<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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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):
[ ] 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held September 12, 2000
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
12, 2000 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
Certificate of Incorporation, as amended, to increase the number of authorized
shares of Group 1 Common Stock from 14,000,000 shares to 50,000,000 shares;
(3) 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 300,000 shares the number of shares subject to stock options
which may be granted under the Plan; and
(4) 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 17,
2000 (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.
--------------------------------------------------------------------------------
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. TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, WE URGE YOU TO
VOTE BY TELEPHONE, VIA THE INTERNET OR TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. YOU CAN WITHDRAW YOUR PROXY, OR
CHANGE YOUR VOTE,
AT ANY TIME BEFORE IT IS VOTED BY EXECUTING A LATER-DATED PROXY, BY VOTING BY
BALLOT AT THE ANNUAL MEETING, BY TELEPHONE OR VIA THE INTERNET, OR BY FILING AN
INSTREMENT OF REVOCATION WITH THE INSPECTORS OF ELECTION IN CARE OF GROUP 1'S
SECRETARY AT THE ABOVE ADDRESS. 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
Lanham, Maryland
July 21, 2000 Edward Weiss
Secretary
<PAGE> 3
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
301/918-0400
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 2000
------------------
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 12, 2000 (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 July 25, 2000.
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 4.
Separate instructions are provided regarding voting by telephone and on the
Internet.
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 or by notification by telephone (if the original vote was
made by telephone) or on the Internet (if the original vote was made on the
Internet). Any proxy may also be revoked by the stockholder's attendance at the
Annual Meeting and voting in person. A written notice of revocation need not be
on any specific form.
The Company has fixed the close of business on July 17, 2000, 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 6,004,400 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.
There are no rights of appraisal or similar rights of dissenters
applicable to the matters to be voted upon at the Annual Meeting.
2
<PAGE> 4
FINANCIAL INFORMATION
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended March 31, 2000 accompanies this Proxy Statement and is incorporated
in this Proxy Statement by reference.
BENEFICIAL OWNERSHIP
The following table sets forth certain information as of June 30,
2000, 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 OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER AND NUMBER OF SHARES OF 6% PREFERRED
NUMBER OF PERSONS IN GROUP PERCENT OF CLASS STOCK AND PERCENT OF CLASS
-------------------------- ---------------- --------------------------
<S> <C> <C>
Prudential Securities 1,397,238 *
One Liberty Plaza 23.3%
New York, NY 10292
Robert S. Bowen 505,141 (1) 5,937
4200 Parliament Place 8.0% 12.5%
Suite 600
Lanham, MD 20706
John Spohler 429,975 (2) 11,875
One Liberty Plaza 7.2% 25%
New York, NY 10292
Dimensional Funds Advisors, Inc. 374,992 *
1299 Ocean Avenue 6.3%
11th Floor
Santa Monica, CA 90401-1038
Milton Kaplan * 11,875
1920 Ocean Avenue 25%
Brooklyn, NY 11230
Leonard J. Smith * 11,875
451 Ives Dairy Road, #A202 25%
North Miami Beach, FL 33179
All directors and officers as a group 1,271,609(3) 5,937
(15 persons) 18.5% 12.5%
</TABLE>
-----
* Less than 5%.
(1) Including Common Stock purchase options for 299,155 shares exercisable
within 60 days of the Record Date.
(2) Includes Common Stock purchase options for 28,125 shares exercisable
within 60 days of the Record Date
(3) Includes Common Stock purchase options for 886,479 shares exercisable
within 60 days of the Record Date.
3
<PAGE> 5
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,
2000, except for the following persons who filed late Form 4's: Robert S. Bowen
- options to purchase 3,300 shares of Common Stock and Richard H. Eisenberg -
options to purchase 1,000 shares of Common Stock (in both cases, the Common
Stock issued was retained by the respective option-holder).
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. One effect of this
arrangement can be to deter efforts to gain control of Group 1 by changing the
composition of the Company's Board of Directors.
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. James P. Marden, Charles A. Mele and
Charles J. Sindelar 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.
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF DIRECTOR OF VOTING SECURITIES
OF THE DIRECTOR PRINCIPAL OCCUPATION, BUSINESS AND PERCENT OF CLASS (AT
COMPANY (AGE) SINCE EXPERIENCE AND DIRECTORSHIPS RECORD DATE)
------------- ----- ---------------------------- ------------
CLASS III DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE THIRD
ANNUAL MEETING OF STOCKHOLDERS FOLLOWING
THE ANNUAL MEETING, AND THE ELECTION AND
QUALIFICATION OF THEIR SUCCESSORS)
<S> <C> <C> <C>
James P. Marden 1992 Senior Executive Vice President, Corporate Development, Medical 52,000(1)
47 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").
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
<S> <C> <C> <C>
Charles A. Mele 1992 Executive Vice President - General Counsel and a director of Medical 95,400(2)
44 Manager Corporation (and its predecessor) for more than five years. 1.6%
For more than five years, up through July, 1994, Executive Vice
President and General Counsel or Co-General Counsel of Medco.
Charles J. Sindelar 1992 Senior Vice President, Business Development and General Manager of 51,000(3)
63 Digital Video Group since 1999, and from 1990-1998, Vice President *
and General Manager-Digital Video/ Network Systems Division of
Zenith Electronics Corporation.
<CAPTION>
MEMBERS OF THE BOARD CONTINUING IN OFFICE
CLASS I DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE NEXT ANNUAL
MEETING OF STOCKHOLDERS FOLLOWING THE ANNUAL
MEETING, AND THE ELECTION AND QUALIFICATION
OF THEIR SUCCESSORS)
<S> <C> <C> <C>
James V. Manning 1992 Chief Executive Officer of Medical Manager Corporation (and its 52,000(4)
53 predecessor) 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
Medical Manager Corporation for more than five years.
Richard H. Eisenberg 1994 President of Great Northern Brokerage Corporation for more than five 37,000(5)
62 years. From 1992 to 1995, also Senior Vice President of Kaye *
Insurance, L.P.
Bruce J. Spohler 1997 Managing Director, High Yield/Leveraged Finance, CIBC Oppenheimer 115,910(6)
40 World Markets for more than five years. *
<CAPTION>
CLASS II DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE SECOND ANNUAL
MEETING OF STOCKHOLDERS FOLLOWING THE ANNUAL
MEETING, AND THE ELECTION AND QUALIFICATION
OF THEIR SUCCESSORS)
<S> <C> <C> <C>
Robert S. Bowen 1983 Vice Chairman since September, 1998 and Chief Executive Officer and a 505,141(7)
62 Director of the Company for more than five years. 8.0%
Ronald F. Friedman 1987 Director and Chief Operating Officer of the Company for more than five 175,727(8)
56 years. 2.3%
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
MEMBERS OF THE BOARD CONTINUING IN OFFICE
<S> <C> <C> <C>
Thomas S. Buchsbaum 1989 Since March 1997, Vice President of Federal Systems and prior to that, 112,173(9)
50 Vice President of Education Sales and Marketing, Dell Computer 1.3%
Corporation. Also serves as a director of Dick Blick Company.
</TABLE>
-----
* Less than 1%
(1) Includes options to purchase 51,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(2) Includes options to purchase 93,900 shares of Common Stock exercisable
within 60 days of the Record Date.
(3) Includes options to purchase 49,500 shares of Common Stock exercisable
within 60 days of the Record Date.
(4) Includes options to purchase 51,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(5) Includes options to purchase 36,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(6) Includes options to purchase 13,500 shares of Common Stock exercisable
within 60 days of the Record Date.
(7) Includes options to purchase 299,155 shares of Common Stock exercisable
within 60 days of the Record Date.
(8) Includes options to purchase 172,577 shares of Common Stock exercisable
within 60 days of the Record Date.
(9) Includes options to purchase 10,950 shares of Common Stock exercisable
within 60 days of the Record Date.
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 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, 2000, Messrs.
Manning, Buchsbaum, Eisenberg, Marden, Mele and Sindelar were each granted
options under the 1995 Directors' 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 Directors 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. But Group 1 options
under the 1995 Directors' 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, therefore, 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 Directors' Plan.
6
<PAGE> 8
COMMITTEES AND MEETINGS
The Bylaws of the Company provide for the Board to appoint an Audit
and Compensation Committee. 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. 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 Option Plan"). The members of the Compensation Committee are
identified directly below. None of the members of the Compensation Committee
has ever been an employee of the Company.
The Audit Committee assists the Board of Directors in fulfilling its
financial oversight responsibilities. The Audit Committee's functions include
recommending to the Board the selection of the Company's independent public
accountants and reviewing with them the plan, scope and results of their audit
of the financial statements and the adequacy of the Company's system of internal
accounting controls. In performing its duties, the Audit Committee maintains
working relationships with the Board of Directors, Group 1's management and
Group 1's external auditors. The Audit Committee is comprised of Messrs.
Manning, Marden and Sindelar, each of whom is independent (i.e., not an officer
or employee of Group 1 or any of its subsidiaries, and has no relationship with
any individual or business which, in the opinion of the Board of Directors,
would interfere with the exercise of independent judgement in carrying out the
responsibilities of an Audit Committee member).
During the fiscal year ended March 31, 2000, the Board of Directors
of the Company held 6 meetings, the Compensation Committee held 3 meetings and
the Audit Committee held 2 meetings. No director, other than Mr. Spohler,
attended less than 75% of all meetings of the Board, and no director attended
less than 75% of the committees on which such director served during fiscal year
2000.
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 "- Members of
the Board Continuing In Office." Mr. Bebee, 46, and Mr. Slater, 45, have both
served in executive positions with the Company for more than the past five
years. Mr. Funston, 40, has served as the Company's Chief Financial Officer
since September, 1996. Prior to that, Mr. Funston was Divisional Chief
Financial Officer for Comsat RSI, a division of COMSAT, Inc. Mr. Miller, 57,
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, 55, has served as Vice President, Domestic and International Postal
Affairs and Data Quality of the Company, for more than the past five years. Mr.
Weiss, 49, has been General Counsel and Secretary of the Company for more than
the past 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.
The compensation programs for executive officers were reviewed by
the Compensation Committee for the most recent fiscal year. Grants of options to
executive officers are reviewed periodically.
Compensation Committee
James V. Manning
Thomas S. Buchsbaum
James P. Marden
Charles A. Mele
7
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation Awards
------------------------------------------------ -----------------------------------------
All other
Name and Principal Position Year Salary Bonus Stock Options Compensation(1)
--------------------------- -------- ---------- --------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Robert S. Bowen 2000 $369,638 $1,061,960 -- $ 20,073
CEO; Director 1999 $352,698 $ 519,300(2) 268,124(3) $349,875(4)
1998 $269,213 $ 231,667 -- $ 67,593
Ronald F. Friedman 2000 $199,495 $ 225,161 45,000 $ 13,452
President; 1999 $184,810 $ 393,155 65,624(3) $ 13,517
Director 1998 $184,105 $ 66,085 18,000 $ 79,318(5)
Mark D. Funston 2000 $141,275 $ 240,763 -- $ 9,650
Chief Financial Officer 1999 $134,700 $ 157,353 15,000 $ 9,335
1998 $125,039 $ 17,292 -- $ 9,249
Alan P. Slater 2000 $186,425 $ 164,024 30,000 $ 17,331
Executive Vice President; 1999 $177,826 $ 146,981 23,925(3) $ 17,442
General Manager 1998 $169,018 $ 96,594 -- $ 7,511
Stephen R. Bebee 2000 $141,595 $ 193,022 7,500 $ 10,030
Executive Vice President; 1999 $135,031 $ 135,569 12,690(3) $ 9,922
General Manager 1998 $134,646 $ 41,859 -- $ 10,909
</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 $371,686, $173,100 and $81,083 of bonus
compensation in 2000, 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 (43,124), Friedman (43,124),
Slater (5,175) and Bebee (690) 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 interest forgiven on a loan from the Company to Mr. Friedman.
This loan, in the original principal amount of $375,000, was satisfied
in full by Friedman during Group 1's Fiscal Year 2000.
8
<PAGE> 10
STOCK OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
% OF TOTAL AT 0% AT 5% AT 10%
# GRANTED TO EXERCISE OR ANNUAL ANNUAL ANNUAL
OPTIONS EMPLOYEES BASE PRICE EXPIRATION GROWTH GROWTH GROWTH
NAME GRANTED IN 2000 ($/SHARE) DATE RATE($) RATE($) RATE($)
---- ------- ------- --------- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Bowen --- --- --- --- $0 $0 $0
Ronald F. Friedman 45,000 26.30% $6.67 11/01/09 $0 $283,050 $717,300
Mark D. Funston --- --- --- --- $0 $0 $0
Alan P. Slater 30,000 17.54% $6.67 11/01/09 $0 $188,700 $478,200
Stephen R. Bebee 7,500 4.38% $6.67 11/01/09 $0 $ 47,175 $119,550
</TABLE>
OPTION/SAR EXERCISES AND YEAR-END
OPTION/SAR VALUES
04/01/99 TO 03/31/00
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs at FY-End Options/SARS at FY-End(1)
---------------------- -------------------------
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Bowen 52,500 $8,925 290,530 231,187 $2,503,292 $2,805,414
Ronald F. Friedman 45,000 $510,794 160,352 121,647 $1,183,389 $1,506,027
Stephen R. Bebee None --- 28,323 25,842 $ 349,077 $ 330,659
Alan P. Slater 11,900 $112,844 28,785 60,321 $ 342,073 $ 758,317
Mark D. Funston None --- 17,850 21,900 $ 189,948 $ 260,832
</TABLE>
(1) These values are based upon the difference between the exercise prices of
all options awarded and the closing price of $18.75 per share for Common
Stock at March 31, 2000.
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]
COMPANY/INDEX/MARKET 1995 1996 1997 1998 1999 2000
Group 1 Software 100.00 98.70 83.50 79.01 83.95 277.64
Peer Group Index 100.00 193.15 108.99 313.76 125.66 290.61
Nasdaq Market Index 100.00 134.51 150.48 227.41 297.18 547.25
9
<PAGE> 11
ASSUMES $100 INVESTED ON APRIL 1, 1995
ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING MARCH 31, 2000
The chart displayed directly above is presented in response to the
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 is not intended to forecast or be indicative of future
financial performance or performance of the Common Stock.
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, as now amended, expires on March 31,
2004. For the current fiscal, Mr. Bowen's total base salary shall be $387,373
per annum. Salary shall be adjusted for the next fiscal year by 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. Effective
April 1, 2001, total base salary shall be $400,000, adjusted annually thereafter
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.
The Bowen Agreement also includes an annual incentive. For the
current fiscal year ending March 31, 2001, his bonus will 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; but this bonus payment may not exceed $800,000 in the current year.
Also, effective April 1, 2001, his bonus will be calculated based on the amount
that consolidated earnings for that year exceed these earnings in the
immediately previous year ("earnings growth"). His bonus will equal 7% of the
Company's earnings growth up $500,000, 10% of a year's earnings growth from
$500,000 to $1,000,000, 14% of a year's earnings growth beyond $1,000,000 up to
$1,500,000, and 17% of such earnings above $1,500,000. Bonus compensation is
capped at $500,000 starting in the fiscal year ending March 31, 2002 but may be
greater in a year if the Compensation Committee determines that special
circumstances warrant. 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.
As part of the most recent amendment to the Bowen Agreement, Mr.
Bowen has also been granted options to purchase up to 250,000 shares of Common
Stock. These options will be issued under the Group 1 1995 Incentive Stock
Option Plan, but they are subject the availability of sufficient options under
the Plan. Under Proposal Three of this Proxy, shareholders are asked to approve
an increase in the number of shares of Common Stock authorized under the Plan.
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
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<PAGE> 12
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. The Fee Agreement, dated as of January 28,
1992 between Bowen and Group 1 has been terminated. No payment was earned under
this fee agreement during the Company's fiscal year ending March 31, 2000.
RONALD F. FRIEDMAN
The Company has entered into an employment agreement dated October
31, 1990, with Ronald F. Friedman, a Director, as President and Chief Operating
Officer. The agreement, as amended, expires on March 31, 2002 and provides for
annual base compensation of $200,000 per annum (adjusted as of May 17, 2000),
which may be further adjusted 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, 2001 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.
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 as compared to internal revenue and profit targets in
the case of Messrs. Bebee, Forman and Slater. 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
11
<PAGE> 13
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 portion of compensation that is deferred, is paid into a trust
designated solely to administer the Deferred Compensation Program. Currently,
Messrs. Bowen and Miller participate in the 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.
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 $10,000,000. 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 $10,500)
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, (ii) $.50 for each $1.00 the participant contributes
for the next 2% of the participant's compensation and (iii) $.25 for each $1.00
the participant contributes for the next 2% of the participant's compensation.
Participants are 100% immediately vested in the Company's contributions and
their own contributions, and earnings thereon.
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<PAGE> 14
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 $143,000 - which includes
compensation to Great Northern for its services that does not exceed $5,000.
The Company has confirmed that the payments to the carrier and Great Northern
are competitive.
PROPOSAL TWO
AMENDMENT TO CERTIFICATE OF INCORPORATION OF GROUP 1 TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF GROUP 1 COMMON STOCK FROM 14,000,000 SHARES TO 50,000,000
SHARES
The Board recommends that stockholders approve the proposed
amendment to the Company's Certificate of Incorporation to increase the number
of shares of Common Stock that the Company is authorized to issue, to an
aggregate of 50,000,000 shares, from an aggregate of 14,000,000 shares that is
currently authorized in the Certificate. The Company's Certificate currently
also provides for an aggregate of 1,200,000 shares of Preferred Stock. No change
is proposed to the current level of authorized shares of Preferred Stock. As of
the Record Date, 6,004,400 shares of Common Stock were issued and outstanding,
and 2,622,780 additional shares of Common Stock were reserved for issuance upon
exercise of outstanding stock options, and for issuance of shares under the
Company's Plans.
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) a total of 50 million (50,000,000) 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."
No other amendment to the Company's Certificate is proposed in this
Proxy Statement. If the proposed amendment is adopted, it will become effective
upon the filing of the proposed amendment with the Delaware Secretary of State.
The Common Stock, including the additional shares proposed for
authorization under this Proposal, do not have preemptive or similar rights,
which means that current stockholders do not have a prior right to purchase any
new issue of capital stock of the Company in order to maintain their
proportionate ownership thereof. Thus, the issuance of additional shares of
Common Stock might dilute, under certain circumstances, the ownership and voting
rights of existing stockholders. Each of the additional authorized shares of
Common Stock will have the same rights and privileges as the currently
authorized Common Stock. If the proposed amendment is approved, the Board of
Directors would be able to authorize the issuance of shares of Common Stock
without the necessity, and related costs and delays, of either calling a special
stockholders' meeting or waiting for the next regularly scheduled meeting of the
stockholders in order to increase the authorized shares of Common Stock.
On February 17, 1999, the Company effected a three-for-two stock
split in the form of a 100% stock dividend, which utilized a substantial portion
of the currently authorized 14,000,000 shares of Common Stock. The Board of
Directors of the Company believes that it is advisable and in the best interests
of the Company to have available additional authorized but unissued shares of
Common Stock in an amount adequate to provide for the future needs of the
Company. The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. However, the additional shares
will be available for issuance
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<PAGE> 15
from time to time by the Company, in the discretion of the Board of Directors,
without further authorization by vote of the stockholders unless such
authorization is otherwise required by applicable law or regulation.
The shares of Common Stock proposed for authorization under this
Proposal may be issued for any proper corporate purpose, including, without
limitation: acquiring other businesses or technologies in exchange for shares of
the Company's Common Stock; entering into joint venture arrangements with other
companies in which Common Stock or the right to acquire Common Stock are part of
the consideration; stock splits or stock dividends; raising capital through the
sale of Common Stock; attracting and retaining valuable employees by the
issuance of additional stock options or use of stock-based plans; issued upon
the exercise of the rights to be granted pursuant to the Stockholders Protection
Rights Agreement adopted by the Board of Directors in 1999. At the present, the
Board has no current plans to use any Common Stock for any of these purposes. In
addition, the availability of additional Common Stock, as well as the authorized
and unissued shares of preferred stock, could be used in the event of an
unsolicited attempt or proposal to acquire control of the Company to deter such
efforts to gain control of the Company through the sale shares of Common Stock
or preferred stock. The Company's Board of Directors could also establish voting
rights for preferred stock that would be greater than the voting rights for
Common Stock. And, shares of Common Stock could be issued pursuant to the terms
of the Stockholders Protection Rights Agreement. The effect of such potential
issuances may be to discourage the acquisition of, or proposal to acquire, a
controlling interest in the Company possibly at prices that could otherwise
exceed the Common Stock's market price and could also serve to maintain
management and the Company's Board of Directors in their positions of control.
See - "Election of Directors " for a discussion of the possible anti-takeover
effect of the classification of the Company's directors into three classes.
Both the non-employee director and the employee stock option plans
of Group 1 provide that upon a change of control, as defined in those plans, all
outstanding options become immediately exercisable. Further, Mr. Friedman has
under his employment agreement an option to resign his position with the Company
and to receive compensation for up to one year after his resignation upon a
change of control as defined in his agreement. See "Proposal Three - The 1995
Incentive Plan - Terms and Conditions of Grants" and "Executive Compensation -
Employment Agreements - Ronald F. Friedman".
The amendment to the Company's Certificate is not proposed as result
of knowledge by the management of the Company of any specific effort to
accumulate Group 1's securities or to obtain control of the Company by means of
merger, tender offer, solicitation in opposition to management or otherwise.
The Company has no current plans or proposals to adopt other
provisions or to enter into other arrangements that may have material
anti-takeover effects.
The affirmative vote of a majority of the outstanding shares of
Common Stock and Preferred Stock entitled to vote at the Annual Meeting is
required for approval of this amendment to the Restated Certificate to increase
the Company's authorized shares of Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE AMENDMENT TO THE
CERTIFICATE TO INCREASE THE NUMBER OF SHARES OF COMMON 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 THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE
COMPANY'S CERTIFICATE.
PROPOSAL THREE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1995 INCENTIVE
STOCK OPTION, NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
TO INCREASE BY 300,000 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 Option Plan, a copy of which is
attached hereto as Exhibit A. The 1995 Incentive Option Plan currently provides
for up to 1,200,000 shares of Common Stock for issuance upon the exercise of
options and stock appreciation rights granted under that Plan. As of the Record
Date, 343,875 shares of Common Stock remained available under the Plan. The 1995
Incentive Option Plan has a term of ten years - extending to September, 2005. At
the 1999 annual meeting, the shareholders approved an additional 300,000 shares
of Company stock to be subject to the 1995 Incentive Option Plan. The current
level of authorization under the 1995 Incentive Option Plan is expected to be
inadequate to deal with future grants under that Plan over the remaining five
years of the Plan. Accordingly, the Board of Directors of the Company considers
it advisable to increase by 300,000 shares the share authorization under the
1995 Incentive Option 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, which
Committee administers the Plan. The following further describes the 1995
Incentive Option Plan.
THE 1995 INCENTIVE OPTION PLAN
The purpose of the 1995 Incentive Option 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 Option Plan enhances the ability of the
Company or a subsidiary to attract competent personnel to enter its employ.
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<PAGE> 16
OPTIONS GRANTED TO EXECUTIVE OFFICERS
(AS OF RECORD DATE) UNDER 1995 INCENTIVE OPTION PLAN
<TABLE>
<CAPTION>
Value
Name Number of Options Exercise Price(s) (7/17/00)
---- ----------------- ----------------- ---------
<S> <C> <C> <C>
Robert S. Bowen 243,750(1)+ $6.67 $2,457,000
250,000 16.75
Ronald F. Friedman 22,500 $5.53 $252,450
18,001 $6.00 $193,511
60,000 $6.67 $604,800
Mark D. Funston 15,000 $5.33 $171,300
24,750 $8.67 $199,980
Alan P. Slater 18,750 $5.33 $214,125
15,000 $6.00 $161,250
41,250 $6.67 $415,800
Stephen R. Bebee 19,500 $5.53 $218,790
15,000 $6.00 $196,250
7,500 $6.67 $75,600
B. Scott Miller 4,800 $5.53 $53,856
9,000 $6.67 $908,720
Victor O. Forman 6,000 $5.53 $67,320
Edward Weiss 6,000 $5.53 $67,320
3,750 $6.67 $37,800
-----
TOTAL 530,551
</TABLE>
(1)+On July 17, 2000, Mr. Bowen was granted under the 1995 Group 1 Incentive
Option Plan, options to purchase 250,000 shares of Common Stock at an exercise
price of $16.75 per share. This grant, however, is subject to the availability
of sufficient options under the Plan. Under this Proposal Three, shareholders
are being asked to approve an increase in the number of shares of Common Stock
authorized under the Plan.
As of the Record Date, 942,700 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 $16.75 per share
on the Record Date.
The following is a brief description of the principal provisions of
the 1995 Incentive Option Plan and is qualified in its entirety by the 1995
Incentive Option Plan included herewith as Exhibit A.
The 1995 Incentive Option 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 1,200,000 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 1,475,000 shares. No other amendment to the
1995 Incentive Option Plan is proposed in this proxy statement.
ADMINISTRATION AND ELIGIBILITY. The 1995 Incentive Option Plan is
administered by the Company's Compensation Committee appointed by the Company's
Board of Directors. The 1995 Incentive Option 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
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<PAGE> 17
officers and employees of the Company designated by the Compensation Committee
are eligible to participate in the 1995 Incentive Option Plan.
The 1995 Incentive Option 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 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 Option 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, however, 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 Option 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 Option 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 Option 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 Option 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 Option 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 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
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<PAGE> 18
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 Option 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 in 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.
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.
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, 2000, 1999 and 1998. 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
If shareholders wish to submit a proposal for inclusion in the
Company's proxy materials for the 2001 Annual Meeting of shareholders, the
Company must receive such proposals at its principal executive office at 4200
Parliament Place, Suite 600, Lanham, Maryland 20706-1844, Attention: Edward
Weiss, Secretary, no later than May 15, 2001.
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In addition, if shareholders wish to bring a proposal before the
2001 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 15, 2001 in order for such
proposal(s) to be considered timely. The persons designated as proxies in
connection with the 2001 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, Internet,
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: July 21, 2000
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EXHIBIT A
GROUP 1 SOFTWARE, INC.
INCENTIVE STOCK OPTION,
NON-QUALIFIED STOCK OPTION AND
STOCK APPRECIATION UNIT PLAN
Group 1 Software, Inc., a Delaware corporation (f/k/a COMNET
Corporation) (hereinafter referred to as the "Company"), adopted and established
a non-qualified stock option and stock appreciation incentive unit plan (the
"Plan") for its officers and other key employees (whether full-time or
otherwise) effective as of September 12, 1995, the date it was approved by the
Company's shareholders at their annual meeting, and amended by the Company's
shareholders at their annual meeting on September 23, 1999.
The provisions of the Plan are set forth below:
SECTION ONE
DESIGNATION AND PURPOSE OF THE PLAN
A. Designation. This document is designated the "GROUP 1 SOFTWARE,
INC. INCENTIVE STOCK OPTION, NON-QUALIFIED STOCK OPTION AND STOCK APPRECIATION
UNIT PLAN" (hereinafter referred to as the "Plan").
B. Purpose. The purpose of the 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
invest in shares of the Company's Stock and/or to receive a 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 responsible for the Company's
success, provides a continuing incentive for them to promote the best interests
of the Company and induces them to continue their employment with the Company or
a Subsidiary. Finally, the Plan will enable the Company or a Subsidiary to
attract competent personnel to enter its employ.
SECTION TWO
DEFINITIONS
The following definitions shall be applicable to the terms used in
the Plan:
A. "Code" means the Internal Revenue Code of 1986, as presently in
effect or as hereafter amended.
B. "Committee" means the Compensation Committee appointed to
administer the Plan pursuant to Section Four.
C. "Company" means COMNET Corporation, a Delaware corporation.
D. "Eligible Individual" means any officer or other key employee
(whether full-time or otherwise) of the Company or a Subsidiary. Options and
Stock Units may be granted under the Plan only to such officers and other key
employees (whether full-time or otherwise) of the Company or a Subsidiary.
E. "Incentive Stock Option" shall mean an option granted under this
Plan that meets the requirements of Code Section 422.
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F. "Incentive Stock Option Plan" shall mean that part of the Plan
the provisions of which are specifically designated as relating solely to
Incentive Stock Options as well as those provisions of the Plan which relate to
Options generally or to both Options and Stock Units.
G. "Non-Qualified Stock Option" means any options granted under the
Plan that are not Incentive Stock Options.
H. "Non-Qualified Stock Option Plan" shall mean that part of the
Plan the provisions of which are specifically designated as relating solely to
Non-Qualified Stock Options as well as those provisions of the Plan which relate
to Options generally or to both Options and Stock Units.
I. "Option" shall mean an Incentive Stock Option and a Non-Qualified
Stock Option granted under this Plan to purchase authorized but unissued or
treasury shares of the Company's Stock.
J. "Participant" means any Eligible Individual who is granted an
Option or Stock Unit as provided in this Plan, and shall also mean the successor
in interest, if any, of a deceased Eligible Individual.
K. "Plan" shall mean the Group 1 Software Incentive Stock Option,
Non-Qualified Stock Option and Stock Appreciation Unit Plan as set forth in this
document, and as hereafter amended, the provisions of which, unless otherwise
designated, form a part of each of the incentive Stock Options Plan, the
Non-Qualified Stock Option Plan, and the Stock Appreciation Unit Plan.
L. "Redemption Date" for a Stock Unit shall be the earlier of (i)
the date so designated in the written instrument granting the Stock Unit, which
shall in no event be earlier than the first anniversary of the date of grant of
the Stock Unit (except as otherwise expressly provided herein) nor later than
the tenth anniversary of the date of grant of the Stock Unit; (ii) the date of
the death of the Participant to whom the Stock Unit was granted; or (iii) the
date which is the first day of the sixth month following the termination of
employment of the Participant to whom the Stock Unit was granted if such
termination of employment is due to "total disability" of the Participant. If
the termination of employment is due to any other cause which the Committee, in
its sole discretion, determines should permit a redemption rather than a
forfeiture of outstanding vested Stock Units, the redemption rules of Section
Twelve A shall apply.
M. "Stock" means the Common Stock of the Company.
N. "Stock Appreciation Unit Plan" shall mean that part of the Plan
the provisions of which are specifically designated as relating solely to Stock
Units as well as those provisions of the Plan which relate to both Stock Units
and Options.
O. "Stock Unit" means a stock appreciation incentive unit granted to
a Participant by the Committee under this Plan.
P. "Subsidiary" shall mean an affiliate controlled by the Company,
directly or indirectly, through one or more intermediaries, subject to Section
Twelve(A)(vi), below.
Q. "Vesting Date" for a Stock Unit shall mean the date or dates upon
which all or any portion of the Stock Units shall become non-forfeitable in the
event of the subsequent total disability or death of the participant or in the
event of the termination of employment of the Participant for other causes
approved by the Committee.
R. Wherever appropriate, words used in this Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine or neuter.
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SECTION THREE
STOCK SUBJECT TO STOCK OPTIONS AND STOCK UNITS
Subject to the adjustment provided in Section Ten, the total number
of shares of Stock which may be delivered to all participants upon the exercise
of all Options granted under this Plan, shall not exceed 1,200,000 and the total
number of shares of Stock which may be so issued may be increased only by a
resolution adopted by the Board of Directors of the Company and approved by the
stockholders of the Company. Shares delivered under this Plan upon the exercise
of an Option shall be fully paid and non-assessable. Subject to the adjustment
provided in Section Ten, the total number of Stock Units which may be issued by
the Committee to all Participants under this Plan shall not exceed 100,000 and
the total of such Stock Units may be increased only by a resolution adopted by
the Board of Directors of the Company and approved by the stockholders of the
Company. Such Stock may either be authorized and unissued or treasury stock.
Subject to the adjustment provided in Section Ten, the total number of Shares of
Stock which may be issued by the Committee in redemption of Stock Units to all
Participants under the Plan shall not exceed 75,000 shares and the total number
of shares of Stock which may be so issued may be increased only by a resolution
adopted by the Board of Directors of the Company and approved by the
stockholders of the Company.
SECTION FOUR
ADMINISTRATION OF THE PLAN
A. Appointment of Committee. The Board of Directors shall appoint a
Compensation Committee (the "Committee") which shall consist of not less than
three (3) members of such Board of Directors, none of whom is, or has been
during the one (1) year period prior to his appointment, an Eligible Individual,
who shall not be eligible during the period of service on the Committee. In
addition, the Board of Directors may designate a member of the Committee to act
as Chairman of the Committee. The Board of Directors, in its sole discretion,
may at any time, remove any member of the Committee and appoint a director to
fill any vacancy on the Committee. No individual may participate as a member of
the Committee in the administration of this Plan if he shall have been eligible
to receive a grant of an award of any options or stock appreciation rights of
the Company or any of its affiliates (as that term is used in SEC Rule 16b-3)
under this Plan or any other discretionary plan of the Company or its affiliates
(as that term is used in SEC Rule 16b-3) at any time within one year prior to
serving on the Committee.
B. Committee Meetings. The Committee shall hold its meetings at such
times and places as are specified by the Committee. A majority of the Committee
shall constitute a quorum. All actions of the Committee shall be taken by a
majority of a quorum present at the meeting duly called by any member of the
Committee; provided, however, that any action taken by a written document signed
by a majority of the Committee members shall be as effective as actions taken by
the Committee at a meeting duly called and held.
C. Committee Powers. Subject to the terms and provisions of this
Plan, the Committee shall have full power and authority to (i) designate the
Eligible Individuals to whom Options or Stock Units shall be granted, (ii)
determine the number of Options and/or Stock Units to be granted to each
Participant, (iii) determine the Redemption Date of any Stock Units and the
Vesting Date for any Stock Units, (iv) determine whether a vested Stock Unit
shall be redeemed for cash or for Stock or for a combination of cash and Stock,
(v) determine the purchase price to be paid for each share of Stock deliverable
upon the exercise of any Options, which shall be at least equal to the fair
market value of a share of Stock at the time the Option is granted, (vi)
determine the period during which an Option may be exercised, which period may
not (except as otherwise expressly provided herein commence prior to the first
anniversary of the date of grant of the Options nor extend beyond the tenth
anniversary of the date of grant of the Options, (vii) establish the provisions
of Non-Qualified Options to avoid such Options being deemed to constitute
incentive stock options under Section 422 of the Code and regulations
thereunder, including but not limited to extending the terms of Non-Qualified
Options to a term not to exceed ten years and seven days and (viii) determine
any other conditions to which the exercise of an Option shall be subject,
including, subject to the provisions of Section Twelve, the effect upon an
Option of the termination of employment or death of a Participant. The Committee
shall have all rights, powers and authority necessary or appropriate to
administer this Plan in
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accordance with its terms, including, without limitation, the power to make
binding interpretations of this Plan and to resolve all questions (whether
express or implied) arising thereunder. The Committee may prescribe such rules
and regulations for administering this Plan as the Committee, in its sole
discretion, deems necessary or appropriate.
SECTION FIVE
SELECTION OF PARTICIPANTS
In determining which Eligible Individuals shall be granted Options
and/or Stock Units, the Committee shall evaluate, inter alia, (i) the duties and
responsibilities of the Eligible Individuals, (ii) their past and prospective
contributions to the success of the Company, (iii) the extent to which they are
performing and will continue to perform valuable services for the benefit of the
Company, and (iv) such other factors as the Committee deems relevant.
SECTION SIX
ISSUANCE OF OPTIONS AND STOCK UNITS
A. Form of Options and Stock Units. Subject to the provisions of
this Plan, each group of Options and/or Stock Units granted to a Participant
shall be set forth in a written instrument upon such terms and conditions as the
Committee determines. The Redemption Date of any Stock Unit and the Vesting Date
of any Stock Unit shall be set forth in such written instrument. Each such
instrument shall incorporate the provisions of this Plan by reference.
B. Date of Grant of Stock Units and Options. The date of grant for a
Stock Unit shall be the date on which the Stock Unit instrument was issued to
the Participant and for an Option shall be the date such options were granted by
the Committee.
C. Delivery of Shares on Exercise of Option. Except as otherwise
expressly provided herein, no Option may be exercised prior to the first
anniversary of the date of grant of the Option. Upon exercise of any Option, or
any portion thereof, the Committee shall deliver to the Participant such number
of shares of Stock as the Participant elects to purchase, as soon as practicable
after the Committee receives (i) written notice of such exercise under and
pursuant to the terms and conditions of the applicable Option document and (ii)
the full purchase price for such shares which shall be paid in cash or shares of
stock, or a combination thereof. The Participant shall be entitled to pyramid
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 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.
SECTION SEVEN
VESTING AND REDEMPTION OF STOCK UNITS
A. Vesting. The amount to be paid in redemption of any Stock Unit as
of the Redemption Date of such Stock Unit shall be equal to the percentage of
the "Stock Unit Value" of the Stock Unit in which the Participant has a vested
interest as of the Redemption Date. The Committee may, in its discretion, issue
Stock Units to a participant in which the Participant has an immediate fully
vested interest or may impose such vesting requirements, expressed in terms of
years of continuous employment with the Company and/or a Subsidiary, as the
Committee, in its sole discretion, may determine is appropriate in any given
situation.
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B. Stock Unit Value. The "Stock Unit Value" of a Stock Unit shall be
determined as of the Redemption Date of the Stock Unit and shall consist of the
appreciation, if any, in the value of one share of Stock of the Company, between
(i) the value of one share of the Company's Stock as of the date of grant of the
Stock Unit, and (ii) the value of one share of Stock of the Company as of the
Redemption Date of such Stock Unit.
C. Payment of Stock Unit Value. Each Stock Unit granted to a
Participant which has become vested shall be redeemed by the Committee on the
Redemption Date of such Stock Unit. The "Stock Unit Value" of the Stock Unit
shall be paid to the Participant in cash, in Stock or in a combination of cash
and Stock as soon as is practicable after the Redemption Date, at the discretion
of the Committee. To the extent that payment of the Stock Unit Value is made in
shares of Stock, the value of the Company's Stock as of the Redemption Date
shall be used in determining the number of shares of Stock to be received by the
Participant. Any shares of stock received by a Participant upon exercise of a
Stock Unit shall be non-transferable until a period of at least six months has
elapsed since the date of the grant of such Stock Unit.
SECTION EIGHT
NON-TRANSFERABILITY OF OPTIONS AND STOCK UNITS
Any Option or Stock Unit granted to an Eligible Individual may not
be sold, exchanged, assigned, pledged, discounted, hypothecated or otherwise
transferred except by will or by the laws of descent and distribution. During
the lifetime of the Eligible Individual to whom an Option or Stock Unit is
issued, such Option or Stock Unit may be exercised only by the Eligible
Individual to whom it was issued or his representative. Upon any attempt to so
sell, transfer, assign, pledge, discount, hypothecate or otherwise transfer any
Option or Stock Unit, or any right thereunder, contrary to the provisions
hereof, such Option of Stock Unit and all rights thereunder shall immediately
become null and void.
SECTION NINE
COMPLIANCE WITH SECURITIES LAWS
Unless a registration statement under the Securities Act of 1933 is
then in effect with respect to the Stock a Participant receives upon the
exercise of an Option or the redemption of a Stock Unit the Committee, in its
discretion, may require, at the time that a Participant so receives such Stock,
that the Participant agrees in writing to acquire any such Stock he may so
receive for investment and not for distribution, or to consent to such other
agreement as the Committee, in its discretion, may deem to be necessary to
comply with the requirements of the Securities Act of 1933 or any applicable
state securities laws. A reference to any such agreement shall be inscribed on
the Stock certificate(s). Each Option shall be subject to the requirement that,
if at any time the Committee determines, in its discretion, that the listing,
registration or qualification of the shares of Stock subject to the Option upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained and the same shall have been free of any conditions not
acceptable to the Committee.
SECTION TEN
CHANGES IN CAPITAL STRUCTURE OF COMPANY
In the event of the splitting or consolidation of shares of Stock of
the Company, the payment of a stock dividend by the Company or a similar
transaction, the number of shares of Stock specified in Section Three of this
Plan, the number of shares of Stock upon which the value of each outstanding
Stock Unit shall be based and the
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value per share and the number and price per share of shares subject to then
outstanding Options shall be proportionately adjusted.
SECTION ELEVEN
REORGANIZATION, DISSOLUTION, LIQUIDATION
CHANGE OF CONTROL OR SIMILAR EVENT
A. Treatment of Options. In the event of an occurrence of any of
the following events and upon approval of the Committee:
(i) the commencement of a bona fide "tender offer"
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 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; each Participant shall have
the right, immediately following such occurrence, to exercise his or her Option
in full to the extent not theretofore exercised regardless of any provision
herein or any provision in the Option contract providing for the deferment of
the vesting or exercise thereof.
The Participant shall be entitled to exercise the options regardless of whether
the tender offer (described in subsection A(i), directly above), 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. Treatment of Stock Units. In the event of an occurrence of any of
the following events and upon approval of the Committee:
(i) the commencement of a bona fide "tender offer"
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;
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(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 shareholders of the Company
immediately prior to such merger or consolidation; the Redemption Date with
respect to all Stock Units 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 Stock Unit
contract providing for the deferment of the vesting or redemption thereof.
The Participant shall be entitled to require redemption (the "Redemption Date")
of the Stock Units 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 Stock
Units 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 Stock Units 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 Stock Unit Value of any
Stock Unit upon the redemption of such Stock Unit 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 Stock Unit, and (ii) the current
value, as of the Redemption Date of such Stock Unit, 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.
SECTION TWELVE
TERMINATION OF EMPLOYMENT
A. Severance.
(i) Stock Units - Termination of Employment. In the
event that a Participant's employment with the Company or a Subsidiary
terminates for any reason, other than due to his death or "total disability,"
any Stock Unit granted to him will be forfeited, whether or not such Stock Unit
had been vested, unless the Committee, in its sole discretion, decides to
authorize the redemption of the Stock Unit, to the extent then vested. If the
Committee so decides to redeem the Stock Unit, it shall be redeemed as of the
third business day following the next date on which quarterly and/or annual
summary statements of sales and sales earnings of the Company are released for
publication on a wire service, in a financial news service, in a newspaper of
general publication or are otherwise made publicly available.
(ii) Stock Units - Total Disability. In the event that
a Participant's employment with the Company or a Subsidiary is terminated due to
his incurring a "total disability", any Stock Units granted to him will be
redeemed, to the extent then vested, upon the expiration of six months following
the date of termination of employment due to a "total disability".
(iii) Options - Termination of Employment. In the
event that a Participant's employment with the Company or a Subsidiary
terminates for any reason, other than due to his death or "total disability",
any Option granted to such Participant will expire in accordance with the
provisions of the Options document dealing with the effect of a termination of
employment. Such provisions must provide for an expiration of the Option not
later than
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six months after the date of such termination. Notwithstanding the foregoing, in
the event that the Participant's employment is terminated for cause any Option
granted to him shall be revoked as of the date his employment terminates.
Notwithstanding any other provisions of this Plan, no payment under any Stock
Unit or issuance of any Stock pursuant to any Option or Stock Unit shall be made
and all rights of the Participant who received such Option or Stock Unit (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 (1)
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; (2) divulges without the consent of the Company any secret or
confidential information belonging to the Company or an affiliate; (3) has been
dishonest or fraudulent in any matter affecting the Company or (4) 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 (described in the
foregoing clauses (1) - (4)) 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 (1)-(4) 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.
(iv) Options - Total Disability. In the event that a
Participant's employment with the Company or a Subsidiary is terminated due
to his incurring a "total disability," any Option granted to such Participant
will expire twelve months after the date of such termination.
(v) Definition of "Total Disability". For purposes of
this Section Twelve, a Participant is totally disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(vi) Definition of "Subsidiary". For purposes of this
Section Twelve, a Participant's employer shall continue to be deemed a
Subsidiary notwithstanding that such entity is no longer directly or indirectly
controlled by the Company and therefore no longer a Subsidiary, provided that
the Participant's employer was a Subsidiary at the time the Options or Stock
Units were granted to such Participant.
B. Death. If a Participant dies while in the employ of the
Company or a Subsidiary, his vested Stock Units will be redeemed as soon as is
practicable after his death and the proceeds of such redemption shall be paid
over to the executor or administrator of the estate of the Participant or to the
person to whom the Stock Units shall pass by will or by the laws of descent and
distribution. If a Participant dies while in the employ of the Company or a
Subsidiary, any Option may provide that it can be exercisable not later than six
months after his death by the executor or administrator of the estate of the
Participant or by the person to whom the Option shall pass by will or by the
laws of descent and distribution, but only to the extent the Participant was
entitled to exercise the Options as of the date of his death.
SECTION THIRTEEN
PARTICIPANT'S RIGHTS AS A HOLDER OF SHARES
A Participant has no rights as a stockholder with respect to any
shares of Stock paid in redemption of any Stock Units or acquired pursuant to
the exercise of an Option until the date a certificate is issued to him for such
shares. Except as otherwise provided in Section Ten of this Plan, no adjustment
shall be made for dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
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SECTION FOURTEEN
AMENDMENTS TO THE PLAN
The Board of Directors of the Company may amend or terminate this
Plan at any time; provided, however, that (i) any such amendment or termination
shall not adversely affect the rights of Participants under Options or Stock
Units granted prior thereto; and (ii) any amendment which increases the total
number of Options, Stock Units or shares of Stock covered by this Plan, changes
the definition of Eligible Individual, changes the criteria for becoming a
member of the Compensation Committee or any other material change to this Plan
shall be subject to obtaining the approval thereof by the Company's
stockholders. Notwithstanding the foregoing, this Plan shall not be amended more
than once every six months, other than to comport with changes in the, the Code,
the Employee Retirement Income Security Act of 1974, as amended or the rules
thereunder.
SECTION FIFTEEN
EFFECTIVE AND EXPIRATION DATES OF THE PLAN
This Plan shall be effective on September 12, 1995, after approval
of it by the Company's shareholders. No Option shall be granted after September
10, 2005.
SECTION SIXTEEN
INCENTIVE STOCK OPTIONS PROVISIONS
The provisions of this Section Sixteen shall apply only to Incentive
Stock Options.
A. Over Ten-Percent Shareholders. Incentive Stock Options shall not
be issued to individuals then owning more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary of the Company.
B. Limit. Incentive Stock Options shall not be granted which will
cause the aggregate fair market value (determined at the time each Option is
granted) of the Stock for which options are granted to any Eligible Individual
under all incentive stock option plans of the Company during the calendar year
to exceed $100,000 plus the "unused limit carry-over" referred to in Section
422(b)(8) of the Internal Revenue Code of 1954.
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<PAGE> 29
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 12, 2000
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 12, 2000, 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.
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS --->
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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.)
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<PAGE> 30
Mr. James P. Marden
Mr. Charles A. Mele
Mr. Charles J. Sindelar
(2) To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 14,000,000 shares to 50,000,000 shares;
(3) 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 300,000 shares the number of shares subject to stock options
which may be granted under the Plan; and
(4) 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 AND THREE.
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: , 2000
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(Signature of Stockholder)
Dated: , 2000
------------------------------- -------------
(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.
The above-signed hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated July ___, 2000 and the Company's Annual Report for the fiscal
year ended March 31, 2000 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.
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