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
COMPUCOM SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-- May 13, 1999 --
Dear CompuCom Stockholder:
The 1999 annual meeting of stockholders of CompuCom Systems, Inc. will be held
on Thursday, May 13, 1999, at CompuCom's principal executive offices at 7171
Forest Lane, Dallas, Texas 75230 at 2:00 p.m. local time.
Only stockholders who owned stock at the close of business on March 25, 1999,
can vote at this meeting or any adjournments that may take place. At the
meeting, we will elect 11 directors, vote on a proposal to amend CompuCom's 1993
Stock Option Plan in order to increase the number of shares authorized for
issuance, and attend to any other business properly presented at the meeting. We
also will report on CompuCom's 1998 business results and other matters of
interest to our stockholders. You will have an opportunity at the meeting to ask
questions, make comments and meet our management team.
CompuCom's board of directors is a vital resource. No matter how many shares you
hold, CompuCom considers your vote important, and we encourage you to vote as
soon as possible.
All stockholders are cordially invited to attend the meeting. Whether or not you
expect to attend the meeting, please fill in, date and sign the accompanying
proxy and mail it promptly in the enclosed envelope.
We have rewritten and reformatted our proxy statement to make it easier to read.
We encourage you to read this document and we welcome your comments on the new
format.
This proxy statement, accompanying proxy card, and 1998 annual report are being
mailed to stockholders beginning April 13, 1999, in connection with the
solicitation of proxies by the board of directors.
Please contact M. Lazane Smith, senior vice president and chief financial
officer, at (972) 856-3600 with any questions or concerns.
Sincerely,
/s/ Edward R. Anderson /s/ James A. Ounsworth
- --------------------------- ------------------------
Edward R. Anderson James A. Ounsworth
Chief Executive Officer Secretary
April 13, 1999
<PAGE>
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QUESTIONS AND ANSWERS
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Q: Who is entitled to vote?
A: Stockholders of record as of the close of business on March 25, 1999, may
vote at the annual meeting.
Q: How many shares can vote?
A: On March 25, 1999, there were 47,634,950 common shares and 1,500,000 shares
series B preferred shares issued and outstanding. In the election of
directors, each series B preferred share may cast five votes for each
common share into which a preferred share may be converted. Each series B
preferred share is convertible into 1.477104 common shares. Every common
stockholder may cast one vote for each share owned.
Q: What may I vote on?
A: You may vote on the election of 11 directors who have been nominated to
serve on our board of directors and on the adoption of an amendment to our
1993 Stock Option Plan to increase the number of shares authorized for
issuance.
Q: How does the board recommend I vote on the proposal?
A: The board recommends a vote FOR each board nominee, and FOR the amendment
to the 1993 Plan.
Q: How do I vote?
A: Sign and date each proxy card you receive, mark the boxes indicating how
you wish to vote, and return the proxy card in the prepaid envelope
provided.
If you sign your proxy card but do not mark any boxes showing how you wish
to vote, Edward R. Anderson and M. Lazane Smith will vote your shares as
recommended by the board of directors.
Q: What if I hold my CompuCom shares in a brokerage account?
A: If you hold your CompuCom shares through a broker, bank or other nominee,
you will receive a voting instruction form directly from them describing
how to vote your shares. This form will, in most cases, offer you three
ways to vote:
1. by telephone,
2. via the Internet, or
3. by returning the form to your broker.
Q: What if I want to change my vote?
A: You may change your vote at any time before the meeting in any of the
following three ways:
1. notifying our chief financial officer, M. Lazane Smith, in writing,
2. voting in person at the meeting, or
3. submitting a proxy card with a later date.
If you hold your shares through a broker, bank or other nominee and wish to
vote at the meeting, you must obtain a legal proxy from that nominee
authorizing you to vote at the meeting. We will be unable to accept a vote
from you at the meeting without that form. If you hold your shares directly
and wish to vote at the meeting, no additional forms will be required.
Q: How will directors be elected?
A: The 11 nominees who receive the highest number of affirmative votes at a
meeting at which a quorum is present will be elected as directors.
2
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QUESTIONS AND ANSWERS (cont'd.)
- -------------------------------------------------------------------------------
Q: What vote is required to adopt the amendment to the 1993 Plan?
A: To approve the amendment to the plan, a quorum must be present and voting,
and a majority of the votes cast must be in favor of the amendment.
Q: Who will count the votes?
A: A representative of CompuCom will count the votes and act as the judge of
election.
Q: What does it mean if I get more than one proxy card?
A: Your shares may be registered differently or may be in more than one
account. We encourage you to have all accounts registered in the same name
and address (whenever possible). You may obtain information about how to do
this by contacting our transfer agent at:
ChaseMellon Shareholder Services
85 Challenger Road
Ridgefield Park, NJ 07660
(toll-free telephone 800-851-9677)
If you provide ChaseMellon with photocopies of the proxy cards that you
receive or with the account numbers that appear on each proxy card, it will
be easier for ChaseMellon to combine your accounts.
You also can find information on transferring shares and other useful
stockholder information on their website at www.chasemellon.com.
Q: What is a quorum?
A: A quorum is a majority of the outstanding shares. The shares may be
represented at the meeting either in person or by proxy. To hold the
meeting, there must be a quorum present.
Q: What if I abstain or fail to give instructions to my broker?
A: If you submit a properly executed proxy, your shares will be counted as
part of the quorum even if you abstain from voting or withhold your vote
for a particular director.
Broker non-votes also are counted as part of the quorum. A broker non-vote
occurs when banks, brokers or other nominees holding shares on behalf of a
stockholder do not receive voting instructions from the stockholder by a
specified date before the meeting. In this event, banks, brokers or other
nominees may vote those shares on matters deemed routine such as the
election of directors. Approval of the Amendment to the 1993 Stock Option
Plan is considered a non-routine matter, therefore, banks, brokers or other
nominees will not be able to vote on that proposal without instructions
from the stockholder. This will result in a "broker non-vote" on that
matter equal to the number of shares for which they do not receive specific
voting instructions.
Broker non-votes and abstentions are not counted in the tally of votes FOR
or AGAINST a proposal. A WITHHELD vote is treated the same as an
abstention.
Q: Who can attend the meeting?
A: All stockholders are encouraged to attend the meeting. Admission tickets
are not required.
Q: Are there any expenses associated with collecting the stockholder votes?
A: We will reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and other materials to our stockholders. We do not anticipate hiring
an agency to solicit votes at this time.
3
<PAGE>
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QUESTIONS AND ANSWERS (cont'd.)
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Q: What is a stockholder proposal?
A: A stockholder proposal is your recommendation or requirement that CompuCom
or our board of directors take action on a matter that you intend to
present at a meeting of stockholders. However, under the proxy rules we
have the ability to exclude certain matters proposed, including those that
deal with matters relating to our ordinary business operations.
Q: Can anyone submit a stockholder proposal?
A: To be eligible to submit a proposal, you must have continuously held at
least $2,000 in market value, or 1%, of our common stock for at least one
year by the date you submit your proposal. You also must continue to hold
those securities through the date of the meeting.
Q: If I wish to submit a stockholder proposal for the annual meeting in 2000,
what action must I take?
A: If you wish us to consider including a stockholder proposal in the proxy
statement for the annual meeting in 2000, you must submit the proposal, in
writing, so that we receive it no later than December 9, 1999. The proposal
must meet the requirements established by the SEC. Send your proposal to:
M. Lazane Smith, Senior Vice
President and Chief Financial Officer
CompuCom Systems, Inc.
7171 Forest Lane
Dallas, TX 75230
As to any proposal presented by a stockholder at the annual meeting that
has not been included in this proxy statement, management proxies will be
allowed to use their discretionary voting authority unless we receive
notice of such proposal no later than February 22, 2000.
Q: Who are CompuCom's largest stockholders?
A: Safeguard Scientifics, Inc. beneficially owns 55.6%, Mr. Anderson
beneficially owns 2.6%, Mr. Lynch owns 1.1%, Mr. Brown beneficially owns
1.7%, and other directors and executive officers, as a group, beneficially
own 6.9% of CompuCom common stock. T. Rowe Price Associates, Inc.
beneficially owns 5.5% of our stock.
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<PAGE>
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ELECTION OF DIRECTORS
Item 1 on Proxy Card
- --------------------------------------------------------------------------------
Directors are elected annually and serve a one-year term. There are 11 nominees
for election this year. The eleven nominees are currently serving as directors.
Each nominee, if elected, has consented to serve until the next annual meeting
or until his successor is elected and qualified. You will find detailed
information on each nominee below. If any director is unable to stand for
re-election after distribution of this proxy statement, the board may reduce its
size or designate a substitute. If the board designates a substitute, proxies
voting on the original director candidate will be cast for the substituted
candidate.
The board recommends a vote FOR each nominee. The 11 nominees who receive the
highest number of affirmative votes will be elected as directors.
- --------------------------------------------------------------------------------
EDWARD R. ANDERSON Director since 1993
Age 52
Mr. Anderson has served as president and chief executive officer of CompuCom
since January 1994. Mr. Anderson is a director of M/A/R/C and Diamond Technology
Partners Incorporated.
- --------------------------------------------------------------------------------
MICHAEL J. EMMI Director since 1994
Age 57
Mr. Emmi has been chairman of the board, president and chief executive officer
of Systems & Computer Technology Corporation, a provider of computer software
and services, since May 1985. Mr. Emmi is a director of Safeguard Scientifics,
Inc. and National Media Corporation.
- --------------------------------------------------------------------------------
RICHARD F. FORD Director since 1991
Age 62
Mr. Ford is the managing general partner of GM Management Company Limited
Partnership and Gateway Associates III, L. P., venture capital management
companies. Mr. Ford is a director of Stifel Financial Corporation, D&K
Healthcare Resources, Inc. and TALX, Inc.
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DELBERT W. JOHNSON Director since 1995
Age 60
Mr. Johnson has been a vice president of Safeguard Scientifics, Inc., a company
that develops and operates rapidly growing information technology businesses,
since 1980. Mr. Johnson served as the president and chief executive officer of
Pioneer Metal Finishing, a division of Safeguard, from 1978 until October 1994,
and as chairman of the board and chief executive officer until October 1997. Mr.
Johnson is a director of Safeguard Scientifics, Inc., Ault, Inc., US Bancorp and
Tennant Company, Inc. Mr. Johnson is the brother of Jerry Johnson, a Safeguard
executive officer.
5
<PAGE>
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS (cont'd.)
Item 1 on Proxy Card
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JOHN D. LOEWENBERG Director since 1995
Age 58
Mr. Loewenberg is the managing partner of JDL Enterprises, a consulting firm.
From May 1995 through March 1996, Mr. Loewenberg served as executive vice
president and chief administrative officer of Connecticut Mutual, a life
insurance company. Prior to joining Connecticut Mutual, Mr. Loewenberg served as
senior vice president of Aetna Life and Casualty, a multi-line insurer, from
March 1989 to May 1995. For the first five years, he was chief executive officer
of Aetna Information Technology, the information systems company of Aetna.
Subsequently, he became senior vice president of Aetna Health Plans, the managed
care operations of Aetna. Mr. Loewenberg is a director of Sanchez Computer
Associates, Inc., Diamond Technology Partners Incorporated, DocuCorp
International, Inc. and Sherwood International, a United Kingdom company.
- --------------------------------------------------------------------------------
THOMAS C. LYNCH Director since 1998
Age 56
Prior to his appointment in October 1998 as executive vice president and chief
operating officer of CompuCom, Mr. Lynch had been a senior vice president of
Safeguard Scientifics, Inc., a position he held from November 1995. Mr. Lynch
retired from the U.S. Navy as an Admiral after 31 years of service, including
serving as superintendent of the U.S. Naval Academy from 1991 through 1994 and
director of the Navy Staff from 1994 through 1995. Mr. Lynch currently serves as
a director of The Eastern Technology Council and a trustee of the U.S. Naval
Academy Foundation. Mr. Lynch is a director of OAO Technology Solutions, Inc.
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JOHN C. MAXWELL, III Director since 1997
Age 40
Mr. Maxwell is managing director of Commercial Electronics, LLC, a venture
capital fund. From January 1996 to November 1997, Mr. Maxwell served as vice
president of business development and market research for the Advanced
Technology and Corporate Development Group of Compaq Computer Corporation. Prior
to joining Compaq, from June 1990 to January 1996, Mr. Maxwell served as
managing director of Soundview Financial Group.
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WARREN V. MUSSER Director since 1984
Age 72
Since May 1998, Mr. Musser has served as chairman of the board of CompuCom, and
since 1953, he has served as the chief executive officer of Safeguard
Scientifics, Inc. He is chairman of the boards of Safeguard Scientifics, Inc.
and Cambridge Technology Partners (Massachusetts), Inc., a director of DocuCorp
International, Inc., National Media Corporation and Sanchez Computer Associates,
Inc., and a trustee of Brandywine Realty Trust. Mr. Musser also serves on a
variety of civic, educational and charitable boards of directors and serves as
vice president/development, Cradle of Liberty Council, Boy Scouts of America, as
vice chairman of The Eastern Technology Council, and as chairman of the
Pennsylvania Partnership on Economic Education.
6
<PAGE>
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ELECTION OF DIRECTORS (cont'd.)
Item 1 on Proxy Card
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANTHONY J. PAONI Director since 1999
Age 54
Mr. Paoni is a clinical professor of information technology at the Kellogg
Graduate School of Management. Before 1996, Mr. Paoni spent 28 years in the
information technology industry, most recently as the chief executive officer of
Eolas, Inc., an Internet software company. Mr. Paoni manages the Kellogg
Technology Speaker Series and acts as a consultant to several companies
including IBM, Xerox, the American Medical Association and Phillips Petroleum
Company. Mr. Paoni is a strategic advisor to the US Navy for the CVX nuclear
carrier program and a director of US Freightways Corporation.
- --------------------------------------------------------------------------------
EDWARD N. PATRONE Director since 1991
Age 64
Mr. Patrone is a business consultant and a director of Primesource Corporation,
Bitwise, Inc. and Global Imaging, Inc.
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HARRY WALLAESA Director since 1999
Age 48
Mr. Wallaesa became president and chief operating officer of Safeguard
Scientifics, Inc. in March 1999. Before joining Safeguard, Mr. Wallaesa served
as president and chief executive officer of aligne, Inc., a strategic technology
management consulting firm which he co-founded in 1996. From 1985 through 1995,
Mr. Wallaesa was the chief information officer and vice president of management
information systems at Campbell Soup Company, a global manufacturer and marketer
of high quality, branded convenience food products.
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BOARD OF DIRECTORS -- ADDITIONAL INFORMATION
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Meetings of the Board: The board of directors held four meetings in 1998. Each
of the incumbent directors attended at least 75% of the total number of board
and committee meetings of which they were members during the period in which
they served as a director.
Annual and Meeting Attendance Fees: Directors who are executive officers of
Safeguard or employees of CompuCom receive no additional compensation other than
their normal salary for serving on the board or its committees.
Non-employee directors receive:
o $1,000 monthly cash retainer
o $750 for each board or committee meeting attended, and
o reimbursement of out-of-pocket expenses.
Stock Options: Directors who are not executive officers of Safeguard or
employees of CompuCom receive:
o a stock option to purchase 10,000 shares of CompuCom's common stock upon
initial election to the board, and
o service grants, upon the determination of the compensation committee.
Directors' options have a ten-year term and vest 25% each year starting on the
first anniversary of the grant date. The exercise price is equal to the closing
price of a share of CompuCom common stock on the grant date.
7
<PAGE>
In October 1998, Messrs. Emmi, Ford, Johnson, Loewenberg, Maxwell and Patrone
were each granted an option to purchase 10,000 shares at an exercise price of
$3.1875 per share. In February 1999, Mr. Paoni received an initial option to
purchase 10,000 shares at an exercise price of $4.375 per share.
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BOARD COMMITTEE MEMBERSHIP ROSTER
Item 1 on Proxy Card
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Audit Compensation Executive
- ---------------------------------------- ------------------------ -------------------------- -----------------------
<S> <S> <C> <C>
Meetings held in 1998 4 4 3
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Michael J. Emmi x*
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Richard F. Ford x* x*
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Delbert W. Johnson x
- ---------------------------------------- ------------------------ -------------------------- -----------------------
John D. Loewenberg x
- ---------------------------------------- ------------------------ -------------------------- -----------------------
John C. Maxwell, III x
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Warren V. Musser x x
- ---------------------------------------- ------------------------ -------------------------- -----------------------
Edward N. Patrone x
- ---------------------------------------- ------------------------ -------------------------- -----------------------
</TABLE>
* Chairperson
Audit: recommends our independent certified public accountants, discusses the
scope and results of our audit with the independent certified public
accountants, reviews with management and the independent certified public
accountants our interim and year-end operating results, considers the adequacy
of our internal accounting controls and audit procedures, and reviews the
non-audit services to be performed by the independent certified public
accountants.
Compensation: reviews and approves management's recommendations for
compensation, including incentive compensation, for all of our officers, and
administers our stock option plans and management incentive plan.
Executive: acts upon all matters with respect to the management of our business
and affairs, except that its authority to authorize and approve investments,
other than investments made in the normal course of business, is limited to
investments of up to $5 million in the aggregate between board meetings.
8
<PAGE>
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PROPOSAL TO AMEND THE 1993 STOCK OPTION PLAN
Item 2 on Proxy Card
- --------------------------------------------------------------------------------
Background and Proposed Amendment
Our current stock option plan was adopted in 1993. Since less than 25,000 shares
remain available for issuance under that plan, in March 1999, our board adopted,
subject to stockholder approval, an amendment authorizing an additional
3,000,000 shares for issuance.
The board recommends a vote FOR approval of the amendment to the 1993 Plan.
Approval of this amendment requires a majority of the votes cast at a meeting at
which a quorum representing a majority of all outstanding voting stock is
present, either in person or by proxy, and voting on the amendment. If the
stockholders do not approve the amendment, then the number of shares that may be
issued under the 1993 Plan may not exceed 5,750,000 shares.
Purpose of the 1993 Plan
The 1993 Plan provides participants with an opportunity to receive grants of
stock options - incentive stock options and non-qualified stock options - with
an exercise price generally equal to or greater than the fair market value on
the grant date.
We believe the plan encourages participants to contribute materially to our
growth, thus benefiting our stockholders, and aligns the economic interests of
the participants with those of our stockholders.
The plan is not qualified under section 401(a) of the Internal Revenue Code and
is not subject to the provisions of the Employee Retirement Income Security Act.
Shares Subject to the 1993 Plan
The 1993 Plan, as amended by this proposal, authorizes the issuance of 8,750,000
shares of CompuCom common stock. The maximum number of shares that may be
granted to any individual during any calendar year is 2,500,000. Shares issued
under the plan may be authorized but unissued shares or may be reacquired
shares. If options granted under the plan terminate, expire or are canceled,
forfeited, exchanged or surrendered without being exercised, those shares will
again be available for purposes of the plan.
No grants have been made and there are no current plans to authorize any
specific grants under this amendment to the plan. The closing price of a share
of our common stock on March 25, 1999, was $3.75 per share.
Administration of the 1993 Plan
The plan is administered by a compensation committee, which is currently
composed of Messrs. Ford, Musser and Maxwell. Mr. Caldwell was a member of the
committee until his resignation from the board in March 1999.
The committee has the authority to administer and interpret the plan.
Specifically, it is authorized to:
o determine the individuals to whom grants shall be made,
o determine the type, size and terms of grants,
o determine the time when grants will be made and the duration of any
applicable exercise period, including the criteria for exercisability and
acceleration of exercisability,
o make factual determinations and adopt or amend appropriate rules,
regulations, agreements and instruments for implementing the plan, and
o deal with any other matter arising under the plan.
Eligibility for Participation and Grants
Those eligible to receive grants are employees (including officers and members
of the board), non-employee directors and certain eligible independent
contractors or advisors of CompuCom or any subsidiary. There are approximately
400 employees, 9 non-employee directors and no independent contractors or
9
<PAGE>
advisors currently eligible to receive grants.
Grants may be incentive stock options or nonqualified stock options. All grants
are subject to the terms and conditions of the 1993 Plan.
All committee decisions are final and binding on all persons having any
interests in the plan or in any grants made under the plan. The committee will
execute its powers in the best interest of CompuCom, not as a fiduciary, and in
keeping with the objectives of the plan. Decisions of the committee need not be
uniform among participants.
Stock Options
Grant of Stock Options. The committee may grant options qualifying as incentive
stock options to employees. The committee may grant nonqualified stock options
to any participant. Grants to employees may be made in any combination of
incentive stock options and nonqualified stock options.
Option Price. The option price is determined by the committee at the time of
grant. To qualify as an incentive stock option, the exercise price may not be
less than the fair market value of common stock on the date of grant. Also, the
value (determined as of the grant date) of any incentive stock options held by a
participant that become exercisable for the first time during any calendar year
cannot exceed $100,000. If a grantee owns stock having more than 10% of the
voting power of CompuCom or any parent or subsidiary, the exercise price of an
incentive stock option may not be less than 110% of the fair market value of the
common stock on the date of grant.
Term and Exercisability of Stock Options. The committee determines the term of
stock options granted under the plan, although the term may not exceed 10 years.
If a grantee owns stock having more than 10% of the voting power of CompuCom or
any parent or subsidiary, the term of an incentive stock option may not exceed
five years. The committee determines how stock options become exercisable and
may accelerate vesting at any time for any reason.
Manner of Exercise of Stock Options. To exercise a stock option, a grantee must
deliver a written exercise notice specifying the number of shares to be
purchased together with payment of the option exercise price. The exercise price
may be paid in any of the following ways:
o in cash,
o by delivering shares of CompuCom common stock already owned by the
participant having a fair market value equal to the exercise price,
o in a combination of cash and shares, or
o any other method of payment as the committee may approve, including a
"cashless exercise" of a stock option, effected by delivering a notice of
exercise to CompuCom and a securities broker, with instructions to the
broker to deliver to CompuCom out of the sale proceeds the amount necessary
to pay the exercise price.
The committee may allow a grantee to elect to cash-out all or part of an option
exercise by paying the grantee an amount, in cash or shares, equal to the
difference between the exercise price and the fair market value of the shares on
the date of the cash-out.
The committee may determine to grant a replacement option at the time of
exercise for a number of shares up to the number of shares subject to the option
being exercised. The terms of the replacement option are determined by the
committee but the exercise price must be equal to the fair market value of a
share on the date of exercise.
For a non-qualified stock option, we also are required to withhold taxes. If
approved by the committee, the income tax withholding obligation may be
satisfied by withholding shares of an equivalent market value. Shares of common
stock tendered in payment of the exercise price must have been held by the
participant long enough to avoid adverse accounting consequences to CompuCom.
Termination of Stock Options as a Result of Termination of Employment,
Disability or Death. Generally, vested stock options will remain exercisable for
a period of time following termination of service as follows:
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o one year following termination of service if an individual dies or is
disabled, or
o three months following termination of service for any other reason.
The committee, either at or after grant, may provide for different termination
provisions. The committee may extend the exercise period for a non-qualified
stock option after termination of service. Options which are not exercisable at
termination of service are terminated as of that date.
If service is terminated for cause, the committee may terminate all stock
options held by the participant at the date of termination. The committee may,
upon refund of the exercise price, require the participant to forfeit all shares
underlying any exercised portion of an option for which we have not yet
delivered the share certificates. Termination for cause means a finding by the
committee that the participant has:
o breached his or her employment contract, non-competition agreement or other
obligation to CompuCom,
o been engaged in fraud, embezzlement, theft, commission of a felony or
proven disloyalty in the course of his or her service, or
o disclosed trade secrets or confidential information.
Transferability of Stock Options. Generally, only a participant may exercise
rights under a stock option during his or her lifetime, and those rights may not
be transferred except by will or by laws of descent and distribution. When a
participant dies, the personal representative or other person entitled to
succeed to his or her rights may exercise those rights upon furnishing
satisfactory proof of that person's right to receive the stock option. The
committee may nevertheless choose to provide with respect to non-qualified stock
options that a participant may transfer those options to family members or other
persons or entities.
Termination and Amendment of the 1993 Plan
The board may amend, abandon or terminate the plan at any time. The plan will,
in any event, terminate on February 18, 2003. Grants made prior to termination
will remain in effect after termination of the plan unless the participant
consents or unless the committee revokes or amends a grant in accordance with
the terms of the plan. The termination of the plan will not impair the power and
authority of the committee with respect to outstanding grants.
Adjustments Provisions
The committee will adjust:
o the number and kind of shares available for grants under the plan,
o the number and kind of shares of outstanding grants, or
o the purchase prices of outstanding options,
to appropriately reflect any of the following events:
o a reorganization, recapitalization or change of shares,
o a stock split, spin-off, stock dividend or reclassification,
o a subdivision or combination of shares,
o a merger, consolidation, rights offering, or
o any other change in corporate structure or shares.
If any event should occur, each outstanding option shall be assumed by the
surviving or successor corporation except if the committee should determine to
terminate the option. In that case, the committee may allow the participant to
exercise the vested portion of the option before the termination.
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Federal Income Tax Consequences
The current federal income tax treatment of grants under the 1993 Plan is
described below. Local and state tax authorities also may tax incentive
compensation awarded under the plan. Because of the complexities involved in the
application of tax laws to specific circumstances and the uncertainties as to
possible future changes in those laws, we urge participants to consult their own
tax advisors concerning the application of the general principles discussed
below to their own situations and the application of state and local tax laws.
Incentive Stock Options. A participant will not recognize taxable income for the
purpose of the regular income tax upon either the grant or exercise of an
incentive stock option. However, for purposes of the alternative minimum tax
imposed under the Internal Revenue Code, in the year in which an incentive stock
option is exercised, the amount by which the fair market value of the shares
acquired upon exercise exceeds the exercise price will be treated as an item of
adjustment.
If a participant disposes of the shares acquired under an incentive stock option
after at least two years following the date of grant and at least one year
following the date of exercise, the participant will recognize a long-term
capital gain or loss equal to the difference between the amount realized upon
the disposition and the exercise price. We will not be entitled to any tax
deduction by reason of the grant or exercise of the incentive stock option.
If a participant disposes of shares acquired upon exercise of an incentive stock
option before satisfying both holding period requirements (known as a
disqualifying disposition), the gain recognized on disposition will be taxed as
ordinary income to the extent of the difference between the lesser of the sale
price or the fair market value of the shares on the date of exercise and the
exercise price. We will be entitled to a federal income tax deduction in the
same amount. The gain, if any, in excess of the amount recognized as ordinary
income on a disqualifying disposition will be long-term or short-term capital
gain, depending upon the length of time the participant held the shares before
the disposition.
If a participant tenders shares of common stock received upon the exercise of an
incentive stock option to pay the exercise price within either the two-year or
one-year holding periods described above, the disqualifying disposition of the
shares used to pay the exercise cost will result in income (or loss) to the
participant and, to the extent of a recognized gain, a tax deduction to
CompuCom. If, however, the holding period requirements are met and the number of
shares received on the exercise does not exceed the number of shares
surrendered, the participant will recognize no gain or loss with respect to the
surrendered shares, and will have the same basis and holding period with respect
to the newly acquired shares as with respect to the surrendered shares. To the
extent that the number of shares received exceeds the number surrendered, the
participant's basis in the excess shares will equal the amount of cash paid by
the participant upon the original exercise of the stock option, and the
participant's holding period with respect to the excess shares will begin on the
date the shares are transferred to the participant. The tax treatment described
above for shares newly received upon exercise is not affected by using shares to
pay the exercise price.
Non-qualified Stock Options. There are no federal income tax consequences to a
participant or CompuCom upon the grant of a non-qualified stock option. Upon the
exercise of a non-qualified stock option, a participant will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares at the time of exercise over the exercise price, and we will be entitled
to a corresponding federal income tax deduction.
If a participant surrenders shares to pay the exercise price, and the number of
shares received on the exercise does not exceed the number of shares
surrendered, the participant will recognize no gain or loss
12
<PAGE>
with respect to the surrendered shares, and will have the same basis and holding
period with respect to the newly acquired shares as with respect to the
surrendered shares. To the extent that the number of shares received exceeds the
number surrendered, the fair market value of the excess shares on the date of
exercise, reduced by any cash paid by the participant upon the exercise, will be
includible in the gross income of the participant. The participant's basis in
the excess shares will equal the sum of the cash paid by the participant upon
the exercise of the stock option plus any amount included in the participant's
gross income as a result of the exercise of the stock option.
The committee may permit the participant to elect to surrender or deliver shares
otherwise issuable upon exercise, or previously acquired shares, in order to
satisfy the federal income tax withholding, subject to certain restrictions
described in the 1993 Plan. Such an election will result in a disposition of the
shares which are surrendered or delivered, and an amount will be included in the
participant's income equal to the excess of the fair market value of the shares
over the participant's basis in the shares.
Upon the sale of the shares acquired by the exercise of a non-qualified stock
option, a participant will have a capital gain or loss (long-term or short-term
depending upon the length of time the shares were held) in an amount equal to
the difference between the amount realized upon the sale and the participant's
adjusted tax basis in the shares (the exercise price plus the amount of ordinary
income recognized by the participant at the time of exercise of the
non-qualified stock options).
Tax Withholding. All grants under the 1993 Plan are subject to applicable tax
withholding requirements. We shall have the right to deduct from all grants paid
in cash, or from other wages paid to a participant, any taxes required by law to
be withheld with respect to the grant. If grants are paid in shares of common
stock, we may require a participant to pay the amount of the taxes that we are
required to withhold or may deduct the amount of the withholding taxes from
other wages paid to the participant. If approved by the committee, the income
tax withholding obligation with respect to grants paid in common stock may be
satisfied by having shares withheld up to an amount that does not exceed the
participant's maximum marginal tax rate for federal (including FICA), state and
local tax liabilities. Our obligations under the 1993 Plan are conditional upon
the payment or arrangement for payment of any required withholding.
Section 162(m). Under section 162(m) of the Internal Revenue code, we may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated employees in any one year. Total remuneration may
include amounts received upon the exercise of options granted under the 1993
Plan. An exception does exist, however, for "performance-based compensation."
13
<PAGE>
- --------------------------------------------------------------------------------
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
and GREATER THAN 5% STOCKHOLDERS:
as of MARCH 25, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Shares Beneficially Options Exercisable Shares
Name Owned Within 60 Days Beneficially Owned Percent of
Assuming Exercise Shares
of Options
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
<S> <C> <C> <C> <C>
Safeguard Scientifics, Inc. 26,291,038 0 26,291,038 55.6%
800 The Safeguard building
435 Devon Park Drive
Wayne, PA 19087
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
T. Rowe Price Associates, Inc. 2,663,000 0 2,663,000 5.5%
100 E. Pratt Street
Baltimore, MD 21202
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Edward R. Anderson 1,125,000 120,000 1,245,000 2.6%
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Michael J. Emmi 0 15,000 15,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Richard F. Ford 20,000 5,000 25,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Delbert W. Johnson 24,500 7,500 32,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
John D. Loewenberg 9,275 22,750 32,025 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Thomas C. Lynch 501,090 0 501,090 1.1%
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
John C. Maxwell, III 0 2,000 2,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Warren V. Musser 462,447 0 462,447 1.0%
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Edward N. Patrone 0 15,000 15,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Anthony J. Paoni 1,000 0 1,000 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Harry Wallaesa 1,757 0 1,757 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
M. Lazane Smith 7,042 58,000 65,042 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
William Barry 8,446 138,000 146,446 *
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Daniel Brown 332,479 482,858 815,337 1.7%
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
Executive officers and directors as a
group (14 persons) 2,493,036 866,108 3,359,144 6.9%
- ----------------------------------------- ---------------------- ---------------------- -------------------- --------------
</TABLE>
* Less than 1% of CompuCom's outstanding shares of common stock
Each individual has the sole power to vote and to dispose of the shares
(other than shares held jointly with spouse) except for the following
shares:
Safeguard Scientifics, Inc. Includes 22,087,848 shares held by
Safeguard Scientifics (Delaware), Inc.,
654,200 shares held by Safeguard Delaware,
Inc., and 1,333,333 shares held by
CompuShop, Inc., wholly-owned subsidiaries
of Safeguard Scientifics, Inc., and
1,500,000 shares of series B preferred
shares held by Safeguard Scientifics
(Delaware), Inc. All of the shares
beneficially owned by Safeguard have been
pledged by Safeguard as collateral under
its line of credit.
T. Rowe Price Associates, Inc. These securities are owned by various
individual and institutional investors
which T. Rowe Price, Inc. (Price
Associates) serves as investment adviser
with power to direct investments and/or
sole power to vote securities. For
purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial
owner of such securities;
14
<PAGE>
however, Price Associates expressly
disclaims that it is, in fact, the
beneficial owner of such securities.
Delbert W. Johnson Includes 20,000 shares held in a Remainder
Trust.
John D. Loewenberg Includes 9,275 shares held by his spouse.
Thomas C. Lynch Includes 1,000 shares held by his spouse,
of which Mr. Lynch disclaims
beneficial ownership.
Warren V. Musser Includes 25,564 shares held by a
charitable foundation of which Mr. Musser
is an officer and director, and 53,300
shares held by two trusts of which Mr.
Musser is a co-trustee. Excludes
26,291,038 shares beneficially owned by
Safeguard, for which Mr. Musser serves as
chairman of the board and chief executive
officer. Mr. Musser disclaims beneficial
ownership of the shares beneficially owned
by the charitable foundation and
Safeguard.
Shares Owned by Directors and Officers of Parent and Subsidiary Corporations:
Safeguard Scientifics, Inc., is the parent corporation of CompuCom. As of March
25, 1999, executive officers and directors of CompuCom beneficially owned the
following percentage of the outstanding shares of Safeguard common stock:
Mr. Musser 9.5%
all other officers and directors of CompuCom, as a group, beneficially own less
than 1% of Safeguard stock.
ClientLink, Inc. is a majority owned subsidiary of CompuCom. As of March 25,
1999, executive officers and directors of CompuCom, as a group, beneficially
owned less than 1% of the outstanding shares of ClientLink.
Section 16(a) Beneficial Ownership Reporting Compliance: The rules of the
Securities and Exchange Commission require that we disclose late filings of
reports of stock ownership by our directors and executive officers. To the best
of our knowledge, the only late filing during 1998 was a Form 4 by Delbert W.
Johnson.
15
<PAGE>
- --------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares the cumulative total return on our common stock for
the period from December 31, 1993, through December 31, 1998, with the
cumulative total return on the Nasdaq Index and the peer group index for the
same period.
<TABLE>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
CompuCom 100 77 234 265 203 86
NASDAQ 100 98 138 170 209 293
Peer Group 100 65 84 113 100 94
</TABLE>
1. The peer group consists of SIC Code 5045--Computer, Peripheral Equipment
and Software Wholesalers, with a 50% weighting for each SIC Code.
2. We have historically reinvested earnings in the growth of our business and
have not paid cash dividends on our common stock.
3. Assumes an investment of $100 on December 31, 1993.
16
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
COMPENSATION PHILOSOPHY
Our mission is to succeed in a highly competitive business and achieve maximum
returns for our stockholders by:
o being the leader in providing IT infrastructure solutions to large
enterprises based on a strategy of customer intimacy and operational
efficiency.
Our philosophy is to align the compensation of senior management and other
employees with that mission and the long-term interests of our stockholders.
This philosophy also helps us to:
o attract and retain outstanding employees who can thrive in a competitive
environment of continuous change,
o promote among our employees the economic benefits of stock ownership, and
o motivate and reward employees who, by their hard work, loyalty and
exceptional service, make contributions of special importance to the
success of our business.
COMPENSATION STRUCTURE
The compensation of our executives consists of:
o base salary,
o annual cash incentives, and
o stock options.
Base Pay
Base pay is established initially on a combination of factors, including a
review of various published salary surveys, and certain subjective factors
including experience and achievements of the individual and the level of
responsibility assumed at CompuCom. Salary increases for 1998 were based on:
o level of achievement of financial and strategic objectives,
o individual performance, and contributions to the achievement of our
objectives.
Mr. Anderson's 1998 base pay. Effective January 1998, Mr. Anderson's base salary
for 1998 was fixed at the same level as 1997.
Other highly compensated executives' 1998 base pay. Base pay was determined by
considering the factors discussed above and individual performance.
Annual Cash Incentives
Annual cash incentives are intended to create an incentive for executives who
significantly contribute to and influence our strategic plans and are
responsible for our performance. Our primary objectives are to:
o focus executives' attention on areas such as profitability and asset
management,
o encourage teamwork, and
o tie executives' pay to corporate performance goals consistent with
long-term performance goals of our stockholders.
Incentives are awarded based on the achievement of annual financial and/or
strategic goals approved by the compensation committee at the beginning of the
year, which goals may include target ranges of:
o pretax earnings,
o earnings per share,
o return on equity,
o or some other objective measurement consistent with long-term goals of our
stockholders.
17
<PAGE>
The committee determines a range of potential incentive amounts for each
executive, stated as a percentage of base salary, and based upon the executive's
ability to impact our performance. Incentives are awarded at year-end based on
the actual achievement level of the specified corporate goals compared to the
target range of achievement. For 1998, the compensation committee determined
that, based on CompuCom's performance, there would be no incentive awards.
Stock Options
Stock options are intended to align the interests of executives and key
employees with the long-term interests of our stockholders and other investors
and to encourage executives and key employees to remain in our employ. Grants
are not made in every year, but are awarded subjectively based on the following
factors including:
o individual's level of responsibility,
o amount and term of options already held by the individual,
o individual's contributions to the achievement of our financial and
strategic objectives,
o our achievement of financial and strategic objectives may include:
o developing strategic alliances,
o identifying and exploiting markets,
o expanding existing market share and penetration, o expanding operating
capabilities, and
o improving net operating margins, productivity of sales representatives
and return on equity.
1998 Stock Option Awards. The committee granted stock options during 1998 to all
directors who are not employees of Safeguard or CompuCom, certain executives
upon joining CompuCom and other executives and employees.
IRS Limits on Deductibility of Compensation.
The committee is aware that Internal Revenue Code section 162(m) provides that
publicly held companies may not deduct in any taxable year compensation in
excess of one million dollars paid to any of the individuals named in the
compensation tables that is not "performance based" as defined in section
162(m). The committee believes that annual levels of executive compensation that
are not performance based are not likely to exceed one million dollars in the
foreseeable future.
Submitted by the compensation committee:
Richard D. Ford, Chairman
Warren V. Musser
John C. Maxwell, III
18
<PAGE>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION & OTHER ARRANGEMENTS
- --------------------------------------------------------------------------------
1998 Annual Compensation for the Top Five Officers
<TABLE>
<CAPTION>
- ----------------------------- ------- ---------------------------------------------------- --------------------- ---------------
Long-Term
Annual Compensation Compensation
------------------------------------------------- ---------------------
Awards
---------------------
Securities All Other
Other Annual Underlying Compensation
Name and Principal Position Compensation Options/SARS (#) ($)(4)
Year Salary ($)(1) Bonus ($)(2) ($)(3)
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward R. Anderson, 1998 $ 360,000 $ 12,833 -- $ 191,409
President and Chief
Executive Officer 1997 360,000 530,122 -- 300,000 11,875
1996 310,000 360,907 -- -- 2,673
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
Thomas C. Lynch, Executive 1998 $ 55,385 $ 0 -- 500,000 $ 100,000
Vice President and Chief
Operating Officer
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
M. Lazane Smith, Senior 1998 $ 220,000 $ 1,581 -- 200,000 $ 3,489
Vice President, Finance and
Chief Financial Officer(5) 1997 187,000 121,444 50,000 2,375
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
Daniel F. Brown, 1998 $ 337,800 $ 0 -- $ 235,700
Former Executive Vice
President, Sales (6) 1997 297,800 401,518 -- 300,000 13,092
1996 290,000 306,368 -- -- 2,519
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
William Barry, Former 1998 $ 220,000 $ 0 $ 56,925 -- $ 11,895
Executive Vice President,
Chief Operating Officer(6) 1997 142,500 156,385 320,000 2,375
- ----------------------------- ------- ----------------- ---------------- ----------------- --------------------- ---------------
</TABLE>
19
<PAGE>
Notes to Annual Compensation Table:
(1) Includes compensation that has been deferred by the top officers under
defined contribution plan.
(2) With respect to Mr. Anderson and Ms. Smith, includes a portion of the
deferred bonus from 1995. Approximately 9% of the bonus earned for 1995 was
deferred. Of this deferred amount, 50% was paid in February 1997, 25% was
paid in February 1998, and 25% was paid in 1999.
(3) Except for Mr. Barry, personal benefits do not exceed $50,000 or 10% of the
total annual salary and bonus for any executive.
(4) For 1998, all other compensation includes the following:
<TABLE>
<CAPTION>
Company Match Life Insurance Amounts Paid
Name Defined Contribution Premiums Paid Pursuant to
Plan Employment
Arrangements
---------------------------- ---------------------- -------------------- --------------------
<S> <C> <C> <C>
Edward R. Anderson $ 3,423 $ 12,986 $ 175,000
Thomas C. Lynch 0 0 100,000
M. Lazane Smith 3,489 0 0
Daniel F. Brown 3,326 57,374 175,000
William Barry 2,500 9,395 0
</TABLE>
(5) Ms. Smith has been an executive officer since February 1997, and Mr. Lynch
served as senior vice president of Safeguard before joining CompuCom in
October 1998.
(6) Mr. Brown served as executive vice president, sales and Mr. Barry served as
executive vice president, chief operating officer, until their resignations
in October 1998.
20
<PAGE>
- --------------------------------------------------------------------------------
1998 Stock Option Grants
- --------------------------------------------------------------------------------
The following table relates to options to acquire CompuCom common
stock, unless otherwise noted in the footnotes.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------- --------------------------------
Potential Realizable Value
At Assumed Annual Rates Of
Individual Grants Stock Price Appreciation
For Option Term(1)
- --------------------------------------------------------------------------------------- --------------------------------
% of Total
Number of Options/
Securities SARS
Underlying Granted To
Options/ Employees In Exercise Or
SARs Fiscal Year Base Price Expiration 5% 10%
Name Granted (#)(2) ($/Sh)(3) Date ($) ($)
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward R. Anderson 0 -- -- -- -- --
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
Thomas C. Lynch 500,000 14.7% $3.1875 10/22/08 $ 1,002,301 $2,540,027
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
M. Lazane Smith 50,000 1.4673% $6.6250 7/23/08 $ 81,591 $ 206,768
150,000 4.4018% 3.1875 10/22/08 427,420 1,083,167
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
Daniel Brown 0 __ __ __ __ __
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
William Barry 0 __ __ __ __ __
- -------------------------- --------------- -------------- -------------- -------------- ---------------- ---------------
</TABLE>
(1) These values assume that the shares appreciate at the compounded annual
rate shown from the grant date until the end of the option term. These
values are not estimates of future price growth of our stock. Executives
will not benefit unless the common stock price increases above the stock
option exercise price.
(2) We granted an option to Mr. Lynch to acquire shares of common stock. The
option vests 25% each year beginning on October 22, 1999, and has a
ten-year term. Mr. Lynch may exercise the option at any time. If his
employment is terminated, we may repurchase the unvested shares purchased
by Mr. Lynch at the exercise price. The option exercise price may be paid
in cash, by delivery of previously acquired shares, subject to certain
conditions, or same-day sales (that is, a cashless exercise through a
broker). the compensation committee may modify the terms of outstanding
options, including acceleration of the exercise date.
(3) All options have an exercise price equal to or greater than the fair market
value on the grant date of the shares subject to each option. The option
exercise price may be paid in cash, by delivery of previously acquired
shares, subject to certain conditions, or same-day sales (that is, a
cashless exercise through a broker). The compensation committee, upon
exercise of an option, may elect to pay an individual, in cash or in common
stock, the difference between the exercise price and the fair market value
on the exercise date. The compensation committee may modify the terms of
outstanding options, including acceleration of the exercise date.
21
<PAGE>
- --------------------------------------------------------------------------------
1998 Stock Option Exercises and Year-End Stock Option Values
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------- -------------- -------------- ------------------------------ ------------------------------
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money Options/SARs
Shares Options/SARs At Fiscal Year-End ($)(1)
Acquired On At Fiscal Year-End (#)
Exercise (#) Value Exercisable Unexercisable
Name Realized($) Exercisable Unexercisable
- -------------------------- -------------- -------------- ------------------------------ ------------------------------
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Edward R. Anderson 775,000 $ 427,813 60,000 240,000 0 0
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
Thomas C. Lynch 500,000 $ 31,250 0 0 0 0
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
M. Lazane Smith 0 -- 42,000 258,000 6,750 46,875
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
William Barry 0 -- 74,000 66,000 5,000 0
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
Daniel F. Brown 0 -- 392,858 180,000 675,000 0
- -------------------------- -------------- -------------- -------------- ---------------- -------------- --------------
</TABLE>
(1) Value is calculated using the difference between the option exercise price
and the year-end stock price, multiplied by the number of shares subject to
an option. The year-end stock price used was $3.50 for each share of common
stock.
22
<PAGE>
Employment Contracts; Severance and Change-in-Control Arrangements
Edward Anderson entered into an employment agreement with CompuCom that provides
for his employment as an executive officer through October 24, 1999, subject to
annual renewals, at a minimum monthly salary of $30,000. The agreement entitles
Mr. Anderson to a bonus of up to 120% of his base salary. In February 1999,
CompuCom amended the agreement to delete payment of an additional bonus of
$175,000 to Mr. Anderson on May 15, 1999 and, if the agreement is extended, on
May 15, 2000. Instead, CompuCom paid $109,375 to Mr. Anderson covering the
period of May through December 1998 and increased Mr. Anderson's salary,
effective January 1999, by $175,000. CompuCom is required to purchase a
renewable term life insurance policy in the amount of $1,000,000, payable to Mr.
Anderson's designated beneficiary, and a comprehensive long-term disability
insurance policy and provides Mr. Anderson with other standard benefits
available to senior management. If his employment is terminated without cause,
or if CompuCom demotes him or reduces his salary or benefits below the level
described in his agreement, Mr. Anderson will be entitled to payment of his
salary for the remaining term of the agreement. Mr. Anderson has agreed not to
compete with CompuCom for two years after his voluntary termination of
employment, and if his employment is terminated for any reason other than due
cause, for the same period of time for which he receives compensation. Within 10
days of a change in control, all unvested stock options held by Mr. Anderson to
purchase shares of CompuCom and ClientLink, Inc. will be vested. If he
voluntarily leaves within six months of a change in control, he will be entitled
to receive, in a lump sum payment, all payments due to him for the remainder of
the agreement.
M. Lazane Smith entered into an employment agreement with CompuCom that provides
for her employment as an executive officer through October 24, 1999, subject to
annual renewals, at a minimum monthly salary of $16,666. The agreement entitles
Ms. Smith to a bonus of up to 50% of her base salary. CompuCom is required to
purchase a renewable term life insurance policy in the amount of $1,000,000,
payable to Ms. Smith's designated beneficiary, and a comprehensive long-term
disability insurance policy and provides Ms. Smith with other standard benefits
available to senior management. If her employment is terminated without cause,
or if CompuCom demotes her or reduces her salary or benefits below the level
described in her agreement, Ms. Smith will be entitled to payment of her salary
for the remaining term of the agreement. Ms. Smith has agreed not to compete
with Compucom for two years after her voluntary termination of employment, and
if her employment is terminated for any reason other than due cause, for the
same period of time for which she receives compensation. Within 10 days of a
change in control, all unvested stock options held by Ms. Smith to purchase
shares of CompuCom or ClientLink, Inc. will be vested. if she voluntarily leaves
within six months of a change in control, she will be entitled to receive, in a
lump sum payment, all payments due to her for the remainder of the agreement.
In 1998, CompuCom accepted the resignations of Daniel F. Brown as executive vice
president, sales, and William Barry as executive vice president and chief
operating officer. CompuCom entered into a severance agreement providing for
the continuation of Mr. Barry's 1998 base salary through November 1999, subject
to certain conditions. The time to exercise his vested options was extended to
the length of the severance period. The options will be treated as nonqualified
stock options. Mr. Barry agreed not to compete with CompuCom and to be available
as a consultant for the length of the severance period. The terms and conditions
of Mr. Brown's severance arrangement are being finalized.
Relationships and Related Transactions with Management and Others
In 1994, Edward Anderson exercised an option to purchase 350,000 shares of
CompuCom common stock and delivered to
23
<PAGE>
CompuCom a full recourse promissory note in the amount of $1,181,250 in payment
of the exercise price. Interest on the note accrues at the rate of 6% per annum
and was initially payable on an annual basis. The note was replaced with a new
note in February 1997 that extended the due date to February 1999. That note was
amended in February 1999 to extend the due date to October 22, 2001, and to
provide for payment of interest at maturity rather than on an annual basis. The
highest outstanding balance during 1998 was $900,000, and the balance
outstanding at February 28, 1999, was $900,000. The note is secured by a pledge
of 266,667 shares of CompuCom common stock.
In October 1998, CompuCom loaned Edward Anderson the sum of $2,021,875, which
provided Mr. Anderson with the funds to pay the cost of exercising his stock
options to acquire 647,000 shares of stock in October 1998. The loan is
evidenced by a full recourse promissory note which bears interest at the annual
rate of 5.1% and is secured by a pledge of 647,000 shares of CompuCom common
stock. The principal and interest will be payable on October 22, 2001.
In December 1998, CompuCom loaned Thomas Lynch the sum of $796,875 which
provided Mr. Lynch with funds to pay the cost of exercising his stock options to
acquire 500,000 shares of stock and to pay related taxes in October 1998. The
loan is evidenced by a full recourse promissory note which bears interest at the
annual rate of 4.33% and is secured by a pledge of 500,000 shares of CompuCom
common stock. The principal and interest will be payable on December 31, 2001.
CompuCom pays Safeguard an administrative support services fee equal to 1/4 of
1% of net sales, up to a maximum of $600,000 annually, including reimbursement
of certain out-of-pocket expenses incurred by Safeguard. The administrative
support services include consultation regarding our general management, investor
relations, financial management, certain legal services, insurance programs
administration, and tax research and planning, but does not cover extraordinary
services or services that are contracted out. The agreement is subject to
termination by Safeguard or CompuCom upon notice 90 days prior to the end of any
fiscal year. CompuCom paid $600,000 during 1998 for these services.
Independent Public Accountants
Since 1987, we have retained KPMG LLP as our independent public accountants, and
we intend to retain KPMG LLP for the current year ending December 31, 1999.
Representatives of KPMG LLP are expected to be present at the annual meeting,
will have an opportunity at the meeting to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
24
<PAGE>
AMENDED AND RESTATED
COMPUCOM SYSTEMS, INC.
1993 STOCK OPTION PLAN
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is to
provide additional incentive, in the form of stock options which may be either
incentive stock options or non-qualified stock options, to employees, (including
employees who are also officers or directors), non-employee directors and
Eligible Independent Contractors (as hereinafter defined) of CompuCom Systems,
Inc., a Delaware corporation (the "Corporation"), and its subsidiaries whose
judgment, initiative and efforts contribute significantly to the successful
operation of the Corporation's business, and to increase their proprietary
interest in the success of the enterprise to the benefit of the Corporation and
its stockholders.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Cause" shall mean, except to the extent otherwise specified by the
Committee, a finding by the Committee that the Optionee has breached his or her
employment or service contract, non-competition agreement or other obligation
with the Corporation, or has been engaged in disloyalty to the Corporation,
including without limitation, fraud, embezzlement, theft, commission of a felony
or proven dishonesty in the course of his or her employment or service, or has
disclosed trade secrets or confidential information of the Corporation to
persons not entitled to receive such information.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(d) "Committee" shall mean the Committee designated by the Board to
administer the Plan.
(e) "Eligible Independent Contractor" shall mean an independent
consultant or advisor hired by the Corporation to provide bona fide services for
the Corporation that are not in connection with the offer or sale of securities
in a capital-raising transaction.
(f) "Employed by the Corporation" shall mean employment as an employee
or Eligible Independent Contractor or member of the Board so that for purposes
of exercising Stock Options, an Optionee shall not be considered to have
terminated employment until the Optionee ceases to be an employee, Eligible
<PAGE>
Independent Contractor or member of the Board; provided, however, that the
Committee may determine otherwise as may be specified in an individual
Optionee's Grant Letter.
(g) "ISO" shall mean a stock option which, at the time such option is
granted, qualifies as an incentive stock option, as defined in Section 422 of
the Code.
(h) "NQSO" shall mean a stock option which, at the time such option is
granted, does not qualify as an ISO as defined in the Code.
(i) "Optionee" shall mean an employee, non-employee director or
Eligible Independent Contractor to whom an award is granted pursuant to the
Plan.
(j) "Options" shall mean all ISOs and NQSOs which from time to time may
be granted under this Plan.
(k) "Share" shall mean a share of the common stock, $.01 par value, of
the Corporation.
(l) "Parent" shall mean any corporate parent of the Corporation, as
defined in Section 424(e) of the Code.
(m) "Plan" shall mean the CompuCom Systems, Inc. 1993 Stock Option
Plan, as amended from time to time.
(n) "Subsidiary" shall mean any corporate subsidiary of the
Corporation, as defined in Section 424(f) of the Code.
3. Administration. The Plan shall be administered by a Committee of the
Board of Directors, which shall consist of not less than two members of the
Board of the Corporation, who shall be appointed by, and shall serve at the
pleasure of, the Board. Each member of such Committee, while serving as such,
shall be deemed to be acting in his capacity as a director of the Corporation.
The Committee shall have full authority, subject to the terms of the
Plan, to select the persons to whom ISOs or NQSOs may be granted under the Plan,
to grant Options on behalf of the Corporation, and to set the number of Shares
to be covered by such Options, the times and dates at which such Options shall
be granted and exercisable and the other terms of such Options. The Committee
also shall have the authority to establish such rules and regulations, not
inconsistent with the provisions of the Plan, for the proper administration of
the Plan, and to amend, modify or rescind any such rules and regulations, and to
make such determinations and interpretations under, or in connection with, the
Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be
<PAGE>
binding and conclusive upon the Corporation, its stockholders and all employees,
and upon their respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any of them.
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Option
granted under it. Nothing herein shall be deemed to expand the personal
liability of a member of the Board or Committee beyond that which may arise
under any applicable standards set forth in the Corporation's by-laws and
Delaware law, nor shall anything herein limit any rights to indemnification or
advancement of expenses to which any member of the Board or the Committee may be
entitled under any by-law, agreement, vote of the stockholders or directors, or
otherwise.
4. Eligibility. The class of persons who shall be eligible to receive
Options under the Plan shall be the employees (including any employees who are
also officers or directors ), non-employee directors and Eligible Independent
Contractors of the Corporation or of any Subsidiary. More than one Option may be
granted to an Optionee under the Plan.
The Committee may require that the exercise of the Option shall be
subject to the satisfaction of conditions relating to the Optionee's position
and duties with the Corporation and the performance thereof.
5. Amount of Stock. The stock to be offered for purchase pursuant to
Options granted under this Plan shall be treasury or authorized but unissued
Shares, and the total number of such Shares which may be issued pursuant to
Options under this Plan shall not exceed 8,750,000 Shares, subject to adjustment
as provided in Section 16 hereof. The maximum aggregate number of shares of
Stock that shall be subject to Options granted under the Plan to any Optionee
shall not exceed 2,500,000. If any unexercised Options are exchanged for new
Options, lapse or terminate for any reason, the Shares covered thereby may again
be optioned.
6. Stock Option Agreement. Each Option granted under this Plan shall be
evidenced by an appropriate stock option agreement ("Agreement"), which
Agreement shall expressly specify whether such Option is an ISO or NQSO and
shall be executed by the Corporation and by the Optionee. The Agreement shall
contain such terms and provisions, not inconsistent with the Plan, as shall be
determined by the Committee. Such terms and provisions may vary between
Optionees or as to the same Optionee to whom more than one Option may be
granted.
<PAGE>
7. Option Price. The exercise price under each Option granted hereunder
shall be determined by the Committee in its discretion, provided, however, that
the exercise price of an ISO shall in no event be less than an amount equal to
the fair market value of the Shares subject to the ISO on the date of grant.
8. Ten Percent Stockholders. If an Optionee owns more than ten percent
of the total combined voting power of all shares of stock of the Corporation or
of a Parent or Subsidiary at the time an ISO is granted to him, the Option price
for the ISO shall be not less than 110% of the fair market value of the Shares
subject to the ISO on the date the ISO is granted, and such ISO, by its terms,
shall not be exercisable after the expiration of five years from the date the
ISO is granted. The conditions set forth in this Section 8 shall not apply to
the grant of NQSOs.
9. Term and Exercise of Option.
(a) Term. Each Option shall expire on such date as may be determined by
the Committee with respect to such Option, but in no event shall any Option
expire more than ten years from the date it is granted. The date on which an
Option shall be granted shall be the date of the Committee's authorization of
the Option or such later date as may be determined by the Committee at the time
the Option is authorized.
(b) Exercise. Options shall be exercisable in such installments and on
such dates, and/or upon the occurrence of such events, as the Committee may
specify. The Committee may accelerate the exercise date of any outstanding
Options, in its discretion, if it deems such acceleration to be desirable.
Except as provided in Section 11, no Option shall be exercised unless at the
time of such exercise the Optionee is then employed by the Corporation or any
Subsidiary. Exercisable Options may be exercised, in whole or in part, from time
to time, by giving written notice of exercise to the Corporation at its
principal office, specifying the number of Shares to be purchased and
accompanied by payment in full of the aggregate Option price for such Shares.
Only full Shares shall be issued under the Plan, and any fractional Share which
might otherwise be issuable upon exercise of an Option granted hereunder shall
be forfeited.
(c) Payment of Option Price. The Option price shall be payable (i) in
cash or its equivalent; (ii) in the discretion of the Committee, in Shares
previously acquired by the Optionee (including Shares acquired in connection
with the exercise of an Option, subject to such restrictions as the Committee
deems appropriate), provided that, if such Shares were acquired through exercise
of an ISO, such Shares have been held by the Optionee for a period of not less
than the holding period described in section 422(a)(1) of the Code on the date
of exercise, and that, in any case, such Shares have been held by the Optionee
for the requisite period of time necessary to avoid a charge to the
<PAGE>
Corporation's earnings for financial reporting purposes and adverse accounting
consequences to the Company with respect to the Option; (iii) in the discretion
of the Committee, in any combination of (i) and (ii) above; or (iv) in the
discretion of the Committee, by delivering a properly executed notice of
exercise of the Option to the Corporation and a broker, with irrevocable
instructions to the broker to deliver to the Corporation on the settlement date
the amount of sale proceeds necessary to pay the exercise price of the Option.
If the applicable Agreement so provides, at the request of the
Optionee, the Corporation shall loan the Optionee, upon exercise of an Option,
an amount not in excess of the sum of (i) 100% of the exercise price of the
Shares subject to that portion of the Option being exercised and (ii) any taxes
due upon exercise of said portion of the Option. The Optionee shall furnish to
the Corporation the Optionee's personal, negotiable promissory note for the
loan, bearing interest at a rate prescribed by the Committee (but not less than
the lowest rate which will avoid imputation of interest under section 7872 of
the Code) and including such other terms as the Committee shall prescribe. Any
amounts outstanding under the note shall become due and payable in full upon the
termination of the Optionee's employment by the Corporation or any subsidiary.
The Optionee shall deliver the optioned Shares, endorsed in blank, to the
Corporation, to be pledged to, and held by, the Corporation, as collateral to
secure the loan. The Optionee shall remain personally liable to the Corporation
or the Corporation's transferee for the repayment of said note. When the entire
amount of the loan is repaid in cash or its equivalent, the Corporation shall
deliver all certificates for Shares for which payment in full has been made to
the Optionee.
(d) Cash-Out Option. On receipt of a written notice to exercise, the
Committee may, in its sole discretion, elect to cash-out all or part of the
portion of the Option(s) to be exercised by paying the Optionee an amount, in
cash or Shares, equal to the excess of the fair market value of the Shares over
the exercise price (the "Spread Value") on the effective date of such cash-out.
(e) Replacement Options. The Committee may, in its sole discretion and
at the time of the original option grant, authorize the Optionee to receive
automatically replacement Options pursuant to this part of the Plan. Any such
replacement Option shall be granted upon such terms and subject to such
conditions and limitations as the Committee may deem appropriate. Any
replacement Option shall cover a number of shares determined by the Committee,
but in no event more than the number of shares of the original Option exercised.
The per share exercise price of any replacement Option shall equal the then
current Fair
<PAGE>
Market Value of a Share, and shall have a term as determined by the Committee at
the time of grant of the original Option.
The Committee shall have the right, and may reserve the right in any
Option grant, in its sole discretion and at any time, to discontinue the
automatic grant of replacement Options if it determines the continuance of such
grants to no longer be in the best interest of the Corporation.
10. Maximum Value of ISOs. The aggregate fair market value of the
Shares, determined as of the date of grant, with respect to which ISOs first
become exercisable during any calendar year by an Optionee (under this Plan and
any other plan of the Corporation or any Parent or Subsidiary) shall not exceed
$100,000.
11. Termination of Employment.
(a) Except as set forth below, in the event of termination (voluntary
or involuntary) for any reason of an Optionee's employment by the Corporation or
any subsidiary, all Options granted hereunder to such Optionee, to the extent
exercisable on the date of termination, or to any greater extent permitted by
the Committee, may be exercised by the Optionee at any time within three months
after the date of such termination, provided, however, that in no event shall
any Option be exercisable after the expiration of its term.
(b) If, however, the termination of employment is due to disability (as
defined in Section 22(e)(3) of the Code), the Optionee shall have the privilege
of exercising the unexercised Option to the extent such Option was exercisable
on the date of such termination due to disability, or to any greater extent
permitted by the Committee, within one year of such date, provided, however,
that in no event shall any Option be exercisable after the expiration of its
term.
(c) If, however, the Optionee dies within three months of termination
of employment or the termination of employment is due to the death of the
Optionee while in the employ of the Corporation or a subsidiary, the estate of
the holder or the person or persons who acquired the right to exercise such
Option by bequest or inheritance, shall have the privilege of exercising the
unexercised Option to the extent such Option was exercisable on the date of such
termination, or to any greater extent permitted by the Committee, within one
year of the earlier of the date of termination or the date of death, but in no
event shall any Option be exercisable after the expiration of its term.
(d) If, however, the Corporation terminates the employment of the
Optionee for Cause, any Option held by such Optionee shall terminate as of the
date the Optionee ceases to be employed by the Corporation, and the Optionee
shall automatically
<PAGE>
forfeit all Shares underlying any exercised portion of an Option for which the
Corporation has not yet delivered the share certificates upon refund by the
Corporation of the exercise price paid by the Optionee for such Shares.
(e) Notwithstanding the provisions of subparagraphs 11(a), 11(b) and
11(c) above, the Committee may determine with respect to any NQSO that such NQSO
shall terminate at a time later than the expiration of such three-month or
one-year periods, as set forth in the Agreement.
12. Withholding and Use of Shares to Satisfy Tax Obligations.
(a) Required Withholding. The obligation of the Corporation to deliver
Shares upon the exercise of any Option shall be subject to applicable federal
(including FICA), state and local tax withholding requirements. The Corporation
may require the Optionee or other person receiving such Shares to pay to the
Corporation the amount of any such taxes that the Corporation is required to
withhold with respect to such Options, or the Corporation may deduct from other
wages paid by the Corporation the amount of any withholding taxes due with
respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, an
Optionee may elect to satisfy the Corporation's income tax withholding
obligation with respect to an Option by having shares withheld up to an amount
that does not exceed the Grantee's maximum marginal tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
13. Non-Assignability. Each Option granted under the Plan shall be
non-transferable by the Optionee except by will or the laws of descent and
distribution, and each Option shall be exercisable during the Optionee's
lifetime only by him. Notwithstanding the foregoing, the Committee may provide,
at or after grant, that an Optionee may transfer NQSOs pursuant to a domestic
relations order or to family members or other persons or entities on such terms
as the Committee may determine.
14. Issuance of Shares and Compliance with Securities Acts. Within a
reasonable time after exercise of an Option, the Corporation shall cause to be
delivered to the Optionee a certificate for the Shares purchased pursuant to the
exercise of the Option. At the time of any exercise of any Option, the
Corporation may, if it shall deem it necessary and desirable for any reason
connected with any law or regulation of any governmental authority relative to
the regulation of securities,
<PAGE>
require the Optionee to represent in writing to the Corporation that it is his
then intention to acquire the Shares for investment and not with a view to
distribution thereof and that such Optionee will not dispose of such Shares in
any manner that would involve a violation of applicable securities laws. In such
event, no Shares shall be issued to such holder unless and until the Corporation
is satisfied with such representation. Certificates for Shares issued pursuant
to the exercise of Options may bear an appropriate securities law legend.
15. Rights as a Stockholder. An Optionee shall have no rights as a
stockholder with respect to Shares covered by his Option until the date of the
issuance or transfer of the Shares to him and only after the exercise price for
such Shares is fully paid either in cash, by the withholding or delivery of
Shares, or by the delivery of a promissory note pursuant to Section 9 hereof. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date of such issuance or transfer.
16. Stock Adjustments. In the event of a reorganization,
recapitalization, change of shares, stock split, or spinoff, stock dividend,
reclassification, subdivision or combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure or shares of the
Corporation, the Committee shall make such adjustment as it, in its sole
discretion, deems appropriate in the number and kind of shares authorized by the
Plan, in the number and kind of shares covered by grants made under the Plan or
in the purchase prices of outstanding Options, and such adjustments shall be
effective and binding on the Optionee and the Corporation for all purposes of
the Plan, provided, however, that no such adjustments shall be made to any ISO
without the Optionee's consent if such adjustment would cause such ISO to fail
to qualify as such under Section 422 of the Code.
In the event of a corporate transaction (as that term is described in
Section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation, provided, however, that in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Corporation. If the Committee decides to
terminate outstanding Options, the Committee shall give each Optionee holding an
Option to be terminated not less than seven days' notice prior to any such
termination by reason of such a corporate transaction, and any such outstanding
Option which is to be so terminated may be exercised (if and only to the extent
that it is then exercisable) up to and including the date immediately preceding
such termination. Notwithstanding the
<PAGE>
preceding sentence, as provided in Section 9 hereof, the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options become exercisable.
17. Adoption by Board and Approval by Stockholders. This Plan becomes
effective on February 18, 1993 (the date the Plan was adopted by the Board),
provided, however, that if the Plan is not approved by a majority of the votes
cast at a duly held meeting at which a quorum representing a majority of all
outstanding voting stock of the Corporation is, either in person or by proxy,
present and voting on the Plan, within 12 months after said date, the Plan and
all Options granted hereunder shall be null and void and no additional Options
shall be granted hereunder.
18. Termination and Amendment of the Plan. Subject to the right of the
Board to terminate the Plan prior thereto, the Plan shall terminate on, and no
Options shall be granted hereunder after, February 18, 2003. The Board shall
have the power at any time, in its discretion, to amend, abandon or terminate
the Plan, in whole or in part, provided that no such action shall affect any
Options theretofore granted and then outstanding under the Plan. Nothing
contained in this Section 18, however, shall terminate or affect the continued
existence of rights created under Options issued hereunder and outstanding on
February 18, 2003, which by their terms extend beyond such date.
The Board may amend or terminate the Plan at any time or from time to
time, but no amendment or termination shall be made which would impair the
rights of an Optionee under an Option theretofore granted without the Optionee's
consent; and provided, further that the Board shall not amend the Plan without
stockholder approval if such approval is required pursuant to the Code or the
rules of any national securities exchange or over-the-counter market on which
the Corporation's Shares are then listed or included.
19. Interpretation. A determination of the Committee as to any question
which may arise with respect to the interpretation of the provisions of this
Plan or any Options shall be final and conclusive, and nothing in this Plan, or
in any regulation hereunder, shall be deemed to give any Optionee, his legal
representatives, assigns or any other person any right to participate herein
except to such extent, if any, as the Committee may have determined or approved
pursuant to this Plan. The Committee may consult with legal counsel who may be
counsel to the Corporation and shall not incur any liability for any action
taken in good faith in reliance upon the advice of such counsel.
<PAGE>
20. Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Agreements thereunder, the Plan, such Agreements and any ISOs
granted pursuant thereto shall be governed by the applicable Code provisions to
the maximum extent possible. Otherwise, the laws of the State of Delaware shall
govern the operation of, and the rights of Optionees under, the Plan, the
Agreements and any Options granted thereunder.
21. Rule 16b-3 Compliance. Unless an Optionee could otherwise transfer
Shares issued hereunder without incurring liability under Section 16(b) of the
Exchange Act, at least six months must elapse from the date of grant of an
Option to the date of disposition of the Shares issued upon exercise of the
Option.
<PAGE>
PROXY
COMPUCOM SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please sign and date this proxy, and indicate how you wish to vote, on the back
of this card. Please return this card promptly in the enclosed envelope. Your
vote is important.
When you sign and return this proxy card, you
o appoint Edward R. Anderson and M. Lazane Smith, and each of them (or any
substitutes they may appoint), as proxies to vote your shares, as you have
instructed, at the annual meeting on May 13, 1999, and at any adjournments
of that meeting,
o authorize the proxies to vote, in their discretion, upon any other business
properly presented at the meeting, and
o revoke any previous proxies you may have signed.
IF YOU DO NOT INDICATE HOW YOU WISH TO VOTE, THE PROXIES WILL VOTE FOR ALL
NOMINEES TO THE BOARD OF DIRECTORS AND FOR THE AMENDMENT TO THE 1993 STOCK
OPTION PLAN AND AS THEY MAY DETERMINE, IN THEIR DISCRETION, WITH REGARD TO ANY
OTHER MATTER PROPERLY PRESENTED AT THE MEETING.
FOLD AND DETACH HERE
<PAGE>
Please mark
your votes as |X|
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS FOR WITHHELD
FOR ALL
|_| |_|
Nominees:
Edward R. Anderson
Michael J. Emmi
Richard F. Ford
Delbert W. Johnson
John D. Loewenberg
Thomas C. Lynch
John C. Maxwell, III
Warren V. Musser
Anthony J. Paoni
Edward N. Patrone
Harry Wallaesa
FOR WITHHELD ABSTAIN
2. AMENDMENT TO THE 1993 STOCK |_| |_| |_|
OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE VOTING FOR THE
REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST.
Signature(s)___________________________________________________________________
Date: ____________________, 1999
YOU MUST SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD. If shares are
jointly owned, you must both sign. Include your full title if you are signing as
an attorney, executor, administrator, trustee or guardian, or on behalf of a
corporation or partnership.
FOLD AND DETACH HERE
Your vote is important,
regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person, please
complete, date and sign the above proxy
card and return it without delay in the enclosed envelope.
[COMPUCOM LOGO]
