<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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Group 1 Software, 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:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1860
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held September 23, 1999
To the Stockholders of Group 1 Software, Inc.:
You are cordially invited to attend the Annual Meeting of stockholders of
Group 1 Software, Inc. (the "Company") to be held on September 23, 1999 at 10:30
AM at Prudential Securities, One Liberty Plaza, New York, New York 10292 (the
"Annual Meeting"), for the following purposes:
(1) To elect three (3) directors to hold office until the third annual
meeting of stockholders of the Company following their election and until the
election and qualification of their successors;
(2) To consider and act upon a proposal to amend the Company's Incentive
Stock Option, Non-Qualified Stock Option and Stock Appreciation Unit Plan to
increase by 200,000 shares the number of shares subject to stock options which
may be granted under the Plan;
(3) To consider and act upon a proposal to adopt the Group 1 Software 1999
Non-Employee Directors Stock Plan;
(4) To consider and act upon a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of Group 1
Preferred Stock from 200,000 shares to 1,200,000 shares; and
(5) To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on July 26, 1999 (the
"Record Date") are entitled to receive notice of, and to vote at, the Annual
Meeting.
We hope that you will be able to attend the Annual Meeting in person.
- --------------------------------------------------------------------------------
IN ORDER TO ASSURE A QUORUM AND TO AVOID THE EXPENSE AND DELAY OF SENDING
FOLLOW-UP LETTERS, PLEASE FILL IN, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED
STATES. IF YOU ARE PRESENT AT THE ANNUAL MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of Directors
Edward Weiss
Secretary
Lanham, Maryland
August ____, 1999
<PAGE> 3
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1860
301/918-0400
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 23, 1999
------------------
This Proxy Statement and the enclosed form of proxy are furnished to
stockholders of Group 1 Software, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company from holders of outstanding shares of its common stock, $.50 par value
(the "Common Stock") and 6% Convertible Preferred Stock (the "6% Preferred
Stock"), (the Common Stock and 6% Preferred Stock, collectively constitute the
"Voting Securities"), for use at the annual meeting of stockholders to be held
on September 23, 1999 (the "Annual Meeting"), and at any adjournment thereof.
The approximate date on which this Proxy Statement and the related form of proxy
are first being sent to stockholders is August ___, 1999.
If the enclosed proxy is properly signed and returned, and if the
stockholder specifies a choice on the proxy, the shares of the Voting Securities
represented by the proxy will be voted (or withheld from voting) in accordance
with the stockholder's choice. If the proxy is signed and returned but no
specification is made, the proxy will be voted FOR the election of the Board's
nominees for directors listed below and FOR each of Proposals 2 through 5.
The Board of Directors of the Company knows of no business that will be
presented for consideration at the Annual Meeting other than the matters
described in this Proxy Statement. If any other matters are presented at the
Annual Meeting, the proxy holders will vote the proxies in accordance with their
judgment.
Any proxy may be revoked by the stockholder giving such proxy, at any time
prior to its being voted, by filing with the Secretary of the Company, at its
address set forth above, a notice of revocation or a duly executed proxy bearing
a later date. Any proxy may also be revoked by the stockholder's attendance at
the Annual Meeting and voting in person. A notice of revocation need not be on
any specific form.
The Company has fixed the close of business on July 26, 1999, as the
record date (the "Record Date") for the determination of the stockholders of the
Voting Securities of the Company entitled to notice of, and to vote at, the
Annual Meeting. On that date, there were outstanding 3,750,290 shares of Common
Stock and 47,500 shares of 6% Preferred Stock. The holders of the Common Stock
and the 6% Preferred Stock will be entitled to one vote per share on each matter
submitted to the Annual Meeting. No other voting securities of the Company are
outstanding.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Voting Securities entitled to vote constitutes a
quorum for the transaction of business at the Annual Meeting. If a quorum should
not be present, the Annual Meeting may be adjourned from time to time until a
quorum is obtained.
1
<PAGE> 4
There are no rights of appraisal or similar rights of dissenters
applicable to the matters to be voted upon at the Annual Meeting.
FINANCIAL INFORMATION
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1999 accompanies this Proxy Statement and is incorporated in
this Proxy Statement by reference.
BENEFICIAL OWNERSHIP
The following table sets forth certain information as of July 26, 1999, as
to all persons who, to the knowledge of the Company, were beneficial owners of
five percent or more of the Common Stock or 6% Preferred Stock of the Company,
and all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK OF 6% PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNER AND STOCK AND
NUMBER OF PERSONS IN GROUP PERCENT OF CLASS PERCENT OF CLASS
-------------------------- ---------------- ----------------
<S> <C> <C>
Robert S. Bowen
4200 Parliament Place 293,999 (1) 5,937
Suite 600 7.5% 12.5%
Lanham, MD 20706
John Spohler 236,875 (2) 11,875
One Liberty Plaza 7.7% 25%
New York, NY 10292
Milton Kaplan
1920 Ocean Avenue * 11,875
Brooklyn, New York 11230 25%
Leonard J. Smith 11,875
451 Ives Dairy Road, #A202 * 25%
North Miami Beach, FL 33179
All directors and officers as a group 840,107 5,937
(16 persons) 19.0% 12.5%
</TABLE>
* Less than 5%.
(1) Including Common Stock purchase options 191,676 shares exercisable within
thirty (30) days of the Record Date.
(2) Includes Common Stock purchase options for 18,750 shares exercisable within
60 days of the Record Date
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company, all directors, officers and beneficial owners of more
than ten percent of any class of stock have filed on a timely basis Forms 3,
Forms 4 and Forms 5 as required in the fiscal year ended March 31, 1999, except
for the following persons who filed late Form 4's regarding stock options to
purchase 5,000 (each) shares of Common Stock, as such options were granted to
them pursuant to the Company's 1995 Non-Employee Directors' Stock Option Plan:
Thomas S. Buchsbaum, Richard H. Eisenberg, James V. Manning, James P.
2
<PAGE> 5
Marden, Charles A. Mele, Charles J. Sindelar and Bruce J. Spohler, and Mr.
Victor Forman with respect to a Form 3.
PROPOSAL ONE
ELECTION OF DIRECTORS
Stockholders are being asked to elect three members to the Company's Board
of Directors. The three members who are so elected and the remaining six
directors whose terms continue after the Annual Meeting will constitute the
Board of Directors of the Company.
Pursuant to the terms of the Company's Certificate of Incorporation, the
directors of the Company are divided into three classes, and one class is
elected at each annual meeting of stockholders and serves for a term ending on
the third annual meeting of stockholders following their election and after
their respective successors have been elected and qualified. Under the Company's
Bylaws, the election of directors is determined by a vote of a majority of the
shares present in person or represented by proxy and voting on the matter. And,
under applicable Delaware law and the Company's Certificate of Incorporation and
Bylaws, abstentions and broker non-votes on proposals to elect directors will
effectively be treated as shares that are not present and voting for that
matter.
The Board has nominated Messrs. Robert S. Bowen, Thomas S. Buchsbaum and
Ronald F. Friedman for election at the Annual Meeting, to serve until the third
annual meeting of stockholders of the Company following their election and their
successors have been elected and qualified. Unless otherwise directed, the
persons named as proxies in the proxy enclosed herewith will vote the shares
represented by such proxy for the election of such nominees as directors.
If for any reason any nominee for director should become unavailable for
election, the proxies may be voted for the election of a substitute designated
by the Company, unless a contrary instruction is given on the proxy. The Company
has no reason to believe that any of the nominees will be unable or unwilling to
serve if elected, and all nominees have expressed an intention to serve the
entire term for which election is sought.
The following table sets forth certain information at the Record Date
concerning the directors and their ownership of the Voting Securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
VOTING SECURITIES AND
NAME OF DIRECTOR OF DIRECTOR PRINCIPAL OCCUPATION, BUSINESS PERCENT OF CLASS (AT
THE COMPANY (AGE) SINCE EXPERIENCE AND DIRECTORSHIPS RECORD DATE)
----------------- ----- ---------------------------- ------------
<S> <C>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
CLASS II DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE THIRD ANNUAL
MEETING OF STOCKHOLDERS FOLLOWING THE ANNUAL MEETING, AND
THE ELECTION AND QUALIFICATION OF THEIR SUCCESSORS)
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
Robert S. Bowen 1983 Vice Chairman since September, 1998 293,999(1)
61 and Chief Executive Officer and a 7.5%
Director of the Company for more
than five years.
Ronald F. Friedman 1987 Director and Chief Operating 160,550(2)
55 Officer of Group 1 for more than 4.1%
five years.
Thomas S. Buchsbaum 1989 Since March 1997, Vice President of 51,005(3)
49 Federal Systems and prior to that, 1.4%
Vice President of Education Sales
and Marketing, Dell Computer
Corporation. Also serves as a
director of Dick Blick Company.
</TABLE>
MEMBERS OF THE BOARD CONTINUING IN OFFICE
CLASS III DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE NEXT ANNUAL MEETING OF
STOCKHOLDERS FOLLOWING THE ANNUAL MEETING, AND THE
ELECTION AND QUALIFICATION OF THEIR SUCCESSORS)
<TABLE>
<S> <C> <C>
Charles J. Sindelar 1992 Vice President and General Manager 30,000(4)
62 of Digital Video Group-Network *
Division since 1996, and from
1990-1996, Staff-Vice President of
the Business Development Network
Systems Division of Zenith
Electronics Corporation.
James P. Marden 1992 Senior Executive Vice President, 30,000(5)
46 Corporate Development, Medical *
Logistics, Inc., from October, 1998
to present; from April, 1997 to
October, 1998, private investor;
from January, 1995 to April, 1997,
President of the Entertainment
Connection and from 1992 to 1994,
Vice President - Acquisitions of
Medco Containment Services, Inc.
("Medco") and Vice President -
Acquisitions of Synetic, Inc.
("Synetic").
Charles A. Mele 1992 Executive Vice President - General 54,000(6)
43 Counsel and a director of Synetic 1.4%
for more than five years. For more
than five years, up through July,
1994, Executive Vice President and
General Counsel or Co-General
Counsel of Medco.
</TABLE>
CLASS I DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE SECOND ANNUAL MEETING OF
STOCKHOLDERS FOLLOWING THE ANNUAL MEETING, AND THE ELECTION
AND QUALIFICATION OF THEIR SUCCESSORS)
4
<PAGE> 7
<TABLE>
<S> <C> <C>
James V. Manning 1992 Chief Executive Officer of Synetic 30,000(7)
52 since September, 1994. Prior to *
that, he was Senior Executive Vice
President - Finance and
Administration and a director of
Medco for more than five years.
He has also been a director of
Synetic for more than five years.
Richard H. Eisenberg 1994 President of Great Northern 20,000(8)
61 Brokerage Corporation for more *
than five years. From 1992 to
1995, also Senior Vice President
of Kaye Insurance, L.P.
Bruce J. Spohler 1997 Managing Director, High Yield, 60,000(9)
39 CIBC Oppenheimer for more than 1.6%
five years.
</TABLE>
* Less than 1%
(1) Includes options to purchase 191,676 shares of Common Stock exercisable
within 60 days of the Record Date.
(2) Includes options to purchase 158,450 shares of Group 1 common stock
exercisable within 60 days of the Record Date.
(3) Includes options to purchase 45,250 shares of Common Stock exercisable
within 60 days of the Record Date.
(4) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(5) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(6) Includes options to purchase 54,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(7) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(8) Includes options to purchase 20,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(9) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days of the Record Date.
Mark D. Funston resigned from the Board of Directors on September 24,
1998. Mr. Buchsbaum was elected as a Director of the Company on September 24,
1998.
The business address of Messrs. Manning, and Mele is River Drive Center 2,
669 River Drive, Elmwood Park, New Jersey 07407-1361. Mr. Marden's business
address is 999 Riverview Drive, Totowa, New Jersey 07512. Mr. Eisenberg's
business address is 122 East 42nd Street, New York, New York 10168. Mr.
Sindelar's business address is 1000 Milwaukee Avenue, Glenview, Illinois 60025.
Mr. Spohler's address is 425 Lexington Avenue, 3rd Floor, New York, New York
10017. Mr. Buchsbaum's address is 1 Dell Way, Round Rock, Texas
5
<PAGE> 8
78682. The business address of Messrs. Bowen and Friedman is 4200 Parliament
Place, Suite 600, Lanham, Maryland 20706.
FAMILY RELATIONSHIPS
There are no family relationships between any director or executive
officer of the Company.
COMPENSATION OF DIRECTORS
No cash payments have been made to directors for attendance at meetings of
the Board or any committee thereof since April, 1985. In September, 1995,
stockholders approved the 1995 Non-Employee Directors' Stock Option Plan (the
"1995 Directors Plan"), which provided for the annual, automatic grant of
options to non-employee directors. During the year ended March 31, 1999, Messrs.
Manning, Buchsbaum, Eisenberg, Marden, Mele and Sindelar were each granted
options under the 1995 Non-Employee Directors Stock Option Plan to purchase
5,000 shares of the Common Stock. As compensation for his service as a Director,
Mr. Spohler would have been granted options under the 1995 Non-Employee
Directors Stock Option Plan. However, as an employee of CIBC Oppenheimer Corp.,
he is required to transfer to CIBC Oppenheimer compensation such as these
options to purchase Common Stock. Further, because Group 1 options under the
1995 Non-Employee Directors Stock Option Plan may only be issued to persons then
serving as directors and may not be transferred to persons who are not
directors, the Company, in lieu of director options, issued transferable
warrants to Mr. Spohler on terms substantially similar to the terms of the
options that would otherwise have been issued to Mr. Spohler under the 1995
Non-Employee Directors Stock Option Plan.
Under Proposal Two, shareholders are asked to approve the adoption of the
1999 Non-Employee Directors Stock Plan (the "1999 Directors Plan"). If this
proposal is approved, non-employee directors of the Company will be compensated
by grants of Common Stock pursuant to the terms of the 1999 Directors Plan for
their service in fiscal year 2001 and thereafter during the term of that Plan.
COMMITTEES AND MEETINGS
The Bylaws of the Company provide for the Board to appoint the Audit and
Compensation Committees. The Compensation Committee's functions include
establishing principles for setting executive compensation, and reviewing
management proposals pertaining to executive compensation, profit sharing and
stock options. The Compensation Committee recommends management bonuses to the
Board for the Company's officers and employees. During the past several fiscal
years, the Committee has granted options to employees under and in accordance
with the Company's 1995 Incentive Stock Option, Non-Qualified Stock Option and
Stock Appreciation Unit Plan (the "1995 Incentive Plan"). The Compensation
Committee is comprised of Messrs. Manning, Buchsbaum, Marden and Mele. None of
the members of the Compensation Committee has ever been an employee of the
Company.
The Audit Committee's functions include recommending to the Board the
selection of the Company's independent public accountants and reviewing with
such accountants the plan, scope and results of their audit of the financial
statements and the adequacy of the Company's system of internal accounting
controls. The Audit Committee is comprised of Messrs. Manning, Marden and
Sindelar.
During the fiscal year ended March 31, 1999, the Board of Directors of the
Company held five meetings, the Compensation Committee held four meetings and
the Audit Committee held one meeting. No director attended less than 75% of all
meetings of the Board and the committees on which such director served during
that fiscal year.
6
<PAGE> 9
EXECUTIVE OFFICERS AND COMPENSATION
The Executive Officers of the Company are Robert S. Bowen, Ronald F.
Friedman, Stephen R. Bebee, Alan P. Slater, Mark D. Funston, B. Scott Miller,
Victor O. Forman and Edward Weiss. The business experience during at least the
past five years for Messrs. Bowen and Friedman is set forth under " -- Nominees
For Election to the Board Of Directors". Mr. Bebee, 45, has served in executive
sales positions with the Company for more than the past five years. Mr. Slater,
44, has served in executive sales positions with the Company during the past
five years. Mr. Funston, 39, has served as the Company's Chief Financial Officer
since September, 1997. Prior to that, Mr. Funston was Divisional Chief Financial
Officer for Comsat RSI, a division of COMSAT, Inc. Mr. Miller, 56, has served as
Chief Information Officer and prior to that, in executive technology positions
in the Company for more than the past five years. Mr. Forman, 54, has served as
Vice President, Postal Affairs, for more than the past five years. Mr. Weiss,
49, has been General Counsel and Secretary of the Company for more than five
years.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company has established an executive compensation program based on the
following on-going principles and objectives: (i) provide compensation
opportunities that will help attract, motivate and retain highly qualified
managers and executives, (ii) link executive's total compensation to Company
performance and the individual performance of the executive and (iii) provide an
appropriate balance between incentives focused on achievement of annual business
plans and longer term incentives linked to increases in shareholder value. To
effectuate these principles and objectives, compensation for each of the
executives of the Company consists of base salary compensation, annual incentive
compensation (based in most cases on profit performance measured against
internal profit targets) and stock option grants.
For Fiscal Year 1999, the Compensation Committee did not review the base
salary or incentive compensation program for Mr. Bowen since these matters are
fixed by the employment agreement between the Company and Mr. Bowen. Grants of
options to executive officers are reviewed periodically. The compensation
programs for executive officers other than Mr. Bowen are reviewed annually by
the Compensation Committee, including the review conducted for the most recent
fiscal year.
Compensation Committee
James V. Manning
Thomas S. Buchsbaum
James P. Marden
Charles A. Mele
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation Awards
------------------- -----------------------------
Name and Principal All other
Position Year Salary Bonus Stock Options Compensation(1)
-------- ---- ------ ----- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert S. Bowen 1999 $352,698 $519,300(2) 178,749(3) $349,875(4)
CEO; Director 1998 269,213 231,667 -- 67,593
1997 323,587 -- 21,562(5) 58,736
Ronald F. Friedman 1999 184,810 393,155 43,749(3) 13,517
President; 1998 184,105 66,085 12,000 79,318(6)
Director 1997 184,105 -- 17,250(5) 6,412
Mark D. Funston 1999 134,700 157,353 10,000 9,335
Chief Financial 1998 125,039 17,292 -- 9,249
Officer 1997 64,616(7) 16,500 16,500 782
Alan P. Slater 1999 177,826 146,981 15,950(3) 17,442
Executive Vice 1998 169,018 96,594 -- 7,511
President; General 1997 150,580 -- 14,887(5) 7,367
Manager
Stephen R. Bebee 1999 135,031 135,569 8,460(3) 9,922
Executive Vice 1998 134,646 41,859 -- 10,909
President; General 1997 87,650 114,333 11,150(5) 9,489
Manager
</TABLE>
- ---------------------
(1) Includes Company contributions to Defined Contribution Savings Plan
(401(k)), auto allowance and group term life insurance benefits.
(2) Mr. Bowen elected to defer $173,100 and $81,083 of bonus compensation in
1999 and 1998, respectively, in accordance with the Company's deferred
compensation plan.
(3) Includes options converted as part of the merger of COMNET and Group 1 in
September, 1998 and granted to Messrs. Bowen (28,749), Friedman (28,749),
Slater (3,450) and Bebee (460) as a result of the merger.
(4) Includes debt forgiveness on a loan from the Company to Mr. Bowen. On
January 23, 1992, the Company entered into a Loan Agreement with Mr. Bowen
under which the Company agreed to loan him $235,000. The loan was
satisfied in full and canceled in accordance with its terms on July 1,
1998.
(5) Includes options converted as part of the merger and granted to Messrs.
Bowen (21,562), Friedman (17,250), Slater (4,887) and Bebee (1,150).
(6) Includes interest forgiven on a loan from the Company to Mr. Friedman.
See "--Friedman Loan Agreement."
(7) Mr. Funston's compensation covers only part of the Company's fiscal year
ended March 31, 1997.
8
<PAGE> 11
STOCK OPTION GRANTS IN FISCAL YEAR 1999
GROUP 1
<TABLE>
<CAPTION>
% OF AT 0% AT 5% AT 10%
OPTIONS TOTAL EXERCISE ANNUAL ANNUAL ANNUAL
GRANTED GRANTED OR EXPIRATION GROWTH GROWTH GROWTH
NAME # TO BASE DATE RATE($) RATE($) RATE($)
---- ------- EMPLOYEES PRICE ---- ------- ------- -------
IN 1999 ($/SHARE)
-------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Bowen 150,000 32.38% 10.00 10/08/08 $0 943,500 2,391,000
28,749 6.21% 11.09 08/13/08 $0 180,831 458,259
Ronald F. Friedman 15,000 3.24% 10.00 12/16/08 $0 94,350 239,100
28,749 6.21% 11.09 08/13/08 $0 180,831 458,259
Mark D. Funston 10,000 2.16% 8.00 12/06/08 $0 62,900 159,400
Alan P. Slater 12,500 2.70% 10.00 12/06/08 $0 78,625 199,250
3,450 0.74% 11.09 08/13/08 $0 21,701 54,993
Stephen R. Bebee 8,000 1.73% 10.00 12/16/08 $0 50,320 127,520
460 0.10% 11.09 08/13/08 $0 2,893 7,332
</TABLE>
OPTION/SAR EXERCISES AND YEAR-END
OPTION/SAR VALUES
04/01/98 TO 03/31/99
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs at FY-End Options/SARS at FY-End(1)
Shares ---------------------- -------------------------
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Bowen None --- 426,179 196,685 $98,584 $36,868
Ronald F. Friedman None --- 172,301 67,698 83,415 36,998
Stephen R. Bebee None --- 20,660 17,150 4,661 5,966
Alan P. Slater None --- 29,456 27,881 16,200 14,603
Mark D. Funston None --- 6,600 19,900 --- 5,000
</TABLE>
(1) These values are based upon the difference between the exercise prices of
all options awarded and the closing price of $8.50 per share for Common
Stock at March 31, 1999.
9
<PAGE> 12
PERFORMANCE MEASUREMENT COMPARISON
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, PEER GROUP AND BROAD MARKET
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG COMNET CORPORATION
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[CHART]
<TABLE>
<CAPTION>
COMPANY/INDEX/MARKET 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Group 1 Software 100.00 115.71 114.29 97.14 91.43 97.14
Peer Group Index 100.00 130.84 252.72 142.81 410.99 231.34
Nasdaq Market Index 100.00 106.09 142.70 159.64 241.26 315.28
</TABLE>
ASSUMES $100 INVESTED ON APRIL 1, 1993
ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING MARCH 31, 1998
The chart displayed directly above is presented in accordance with
requirements of the Securities and Exchange Commission. The industry peer group
consisted of Mobius, Inc., DocumentUM, Inc. and Timberline Software, CP.
Stockholders are cautioned against drawing any conclusions from the data
contained therein, as past results are not necessarily indicative of future
performance. This graph in no way reflects the Company's forecast of future
financial performance.
The graph and the related disclosure contained in this section of the
Proxy Statement should not be incorporated by reference into any prior filings
by the Company under the Securities and Exchange Act of 1934 that incorporated
future filings or portions thereof (including this Proxy Statement or the
Executive Compensation section of this Proxy Statement).
EMPLOYMENT AGREEMENTS
ROBERT S. BOWEN
The Company and Mr. Bowen, as President and Chief Executive Officer of the
Company, are party to an amended and restated employment agreement, dated as of
January 28, 1992 (the "Bowen Agreement"). The Bowen Agreement was ratified by
Group 1's stockholders at the January 22, 1993 meeting and assumed by the
Company as part of the merger of COMNET Corporation with Group 1 Software, Inc.,
in September, 1998. The Bowen Agreement expires on March 31, 2001, and provides
for a current total base salary of $370,692 per annum adjusted annually
(effective each July 1) by the greater of changes in the area cost of living or
the average salary percentage increase for Company employees as part of the
annual budget presented to the Board as part of the annual budget. The Bowen
Agreement also includes an annual incentive bonus equal to 7-1/2% of the first
$1,000,000 of consolidated net income of the Company before taxes with certain
adjustments as defined, and 10% of such income in excess of $1,000,000.
Consolidated net income as defined in the Bowen Agreement includes all earnings
of the Company and its subsidiaries from any source, subject to certain
specified deletions but including gain or loss on the sale of stock or assets of
Group 1 and/or a subsidiary. Specified deletions from net income include, among
other items, any provision for taxes, any bonus payable under the Bowen
Agreement, any excess of interest income from bank and other cash deposits over
interest expense from loans or other financing, and any charge to income
associated with the exercise of stock options.
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<PAGE> 13
If Mr. Bowen's employment with the Company during the term of the Bowen
Agreement is terminated because of his disability or death, his base salary and
bonus will be prorated through the date of termination. If Mr. Bowen terminates
his employment with the Company for any reason other than death or disability or
he is discharged by the Company for cause, Mr. Bowen is entitled to his base
salary, equitably prorated, and any bonuses earned for any fiscal year prior to
the fiscal year in which his termination of employment occurred. If the Company
terminates Mr. Bowen's employment without cause, Mr. Bowen is entitled to
receive his salary, fringe benefits and bonuses throughout the remaining term of
the Bowen Agreement. Upon any termination of Bowen's employment under the Bowen
Agreement, all options held by Bowen to purchase Common Stock will be treated as
provided in the instruments or agreements governing such options.
RONALD F. FRIEDMAN
Group 1 has entered into an employment agreement dated October 31, 1990,
with Ronald F. Friedman, a director, as President and Chief Operating Officer of
Group 1. The agreement, as amended, expires on March 31, 1999 and provides for
annual base compensation of $200,000 per annum (adjusted as of May 17, 1999),
which may be further adjusted annually for merit increases upon approval of the
Compensation Committee. Under his employment agreement, Mr. Friedman is entitled
to receive an annual bonus for the fiscal year ending March 31, 2000 based on a
percentage of the profitability of operations under his direction: at 100%
achievement of the profit target, Mr. Friedman will earn $160,000; at profit
achievement below that profit target, Mr. Friedman will earn pro ratedly less
until no bonus will be earned at achievement below 70% of the profit target. If
the profit target is exceeded, Mr. Friedman will earn a progressively greater
percentage of the profit beyond target, up to a maximum of 9% of profit
exceeding target level. The bonus is also based upon satisfactory growth over
actual prior year results in the opinion of Group 1's compensation committee and
board of directors. If Mr. Friedman retires or becomes totally and permanently
disabled, Mr. Friedman shall be entitled to receive all earned but unpaid
bonuses and any subsequent bonus installments. In the case of death, all earned
but unpaid bonuses and subsequent bonus installments shall be paid promptly in
one sum. If Mr. Friedman is terminated for cause or resigns under circumstances
which would justify termination for cause, all unpaid bonuses will be forfeited
and no longer be payable. If a change in control of Group 1 occurs, Mr.
Friedman, at his option, has the right to resign his position with Group 1 and
Group 1 will continue to pay his compensation and provide him with employee
benefits for one year or until the expiration date of the employment agreement,
whichever is the shorter period, and will pay Mr. Friedman, as a lump sum, all
earned but unpaid bonuses. In addition, bonuses will be paid on a pro-rata basis
for the period through the nearest full fiscal quarter prior to resignation.
FEE AGREEMENT WITH MR. BOWEN
The Company has agreed, pursuant to separate fee agreement dated as of
January 28, 1992, to pay Mr. Bowen fees of 1/2% of the total consideration paid
on acquisitions, and 1/2% of the pre-tax gain (net of expenses) on dispositions
of the Company's or its subsidiaries' businesses. However, this fee is not to be
paid with respect to a disposition, if any, of Group 1 or any of the Company's
business operations or subsidiaries directly related to the particular lines of
business engaged in by such companies as of July 1, 1991, which shall remain
subject to the incentive compensation arrangements in Mr. Bowen's amended and
restated employment agreement with the Company.
The term of Bowen's fee agreement extends until January 27, 2002, unless
Mr. Bowen is no longer a director, officer or employee of the Company, provided
that if Mr. Bowen's employment is terminated without cause (as defined in his
amended and restated employment agreement), the Company must either continue his
fee agreement until January 27, 2002 or pay Mr. Bowen the incentive bonus upon a
disposition, if any, of the Company's interests
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<PAGE> 14
in Group 1 to which Mr. Bowen would have been entitled under his employment
agreement with the Company as in effect prior to its January 28, 1992 amendment
and restatement. No payment was earned under this fee agreement during the
Company's fiscal year ending March 31, 1999.
The Company had entered into fee agreements with Messrs. Manning and
Friedman. These agreements were terminated by the Company and Mr. Friedman and
Manning, respectively, in July, 1999.
BONUS PROGRAMS FOR OTHER EXECUTIVES
Messrs. Bebee, Forman, Miller, Funston and Slater are entitled to an
annual incentive bonus for the fiscal year ended March 31, 2000 to be calculated
on the basis of the revenue and profit performance of the Company in the case of
Messrs. Miller and Funston and the revenue and profit performance of their
respective business units in the case of Messrs. Bebee, Forman and Slater as
compared to internal revenue and profit targets. Mr. Weiss is entitled to an
annual bonus for fiscal year ended March 31, 2000 calculated on the basis the
Company's profit performance as compared to internal profit targets and the
achievement of certain other objectives.
DEFERRED COMPENSATION ARRANGEMENTS
The Company has adopted a Deferred Compensation Plan by which certain
members of senior management have the option of deferring the receipt of amounts
of their annual bonus compensation, if any, and/or their base compensation (the
"Deferred Compensation Plan"). The Deferred Compensation Plan is intended by the
Company to qualify as an unfunded plan for federal income tax purposes and the
Employee Retirement Income Security Act (ERISA). The Deferred Compensation Plan
is administered by the Company. The expenses associated with the establishment
and administration of the Deferred Compensation Plan are borne by the Company.
Any expenses, however, of implementing any investment option selected by a
participant are charged against that participant's account.
The compensation, that is deferred, is paid into a trust designated solely
to administer the Deferred Compensation Program. Currently, Robert S. Bowen and
Scott Miller are the only participants in the Company's Deferred Compensation
Plan.
EXECUTIVE SUPPLEMENTARY BENEFITS
The Company provides certain of its executive officers with group health
insurance and disability insurance policies that are not available to all
salaried employees. These supplementary benefits to such executive officers are
limited to the cost of the premiums for the coverage. The aggregate cost is less
than $25,000 per year for each covered executive officer.
FRIEDMAN LOAN AGREEMENT
The loan is secured by a second mortgage on Mr. Friedman's residence and
by any proceeds from the exercise of stock options and subsequent disposition of
such option shares that Mr. Friedman holds in the Company. Effective with the
January 15, 1997 amendments, the loan was modified so that its term is now the
earlier to occur of 20 years or the termination of his employment with the
Company; the principal balance is now subject to interest at the rate charged to
the Company (adjusted quarterly) by its primary commercial lender; interest is
payable quarterly; 30% of Mr. Friedman's incentive bonus from the Company (after
salary draw is satisfied) shall be applied to annual principal payments. The
loan's current interest rate is seven percent (7%). The principal and interest
balance on the loan outstanding as of March 31, 1999 was $267,678.
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<PAGE> 15
INDEMNIFICATION AGREEMENTS; DIRECTORS AND OFFICERS LIABILITY INSURANCE
INDEMNIFICATION AGREEMENTS. Each current member of the Board of Directors
is signatory to an indemnification agreement (the "Indemnification Agreement")
with the Company. Each Indemnification Agreement provides that the Company shall
indemnify the director or officer who is a party to the agreement (an
"Indemnitee") if he was or is a party to or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (except a derivative
proceeding) by reason of the fact that he is or was a director or officer of the
Company, or is or was serving at its request in certain capacities for another
entity, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Company) incurred in connection with such actions, suits or proceedings. The
indemnification is limited to instances where the Indemnitee acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful. With respect to derivative
proceedings, the Indemnification Agreement provides indemnification similar to
that provided in the Indemnification Agreement for non-derivative proceedings
discussed above, except that indemnification is allowed only to the extent
determined to be fair and reasonable by the court.
The Indemnification Agreement provides that if a director or officer is
entitled to indemnification for some or a portion of the expenses, judgments,
fines or penalties actually or reasonably incurred by him in the investigation,
defense, appeal or settlement of any civil or criminal action, suit or
proceeding, the Company shall nevertheless indemnify him to the extent to which
he is entitled. By the terms of the Indemnification Agreement, its benefits are
not available for expenses or liabilities paid directly to the Indemnity under a
policy of officers' and directors' insurance maintained by the Company or in
several other instances such as if a court determines that each material
assertion made by the Indemnitee in that proceeding was not made in good faith
or was frivolous, or if the claim arises from the purchase and sale by the
Indemnitee of securities in violation of Section 16(b) of the Exchange Act, or
similar successor statute.
DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company currently
maintains a Directors and Officers liability policy with an aggregate limit of
liability of $5,000,000. Deductibles under this policy range from $5,000 per
officer or director for each claim to $50,000 in the aggregate for certain
covered claims. This policy does not cover, among other matters, dishonest,
fraudulent, or criminal behavior.
401(k) PLAN
In January, 1994, the Company adopted the Group 1 Software, Inc. and
Subsidiaries 401(k) Retirement Savings Plan and Trust (the "401(k) Plan"). The
401(k) Plan provides for a contribution to be made by the Company and its
subsidiaries out of current operating earnings based upon the contributions made
by participating employees.
All employees of the Company or its subsidiaries who have been employed
for at least three months are eligible to participate in the 401(k) Plan.
Participants in the 401(k) Plan may contribute from 1% to 15% of their
compensation from the Company or its subsidiary (up to a limit of $10,000) in a
calendar year. The Company or the relevant subsidiary will make contributions to
an employee's 401(k) Plan account equal to the sum of the following: (i) $.75
for each $1.00 a participant contributes up to 2% of the participant's
compensation and (ii) $.50 for each $1.00 the participant contributes for the
next 1% of the participant's compensation. Participants are 100% vested in the
contributions, and earnings thereon, they make to the 401(k) Plan out of their
compensation. Participants vest in Company contributions, and earnings thereon,
at a rate of 20% per year of employment with the Company or its subsidiary, up
to 100%. However, if a participant's employment with the Company or its
subsidiary terminates because of
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<PAGE> 16
retirement, death or disability (as defined in the 401(k) Plan), 100% of the
Company contributions, and their earnings thereon, become 100% vested.
CERTAIN TRANSACTION
The Company has used the services of Great Northern Brokerage Corporation
("Great Northern") of New York, New York to obtain directors and officers
liability insurance coverage for the current fiscal year. A description of this
coverage is set out above in "Executive Officers and Compensation --
Indemnification Agreements; Directors and Officers Liability Insurance." Richard
H. Eisenberg, a director of the Company, is also President of Great Northern.
The Company's payment for this coverage is $93,000 - which includes compensation
to Great Northern for its services that does not exceed $5,000. (See also -
"Friedman Loan Agreement" for a description of that related party transaction.)
PROPOSAL TWO
APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1995 INCENTIVE
STOCK OPTION, NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
TO INCREASE BY 200,000 SHARES THE NUMBER OF SHARES SUBJECT TO THE PLAN
The Board recommends to the stockholders that they approve the proposed
amendment to the 1995 Incentive Stock Option, Non-Qualified Stock Option and
Stock Appreciation Rights Plan, a copy of which is attached hereto as Exhibit A
(the "1995 Incentive Option Plan"). The 1995 Incentive Option Plan currently
provides for up to 600,000 shares of Common Stock for issuance upon the exercise
of options and stock appreciation rights granted under that Plan. As of July 26,
1999, 152,006 shares of Common Stock remained available under the Plan. The 1995
Incentive Plan has a term of ten years - extending to September, 2005. The
current level of authorization under the 1995 Incentive Plan is expected to be
inadequate to deal with future grants under that Plan over the remaining six
years of the Plan. Accordingly, the Board of Directors of the Company considers
it advisable to increase by 200,000 shares the share authorization under the
1995 Incentive Plan. The increased share authorization will afford the ability,
if and when appropriate circumstances arise, to issue grants under that Plan
suitable, in the determination of the Compensation Committee. The Compensation
Committee administers the Plan. The following further describes the 1995
Incentive Plan.
THE 1995 INCENTIVE STOCK OPTION PLAN
The purpose of the 1995 Incentive Plan is to advance the growth and
development of the Company by affording an opportunity to the officers and other
employees (whether full-time or otherwise) of the Company or a subsidiary to
purchase in shares of the Company's stock and/or to receive cash or stock
distribution representing increases in the value of the Company's stock. The
acquisition of such stock by such employees and/or the payment of cash
distributions to such employees, who contribute to the Company's success,
provide the continuing incentive for them to promote the best interest of the
Company and induces them to continue their employment with the Company or a
subsidiary. Finally, the 1995 Incentive Plan enhances the ability of the Company
or a subsidiary to attract competent personnel to enter its employ.
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<PAGE> 17
Options Granted to Executive Officers (as of Record Date) Under 1995
Incentive Plan
<TABLE>
<CAPTION>
Name Number of Options Opt. Exercise Price($) Value - 07/26/99
---- ----------------- ---------------------- ----------------
<S> <C> <C> <C>
Robert S. Bowen 162,500 10.00 0
Ronald F. Friedman 15,000 8.00 0
10,000 10.00 0
Mark D. Funston 10,000 8.00 0
16,500 13.00 0
Alan P. Slater 12,500 8.00 0
7,500 10.00
Stephen R. Bebee 8,000 8.00 0
5,000 10.00 0
B. Scott Miller 4,000 8.00 0
5,000 10.00
Victor O. Forman 4,000 8.00 0
Edward Weiss 4,000 8.00 0
2,500 10.00 0
-------
TOTAL 266,500
</TABLE>
As of the Record Date, 692,700 options to purchase Common Stock had been
granted to all Company employees, including current officers who are not
executive officers. The closing price for the Common Stock was ____________ on
August ___, 1999.
The following is a brief description of the principal provisions of the
1995 Incentive Plan and is qualified in its entirety by the 1995 Incentive Plan
included herewith as Exhibit A.
The 1995 Incentive Plan authorizes the grant of incentive stock options
("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), non-qualified stock options ("Non-Qualified Stock Options"), and
stock appreciation rights units ("Stock Units") redeemable at the discretion of
the Company for cash or stock or a combination thereof. Only employees of the
Company or employees of the Company's subsidiaries are eligible for options
under the Plan. The Plan reserves currently 600,000 shares for issuance upon the
exercise of options granted and for issuance upon redemption of Stock Units
granted under it. Upon adoption of the proposed amendment, that issuance level
would be raised to 800,000 shares. No other amendment to the 1995 Incentive
Option Plan is proposed in this proxy statement.
ADMINISTRATION AND ELIGIBILITY. The 1995 Incentive Plan is administered by
the Company's Compensation Committee appointed by the Company's Board of
Directors. The 1995 Incentive Plan authorizes the grant of options with an
exercise price equal to 100% of the fair market value of the shares of Common
Stock on the date the options are granted. Only those officers and employees of
the Company designated by the Compensation Committee are eligible to participate
in the 1995 Incentive Plan.
The 1995 Incentive Plan precludes the issuance of ISOs to individuals
owning stock possessing more than ten percent of the total combined voting power
of all classes of stock in the Company, its subsidiaries, and any parent it may
subsequently have. Options to purchase Common Stock are not included in
determining whether a person is a ten percent
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<PAGE> 18
or more stockholder. To the knowledge of the Company, no person otherwise
eligible to receive ISOs holds or owns ten percent or more of the total combined
voting power of all classes of stock.
TERMS AND CONDITIONS OF GRANTS. The Options contain such terms as the
Compensation Committee determines including the term and installments, if any,
during which the options may be exercised. The 1995 Incentive Plan provides that
options may be exercised not later than six months after the date of termination
of employment except in the event of the termination of employment by the
Company for cause, in which event the options will be revoked upon termination
of employment. In the event of the termination of employment as a result of the
disability of the optionee, the options will be exercisable for a period of
twelve months following such termination. The options may not be transferred
other than by will or the laws of descent and distribution.
The 1995 Incentive Plan permits optionees to pyramid and to surrender to
the Company already-owned shares of the Common Stock, valued at the fair market
value on the date of exercise, in full or partial payment of the exercise price.
The 1995 Incentive Plan provides for the acceleration of the vesting and
redemption of stock units and stock options upon the occurrence of any of the
following events and approval of the acceleration by the Compensation Committee:
(i) the commencement of a bona fide "tender offer", other than by the Company,
acceptable to the Board for the shares of the Company as provided under Rule
14d-2 promulgated under the Securities Exchange Act of 1934, as amended, or any
subsequent comparable federal rule or regulation governing tender offers; (ii) a
successful tender offer not previously approved by the Board resulting in a
change of control of the Board; (iii) the Company's execution of an agreement
concerning the sale of substantially all of its assets (other than to a
subsidiary in a mere corporate restructuring); (iv) the Company's adoption of a
plan of dissolution or liquidation; or (v) the Company's execution of an
agreement concerning a merger or consolidation involving the Company in which
the Company is not the surviving corporation or if, immediately following such
merger or consolidation, less than fifty percent (50%) of the surviving
corporation's outstanding voting stock is held by persons who were stockholders
of the Company immediately prior to such merger or consolidation. The options
shall be fully exercisable regardless of whether the tender offer is successful,
regardless of whether the dissolution or liquidation is consummated, and
regardless of whether the other corporation which is the surviving corporation
in a merger or consolidation shall adopt and maintain any plan under which
options are granted to holders of outstanding options. If the agreement
concerning the sale of substantially all of the Company's assets or the
agreement concerning a merger or consolidation is not consummated by the
parties, then the options not exercised prior to a formal determination by the
Company's Board of Directors that the contemplated transaction will not be
consummated shall, on and after the date of such determination, be subject to
the exercise restrictions set forth in the respective option agreements. Under
the accelerated vesting provisions of the 1995 Incentive Plan, the Board of
Directors cannot prevent accelerated vesting of options upon a triggering event.
CERTAIN TAX MATTERS. The following is a summary, and does not purport to
be a complete description, of certain federal income tax aspects of the 1995
Incentive Plan and transactions thereunder. Furthermore, no information is given
with respect to any state, local, or foreign taxes which may be applicable.
Under the 1995 Incentive Plan, an optionee does not recognize any taxable
income at the time of the grant of an ISO. Furthermore, in general, the optionee
does not recognize income on the exercise of an ISO. However, if the option is
exercised by an individual who has terminated his or her employment more than
three months prior to the exercise of the ISO, the individual will be taxed on
the difference between the fair market value of the stock and the amount paid
for the stock. While the exercise of an ISO does not generally result in current
taxable income, the same does not hold true for purposes of
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<PAGE> 19
the Alternative Minimum Tax ("AMT"). Upon the exercise of an ISO, the optionee
must recognize for AMT purposes the difference between the exercise price of the
option and the fair market value of the stock received.
An employee who disposes of stock, acquired through the exercise of an
ISO, will recognize long-term capital gain equal to the excess of the sale price
over the price paid for the stock if such sale does not occur within (A) two
years after the option is granted, and (B) one year after the stock is acquired.
In this case, the Company will not receive a deduction for compensation expense.
If, however, the employee disposes the stock prior to the aforementioned holding
periods, then the employee will have ordinary income equal to the lesser of (i)
the difference between the option exercise price and the fair market value of
the stock on the date the option was exercised or (ii) the difference between
the option exercise price and the fair market value of the stock on the date of
sale or exchange. Any additional gain attributed to the sale will be considered
capital gain. The amount so recognized as ordinary income to the employee will
be deductible to the Company as compensation expense.
If the exercise of an ISO is made by delivery of shares of Common Stock
(acquired pursuant to the 1995 Incentive Plan) in payment of the option price,
the shares delivered are deemed to be exchanged in a tax-free transaction
provided that such shares were not delivered prior to (A) two years after the
option had been granted, and (B) one year after the stock had been acquired. If
stock is used to exercise an option, but is delivered prior to the expiration of
the aforementioned holding periods, the employee will have ordinary income equal
to the difference between the fair market value of the stock on the date
acquired, and the price paid to exercise the option. In addition, the employee
will recognize capital gain income equal to the difference between the fair
market value of the stock when acquired, and the fair market value of the newly
issued stock received. The Company will be able to take a compensation expense
deduction for the amount recognized by the employee as ordinary income.
With respect to Non-Qualified Stock Options, the optionee does not
recognize taxable income, and the Company is not entitled to a deduction, upon
the grant of such options. Upon exercise of such options, the optionee
recognizes ordinary income in an amount equal to the amount by which the fair
market value of each share of Common Stock on the date of exercise exceeds the
option price. The amount so recognized as income is deductible by the Company.
Upon any subsequent sale of shares by an optionee, the optionee's basis on the
shares purchased for determining gain or loss is the fair market value on the
date of exercise, if such shares were acquired for cash. If the exercise of the
option is made by delivery of shares of Common Stock in payment of the option
price, the shares delivered are deemed to be exchanged in a tax-free transaction
for the equivalent number of new shares of Common Stock. Such equivalent number
of new shares have the same basis and holding period as the shares exchanged.
The number of shares received in excess of the number of shares delivered
is included in the optionee's income at the fair market value thereof at the
time of exercise. Any gain or loss recognized upon the sale or other disposition
of these shares will be capital gain or loss, either long-term or short-term
depending upon the holding period of the shares (which begins on the date the
optionee recognizes income with respect to such shares, except for the shares
deemed to be received in a tax-free transaction as described above).
Any payment received for the redemption of Stock Units is compensation
income to the employee and a compensation deduction to the employer.
The foregoing is not to be considered as tax advice to any persons who may
be optionees, and any such persons are advised to consult their own tax counsel.
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<PAGE> 20
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE AMENDMENT TO
THE 1995 INCENTIVE OPTION PLAN.
AN AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF VOTING
SECURITIES PRESENT AND VOTING AT THE MEETING IS REQUIRED FOR APPROVAL. THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT TO THE 1995 INCENTIVE OPTION PLAN.
PROPOSAL THREE
APPROVAL OF THE COMPANY'S 1999 NON-EMPLOYEE
DIRECTOR STOCK PLAN
The Board is recommending to the stockholders that they approve the 1999
Directors Plan, a copy of which is attached hereto as Exhibit B. Because
adoption of the 1999 Directors Plan may benefit the current non-employee
directors of the Company, they may be deemed to have an interest in this
proposal.
THE 1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN.
The purpose of the 1999 Directors Plan is to provide incentives that will
attract and retain highly competent persons to serve as non-employee directors
by providing them with opportunities to acquire a propriety interest in the
Company. The 1999 Directors Plan is designed to meet exemptions from the
short-swing liability provisions contained in Section 16 of the Exchange Act. By
providing for automatic stock awards in accordance with a fixed formula,
non-employee directors have no discretionary authority with respect to their own
awards.
The following is a brief description of the principal provisions of the
1999 Directors Plan and is qualified in its entirety by the 1999 Directors Plan
included herewith as Exhibit B.
Under the 1999 Directors Plan, the aggregate number of shares of Common
Stock of the Company which may be issued 70,000 shares, subject to adjustment in
certain circumstances, including merger, consolidation, reorganization,
recapitalization, stock dividends, stock splits, combination of shares, exchange
of shares, change of corporate structure or other similar transactions.
The terms and conditions under which stock shall be granted under the 1999
Directors Plan are set forth in the 1999 Directors Plan and described below. The
Board of Directors or any executive officer of the Company designated by the
Board of Directors shall have authority to interpret the provisions of the 1999
Directors Plan, to establish such rules and procedures as may be necessary or
advisable to administer the 1999 Directors Plan and to make all determinations
necessary or advisable for the administration of the 1999 Directors Plan,
provided that no such interpretation or determination shall change or affect the
selection of participants eligible to receive grants under the 1999 Directors
Plan, the number of shares of Common Stock covered under the 1999 Directors Plan
or the terms and conditions thereof.
ELIGIBILITY. Non-employee directors of the Company are eligible to receive
stock under the 1999 Directors Plan. The Company currently has seven
non-employee directors who would be eligible to participate in this Plan.
TERM OF PLAN; GRANT OF STOCK TO NON-EMPLOYEE DIRECTORS. The 1999 Directors
Plan shall be effective as of September 23, 1999, upon approval of the
stockholders at the Annual Meeting. On the first day of each fiscal year of the
Company commencing with April
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<PAGE> 21
1, 2000 during the term of the 1999 Directors Plan, each non-employee director
then in office would be automatically granted $10,000 worth of shares of Common
Stock. In addition, each non-employee director whose continuing for initial term
commences on a date other than the first day of any Plan year shall receive for
the first (partial) year of service as a director a number of shares of Common
Stock, based on $10,000 but pro rated to reflect the partial year of service. No
stock shall be granted under the 1999 Directors Plan after September 22, 2009.
If the 1999 Directors Plan had been in effect in the last fiscal year,
each non-employee director would have received 1,290 shares of Common Stock on
April 1, 1999.
TERMS AND CONDITIONS OF STOCK GRANTS. At the time of the grant of the
stock under the Plan, each eligible director shall receive an amount of Common
Stock valued at $10,000 (based on the stock's then-current fair market value).
For purposes of the 1999 Directors Plan, fair market value shall mean (i) the
closing price on the grant date of a share of Common Stock, as reported on the
National Market System of The Nasdaq Stock Market, Inc., but if no shares of
Common Stock were traded on such date, then on the last previous date on which a
share of Common Stock was so traded, (ii) the closing price for a share of
Common Stock on the stock exchange, if any, on which the shares of Common Stock
are primarily traded, but if no shares of Common Stock were traded on such date,
then on the last previous date on which a share of Common Stock was so traded or
(iii) if none of the above is applicable, the value of a share of Common Stock
for such date as established in good faith by the Board. A fractional share will
be rounded up to the next full share. Stock issued under the Plan shall not be
forfeitable after issuance to a Director by reason of a change of control (as
defined in the Plan) in Company.
Directors will not be able to sell or transfer Common Stock issued to them
under the Plan for twelve months from date of issuance and thereafter will be
subject to the trading restrictions under Rule 144 of the Securities Act of
1933, as amended.
The 1999 Directors Plan may be terminated and may be modified or amended
by the Company's Board of Directors at any time; provided, however, that no
modification or amendment increasing the aggregate number of shares which may be
issued, materially increasing benefits accruing to participants under the 1999
Directors Plan, or materially modifying the requirements as to eligibility to
receive stock without stockholder approval.
CERTAIN TAX MATTERS. The following is a summary, and does not purport to
be a complete description, of certain federal income tax aspects of the Plan and
transactions thereunder. Furthermore, no information is given with respect to
any state, local, or foreign taxes which may be applicable.
Under the 1999 Directors Plan, a grantee will recognize taxable ordinary
income, and the Company will be entitled to a deduction, upon the grant of
Stock. Any gain or loss recognized upon the sale or other disposition of these
shares will be capital gain or loss, either long-term or short-term depending
upon the holding period of the shares (which begins on the date the grantee
recognizes income with respect to such shares.)
The foregoing is not to be considered as tax advice to the grantee, and
any such person should consult their tax counsel.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ADOPTION OF THE 1999
DIRECTORS PLAN.
AN AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF VOTING
SECURITIES PRESENT AND VOTING AT THE MEETING IS REQUIRED FOR APPROVAL. THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE 1999 DIRECTORS' PLAN.
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PROPOSAL 4
AMENDMENT TO GROUP 1 CERTIFICATE TO INCREASE NUMBER OF
AUTHORIZED SHARES OF PREFERRED STOCK FROM 200,000 TO 1,200,000 SHARES
The Board recommends that stockholders approve an amendment to the
Company's Certificate of Incorporation strictly limited to increasing the number
of shares of preferred stock that the Company is authorized to issue to an
aggregate of 1,200,000 shares, from an aggregate of 200,000 shares that is
currently authorized in the Certificate. The Company's Certificate currently
provides for an aggregate of 14,000,000 shares of Common Stock. No change is
proposed to the current level of authorized shares of Common Stock.
No other amendment to the Company's Certificate is proposed in this
proxy statement. Further, no change is proposed to the authority of the
Company's Board of Directors under the Certificate to determine designations,
powers, preferences, rights, restrictions and other terms and conditions of
preferred stock that may be issued by the Company.
CERTIFICATE AS AMENDED. Upon the effectiveness of the proposed
amendment, Article Fifth of the Company's Certificate will read in its entirety
as follows:
"FIFTH. The corporation shall have the authority to issue the following
classes of stock:
(1) total of 14 million (14,000,000) shares of Common Stock, each of such
shares having a par value of $.50 per share; and
(2) a total of one million, two hundred thousand (1,200,000) shares of
Preferred Stock, each of such shares having a par value of $.25 per share
to be issued (i) in such series and with such designations, powers,
preferences, rights, and such qualifications, limitations or restrictions
thereof as the Board of Directors shall fix by resolution or resolutions
which are permitted by Section 151 of the Delaware Corporation Law for any
such series of Preferred Stock, and (ii) in such number of shares in each
series as the Board of Directors shall fix by resolution or resolutions,
provided that the aggregate number of all shares of Preferred Stock issued
does not exceed the number of shares of Preferred Stock authorized
hereby."
SOME POTENTIAL AFFECTS. Adoption of the proposed amendment and
issuance of additional shares of Preferred Stock could affect the rights of the
holders of currently outstanding shares of Preferred or Common Stock, depending
on the nature of rights and preferences granted to the newly issued Preferred
Stock. If the amendment is adopted, it will become effective upon the filing of
a Certificate of Amendment of the Company's Certificate with the Secretary of
State of the State of Delaware.
CURRENT STOCK ISSUED. On July 26, 1999, 47,500 shares of 6%
Cumulative Convertible Preferred Stock and 3,725,290 shares of Common Stock were
issued and outstanding. On July 26, 1999, approximately 208,776 shares of Common
Stock were reserved for issuance upon exercise of options outstanding or
available for grant under Group 1's various stock option plans. There is no
established public trading market for any the currently issued Group 1 preferred
stock.
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6% CUMULATIVE CONVERTIBLE PREFERRED STOCK. Currently, the only
preferred stock issued by Group 1 and outstanding is 47,500 shares of 6%
Cumulative Convertible Preferred Stock. The following is a summary of various
salient characteristics of the 6% Cumulative Convertible Preferred Stock.
Dividends. Each share of this Preferred Stock currently issued is
entitled to receive a 6% dividend, semi-annually, prior to the payment of any
cash dividends with respect to the Common Stock. Dividends are cumulative from
the date of original issue. Dividend payments for the period of time from the
issuance of this Preferred Stock to July 1, 1999 (the last dividend payment
date) have been paid in full. Dividends payable on this Preferred Stock for each
full dividend period are computed by dividing the annual dividend rate by two.
Voting Rights. Each share of this Preferred Stock has the right to
one vote for each whole share of Common Stock into which it is convertible. This
Preferred Stock is convertible into Common Stock on a one-to-one basis. Holders
of shares of this Preferred Stock vote together with holders of the Common
Stock, as a single class (except as otherwise required by Delaware law).
Conversion. Each share of this Preferred Stock is convertible into
one share of Common Stock, subject to certain anti-dilution protection,
including provisions adjustments in the conversion ratio in the event of (i)
stock dividends, stock splits or combinations or reclassifications of shares of
the Common Stock, (ii) Group 1 issues Common Stock or rights to acquire, or
securities convertible into, the Common Stock at a price below the then-market
price for the Common Stock, or (iii) mergers, acquisitions or consolidations of
Group 1. Group 1 may not declare dividends or distributions with respect to
Common Stock, except for dividends payable solely in Common Stock, unless the
holders of this Preferred Stock concurrently receive dividends or distributions
equal in amount and kind to what such holders would have received if they had
converted their shares of this Preferred Stock into Common Stock.
Preemption Rights. This Preferred Stock has no preemptive rights
with respect to any subscription rights or grants of options, warrants or other
interests in Common Stock which may be issued by Group 1. Holders of this
Preferred Stock are entitled to receive prior notice of corporate events such as
dividend payments in capital reorganizations, mergers, acquisitions and
consolidations.
Redemption. This Preferred Stock may be redeemed at the option of
Group 1 at $20.00 per share, plus accrued but unpaid dividends. The redemption
price is to be paid in cash, except that with respect to the 47,500 shares of
Preferred Stock issued to Dr. Milton Kaplan, Ms. Jane Bowen and Messrs. Robert
Bowen, Leonard Smith and John Spohler, each may, at Group 1's option, be paid by
Group 1 issuing promissory notes to these holders secured by a pledge of 250,000
shares of Common Stock. To date, Group 1 has issued no such promissory notes.
Group 1 has entered into a registration rights agreement granting holders the
right, subject to the terms and conditions of such agreement, to registration
under the Securities Act of 1933, as amended, of Common Stock issuable upon
conversion of the shares of this Preferred Stock. This Preferred Stock is not be
subject to any sinking fund.
POTENTIAL USES. Any authorized but unissued shares of preferred
stock may be issued upon the exercise of the rights to be granted pursuant to
the Stockholder Protection Rights Agreement that has been adopted by the Board.
Accordingly, authorized shares of preferred stock could be used by the Company
to oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. In addition, the Board could use authorized shares of
preferred stock to strategically sell shares of preferred stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. From time to time, the Company has received unsolicited acquisition
proposals. Management has considered, and will continue to consider such
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proposals in the ordinary course of business to determine whether such proposals
are in the long-term best interests of its stockholders. Although this proposal
to increase the number of authorized preferred stock has been prompted by
business and financial considerations and not by the threat of any hostile
takeover attempt, nevertheless, stockholders should be aware that approval of
the proposal could facilitate future efforts by to deter or prevent changes in
control of the Company, including transactions in which the stockholders might
otherwise receive a premium for their shares over then current market prices.
The terms of the additional shares of preferred stock could provide for the
conversion of those shares into shares of Common Stock at a conversion rate that
represents a premium over market.
The Bylaws of the Company provide for a classified board and the
Certificate of Incorporation provides that directors may be removed without
cause by the affirmative vote of 80% of the stockholders or removed for cause by
a majority vote of the stockholders. These provisions can have the effect of
delaying, deferring or preventing a change of control of the Company.
Although at present the Board has no plans to issue additional
shares of preferred stock, it believes it is desirable to have such shares
available to provide additional flexibility to use its capital stock for
business and financial purposes in the future. Further, the additional shares
may be issued for various purposes, including, without limitation, stock splits,
stock dividends, establishing strategic relationships with other companies and
expanding the Company's business or product lines through the acquisition of
other businesses or products in consideration for preferred stock. If the
proposed amendment to the Company's Certificate is approved, the Board may
determine to take any of the foregoing actions without the need for further
stockholder approval.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE AMENDMENT TO THE
CERTIFICATE TO INCREASE THE NUMBER OF SHARES OF PREFERRED STOCK AUTHORIZED TO
BE ISSUED
AN AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK AND PREFERRED STOCK WILL BE REQUIRED TO APPROVE THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE. AS A RESULT, ABSTENTIONS AND BROKER
NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers, L.L.P. ("PWC" and its predecessor, Coopers &
Lybrand, L.L.P.) has audited the Company's financial statements for the fiscal
years ending March 31, 1999, 1998 and 1997. A representative of PWC is expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if he desires to do so and is expected to be available to respond to
appropriate questions.
SHAREHOLDERS' PROPOSALS
Eligibility as a shareholder to submit proposals, the proper subjects of
such proposals and other issues governing stockholder proposals are regulated by
the rules adopted under Section 14 of the Securities Exchange Act of 1934, as
amended. If shareholders wish to submit a proposal for inclusion in the
Company's proxy materials for the 2000 Annual Meeting of Shareholders, the
Company must receive such proposals at its
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principal executive office at 4200 Parliament Place, Suite 600, Lanham, Maryland
20706-1844, Attention: Edward Weiss, Secretary, no later than May 23, 2000.
In addition, if shareholders wish to bring a proposal before the 2000
Annual Meeting of shareholders but do not wish to have such proposal included in
the Company's proxy statement for that meeting, the shareholder must give the
Company written notice of such proposal(s) at the address set forth in the
preceding paragraph, on or before June 23, 2000 in order for such proposal(s) to
be considered timely. The persons designated as proxies in connection with the
2000 Annual Meeting will have discretionary voting authority with respect to any
shareholder proposal(s) not received timely.
Each proposal submitted should include the full and correct name and
address of the shareholder(s) making the proposal, the number of shares
beneficially owned and their date of acquisition. If beneficial ownership is
claimed, proof thereof should also be submitted with the proposal. The
shareholder or his or her representative must appear in person at the annual
meeting and must present the proposal, unless he or she can show good reason for
not doing so.
SOLICITATION PROCEDURES
Officers and regular employees of the Company, without extra compensation,
may solicit the return of proxies by mail, telephone, telegram and personal
interview. Certain holders of record such as brokers, custodians and nominees,
are being requested to distribute proxy materials to beneficial owners and to
obtain such beneficial owner's instructions concerning the voting of proxies.
The cost of solicitation of proxies (including the cost of reimbursing banks,
brokerage houses, and other custodians, nominees and fiduciaries for their
reasonable expenses in regard to the proxy soliciting materials) will be paid by
the Company.
MISCELLANEOUS
Management does not intend to present any other matters at the Annual
Meeting. If other matters are properly presented at the Annual Meeting, the
persons named as proxies will vote them in accordance with their best judgment.
Where information contained in this Proxy Statement rests particularly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person or contained in filings made by such
person with the Securities Exchange Commission.
By Order of the Board of Directors
Edward Weiss
Secretary
Dated: August ___, 1999
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EXHIBIT A
1995 GROUP 1 SOFTWARE, INC.
INCENTIVE STOCK OPTION, NON-QUALIFIED
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
Section 1: Purpose.
1.1 This Plan (the "Plan") is intended to provide a means for the granting
of awards (each such award is hereinafter referred to as the "Award") of stock
options and/or stock appreciation rights to selected full- and part-time
employees (including officers who are also employees) of Group 1 Software, Inc.
(the "Company") and such of its domestic or foreign, present or future,
affiliated companies as shall be designated from time to time by the Company's
Board of Directors (the "Board") (each such person, upon receipt of an Award is
hereinafter referred to as a "Participant").
1.2 This Plan is designed to (a) provide incentives and rewards to those
persons who are in a position to contribute to the long-term growth and
profitability of the Company; (b) assist the Company and such affiliated
companies (the "Affiliates") to attract, retain and motivate personnel with
experience and ability; and (c) make the Company's compensation program more
competitive with those of other companies. The Company expects that by providing
such Awards it will benefit from the added interest which such personnel will
have in the success of the Company and/or the Affiliates as a result of their
proprietary interest.
1.3 For purposes of this Plan, an Affiliate shall mean any corporation
defined as a subsidiary corporation under Section 425(f) of the Internal Revenue
Code, as amended (the "Code").
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Section 2: Administration.
2.1 This Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). Members of the Committee shall be disinterested within
the meaning of SEC Rule 16b-3. No individual may participate as a member of the
Committee in the administration of this Plan if he shall have been eligible to
receive Awards or any other stock options or stock appreciation rights of the
Company or any of its Affiliates under this Plan or any other discretionary plan
of the Company or its Affiliates at any time within one year prior to serving on
the Committee. Subject to the express provisions of this Plan and to such orders
or resolutions not inconsistent with the provisions of this Plan as may be
issued or adopted from time to time by the Board, the Committee shall have full
power and authority, in its discretion, to grant Awards; to determine to whom
and the time when Awards will be granted; to designate Awards as incentive stock
options or nonqualified stock options; to determine the purchase price of the
common stock covered by each option, the term of each option, and the
exercisability of each option; to determine the terms and provisions of the
option agreements (which need not be identical) entered into in connection with
Awards under this Plan; to interpret this Plan; to supervise the administration
of this Plan; to prescribe, amend and rescind rules and regulations relating to
this Plan; and to make all other determinations and take any other action deemed
necessary or desirable to the proper operation or administration of this Plan.
The Committee may authorize such of the Company's officers and other persons to
perform such functions in the execution and administration of this Plan (other
than the interpretation of this Plan and the adoption of rules governing its
execution and administration) as the Committee shall determine from time to
time.
2.2 All decisions made by the Committee pursuant to the powers vested in
it by this Plan document and related orders or resolutions of the Board shall be
final and binding on all persons (including Participants, the Company and any
stockholder and/or employee of the Company or any Affiliate). No member of the
Committee shall be liable for any action or determination made in good faith
with respect to this Plan or any Award granted under it.
Section 3: Scope and Duration.
3.1 Awards under this Plan may be granted in the form of incentive stock
options (the "ISO's") as provided in Section 422 of the Code or in the form of
nonqualified stock options (the "NQSO's") and/or stock appreciation rights (the
"SAR's") as provided in Section 7. Unless otherwise indicated, references in
this Plan to "Options" include ISO's and NQSO's. As used in the preceding
sentence, the term "stock appreciation rights" means rights to receive the
payment provided for in Section 7, upon the surrender of an unexercised related
Option.
3.2 The total number of shares of common stock of the Company (the
"Stock") as to which Options or SAR's may be granted under this Plan shall be
300,000 shares subject to adjustments as provided in this Plan. Issuance of
Stock upon exercise of an option or reduction of the number of shares of Stock
subject to an option upon exercise of an SAR shall reduce the total number of
shares of Stock available under this Plan. There shall not be counted against
this total any shares of Stock covered by an Option that has lapsed unexercised
or has been forfeited as hereinafter provided.
3.3 Subject to adjustments provided for in Section 12 hereof, shares of
Stock as to which Options and SAR's under this Plan may be granted may be made
available by the Company from authorized but unissued shares of Stock or from
shares reacquired by the Company (including shares purchased in the open
market).
Section 4: Eligible Persons. The persons who shall be eligible to receive Awards
under this Plan shall be all full- and part-time employees (including officers
who are also
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employees) of the Company or an Affiliate, without limitation as to length of
service ("Eligible Persons").
Section 5: Granting Awards.
5.1 Subject to the limitations of this Plan, the Committee, at any time
and from time to time, and after such consultation with and consideration of
such recommendations of management as the Committee deems desirable, shall
select from Eligible Persons those persons to be granted Awards and determine
the time when each Award shall be granted, the number of shares of Stock to be
subject to an option and/or SAR and the terms and conditions, consistent with
this Plan, upon which Options and/or SAR's are to be awarded. The Committee
shall make Awards to the Eligible Persons so selected for the number of options
and/or SAR's and upon the terms and conditions to determined. No Options or
SAR's or underlying shares of Stock shall be issued or distributed under this
Plan unless and until all legal requirements applicable to the issuance or
transfer of such Options, SAR's and/or Stock have been complied with to the
satisfaction of the Committee and the Company.
5.2 No ISO shall be granted hereunder to any person who, at the time such
Option is to be granted, owns stock of the Company or of any of its Affiliates
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any such Affiliate unless such grant complies with
Section 422 of the Code. For purposes of the preceding sentence, the attribution
rules of stock ownership set forth in Section 425(d) of the Code shall apply.
5.3 No Awards shall be granted under this Plan after its termination on
September 12, 2005, but Awards granted prior to such termination date may extend
beyond that date, and the terms of this Plan shall continue to apply to such
awards.
Section 6: Terms and Conditions of Options.
6.1 General. Each Option granted pursuant to this Plan shall be subject to
all of the terms and conditions hereinafter provided in this Section 6, all
other terms and conditions set forth in any other Section of this Plan, and such
other terms and conditions ("Discretionary Conditions") as may be specified by
the Committee with respect to the option and the Stock covered thereby at the
time of the making of the Award or as may be specified thereafter by the
Committee in the exercise of its powers under this Plan. Without limiting the
foregoing, it is understood that the Committee may, at any time and from time to
time after the granting of an Award under this Plan, specify such additional
terms and conditions with respect to such Award as may be deemed necessary or
appropriate to ensure compliance with all applicable laws, including, but not
limited to, terms and conditions for compliance with Federal and state
securities laws and methods of withholding or providing for the payment of
required taxes. The terms and conditions with respect to any Participant need
not be identical with the terms and conditions with respect to any other Award,
or with respect to any Award to any other Participant.
6.2 Option Agreement. Receipt of an Option shall be subject to execution
of a written agreement (the "Option Agreement") between the Company and the
Participant, in a form approved by the Committee, which shall set forth the
number of shares covered by the Option, the exercisability provisions of the
Option, the applicable Option Period (as defined herein), the conditions
provided in this Plan as may be deemed appropriate by the Committee, including,
but not limited to, any such Discretionary Conditions. A fully executed original
counterpart of the Option Agreement shall be provided to the Company and the
Participant.
6.3 Option Price. The purchase price of the Stock covered by each option
shall be determined by the Committee, but in no event shall the option Price be
less than 100% of the Fair Market Value of such Stock on the date the Option is
granted for ISO's nor less
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than 85% of the Fair Market Value of such Stock on the date the Option is
granted for NQSO's. If the Stock is listed on an established stock exchange,
such Fair Market value shall be deemed to be the closing price of the Stock on
such stock exchange on the day the Option is granted or if no sale of the Stock
shall have been made on any stock exchange on that day, the next preceding day
on which there was a sale of the Stock. If the Stock is not listed on an
established stock exchange but is traded in the over-the-counter market, the
Fair Market Value of the Stock shall be the closing price as quoted in the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") on the day the option is granted or if no sale of Stock is reflected
in NASDAQ on that day, on the preceding day on which there was a sale of Stock
reflected in NASDAQ. If no quotations are available, the Fair Market Value shall
be as determined by the Committee in good faith. The Committee shall have full
authority in fixing the option price, and be fully protected in doing so.
6.4 Term of Option. The duration of each Option granted under this Plan
shall not be more than 10 years from the date of grant, as the Committee shall
determine, subject to earlier termination as provided in Sections 9, 10 and 11.
6.5 Exercise and Vesting of Options; Time of Payment.
6.5.1 No ISO or NQSO shall be exercisable during the year ending on the
first anniversary of the Option's grant. Each ISO and NQSO shall be exercisable
thereafter as determined by the Committee (subject to the terms of this Plan)
and set forth in the Option Agreement.
6.5.2 A Participant wishing to exercise an option shall give written
notice to the Company in the form and manner prescribed by the Committee,
indicating the date of award and type of Option being exercised, the number of
shares to be exercised, and such other information as shall be required by the
Committee. Full payment for the shares exercised pursuant to the Option must
accompany the written notice. Except as provided in Sections 9 and 10, no Option
may be exercised at any time unless the Participant is then a full- or a
part-time employee of the Company or an Affiliate.
6.5.3 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall, without stock issuance
or transfer taxes to the Participant or to any other person entitled to exercise
an option pursuant to the Plan, deliver to the Participant or such other person
a certificate or certificates for the requisite number of shares of Stock.
6.5.4 Rights as a Stockholder. A Participant or any other person entitled
to exercise an Option under this Plan shall have no rights as a stockholder with
respect to any Stock covered by the Option until the date of issuance of a Stock
certificate for such Stock.
6.5.5 Partial Exercise. An Option granted under this Plan may be exercised
as to any lesser number of shares than the full amount for which it could be
exercised. Such a partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan as to the
remaining shares subject to the Option.
6.5.6 The Option Price for the shares as to which an Option is exercised
shall be paid to the Company in full on the date of exercise. At the election of
the Participant, such payment may be (i) in cash, (ii) in shares of Stock owned
by the Participant prior to exercising the Option and having a Fair Market Value
on the date of payment equal to the Option Price for the shares of Stock being
purchased, and satisfying such other requirements as may be imposed by the
Committee or (iii) partly in cash and partly in such shares of Stock. The
Participant shall also be entitled to make payment by pyramiding the shares
received upon exercise of Options by simultaneously delivering such shares of
stock in payment of the purchase price of shares subject to additional Options;
any share
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delivered in payment of the exercise price must have been held of record by the
Optionee for a least six months or such other period as may be required to avoid
any adverse effect on the financial position of the Company or a Subsidiary as a
result of incurring compensation expense or otherwise.
Such shares, which shall be fully paid and non-assessable upon the
issuance thereof, shall be represented by a certificate or certificates
registered in the name of the Participant and stamped with any appropriate
legend. In addition, prior to delivery of the shares of Stock, any amount
necessary to satisfy applicable Federal, state or local tax requirements shall
be paid promptly upon notification of the amount due. Stock acquired by the
Participant which is identified as having been obtained through an ISO under
this Plan and still subject to ISO holding requirements as defined in the Code,
may not be tendered in payment of the Option Price.
6.6 Limitations on ISO's.
6.6.1 The aggregate Fair Market Value (determined as of the time of grant)
of all Stock for which an employee may be granted ISO's in any calendar year
(under this Plan and any other plan of the Company, any Affiliate or any
predecessor of any such corporation) shall not exceed the limitations imposed by
Section 422 of the Code.
6.6.2 ISO's shall also comply with any other restrictions and limitations
imposed by Section 422 of the Code not otherwise provided in the Plan.
Section 7: Terms and Conditions of SAR's.
7.1 Grants. The Committee may grant SAR's to Eligible Persons in
connection with Options granted under this Plan. Each SAR shall entitle the
Participant upon prior consent of the Committee (which consent the Committee may
withhold as to any individual SAR in its absolute discretion), to surrender to
the Company an unexercised related Option (or any portion thereof which the
employee from time to time determines to surrender for this purpose) and to
receive from the Company in exchange therefor, subject to the provisions of this
Plan and such rules and regulations as from time to time may be established by
the Committee, a quantity of shares of Stock equal to the excess of the Fair
Market Value on the exercise date of one share of Stock over the Option Price
per share times the number of shares covered by the Option, or portion thereof,
which is surrendered. The date a notice of exercise is received by the Company
shall be the exercise date.
7.2 General. Each SAR shall be subject to the same terms and conditions as
the Option to which it relates, shall be exercisable only to the extent the
related option is exercisable and the Committee consents to its exercise, and
shall be subject to such other terms and conditions as the Committee may
determine.
7.3 Exercise of SAR's.
7.3.1 SAR's may be exercised from time to time as follows:
7.3.1.1 The Committee must receive written notice of exercise
stating the number of shares of Stock subject to an exercisable Option with
respect to which the SAR is being exercised.
7.3.1.2 The Committee shall advise the Participant within five
business days after receipt of such written notice whether or not it will
consent to such exercise.
7.3.1.3 If the Committee consents to the exercise, the SAR will be
deemed to have been exercised on the date of the Company's receipt of the
written notice.
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7.3.1.4 If the Committee does not notify the Participant of its
decision within such five business day period, the Committee shall be
conclusively presumed to have given its consent.
7.3.1.5 If the Committee denies its consent, the Participant shall
not have the right to submit another written notice of exercise until six months
after the date of submission of the previous written notice of exercise.
7.3.2 All shares shall be valued at their Fair Market Value as of the date
of exercise of the SAR; provided, however, that with respect to exercises of
SAR's by a Participant who is subject to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, during any period commencing on the third
business day following the date of release for publication of any annual or
quarterly summary statements of the Company's sales and earnings and ending on
the twelfth business day following such date (a "window period"), the Committee
shall prescribe whether payment shall be made in cash or otherwise, and may
prescribe, by rule of general application, such other measure of fair market
value per share as the Committee may, in its discretion, determine, but not in
excess of the highest Fair Market Value (as defined in Section 6.3) during such
window period and, in the case of SAR's that relate to an ISO, not in excess of
the maximum amount that would be permissible under Section 422A of the Code
without disqualifying such option as an ISO under such Section 422A.
7.3.3 The number of shares of Stock received by a Participant upon
exercise of a SAR may not exceed the number of shares covered by the Option or
portion thereof surrendered. No cash will be paid in lieu of any fractional
share of Stock.
7.3.4 Any amount necessary to satisfy applicable Federal, state or local
tax requirements shall be withheld or paid promptly upon notification of the
amount due and prior to or concurrently with delivery of a certificate
representing shares of Stock.
7.3.5 Upon exercise of a SAR, the number of shares of Stock subject to
exercise under the related Option shall automatically be reduced by the number
of shares of Stock represented by the Option or portion thereof surrendered.
Shares of Stock subject to options or portions thereof surrendered upon the
exercise of SAR's shall not be available for subsequent awards under this Plan.
Section 8. Nontransferability of Options and SAR's.
Options and SAR's granted under this Plan shall not be transferable by the
Participant other than by will or by the laws of descent and distribution.
During the lifetime of a Participant, Options and SAR's may be exercised only by
the Participant or its representative. Options and SAR's exercisable after the
death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant.
Section 9. Termination of Employment.
9.1 If, prior to the expiration of the Option Period, a Participant's
employment by the Company or an Affiliate terminates (other than by reason of
death or disability), each Option then outstanding as to that Participant shall
remain exercisable for a period of three (3) months from the date of termination
of employment (but not later than the end of the Option Period) to the extent it
was exercisable on the date of termination of employment, and thereafter all
such Options shall terminate.
9.2 Notwithstanding any other provisions of this Section 9, if a
participant's employment is terminated for cause, all rights of the Participant
under any Options shall cease immediately.
Section 10. Death or Disability of Participant.
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10.1 If, prior to the end of the Option Period, a Participant's employment
by the Company or an Affiliate terminates by reason of death, each option shall
remain exercisable for a period of six months from the date of death (but no
later than the end of the Option Period) to the extent that it was exercisable
on the date of death.
10.2 If, prior to the end of the Option Period, a Participant's employment
by the Company or an Affiliate terminates by reason of disability, each option
shall remain exercisable for a period of one year from the date of such
termination (but no later than the end of the Option Period) to the extent that
it was exercisable at the date of termination as used in this Section 10 and
elsewhere in this Plan, the term "disability" means a physical or mental
impairment which comes within the definition of disability as set forth in
Section 22(e)(3) of the Code.
Section 11: Forfeiture Upon Occurrence of Certain Acts.
Notwithstanding any other provisions of this Plan, no payment under any
SAR or issuance of any Stock pursuant to any Award shall be made and all rights
of the Participant who received such Award (or his designated beneficiary or
legal representatives) under this Plan shall be forfeited if, prior to the time
of such payment or issuance, the Participant (i) shall be employed without the
Company's or Affiliate's consent by a competitor of, or shall be engaged in any
activity in competition with, the Company or an Affiliate; (ii) divulges without
the consent of the Company any secret or confidential information belonging to
the Company or an Affiliate; (iii) has been dishonest or fraudulent in any
matter affecting the Company or (iv) has committed any act which, in the sole
judgment of the Committee, has been substantially detrimental to the interests
of the Company. The Company shall give a Participant written notice of the
occurrence of any such event prior to making any such forfeiture. The
determination of the Committee as to the occurrence of any of the events
specified in the foregoing clauses (i) and (iv) of this Section 11 shall be
conclusive and binding upon all persons for all purposes. Any Award shall be
subject to forfeiture for the reasons provided in this Section in such manner as
shall be provided by the Committee.
Section 12: Stock Adjustments.
12.1 In the event that the shares of Stock shall be changed into or
exchanged for a different number or kind of shares of stock of the Company or of
another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock split, combination of shares or
otherwise), or if the number of such shares of Stock shall be increased through
the payment of a stock dividend, then there shall be substituted for or added to
each share of Stock subject to, or which may become subject to, an Option under
this Plan, the number and kind of shares into which each outstanding share of
Stock shall be so changed or for which each such share shall be exchanged, or to
which each such share shall be so entitled, as the case may be. Outstanding
options shall also be appropriately amended as to Option Price and other terms
as may be necessary to reflect the foregoing events. In the event there shall be
any other change in the number or kind or outstanding shares of the Stock, or of
any shares into which such shares shall have been changed, or for which they
shall have been exchanged, and if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in any Option
theretofore granted or which may be granted under this Plan, such adjustments
shall be made in accordance with such determination.
12.2 Fractional shares resulting from any adjustment in Options pursuant
to this Section 12 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each holder
of an option which shall have been so adjusted and such adjustment (whether or
not such notice is given) shall be effective and binding for all purposes of
this Plan.
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12.3 Treatment of Options and SARs.
A. In the event of an occurrence of any of the following events:
(i) the commencement of a bona fide "tender offer", (other than
by the Company or COMNET Corporation, a Delaware corporation("COMNET") or
COMNET's successor or assign), which tender offer is acceptable to the Company's
Board for the shares of the Company as provided under Rule 14d-2 promulgated
under the Federal Securities Exchange Act of 1934, as amended, or any subsequent
comparable Federal rule or regulation governing tender offers;
(ii) a successful tender offer not previously approved by the
Company's Board of Directors resulting in a change of control of the Board;
(iii) the Company's execution of an agreement concerning the sale of
substantially all of its assets (other than to a subsidiary in a mere corporate
restructuring);
(iv) the Company's adoption of a plan of dissolution or
liquidation; or
(v) the Company's execution of an agreement concerning a merger or
consolidation (with a corporation other than COMNET) involving the Company in
which the Company is not the surviving corporation or if, immediately following
such merger or consolidation, less than fifty percent (50%) of the surviving
corporation's outstanding voting stock is held by persons who were shareholders
of the Company immediately prior to such merger or consolidation; upon approval
of the Compensation Committee each Participant shall have the right, immediately
following such occurrence, to exercise his or her Options in full to the extent
not theretofore exercised regardless of any provision herein or any provision in
the Options contract providing for the deferment of the vesting or exercise
thereof.
The Participant shall then be entitled to exercise the Options regardless
of whether the tender offer (described in 12.3A(i)) is successful, regardless of
whether the dissolution or liquidation is consummated, and regardless of whether
the other corporation which is the surviving corporation in a merger or
consolidation shall adopt and maintain any plan under which options are granted
to the Participant. In the event the agreement concerning the sale of
substantially all of its assets or the agreement concerning a merger or
consolidation is not consummated by the parties, then the options not exercised
prior to the formal determination by the Board that the contemplated transaction
will not be consummated shall on and after the date of such determination again
be subject to the exercise restrictions set forth in the Option agreement. In
the case of a merger, consolidation, reorganization, reclassification, sale of
assets or similar event, all outstanding Options shall pertain to the securities
or other property to which a holder of the number of shares of Stock covered by
the Option would have been entitled to receive in connection with such event,
and in the case of any other event specified herein, each outstanding Option
shall remain outstanding and exercisable in accordance with its terms.
B. In the event of any of the occurrences referenced in Section 12.3A,
above, and upon approval of the Compensation Committee, the Redemption Date with
respect to all SARs theretofore granted hereunder and outstanding at that time
shall be the date of such event, regardless of any provision herein or any
provision in the Stock Unit contract providing for the deferment of the vesting
or redemption of any provision herein or any provision in the SAR contract
providing for the deferment of the vesting or redemption thereof. The
Participant shall be entitled to redeem the SAR regardless of whether the tender
offer is successful, regardless of whether the dissolution or liquidation is
consummated, and regardless of whether the other corporation which is the
surviving corporation in a merger or consolidation shall adopt and maintain any
plan under which SARs are granted to the Participant. In the event the agreement
concerning the sale of
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substantially all of its assets or the agreement concerning a merger or
consolidation is not consummated by the parties, then the SARs not exercised
prior to the formal determination by the Board that the contemplated transaction
will not be consummated shall on and after the date of such determination again
be subject to the vesting restrictions set forth in the Option agreement.
In the case of a merger, consolidation, reorganization, reclassification,
sale of assets or similar event, the SARs Value of any SAR upon the redemption
of such SAR shall be determined on the basis of the difference, if any, between
(i) the value of a single share of the Company's Stock as of the date of grant
of such SAR, and (ii) the current value, as of the Redemption Date of such SAR,
of the shares of stock or other securities into which a single share of the
Company's Stock would have been converted on the date of such reclassification,
consolidation, merger, reorganization, sale of assets or other similar event.
12.4 In making the adjustments provided for, by this Section 12,
consideration shall be given to applicable tax laws in order to avoid a
premature lapse or disqualifying disposition of an option due solely to such
adjustment.
Section 13: Effective Date, Termination and Amendment of the Plan.
13.1 This Plan shall become effective September 12, 1995, after approval
by the Company's stockholders. Once effective, this Plan shall terminate on
September 10, 2005.
13.2 The Board may, insofar as permitted by law, from time to time and at
any time, with respect to any shares at the time not subject to Options,
terminate, suspend, alter, amend or discontinue this Plan, in whole or in part,
except that no such modification, alteration, amendment or discontinuation
shall, without the Participant's consent, impair the rights of any Participant
under any Option granted to such Participant, except in accordance with the
provisions of this Plan and/or the Option Agreement applicable, to any such
Award, and except, further, that no modification, alteration of amendment shall,
without the approval by the holders of a majority of the then-outstanding voting
stock of the Company represented and entitled to vote at a stockholders'
meeting:
(i) Increase the total number of shares reserved for the purposes of this
Plan, except as provided in Section 12 for this Plan;
(ii) Decrease the Option Price of ISO's to less than 100% of Fair Market
Value on the date of grant of an Option or the option Price of NQSO's to less
than 85% of Fair Market Value on the date of grant of an option.
(iii) Change the persons (or class of persons) eligible to receive options
and SAR's under this Plan;
(iv) Materially increase the benefits accruing to Participants under this
Plan.
Section 14: Miscellaneous.
14.1. This Plan does not, directly or indirectly, create any right for the
benefit of any employee or class of employees to receive any Awards under this
Plan, or create in any employee or class of employees any right with respect to
continuation of employment by the Company or an Affiliate, and it shall not be
deemed to interfere in any way with the Company's or an Affiliate's right to
terminate or otherwise modify an employee's employment at any time.
14.2 Notwithstanding any other provision of this Plan, no delivery of
Stock with respect to any Award shall be made, and all rights of the Participant
who receives such Award (or his designated beneficiary or legal representative)
to such delivery of Stock
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under this Plan shall be forfeited, at the discretion of the Committee, if,
prior to the time of such delivery, the Participant breaches a restriction or
any of the terms, restrictions and/or conditions of this Plan and/or the Stock
Option Agreement.
14.3 The provisions of this Plan and the terms and conditions of any Award
shall, in accordance with their terms, be binding upon, and inure to the benefit
of, all successors of each Participant, including, without limitation, such
Participant's estate and the executors, administrators or trustees thereof,
heirs and legatees and any receiver, trustee in bankruptcy or representative of
creditors of such Participant.
14.4 No member of the Committee shall be personally liable by reason of
any contract or other instrument executed by him or on his behalf in his
capacity as a member of the Committee, nor for any mistake of judgment made in
good faith, and the Company shall indemnify and hold harmless each member of the
Committee and each other officer, employee or director of the Company to whom
any duty or power relating to the administration or interpretation of this Plan
may be allocated or delegated, against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim with the
approval of the Board) arising out of any act or omission to act in connection
with this Plan, unless arising out of such person's own fraud or bad faith.
14.5 Nothing contained in the Plan shall be construed to preclude the
granting of an Option or Options pursuant to Section 5.1 to an Optionee in
addition to an Option or options for the purchase of Shares already held by that
Optionee or the granting of more than one option pursuant to Section 5.1 to an
Optionee at the same time.
14.6 Any and all grants of Options shall be subject to all applicable
rules and regulations of any exchange on which the Company's Common Stock may
then be listed.
14.7 Notwithstanding any provision of the Plan or any Option Agreement to
the contrary, no Option may be granted or exercised at any time when such Option
or the granting or exercise thereof or payment therefor may result in the
violation of any law or governmental order or regulation.
14.8 Each member of the Board, Compensation Committee and each officer and
employee of the Company in performing duties under the Plan shall be entitled to
rely upon information and reports furnished in connection with the
administration of this Plan by any duly authorized officer or agent of the
Company.
14.9 No a member of the Board, Compensation Committee and no officer or
employee of the Company shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under the Plan.
14.10 Any Option Agreement may include provisions that if the Company or a
Subsidiary shall be required to withhold any amounts by reason of any federal,
state or local tax rules or regulations in respect of the issuance of Shares
pursuant to the exercise of an Option, the Company or the Subsidiary shall be
entitled to deduct and to withhold such amount from any cash payments to be made
to the Optionee. The Administrator may establish such rules and procedures,
including, without limitation, any rules or procedures necessary to comply with
Rule 16b-3, as it may deem necessary or advisable in connection with the
withholding taxes relating to the exercise of any option.
14.11 If at any time an Optionee is indebted to or otherwise obligated to
make any payment to the Company or any Subsidiary, the Company may (a) withhold
from the Optionee (i) following the exercise by the Optionee of an Option,
Shares issuable to the Optionee having a Fair Market Value on the date of
exercise up to the amount of Indebtedness to the Company or (ii) following the
sale by an Optionee of Shares received pursuant to the exercise of an Option
amounts due to an Optionee in connection with the sale of such Shares up to the
amount of the indebtedness to the Company, or (b) take any substantially similar
action. The
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Company may establish such rules and procedures as it may deem necessary or
advisable in connection with the taking of any action contemplated by this
Section 14.11.
14.12 The section headings contained herein have no substantive meaning or
content and are not part of this Plan.
////////////
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EXHIBIT B
1999 GROUP 1 SOFTWARE, INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN
Section 1: Introduction.
1.1 Establishment. Group 1 Software, Inc. (the "Company") has established
the 1999 Non-Employee Director Stock Plan (the "Plan") for those directors of
the Company who are neither officers nor employees of the Company. The Plan
provides for the payment of annual Director's fees in the form of Restricted
Stock to compensate the Directors for their service as members of the Board.
1.2 Purposes. The Plan is intended to encourage the Directors to own an
equity interest in Company and thereby to align their interests more closely
with the interests of the other shareholders of the Company, to encourage the
highest level of Director performance, and to provide a financial incentive that
will help attract and retain qualified Directors.
Section 2: Definitions.
2.1 Definitions. The following terms will have the meanings set forth
below:
(a) "Annual Director Fee" means an award of Restricted Stock with
a then-current Fair Market Value of Ten Thousand Dollars ($10,000);
(b) "Board" means the Board of Directors of the Company;
(c) "Committee" means the Compensation Committee of the Board or any
successor committee established by the Board, in each case consisting of two or
more members each of whom is a "non-employee director" as that term is defined
by Rule 16b-3 under the Exchange Act, as such rule may be amended, or any
successor rule;
(d) "Company" means Group 1 Software, Inc. and, where
appropriate, its subsidiaries;
(e) "Director" means a member of the Board who is neither an officer
nor an employee of the Company. For purposes of the Plan, an employee is an
individual whose wages are subject to the withholding of federal income tax by
the Company under Section 3401 of the Internal Revenue Code, and an officer is
an individual elected or appointed by the Board or chosen in such other manner
as may be prescribed in the By-laws of the Company to serve as such;
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time;
(g) "Fair Market Value" means (i) the closing price of a share of
Stock, as reported on the National Market System of The Nasdaq Stock Market,
Inc., on the grant date, but if no shares of Stock were traded on such date,
then on the last previous date on which a share of Stock was so traded, (ii) the
closing price for a share of Stock on the stock exchange, if any, on which the
shares of Stock are primarily traded, but if no shares of Stock were traded on
such date, then on the last previous date on which a share of Stock was so
traded or (iii) if none of the above is applicable, the value of a share of
Stock for such date as established in good faith by the Board;
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(h) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time;
(i) "Restricted Stock" means shares of Stock granted to a Director
pursuant to Section 5 and subject to the restrictions set out in the Plan;
(j) "Restricted Stock Award" means an award of shares of Restricted
Stock granted to a Director pursuant to Section 5;
(k) "Restriction Period" means the period of time described in
Section 5.2; and
(l) "Stock" means the common stock ($.50 par value) of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender will also include the feminine gender, and the definition of
any term herein in the singular will also include the plural.
Section 3: Plan Administration.
(a) The Plan will be administered by the Committee. The members of
the Committee will be members of the Board appointed by the Board, and any
vacancy on the Committee will be filled by the Board or in a manner authorized
by the Board. A majority of the Committee will constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is present
will be the acts of the Committee. Any action that may be taken at a meeting of
the Committee may be taken without a meeting if a consent or consents in writing
setting forth the action so taken is signed by all of the members of the
Committee.
(b) Subject to provisions of the Plan, the Committee will have the
sole and complete authority: (i) to impose such limitations, restrictions and
conditions upon such awards as it deems appropriate; (ii) to interpret the Plan
and to adopt, amend and rescind administrative guidelines and other rules and
regulations relating to the Plan; and (iii) to make all other determinations and
to take all other actions necessary or advisable for the implementation and
administration of the Plan. Notwithstanding the foregoing, the Committee will
have no authority, discretion or power to select the Directors who will receive
Restricted Stock Awards pursuant to the Plan, determine the awards to be granted
pursuant to the Plan, the number of shares of Stock to be issued thereunder
(other than pursuant to a determination of Fair Market Value as defined herein)
or the time at which such awards are to be granted, establish the duration and
nature of awards or alter any other terms or conditions specified in the Plan,
except in the sense of administering the Plan subject to the provisions of the
Plan. The Committee's determinations on matters within its authority will be
conclusive and binding upon the Company and all other persons.
(c) The Company will be the sponsor of the Plan. All expenses
associated with administering the Plan will be borne by the Company.
Section 4: Stock Subject to the Plan.
4.1 Number of Shares. Seventy-Five Thousand (75,000) shares of Stock are
authorized for issuance under the Plan in accordance with the provisions of the
Plan, subject to adjustment and substitution as set forth in this Section 4.
This authorization may be increased from time to time by approval of the Board
and, if such approval is required, by the shareholders of the Company. The
Company will, at all times during the term of the Plan, reserve from its
authorized but unissued Stock at least the number of shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its
ability to perform its obligations hereunder.
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4.2 Adjustments Upon Changes in Stock. If there is any change in the Stock
of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization stock dividend, stock split,
spin-off, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments shall be made by
the Committee (or, if the Company is not the surviving corporation in any such
transaction, the Board of Directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares which may be issued under the Plan.
Section 5: Restricted Stock Awards.
5.1 Grants of Restricted Stock.
(a) Grant Dates and Award Amounts. During the term of the Plan,
beginning on April 1, 2000 and continuing on the first day of April in each year
thereafter, each person then currently serving as a Director shall be granted a
Restricted Stock Award in the form of a number shares of Stock equal in value at
that date to Ten Thousand Dollars ($10,000). The $10,000 value shall be computed
based on the Fair Market Value of the Stock. If a person joins the Board or
otherwise first becomes a Director at any time after the first day of April and
before March 31 of the following year during the term of this Plan, whether by
action of the shareholders of the Company or the Board or otherwise, such person
upon becoming a Director will be granted automatically a number of shares of
Common Stock, on the day he joins the Board, equal to the following: $10,000
times a fraction whose numerator is the number of days between the director's
first day of service on the Board and the next March 31, and whose denominator
is 365; and this number shall then be divided by the Fair Market Value of the
Stock [i.e. - $10,000 (x) days of service in the partial year (/) 365 (/) Fair
Market Value]. By way of example and for clarification, if a person joins the
Board on October 1 and the closing price of the Stock on that day is $20.00 per
share, then the Director shall be granted 100 shares of Stock for his first
(partial) year of service on the Board. Any fractional share will be rounded up
to the next full share.
(b) Restricted Stock granted pursuant to Section 5.1 is subject to
adjustment as provided in Section 4.2.
5.2 Terms and Conditions of Restricted Stock. Restricted Stock granted
under the Plan will be subject to the following terms and conditions:
(a) Restriction Period. Stock issued under the Plan (and any
interest in such Stock) may not be offered, pledged, hypothicated or otherwise
assigned, disposed of, sold, distributed or transferred for value by the
recipient Director for twelve (12) months from the date of issue (the
"Restriction Period"). Thereafter, the transfer or sale of Stock issued under
the Plan will be subject to restrictions set out in Rule 144 of the Securities
Act of 1933, as amended.
(b) Issuance of Shares. On or about the grant date, a certificate
representing the shares of Restricted Stock will be registered in the Director's
name and delivered to the Director. Each certificate will bear the following
legend:
THESE SECURITIES ARE NOT REGISTERED UNDER STATE OR U.S. FEDERAL SECURITIES
LAWS. THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
DISTRIBUTED OR TRANSFERRED FOR VALUE FOR TWELVE (12) MONTHS FROM THE DATE
OF ISSUANCE TO THE STOCKHOLDER LISTED ON THE FRONT OF THIS CERTIFICATE,
NOR MAY THEY BE TRANSFERRED ON THE BOOKS OF THE COMPANY. THEREAFTER, THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED FOR VALUE WITHOUT AN OPINION OF
COUNSEL FURNISHED TO THE COMPANY AND SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED.
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Subject to the transfer restrictions set forth in Sections 5.2(a) and (c),
the Director as owner of shares of Restricted Stock will have the rights of the
holder of such Restricted Stock during the Restriction Period.
(c) General Restriction.
(1) The obligation of the Company to issue shares of
Restricted Stock under the Plan will be subject to the condition that if, at any
time, the Committee determines that (a) the listing, registration or
qualification of shares of Restricted Stock upon any securities exchange or
under any state or federal law or (b) the consent or approval of any government
or regulatory body is necessary or desirable, then such Restricted Stock will
not be issued unless such listing, registration, qualification, consent or
approval has been effected or obtained free from any conditions not acceptable
to the Company.
(2) Shares of Stock for use under the provisions of this
Section 5 will not be issued until they have been duly listed, upon official
notice of issuance, upon the Nasdaq National Market System and such other
exchanges, if any, as the Board may determine.
Subject to the foregoing provisions of this Section 5.2 and the other
provisions of the Plan, any shares of Restricted Stock granted under the Plan
will be subject to such restriction and other terms and conditions, if any, as
may be determined by the Committee, in its discretion; provided, however, that
in no event will the Committee or the Board have any power or authority which
would cause transactions pursuant to the Plan to cease to be exempt from the
provisions of Section 16(b) of the Exchange Act under Rule 16b-3, as such rule
may be amended, or any successor rule.
5.3 Designation of a Beneficiary. A Director may designate a beneficiary,
in a form approved by the Company, to hold shares of Restricted Stock in
accordance with the Plan in the event of the Director's death.
5.4 Holding Period Applicable to a Deceased Grantee's Estate. As long as
at least six (6) months have elapsed since the grant date, a beneficiary
properly designated by the Director pursuant to Section 5.3 prior to the death
of the Director, or a person holding shares of Restricted Stock under a deceased
grantee's will or under the applicable laws of descent or distribution, will not
be subject to the Restriction Period with respect to such shares of Restricted
Stock.
Section 6: Change in Control
6.1 Settlement of Compensation. Restricted Stock issued hereunder shall
not be forfeitable in the event of a Change in Control of the Company.
6.2 Definition of Change in Control. A Change in Control will mean the
occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or merger of
the Company in which the Company is not continuing or the surviving corporation
or pursuant to which shares of the Company's Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; or
(b) the shareholders of the Company shall approve of any plan or
proposal for the liquidation or dissolution of the Company; or
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(c) (i) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity shall purchase any Stock of the
Company (or securities convertible into the Company's Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Stock (or securities
convertible into Stock), the Board shall determine that the making of such
purchase shall not constitute a Change in Control, or (ii) any person (as such
term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored by the Company or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then-outstanding securities ordinarily
(and apart from any rights accruing under special circumstances) having the
right to vote in the election of directors (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities), unless, prior to
such person so becoming such beneficial owner, the Board shall determine that
such person so becoming such beneficial owner shall not constitute a Change in
Control; or
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board
shall cease for any reason to constitute at least a majority thereof, unless the
election or nomination for election of each new director during such two-year
period is approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such two-year period.
Section 7: Assignability
7.1 The right to receive any shares of Restricted Stock granted hereunder
will not be transferable or assignable by a Director other than by will, by the
laws of descent and distribution, to a beneficiary properly designated by the
Director pursuant to the appropriate section of the Plan in the event of death,
or pursuant to a domestic relations order as defined by Section 414(p)(1)(B) of
the Internal Revenue Code or the rules thereunder that satisfies Section
414(p)(1)(A) of the Internal Revenue Code or the rules thereunder.
7.2 In addition, Restricted Stock will not be transferable prior to the
end of the applicable Restriction Period, described in Sections 5.2 and 5.4, in
either case other than by will, by transfer to a beneficiary properly designated
by the Director pursuant to the appropriate section of the Plan in the event of
death, by the applicable laws of descent and distribution, or pursuant to a
domestic relations order as defined by Section 414(p)(1)(B) of the Internal
Revenue Code or the rules thereunder that satisfies Section 414(p)(1)(A) of the
Internal Revenue Code or the rules thereunder.
Section 8: Retention; Withholding of Tax
8.1 Retention. Nothing contained in the Plan or in any Restricted Stock
Award granted under the Plan will interfere with or limit in any way the right
of the Company to remove any Director from the Board pursuant to the Company's
Certificate of Incorporation and the By-laws of the Company, nor confer upon any
Director any right to continue in the service of the Company.
8.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company will be required to make such
payment or issue such shares under the Plan.
Section 9: Plan Amendment, Modification and Termination
9.1 The Board may, at any time, terminate, and from time to time amend or
modify the Plan; provided, however, that no amendment or modification may become
effective without
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approval of the amendment or modification by the shareholders if shareholder
approval is required to enable the Plan to satisfy any applicable statutory or
regulatory requirements.
Section 10: Requirements of Law
10.1 Federal Securities Law Requirements. Implementation and
interpretation of actions made pursuant to the Plan will be subject to all
conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule.
10.2 Governing Law. The Plan and all agreements hereunder will be
construed in accordance with and governed by the laws of the State of Maryland.
40
<PAGE> 43
GROUP 1 SOFTWARE, INC.
4200 PARLIAMENT PLACE, SUITE 600
LANHAM, MARYLAND 20706-1844
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GROUP 1 SOFTWARE, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 23, 1999
The undersigned hereby appoints Edward Weiss and Mark D. Funston, as true
and lawful attorneys and proxy of the undersigned, with full power of
substitution, for and in the name of the undersigned, to vote and otherwise act
at the Annual Meeting of Stockholders of Group 1 Software, Inc. (the "Company")
to be held on Thursday, September 23, 1999, at 10:30 AM at Prudential
Securities, One Liberty Plaza, New York, New York 10292, and at any adjournment
or postponement thereof (the "Annual Meeting"), with respect to all shares of
Common Stock and 6% Preferred Stock of the Company which the undersigned would
possess if personally present, on the following matters.
The shares represented by this Proxy will be voted in the manner directed
and, if no instructions to the contrary are indicated, will be voted FOR the
election of the nominees for director and FOR the other proposals set forth in
the Company's Notice of Annual Meeting of Stockholders.
(1) Election of Directors
Election of the nominees listed at right to the Company's Board of
Directors to hold office until the third annual meeting of stockholders of the
Company following their election and until the election and qualification of
their successors.
(Instruction: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
below.)
Mr. Robert S. Bowen
Mr. Thomas S. Buchsbaum
Mr. Ronald F. Friedman
(2) To consider and act upon a proposal to amend the Company's 1995
Incentive Stock Option, Non-Qualified Stock Option and Stock Appreciation Unit
Plan to increase by 200,000 shares the number of shares subject to stock options
which may be granted under the Plan;
(3) To consider and act upon a proposal to adopt the Company's 1999
Non-Employee Directors Stock Plan;
(4) To consider and act upon a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of Preferred Stock
from 200,000 shares to 1,200,000 shares; and
(5) Other Matters: Discretionary authority is hereby granted with respect
to such other matters as may properly come before the Annual Meeting or any
adjournment or postponement thereof, including discretionary authority to
consider and vote upon procedural matters and any adjournment or postponement of
the meeting.
There is no assurance that any of the Company's nominees will serve as
directors if any other nominees are elected to the Board.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED TO ELECT THE INDIVIDUALS NAMED IN PROPOSAL ONE AND FOR EACH OF
PROPOSALS TWO THROUGH FIVE.
<PAGE> 44
In their discretion, the appointed proxies may also vote upon any other
matters which the persons making the solicitation do not know, a reasonable time
before the solicitation and that properly come before the Annual Meeting or any
adjournment or postponement thereof, including the election of any person to any
office for which a nominee is named in the proxy statement and such nominee is
unable to serve for good cause.
The undersigned hereby ratifies and confirms that the aforesaid attorneys
and proxies may do hereunder.
_______________________________ Dated:_____________, 1999
(Signature of Stockholder)
_______________________________ Dated:_____________, 1999
(Signature of Stockholder)
(Please sign your name exactly as it appears hereon. When signing as attorney,
agent, executor, administrator, trustee, guardian or corporate officer, please
give your full title as such. Each joint owner should sign the proxy. IN ORDER
TO ASSURE A QUORUM AND TO AVOID THE EXPENSE AND DELAY OF SENDING FOLLOW-UP
LETTERS, PLEASE FILL IN, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE WHICH REQURES NO POSTAGE IF MAILED IN THE UNITED STATES. The
above-signed hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated August ___, 1999 and the Company's Annual Report for the
fiscal year ended March 31, 1999 furnished herewith.
TO INSURE A QUORUM AND TO AVOID THE EXPENSE AND DELAY OF SENDING FOLLOW-UP
LETTERS, PLEASE FILL IN, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
