<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AFFILIATED COMPUTER SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[ACS LOGO]
AFFILIATED COMPUTER SERVICES, INC.
2828 North Haskell Avenue
Dallas, Texas 75204
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 26, 1999
To the Stockholders of
AFFILIATED COMPUTER SERVICES, INC.:
The Annual Meeting of Stockholders of Affiliated Computer Services, Inc.
will be held at Cityplace Conference Center, 2711 North Haskell Avenue, Dallas,
Texas 75204 on October 26, 1999 at 11:00 a.m. for the following purposes:
1. To elect four directors to hold office for a three year term and
until their respective successors shall have been duly elected and
qualified;
2. To approve an amendment to the ACS Restated Certificate of
Incorporation, as amended (the "Charter"), to authorize the current
Chairman of the Board to fill any future vacancies on the ACS Board of
Directors resulting from the removal of, or resignation by, a director or
directors from the Board, for the remaining portion of the term of the
former Director;
3. To consider and vote upon the performance-based incentive
compensation for the company's executive officers; and
4. 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 22,
1999 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. 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
/s/ DAVID W. BLACK
David W. Black
Secretary
September 28, 1999
<PAGE> 3
AFFILIATED COMPUTER SERVICES, INC.
2828 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 26, 1999
GENERAL INFORMATION
This proxy statement is being furnished to stockholders of record, as of
September 22, 1999, of Affiliated Computer Services, Inc. (a Delaware
corporation) ("ACS"), in connection with the solicitation by the Board of
Directors of ACS of proxies to be voted at the Annual Meeting of Stockholders to
be held at Cityplace Conference Center, 2711 North Haskell Avenue, Dallas, Texas
75204, on October 26, 1999, at 11:00 a.m., Dallas time, 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 28, 1999.
RECORD DATE AND VOTING
The Board of Directors of ACS has fixed the close of business on September
22, 1999 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, ACS had outstanding 46,010,178 shares of
Class A common stock, $0.01 par value, and 3,299,686 shares of Class B common
stock, $0.01 par value. A holder of shares of Class A common stock is entitled
to one vote, in person or by proxy, for each share of Class A common stock
standing in his or her name on the books of ACS on the Record Date on any
matters properly presented to a vote of the stockholders at the Annual Meeting.
A holder of shares of Class B common stock is entitled to 10 votes, in person or
by proxy, for each share of Class B common stock standing in his name on the
books of ACS on the Record Date on any matter properly presented to a vote of
the stockholders 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. Abstentions are counted
in tabulations of votes cast on proposals submitted to stockholders to determine
the total number of votes cast. Abstentions are not counted as votes for or
against any such proposal. Broker nonvotes are not counted as votes cast for
purposes of determining whether a proposal has been approved.
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 ACS, in person or by proxy, is required to approve Proposal 1,
the proposal 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 total issued and outstanding common
stock of ACS (regardless of the number of shares actually voting at the Annual
Meeting), in person or by proxy, is required to approve Proposal 2, the proposal
to amend the Charter. 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 ACS eligible to vote and voting, either in
person or by proxy, at the Annual Meeting, is required to approve Proposal 3,
the proposal to approve the performance-based incentive compensation for ACS's
executive officers.
<PAGE> 4
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 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, and in favor of the proposal to
amend the Company's Charter and to approve the performance-based compensation
for ACS's executive officers. 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 this proxy
statement and the enclosed proxy form and the cost of soliciting proxies related
to the Annual Meeting will be borne by ACS. ACS 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.
2
<PAGE> 5
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 ACS 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 ACS's directors and executive
officers and by all ACS's executive officers and directors as a group:
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
AMOUNT AND AND NATURE TOTAL
NATURE OF PERCENT OF OF SHARES OF
BENEFICIAL TOTAL SHARES BENEFICIAL CLASS B PERCENT OF TOTAL
OWNERSHIP OF OF CLASS A OWNERSHIP COMMON SHARES OF CLASS A PERCENT OF
CLASS A COMMON STOCK OF CLASS B STOCK AND CLASS B TOTAL
COMMON OWNED COMMON OWNED COMMON STOCK VOTING
DIRECTORS AND EXECUTIVE OFFICERS STOCK BENEFICIALLY STOCK BENEFICIALLY OWNED BENEFICIALLY POWER(1)
- -------------------------------- ------------ ------------ ------------ ------------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason(2)................. 2,574,772 5.56% 3,299,686 100% 11.84% 44.84%
Jeffrey A. Rich(3)............... 22,247 * -- -- * *
Mark A. King(4).................. 46,824 * -- -- * *
Henry G. Hortenstine(5).......... 1,241 * -- -- * *
David W. Black(6)................ 5,797 * -- -- * *
Peter A. Bracken(7).............. 115,478 * -- -- * *
Joseph P. O'Neill................ 23,810 * -- -- * *
Frank A. Rossi................... 5,000 * -- -- * *
Clifford M. Kendall(8)........... 350,855 * -- -- * *
Lynn Blodgett.................... 81,000 * -- -- * *
Thomas Connor, Jr.(9)............ 18,598 * -- -- * *
Bill Woodard(10)................. 2,758 * -- -- * *
All Executive Officers and
Directors as a Group (12
persons)(11)................... 3,248,380 7.01% 3,299,686 100% 13.20% 45.70%
BENEFICIAL OWNERS OF MORE THAN 5% OF ACS'S COMMON STOCK(12)
T. Rowe Price Associates,
Inc. .......................... 5,514,000 11.90% -- -- 11.11% 6.95%
100 E. Pratt Street Baltimore,
MD 21202
Massachusetts Financial Services
Company........................ 4,999,000 10.79% -- -- 10.07% 6.30%
500 Boylston Street Boston, MA
02116
Putnam Investments............... 3,966,000 8.56% -- -- 7.99% 5.00%
1 Post Office Square Boston, MA
02109
Fidelity Financial Services...... 2,429,000 5.24% -- -- 4.90% 3.06%
14651 Dallas Parkway Suite 200
Dallas, TX 75240
</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) 3,299,686 of the shares of ACS Class B common stock listed and 2,484,997 of
the shares of ACS Class A common stock listed are owned by The Deason
International Trust, and 71,146 of the shares of ACS Class B common stock
are owned by the Deason Foundation. Mr. Deason holds the sole voting power
with respect to such shares through an irrevocable board resolution passed
by the Trust and the Foundation. The investment power with respect to such
shares is held by the Trust and the Foundation. The shares of ACS Class A
common stock include 7,310 shares owned by Mr. Deason's spouse and spouse's
daughter, as to which shares Mr. Deason disclaims beneficial ownership and
1,219 shares granted to Mr. Deason under the ACS Employee Stock Purchase
Plan.
3
<PAGE> 6
(3) Includes 61 shares owned through the ACS 401(k) Plan.
(4) Includes 4,679 shares of ACS Class A common stock owned by Mr. King's
spouse, to which Mr. King disclaims beneficial ownership; 836 shares of ACS
Class A common stock owned through the ACS 401(k) Plan, and 2,497 shares of
ACS Class A common stock granted to Mr. King under the ACS Employee Stock
Purchase Plan.
(5) Represents 1,202 shares owned under the ACS Employee Stock Purchase Plan
and 39 shares owned through the ACS 401(k) Plan.
(6) Includes 441 shares of Class A common stock owned through in the ACS 401(k)
Plan and 356 shares of ACS Class A common stock granted to Mr. Black under
the ACS Employee Stock Purchase Plan.
(7) Includes 50,360 shares of Class A common stock not outstanding but subject
to currently exercisable options; 1,759 shares of Class A common stock
owned by Mr. Bracken's spouse, as to which shares Mr. Bracken disclaims
beneficial ownership, 1,226 shares of Class A common stock granted to Mr.
Bracken under the ACS Employee Stock Purchase Plan and 1,773 shares owned
through the ACS 401(k) Plan.
(8) Includes 145,385 shares of ACS Class A common stock owned by Mr. Kendall's
spouse, as to which Mr. Kendall disclaims beneficial ownership and 2,409
shares owned by Mr. Kendall in an individual retirement account.
(9) Includes 1,543 shares owned under the ACS Employee Stock Purchase Plan and
29 shares of Class A common stock owned through the ACS 401(k) Plan.
(10) Includes 329 shares owned under the ACS Employee Stock Purchase Plan and
2,429 shares of Class A common stock owned through the ACS 401(k) Plan.
(11) Includes 76,745 shares of ACS Class A common stock issuable pursuant to
options that are currently exercisable; 5,608 shares of ACS Class A common
stock owned through the ACS 401(k) Plan; and 8,372 shares of ACS Class A
common stock granted under the ACS Employee Stock Purchase Plan.
(12) Based on filings by the stockholder with the Securities and Exchange
Commission.
4
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is comprised of nine directors, divided into three
classes. Messrs. Deason and Rich are in the class whose terms expire in 2000;
Messrs. King, Black and Bracken are in the class whose terms expire in 2001. The
third class of directors, each of whom currently serves on the Board of
Directors and is up for election at this Annual Meeting for a three-year term,
is comprised of Messrs. Hortenstine, O'Neill, Rossi and Kendall. All directors
serve until their respective successors are duly elected and qualified.
Shares represented by proxies returned duly executed will be voted, unless
otherwise specified, in favor of the four nominees for the Board of Directors
named below. The proxies cannot be voted for more than four 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 pursuant to the
recommendation of Mr. Deason under his authority as the Nominating Committee for
the Board. 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; CONTINUING DIRECTORS
The following table lists the name and principal occupation of each nominee
and each continuing director, and the year in which each such person 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 1988
Jeffrey A. Rich......................... President and Chief Executive 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; Group
President of ACS Technology Solutions
Group 1996
Peter A. Bracken........................ Vice Chairman of ACS Government
Solutions Group, Inc. 1997
Joseph P. O'Neill*...................... President and Chief Executive Officer,
Public Strategies, Washington, Inc. 1994
Frank A. Rossi*......................... Chairman, FAR Holdings Company, L.L.C. 1994
Clifford M. Kendall*.................... Private Investor 1997
</TABLE>
- ---------------
* Nominee for election as director at this year's Annual Meeting.
BUSINESS EXPERIENCE OF NOMINEES AND CONTINUING DIRECTORS
Set forth below is certain information with respect to each of the nominees
for the office of director.
DARWIN DEASON, age 59, has served as Chairman of the Board of ACS since its
formation in 1988. He also served as Chief Executive Officer from the formation
of ACS until February 1999. Prior to the formation of ACS, Mr. Deason spent 20
years with MTech Corp., a data processing subsidiary of MCorp, a bank holding
corporation based in Dallas, Texas, 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 information technology industry. Mr. Deason
is a director of
5
<PAGE> 8
Precept Business Services, Inc., an affiliate of ACS and a publicly traded
company, where he is Chairman of the Board and has voting control.
JEFFREY A. RICH, age 39, has served as President and Chief Executive
Officer of ACS since February 1999. Prior to then, he had served as President
and Chief Operating Officer since April 1995. He has served as a director since
August 1991. Mr. Rich joined ACS in 1989 as Senior Vice President and Chief
Financial Officer and was named Executive Vice President in 1991. Prior to
joining ACS, 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.
MARK A. KING, age 42, has served as Executive Vice President and Chief
Financial Officer since May 1995 and as a director since May 1996. Mr. King
joined ACS in November 1988 as Chief Financial Officer of various ACS
subsidiaries. Prior to joining ACS, Mr. King was Vice President and Assistant
Controller of MTech. Mr. King has over 20 years of finance and accounting
experience, including over 10 years of experience in the information technology
industry.
DAVID W. BLACK, age 37, has served as Executive Vice President, Secretary
and General Counsel and as a director since May 1995. Mr. Black joined ACS in
February 1995 as Associate General Counsel. Prior to that time, Mr. Black was an
attorney engaged in private practice with a large law firm in Dallas from 1986
through January 1995.
HENRY G. HORTENSTINE*, age 55, has served as Executive Vice President of
ACS since March 1995, as Group President of ACS Technology Solutions Group since
April 1998 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 ACS 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.
PETER A. BRACKEN, age 58, joined Computer Data Services, Inc. (now known as
ACS Government Solutions Group, Inc.) in May 1996 as Chief Executive Officer and
President. At the time of the acquisition by ACS of ACS Government Solutions
Group, Inc. by a merger in December 1997, Mr. Bracken became an Executive Vice
President and ACS director, and served as Group President of ACS Government
Solutions Group, Inc. from April 1998 until July 1999. Mr. Bracken now serves
ACS as Vice Chairman of ACS Government Solutions Group, Inc.. From 1986 to 1996,
Mr. Bracken was employed by Martin Marietta Corporation (now Lockheed Martin
Corporation), most recently as President of the Information Sciences Group.
Before joining Martin Marietta in 1986, Mr. Bracken served as Director of
Mission Operation and Data Systems for NASA's Goddard Space Flight Center.
JOSEPH P. O'NEILL*, age 52, has served as a director of ACS since November
1994 and also serves as a consultant to ACS. 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 62, has served as a director of ACS since November
1994 and also serves as a consultant to ACS. 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.
CLIFFORD M. KENDALL*, age 68, had been with ACS Government Solutions Group,
Inc. since the founding of its predecessor in 1968 until it was acquired by ACS
by a merger in December 1997. At the time of the merger in December 1997, Mr.
Kendall became an ACS director. From 1970 to 1991, Mr. Kendall served as
- ---------------
* Nominee for election as director at this year's Annual Meeting.
6
<PAGE> 9
Chief Executive Officer of ACS Government Solutions, Inc. Mr. Kendall also
currently serves as a director of Washington Real Estate Investment Trust.
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, or subject to the requirements of
Section 15(d) of the Securities Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940, as amended.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE FOUR 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, the Independent
Directors Committee, the Special Transactions Committee and the Nominating
Committee. The Audit Committee is composed of Messrs. Rossi (Chairman), O'Neill
and Kendall. The Audit Committee was formed in 1994 and given general
responsibility for meeting periodically with representatives of ACS's
independent public accountants and electronic data processing ("EDP") auditors
to review the general scope of audit coverage, including consideration of ACS's
accounting and EDP practices and procedures and the adequacy of ACS'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 ACS's independent public accountants and EDP
auditors and is also responsible for monitoring ACS's "Year 2000" compliance.
The Compensation Committee was formed in May 1994. The members of the
Compensation Committee are Messrs. Deason (Chairman), Rossi and O'Neill. 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 ACS, 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 ACS's
stock option plans. In connection with ACS's establishment of certain procedures
to comply with the requirements of Section 162(m) of the Internal Revenue Code
of 1986, as amended, so that compensation to executive officers whose
compensation exceeds $1 million may be deductible by ACS for federal income tax
purposes, ACS formed the Special Compensation Committee in August 1996. The
members of the Special Compensation Committee are Messrs. Rossi and O'Neill
(Chairman). The Special Compensation Committee is responsible for reviewing the
compensation of the executive officers whose compensation exceeds $1 million,
including reviewing and recommending salaries, bonuses and other forms of
additional compensation, including grants of awards under the stock option
plans.
The members of the Independent Directors Committee are Messrs. O'Neill and
Rossi (Chairman). The Independent Directors Committee was formed in May 1994 to
review annually the prices and terms of the services, forms and supplies
provided between ACS and Precept Business Services, Inc., an affiliate of ACS,
pursuant to the parties' reciprocal services agreement, and other related party
transactions. See "Certain Transactions."
The Special Transactions Committee, which was formed in August 1997 and on
which Mr. Deason serves, has the responsibility of considering, evaluating, and
approving the terms of potential transactions resulting in the acquisition of
assets, businesses, or stock of third parties for cash, ACS Class A common
stock, or other consideration with a dollar value of up to the greater of
$50,000,000 or 10% of ACS's consolidated assets.
The Nominating Committee, which was formed in March 1999 and on which Mr.
Deason serves, has the responsibility of considering, evaluating and
recommending to the Board the slate of director nominees. Recommendations as to
nominees will be considered by the Nominating Committee. Such recommendations
can be submitted to the Nominating Committee by directing them to ACS's
executive offices at 2828 North Haskell Avenue, Dallas, Texas 75204, to the
attention of Darwin Deason.
7
<PAGE> 10
During the fiscal year ended June 30, 1998, there were four regular
meetings of ACS'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. There
were twelve meetings held by ACS's Audit Committee during the fiscal year, two
meetings held by each of ACS's Compensation Committee and Special Compensation
Committee and one meeting held by each of the Independent Directors Committee
and the Nominating Committee during the fiscal year.
PROPOSAL 2
APPROVAL OF AMENDMENT TO ACS'S CHARTER
TO AUTHORIZE THE CURRENT CHAIRMAN OF THE BOARD
TO FILL ANY FUTURE VACANCIES ON ACS'S BOARD OF DIRECTORS
ACS's Restated Articles of Incorporation, or Charter, currently gives the
directors the authority to fill vacancies on the Board of Directors, whether
resulting from the removal of, or resignation by, a director or directors. In
March 1999, the ACS Board approved an amendment to the Charter to authorize the
current Chairman of the Board to fill future vacancies on the ACS Board of
Directors, whether resulting from removal of, or resignation by, a director or
directors, for the remaining portion of the term of the former director. This
amendment must also be approved by the shareholders. This action was taken after
ACS entered into an Employment Agreement with the current Chairman of the Board,
Darwin Deason, which included a provision giving Mr. Deason this authority,
subject to an appropriate Charter amendment. This Employment Agreement is
described below at "Executive Compensation and Other Information -- Mr. Deason's
Supplemental Executive Retirement Agreement and Employment Agreement." Vesting
this authority in the current Chairman is intended to ensure the orderly
succession of members of the ACS Board of Directors.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE CHARTER.
PROPOSAL 3
APPROVAL OF PERFORMANCE-BASED INCENTIVE
COMPENSATION FOR THE COMPANY'S EXECUTIVE OFFICERS
The Internal Revenue Code limits ACS'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 Internal Revenue 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 ACS's executive officers.
Executive officer compensation for fiscal year 2000 will consist of a base
salary, stock option plan, and bonus compensation and will be based on criteria
similar to criteria previously used for ACS'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% (up to 250% for the Chairman of the Board, up to 200% for the
President and Chief Executive Officer and up to 125% for all other executive
officers) of their base salaries upon achievement of bonus performance goals,
which include ACS'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.
In addition to the above described bonus plan, for fiscal year 2000, there is an
accelerator bonus plan which allows each of the executive officers to earn up to
an additional 25% of their maximum bonus upon exceeding certain financial
projections. The bonus performance goals have been pre-established by the
Compensation Committee and approved by the Board of Directors for
8
<PAGE> 11
all executive officers other than any executive officer whose compensation may
exceed $1 million. For any executive officer whose compensation may exceed $1
million, bonus performance goals are previously established by the Special
Compensation Committee, which is comprised solely of non-employee directors, and
approved by the Board of Directors. ACS believes that the incentive-related
provisions provide performance incentives that are and will be beneficial to ACS
and its stockholders.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCENTIVE COMPENSATION
PROVISIONS FOR THE EXECUTIVE OFFICERS.
DIRECTOR AND EXECUTIVE COMPENSATION AND OTHER INFORMATION
DIRECTOR'S COMPENSATION
Messrs. Rossi and O'Neill, two of the members of the Board of Directors of
ACS who are not employed by ACS, receive 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, ACS 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 ACS. Such agreements are terminable by either
party with 30 days notice. Pursuant to such agreements, in exchange for such
services, Messrs. O'Neill and Rossi receive nominal consideration and ACS
reimburses both Messrs. O'Neill and Rossi for their out-of-pocket expenses. ACS
has granted Messrs. Rossi and O'Neill options to purchase 50,000 and 20,000
shares of Class A common stock, respectively. In addition, Mr. Kendall has an
option covering 50,000 shares of Class A common stock which was awarded to him
shortly after the acquisition by merger of ACS Government Solutions, Inc. in
December 1997, in recognition of his duties after the merger as Chairman of the
Advisory Board of Directors of ACS Government Solutions, Inc. Such options vest
ratably over five years.
SUMMARY OF NAMED EXECUTIVE OFFICERS' CASH AND OTHER COMPENSATION
The following table sets forth certain information regarding compensation
paid for all services rendered to ACS in all capacities during fiscal years
1999, 1998 and 1997 by ACS's chairman and chief executive officer and the four
other most highly compensated executive officers of ACS whose total annual
salary and bonus exceeded $100,000, based on salary and bonuses earned during
fiscal year 1999 (collectively, the "Named Executive Officers").
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------- -------------------------------------------------
PAYOUTS
RESTRICTED -------
OTHER STOCK LTIP
BONUS ANNUAL AWARDS OPTIONS/ PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) COMPENSATION($)(1) ($)(2) SARS(3) ($)(2) COMPENSATION($)
- --------------------------- ---- ------- --------- ------------------ ---------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Darwin Deason............... 1999 525,000 1,312,500 -- -- 75,000 -- --
Chairman of the Board 1998 487,500 1,250,000 -- -- -- -- --
and, until February 1999, 1997 450,000 1,125,000 -- -- -- -- --
Chief Executive Officer
Jeffrey A. Rich............. 1999 425,000 850,000 -- -- 250,000 -- 2,922
President and Chief 1998 312,500 650,000 -- -- -- -- --
Operating Officer until 1997 275,000 550,000 -- -- 60,000 -- --
February 1999 and President
and Chief Executive Officer
thereafter
Mark A. King................ 1999 275,000 412,500 -- -- 50,000 -- 1,289
Executive Vice President 1998 212,500 337,500 -- -- 40,000 -- --
and Chief Financial Officer 1997 175,000 218,750 -- -- 40,000 -- --
Henry G. Hortenstine........ 1999 275,000 412,500 -- -- -- -- 1,719
Group President -- ACS 1998 237,500 375,000 -- -- 40,000 -- --
Technology Solutions, and 1997 200,000 250,000 -- -- 40,000 -- --
Executive Vice President
Peter A. Bracken............ 1999 272,100 408,400 -- -- -- -- 4,544
Vice-Chairman, ACS 1998 283,800 230,500 -- -- 270,360(4) -- 2,507
Government
Solutions Group, Inc., and, 1997 300,000 173,960 -- -- -- -- 3,750
until July 1999, Group
President -- ACS Government
Solutions Group, Inc., and
Executive Vice President
Thomas Connor, Jr. ......... 1999 222,600 337,500 -- -- 50,000 -- 1,266
Group President -- ACS 1998 167,900 178,900 -- -- 25,000 -- --
Financial Industry Group, 1997 160,900 -- -- -- -- --
and Executive Vice
President
</TABLE>
- ---------------
(1) None of the Named Executive Officers received personal benefits, securities
or property in excess of the lesser of $50,000 or 10% of such individual's
reported salary and bonus during fiscal years 1999, 1998 and 1997.
(2) ACS did not grant any restricted stock awards or long-term incentive plan
payouts to the Named Executive Officers during fiscal years 1999, 1998 and
1997.
(3) ACS did not grant any stock appreciation rights ("SARS") to the Named
Executive Officers during fiscal years 1999, 1998 or 1997.
(4) Option grants have been adjusted in connection with the acquisition of ACS
Government Solutions Group, Inc. (formerly known as Computer Data Services,
Inc.) by ACS through a merger in December 1997.
10
<PAGE> 13
The following table sets forth the number of options granted during the
fiscal year ended June 30, 1999 to the Named Executive Officers to purchase
shares of Class A common stock and the potential realizable value of these
options.
OPTION GRANTS DURING FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN FOR OPTION TERM(1)
OPTIONS/SARS FISCAL EXERCISE OR EXPIRATION -------------------------
NAME GRANTED(#) YEAR(%) BASE PRICE($) DATE 5% ($) 10% ($)
- ---- ------------ ------------ ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason............. 75,000 4.5% 23.06 10/8/08 1,087,791 2,756,676
Jeffrey A. Rich........... 250,000 14.9% 23.06 10/8/08 3,625,971 9,188,921
Mark A. King.............. 50,000 3.0% 23.06 10/8/08 725,194 1,837,784
Henry G. Hortenstine...... -- -- -- -- -- --
Peter A. Bracken.......... -- -- -- -- -- --
Thomas Connor, Jr. ....... 50,000 3.0% 23.06 10/8/08 725,194 1,837,784
</TABLE>
- ---------------
(1) The amounts in these columns are the result of calculations at the 5% and
10% rates set by the SEC and are not intended to forecast possible future
appreciation, if any, of ACS's stock price.
The following table provides information related to options exercised by
the Named Executive Officers during fiscal year 1999 and the number and value of
options held at fiscal year end. ACS does not have any SARS outstanding.
AGGREGATE OPTION/SAR EXERCISES IN FISCAL 1999
AND FISCAL YEAR END 1999 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($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Darwin Deason.......... -- -- -- 75,000 -- 2,067,188
Jeffrey A. Rich........ 28,186 886,968 -- 732,050 -- 24,403,650
Mark A. King........... -- -- -- 250,014 -- 7,628,692
Henry G. Hortenstine... -- -- -- 303,970 -- 10,190,785
Peter A. Bracken....... 70,000 1,435,800 50,360 70,000 1,405,481 1,863,750
Thomas Connor, Jr. .... -- -- -- 175,000 -- 5,261,875
</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.
(2) Represents the value of unexercised options calculated as the number of
unexercised options times the difference between the closing price at June
30, 1999 and the exercise price.
MR. DEASON'S SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT AND EMPLOYMENT
AGREEMENT
In December 1998, ACS entered into a Supplemental Executive Retirement
Agreement with Mr. Deason. Pursuant to the Supplemental Executive Retirement
Agreement, Mr. Deason will receive a benefit upon the occurrence of certain
events equal to the excess of the value of particular options granted to Mr.
Deason (including 75,000 shares covered by options granted in October 1998 with
an exercise price of $23.08 per share) over an actuarially calculated amount
based on a percentage of his average monthly
11
<PAGE> 14
compensation determined by his monthly compensation during the highest
thirty-six consecutive calendar months from among the 120 consecutive calendar
months ending on the earlier of his termination with ACS or his normal
retirement date. The percentage applied to the average monthly compensation will
vary from 2% on June 30, 1999 to 56% on May 18, 2005. The events triggering the
benefit are normal retirement, late retirement, total and permanent disability,
death, resignation, change in control of ACS or termination for reasons other
than cause. The benefit will be paid in a lump sum or, at the election of Mr.
Deason, in monthly installments over a period not to exceed ten years. If the
payment is caused by a change in control and at such time Mr. Deason would be
subject to an excise tax under the Internal Revenue Code with respect to the
benefit, the amount of the benefit will be grossed-up to offset this tax.
In March 1999, ACS also entered into an Employment Agreement with Mr.
Deason. The Employment Agreement, which replaced an earlier severance agreement,
has a term until May 18, 2004, unless extended in accordance with its terms or
terminated earlier, either by Mr. Deason or by a unanimous vote of the Board of
Directors (not including Mr. Deason). The Employment Agreement provides for a
base salary of $525,000 per year, subject to annual adjustments by a percentage
equal to the average percentage adjustments to the annual salaries of the top
five executive officers of ACS. The Employment Agreement also provides for an
annual bonus based on the achievement of financial goals set for Mr. Deason by
the Special Compensation Committee. This bonus can be up to 250% of Mr. Deason's
base salary for that year. In addition, the Employment Agreement provides for
severance benefits for Mr. Deason upon a change of control of ACS and for
supplemental retirement benefits for Mr. Deason.
COMPENSATION COMMITTEE AND SPECIAL COMPENSATION COMMITTEE REPORTS ON EXECUTIVE
COMPENSATION
The Compensation Committee has been responsible for administering ACS's
Stock Option Plans and approving compensation for ACS's senior executives,
including recommending to the Board of Directors policies and plans concerning
the salaries, bonuses and other compensation for all executive officers, except
that such approval and recommendation with respect to salaries, bonus and other
compensation for Mr. Deason and, beginning with fiscal year 1999, Mr. Rich are
the responsibility of the Special Compensation Committee. Mr. Deason's
Supplemental Executive Retirement Agreement and Employment Agreement, which are
described above, have been reviewed and approved by the Special Compensation
Committee and by the full Board of Directors (not including Mr. Deason). The
objective of ACS'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 ACS's stockholders. The executive
compensation program is intended to provide ACS'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 ACS'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, in some instances,
business unit performance, as well as competitive and inflationary
considerations.
INCENTIVE BONUS
Incentive bonus payments for executive officers are made at the end of each
fiscal year based upon the achievement of some or all of the following:
consolidated financial criteria (which can include consolidated revenues,
consolidated earnings before interest, taxes and depreciation, consolidated
pre-tax earnings and consolidated earnings per share), business unit financial
criteria, and the attainment of individual goals. Such criteria and goals are
established by the Chairman of the Board of ACS, subject to approval by the
Compensation Committee of the Board of Directors, at the beginning of each
fiscal year (or, in the cases of the Chairman and the Chief Executive Officer,
subject to the approval of the Special Compensation Committee). During fiscal
year 1999, ACS achieved 100% of such measures of consolidated financial
criteria.
12
<PAGE> 15
For fiscal year 1999, executive officers were eligible to receive maximum
bonuses of between 125% and 250% of salary provided the set goals and criteria
were met.
In addition to the above described bonus plan, for fiscal year 2000, there
is an accelerator bonus plan which allows each of the executive officers to earn
up to an additional 25% of their maximum bonus upon exceeding certain financial
projections.
STOCK OPTION PLAN
ACS's 1997 Stock Incentive Plan ("Stock Option Plan") is administered by
the Compensation Committee and, with respect to Darwin Deason and Jeffrey A.
Rich, the Special Compensation Committee of ACS's Board of Directors. The
Compensation Committee and the Special Compensation Committee have 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 ACS's Class A common stock at the time of grant. There have been no
stock purchase rights granted through June 30, 1999.
Submitted by the Compensation
Committee
and the Special Compensation
Committee
of the Board of Directors:
DARWIN DEASON*
FRANK A. ROSSI
JOSEPH P. O'NEILL
*Not a member of the
Special Compensation Committee
13
<PAGE> 16
COMPARISON OF TOTAL CUMULATIVE RETURN FROM SEPTEMBER 26, 1994
(THE "IPO DATE") THROUGH JUNE 30, 1999 OF
AFFILIATED COMPUTER SERVICES, INC. CLASS A COMMON STOCK,
STANDARD & POOR'S COMPUTER SOFTWARE & SERVICES INDEX
AND THE STANDARD & POOR'S STOCK INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
ACS STANDARD & POORS
--- COMPUTER SOFTWARE & STANDARD & POOR'S STOCK
SERVICES INDEX INDEX
------------------- -----------------------
<S> <C> <C> <C>
'09/26/94' 100.00 100.00 100.00
'06/30/98' 481.00 427.00 257.00
'06/30/99' 633.00 641.00 312.00
</TABLE>
Note: The graph above compares the total cumulative return of ACS Class A
common stock from the IPO Date through June 30, 1999 with the Standard & Poor's
Computer Software & Services Index and the Standard & Poor's Stock Index.
The graph assumes the investment of $100 and the reinvestment of all
dividends. The stock price performance shown on the graph is not necessarily
indicative of future stock performance.
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 ACS UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT ACS
SPECIFICALLY INCORPORATES SUCH REPORT OR GRAPH BY REFERENCE.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For information on Compensation Committee interlocks and insider
participation, see "Certain Transactions."
CERTAIN TRANSACTIONS
In connection with the reorganization of ACS on June 30, 1994, ACS and
Precept Business Services, Inc. ("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 ACS, and ACS would
provide
14
<PAGE> 17
office space and certain administrative services to Precept. Mr. Deason is a
director and holds voting control of Precept. Douglas Deason, one of Mr.
Deason's sons, is the President and a director of Precept and owns in excess of
10% of Precept's outstanding common stock. The prices for all services, forms
and supplies provided by Precept to ACS 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 ACS. The
prices for all services provided by ACS to Precept will be at no less than ACS's
direct cost. The costs incurred by ACS for services provided by Precept covered
by such reciprocal services agreement, which are believed to approximate fair
market value, were approximately $7 million for fiscal year 1999. Precept's
payments to ACS under the reciprocal services agreement were approximately
$200,000 for fiscal year 1999.
Mr. Deason, ACS and Precept, along with two other investors, are the
stockholders in DDH Aviation, Inc., a start-up corporate airplane brokerage firm
organized in late 1997. DDH has a $30 million line of credit with Wells Fargo
Bank, N.A., for which Mr. Deason and ACS, in exchange for warrants to acquire
additional voting stock, act as guarantors for up to approximately $11.5 million
each. Taking into account the exercise of such warrants, Mr. Deason owns over
one-third of the equity interests in DDH and ACS owns approximately 18%. Mr.
Deason is one of the five directors of DDH, as well as its Chairman of the
Board. ACS has access to aircraft from DDH.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, independent certified accountants, has been
selected as ACS's independent accountant for the fiscal year 2000.
PricewaterhouseCoopers LLP was also ACS's independent accountant for fiscal year
1999. A representative of PricewaterhouseCoopers LLP is expected to be present
at the Annual Meeting. That representative will have an opportunity to make a
statement, if desired, and will be available to respond to appropriate
questions.
STOCKHOLDERS PROPOSALS FOR 2000 ANNUAL MEETING
If any stockholder of ACS intends to present a proposal for consideration
at the Fiscal Year 2000 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 ACS's
principal executive offices, 2828 North Haskell Avenue, Dallas, Texas 75204,
Attention: David W. Black, Corporate Secretary, no sooner than May 30, 2000 but
not later than June 29, 2000.
By Order of the Board of Directors
/s/ DAVID W. BLACK
David W. Black
Secretary
September 28, 1999
15
<PAGE> 18
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<PAGE> 19
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<PAGE> 20
AFFILIATED COMPUTER SERVICES, INC.
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS AT 11:00 A.M. TUESDAY, OCTOBER 26, 1999
CITYPLACE CONFERENCE CENTER, 2711 NORTH HASKELL AVENUE, DALLAS, TEXAS 75204
The undersigned shareholder of Affiliated Computer Services, Inc. (the
"Company") hereby appoints Jeffrey A. Rich and David W. Black or either of them,
as proxies, each with full powers of substitution, to vote the shares of the
undersigned at the above-stated Annual Meeting and at any postponements or
adjournments thereof, on the following proposals:
PLEASE MARK YOUR VOTES AS INDICATED IN THE EXAMPLE [X]
<TABLE>
<S> <C> <C>
(1) Election of Henry G. [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
Hortenstine, Joseph P. (except as marked to the contrary nominees listed below
O'Neill, Frank A. Rossi below)
and Clifford M. Kendall
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name here)
- --------------------------------------------------------------------------------
(2) Approval of amendment to the Company's Charter to authorize the current
Chairman of the Board to fill any future vacancies on the Company's
Board of Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Approval of performance-based incentive compensation for the Company's
executive officers
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
(Continued from other side)
IN THEIR DISCRETION, THE PROXIES ARE, AND EACH OF THEM IS, AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS OR MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED
IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A CHOICE IS
NOT INDICATED WITH RESPECT TO ITEMS (1), (2) AND (3) THIS PROXY WILL BE VOTED
"FOR" SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY OTHER
MATTER PROPERLY BROUGHT BEFORE THE MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS
THEREOF. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
RECEIPT HEREWITH OF THE COMPANY'S ANNUAL REPORT AND NOTICE OF MEETING AND
PROXY STATEMENT, DATED SEPTEMBER 28, 1999, IS HEREBY ACKNOWLEDGED.
---------------------------
(Signature(s) of
Shareholder(s))
Date _____________ , 1999
(Joint owners must EACH
sign. Please sign EXACTLY
as your name(s) appear(s)
on this card. When signing
as attorney, trustee,
executor, administrator,
guardian or corporate
officer, please give your
FULL title.)
