<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
File No. 0-22001
[X] 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 Section 240.14a-11(c) or Section
240.14a-12
DELTEK SYSTEMS, INC.
(Name of Registrant As Specified in its Charter)
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:
N/A
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
N/A
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:(1)
N/A
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
N/A
------------------------------------------------------------------
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 date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------
<PAGE> 2
DELTEK SYSTEMS, INC.
May 1, 1998
Dear Deltek Shareholder:
You are cordially invited to attend the 1998 annual meeting of shareholders of
Deltek Systems, Inc. ("Deltek") on Thursday, May 28, 1998. The meeting will
begin promptly at 10:00 a.m. local time, at the McLean Hilton, 7920 Jones Branch
Drive, McLean, Virginia.
The following items are included with this letter: (1) the official notice of
the meeting, (2) the proxy statement, (3) the proxy form, (4) the 1997 Annual
Report on Form 10-K, (5) Corporate Overview and (6) reservation request form.
The matters listed in the notice of meeting are described in detail in the
proxy statement. The annual report includes a financial review of Deltek's
performance in 1997.
If you plan to attend the annual meeting, please complete and return to Deltek
the meeting reservation request form.
Your vote is important. Whether or not you plan to attend the annual meeting, I
urge you to complete, sign and date the enclosed proxy card and return it in the
accompanying envelope as soon as possible so that your stock may be represented
at the meeting.
Sincerely,
Kenneth E. deLaski
President and Chief Executive Officer
<PAGE> 3
DELTEK SYSTEMS, INC.
Principal Executive Offices:
8280 Greensboro Drive
McLean, VA 22102
NOTICE OF ANNUAL MEETING
To be held May 28, 1998
The 1998 annual meeting of shareholders (the "Annual Meeting") of Deltek
Systems, Inc., a Virginia corporation (the "Company" or "Deltek") will be held
at the McLean Hilton, 7920 Jones Branch Drive, McLean, Virginia, on Thursday,
May 28, 1998, at 10:00 a.m. local time, and thereafter as it may from time to
time be adjourned for the following purposes:
1. To elect one Class I Director for three years or until his successor
has been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for its current fiscal year; and
To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
Holders of record of Deltek common stock on April 22, 1998, are entitled
to notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE TO BOSTON EQUISERVE LP, P.O. BOX 1865, BOSTON, MA 02105-1865.
By order of the Board of Directors,
Alan R. Stewart
Secretary
McLean, Virginia
May 1, 1998
<PAGE> 4
DELTEK SYSTEMS, INC.
Principal Executive Offices:
8280 Greensboro Drive
McLean, VA 22102
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement and the accompanying proxy card and 1997 annual
report are furnished in connection with the solicitation of proxies by the board
of directors (the "Board") of Deltek Systems, Inc. ("Deltek" or the "Company")
for the annual meeting of shareholders to be held on Thursday, May 28, 1998, at
10:00 a.m., or at any adjournments thereof, at the McLean Hilton, 7920 Jones
Branch Drive, McLean, Virginia (the "Annual Meeting"). These proxy materials are
first being sent to shareholders on or about May 1, 1998. Only shareholders of
record on April 22, 1998 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting.
VOTING OF PROXIES
Your vote is important. Shares can be voted at the Annual Meeting only if
you are present in person or represented by proxy. Even if you plan to attend
the Annual Meeting, you are urged to sign, date and return the accompanying
proxy card.
When the enclosed proxy card is properly signed, dated, and returned, the
stock represented by the proxy will be voted in accordance with your directions.
You can specify your voting instructions by marking the appropriate boxes on the
proxy card. If your proxy card is signed and returned without specific voting
instructions, your shares of Deltek common stock will be voted as recommended by
the directors: "FOR" the election of the nominee for director named on the proxy
card (Item No. 1), and "FOR" the ratification of the independent auditors
appointed by the Board (Item No. 2).
You may revoke your proxy at any time before it is exercised by (a)
delivering to the Company's secretary at the Company's principal executive
offices either (i) written notice of revocation of the proxy or (ii) a duly
executed later-dated proxy, or by (b) voting by ballot at the Annual Meeting.
VOTES REQUIRED
The presence, in person or by proxy, of the holders of at least a majority
of the shares of Deltek common stock outstanding on the Record Date is necessary
to have a quorum for the Annual Meeting. Abstentions and broker "non-votes" are
counted as present for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares of Deltek common stock for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Less than a quorum may adjourn a
meeting.
1
<PAGE> 5
As of the Record Date, 17,153,668 shares of Deltek common stock were
outstanding (which include 80,000 shares which were repurchased by the Company
in 1997 and which the Company intends to retire). Each shareholder is entitled
to one vote on each item at the Annual Meeting, in person or by proxy, for each
share of common stock held of record by such shareholder on the Record Date.
Election of the nominee for the Board (Item No. 1) will require the plurality of
the votes cast by shares entitled to vote in the election. Should the nominee
become unavailable to accept nomination or election as a director, the
individuals named as proxies on your proxy card will vote the shares represented
by your proxy card for the election of such other person as the Board may
recommend. The Board knows of no reason why the nominee will be unavailable or
unable to serve. Ratification of the appointment of independent auditors (Item
No. 2) will be approved if the votes cast favoring ratification exceed the votes
cast in opposition. Proxies solicited by the Board will be voted "FOR" each
item, unless otherwise instructed on your proxy card. Shares not voted by
abstention and broker non-votes will not be counted either for or against an
item, and such abstentions and broker non-votes will not affect the outcome of
the vote on such item.
SOLICITATION OF PROXIES
Solicitation of proxies may be made by use of the mails, and may also be
made in person or by telephone or other electronic communications. The cost of
soliciting proxies in the accompanying form will be borne by the Company. The
Company may reimburse brokerage firms and others for their expenses in
forwarding proxy materials to the beneficial owners and soliciting them to
execute the proxies.
ANNUAL MEETING ATTENDANCE
Admission to the Annual Meeting is limited to shareholders of record or
their proxy, beneficial owners of Deltek common stock having evidence of
ownership, and guests of Deltek. If you are a registered owner of Deltek common
stock and plan to attend the Annual Meeting in person, please complete and
return to Deltek's Corporate Secretary the meeting reservation request form
printed on the back of this proxy statement. Shareholders who have not obtained
a reservation for the Annual Meeting will be admitted upon verification of
ownership at the Annual Meeting. Results of the Annual Meeting will be included
in Deltek's next quarterly report filed with the Securities and Exchange
Commission.
PROCEDURE FOR SHAREHOLDER PROPOSALS AND NOMINATIONS
The Board currently performs the functions of a nominating committee, and
will consider director nominees recommended by shareholders for election at an
annual meeting, in accordance with the procedures set forth in the Company's
Bylaws. Under the Bylaws, written notice of a shareholder's intent to make such
a nomination generally must be received at the Company's principal executive
offices not less than 120 calendar days in advance of the date that the
Company's proxy statement was released to the shareholders in connection with
the previous year's annual meeting of shareholders. The notice must contain the
information required by the Company's Bylaws.
The Bylaws also provide that no business shall be conducted at any meeting
of shareholders unless specified in the notice of the meeting (or any supplement
thereto) by or at the direction of the Board, otherwise brought before the
meeting by or at the direction of the Board, or properly brought
2
<PAGE> 6
before the meeting by a shareholder of the Company who complies with certain
notice procedures set forth in the Bylaws. These requirements are separate and
apart from, and in addition to, the Security and Exchange Commission's
requirements for the inclusion of a shareholder's proposal in the Company's
proxy statement.
The Company's Bylaws are incorporated herein by this reference. A copy of
the Bylaws may be obtained by following the instructions set forth on the last
page of this proxy statement.
DISSENTERS' RIGHTS OF APPRAISAL
The Board has not proposed any action for which the laws of the State of
Delaware, the Certificate of Incorporation or By-Laws of the Company provide a
right of a shareholder to dissent and obtain payment for shares.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1999 annual
meeting must be received by the Company's secretary at the Company's principal
executive offices no later than December 21, 1998, for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Such
proposals must meet the requirements set forth in the rules and regulations of
the Securities and Exchange Commission in order to be eligible for inclusion in
the Company's 1999 proxy materials.
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The Board does not know of any matters which will be brought before the
1998 Annual Meeting other than those specifically set forth in the notice of
meeting and this proxy statement. If any other matters are properly introduced
at the meeting for consideration, including, among other things, consideration
of a motion to adjourn the meeting to another time or place, the individuals
named on the proxy card will vote in accordance with their best judgment.
PROPOSAL 1
TO ELECT ONE CLASS I DIRECTOR
TO SERVE FOR THREE YEARS OR UNTIL HIS
SUCCESSOR HAS BEEN DULY ELECTED AND QUALIFIED
The Company's Board currently consists of Kenneth E. deLaski, Donald
deLaski, Robert E. Gregg, Darrell J. Oyer and Charles W. Stein. The Company's
Articles of Incorporation and Bylaws provide that, commencing with the 1997
annual meeting of shareholders, the Board shall be divided into three classes
with each class containing one third of the total number of directors, as nearly
equal in number as possible. At the 1997 Annual Meeting, a director of the first
class (Class I), Charles W. Stein, was elected to hold office for a term
expiring at the 1998 annual meeting of shareholders, directors of the second
class (Class II), Donald deLaski and Darrell J. Oyer, were elected to hold
office for a term expiring at the 1999 annual meeting of shareholders, and
directors of the third class (Class III), Kenneth E. deLaski and Robert E.
Gregg, were elected to hold office for a term expiring at the 2000 annual
meeting of shareholders.
3
<PAGE> 7
The Board has concluded that the re-election of Charles W. Stein as a
Class I director is in the best interest of the Company and recommends approval
of his election. Biographical information concerning Mr. Stein can be found
under "Executive Officers and Directors." The remaining directors will continue
to serve in their positions for the remainder of their terms.
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kenneth E. DeLaski.........40 President, Chief Executive Officer and Director
Donald deLaski.............66 Chairman of the Board of Directors and Treasurer
Eric F. Brown..............33 Executive Vice President, Technical Operations
Alan R. Stewart............43 Chief Financial Officer and Secretary
Robert E. Gregg............50 Director
Darrell J. Oyer............57 Director
Charles W. Stein...........57 Director and Class I Director Nominee
</TABLE>
Kenneth E. deLaski was a co-founder of the Company in November 1983 and
has served as a director since its inception. Mr. deLaski also has served as the
Company's President since May 1990 and as its Chief Executive Officer since
February 1996. From May 1990 to February 1996, he served as the Company's Chief
Operating Officer. Mr. deLaski is a certified public accountant. Kenneth E.
deLaski is the son of Donald deLaski, Chairman of the Board of Directors and
Treasurer of the Company.
Donald deLaski was a co-founder of the Company in November 1983 and has
served as Chairman of the Board of Directors and Treasurer since its inception.
Mr. deLaski also served as the Company's Chief Executive Officer from its
inception until February 1996. Mr. deLaski is a certified public accountant.
Donald deLaski is the father of Kenneth E. deLaski, President and Chief
Executive Officer of the Company.
Eric F. Brown was a co-founder of the Company in November 1983. He has
served as the Company's Vice President, Technical Operations since May 1990, and
as Executive Vice President since January 1997. Prior to May 1990, Mr. Brown
held various technical and management positions with the Company, including
management of the Company's Technical Services Division, which provides custom
programming services to the Company's customers, and various of the Company's
product groups responsible for development and maintenance of the Company's core
software products.
4
<PAGE> 8
Alan R. Stewart joined the Company in July 1992 as Chief Financial Officer
and has served as its Secretary since February 1996. From March 1991 until July
1992, he was employed as Director of Accounting at BTG, Inc., a government
contractor. Prior to March 1991, Mr. Stewart held positions as a senior
accountant with Touche Ross and Co., as assistant Controller of C3, Inc., as
Controller and Treasurer of Tempest Technologies, Inc. and as a staff accountant
with the U.S. Securities and Exchange Commission. Mr. Stewart is a certified
public accountant.
Robert E. Gregg has served as a Director of the Company since September
1986. He has been a shareholder in Hazel & Thomas, P.C., counsel to the Company,
since Hazel & Thomas' inception in 1987.
Darrell J. Oyer became a director of the Company immediately following the
closing of the Company's initial public offering in February 1996. Since June
1991, Mr. Oyer has served as President of Darrell J. Oyer and Company, a
consulting company. Mr. Oyer is a certified public accountant.
Charles W. Stein became a director of the Company on April 1, 1997. From
February 1987 until January 1997, Mr. Stein served as President and Chief
Executive Officer of Netrix Corporation, a wide area network product and systems
company. Mr. Stein also was a member of Netrix's Board of Directors and was
serving as its Chairman when he resigned from the board on March 31, 1997. Mr.
Stein currently is a director of Trusted Information Systems, Inc.
Deltek's executive officers are appointed annually by, and serve at the
discretion of, the Board. Each executive officer is a full-time employee of the
Company. Other than the relationship between Donald deLaski and Kenneth E.
deLaski, there are no family relationships between any director or executive
officer of the Company.
THE BOARD OF DIRECTORS
The Board is responsible for overseeing the overall performance of the
Company. Members of the Board are kept informed of the Company's business
through discussions with the Chairman and other members of the Company's
management and staff, by reviewing materials provided to them and by
participating in board and committee meetings. During 1997, the Board acted
primarily by unanimous written consent, but also met eight times.
COMMITTEES OF THE BOARD
The Company has audit and compensation committees, but not a nominating
committee, of the Board. The Audit Committee, appointed in April 1997, is
responsible for reviewing with management the financial controls, accounting,
credit and reporting activities of the Company. The Audit Committee reviews the
qualifications of the Company's independent auditors, makes recommendations to
the Board regarding the selection of independent auditors, reviews the scope,
fees and results of any audit, and reviews non-audit services and related fees
provided by the independent auditors. The members of the Audit Committee are
Darrell J. Oyer and Charles W. Stein, both of whom are independent directors.
One meeting was held during the last fiscal year.
The Compensation Committee, appointed in April 1997, is responsible for
the administration of all salary and incentive compensation plans for the
officers and key employees of the Company,
5
<PAGE> 9
including bonuses. The Compensation Committee may also administer the Company's
1996 Stock Option Plan and 1996 Employee Stock Purchase Plan. The members of the
Compensation Committee are Darrell J. Oyer and Charles W. Stein, both of whom
are independent directors. The Compensation Committee acted once by unanimous
written consent during the last fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no interlocking relationships or other transactions
involving any of its Compensation Committee members that are required to be
reported by the Securities and Exchange Commission rules and no current or
former officer of the Company serves on its Compensation Committee.
DIRECTOR COMPENSATION
Prior to the Company's initial public offering in February 1997, directors
received no compensation for their services as members of the Board. Currently
directors who are not employees of the Company receive $1,000 for each meeting
of the Board or any committee thereof attended in person and $500 for each such
meeting attended telephonically, except that if a committee meeting is held on
the same day as a meeting of the full Board, the compensation for attendance at
such committee meeting is $300. The Company reimburses outside directors for any
travel expenses incurred in connection with attending Board or Committee
meetings. Each of the outside directors has been granted nonqualified options
under the Company's 1996 Stock Option Plan to purchase 8,000 shares of the
Company's Common Stock either at the initial public offering price or the
closing price on the date immediately prior to the date of the option grant.
Directors who are employees of the Company will receive no additional cash
compensation for their services as members of the Board of Directors or
committees thereof other than reimbursement for travel expenses incurred in
connection with attending board and committee meetings.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth information concerning the compensation
earned during the years ended December 31, 1996 and 1997 by the Company's Chief
Executive Officer and each of the Company's other most highly compensated
executive officers who were serving as executive officers at December 31, 1997
(collectively, the "Named Executive Officers"):
6
<PAGE> 10
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
--------------------------------- -----------------------------
Securities
Other Restricted Underlying All Other
Name and Annual Stock Options/ LTIP Compensa-
Principal Year Salary Bonus Compensa- Awards($) SARs(#) Payouts(#) tion ($)(2)
Position ($) ($) tion ($) (1)
- --------------------- -------- ------- --------- ---------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth E. deLaski, 1997 161,413 -- -- -- -- -- 4,000
President and Chief 1996 156,667 -- -- -- -- -- 4,000
Executive Officer
Donald deLaski, 1997 109,198 -- -- -- -- -- 4,000
Chairman and 1996 135,013 -- -- -- -- -- 4,000
Treasurer
Eric F. Brown, 1997 132,813 -- -- -- -- -- 4,000
Vice President, 1996 126,667 -- -- -- 30,000 -- 4,000
Technical Operations
Alan R. Stewart 1997 101,417 -- 122,537(3) -- 15,000 -- 4,000
Chief Financial 1996 104,362 -- -- -- -- -- 4,000
Officer and Secretary
</TABLE>
- -------------------
(1) The Named Executive Officer did not hold restricted stock awards as of the
end of the fiscal year. The number and value of the aggregate restricted
stock holdings for Messrs. K. deLaski, D. deLaski, Brown and Stewart at
the end of the last fiscal year, based on the closing bid price of the
Company's Common Stock on the Nasdaq National Market on December 31, 1997,
were 4,161,000, 4,712,800, 444,200, and 12,250 shares, respectively, with
values of $65,797,893, $74,523,506, $7,024,135, and $193,709,
respectively, without giving effect to the consideration paid by the Named
Executive Officer.
(2) Does not include pro rata distributions of S Corporation dividends to the
individual as a shareholder. Includes for each individual for 1996 and
1997 a 401(k) plan profit sharing contribution of $4,000. Does not include
other prerequisites and personal benefits the aggregate amount of which
did not exceed 10% of the total annual salary and bonus reported for the
Named Executive Officer.
(3) Represents the dollar value of non-cash compensation from the exercise of
options to convert to Common Stock during the fiscal year.
Option Grants in Last Fiscal Year
The following table sets forth information concerning grants of options to
purchase the Company's Common Stock made during the year ended December 31, 1997
to the Named Executive Officers.
7
<PAGE> 11
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
----------------- STOCK PRICE
APPRECIATION FOR
OPTION TERM(2)
--------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR(1) SHARE DATE 5% 10%
- ---- ------- -------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. deLaski -- -- -- -- -- --
Donald deLaski -- -- -- -- -- --
Eric F. Brown -- -- -- -- -- --
10,000 2.88 11.00 1/24/07 69,178 175,311
Alan R. Stewart 5,000 1.44 17.00 6/30/07 53,456 135,468
- ----------------------
</TABLE>
(1) The Company granted options to purchase an aggregate of 347,000 shares of
the Company's Common Stock to employees during the year ended December 31,
1997.
(2) The potential realizable value is based on the term of the option at the
time of grant (ten years). Potential gains are net of the exercise price
but before taxes associated with the exercise. Amounts represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. The assumed 5% and 10% rates of
stock price appreciation are provided in accordance with the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future common stock price. Actual gains, if
any, on stock option exercises are dependant on the future financial
performance of the Company, overall market conditions and the option
holders' continued employment through the vesting period. This table does
not take into account any appreciation in the price of the common stock
from the date of grant to the date hereof.
Option Exercises and 1997 Fiscal Year-End Option Values
The following table sets forth information concerning the exercise of
stock options during the year ended December 31, 1997 and the value of options
held as of such date by the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT DECEMBER 31, 1997 DECEMBER 31, 1997(2)
UPON VALUE ---------------------------- --------------------
NAME EXERCISE RECEIVED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. deLaski -- -- -- -- -- --
Donald deLaski -- -- -- -- -- --
Eric F. Brown -- -- 6,000 24,000 70,878 283,512
Alan R. Stewart 16,800 122,537 2,000 20,200 9,626 123,558
</TABLE>
8
<PAGE> 12
- ---------------
(1) "Value Realized" represents the fair market value of the underlying Common
Stock on the exercise date minus the aggregate exercise price of such
options.
(2) Based upon the closing bid price on Nasdaq of the Company's Common Stock
as of December 31, 1997 of $15.813 per share, minus the aggregate exercise
price of such options.
1996 Stock Option Plan
Deltek's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by
the Company's Board in November 1996 and approved by the Company's shareholders
in December 1996. A total of 900,000 shares of Common Stock have been reserved
for issuance under the 1996 Option Plan. The 1996 Option Plan will be
administered by the Board or a committee thereof. The 1996 Option Plan provides
for grants of "incentive stock options," within the meaning of Section 422 of
the Code, to employees (including officers and employee directors), and for
grants of nonstatutory options to employees, non-employee directors and
consultants. The 1996 Option Plan will terminate in December 2006, unless
terminated sooner by the Board.
The exercise price of stock options granted under the 1996 Option Plan
must be not less than the fair market value of the Common Stock on the date of
grant. With respect to any optionee who owns stock representing more than 10% of
the voting power of all classes of the Company's outstanding capital stock, the
exercise price of any incentive stock option must be equal to at least 110% of
the fair market value of the Common Stock on the date of grant, and the term of
the option must not exceed five years. The terms of all other options may not
exceed ten years. The aggregate fair market value of Common Stock (determined as
of the date of the option grant) for which an incentive stock option may for the
first time become exercisable in any calendar year may not exceed $100,000. The
Board or any committee administering the 1996 Option Plan has discretion to
determine exercise schedules and vesting requirements, if any, of all option
grants under the 1996 Option Plan.
Options to purchase an aggregate of 347,000 shares were granted under the
1996 Option Plan, at exercise prices ranging from $8.00 per share to $22.50 per
share.
Employee Time Accelerated Stock Option Plan
Deltek's Time Accelerated Stock Option Plan (the "Accelerated Plan") was
adopted by the Company's Board and approved by its shareholders in April 1996. A
total of 1,500,000 shares of Common Stock originally were reserved for issuance
under the Accelerated Plan. In December 1996, the Company's Board reduced the
number of shares of Common Stock reserved for issuance under the Accelerated
Plan to 679,500, the number of shares of Common Stock issuable upon the exercise
of options then outstanding. The Accelerated Plan provides for grants of
nonstatutory options to key employees of the Company. The Accelerated Plan was
discontinued at the time of the adoption of the 1996 Option Plan, and no
additional options will be granted under the Accelerated Plan. Options
previously granted under the Accelerated Plan will continue to be governed by
the terms of the Accelerated Plan, which will be administered by the Board.
The exercise price of options granted under the Accelerated Plan must be
not less than the fair market value of the Common Stock on the date of grant.
The term of options granted under the
9
<PAGE> 13
Accelerated Plan is ten years, subject to certain exceptions. All of the options
granted under the Accelerated Plan become exercisable on January 1, 2004.
However, upon the occurrence of certain events, including a public offering of
the Company's Common Stock, such options will thereafter become exercisable
pursuant to a five-year vesting schedule beginning on the date of grant. Any
options that are fully vested at the time an optionee's employment with the
Company terminates for any reason (other than death, disability or retirement)
terminate three months after the date of termination unless earlier exercised.
As of December 31, 1997, options to purchase 571,084 shares of Common
Stock, at a weighted average exercise price of $4.00 per share, were
outstanding under the Accelerated Plan and 106,684 of such options were
exercisable.
1987 Employee Stock Option Plan
Deltek's 1987 Employee Stock Option Plan (the "1987 Option Plan") was
adopted by the Company's Board and approved by its shareholders in December
1987. A total of 900,000 shares of Common Stock originally were reserved for
issuance under the 1987 Option Plan. In December 1996, the Company's Board
reduced the number shares of Common Stock reserved for issuance under the 1987
Option Plan to 388,500, the number of shares of Common Stock issuable upon the
exercise of options outstanding as of September 30, 1996. The 1987 Option Plan
provides for grants of nonstatutory options to key employees of the Company. The
1987 Option Plan was discontinued at the time of the adoption of the 1996 Option
Plan, and no additional options will be granted under the 1987 Option Plan.
Options previously granted under the 1987 Option Plan will continue to be
governed by the terms of the 1987 Option Plan, which will be administered by the
Board.
The exercise price of options granted under the 1987 Option Plan is based
on the book value of the Common Stock at the end of the fiscal year immediately
prior to the year in which the option is granted, as reflected in the Company's
audited financial statements, reduced by any dividend declared by the Company
with respect to the previous fiscal year. The term of options granted under the
1987 Option Plan is ten years, subject to certain exceptions. Generally, options
granted under the 1987 Option Plan become exercisable pursuant to a five-year
vesting schedule provided the optionee remains employed full time by the Company
and are subject to a right of repurchase by the Company upon the termination of
the optionee's employment.
As of December 31, 1997, options to purchase 217,400 shares of Common
Stock, at a weighted average exercise price of $0.40 per share, were outstanding
under the 1987 Option Plan. Options to purchase 156,200 shares were fully vested
as of December 31, 1997. Assuming all of the optionees remain continually
employed by the Company, the remaining unvested options will become fully vested
by December 31, 1998.
1996 Employee Stock Purchase Plan
Deltek's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board in November 1996 and approved by its shareholders
in December 1996. A total of 400,000 shares of Common Stock are reserved for
issuance under the Purchase Plan. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, will be administered by the Board or a
committee thereof. Employees (including officers and employee directors of the
Company) are eligible to participate in the Purchase Plan if they are
customarily employed for more
10
<PAGE> 14
than 20 hours per week five months per year. The Purchase Plan will be
implemented during sequential six-month offering periods. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions,
which may not exceed 10% of an employee's compensation. The price at which stock
may be purchased under the Purchase Plan is equal to 85% of the lower of the
fair market value of the Common Stock on the first day of the offering period or
the last day of the offering period. Employees may end their participation in
the offering at any time during the offering period, and participation ends
automatically on termination of a participant's employment with the Company. In
addition, participants may not purchase shares of Common Stock having a value
(measured at the beginning of the offering period) greater than $25,000 in any
calendar year.
As of December 31, 1997, 29,195 shares of Common Stock have been issued
under the Purchase Plan.
Performance Graph
[GRAPH]
Assumes initial investment of $100
* Total Return assumes reinvestment of dividends
Note: Total Returns based on market capitalization
<TABLE>
<CAPTION>
February 1997 December 1997
------------- -------------
<S> <C> <C>
Deltek Sytems 100.00 143.75
S&P Smallcap 600 100.00 123.53
Peer Group 100.00 90.47
</TABLE>
11
<PAGE> 15
The above graph assumes a $100 investment on February 20, 1997 and
reinvestment of all dividends, in the Company's Common Stock, the S&P 600 Index,
and a composite peer group consisting of the following companies: Aspen
Technology, Inc., Dataworks Corp., J.D. Edwards & Co., HNC Software Inc.,
Infinium Software, Inc., JDA Software Group, Inc., Lightbridge, Inc.,
Manugistics Group, Inc., Pegasus Systems, Inc., Project Software & Development,
Inc., Remedy Corp., Scopus Technology, Inc., Symix Systems, Inc., and The
Vantive Corp.
CERTAIN TRANSACTIONS
From 1987 until February 25, 1997 (the "Termination Date"), Deltek elected
to be treated for federal and certain state income tax purposes as an S
Corporation under Subchapter S of the Internal Revenue Code of 1986. As a
result, the Company's earnings for prior tax years and through February 24, 1996
were taxed, with certain exceptions, for federal and certain state income tax
purposes directly to Deltek's shareholders. Prior to its initial public
offering, Deltek and its pre-IPO shareholders entered into a Tax Indemnification
Agreement, which generally provides that those shareholders will be responsible
for any federal and certain state income taxes imposed upon the Company for all
taxable periods ending prior to the Termination Date and that the Company will
be responsible for all federal and state income taxes arising on or after the
Termination Date. All executive officers and directors (other than Messrs.
Gregg, Oyer and Stein who were not shareholders prior to the initial public
offering) executed the Tax Indemnification Agreement.
Robert E. Gregg, a director of the Company, is a shareholder in Hazel &
Thomas, P.C., a law firm that the Company has retained. The legal fees paid to
Hazel & Thomas by the Company did not exceed 5% of Hazel & Thomas' gross
revenues during the firm's last full fiscal year.
The Company has entered into indemnification agreements with its executive
officers and directors setting forth certain procedures and other conditions
applicable for claims for indemnification pursuant to the Company's articles of
incorporation and agreeing, subject to certain limitations, to obtain and
maintain directors' and officers' liability insurance coverage for its directors
and officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During its fiscal year ended December 31, 1997, the Company's decisions on
executive officer compensation were made in an effort to attract and retain
highly qualified personnel and to recognize individual performance through the
use of incentives, including equity-based incentives, that reward the creation
of shareholder value and the achievement of key Company objectives.
EXECUTIVE COMPENSATION POLICY
The executive compensation policy of the Compensation Committee is to
offer compensation to its executive officers in such forms and at such levels
that will attract, retain, and motivate the management talent that is necessary
for the Company's continued success, and to create incentives for executive
officers to continuously improve the Company's financial performance, customer
satisfaction, and shareholder value.
12
<PAGE> 16
To implement this policy, the Compensation Committee believes that the
compensation of the Company's executive officers should be competitive in
relation to similar software companies and closely related to both personal and
Company performance. The Compensation Committee also believes that compensation
should include components such as stock options designed to align the interests
of executive officers and shareholders.
As part of its executive compensation policy, the Compensation Committee
will review executive compensation, including that of its Chief Executive
Officer, in light of its relationship to corporate performance. The Compensation
Committee will consider measures of corporate performance including software
sales, earnings per share, and the trading price of the Company's Common Stock.
ROLE OF THE COMPENSATION COMMITTEE
Historically, the Company's Chairman, Donald deLaski, and President,
Kenneth E. deLaski, have adjusted the compensation of the Company's senior
management in May of each year (the month in which the Company was founded).
For 1997, under authority given by the Board of Directors at its 1997 annual
meeting, the Chairman and President adjusted the salaries of certain officers
of the Company, and recommended adjustments to the salaries of Kenneth E.
deLaski, President (an increase), and Donald deLaski, Chairman (a decrease).
The reduction of Donald deLaski's salary was made to reflect his reduced active
involvement in the Company's management, and his salary may again be
reevaluated to take into account his future level of involvement.
Acting for the first time in June 1997 after its establishment shortly
after the Company's initial public offering, the Compensation Committee
considered the foregoing salary changes as made and recommended by the Chairman
and President, taking into account the Company's interest in attracting,
retaining, and motivating the management and technological talent that is
crucial to the Company's success, as well as the performance of the Company and
the personal performance of each of the foregoing officers and key employees,
and found that the salary adjustments were reasonable and appropriate. The
Compensation Committee therefore recommended that the Board of Directors ratify,
confirm and approve the foregoing salary adjustments.
With the Compensation Committee established and its executive compensation
policy in place, future executive compensation decisions will be reviewed by the
Compensation Committee prior to implementation to determine whether or not they
are consistent with its policy, and the Committee will make recommendations to
the Board of Directors accordingly.
The Compensation Committee:
Darrell J. Oyer
Charles W. Stein
13
<PAGE> 17
PROPOSAL 2
TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT AUDITORS
FOR ITS CURRENT FISCAL YEAR
Subject to ratification by the shareholders, the Board has reappointed
Arthur Andersen LLP as independent accountants to audit the consolidated
financial statements of the Company for its fiscal year ending 1998. The Board
recommends a vote in favor of ratification of the reappointment of Arthur
Andersen.
Arthur Andersen LLP has served as the Company's independent accountants to
audit the financial statements of the Company for the past 10 years.
Representatives from Arthur Andersen LLP are expected to be present at the
Annual Meeting, and they will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
The ratification of independent accountants is not a matter required to be
submitted to a vote of the shareholders, but is being submitted because of the
Company's general policy of submitting the appointment of independent
accountants to shareholder ratification. The Company believes this policy may
provide the auditors with a greater degree of independence from management. In
the event of a negative vote by the shareholders, the Board would reconsider the
reappointment of Arthur Andersen LLP.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table contains information, to the best of the Company's
knowledge, regarding the beneficial ownership of the Company's common stock by
each beneficial owner of more than 5% of the Company's common stock, as of the
Record Date:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership (1) Percent of Class
- -------------- ---------------- ------------------------ ----------------
<S> <C> <C> <C>
Common Stock Kenneth deLaski 5,094,500(2) 29.70
c/o Deltek Systems, Inc.
8280 Greensboro Drive
McLean, VA 22102
Common Stock Donald deLaski 4,607,800 26.86
c/o Deltek Systems, Inc.
8280 Greensboro Drive
McLean, VA 22102
Common Stock Onae Trust, R.A. Jacobs, Trustee 950,000 5.54
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005-1413
</TABLE>
14
<PAGE> 18
- --------------
(1) Unless otherwise indicated in the footnotes to this table, the persons
named in this table have sole voting and sole investment power with
respect to the shares beneficially owned by them, subject to community
property laws where applicable.
(2) Includes 962,500 shares owned by Mr. deLaski's spouse and 34,500 shares
owned by various trusts for which Mr. deLaski and his spouse serve as
trustees.
SECURITY OWNERSHIP OF MANAGEMENT
The following table contains information regarding the beneficial
ownership of the Company's Common Stock by each of the Company's Named Executive
Officers, directors and director nominee and executive officers and directors as
a group, as of the Record Date:
<TABLE>
<CAPTION>
Name of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership (1) Percent of Class
- -------------- ---------------- ------------------------ ----------------
<S> <C> <C> <C>
Common Stock Kenneth deLaski 5,094,500(2) 29.70
Common Stock Donald deLaski 4,607,800 26.86
Common Stock Eric F. Brown 432,200(3) 2.52
Common Stock Alan R. Stewart 16,222(4) *
Common Stock Robert E. Gregg 2,000(5) *
Common Stock Darrell J. Oyer 4,519(5)(6) *
Common Stock Charles W. Stein 5,350(5) *
Common Stock All directors, director 10,162,591 59.19
nominee and executive
officers as a group
(7 persons)
</TABLE>
- ------------
*Represents less than one percent.
(1) Unless otherwise indicated in the footnotes to this table, the persons
named in this table have sole voting and sole investment power with
respect to the shares beneficially owned by them, subject to community
property laws where applicable.
(2) Includes 962,500 shares owned by Mr. deLaski's spouse and 34,500 shares
owned by various trusts for which Mr. deLaski and his spouse serve as
trustees.
(3) Includes 6,000 shares issuable upon exercise of vested options and
excludes 24,000 shares issuable upon exercise of unvested options.
(4) Includes 3,800 shares issuable upon exercise of vested options and
excludes 18,400 shares issuable upon exercise of unvested options.
15
<PAGE> 19
(5) Includes 2,000 shares issuable upon exercise of vested options and
excludes 6,000 shares issuable upon exercise of unvested options.
(6) Includes 319 shares owned by Mr. Oyer's spouse. Mr. Oyer's shares are held
in a pension trust for which he serves as trustee.
16
<PAGE> 20
THE COMPANY'S BYLAWS ARE INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF
THE COMPANY'S BYLAWS WITHIN ONE BUSINESS DAY OF THE RECEIPT OF SUCH REQUEST, BY
FIRST CLASS MAIL OR EQUALLY PROMPT MEANS. ANY SUCH REQUEST SHOULD BE DIRECTED TO
THE COMPANY'S INVESTOR RELATIONS DEPARTMENT AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE, 8280 GREENSBORO DRIVE, MCLEAN, VA 22102, (703) 734-8606.
PUBLICATIONS OF INTEREST TO DELTEK SHAREHOLDERS ARE AVAILABLE, FREE OF CHARGE.
THESE INCLUDE ANNUAL AND QUARTERLY REPORTS TO SHAREHOLDERS, AS WELL AS OTHER
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS MATERIAL MAY BE
OBTAINED BY WRITTEN REQUEST TO THE COMPANY'S INVESTOR RELATIONS DEPARTMENT SENT
TO THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE.
<PAGE> 21
Detach Here
- --------------------------------------------------------------------------------
DELTEK SYSTEMS, INC.
1998 ANNUAL SHAREHOLDERS MEETING
RESERVATION REQUEST FORM
Complete the following information and return it to Corporate Secretary, Deltek
Systems, Inc., 8280 Greensboro Drive, McLean, VA 22102, for admission to the
1998 Annual Shareholders Meeting of Deltek Systems, Inc.
Shareholder's Name and Address:
--------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Number of Shares of Deltek
Common Stock held:
----------------------------------------------------
If the shares listed above are not registered in your name, identify the
name of the shareholder of record below and bring with you to the annual meeting
evidence that you beneficially own the shares.
Shareholder of Record:
-------------------------------------------------
THIS IS NOT A PROXY CARD
18
<PAGE> 22
DELTEK SYSTEMS, INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS OF
DELTEK SYSTEMS, INC.
ON MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth E. deLaski and Donald deLaski and each
of them, proxies, with power of substitution, to vote all shares of the
undersigned at the Annual Meeting of Shareholders of Deltek Systems, Inc., a
Virginia corporation (the "Company"), to be held on May 28, 1998 at 10:00 a.m.
at the McLean Hilton, 7920 Jones Branch Drive, McLean, Virginia, or at any
adjournment thereof, upon the matters set forth in the Proxy Statement for such
meeting, and in their discretion, upon such other business as
may properly come before the meeting.
1. TO ELECT ONE CLASS I DIRECTOR TO SERVE FOR THREE YEARS AND UNTIL HIS
SUCCESSOR HAS BEEN DULY ELECTED AND SHALL QUALIFY.
NOMINEE: Charles W. Stein
FOR WITHHELD
[ ] [ ]
2. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR ITS CURRENT FISCAL YEAR.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
<PAGE> 23
THE SHARES REPRESENTED BY ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH
THE CHOICES SPECIFIED ON SUCH PROXIES. THE SHARES REPRESENTED BY A PROXY WILL BE
VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID
PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE BOARD OF DIRECTORS WITH
RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
NOTE: When shares are held by joint tenants, both should sign. Persons signing
as Executor, Administrator, Trustee, etc. should so indicate. Please sign
exactly as the name appears on the proxy.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: Date: Signature: Date:
--------------- -------- --------------- --------
