<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Affiliated Computer Services, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Affiliated Computer Services, Inc.
- -------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-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 O-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:
--------------------------------------------------------------------------
/x/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided for by Exchange Act
Rule O-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:
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4. Date Filed:
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<PAGE>
AFFILIATED COMPUTER SERVICES, INC.
2828 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 1996
To the Stockholders of Affiliated Computer Services, Inc.:
The Annual Meeting of Stockholders of Affiliated Computer Services, Inc.
("ACS" or the "Company") will be held at City Place, 2711 North Haskell Avenue,
Dallas, Texas 75204 on October 28, 1996 at 11:00 a.m. for the following
purposes:
1. To elect directors to hold office until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;
2. To consider and vote upon an amendment to the Company's Restated
Certificate of Incorporation to increase the number of shares of the
Company's Class A Common Stock, par value $0.01, and Class B Common
Stock, par value $0.01, authorized for issuance;
3. To consider and vote upon amendments to the Company's 1988 Stock Option
Plan (the "Stock Option Plan") to bring the Stock Option Plan into
compliance with the requirements of Section 162 (m) of the Internal
Revenue Code of 1986, as amended, and to increase by 1,150,000 the number
of shares of Class A Common Stock reserved for issuance thereunder;
4. To consider and vote upon the adoption of the Company's 1995 Employee
Stock Purchase Plan;
5. To consider and vote upon the performance-based incentive compensation
for the Company's Chief Executive Officer; and
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on September 20, 1996
as the record date (the "Record Date") for the determination of stockholders of
the Company entitled to notice of, and to vote at, the Annual Meeting of
Stockholders (the "Annual Meeting"). Only stockholders of record at the close of
business on the Record Date are entitled to notice of and to vote at the Annual
Meeting. A holder of shares of the Company's Class A Common Stock is entitled to
one vote, in person or by proxy, for each share of Class A Common Stock on all
matters properly brought before the Annual Meeting, and a holder of shares of
the Company's Class B Common Stock will be entitled to 10 votes, in person or by
proxy, for each share of Class B Common Stock on all matters properly brought
before the Annual Meeting.
ALL HOLDERS OF THE COMPANY'S CLASS A COMMON STOCK AND CLASS B COMMON STOCK
(WHETHER THEY EXPECT TO ATTEND THE ANNUAL MEETING OR NOT) ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE PROXY CARD ENCLOSED WITH THIS
NOTICE.
By Order of the Board of Directors
DAVID W. BLACK
SECRETARY
September 30, 1996
<PAGE>
AFFILIATED COMPUTER SERVICES, INC.
2828 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 28, 1996
GENERAL INFORMATION
This Proxy Statement is being furnished to stockholders of record of
Affiliated Computer Services, Inc., ("ACS" or the "Company") as of September 20,
1996 in connection with the solicitation by the Board of Directors of ACS of
proxies to be voted at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at City Place, 2711 North Haskell Avenue, Dallas, Texas 75204, on
October 28, 1996, at 11:00 a.m., or at any adjournments thereof, for the
purposes stated in the Notice of Annual Meeting. The approximate date of mailing
this Proxy Statement and enclosed form of proxy to stockholders is on or about
September 30, 1996.
RECORD DATE AND VOTING
The Board of Directors of ACS has fixed the close of business on September
20, 1996 as the record date (the "Record Date") for the Annual Meeting. Only
holders of record of the outstanding shares of Class A Common Stock and Class B
Common Stock at the close of business on the Record Date are entitled to notice
of, and to vote at, the Annual Meeting or any adjournments thereof. As of the
close of business on the Record Date, the Company had outstanding 14,517,588
shares of Class A Common Stock, $0.01 par value, and 3,202,843 shares of Class B
Common Stock, $0.01 par value (collectively, the "Common Stock"). Each share of
Class A Common Stock is entitled to one vote, in person or by proxy, on all
matters properly presented at the Annual Meeting, and each share of Class B
Common Stock is entitled to 10 votes, in person or by proxy, on all matters
properly presented at the Annual Meeting. The Class A Common Stock and the Class
B Common Stock are the only classes of stock entitled to vote at the Annual
Meeting. The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding shares of Class A Common Stock and Class B Common
Stock entitled to vote at the Annual Meeting or any adjournment thereof is
necessary to constitute a quorum to transact business.
VOTE REQUIRED
The affirmative vote of the holders of shares of Class A Common Stock and
Class B Common Stock, voting together as a class, having a plurality of the
voting power of the Company, in person or by proxy, is required to elect
directors. The affirmative vote of the holders of shares of Class A Common Stock
and Class B Common Stock, voting together as a class, having a majority of the
voting power of the Company (regardless of the number of shares actually voting
at the Annual Meeting) in person or by proxy, is required to approve Proposal 2,
the amendment to the Company's Restated Certificate of Incorporation to increase
the number of shares of the Company's Class A Common Stock authorized for
issuance. The affirmative vote of the holders of shares of the Class A Common
Stock and Class B Common Stock, voting together as a class, having a majority of
the voting power of the Company eligible to vote and voting, either in person or
by proxy, at the Annual Meeting, is required to approve Proposal 3, the
amendment to the Company's 1988 Employee Stock Option Plan (the "Stock Option
Plan") to increase the number of shares of the Company's Class A Common Stock
recovered for issuance thereunder, to approve Proposal 4, the proposal to
approve the Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan"),
and to
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<PAGE>
approve Proposal 5, the proposal to approve the performance-based incentive
compensation for the Company's Chief Executive Officer.
PROXY, SOLICITATION, REVOCATION AND EXPENSES
All proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted as indicated on the proxy. If the enclosed proxy is
signed and returned, it may, nevertheless, be revoked at any time prior to the
voting thereof at the pleasure of the stockholder signing it, either by (i)
filing a written notice of revocation received by the person or persons named
therein, (ii) the stockholder attending the Annual Meeting and voting the shares
covered thereby in person, or (iii) delivering another duly executed proxy
statement dated subsequent to the date thereof to the addressee named in the
enclosed proxy.
Shares represented by duly executed proxies in the accompanying form will be
voted in accordance with the instructions indicated on such proxies, and, if no
such instructions are indicated thereon, will be voted in favor of the nominees
for election of directors named below, in favor of the proposal to amend the
Company's Restated Certificate of Incorporation to increase the number of shares
of the Company's Class A Common Stock authorized for issuance, in favor of the
proposal to amend the Stock Option Plan to bring the Stock Option Plan into
compliance with the requirements of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and to increase by 1,150,000 the number of
shares of Class A Common Stock reserved for issuance thereunder, in favor of the
proposal to adopt the Purchase Plan and in favor of the proposal to approve the
performance-based compensation for the Company's Chief Executive Officer.
Abstentions, broker non-votes and proxies directing that the shares are not to
be voted will not be counted as a vote in favor of a matter called for vote.
The cost of preparing, assembling, printing and mailing the Proxy Statement
and the enclosed proxy form and the cost of soliciting proxies related to the
Annual Meeting will be borne by the Company. The Company will request banks and
brokers to solicit their customers who are beneficial owners of shares of Common
Stock listed of record in names of nominees, and will reimburse such banks and
brokers for the reasonable out-of-pocket expenses for such solicitation.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to the shares of Class A Common Stock and the Class B Common Stock
beneficially owned by stockholders known to the Company to own more than 5% of
the outstanding shares of such classes and the shares of Class A Common Stock
and Class B Common Stock beneficially owned by each of the Company's directors
and executive officers and by all the Company's executive officers and directors
as a group:
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT AND PERCENT OF PERCENT OF
NATURE OF PERCENT OF NATURE OF TOTAL SHARES TOTAL SHARES
BENEFICIAL TOTAL SHARES BENEFICIAL OF CLASS B OF CLASS A
OWNERSHIP OF CLASS A OWNERSHIP COMMON AND CLASS B
OF CLASS A COMMON STOCK OF CLASS B STOCK COMMON STOCK PERCENT OF
COMMON OWNED COMMON OWNED OWNED TOTAL VOTING
DIRECTORS AND EXECUTIVE OFFICERS STOCK BENEFICIALLY STOCK BENEFICIALLY BENEFICIALLY POWER (1)
- ---------------------------------- ----------- ------------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason (2)................. 3,655 * 3,202,843 100% 18.09% 68.82%
Jeffrey A. Rich (3)............... 14,093 * -- -- * *
Thomas G. Connor, Jr.............. 10,721 * -- -- * *
Gerald J. Ford (4)................ -- -- -- -- -- --
Joseph P. O'Neill................. 11,905 * -- -- * *
Frank A. Rossi.................... 2,500 * -- -- * *
Henry G. Hortenstine (5).......... 21,518 * -- -- * *
David W. Black.................... -- -- -- -- -- --
Mark A. King...................... 16,906 * -- -- * *
All Executive Officers and
Directors as a Group (nine
persons) (6).................... 81,298 * 3,202,843 100% 18.50% 68.93%
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY'S STOCK
FMR Corp. (7)..................... 1,882,100 12.96% -- -- 10.62% 4.04%
82 Devonshire Street
Boston, Massachusetts 02109
First Nationwide Bank (8)......... 1,041,808 7.18% -- -- 5.88% 2.24%
14651 Dallas Parkway
Suite 200
Dallas, Texas 75240
Massachusetts Financial Services
Company (7)..................... 799,000 5.50% -- -- 4.51% 1.72%
500 Boylston Street
Boston, Massachusetts 02116
</TABLE>
- ------------------------
* Less than 1%.
(1) In calculating the percent of total voting power, the voting power of shares
of Class A Common Stock (one vote per share) and Class B Common Stock (ten
votes per share) is aggregated.
(2) All of the shares of Class B Common Stock listed are owned by The Deason
International Trust (the "Trust"). Mr. Deason holds the sole voting power
with respect to such shares through an irrevocable proxy granted by the
Trust. The investment power with respect to such shares is held by the
Trust. The
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shares of Class A Common Stock are owned by, and are the separate property
of, Mr. Deason's spouse and his spouse's daughter. The beneficial ownership
of all such shares of Class A Common Stock is disclaimed by Mr. Deason.
(3) Consists of 14,093 shares of Class A Common Stock issuable pursuant to
options that are currently exercisable.
(4) Excludes 1,041,808 shares of Class A Common Stock owned by First Nationwide
Bank, of which Mr. Ford serves as Chairman of the Board. Mr. Ford,
individually, has neither voting nor investment power with respect to such
shares.
(5) Includes 21,518 shares of Class A Common Stock issuable pursuant to options
that are currently exercisable.
(6) Includes 35,611 shares of Class A Common Stock not outstanding but subject
to currently exercisable options and 3,655 shares of Class A Common Stock as
to which Mr. Deason disclaims beneficial ownership. Excludes 1,041,808
shares of Class A Common Stock owned by First Nationwide Bank, of which Mr.
Ford serves as Chairman of the Board. Mr. Ford, individually, has neither
voting nor investment power with respect to such shares.
(7) Based on filings by the stockholder with the Securities and Exchange
Commission.
(8) All shares are owned of record by First Nationwide Bank, which is a wholly
owned subsidiary of First Nationwide Holdings Inc. ("FN Holdings"). Gerald
J. Ford, a director of the Company, beneficially owns 20% of the outstanding
capital stock of FN Holdings, the remaining 80% of which is beneficially
owned by Ronald Perelman.
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<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is comprised of nine directors. Eight directors are
currently members and will be elected for terms expiring at the next Annual
Meeting. The directors will continue to serve until their respective successors
are duly elected and qualified. Presently, there is a vacancy on the Board of
Directors. This vacancy will remain open until a candidate is identified by the
Board of Directors and, pursuant to the Company's Bylaws, filled solely by the
affirmative vote of (i) a majority of the remaining directors then in office or
(ii) by a sole remaining director.
Shares represented by proxies returned duly executed will be voted, unless
otherwise specified, in favor of the eight nominees for the Board of Directors
named below. The proxies cannot be voted for more than eight nominees. The
nominees have indicated that they are able and willing to serve as directors. If
any (or all) such persons should be unable to serve, the persons named in the
enclosed proxy will vote the shares covered thereby for such substitute nominee
(or nominees) as the Board of Directors may select. Stockholders may withhold
authority to vote for any nominee by entering the name of such nominee in the
space provided for such purpose on the proxy card.
NOMINEES FOR ELECTION AS DIRECTOR
The following table lists the name and principal occupation of each nominee
and the year in which each nominee was first elected as a director of ACS.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE
- --------------------- ---------------------------------------------------------------------- -----------
<S> <C> <C>
Darwin Deason Chairman of the Board and Chief Executive Officer 1988
Jeffrey A. Rich President and Chief Operating Officer 1991
Mark A. King Executive Vice President and Chief Financial Officer 1996
David W. Black Executive Vice President, Secretary and General Counsel 1995
Henry Hortenstine Executive Vice President 1996
Gerald J. Ford Chairman, First Nationwide Bank, a Federal Savings Bank 1991
Joseph P. O'Neill President and Chief Executive Officer, Public Strategies, Washington, 1994
Inc.
Frank A. Rossi Chairman, FAR Holdings Company, L.L.C. 1994
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES
Set forth below is certain information with respect to each of the nominees
for the office of director.
DARWIN DEASON, age 56, has served as Chairman of the Board and Chief
Executive Officer of the Company since its formation in 1988. Prior to the
formation of the Company, Mr. Deason spent 20 years with MTech Corp ("MTech"), a
data processing subsidiary of MCorp, a bank holding corporation based in Dallas,
Texas ("MCorp"), serving as MTech's Chief Executive Officer and Chairman of the
Board from 1978 until April 1988, and served on the board of various
subsidiaries of MTech and MCorp. Prior to that, Mr. Deason was employed in the
data processing department of Gulf Oil in Tulsa, Oklahoma. Mr. Deason has over
30 years of experience in the data processing industry.
JEFFREY A. RICH, age 36, has served as President and Chief Operating Officer
of the Company since April 1995 and as a director since August 1991. Mr. Rich
joined the Company in 1989 as Senior Vice President and Chief Financial Officer
and was named Executive Vice President in 1991. Prior to joining the Company,
Mr. Rich served as a Vice President of Citibank N.A. from March 1986 through
June 1989, and also served as an Assistant Vice President of Interfirst Bank
Dallas, N.A. from 1982 until March 1986.
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<PAGE>
MARK A. KING, age 39, has served as Executive Vice President and Chief
Financial Officer since May 1995 and as a director since May 1996. Mr. King
joined the Company in November 1988 as Chief Financial Officer of various ACS
subsidiaries. Prior to joining the Company, Mr. King was Vice President and
Assistant Controller of MTech. Mr. King has over 17 years of finance and
accounting experience, including over 10 years of experience with the data
processing industry.
DAVID W. BLACK, age 34, has served as Executive Vice President, Secretary
and General Counsel and as a director of the Company since May 1995. Mr. Black
joined the Company in February 1995 as Associate General Counsel. Prior to that
time, Mr. Black was an attorney engaged in private practice in Dallas from 1986
through January 1995.
HENRY G. HORTENSTINE, age 52, has served as Executive Vice President of the
Company since March 1995 and as a director since September 1996. Prior to that
time, he served as Senior Vice President -- Business Development from July 1993
to March 1995. Mr. Hortenstine was engaged by the Company as a consultant
providing various business and corporate development services from 1990 to July
1993. Prior to that, he was Senior Executive Vice President of Lomas Mortgage
USA, a subsidiary of Lomas Financial Corporation, from 1987 to 1989.
GERALD J. FORD, age 51, has been a director of the Company since August
1991. Mr. Ford served as Chairman of the Board, Chief Executive Officer and a
director of First Gibraltar Bank, FSB ("FGB") until February 1993, when he
assumed his present position as Chairman of the Board of Directors and Chief
Executive Officer of First Nationwide Bank ("First Nationwide"), the successor
of First Madison Bank, FSB (successor to FGB). Mr. Ford also served as Chairman
and Chief Executive Officer of First United Bank Group, Inc., until it was
acquired by Norwest Corporation on January 14, 1994. In addition, Mr. Ford
serves as a director of Norwest Corporation.
JOSEPH P. O'NEILL, age 48, has served as a director of the Company since
November 1994 and also serves as a consultant to the Company. Mr. O'Neill has
served as President and Chief Executive Officer of Public Strategies Washington,
Inc., a public affairs and consulting firm, since March 1991, and from 1985
through February 1991, served as President of the National Retail Federation, a
national association representing United States retailers. Mr. O'Neill also is a
director of Careerstaff, Inc.
FRANK A. ROSSI, age 58, has served as a director of the Company since
November 1994 and also serves as a consultant to the Company. Mr. Rossi has
served as Chairman of FAR Holdings Company, L.L.C., a private investment firm,
since February 1994, and before that was employed by Arthur Andersen & Co. for
over 35 years. Mr. Rossi served in a variety of capacities for Arthur Andersen
since 1959, including Managing Partner/Chief Operating Officer and as a member
of the firm's Board of Partners and Executive Committee.
Except as set forth above, none of the nominees holds a directorship in any
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to
the requirements of Section 15(d) of the Exchange Act or any company registered
as an investment company under the Investment Company Act of 1940, as amended.
BUSINESS EXPERIENCE OF OTHER EXECUTIVE OFFICER
Set forth below is certain information with respect to the other executive
officer of the Company:
THOMAS G. CONNOR, age 55, has served as Executive Vice President of the
Company since July 1988 and is also Chairman of the Board and Chief Executive
Officer of Dataplex Corporation, the Company's image management subsidiary.
Prior to joining the Company, Mr. Connor served as Executive Vice President and
General Manager of MTech's Northern Region. Mr. Connor has over 30 years of
experience in the data processing industry.
6
<PAGE>
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR SET
FORTH ABOVE.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee, the Special Compensation Committee, and the
Independent Directors Committee. The Board of Directors does not have a standing
nominating committee. The Audit Committee is composed of Messrs. Rossi
(Chairman) and O'Neill. The Audit Committee was formed in 1994 and given general
responsibility for meeting periodically with representatives of the Company's
independent public accountants and electronic data processing ("EDP") auditors
to review the general scope of audit coverage, including consideration of the
Company's accounting and EDP practices and procedures and the adequacy of the
Company's system of internal controls, and to report to the Board of Directors
with respect thereto. The Audit Committee also is responsible for recommending
to the Board of Directors the appointment of the Company's independent public
accountants and EDP auditors.
The Board of Directors also has a Compensation Committee, which was formed
in May 1994. The members of the Compensation Committee are Messrs. Deason, Ford
and O'Neill. A vacancy on the committee occurred upon the resignation of David
A. Smith from the Company's Board of Directors in January 1995, and was filled
with the appointment of Mr. O'Neill in August 1996. The Compensation Committee
is responsible for recommending to the Board of Directors policies and plans
concerning the salaries, bonuses and other compensation of the executive
officers of the Company, including reviewing the salaries of the executive
officers and recommending bonuses and other forms of additional compensation for
the executive officers and the administration of and grant of awards under the
Stock Option Plan. In connection with the Company's establishment of certain
procedures to comply with the requirements of Section 162(m) of the Code so that
compensation to executive officers whose compensation exceeds $1 million may be
deductible by the Company for federal income tax purposes, the Company formed
the Special Compensation Committee in August 1996. The members of the Special
Compensation Committee are Messrs. Ford and O'Neill. The Special Compensation
Committee will be responsible for reviewing the compensation of the executive
officers whose compensation exceeds $1 million, including reviewing salaries,
recommending bonuses and other forms of additional compensation, including
grants of awards under the Stock Option Plan.
In addition, the Board of Directors has an Independent Directors Committee
on which Messrs. Ford, O'Neill and Rossi serve. The Independent Directors
Committee was formed in May 1994 to review annually the prices and terms of the
services, forms and supplies provided between the Company and Precept Business
Products, Inc. ("Precept"), an affiliate of the Company, pursuant to the
Company's reciprocal services agreement and other related party transactions.
See "Certain Transactions."
During the fiscal year ended June 30, 1996, there were four regular meetings
of the Company's Board of Directors. No incumbent directors attended fewer than
75% of the aggregate of (i) the Board meetings held during the fiscal year and
(ii) the meetings held by all committees of the Board on which he served, except
for Mr. Ford. There were three meetings held by the Company's Audit Committee
during the fiscal year and one meeting held by each of the Company's
Compensation and Independent Directors Committees during the fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, all statements of beneficial ownership required
to be filed with the Securities and Exchange Commission (the "Commission") for
the fiscal year ended June 30, 1996 have been timely filed, except for a report
relating to the disposition by Mr. Hortenstine of beneficial ownership of 1,000
shares of the Company's Class A Common Stock, a report relating to the
acquisition by Mr. Rossi of beneficial ownership of 1,000 shares of the
Company's Class A Common Stock and a report by Thomas
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<PAGE>
M. Rouse (who is no longer with the Company) filed with respect to the exercise
of a stock option and the subsequent sale of such shares of Class A Common
Stock, all of which reports have been filed.
PROPOSAL 2
APPROVAL OF AN AMENDMENT
TO THE
COMPANY'S CERTIFICATE OF INCORPORATION
At the Annual Meeting, the Company's stockholders will be asked to consider
and vote upon a proposal to amend the Company's Certificate of Incorporation to
increase from 17,195,742 to 75,000,000 the number of shares of Class A Common
Stock, par value $.01, authorized for issuance, and to increase from 4,804,258
to 6,405,686 the number of shares of Class B Common Stock, par value $.01,
authorized for issuance. This amendment was adopted by the Company's Board of
Directors on August 21, 1996 subject to stockholder approval.
The Company's authorized capital stock currently consists of a total of
25,000,000 shares, including 17,195,742 shares of Class A Common Stock, par
value $.01 per share, 4,804,258 shares of Class B Common Stock, $.01 par value,
and 3,000,000 shares of Preferred Stock, par value $1.00 per share. There are no
preemptive rights associated with any of the Company's Common Stock. As of the
Record Date, there were outstanding 14,517,588 shares of the Company's Class A
Common Stock and 3,202,843 shares of the Company's Class B Common Stock, options
to purchase approximately 1,163,031 shares of the Company's Class A Common
Stock, and a warrant to purchase 396,594 shares of Class A Common Stock. Between
November 7, 1995 (the record date for the 1995 Annual Meeting of Stockholders)
and the Record Date, the Company issued approximately 4,339,741 additional
shares of its Class A Common Stock, primarily in connection with the
consummation of public offerings in March and June, 1996.
PROPOSED AMENDMENT
The amendment to the Company's Certificate of Incorporation, if approved,
would increase from 17,195,742 to 75,000,000 the number of shares of Class A
Common Stock, par value $.01, authorized for issuance by the Company and from
4,804,258 to 6,405,686 the number of shares of Class B Common Stock, par value
$.01, authorized for issuance by the Company. The Company's Board believes that
it is desirable for the Company to have additional authorized but unissued
shares of the Company's Class A Common Stock to provide flexibility to act
promptly with respect to acquisitions, public and private financings, to effect
future stock splits or dividends, and other appropriate purposes. Approval of
the increase at the Annual Meeting will eliminate the delays and expense that
otherwise would be incurred if stockholder approval were required to increase
the authorized number of shares of the Company's Class A Common Stock and Class
B Common Stock for possible future transactions involving the issuance of
additional shares. However, the rules of the National Association of Securities
Dealers, Inc. governing corporations with securities listed on the NASDAQ
National Market System would still require stockholder approval by a majority of
the total votes cast in person or by proxy prior to the issuance of designated
securities where (1) the issuance would result in a change of control of the
issuer, (2) in connection with the acquisition of the stock or assets of another
company if an affiliate of the issuer has certain interlocking interests with
the company to be acquired or where the issuer issues more than 20% of its
currently outstanding shares or (3) in connection with a transaction other than
a public offering involving the sale or issuance of more than 20% of the common
stock or voting power outstanding before the issuance. While there is no
transaction pending that would require approval of the increase, failure to
approve the increase would leave the Company with a smaller pool of authorized
but unissued Class A Common Stock than the Board considers appropriate or
desirable.
8
<PAGE>
In addition, the Company's Board believes that it is desirable for the
Company to have additional authorized but unissued shares of the Company's Class
B Common Stock to provide flexibility in the event that the Company elects to
effect future stock splits or dividends.
The additional Class A Common Stock and Class B Common Stock to be
authorized by adoption of the amendment would have rights identical to the
currently outstanding Class A Common Stock and Class B Common Stock,
respectively, of the Company. Adoption of the proposed amendment and issuance of
the Class A Common Stock and the Class B Common Stock would not affect the
rights of the holders of currently outstanding Class A Common Stock and Class B
Common Stock of the Company, except for effects incidental to increasing the
number of shares of the Company's Class A Common Stock and Class B Common Stock
outstanding, including possible dilution of the equity interests of existing
stockholders or reduction of the proportionate voting power of existing
stockholders. In addition, the issuance of additional shares could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company, although this is not the
intention of this proposal. If the amendment is adopted, it will become
effective upon the filing of a Certificate of Amendment to the Company's
Restated Certificate of Incorporation with the Secretary of the State of
Delaware.
The additional shares may be used, without further stockholder approval, for
various purposes, including, without limitation, raising capital, effecting
future stock splits, establishing strategic relationships with other companies
and expanding the Company's business or product lines through the acquisition of
other business or products. The Company does believe that it is probable that it
will engage in acquisitions in the future to expand the Company's business or
product lines through the acquisition of other businesses or products, and that
additional shares may be issued in connection with such acquisitions. As of the
date of this Proxy Statement, the Company has not entered into any agreements,
arrangements or understandings with respect to any material acquisition. The
additional shares of the Company's Class A and Class B Common Stock may be
issued, subject to certain exceptions, by the Company's Board at such times, in
such amounts and upon such terms as the Board may determine without further
approval of the stockholders. Stockholders have no preemptive rights to
subscribe to additional shares when issued. To accomplish this proposed increase
in the Company's Class A Common Stock and Class B Common Stock, the first
sentence of Article Fourth, Section 2 of the Company's Restated Certificate of
Incorporation must be amended to be and read as follows:
"The total number of shares of all classes of capital stock that the Company
shall have the authority to issue is 84,405,686 shares, consisting of (a)
75,000,000 shares of Class A Common Stock, par value $0.01 per share ("Class
A Common Stock"), (b) 6,405,686 shares of Class B Common Stock, par value
$0.01 per share ("Class B Common Stock", and together with Class A Common
Stock, "Common Stock"), and (c) 3,000,000 shares of Preferred Stock, par
value $1.00 per share ("Preferred Stock").
THE BOARD RECOMMENDS A VOTE "FOR" AMENDMENT OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL 3
APPROVAL OF AMENDMENTS
TO THE COMPANY'S
1988 EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting, the Company's stockholders will be asked to consider
and vote upon amendments to the Company's Stock Option Plan. The amendments were
adopted by the Company's Board of Directors on August 21, 1996 subject to
stockholder approval.
The purpose of the amendments is two-fold. The first purpose is to bring the
Stock Option Plan into compliance with the requirements of Section 162(m) of the
Code, so that the compensation expense
9
<PAGE>
resulting from grants of stock options under the Stock Option Plan to certain
executive officers whose compensation exceeds $1 million may be deductible by
the Company for federal income tax purposes. The affected executive officers are
described in Code Section 162(m), and they may from time to time, be
participants under the Stock Option Plan (collectively, the "Section 162(m)
Participants"). The executive officers named in the Summary Compensation Table
may become Section 162(m) Participants. The second purpose of the amendments is
to increase the number of shares of the Company's Class A Common Stock reserved
for issuance under the Stock Option Plan to 3,000,000. This amendment will
involve an increase of 1,150,000 shares of Class A Common Stock available for
distribution. All employees of the Company and its subsidiaries (including
employees who are also members of the Board), as well as certain consultants,
are eligible to receive options under the Stock Option Plan. The purpose of the
Stock Option Plan is to provide the Company with an effective means to attract
and retain highly qualified personnel as well as to provide additional incentive
to employees and others who provide services to the Company and who can
contribute significantly to the Company's success. The Board of Directors
believe that this increase is necessary for the Company to remain competitive in
the recruitment, motivation and retention of employees and other key persons,
and recommends that the stockholders approve this proposal.
The shares awarded to employees of and consultants to the Company under the
Stock Option Plan come from authorized but unissued shares of Class A Common
Stock. Without the 1,150,000 shares that are the subject of this proposal, there
are a total of 1,850,000 shares of the Company's Class A Common Stock authorized
for issuance upon the exercise of options granted under the Stock Option Plan.
As of September 20, 1996, a total of 870,642 shares of Class A Common Stock had
been purchased upon the exercise of options issued under the Stock Option Plan
and a total of 1,163,031 shares of Class A Common Stock were subject to
outstanding options that have been granted pursuant to the Stock Option Plan. Of
the 1,163,031 shares, options for 200,000 shares have been granted to former
Genix employees (who are new employees of the Company) subject to stockholder
approval of an increase in the number of shares of the Class A Common Stock that
may be subject to options issued under the Stock Option Plan; in the event that
stockholder approval of the increase is not obtained at the Annual Meeting,
these options will not become exercisable.
DESCRIPTION OF THE STOCK OPTION PLAN
The complete text of the Stock Option Plan is attached as Appendix 1 hereto,
and the following summary of the Stock Option Plan is qualified in its entirety
by reference to such text.
GENERAL. The Stock Option Plan is designed to comply with the requirements
of Section 16b of the Exchange Act. Provided the stockholders approve the
increase of 1,150,000 shares, an aggregate of 3,000,000 shares of Class A Common
Stock will be available for issuance under the Stock Option Plan, subject to
adjustment from time to time for stock dividends and certain other changes in
capitalization as provided in the Stock Option Plan. No options may be granted
under the Stock Option Plan after September 2, 1998.
ADMINISTRATION. The Stock Option Plan has been administered by the
Compensation Committee and will in the future be administered by the Special
Compensation Committee of the Company's Board of Directors (the "Special
Compensation Committee"). Under its terms, the Stock Option Plan may be
administered by the Board of Directors of ACS or another body, as permitted by
Rule 16b-3 ("Rule 16b-3") promulgated under the Exchange Act. The Special
Compensation Committee determines the individuals eligible to receive grants of
options under the Stock Option Plan, the type of option granted, the number of
shares of Class A Common Stock subject to a grant and the terms of the grant,
including exercise price, exercise date and any restrictions on exercise. The
Special Compensation Committee also is responsible for determining the
advisability and terms of any buyout of options previously granted, reductions
in the exercise prices of previously granted options and the terms of any
deferred grant options under the Stock Option Plan.
10
<PAGE>
ELIGIBILITY. Employees of and consultants to the Company and any parent or
subsidiary of the Company are eligible to receive grants of options under the
Stock Option Plan. Directors who are not otherwise employed by the Company are
not considered to be "employees" of the Company for purposes of the Stock Option
Plan. Only directors who are compensated other than by a director's fee for
services rendered to the Company are deemed to be "consultants."
TYPES OF GRANTS. The Stock Option Plan provides for issuance of incentive
stock options within the meaning of Section 422 of the Code ("Incentive Stock
Options"), nonstatutory stock options ("Nonstatutory Stock Options" and,
together with Incentive Stock Options, "Options") and stock purchase rights
("Stock Purchase Rights"). Incentive Stock Options may be granted only to
employees. Options and Stock Purchase Rights entitle the holders thereof to
purchase the Company's Class A Common Stock. All grants are evidenced by a
written agreement in a form approved by the Special Compensation Committee. To
date, only Nonstatutory Stock Options have been granted under the Option Plan.
OPTIONS. The exercise price of an Incentive Stock Option shall be no less
than 100% of the fair market value of the Company's Class A Common Stock at the
time of the grant (110% of fair market value if the grant is made to an employee
that owns stock representing more than 10% of the voting power of all classes of
stock of the Company or any parent or subsidiary of the Company (a "10%
Holder"). Fair market value is determined by reference to the stock's closing
price on the date of the grant. Incentive Stock Options shall have a term of no
more than 10 years (5 years if granted to a 10% Holder). The exercise price of a
Nonstatutory Stock Option shall be no less than 85% of the fair market value of
the Company's Class A Common Stock at the time of grant.
In the event that the recipient of an Option grant is terminated for cause
as a consultant or an employee, all Options granted under the Stock Option Plan,
whether or not vested, are forfeited. If a consultant or employee's relationship
with the Company terminates other than for cause, a vested Option granted to
such person is exercisable to the extent provided in the agreement granting the
Option, but, in case of an Incentive Stock Option, shall be exercised within 90
days of the date of such termination (12 months, if the termination was the
result of a disability) and only to the extent exercisable on the date of such
termination. If there is a change in control of the Company, all Options
previously granted, whether or not vested, shall become fully vested and
exercisable, effective the day immediately prior to the change in control. If
the recipient of an Option grant dies, the Option may be exercised only to the
extent vested at time of death and only by the estate of the recipient or a
person who acquired the Option by bequest or inheritance.
TRANSFERABILITY. No Option is transferable by a recipient except by will or
the laws of descent and distribution. An Option may be exercised during the life
of a recipient only by the recipient.
STOCK PURCHASE RIGHTS. When a Stock Purchase Right has been granted, the
Special Compensation Committee advises the recipient of the grant of the terms
and conditions of the grant, including any restrictions on the grant, the number
of shares subject to the grant, the exercise price of the grant and the time
within which the grant must be accepted by the recipient. The maximum amount of
time that a recipient may have to accept the grant is 30 days. The purchase
price of stock acquired pursuant to a Stock Purchase Right shall not be less
than 50% of the fair market value of the Company's Class A Common Stock at the
time of grant.
Unless the Special Compensation Committee determines otherwise, each grant
of a Stock Purchase Right shall include a repurchase option. The repurchase
option shall give the Company the right to repurchase the shares issued pursuant
to the Stock Purchase Right and be exercisable upon the termination of the
recipient's employment with the Company for any reason, including death or
disability. The purchase price for shares repurchased by the Company shall be
the price paid to the Company by the recipient of the grant. The Special
Compensation Committee determines the term of the repurchase option.
11
<PAGE>
AMENDMENTS AND TERMINATION. The Board of Directors of the Company may
amend, alter, suspend or discontinue the Stock Option Plan at any time. However,
no such amendment, alteration, suspension or discontinuation shall impair the
material rights of any holder of an Option without such holder's consent. The
Company is required to obtain stockholder approval of any amendment to the Stock
Option Plan, if required under Rule 16b-3, Section 442 of the Code or any other
applicable law or regulation, including the rules of any established stock
exchange on which the Company's securities are traded.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option has no
immediate federal income tax consequences to the optionee or the Company. The
exercise of an incentive stock option while the optionee is an employee or
within three months after termination of employment generally has no immediate
tax consequences to the Company or the optionee. If the optionee is subject to
the alternative minimum tax, however, the exercise of an incentive stock option
would result in an increase in the optionee's alternative minimum taxable income
equal to the excess of the fair market value of the shares at the time of
exercise over the exercise price. If an optionee holds the shares acquired
pursuant to the exercise of an incentive stock option for the required holding
period, the optionee generally recognizes long-term capital gain or loss upon a
subsequent sale of the shares in the amount of the difference between the amount
realized upon the sale and the exercise price of the shares. In such a case, the
Company is not entitled to a deduction in connection with the grant or exercise
of the incentive stock option or the sale of shares acquired pursuant to such
exercise. If, however, an optionee exercises an incentive stock option more than
three months after termination of employment or disposes of the shares prior to
the expiration of the required holding period, the optionee generally recognizes
ordinary income equal to the excess of the fair market value of the shares on
the date of exercise, the excess generally would be treated as long-term or
short-term capital gain. The required holding period is the longer of two years
from the date of the option was granted and one year after the date of issuance
of the shares upon the exercise of the option.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option has
no immediate federal income tax consequences to the optionee or the Company.
Upon the exercise of a non-qualified stock option, the optionee recognizes
ordinary income (subject to wage withholding and employment taxes) in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price, and the Company is entitled to a corresponding
deduction if the compensation constitutes an ordinary and necessary business
expense. The optionee's tax basis in the shares is the exercise price plus the
amount of ordinary income recognized by the optionee, and the optionee's holding
period will commence on the date the shares are received. Upon a subsequent sale
of the shares, any difference between the optionee's tax basis in the shares and
the amount realized on the sale generally is treated as long-term or short-term
capital gain or loss.
OPTION GRANTS
The following table sets forth, as of the Record Date, the total number of
unexercised options granted under the Option Plan to the Company's Named
Executive Officers (as hereinafter defined), all current
12
<PAGE>
executive officers as a group, all current directors who are not executive
officers as a group and all employees, including all current officers who are
not executive officers, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OR GROUP AND SUBJECT TO AVERAGE PER SHARE
NUMBER IN GROUP OPTIONS GRANTED EXERCISE PRICE
- ------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Darwin Deason..................................................... -- --
Jeffrey A. Rich................................................... 225,118 $ 25.03
Thomas G. Connor, Jr.............................................. 50,000 $ 32.95
Henry G. Hortenstine.............................................. 133,503 $ 23.28
David W. Black.................................................... 22,000 $ 20.45
All current executive officers as a group (six persons)........... 490,628 $ 25.67
All current directors who are not executive officers (three
persons)........................................................ 35,000 $ 19.50
All current employees as a group (49 persons)..................... 456,778 $ 34.04
</TABLE>
Over the term of the Stock Option Plan, up to the Record Date, a total of
2,118,165 options had been granted and options for a total of 84,492 shares had
been canceled.
Options outstanding under the Stock Option Plan have expiration dates
ranging from July 1999 to June 2006.
All of the 200,000 shares subject to options that have been granted under
the Stock Option Plan subject to stockholder approval have been granted to
non-executive officers at an exercise price of $46.25 per share. Future grants
are discretionary and future exercise prices are unknown, because they will
generally be based on fair market value on the date of grant.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE
COMPANY'S 1988 EMPLOYEE STOCK OPTION PLAN.
PROPOSAL 4
APPROVAL OF
THE 1995 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION
At the Annual Meeting, the Company's stockholders will be asked to consider
and vote upon the Company's 1995 Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan was adopted by the Company's Board of Directors on
December 14, 1995 subject to stockholder approval. The Purchase Plan provides
for the purchase of an aggregate of up to 500,000 shares of Class A Common Stock
by certain employees, as described below. The Company believes that the Purchase
Plan is necessary to attract and retain the services of such persons who promote
the interests of the Company and its stockholders by aligning employees'
interests with those of stockholders by facilitating and encouraging the
purchase of shares.
A copy of the Purchase Plan is attached as Appendix 2 hereto and is
incorporated herein by reference. The following description of the Purchase Plan
is a summary of the major provisions and does not purport to describe the
details of the Purchase Plan.
DESCRIPTION OF THE PURCHASE PLAN
SHARES SUBJECT TO THE PLAN. An aggregate of up to 500,000 shares of Class A
Common Stock is authorized for issuance under the Purchase Plan, subject to
adjustment from time to time for stock dividends and certain other changes in
capitalization as provided in the Purchase Plan. The Class A Common Stock issued
under the Purchase Plan may be either authorized but unissued shares or shares
now held or subsequently acquired by the Company as treasury shares.
13
<PAGE>
ADMINISTRATION. The Purchase Plan is administered by the Compensation
Committee or by another committee or committees appointed by the Board of
Directors (the "Plan Administrator"). The Plan Administrator is authorized to
administer and interpret the Purchase Plan and to make such rules and
regulations as it deems necessary to administer the Purchase Plan, so long as
such interpretation, administration or application with respect to purchases
under the Purchase Plan corresponds to the requirements of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
ELIGIBILITY. The Purchase Plan is an employee benefit program that enables
qualified employees to purchase shares of Class A Common Stock through payroll
deductions without incurring broker commissions. To participate, an individual
employee must (i) have worked for the Company or certain of its subsidiaries for
at least one year, (ii) be employed in a position with regular hours of 20 or
more per week, and (iii) be employed for at least five months in any calendar
year. An employee is not eligible to continue participation in the Purchase Plan
in the event his or her employment is voluntarily or involuntarily terminated,
or if such employee owns or will own, as a result of such participation, shares
possessing 5% or more of the total combined voting power or value of all classes
of stock of the Company or any related corporation. As of the Record Date,
approximately 2,520 of the Company's employees were eligible to participate in
the Purchase Plan, including all of the Company's current executive officers
other than Darwin Deason. Non-employee directors of the Company are not eligible
to participate in the Purchase Plan.
STOCK PURCHASES. The Purchase Plan is divided into offering periods that
have a duration of three months. During these offering periods, participating
employees accumulate funds in an account used to buy Class A Common Stock
through payroll deductions at a rate of not less than 1% nor more than 15% of
such participant's base pay plus bonus and commission, if any, during each
payroll period within an offering period.
At the end of each offering period, the market price is determined and the
participating employee's accumulated funds are used to purchase the appropriate
number of whole shares of Class A Common Stock. No participant may purchase more
than $25,000 fair market value of Class A Common Stock for any calendar year
under the Purchase Plan. The purchase price per share of Class A Common Stock
under the Purchase Plan will be as established by the Plan Administrator, but
may not be less than the lower of 85% of the per share fair market value of the
Class A Common Stock on either the first day of the offering period or the last
day of the period. The Purchase Plan will initially be implemented with a
purchase price equal to 85% of the fair market value of the Class A Common Stock
on the last day of the offering period. For purposes of the Purchase Plan, "fair
market value" means the closing price of the Class A Common Stock on the Nasdaq
National Market System for a single trading day. The closing price of a share of
Class A Common Stock on the Record Date was 60 1/4 as reported in THE WALL
STREET JOURNAL.
Participants have no right to acquire shares of the Company under the
Purchase Plan after termination of their employment. Upon termination of a
participant's employment for any reason on or prior to the last business day of
an offering period, the balance in such participant's account will be paid to
the participant or, in the event of the death of the participant, to the
participant's spouse, or, if there is no surviving spouse, to his or her estate.
Neither payroll deductions credited to a participant's account nor any rights
with regard to the purchase of shares under the Purchase Plan may be assigned,
transferred, pledged or otherwise disposed of in any way by the participant,
other than by will or the laws of descent and distribution.
AMENDMENTS AND TERMINATION. The Board of Directors has the power to amend,
suspend or terminate the Purchase Plan, provided that the Board may not amend
the Purchase Plan without stockholder approval if such approval is required by
Section 423 of the Code or Rule 16b-3. The Compensation Committee may also amend
the Purchase Plan so long as such amendment does not require stockholder
approval.
14
<PAGE>
TERM OF THE PLAN. The Purchase Plan shall continue in effect until December
31, 2005.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences to employees and the Company in connection with participation in
the Purchase Plan. The discussion is general in nature and does not address
issues relating to the income tax circumstances of any individual employee. The
discussion is based on federal income tax laws and regulations in effect on the
date hereof and is, therefore, subject to possible future changes in the law.
The discussion does not address the consequences of state, local or foreign tax
laws.
The Company intends that the Purchase Plan qualify as an "employee stock
purchase plan" under Section 423 of the Code. Under the Code, the Company is
deemed to grant participants an "option" on the first day of each offering
period to purchase as many shares of Class A Common Stock as the participant
will be able to purchase within the offering period. On the last day of each
offering period, the market price is determined and the participant is deemed to
have exercised the "option" and purchased the number of shares of Class A Common
Stock his or her accumulated payroll deductions will purchase at the market
price.
The required holding period for favorable tax treatment upon disposition of
Class A Common Stock acquired under the Purchase Plan is the later of (i) two
years after the deemed "option" is granted (the first day of an offering period)
and (ii) one year after the deemed "option" is exercised and the Class A Common
Stock is purchased (the last day of an offering period). When the Class A Common
Stock is disposed of after this period, the participant realizes ordinary income
to the extent of the lesser of (a) the amount by which the fair market value of
the Class A Common Stock at the time the "option" was granted exceeded the
"option price" and (b) the amount by which the fair market value of the Class A
Common Stock at the time of disposition exceeded the "option price." "Option
price" is determined as of the date of grant and, therefore, is equal to the
fair market value of the Class A Common Stock as of the first day of an offering
period less any discount established by the Plan Administrator (up to a maximum
of 15%). Thus, the maximum amount of gain taxable as ordinary income is the
amount of any discount measured as of the first day of an offering period. Any
further gain is taxed at capital gain rates. It the sale price is less than the
option price, there is no ordinary income, and the participant recognizes
long-term capital loss.
When a participant sells the Class A Common Stock before the expiration of
the required holding period, the participant recognizes ordinary income to the
extent of the difference between the price actually paid for the Class A Common
Stock and the fair market value of the Class A Common Stock at the date the
option was exercised (the last day of an offering period), regardless of the
price at which the Class A Common Stock is sold. If the sale price is less than
the fair market value of the Class A Common Stock at the date of exercise, then
the participant will also have a capital loss equal to such difference.
If a participant dies while owning Class A Common Stock acquired under the
Purchase Plan, ordinary income must be reported on his or her final income tax
return. This amount will be the same as if the Class A Common Stock had been
held for the requisite period as above discussed; that is, it will be the lesser
of (i) the amount by which the fair market value of the Class A Common Stock at
the time the "option" was granted exceeded the option price and (ii) the amount
by which the fair market value of the Class A Common Stock at the time of the
participant's death exceeded the option price.
Even though a participant who, after waiting the requisite holding period,
must treat part of his or her gain on a disposition of the Class A Common Stock
as ordinary income, the Company may not take a business deduction for such
amount. However, if a participant disposes of Class A Common Stock before the
end of the requisite holding period, the amount of income that the participant
must report as ordinary income qualifies as a Company business deduction for the
year of such disposition.
15
<PAGE>
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY'S 1995 EMPLOYEE
STOCK PURCHASE PLAN.
PROPOSAL 5
APPROVAL OF PERFORMANCE-BASED INCENTIVE
COMPENSATION FOR THE COMPANY'S EXECUTIVE OFFICERS
Recent changes in the Code limit the Company's tax deduction for expense in
connection with compensation of its chief executive officer and its four other
most highly-compensated executive officers for any fiscal year to the extent
that the remuneration of such person exceeds $1 million during such fiscal year,
excluding remuneration that qualifies as "performance-based compensation."
Section 162(m) of the Code provides that in order for remuneration to be treated
as qualified performance-based compensation, the material terms of the
performance goals must be disclosed to and approved by the stockholders of the
employer.
At the Annual Meeting, the stockholders will be asked to approve the terms
relating to incentive compensation to be paid to the Company's Executive
Officers. Executive Officer compensation for fiscal 1997 will consist of a base
salary, stock option plan, and bonus compensation and will be based on criteria
similar to criteria previously used for the Company's executive officers. See
"Executive Compensation and Other Information--Compensation Committee Report on
Executive Compensation." Executive Officers will be entitled to receive varying
ranges of up to 250% of their base salaries upon achievement of bonus
performance goals which inlcude the Company's achievement of four targeted
financial measures: consolidated revenues, consolidated earnings before
interest, taxes and depreciation, consolidated pre-tax earnings and consolidated
earnings per share. The bonus performance goals have been pre-established by the
Compensation Committee for all executive officers other than any executive
officer whose compensation may exceed $1 million, which other officer's goals
have been previously established by the Special Compensation Committee, which is
comprised solely of non-employee directors, and all of such goals have been
approved by the Board of Directors. The Company believes that the
incentive-related provisions provide performance incentives that are and will be
beneficial to the Company and its stockholders.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCENTIVE COMPENSATION
PROVISIONS FOR THE EXECUTIVE OFFICERS.
16
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
DIRECTOR'S COMPENSATION
Effective November 1994, each member of the Board of Directors of the
Company who is not employed by the Company receives compensation in the amount
of $3,000 for attendance at each Board meeting. Directors are reimbursed for
their travel expenses incurred in connection with the meetings. On November 30,
1994, the Company and each of Messrs. O'Neill and Rossi entered into consulting
agreements in which Messrs. O'Neill and Rossi agreed to provide, among other
things, certain corporate development services to the Company. Such agreements
are terminable by either party with 30 days notice. Pursuant to such agreements,
in exchange for such services, the Company has agreed to reimburse both Messrs.
O'Neill and Rossi for their out-of-pocket expenses. In addition, the Company
paid Mr. Rossi $5,000 per month through January 1996 for such services. The
Company granted Messrs. Rossi and O'Neill options to purchase 25,000 and 10,000
shares of Class A Common Stock, respectively. Such options vest ratably over
five years.
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth certain information regarding compensation
paid for all services rendered to the Company in all capacities during fiscal
years 1996, 1995 and 1994 by the Company's chief executive officer and the four
other most highly compensated executive officers of the Company whose total
annual salary and bonus exceeded $100,000, based on salary and bonuses earned
during fiscal year 1996 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -------------------------------------
------------------------------------------------ PAYOUTS
OTHER RESTRICTED -----------
ANNUAL STOCK OPTIONS/ LTIP
BONUS COMPENSATION AWARDS SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(1) ($)(2) (3) ($) (2)
- --------------------------------- --------- --------- --------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Darwin Deason.................... 1996 403,918 807,836 -- -- -- --
Chairman of the Board and 1995 403,918 776,473 -- -- -- --
Chief Executive Officer 1994 435,382 788,170 -- -- -- --
Jeffrey A. Rich.................. 1996 222,385 437,500 -- -- 100,000 --
President and Chief Operating 1995 155,322 149,291 -- -- 111,025 --
Officer 1994 160,480 155,549 -- -- -- --
Henry Hortenstine................ 1996 166,000 166,000 -- -- 60,000 --
Executive Vice President 1995 144,600 60,856 92,914(4) -- 51,985 --
1994 130,000 38,458 111,783(4) -- 21,518 --
Thomas G. Connor, Jr. ........... 1996 167,915 142,728 -- -- 50,000 --
Executive Vice President 1995 191,665 -- -- -- -- --
1994 197,197 -- -- -- -- --
David W. Black................... 1996 133,004 133,004 -- -- -- --
Executive Vice President and 1995 54,118 46,905 -- -- 22,000 --
General Counsel 1994 -- -- -- -- -- --
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION ($)
- --------------------------------- -----------------
<S> <C>
Darwin Deason.................... --
Chairman of the Board and --
Chief Executive Officer --
Jeffrey A. Rich.................. --
President and Chief Operating --
Officer --
Henry Hortenstine................ --
Executive Vice President --
--
Thomas G. Connor, Jr. ........... --
Executive Vice President --
--
David W. Black................... --
Executive Vice President and --
General Counsel --
</TABLE>
- ------------------------------
(1) None of the Named Executive Officers received personal benefits, securities
or property in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus during fiscal years 1996, 1995 and 1994.
(2) The Company did not grant any restricted stock awards or long-term incentive
plan payouts to the Named Executive Officers during fiscal years 1996, 1995
and 1994.
(3) The Company did not grant any stock appreciation rights ("SARS") during
fiscal years 1996, 1995 or 1994.
(4) Represents commissions received during the year.
17
<PAGE>
The following table sets forth the number of options granted during the
fiscal year ended June 30, 1996 to the Named Executive Officers to purchase
shares of Class A Common Stock and the potential realizable value of these
options.
OPTION GRANTS DURING FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO OR OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR (%) BASE PRICE ($) DATE 5% ($) 10% ($)
- ------------------------------ ------------- ---------------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason................. -- 0.0% -- -- -- --
Jeffrey A. Rich............... 100,000 17.1% 33.75 03/08/06 2,122,875 5,379,750
Henry Hortenstine............. 60,000 10.2% 33.75 03/08/06 1,273,725 3,227,850
T. G. Connor, Jr.............. 20,000 3.4% 31.75 11/21/05 399,415 1,012,190
30,000 5.1% 33.75 03/08/06 636,863 1,613,925
David W. Black................ -- 0.0% -- -- -- --
</TABLE>
- ------------------------
(1) The amounts in these columns are the result of calculations at the 5% and
10% rates set by the Commission and are not intended to forecast possible
future appreciation, if any, of the Company's stock price.
The following table provides information related to options exercised by the
Named Executive Officers during fiscal year 1996 and the number and value of
options held at fiscal year end. The Company does not have any SARS outstanding.
AGGREGATE OPTION/SAR EXERCISES IN FISCAL 1996
AND FISCAL YEAR END 1996 OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT SARS AT FISCAL
SHARES VALUE FISCAL YEAR END (#) YEAR END ($) (1)
ACQUIRED ON REALIZED ($) -------------------------- -------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- --------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason............... -- -- -- -- -- --
Jeffrey A. Rich............. -- -- 26,593 211,025 1,228,065 4,294,359
Henry Hortenstine........... -- -- 21,518 111,985 980,575 2,185,947
T. G. Connor, Jr............ -- -- -- 50,000 -- 702,500
David W. Black.............. -- -- -- 22,000 -- 584,100
</TABLE>
- ------------------------
(1) Represents the value realized upon exercise calculated as the number of
options exercised times the difference between the average of the high and
low stock trading price from the trading day immediately prior to the
exercise date and the exercise price.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has been responsible for administering the
Company's Stock Option Plan and approving compensation for the Company's senior
executives, including recommending to the Board of Directors policies and plans
concerning the salaries, bonuses and other compensation for all executive
officers. The objective of the Company's executive compensation program is to
attract and retain qualified, motivated executives and to closely align their
financial interests with both the short and long-term interests of the Company's
stockholders. The executive compensation program is intended to provide
18
<PAGE>
the Company's executive officers with overall levels of compensation that are
competitive within the information industry, as well as within a broader
spectrum of companies of size and complexity.
The three principal components of the Company's executive compensation
program are base salary, annual incentive bonus opportunities and stock options.
BASE SALARIES
Each executive officer's base salary is reviewed annually and is subject to
adjustment on the basis of individual, corporate and business unit performance,
as well as competitive and inflationary considerations.
INCENTIVE BONUS
Incentive bonus payments for executive officers other than the Chief
Executive Officer and Chief Operating Officer are made at the end of each fiscal
year based upon the achievement of consolidated financial criteria, business
unit financial criteria, and the attainment of individual goals, all of which
are established by the Chief Executive Officer and the Chief Operating Officer
of the Company subject to approval by the Compensation Committee of the Board of
Directors at the beginning of each fiscal year. Compensation for the Chief
Executive Officer and Chief Operating Officer of the Company consisted of a base
salary and bonus compensation. Bonus compensation was substantially dependent on
the achievement of four targeted financial measures: consolidated revenues,
consolidated earnings before interest, taxes and depreciation, consolidated
pre-tax earnings and consolidated earnings per share. During fiscal year 1996,
the Company achieved 100% of such measures. The Company's Chief Executive
Officer and Chief Operating Officer did not participate in the Committee's
decisions regarding their own compensation. For fiscal year 1996, executive
officers were eligible to receive maximum bonuses of between 100% and 200% of
salary provided certain financial goals were met.
STOCK OPTION PLAN
The Stock Option Plan has been administered by the Compensation Committee of
the Company's Board of Directors. Under its terms, the Stock Option Plan may be
administered by the Board of Directors of ACS or another body, if permitted by
Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"). The Compensation
Committee has determined the individuals eligible to receive grants of options
under the Stock Option Plan, the type of option granted, the number of shares of
Class A Common Stock subject to a grant and the terms of the grant, including
exercise price, exercise date and any restrictions on exercise. The Compensation
Committee also has been responsible for determining the advisability and terms
of any buyout of options previously granted, reductions in the exercise prices
of previously granted options and the terms of any deferred grant of options
granted under the Stock Option Plan.
The Stock Option Plan also provides for the issuance of stock purchase
rights. When the Compensation Committee determines to grant a stock purchase
right, it advises the recipient of the grant of the terms and conditions of the
grant, including any restrictions on the grant, the number of shares subject to
the grant, the exercise price of the grant and the time within which the grant
must be accepted by the recipient. The maximum amount of time that a recipient
may have to accept the grant is 30 days. The purchase price of stock acquired
pursuant to a stock purchase right shall not be less than 50% of the fair market
value of the Company's Class A Common Stock at the time of grant. There have
been no stock purchase rights granted through June 30, 1996.
Submitted by the Compensation
Committee
of the Board of Directors:
DARWIN DEASON
GERALD J. FORD
19
<PAGE>
COMPARISON OF TOTAL CUMULATIVE RETURN FROM SEPTEMBER 26, 1994
(THE "IPO DATE") THROUGH JUNE 30, 1996 OF
AFFILIATED COMPUTER SERVICES, INC. CLASS A COMMON STOCK,
THE NASDAQ COMPUTER AND DATA PROCESSING INDEX,
AND THE NASDAQ MARKET INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ACS NASDAQ INDUSTRY NASDAQ MARKET
<S> <C> <C> <C>
9/26/1994 100.0 100.0 100.0
6/30/1995 190.6 147.5 123.1
6/30/1996 293.8 194.6 161.0
</TABLE>
<TABLE>
<CAPTION>
09/26/94 06/30/95 06/30/96
----------- ----------- -----------
<S> <C> <C> <C>
ACS............................................................. 100 190.6 293.8
NASDAQ Industry................................................. 100 147.5 194.6
NASDAQ Market................................................... 100 123.1 161.0
</TABLE>
Note: The graph above compares the total cumulative return of ACS Class A
Common Stock from the IPO Date through June 30, 1996 with the NASDAQ Computer &
Data Processing Index and the overall NASDAQ Market Index.
Assumes $100 invested on the IPO date in Affiliated Computer Services, Inc.
Class A Common Stock, the NASDAQ Computer & Data Processing Index and the NASDAQ
Market Index, including reinvestment of dividends.
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE
GRAPH WILL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH OR
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT
THE COMPANY SPECIFICALLY INCORPORATES SUCH REPORT OR GRAPH BY REFERENCE.
CERTAIN TRANSACTIONS
In connection with the reorganization of the Company on June 30, 1994, the
Company and Precept entered into a reciprocal services agreement pursuant to
which Precept would sell business forms and supplies, and provide courier and
certain other administrative services to the Company, and the Company
20
<PAGE>
would provide office space and certain administrative services to Precept. Mr.
Deason is a director and holds voting control of Precept. The prices for all
services, forms and supplies provided by Precept to the Company under such
agreement must be no less favorable than could be obtained from an independent
third party and are subject to review from time to time by the Independent
Directors Committee of the Company. The prices for all services provided by the
Company to Precept will be at no less than the Company's direct cost. The costs
incurred by the Company for services provided by Precept covered by such
reciprocal services agreement, which are believed to approximate fair market
value, were approximately $6.1 million for fiscal year 1996. Precept's payments
to ACS under the reciprocal services agreement were approximately $0.4 million
for fiscal year 1996. In addition, in fiscal 1996, one of the Company's
buildings adjacent to its headquarters was renovated by Precept Builders, Inc.,
an affiliate of the Company and Precept (and controlled by Mr. Deason). The
renovations were made pursuant to a written agreement for a cost of
approximately $3.9 million. The transaction was approved by the Company's Board
of Directors, which included the members of the Independent Directors Committee,
and the transaction was conducted on terms believed to be no less favorable than
could be obtained from independent third parties.
Effective April 1996, the Company sold all of the outstanding capital stock
of ACS Merchant Services, Inc. ("Merchant Services"), a wholly owned subsidiary
formed as a start-up operation of the EFT business line, to Thomas M. Rouse, a
former executive officer and director of the Company, for a promissory note in
the principal amount of $500,000. The promissory note bears interest at the
prime lending rate of Wells Fargo Bank, N.A. Amortization of principal begins in
1999. There was no gain or loss recognized on the sale. Simultaneously with the
sale, the Company contributed an additional $1,500,000 and the unpaid balance of
an intercompany note due from Merchant Services of approximately $712,000 in
exchange for 1,000 shares of 5% cumulative redeemable convertible preferred
stock of Merchant Services. This preferred stock is convertible after five years
into approximately 55% of the common stock of Merchant Services on a fully
diluted basis with a face value of $2,212,000.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP served as the Company's accountants for fiscal year
ended June 30, 1996. The Board of Directors has not yet selected independent
public accountants for the 1997 fiscal year. The Board of Directors anticipates
making this selection after receiving the recommendation of the Audit Committee,
which is scheduled to meet in October 1996.
Representatives of Price Waterhouse 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 will be available to respond to appropriate questions.
STOCKHOLDERS PROPOSALS FOR 1997 ANNUAL MEETING
If any stockholder of the Company intends to present a proposal for
consideration at the 1997 Annual Meeting of Stockholders and desires to have
such proposal in the proxy statement and form of proxy distributed by the Board
of Directors with respect to such meeting, such proposal must be received at the
Company's principal executive offices, 2828 North Haskell Avenue, Dallas, Texas
75204, Attention: David W. Black, Corporate Secretary, not later than June 30,
1997.
By Order of the Board of Directors
DAVID W. BLACK
SECRETARY
September 30, 1996
21
<PAGE>
APPENDIX 1
AFFILIATED COMPUTER SERVICES, INC.
1988 STOCK OPTION PLAN
(AS AMENDED NOVEMBER 8, 1994)
1. PURPOSES OF THE PLAN. The purposes of this Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights may also be granted under the
Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "AFFILIATE" means a company that is a member of a chain of
corporations that includes the Company and that is connected through stock
ownership with a common Parent but only if (i) the common Parent owns
directly at least 50' of the value of the stock in at least one of the other
corporations and (ii) at least 50' of the stock of each corporation is owned
directly by one or more of the other corporations.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(f) "COMMON STOCK" means the Class A Common Stock of the Company;
provided, however, that if the Company's certificate of incorporation is
amended after the date hereof to reclassify the shares of the Company's
capital stock, "Common Stock" shall mean the Class A Common Stock of the
Company.
(g) "COMPANY" means Affiliated Computer Services, Inc., a Delaware
corporation.
(h) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services; provided that the term Consultant shall not
include directors who are paid only a director's fee by the Company.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Board, provided that such leave is
for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or
(iv) in the case of transfers between locations of the Company or between
the Company, its Subsidiaries or its successor.
(j) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
- ------------------------
The proposed amendments to the 1988 Stock Option Plan are set forth in capital
letters.
<PAGE>
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange for the last market
trading day prior to the time of determination) as reported in the Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator based upon the book value of the Company (or such other
valuation method as is deemed appropriate by the Administrator).
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422A of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "OPTION" means a stock option granted pursuant to the Plan.
(p) "OPTIONED STOCK" means the Common Stock subject to an Option.
(q) "OPTIONEE" means an Employee or Consultant who receives an Option.
(r) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 425(e) of the Code.
(s) "PLAN" means this 1988 Stock Plan, as amended.
(t) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 12 of the Plan.
(u) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(v) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 425(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. The maximum aggregate number of shares which
may be optioned and sold under the Plan is 3,000,000 shares of Common Stock,
subject to adjustment pursuant to Section 14 of the Plan. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With
respect to grants of Options or Stock Purchase & Rights to Employees who
are also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 promulgated under the Exchange Act or any
successor thereto ("Rule 16b-3")
2
<PAGE>
with respect to a plan intended to qualify thereunder as a discretionary
plan, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. NOTWITHSTANDING THE FOREGOING, WITH RESPECT TO ANY "COVERED
EMPLOYEE" (AS DEFINED IN CODE SECTION 162(m)), THE PLAN SHALL BE
ADMINISTERED BY A COMMITTEE OF THE BOARD COMPRISED SOLELY OF TWO OR MORE
OUTSIDE DIRECTORS. From time to time the Board may increase the size of
the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor,
fill vacancies, however caused, and remove all members of the Committee
and thereafter directly administer the Plan, all to the extent permitted
by Rule 16b-3 with respect to a plan intended to qualify thereunder as a
discretionary plan.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors
nor officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a
Committee designated by the Board, which Committee shall be constituted
in such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of Texas
corporate and securities laws and of the Code (the "Applicable Laws").
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(1) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder; provided, however, that no Optionee
shall be granted Options for more than 100,000 shares of Common Stock in
any one fiscal year of the Company, subject to adjustment as provided in
Section 14 of this Plan;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Option or
3
<PAGE>
other award and/or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator shall determine, in its
sole discretion);
(vii) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining the
amount, if any, of any deemed earnings on any deferred amount during any
deferral period);
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was granted.
ANY SUCH REDUCTION IN EXERCISE PRICE SHALL BE SUBJECT TO THE REQUIREMENTS
OF SECTION 8(a) BELOW AS IF A NEW OPTION WERE GRANTED, AND SHALL BE
TREATED AS THE GRANTING OF ADDITIONAL OPTIONS FOR PURPOSES OF THE 100,000
SHARE LIMITATION SET FORTH IN SECTION 4(b)(iv) ABOVE; and
(x) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time, with or
without cause.
6. TERM OF PLAN. The Plan shall continue in effect for a term of ten (10)
years from the original effective date unless sooner terminated under Section 16
of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement. In the
case of an Incentive Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Incentive Stock
4
<PAGE>
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option granted to any
person, the per Share exercise price shall be no less than 85% of the
Fair Market Value per Share on the date of grant. NOTWITHSTANDING THE
FOREGOING, IN THE CASE OF ANY NONSTATUTORY STOCK OPTION GRANTED TO ANY
"COVERED EMPLOYEE" (AS DEFINED IN CODE SECTION 16(m)(3)), THE PER SHARE
EXERCISE PRICE SHALL BE NO LESS THAN 100% OF THE FAIR MARKET VALUE PER
SHARE ON THE DATE OF GRANT.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall
be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (4) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised, (5) authorization
from the Company to retain from the total number of Shares as to which the
Option is exercised that number of Shares having a Fair Market Value on the
date of exercise equal to the exercise price for the total number of Shares
as to which the Option is exercised, (6) delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required
to pay the exercise price, (7) delivery of an irrevocable subscription
agreement for the Shares which irrevocably obligates the Optionee to take
and pay for the Shares not more than twelve months after the date of
delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment
for the issuance of Shares to the extent permitted under Applicable Laws. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE: RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the
5
<PAGE>
Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF EMPLOYMENT. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee with
the Company, such Optionee may, subject to Section 9(g) below, exercise
vested Options that are not Incentive Stock Options to the extent set out in
Optionee's Notice of Grant and Stock Option Agreement. In the case of an
Incentive Stock Option, such Option may be exercised only within sixty (60)
days (or such other period of time as is determined by the Administrator,
with such determination being made at the time of grant of the Option and
not exceeding ninety (90) days) after the date of such termination (but in
no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), and only to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise an Incentive Stock Option at the date
of such termination, or if Optionee does not exercise such Option to the
extent so entitled under the Option Agreement within the time specified
herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
9(b) above, in the case of an Incentive Stock Option, in the event of
termination of an Optionee's Continuous Status as an Employee as a result of
his total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise an Incentive
Stock Option to the extent otherwise entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise
an Incentive Stock Option at the date of termination, or if Optionee does
not exercise such Incentive Stock Option to the extent so entitled within
the time specified herein, the Incentive Stock Option shall terminate.
However, the twelve (12) month limitation set out in this paragraph shall
not apply to limit the exercise period set out in the Stock Option Agreement
in the case of any Nonstatutory Stock Option.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, according to its terms, by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Option was vested at the date of
death. To the extent the Option was unvested at the date of death, the
Option shall terminate.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
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(g) TERMINATION FOR CAUSE. Notwithstanding subsections (b), (c) and
(d) of this Section 9, any Optionee whose consulting relationship or
Continuous Status as an Employee is terminated by the Company for Cause
shall forfeit all Options granted under this Plan, whether or not vested.
For purposes of this Plan, an Optionee shall be deemed to have been
terminated for Cause if the Optionee fail to satisfactorily perform his or
her assigned duties or commits an act of gross negligence or willful
misconduct, including, but not limited to, a dereliction of duty or the
committing of and conviction for a crime involving breach of fiduciary duty
to an employer, a felony or a crime involving moral turpitude.
10. VESTING OF OPTIONS IN CERTAIN EVENTS.
(a) If the Company undergoes a Change of Control, then all of the
outstanding Options held by any Optionee, whether or not such Options are
vested at such time, shall become vested and exercisable, effective the day
immediately prior to such Change of Control. For purposes of the preceding
sentence, a "Change of Control" shall have occurred if the Company is
merged, consolidated, or reorganized into or with another person, entity, or
group of entities under common control or if a majority of the outstanding
capital stock or all or substantially all of the assets of the Company are
sold to any other person, entity, or group of entities under common control
and as a result of such merger, consolidation, reorganization, or sale of
capital stock or assets, more than 51% of the combined voting power of the
then outstanding voting securities of the surviving person or entity
immediately after such transaction are held in the aggregate by a person,
entity or group of entities under common control who beneficially owned less
than 51% of the combined voting power of the Company prior to such
transaction.
(b) Notwithstanding the terms of any Option granted on or prior to
September 25, 1994, all Options granted on or prior to September 25, 1994
shall become vested and exercisable on October 3, 1994.
(c) NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THE TOTAL PAYMENTS
IN THE NATURE OF COMPENSATION TO AN OPTIONEE THAT ARE CONTINGENT ON A CHANGE
OF CONTROL (WITHIN THE MEANING OF CODE SECTION 280G(b)(2) (INCLUDING AMOUNTS
HEREUNDER AND UNDER ANY OTHER PLAN, AGREEMENT OR ARRANGEMENT) EXCEED 299% OF
THE OPTIONEE'S BASE AMOUNT (AS DEFINED IN CODE SECTION 280G(b)(3)). SUCH
PAYMENTS SHALL BE LIMITED SO THAT IN NO EVENT SHALL ANY "PARACHUTE PAYMENTS"
SUBJECT TO CODE SECTION 280G(a) OR CODE SECTION 4999 OCCUR. IF NECESSARY TO
SATISFY THE FOREGOING LIMITATIONS, THE NUMBER OF SHARES SUBJECT TO
ACCELERATED VESTING AND EXERCISABILITY UNDER THIS SECTION 10 SHALL BE
REDUCED TO THE EXTENT NECESSARY TO AVOID ANY PARACHUTE PAYMENTS, AS
DETERMINED BY THE COMMITTEE IN GOOD FAITH; IN NO EVENT SHALL ANY SHARES THAT
WERE EXERCISABLE AND VESTED IRRESPECTIVE OF A CHANGE IN CONTROL BE ADVERSELY
AFFECTED BY THE FOREGOING LIMITATION.
11. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
Will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall
be entitled to purchase, the price to be paid (which price shall not be less
than 50% of the Fair Market Value of the Shares as of the date of the
offer), and the time
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within which such person must accept such offer, which shall in no event
exceed thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted
by execution of a Restricted Stock purchase agreement in the form determined
by the Administrator. Shares purchased pursuant to the grant of a Stock
Purchase Right shall be referred to herein as "Restricted Stock".
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as
the Committee may determine.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
In addition, the provisions of Restricted Stock purchase agreements need not
be the same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder when his or her purchase is entered upon the records of the duly
authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 14 of the
Plan.
13. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, or the Shares to be issued in connection with the Stock Purchase Right,
if any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of the
Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall
receive the full number of Shares with respect to which the Option or Stock
Purchase Right is exercised but such Optionee shall be unconditionally
obligated to tender back to the Company the proper number of Shares on the
Tax Date.
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14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action. In
the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event that such successor corporation does not agree to assume the Option
or to substitute an equivalent option, the Board may, in lieu of such assumption
or substitution, provide for the Optionee to have the right to exercise the
Option as to all of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of such assumption or substitution in the event of a merger,
the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period.
15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the material rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain shareholder approval
of any Plan amendment in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, as amended, the rules and regulations
promulgated thereunder, and the
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requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law. TO THE EXTENT REQUIRED UNDER CODE
SECTION 162(m)(4)(C), OPTIONS HEREUNDER WITH RESPECT TO ANY "COVERED EMPLOYEE"
ARE SUBJECT TO STOCKHOLDER APPROVAL OF THE PLAN.
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
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APPENDIX 2
1995 EMPLOYEE STOCK PURCHASE PLAN
FOR
AFFILIATED COMPUTER SERVICES, INC.
Section 1. PURPOSE. This 1995 Employee Stock Purchase Plan of Affiliated
Computer Services, Inc. is intended to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Stock of the Company
through accumulated payroll deductions under an "Employee Stock Purchase Plan"
as defined in Section 423 of the Code, and all provisions hereof will be
construed in accordance with those objectives.
Section 2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "ACCOUNT" shall mean the account established for each Participant to
record the amounts withheld from his or her Compensation during the Offering
Period of reference.
(b) "ACCOUNT MANAGER" shall mean the third party broker selected by the
Administrator in its sole discretion.
(c) "ADMINISTRATOR" shall mean the Board or a committee appointed by the
Board.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMPANY" shall mean Affiliated Computer Services, Inc., a Delaware
corporation.
(g) "COMPENSATION" shall mean the actual amounts paid to the Participant
of reference by his Employer during the Offering Period of reference.
(h) "CONSIDERED COMPENSATION" shall be determined with respect to each
calendar year, and shall mean (i) in the case of each salaried Participant,
such Participant's annualized basic rate of salary plus bonus and
commissions, if any, at the beginning of the calendar year of reference or,
if an employee is not eligible to become a Participant until a subsequent
Offering Period during the fiscal year, at the beginning of the Offering
Period for which such employee becomes an Eligible Employee; and (ii) in the
case of each hourly Participant, the amount of such Participant's total
compensation paid with respect to services rendered during the last two
months of the Offering Period immediately preceding the Enrollment Date of
reference, annualized by multiplying the two month total by 6.
(i) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries that have
payroll systems that are consolidated with the Company's payroll system and
that have been designated by the Board from time to time in its sole
discretion as eligible to adopt this Plan for the benefit of their
Employees.
(j) "DIRECTED WITHHOLDING" shall mean the amount that an Eligible
Employee directs his or her Employer to withhold from the Participant's
Compensation on each Payroll Date during the calendar year of reference;
provided, however, that the aggregate amount of Directed Withholding for the
calendar year of reference may not exceed the lesser of (x) fifteen percent
(15%) of such Participant's Considered Compensation for such calendar year,
and (y) Twenty-one Thousand Two Hundred and Fifty Dollars ($21,250).
(k) "DIRECTION TO WITHHOLD" shall mean the written notice to the
Administrator, in the form of Exhibit A attached hereto, which directs an
Eligible Employee's Employer to commence to deduct the Directed Withholding
from his Compensation on each Payroll Date during the Offering Period of
reference.
(l) "ELECTION TO RESCIND" shall mean the written notice to the
Administrator, in the form of Exhibit B attached, which directs a
Participant's Employer to discontinue deductions of Directed Withholding,
and to refund the entire amount credited to such Participant's Account.
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(m) "ELIGIBLE EMPLOYEE" shall mean each Employee (i) who is employed for
at least one year preceding the Offering Period of reference, (ii) who
continues to be employed as an Employee on the following Enrollment Date,
and (iii) in any case, on the Enrollment Date of reference owns Stock
(within the meaning of Section 423(b)(3) of the Code) possessing less than
five percent (5%) of the total combined voting power or value of all classes
of stock of the Company or of any Subsidiary and, without limiting the
generality of the foregoing, in computing the amount of such Stock owned by
an Employee, there shall be included the amount of Stock owned directly, the
Stock subject to a Purchase Right, the Stock that with respect to which the
Employee has an option to acquire, and the Stock owned by any other person
whose stock is attributed to such Employee pursuant to Section 424(d) of the
Code.
(n) "EMPLOYEE" shall mean any person, including an officer and director
who is also an Employee, who, at the time of reference is customarily
employed for at least twenty (20) hours per week and for more than five (5)
months in the calendar year by the Employer.
(o) "EMPLOYER" shall mean, collectively, the Company and each Designated
Subsidiary.
(p) "ENROLLMENT DATE" shall mean the first business day of each of the
Company's fiscal quarters.
(q) "FAIR MARKET VALUE" of a Share on the Enrollment Date or on the
Purchase Date shall be the closing price of Stock on such date, which shall
be (i) if the Stock is listed or admitted for trading on any United States
national securities exchange, the last reported sale price of Stock on such
exchange as reported in any newspaper of general circulation, (ii) if the
Stock is quoted on NASDAQ or any similar system of automated dissemination
of quotations of securities prices in common use, the mean between the
closing high bid and low asked quotations for such day of the Stock on such
system or (iii) if neither clause (i) nor (ii) is applicable, a value
determined by any fair and reasonable means prescribed by the Board.
(r) "OFFERING PERIOD" shall mean the period beginning on the first day
of each fiscal quarter and ending on the last day of such fiscal quarter;
provided, that the initial Offering Period hereunder shall begin on December
18, 1995 and shall end on December 31, 1995.
(s) "PARTICIPANT" shall mean each Eligible Employee who is having an
amount withheld from his Compensation under Section 4 at the time of
reference.
(t) "PAYROLL DATE" shall mean each date on which a Participant is paid
his or her salary, wage, bonus or commission, but not including tips.
(u) "PLAN" shall mean this Affiliated Computer Services, Inc. 1995
Employee Stock Purchase Plan.
(v) "PURCHASE DATE" shall mean the last business day of each of the
Company's fiscal quarters.
(w) "PURCHASE PRICE" shall mean, with respect to open market purchases,
85% of the Fair Market Value of the Shares on the Purchase Date, and with
respect to issuance of treasury shares, the lesser of (i) 85% of the Fair
Market Value of the Shares on the Enrollment Date of reference, or (ii) 85%
of the Fair Market Value of the Shares on the Purchase Date of reference,
but never less than the par value of a Share with respect to issuance of
treasury shares.
(x) "PURCHASE RIGHT" shall mean the Participant's right to acquire the
number of Shares that may be purchased in accordance with Section 3(b), as
limited by Sections 3(c) and 9.
(y) "SHARES" shall mean the shares of Stock to be purchased in open
market transactions pursuant to the Plan or that are reserved for issuance
under this Plan.
(z) "STOCK" shall mean the Class A Common Stock, $0.01 par value per
share, of the Company.
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(a) "SUBSIDIARY" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at the
time of reference, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
Section 3. SHARES SUBJECT TO PURCHASE.
(a) Subject to adjustments provided in Section 16 hereof the maximum number
of shares of Stock that may be purchased by and for Participants shall not
exceed Five Hundred Thousand (500,000) Shares. Shares to be purchased pursuant
to the Plan will be purchased in open market transactions by the Account
Manager. The Account Manager will maintain a separate account for each
Participant and will distribute Shares from such accounts to Participants in
accordance with the terms set forth in Section 8 below. The Shares subject to
the Plan may also consist of previously issued Shares reacquired and held by the
Company, or any Subsidiary, and such number of Shares shall be and hereby is
reserved for sale for such purpose. Any of such Shares that are reserved for
sale that may remain unsold at the termination of the Plan shall cease to be
reserved for the purpose of the Plan. Should any Shares subject to Purchase
Rights on the Enrollment Date of an Offering Period fail to be purchased on the
Purchase Date for such Offering Period, such Shares may again be made available
for purchase with respect to a subsequent Offering Period.
(b) Not less than 15 days prior to each calendar year, the Administrator
shall determine the maximum number of Shares (if any) that will be available for
purchase for each Offering Period during such fiscal year. Each Participant will
have a Purchase Right to purchase the number of full Shares equal to the
quotient of (i) the amount in the Participant's Account on the Purchase Date,
and (ii) the Purchase Price of the Shares for the Offering Period, all subject
to the maximum amounts, and the adjustments, if any, in Section 9.
(c) In the event that as of the Enrollment Date of reference the quotient of
(i) the aggregate Directed Withholdings of all Participants for the Offering
Period, divided by (ii) the Purchase Price of a Share on such Enrollment Date,
exceeds the number of Shares designated by the Administrator in the first
sentence of Section 3(b) by a percentage (not less than 100%) specified by the
Administrator at the time it determines the number of Shares under Section 3(b)
above, the Administrator will take reasonable steps to reduce, as nearly as
possible, each Participant's Directed Withholding to an amount equal to the
product of (x) his Directed Withholding, and (y) a fraction, the numerator of
which is the product of the percentage specified by the Administrator in (ii)
multiplied by the number of Shares designated by the Administrator in the first
sentence of Section 3(b), and the denominator of which is the quotient of (i)
and (ii) above.
Section 4. PARTICIPATION AND DEDUCTION OF DIRECTED WITHHOLDING.
(a) During the 15 days ending on the Enrollment Date for the Offering Period
of reference (except for the initial Offering Period), each Eligible Employee
may become a Participant for such Offering Period by filing with the
Administrator a written Direction to Withhold setting forth the amount of such
Eligible Employee's Directed Withholding. An Eligible Employee who fails to
return a completed authorization form to the Administrator on or before the due
date shall be deemed to have elected not to participate in the Plan for the
Offering Period of reference. With respect to the initial Offering Period, each
Eligible Employees may become a Participant by presenting to the Administrator
by December 21, 1995 a check (payable to Administrator), which amount may not
exceed the lesser of (y) fifteen percent (15%) of such Participant's Considered
Compensation for such calendar year, and (y) Twenty-One Thousand Two Hundred and
Fifty Dollars ($21,250).
(b) All amounts deducted from a Participant's Compensation under this Plan
shall be credited to such Participant's Account, but shall remain the
unencumbered assets of the Employer.
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Section 5. WITHDRAWAL, OR TERMINATION OF EMPLOYMENT.
(a) A Participant may not increase or decrease the amount of his Directed
Withholding during an Offering Period; except, however, (i) a Participant may
rescind his Direction to Withhold in its entirety at any time prior to the
Purchase Date for the Offering Period of reference by filing a written Election
to Rescind with the Administrator no later than fifteen (15) days before the end
of the fiscal quarter of reference, (ii) a Participant will be deemed to have
rescinded his Direction to Withhold in its entirety in the event that his
Compensation payable on any Payroll Date is insufficient to fund the Directed
Withholding for such Payroll Date and such Participant fails to furnish the
Administrator with personal funds in an amount sufficient to complete the
Directed Withholding for such Payroll Date on or before the next Payroll Date,
and (iii) a Participant will be deemed to have rescinded his Direction to
Withhold in its entirety in the event of his termination of employment by an
Employer prior to the Purchase Date for the Offering Period of reference.
(b) If either 5(a)(i), (ii) or (iii) occurs with respect to a Participant
before the Purchase Date of reference, the entire amount credited to such
Participant's Account will be paid to such Participant in a lump sum, in cash
without interest, as soon as reasonably possible following such occurrence.
(c) The occurrence of an event described in 5(a)(i), (ii) or (iii) with
respect to a Participant during an Offering Period shall not limit such
Participant's right to file a Direction to Withhold with respect to any later
Offering Period provided that at such time Participant is an Eligible Employee,
and provided further that a Participant may withdraw and subsequently re-enroll
in the Plan only one time per calendar year.
Section 6. EXERCISE OF PURCHASE RIGHT.
(a) In the case of open market purchases, on each Purchase Date, the Account
Manager shall use the funds available in the Participant's Account for open
market purchases of Shares and debit his Account in the amount of the Purchase
Price of the Shares subject to his Purchase Right. For purposes of the Plan,
fractional amounts of Stock shall be disregarded in determining the number of
Shares that the Account Manager purchases on behalf of each Participant.
(b) In the case of previously issued Shares reacquired and held by the
Company or any Subsidiary and reserved for sale for such purpose, the
Participant's Purchase Right will be exercised automatically on each Purchase
Date by debiting his Account with the Purchase Price of the Shares subject to
his Purchase Right.
Section 7. LIMITATION ON THE PURCHASE OF SHARES. The Administrator may, in
its sole discretion, request the Account Manager to suspend or delay purchases
of Stock on behalf of Participants in order to comply with applicable securities
laws. Any such suspension or delays shall not affect a Participant's right to
receive Stock pursuant to the Plan, but may affect the date of the purchase of
such Stock.
Section 8. DELIVERY. As promptly as practicable after each Purchase Date,
the Administrator shall arrange the delivery to each Participant of a
certificate representing the Shares purchased on such Purchase Date.
Section 9. MAXIMUM SHARES, AND REDUCTION IN SHARES, SUBJECT TO PURCHASE
RIGHTS.
(a) Notwithstanding any provision hereof to the contrary, the maximum number
of Shares subject to each Participant's Purchase Right at any time during any
calendar year shall be that number of Shares equal to the lesser of (i) that
number of Shares that has an aggregate Fair Market Value on the Enrollment Date
equal to $25,000, and (ii) that number of Shares that may be purchased with the
lesser of the maximum Directed Withholding amounts described in Section 2(j) at
the Purchase Price set forth in Section 2(w)(i), and (iii) the maximum number of
Shares (if any) that will not cause the Participant to exceed the 5% ownership
limitation of Section 2(m).
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(b) If, on a Purchase Date, the maximum number of Shares available for
purchase as determined under Section 3(b) is less than the number of Shares
subject to all then existing Purchase Rights (as limited by Section 9(a), if
applicable), the Administrator will reduce the number of Shares subject to each
Participant's Purchase Right to an amount equal to the product of (i) the
maximum Shares available for purchase as determined under Section 3(b), and (ii)
a fraction, the numerator of which is the amount in such Participant's Account
(after such reductions, if any, required by the proviso of Section 2(j)), and
the denominator of which is the amount in the Accounts of all Participants
(after such reductions, if any, required by the proviso of Section 2(j)).
Section 10. VOTING AND REGISTRATION.
(a) A Participant will have no interest or voting right in or other
privileges relating to Shares subject to a Purchase Right until delivery of the
certificate representing such Shares.
(b) Shares to be delivered to a Participant will be registered in the name
of the Participant.
Section 11. ADMINISTRATION. The Plan shall be administered by the
Administrator, which will be the Board or a committee appointed by the Board. If
a committee is appointed by the Board to act as Administrator, such committee
shall have all of the powers of the Board with respect to the Plan except for
those powers set forth in Section 17 hereof. The administration, interpretation
or application of the Plan by the Administrator shall be final, conclusive and
binding upon all Participants. Eligible Employees with respect to the Offering
Period of reference may not serve as a member of the Administrator with respect
to the Offering Period of reference or the succeeding Offering Period. In the
event that Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor provision ("Rule 16b-3") provides
specific requirements for the Administrators of plans of this type, the Plan
shall only be administered by such body and in such manner as shall comply with
the applicable requirements of Rule 16b-3. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable provisions of the Rule 16-3. To the extent any
provision of the Plan or action of the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Administrator.
Section 12. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who is to
receive any cash as a result of the Participant's death prior to a Purchase
Date, or to receive any Shares (and excess cash, if any) in the event of
Participant's death subsequent to a Purchase Date but before delivery of the
Shares (and excess cash, if any).
(b) Such designation of beneficiary may be changed by the Participant at any
time by written notice. In the event of the death of a Participant without a
designated surviving beneficiary, the Administrator shall deliver such cash
and/or Shares to the spouse of the Participant or, if there is no surviving
spouse, then to the executor or administrator of the estate of the Participant.
Section 13. TRANSFERABILITY. Neither payroll deductions credited to
Participant's Account, nor any rights with regard to the making or recision of a
Directed Withholding, nor the right to receive Shares (and excess cash, if any)
may be assigned, transferred, pledged or otherwise disposed of in any way (other
than as provided in Section 12) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect.
Section 14. USE OF FUNDS. All payroll deductions received or held by the
Employer under the Plan may be used by the Employer for any corporate purpose,
and the Employer shall not be obligated to segregate such payroll deductions.
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<PAGE>
Section 15. REPORTS AND WITHHOLDING.
(a) Statements will be given to all Participants within a reasonable time
following a Purchase Date, which statements will set forth the amounts of
payroll deductions, the per Share Purchase Price, the number of Shares purchased
(and an explanation of any reduction in the Shares subject to the Purchase
Right), and the remaining cash balance, if any.
(b) Each person who acquires Shares hereunder shall agree as a condition of
such acquisition that he shall notify his Employer in the event he disposes of
the Shares before the second anniversary of the Enrollment Date on which he
acquired the Purchase Right with respect to such Shares, and in the event of
such disposition while an employee of the Employer, and upon disposition of such
Shares prior to the second anniversary of the Enrollment Date, the Employer may
withhold from such Participant's current Compensation such amount as it
reasonably determines to be necessary to satisfy the Company's obligation to
withhold for federal and state taxes with respect to such events.
Section 16. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) If a stock dividend, stock split, spinoff, recapitalization, merger,
consolidation, exchange of shares or the like, occurs during an Offering Period,
as a result of which shares of any class shall be issued in respect of the
Shares subject to purchase with respect to such Offering Period, or such Shares
shall be changed into a different number of the same or another class or
classes, the number of Shares to which each Purchase Right shall be applicable
and the calculation of the Fair Market Value as of the Enrollment Date for such
Shares shall be appropriately adjusted by the Company in a manner that in its
sole discretion will keep this Plan qualified under Section 423 of the Code.
(b) In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will close, and the Purchase Date will occur, 15 days
immediately prior to the consummation of such proposed action, all Participants
will be notified in advance of such revised Purchase Date, and each Participant
will be entitled to complete all or any portion of the funding of such
Participant's Directed Withholding with personal funds. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, either (i) the event
will be deemed to constitute the dissolution or liquidation of the Company and
Participants shall have the rights set forth in the first sentence hereof, or
(ii) this Plan, and each Purchase Right shall be assumed or an equivalent plan
and right shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation.
Section 17. AMENDMENT OR TERMINATION. The Board may at any time and for
any reason terminate or amend the Plan, provided, however, that, if required by
Rule 16b-3, the Plan may not be amended without the consent (which may take the
form of a ratification within 12 months of the effective date) of stockholders
in accordance with Section 18 (as though such Amendment were the adoption of the
Plan) to either increase the number of Shares reserved for issuance under the
Plan, materially modify the requirements for eligibility to participate in the
Plan, or make such other change(s) that requires stockholder approval in order
to comply with Rule 16b-3 or any successor rule. Except as specifically provided
in the Plan, no such termination or amendment can reduce such rights as a
Participant would have if the effective date of the termination or amendment
were deemed to be a liquidation or dissolution of the Company, with the
resulting rights, duties and obligations set forth in Section 16(b).
Section 18. STOCKHOLDER APPROVAL. If required by Rule 16b-3 and other
applicable laws, the Company shall, within 12 months after the effective date of
the Plan, obtain the approval of a majority of the votes cast at a duly held
stockholders' meeting at which a quorum representing a majority of all
outstanding voting stock is, either in person, or by proxy, present and,
notwithstanding any other provision hereof to the contrary, in the absence of
such approval, this Plan and any Purchase Rights granted hereunder shall be null
and void.
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<PAGE>
Section 19. NOTICES. All notices or other communications shall be deemed
to have been duly given (i) if by a Participant to the Administrator, when
received in the required form at the corporate home office of the Company,
addressed to "Administrator, Employee Stock Purchase Plan," and (ii) if by the
Administrator to the Participant, when mailed to the last known address of
Participant shown on the Employer's records.
Section 20. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
unless such issuance and delivery shall comply with all applicable provisions of
law, domestic or foreign, and the requirements of any stock exchange upon which
the Shares may then be listed, including, in each case the rules and regulations
promulgated thereunder, and shall be further subject to the approval of counsel
for the Company with respect to such compliance, which may include a
representation and warranty from the Participant that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
Section 21. TERM OF PLAN. The Plan shall become effective on December 18,
1995 and shall terminate December 31, 2005, subject to Sections 17 and 18.
Section 22. MISCELLANEOUS.
(a) EXECUTION OF RECEIPTS AND RELEASES. Any payment or any issuance or
transfer of Shares to any person shall be in full satisfaction of all claims
hereunder against the Plan, and the Administrator may require such person, as a
condition precedent to receiving delivery of Shares, to execute a receipt and
release therefor in such form as it shall determine.
(b) PAYMENT OF EXPENSES. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Company.
(c) RECORDS. Records of the Company as to any matters relating to this
Plan will be conclusive on all persons.
(d) INTERPRETATIONS AND ADJUSTMENTS. To the extent permitted by law, an
interpretation of the Plan and a decision on any matter within the Board's or
Administrator's discretion made in good faith is binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known
and the person responsible shall make such adjustment on account thereof as he
considers equitable and practicable.
(e) NO RIGHTS IMPLIED. Nothing contained in this Plan or any modification
or amendment to the Plan or in the creation of any Account, or the execution of
any subscription agreement, or the issuance of any Shares under the Plan, shall
give any Employee any right to continue employment or any legal or equitable
right against the Company or any officer, director, or Employee of the Company,
except as expressly provided by the Plan.
(f) INFORMATION. The Company shall, upon request or as may be specifically
required hereunder, furnish or cause to be furnished, all of the information or
documentation that is necessary or required by the Board and/or Administrator to
perform its duties and functions under the Plan. The Company's records as to the
current information the Company furnishes to the Board and/or Administrator
shall be conclusive as to all persons.
(g) SEVERABILITY. In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions of the Plan, but shall be fully severable and
the Plan shall be construed and enforced as if the illegal or invalid provision
had never been included herein.
(h) HEADINGS. The titles and headings are included for convenience of
reference only and are not to be considered in construction of the provisions
hereof.
7
<PAGE>
(i) NO LIABILITY FOR GOOD FAITH DETERMINATIONS. Neither the members of the
Board nor the Administrator (nor their respective delegatees) shall be liable
for any act, omission, or determination taken or made in good faith with respect
to the Plan or any right to purchase Shares granted under it, and members of the
Board and the Administrator (and their delegatees) shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage, or expense (including attorneys' fees, the costs of settling any suit,
provided such settlement is approved by independent legal counsel selected by
the Company, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent permitted
by law and under any directors and officers liability or similar insurance
coverage that may from time to time be in effect.
(j) COMPANY ROLE. The Company has arranged this Plan for the reasons
described under Section 1. The Company's role is simply to encourage and
facilitate its employees' investment in the Company through the arrangement of
the payroll deduction. Each Participant will be solely responsible for
determining his or her continued participation in the Plan and whether that
person retains or sells the shares of Stock that he or she purchases under the
Plan.
IN WITNESS WHEREOF, the undersigned has executed this Plan as of this 18th
day of December, 1995 to fully evidence the Company's adoption thereof, to be
effective as provided in Section 21 hereof.
AFFILIATED COMPUTER SERVICES, INC.
By:
--------------------------------------
Name: Darwin Deason
Title: Chairman and Chief Executive
Officer
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P
R
O
X
Y
AFFILIATED COMPUTER SERVICES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MONDAY, OCTOBER 28, 1996
The undersigned stockholder of Affiliated Computer Services, Inc. hereby
appoints Darwin Deason and Jeffrey A. Rich, each with power to act without the
other and with full power of substitution and revocation, as attorneys and
proxies to represent and to vote, as designated on the reverse side, all shares
of Class A Common Stock of Affiliated Computer Services, Inc. owned by the
undersigned at the Annual Meeting of Stockholders to be held at City Place, 2711
North Haskell Avenue, Dallas, Texas 75204, on Monday, October 28, 1996, at 11:00
a.m. (local time), upon such business as may properly come before the meeting or
any adjournment thereof, including the matters set forth on the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SPECIFIC DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED (I) FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, (II) FOR
THE PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, (III)
FOR THE PROPOSAL TO AMEND THE 1988 STOCK OPTION PLAN, (IV) FOR THE PROPOSAL TO
ADOPT THE 1995 EMPLOYEE STOCK PURCHASE PLAN, (V) FOR THE PROPOSAL TO APPROVE THE
PERFORMANCE-BASED COMPENSATION FOR THE COMPANY'S CHIEF EXECUTIVE OFFICER, AND
(VI) IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY USING
THE ENCLOSED ENVELOPE..
<PAGE>
1. Election of Directors of the eight nominees listed below
FOR ALL NOMINEES WITHHOLD AUTHORITY to vote on one or more
nominees and struck out to the right
/ /
INSTRUCTION: To WITHHOLD authority to vote for any individual nominee, check the
WITHHOLD box and write the nominee's name on the space provided below.
Darwin Deason, Jeffrey A. Rich, Mark A. King, David W. Black, Henry Hortenstine,
Gerald J. Ford, Joseph P. O'Neill and Frank A. Rossi
- --------------------------------------------------------------------------------
2. Proposal to amend the Company's Restated Certificate of Incorporation to
increase the number of shares of the Company's Class A Common Stock and
Class B Common Stock authorized for issuance.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to amend the Company's 1988 Stock Option Plan to bring the Stock
Option Plan into compliance with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and to increase by 1,150,000 the
number of shares of Class A Common Stock reserved for issuance thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal to adopt the Company's 1995 Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
/ / / / / /
5. Proposal to approve the performance-based incentive compensation for the
Company's Executive Officers.
FOR AGAINST ABSTAIN
/ / / / / /
6. In their discretion on any other matter that may properly come before the
meeting or any adjournments thereof.
FOR AGAINST ABSTAIN
/ / / / / /
Dated: , 1996
-------------------------------------
- --------------------------------------------------
Signature
- --------------------------------------------------
(Signature if held jointly)
Please date, sign exactly as shown hereon and mail promptly this proxy in the
enclosed envelope. When there is more than one owner, each should sign. When
signing as an attorney, administrator, executor, guardian or trustee, please add
your title as such. If executed by a corporation, this proxy should be signed
by a duly authorized officer. If executed by a partnership, please sign in the
partnership name by an authorized person.
This proxy may be revoked prior to the exercise of the powers conferred by the
proxy.
