, which is intended to qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as
amended (the "401(k) Plan"). Employees of the Company who have
completed at least one year of service with the Company are
eligible to make contributions to the 401(k) Plan on a pre-tax basis
of between 1% and 15% of the participant's compensation in any year in
accordance with certain limitations defined in the Code. The Company
matches 50% of each employee's pre-tax contributions, up to a maximum
matching contribution of 3.0% of such participant's annual
compensation. The pre-tax contributions by participants and the
earnings thereon are at all times fully vested. The Company's
contribution vests to the employee over three years at the rate of
25%, 55% and 100% of the contribution. A participant's vested benefit
under the 401(k) Plan may be distributed to the participant upon his
retirement, death, disability or termination of employment or upon reaching
age 59 1/2.
(3) Mr. Ellenberger joined the Company in March 1996 and resigned from the
Company as of January 30, 1997. Mr. Ellenberger's 1996 other annual
compensation includes $178,182 of relocation expenses paid by the Company.
(4) Mr. Wallace became President of the Company on December 30, 1996. Mr.
Wallace's 1996 bonus includes $46,403 paid during the first quarter of
1996 on account of 1995 performance. Mr. Wallace's 1996 other annual
compensation includes $55,601 of relocation expenses paid by the
Company.
(5) Mr. Chidester joined the Company in March 1996 and resigned from the
Company on January 24, 1997.
The following table presents information with respect to grants of
stock options pursuant to the Company's 1996 Long-Term Incentive Plan,
during the year ended December 31, 1996, to the named executive officers
reflected in the Summary Compensation Table:
<TABLE>
<CAPTION>
Option Grants in the Last Fiscal Year
Potential Realizable
Individual Grants (1) Values at Assumed Annual
% of Total Rates of Stock Price
Options Granted Exercise or Appreciation (through
Options to to Employees Base Price Expiration Expiration Date) (3)
Name Granted (1) in Fiscal Year (2) Per Share Date 5% 10%
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard G. Ellenberger(4) 525,000 20.3% $9.35 9/6/06 $2,960,186 $6,876,273
Timothy W. Wallace 260,000 10.1% $9.35 9/6/06 $1,465,988 $3,405,392
John J. Chidester, III (4) 215,000 8.3% $9.35 9/6/06 $1,212,259 $2,815,597
Stephanie D. Cohen 215,000 8.3% $9.35 9/6/06 $1,212,259 $2,815,597
Jeffrey A. Blain 90,000 3.5% $15.00 10/17/06 $ 827,192 $1,929,088
James P. Joyce 90,000 3.5% $15.00 10/17/06 $ 827,192 $1,929,088
</TABLE>
_____________
(1) Granted pursuant to the Company 1996 Long-Term Incentive Plan, such
options become exercisable over a four-year period at the rate of 25%
of the shares underlying each option per year.
(2) Includes options granted to employees of IE and members of the Boards
of Directors of the Company and IE on the date of the Company's IPO.
(3) These are hypothetical values using assumed growth as prescribed by
the Commission.
(4) Options granted to Messrs. Ellenberger and Chidester were subsequently
canceled upon their resignations in January 1997.
No stock options were exercised by any of the named executive officers
during the fiscal year ended December 31, 1996. The following table
presents information concerning the stock option values as of the end of
1996 for unexercised stock options held by each of the named executive
officers:
<TABLE>
<CAPTION>
Option Exercises in Last Fiscal Year
And Fiscal Year-End Option Values
Number of Number Value of Unexercised
Shares Unexercised Options In-the-Money Options/
Acquired on Value at Year End SARs at Year End
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ---------------- -------------- ------------- ---------------- -------------- --------------
<S> <C> <S> <C> <C> <C>
Richard G. Ellenberger(2) - - - 525,000 $0 $10,185,000
Timothy W. Wallace - - - 260,000 $0 $ 5,044,000
John J. Chidester, III(2) - - - 215,000 $0 $ 4,171,000
Stephanie D. Cohen - - - 215,000 $0 $ 4,171,000
Jeffrey A. Blain - - - 90,000 $0 $ 1,237,500
James P. Joyce - - - 90,000 $0 $ 1,237,500
</TABLE>
(1) Represents the product of the number of shares acquired on exercise,
multiplied by the difference between (i) the per share fair market
value of the Common Stock on the date of exercise and (ii) the
exercise price per share.
(2) Options granted to Messrs. Ellenberger and Chidester were subsequently
canceled upon their resignations in January 1997.
Employment Agreements
As of April 30, 1997, the Company has no employment contracts or
severance agreements in effect with any of its named executive officers,
except that upon a termination of employment without cause, Mr. Wallace and
Ms. Cohen retain the right to exercise stock options held by them for a
period of two years after the consummation of the Company's initial public
offering on October 17, 1997.
<PAGE>
<PAGE>
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON ANNUAL EXECUTIVE COMPENSATION
The current members of the Compensation and Benefits Committee of the
Board of Directors (the "Committee") are Messrs. Doherty, Johnson and
Porter, non-employee directors of the Company. The Committee, which was
formed in June 1996, is charged with reviewing the Company's compensation
practices and policies generally and specifically establishing such
practices and policies for the Chief Executive Officer, the President and
for the other executive officers of the Company. The Company currently
does not have a Chief Executive Officer.
The compensation of the Chief Executive Officer and the other
executive officers for 1996 was agreed to in offer letters entered into by
the Company and each executive at the time of the Company's formation and
prior to the formation of the Committee and the consummation of the
Company's IPO. Such compensation was based on an evaluation of individual
anticipated value and expected job performance and the anticipated
performance of the Company as a whole.
The Committee is developing and implementing compensation policies,
plans and programs which align the financial interests of the Company's
senior management, in their management capacities, with those of its
shareholders. The Committee believes that (1) executive compensation
should be meaningfully related to the performance of the Company and the
value created for shareholders; (2) compensation programs should support
both short and long-term goals and objectives of the Company; (3)
compensation programs should reward individuals for outstanding
contributions to the Company's success; and (4) short and long-term
compensation policies play a significant role in attracting and retaining
well qualified executives.
In setting annual compensation for executive officers, the Committee
reviews a number of criteria relating to the financial performance of the
Company generally and of each executive officer specifically during the
prior fiscal year, evaluates its expectation as to each such individual's
future contributions to the Company and considers industry and comparably-
sized company data generally. For the President's compensation, the
Committee considers the recommendations of the Chairman of the Board, and
for the compensation of the Company's other executive officers, the Company
considers the recommendation of the President. In making its decision on
compensation levels, the Committee does not use any predetermined formula
or assign any particular weight to any individual criteria.
The Committee believes that it is important for executives, as well as
other employees, to have a vested interest in the Company, through the
granting of stock options which generally vest over a four year period,
thereby more closely aligning the long-term interest of executives with
that of the Company's shareholders. The Committee believes that stock
options provide incentive to executives by giving them a strong economic
interest in maximizing stock price appreciation and enhancing their
performance in attaining long-term Company objectives. The Committee makes
grants under the Company's 1996 Long-Term Incentive Plan and granted stock
options to purchase 1,395,000 shares of Common Stock to the named executive
officers during 1996. The Company also uses initial option grants to
induce qualified management and technical candidates to accept offers of
employment. All stock options granted during fiscal 1996 by the Company
had exercise prices equal to the fair market value of the Common Stock on
the date of grant. All employees of the Company are eligible to receive
grants of stock options under the 1996 Long-Term Incentive Plan, and the
Committee, upon senior management's recommendations, makes an effort to
ensure that option grants are made to all levels of employees within the
Company, given the competitive nature of the industry with respect to
recruiting and retaining the best available personnel.
Section 162(m) of the Internal Revenue Code imposes a $1 million limit
on the allowable tax deduction of compensation paid by a publicly-held
corporation to its chief executive officer and its other four most highly
compensated officers employed at year-end, subject to certain pre-
established objective performance-based exceptions. The Committee intends
to take Section 162(m) into account when formulating its compensation
policies for the Company's executive officers and to comply with Section
162(m), if and where the Committee determines compliance to be practicable
and in the best interests of the Company and its shareholders.
The Report of the Compensation and Benefits Committee on Executive
Compensation 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 (the "Securities Act") or under the
Exchange Act and shall not otherwise be deemed filed under such Acts.
Respectfully submitted,
J.B. Doherty
William E. Johnson
John A. Porter
Compensation and Benefits Committee Interlocks
and Insider Participation
The Compensation and Benefits Committee of the Board of Directors
currently consists of Messrs. Doherty, Johnson and Porter. Messrs. Johnson
and Porter are members of the Board of Directors of IE, the beneficial
owner of 80.0% of the Company's outstanding Common Stock.
<PAGE>
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return (assuming $100 invested at
the opening of the market on October 17, 1996, the date that the Company's
Common Stock began trading on the Nasdaq Stock Market, and the reinvestment
of dividends paid during the period) of the Common Stock with the Nasdaq
Stock Market - U.S. Companies Index and the Nasdaq Stock Market -Computer
and Data Processing Services Index, during the period from October 17, 1996
through December 31, 1996. The Company does not make or endorse any
predictions as to future stock performance.
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
MEASURING POINTS
--------------------
10/17/96 12/31/96
XLConnect Solutions, Inc. 100 192
Nasdaq Stock Market - US Companies Index 100 104
Nasdaq Stock Market - Computer And Data 100 103
Processing Services Index
The graph set forth above shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange
Act and shall not otherwise be deemed filed under such Acts.
CERTAIN TRANSACTIONS
Messrs. Sanford, Abelson, Johnson and Porter are directors of the Company
who have been nominated for reelection to the Board. Mr. Sanford is the Chief
Executive Officer and Chairman of the Board and Messrs. Abelson, Johnson
and Porter are members of the Board of Directors of IE, the beneficial owner
of 80.0% of the Company's outstanding Common Stock. Mr. Abelson is a
partner of the law firm of Pepper, Hamilton & Scheetz LLP, which provides
various legal services for the Company.
The Company and IE have entered into a number of agreements for the
purpose of defining certain relationships between them. These agreements
are described in Notes 6 and 12 to the Company's Consolidated Financial
Statements which are part of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 filed with the Securities and Exchange
Commission and distributed to the Company's shareholders with this Proxy
Statement. The discussion regarding these agreements is hereby
incorporated herein by this reference.
AUDITORS
(Proposal No. 2)
KPMG Peat Marwick LLP have been the Company's (including predecessor
operations) auditors since January 1993. Upon the recommendation of
the Audit Committee, the Board of Directors has appointed KPMG Peat
Marwick LLP to be the independent auditors of the Company for the year
ending December 31, 1997. It is anticipated that representatives of KPMG
Peat Marwick LLP will be present at the Annual Meeting to respond to
questions and, if they desire, to make a statement. This appointment is
being presented to the shareholders for ratification at the Annual Meeting.
Submission of the appointment is not legally required; however, the Board
desires to ascertain the views of the shareholders. If the shareholders
do not ratify the appointment, the Board will reconsider its selection.
The Board of Directors recommends a vote FOR ratification of this appointment.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present
proposals at shareholder meetings. Any such proposal to be included in
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders
must be submitted by a shareholder prior to December 30, 1997 in a form
that complies with applicable regulations.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance thereof files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or
obtained by mail from the Public Reference Section of the Commission, at
prescribed rates.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If, however, other matters are properly
presented, the persons named in the enclosed proxy will vote the shares
represented thereby in accordance with their best judgment.
By order of the Board of Directors
Stephanie D. Cohen
Secretary
Exton, Pennsylvania
May 23, 1997
<PAGE>
<PAGE>
XLCONNECT SOLUTIONS, INC.
Proxy Solicited on Behalf of the Board of Directors
The undersigned, revoking all previous proxies, hereby
appoints Richard D. Sanford, Timothy W. Wallace, Barry M.
Abelson, J.B. Doherty, William E. Johnson and John A. Porter, or
any of them acting individually, as the proxy of the undersigned,
with full power of substitution, to vote, as indicated below and
in their discretion upon such other matters as may properly come
before the meeting, all shares which the undersigned would be
entitled to vote at the Annual Meeting of the Company to be held
at 10:00 a.m., Eastern time, June 25, 1997 at the Hotel duPont, Eleventh
and Market Streets, Wilmington, Delaware 19801, and at any adjournment
or postponement thereof.
1. ELECTION OF DIRECTORS:
/_/ FOR all nominees listed below
/_/ Withhold Authority to vote for all nominees listed below
Nominees: For a one-year term expiring at the next Annual Meeting
of Shareholders:
Richard D. Sanford, Timothy W. Wallace, Barry M. Abelson,
J.B. Doherty, William E. Johnson and John A. Porter.
(Instruction: To withhold authority to vote for any
nominee(s), write the name(s) of such nominee(s) on the
line below.)
2. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK LLP
AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997:
/_/ FOR /_/ AGAINST /_/ ABSTAIN
Please date and sign your Proxy on the reverse side and return it promptly.
This Proxy is solicited on behalf of the Board of Directors.
Unless otherwise specified, the shares will be voted "FOR" the
election of all nominees for director listed on the reverse side
hereof and "FOR" ratification of appointment of KPMG Peat
Marwick LLP as the Company's independent auditors. This Proxy
also delegates discretionary authority with respect to any other
business which may properly come before the meeting or any
adjournment or postponement thereof.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement.
Date: ___________________________, 1997
_____________________________________
Signature of Shareholder
_____________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S) APPEAR ON YOUR
STOCK CERTIFICATE. WHEN SIGNING AS ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE ADD YOUR TITLE AS
SUCH, AND IF SIGNER IS A CORPORATION, PLEASE SIGN WITH FULL
CORPORATE NAME BY A DULY AUTHORIZED OFFICER OR OFFICERS AND AFFIX
THE CORPORATE SEAL. WHERE STOCK IS ISSUED IN THE NAME OF TWO (2)
OR MORE PERSONS, ALL SUCH PERSONS SHOULD SIGN.
