<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GROUP 1 SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held September 12, 1996
To the Stockholders of Group 1 Software, Inc.:
You are cordially invited to attend the annual meeting of stockholders of
Group 1 Software, Inc. (the "Company") to be held on September 12, 1996, at
10:15 a.m. at Prudential Securities, One Liberty Plaza, New York, New York
10292 (the "Meeting"), for the following purposes:
(1) To elect two (2) directors to hold office until the third annual
meeting of stockholders of the Company following their election and until the
election and qualification of their successors; and
(2) To transact such other business as may properly come before the
Meeting and any adjournment thereof.
Only stockholders of record at the close of business on July 17, 1996 (the
"Record Date") are entitled to receive notice of, and to vote at, the Meeting.
We hope that you will be able to attend the Meeting in person.
- --------------------------------------------------------------------------------
IN ORDER TO ASSURE A QUORUM AND TO AVOID THE EXPENSE AND DELAY OF SENDING
FOLLOW-UP LETTERS, PLEASE FILL-IN, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED
STATES. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW
YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of Directors
/s/ Edward Weiss
---------------------
Edward Weiss
Secretary
Lanham, Maryland
July 29, 1996
<PAGE> 3
GROUP 1 SOFTWARE, INC.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
301/731-2300
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 1996
This Proxy Statement and the enclosed form of proxy are furnished to the
stockholders of Group 1 Software, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board") from holders of outstanding shares of its common stock,
$.01 par value (the "Voting Securities"), for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on September 12, 1996 and at any
adjournment thereof. Other than the Company's $.01 par value common stock,
there are no other voting securities of the Company outstanding. The
approximate date on which this Proxy Statement and the related form of proxy
are first being sent to stockholders is July 29, 1996.
If the enclosed proxy is properly signed and returned, and if the
stockholder specifies a choice on the proxy, the shares of the Voting
Securities represented by the proxy will be voted (or withheld from voting) in
accordance with the stockholder's choice. If the proxy is signed and returned
but no specification is made, the proxy will be voted FOR the election of the
Board's nominees for directors listed below.
The Board of Directors of the Company knows of no business that will be
presented for consideration at the Meeting other than the matters described in
this Proxy Statement. If any other matters are presented at the Meeting, the
proxy holders will vote the proxies in accordance with their judgment.
Any proxy may be revoked by the stockholder giving such proxy, at any time
prior to its being voted, by filing with the Secretary of the Company, at its
address set forth above, a notice of revocation or a duly executed proxy
bearing a later date. Any proxy may also be revoked by the stockholder's
attendance at the Meeting and voting in person. A notice of revocation need
not be on any specific form.
The Company has fixed the close of business on July 17, 1996 as the record
date (the "Record Date") for the determination of the stockholders of the
Company entitled to notice of, and to vote at, the Meeting. On that date,
there were outstanding 4,293,697 shares of the Voting Securities, the holders
of which will be entitled to one vote per share on each matter submitted to the
Meeting. No other voting securities of the Company are outstanding.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the shares of the Voting Securities entitled to vote constitutes a
quorum for the transaction of business at the Meeting. If a quorum should not
be present, the Meeting may be adjourned from time to time until a quorum is
obtained.
There are no rights of appraisal or similar rights of dissenters
applicable to the matter to be voted upon at the Meeting.
FINANCIAL INFORMATION
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1996 accompanies this Proxy Statement. The Annual Report is
not part of the proxy solicitation materials.
2
<PAGE> 4
BENEFICIAL OWNERSHIP
The following table sets forth certain information as of the Record Date
as to all persons who, to the knowledge of the Company, were beneficial owners
of five percent or more of the common stock of the Company and all directors
and officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF TITLE OF SHARES OF PERCENT OF
BENEFICIAL OWNER CLASS CLASS CLASS
------------------- -------- --------- -----------
<S> <C> <C> <C>
COMNET Corporation (1)
4200 Parliament Place Common 3,484,588 81.2%
Suite 600 Lanham, MD Stock
20706-1844
All directors and
officers as a group Common 100,037 2.3%
(9 persons) (2)(3) Stock
</TABLE>
- ------------
(1) As of July 11, 1995, Medco Containment Services, Inc. ("Medco"), owned
17.0% of the issued and outstanding shares of the voting securities of
COMNET Corporation ("COMNET"). Pursuant to an Agreement and Plan of
Merger, dated as of July 27, 1993, as amended, by and among Merck & Co.,
Inc., a New Jersey corporation ("Merck"), M Acquisition Corp. ("Merger
Sub") and Medco, Medco was merged with and into Merger Sub and Medco
became a wholly owned subsidiary of Merck. Merck is a worldwide
organization engaged primarily in the business of discovering, developing,
producing and marketing products, and services for the treatment of
disease and the maintenance or restoration of health. The principal
executive offices of Merck are located at One Merck Drive, Whitehouse
Station, New Jersey. As of July 11, 1995, Merck may be deemed to be the
indirect beneficial owner, through its ownership of Medco, of 543,345
shares of COMNET's common stock, representing approximately 17.0% of the
outstanding shares of COMNET's common stock and Merck may also be deemed
to be the indirect beneficial owner, through its ownership of Medco, of
100,000 shares of COMNET's 6% Preferred Stock. Merck effectively has the
sole power to vote and direct the vote of such shares of common stock and
6% Preferred Stock, and to dispose and direct the disposal of such shares.
(2) Includes common stock purchase options for 84,000 shares of the Company's
common stock which are currently exercisable or will become exercisable
within 60 days of July 17, 1996.
(3) All directors and officers of the Company, as a group (9 persons), were
beneficial holders of 165,717 shares of COMNET common stock, and common
stock purchase options for 441,114 shares of COMNET common stock which are
currently exercisable or will become exercisable within 60 days of July
17, 1996.
Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company, all directors, officers and beneficial owners of more
than ten percent of any class of stock have filed on a timely basis Forms 3,
Forms 4 and Forms 5 as required in the fiscal year ended March 31, 1996, except
for the following persons who inadvertently filed late Form 4's regarding stock
options granted to them pursuant to the 1995 Incentive Stock Option,
Non-Qualified Stock Option and Stock Appreciation Rights Plan of COMNET
Corporation: Robert S. Bowen (12,500), Ronald F. Friedman (10,000), Charles A.
Crew (7,500), Alan Slater (7,500) and Edward Weiss (2,500).
3
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
Stockholders are being asked to elect two members to the Company's Board
of Directors. The two members who are so elected and the remaining four
directors whose terms continue after the Meeting will constitute the Board of
Directors of the Company.
Pursuant to the terms of the Company's Certificate of Incorporation, the
directors of the Company are divided into three classes, and one class is
elected at each annual meeting of stockholders and serves for a term ending on
the third annual meeting of stockholders following their election and after
their successor has been elected and qualified. Under the Company's Bylaws,
the election of directors is determined by a vote of a majority of the shares
present in person or represented by proxy and voting on the matter. And, under
applicable Delaware law and the Company's Articles of Incorporation and Bylaws,
abstentions and broker non-votes on proposals to elect directors will
effectively be treated as shares that are not present and voting for that
matter.
The Board has nominated Messrs. Buchsbaum and Friedman (whose current
terms will expire after directors are elected and qualify at the Meeting) to
serve until the third annual meeting of stockholders following their election,
and after their successors are elected and qualify. Unless otherwise directed,
the persons named as proxies in the proxy enclosed herewith will vote the
shares of the Voting Securities represented by such proxy for the election of
such nominees as directors.
AS OF JULY 17, 1996, COMNET OWNED 81.2% OF THE COMPANY'S VOTING
SECURITIES. ACCORDINGLY, THE AFFIRMATIVE VOTE OF NO OTHER STOCKHOLDERS WOULD
BE REQUIRED IN ORDER TO ELECT MESSRS. BUCHSBAUM AND FRIEDMAN, WHO ARE NOMINEES
FOR ELECTION AT THE MEETING OR ANY OTHER PROPOSALS SET OUT AT THE MEETING.
If for any reason any nominee for director should become unavailable for
election, the proxies may be voted for the election of a substitute designated
by management, unless a contrary instruction is given on the proxy. Management
has no reason to believe that any of the nominees will be unable or unwilling
to serve if elected, and each has expressed an intention to serve the entire
term for which election is sought.
The following table sets forth certain information at the Record Date
concerning the directors and their ownership of the Voting Securities and
common stock of COMNET as of July 17, 1996.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF VOTING
NAME OF DIRECTOR OF DIRECTOR PRINCIPAL OCCUPATION, BUSINESS SECURITIES AND PERCENT OF
THE COMPANY (AGE) SINCE EXPERIENCE AND DIRECTORSHIPS CLASS (AT RECORD DATE)
- ------------------- -------- ------------------------------ ---------------------------
GROUP 1 COMNET
------- COMMON STOCK
------------
<S> <C> <C>
CLASS II DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE THIRD ANNUAL MEETING OF
STOCKHOLDERS AFTER THE MEETING, AND THE ELECTION AND
QUALIFICATION OF THEIR SUCCESSORS)
Thomas S. Buchsbaum 1989 Executive (and previously Senior) Vice 25,000(1) 0
(46) President, Federal Systems for Zenith Data * *
Systems, Inc. for more than five years.
Also serves as a director of Dick Blick
Company.
Ronald F. Friedman 1986 President and Chief Operating Officer of 16,287(2) 166,618(3)
(52) the Company and its predecessor for more * 5.2%
than five years. Also serves as a
director of COMNET.
</TABLE>
4
<PAGE> 6
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
NUMBER OF SHARES OF VOTING
NAME OF DIRECTOR OF DIRECTOR PRINCIPAL OCCUPATION, BUSINESS SECURITIES AND PERCENT OF
THE COMPANY (AGE) SINCE EXPERIENCE AND DIRECTORSHIPS CLASS (AT RECORD DATE)
------------------- -------- ------------------------------ ---------------------------
GROUP 1 COMNET
------- COMMON STOCK
------------
<S> <C> <C>
CLASS I DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE SECOND ANNUAL
MEETING OF STOCKHOLDERS AFTER THE MEETING, AND
THE ELECTION AND QUALIFICATION OF THEIR SUCCESSORS)
Joseph R. Sullivan 1986 Vice President, Marketing and Business 27,750(4) 2,700
(51) Development of the Display Division of * *
Zenith Electronics Corporation for more
than five years.
Charles A. Crew 1990 Executive Vice-President, Chief Financial 0 51,320(5)
(53) Officer and Treasurer of the Company for * 1.6%
more than five years; also Executive Vice
President and Chief Financial Officer of
COMNET for more than five years and as
such has 20% of his time to the business
affairs of COMNET. Also serves as a
director of COMNET.
Charles A. Mele 1992 Executive Vice President - General 6,000(6) 10,000(7)
(40) Counsel and a director of Synetic, Inc. * *
("Synetic") for more than five years.
Also serves as a Director of COMNET.
CLASS III DIRECTORS (WHOSE TERMS WILL EXPIRE AT THE NEXT ANNUAL MEETING OF
STOCKHOLDERS AFTER THE MEETING, AND THE ELECTION AND
QUALIFICATION OF THEIR SUCCESSORS)
Robert S. Bowen 1986 Chairman and Chief Executive Officer of 30,750(8) 355,533(9)
(58) the Company and President and Chief * 11.2%
Executive Officer of COMNET for more than
five years. Also serves as a director of
COMNET.
</TABLE>
- --------------
* Less than 1%
(1) Includes options to purchase 25,000 shares of the Company's common stock
exercisable within 60 days of the Record Date.
(2) Includes options to purchase 15,000 shares of the Company's common stock
exercisable within 60 days of the Record Date.
5
<PAGE> 7
(3) Includes options to purchase 153,998 shares of COMNET common stock
exercisable within sixty (60) days of the Record Date.
(4) Includes options to purchase 25,000 shares of the Company's common stock
exercisable within 60 days of the Record Date.
(5) Includes options to purchase 51,320 shares of COMNET common stock
exercisable within 60 days of the Record Date.
(6) Includes options to purchase 6,000 shares of the Company's common stock
exercisable within 60 days of the Record Date.
(7) Includes options to purchase 10,000 shares of COMNET common stock
exercisable within 60 days of the Record Date.
(8) Includes options to purchase 18,750 shares of the Company's common stock
exercisable within 60 days of the Record Date.
(9) Includes options to purchase 201,816 shares of COMNET common stock
exercisable within 60 days of the Record Date.
Mr. Carl I. Kanter resigned from the Board of Directors on December 8,
1995.
Mr. Buchsbaum's business address is 2455 Horse Penn Road, Herndon,
Virginia 22071. Mr. Sullivan's business address is 1000 Milwaukee Avenue,
Glenview, Illinois 60025. Mr. Mele's business address is River Drive Center 2,
669 River Drive, Elmwood, New Jersey 07407. The business address of each of
Messrs. Bowen, Friedman and Crew is 4200 Parliament Place, Suite 600, Lanham,
Maryland 20706.
FAMILY RELATIONSHIPS
There are no family relationships among any director or executive officer
of the Company.
COMMITTEES AND MEETINGS
The Board currently has the following standing committees: the Executive,
Audit and Compensation Committees. The Executive Committee has and may
exercise all of the powers of the Board within the limits set out by General
Corporation Law of Delaware. The Executive Committee is comprised of Messrs.
Bowen and Friedman.
The Audit Committee's functions include recommending to the Board the
selection of the Company's independent public accountants and reviewing with
such accountants the plan, scope and results of their audit of the financial
statements and the adequacy of the Company's system of internal accounting
controls. The Audit Committee is comprised of Messrs. Mele and Sullivan.
The Compensation Committee's functions include reviewing management
proposals pertaining to executive compensation, profit sharing and stock
options. The Compensation Committee recommends management bonuses to the Board
for the Company's officers and employees. It has granted options and rights to
employees under and in accordance with the Company's Incentive Stock Option,
Non-Qualified Stock Option and Stock Appreciation Unit Plan (the "1986 ISO
Plan") and may grant options and rights to employees under and in accordance
with the Company's 1995 Incentive Stock Option, Non-Qualified Stock Option and
Stock Appreciation Unit Plan (the "1995 ISO Plan"). The Compensation Committee
is comprised of Messrs. Buchsbaum and Sullivan. Mr. Buchsbaum has never been
an employee of the Company. Mr. Sullivan has not been an employee of the
Company since October, 1988.
During the fiscal year ended March 31, 1996, the Board held 6 meetings,
the Executive Committee held 2 meetings, the Compensation Committee held 3
meetings and the Audit Committee held 1 meeting. No director attended less
than 75% of all meetings of the Board and the committees on which such director
served during that fiscal year.
6
<PAGE> 8
COMPENSATION OF DIRECTORS
No cash payments have ever been made to directors for attendance at
meetings of or otherwise serving on the Board or any committee thereof. In
September, 1995, the stockholders approved the Group 1 Software, Inc. Stock
Option Plan for Non-Employee Directors (the "1995 Directors' Plan"), which
provides for the annual, automatic grant of options to non-employee directors.
During the year ended March 31, 1996, Messrs. Buchsbaum, Sullivan and Mele were
each granted options under this plan to purchase 5,000 shares of the Company's
common stock.
EXECUTIVE OFFICERS AND COMPENSATION
The Executive Officers of the Company are Robert S. Bowen, Ronald F.
Friedman, Alan P. Slater, Charles A. Crew and Edward Weiss.
The business experience during at least the past five years for Messrs.
Buchsbaum and Friedman is set forth under "-- Nominees for Election to the
Board of Directors" and for Messrs. Bowen, Crew, Sullivan and Mele under "--
Directors Continuing in Office". From March, 1982 to the present, Mr. Slater,
39, has been employed by the Company. From April, 1992 to the present, Mr.
Slater has served as Executive Vice President, and for the five years prior to
that, he served as Vice President, Sales. Mr. Weiss, 45, has been General
Counsel of the Company since January, 1990, and has been its Secretary since
November, 1990.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company has established an executive compensation program based on the
following on-going principles and objectives: (i) provide compensation
opportunities that will help attract, motivate and retain highly qualified
managers and executives, (ii) link executive's total compensation to Company
performance and the individual performance of the executive and (iii) provide
an appropriate balance between incentives focused on achievement of annual
business plans and longer term incentives linked to increases in shareholder
value. To effectuate these principles and objectives, compensation for each of
the executives of the Company consists of base salary compensation, annual
incentive compensation (based in most cases on profit performance measured
against internal profit targets) and stock option grants.
For Fiscal Year 1996, the Compensation Committee did not review the base
salary or incentive compensation program for Mr. Bowen, nor the base salary for
Mr. Friedman since in regard to both executives these matters are fixed by
employment agreements between the Company and the respective executives.
Grants of options to Messrs. Bowen and Friedman, increases to Mr. Friedman's
base salary and his incentive compensation program, and the entire compensation
program for the remaining executives, are reviewed annually by the Compensation
Committee, including the review conducted for the most recent fiscal year.
Compensation Committee
----------------------
Thomas S. Buchsbaum
Joseph R. Sullivan
COMPENSATION COMMITTEE INTERLOCK
Mr. Sullivan, a member of the Company's Compensation Committee beginning
in fiscal year 1996, served as Chief Financial Officer of the Company from
September 1986 to October 1988, and as Vice President and Chief Financial
Officer of COMNET from September 1985 to October 1988.
7
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------------------------------ -----------------------------------
Name and Principal Stock All other
Position Year Salary Bonus Options(2) Compensation(3)
------------------ ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Robert S. Bowen 1996 $200,683 $564,519(1) --- $1,800
Chairman of the Board and 1995 $178,135 $484,262(1) --- $1,800
Chief Executive Officer 1994 $170,545 $ 67,112 --- $5,748
Ronald F. Friedman 1996 $183,400 $123,740 10,000 $3,000
President-Group 1 1995 $173,088 $307,237 --- $3,000
Software; Director 1994 $166,892 --- 10,000 $4,448
Alan P. Slater 1996 $140,769 $ 87,066 7,500 $2,989
Executive Vice President 1995 $133,673 $198,629 --- $2,877
1994 $129,780 --- 4,000 $3,420
Charles A. Crew 1996 $ 95,788 $ 37,383 7,500 $2,400
Chief Financial Officer; 1995 $ 89,123 $104,265 --- $ 822
Director 1994 $ 69,210 --- 3,300 $1,381
B. Scott Miller 1996 $105,000 $ 35,306 5,000 $2,989
Vice President 1995 $ 99,383 $ 92,183(1) --- $1,891
1994 $ 95,365 --- 3,300 $2,008
Sally Campbell 1996 $ 81,750 $ 20,768 5,000 $2,721
Vice President 1995 $ 78,595 $ 55,210 --- $1,540
1994 $ 75,197 --- 5,000 $1,578
Victor Forman 1996 $110,705 (4) $ 12,460 5,000 $1,669
Vice President 1995 $ 63,750 (4) --- --- ---
1994 $ 61,500 --- --- $2,291
</TABLE>
(1) Mr. Bowen elected to defer bonus compensation of $197,582 and $161,421 in
1996 and 1995 respectively; and Mr. Miller elected to defer $161,421 and
$46,092 of bonus compensation in 1995, in accordance with the respective Group
1 or COMNET deferred compensation plans.
(2) All options were granted by COMNET to purchase its common stock. Options
vest ratably over five years and expire in ten years.
(3) Includes Company contributions to the Defined Contribution Savings
(401(k)) Plan.
(4) Mr. Forman left the Company in September 1994 and returned in June 1995;
therefore, both fiscal years 1996 and 1995 reflect less than full year
compensation.
8
<PAGE> 10
STOCK OPTION GRANTS IN FISCAL YEAR 1996
GROUP 1
No stock options were granted during fiscal year 1996.
COMNET
The following stock options were granted during fiscal year 1996:
<TABLE>
<CAPTION>
% OF TOTAL AT 0% AT 5% AT 10%
OPTIONS GRANTED TO EXERCISE OR ANNUAL ANNUAL ANNUAL
GRANTED EMPLOYEES BASE PRICE EXPIRATION GROWTH GROWTH GROWTH
NAME # IN 1996 ($/SHARE) DATE RATE RATE RATE
---- -------- -------- --------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald F. Friedman 10,000 3.19% $10.00 12/20/2005 $0 $62,889 $159,374
Charles A. Crew 7,500 2.39% $10.00 12/20/2005 $0 $47,167 $119,531
Alan R. Slater 7,500 2.39% $10.00 12/20/2005 $0 $47,167 $119,531
Scott Miller 5,000 1.59% $10.00 12/20/2005 $0 $31,444 $ 79,687
Sally Campbell 5,000 1.59% $10.00 12/20/2005 $0 $31,444 $ 79,687
Victor Forman 5,000 1.59% $10.00 12/20/2005 $0 $31,444 $ 79,687
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options/SARs at FY-End Options/SARs at FY-End (1)
Acquired ------------------------- ---------------------------
on Value
Company Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Group 1
- -------
Robert S. Bowen None None 18,750 --- $37,500 ---
Ronald F. Friedman None None 15,000 --- $30,000 ---
Alan P. Slater None None 4,250 --- $ 8,500 ---
Charles A. Crew None None --- --- ---
B. Scott Miller None None --- --- --- ---
Sally P. Campbell None None --- --- --- ---
COMNET
- ------
Robert S. Bowen (2)
Ronald F. Friedman 12,000 $79,250 140,997 29,003 $191,250 ---
Alan Slater None None 14,600 9,900 $ 30,125 ---
Charles A. Crew None None 46,319 14,481 $ 66,250 ---
B. Scott Miller None None 13,320 6,980 $ 29,825 ---
Sally P. Campbell None None 6,200 8,000 $ 10,500 ---
Victor O. Forman None None --- 5,000 --- ---
</TABLE>
(1) These values are based upon the difference between the grant prices of all
options awarded and the average price of $10.00 per share for COMNET common
stock and $8.00 per share for Group 1 common stock at March 31, 1996.
(2) COMNET granted to Mr. Bowen options to purchase COMNET common stock in his
capacity as an officer of COMNET, and are therefore not included herein.
9
<PAGE> 11
THE GRAPH PRESENTED IN THE DEFINITIVE PROXY IS A COMPARISON OF THE 5 YEAR
CUMULATIVE TOTAL RETURN OF THE COMPANY VERSUS A PEER GROUP AND THE BROAD
MARKET.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GROUP 1 SOFTWARE, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
NASDAQ PEER
MARKET GROUP
GROUP 1 SOFTWARE, INC. INDEX INDEX
<S> <C> <C> <C>
1996 $31.68 $194.52 $224.06
1995 38.61 144.62 202.10
1994 32.67 136.32 124.71
1993 55.45 117.95 138.55
1992 88.12 105.40 129.97
</TABLE>
ASSUMES $100 INVESTED ON APR. 1, 1991
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING MAR. 31, 1996
The chart displayed directly above is presented in accordance with SEC
requirements.
The industry peer group included BGS Systems, Inc., Hathaway Corp.,
Hyperion Software, Inc., and Timberline Software, CP. Stockholders are
cautioned against drawing any conclusions from the data contained therein, as
past results are not necessarily indicative of future performance. This graph
in no way reflects the Company's forecast of future financial performance.
The graph and the related disclosure contained in this section of the
Proxy Statement should not be incorporated by reference into any prior filings
by the Company under the Securities Exchange Act of 1934 that incorporated
future filings or portions thereof (including this Proxy Statement or the
Executive Compensation section of this Proxy Statement).
EMPLOYMENT AGREEMENTS
ROBERT S. BOWEN.
Group 1 Agreement. The Company entered into an amended and restated
employment agreement dated as of January 28, 1992, with Mr. Bowen (the "Group 1
Agreement"). The Group 1 Agreement expires on July 1, 1999 and provides for a
salary of not less than $211,750 per annum subject to adjustments (effective
each July 1) depending upon the amount of professional time dedicated to Group
1 vis-a-vis COMNET and adjusted annually by the greater of changes in the area
cost of living index or the average salary percentage increase for employees
approved by the Board as part of its annual budget.
The Group 1 Agreement includes an annual incentive bonus equal to 7-1/2%
of the first $1,000,000 of consolidated net income of Group 1 before taxes with
certain adjustments as defined, and 10% of such income in excess of $1,000,000,
such bonus to be no greater than that determined under a similar bonus program
related to the consolidated earnings of COMNET as long as the program relating
to COMNET is effective. Consolidated net income as defined in the Group 1
Agreement includes all earnings of Group 1 and its subsidiaries from any
source, subject to certain specified deletions but including gain or loss on
the sale of stock or assets of Group 1 and/or a subsidiary. Specified
deletions from net income include, among other items, any provision for taxes,
any bonus payable under the Group 1 Agreement, any excess of interest income
from bank and other cash
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deposits over interest expense, and any charge to income associated with the
exercise of stock options. Salary and incentive compensation paid under the
Group 1 Agreement are not to be duplicated by payments under the COMNET
Agreement (described below), so long as the COMNET Agreement is effective.
If Mr. Bowen's employment with Group 1 during the term of the Group 1
Agreement is terminated because of his disability or death, his base salary and
bonus will be prorated through the date of termination. If Mr. Bowen
terminates his employment with Group 1 for any reason other than death or
disability or he is discharged by Group 1 for cause, Mr. Bowen is entitled to
his base salary, equitably prorated, and any bonuses earned for any fiscal year
prior to the fiscal year in which his termination of employment occurred. If
Group 1 terminates Mr. Bowen's employment without cause, Mr. Bowen is entitled
to receive his salary, fringe benefits and bonuses throughout the remaining
term of the Group 1 Agreement. Upon any termination of Bowen's employment
under the Group 1 Agreement, all options held by him to purchase Group 1's
common stock will be treated as provided in the instruments or agreements
governing such options.
The Group 1 Agreement also provides that as long as COMNET owns 25% or
more of Group 1's common stock, Mr. Bowen will receive no additional
compensation under the Group 1 Agreement, but Mr. Bowen's aggregate
compensation payable under his employment agreement with COMNET will be
allocated between COMNET and Group 1 based on the proportion of his time spent
working for each of such companies. If COMNET ceases to own 25% or more of
Group 1's common stock, (i) Mr. Bowen's annual salary under the Group 1
Agreement is increased to the greater of $240,000 or 160% of the then current
base salary of Group 1's chief operating officer, adjusted upward or downward
to the extent that the proportion of Mr. Bowen's time spent working for Group 1
is greater or lesser than 50% and adjusted for changes in the cost of living,
(ii) Mr. Bowen's annual salary under his employment agreement with COMNET is
reduced to reflect only the proportion of his time spent working for COMNET
business other than Group 1 and (iii) Mr. Bowen becomes entitled to receive
incentive bonus compensation from Group 1 as follows: (A) if COMNET disposes of
its interest in Group 1 in a registered public offering, then for each fiscal
year, if Group 1's earnings equal budget targets established by the Board in
its reasonable business judgment, then Mr. Bowen's bonus shall be the greater
of $200,000 or 160% of the bonus payable to Group 1's chief operating officer,
and if Group 1's earnings are greater or lesser than such targets, then Mr.
Bowen's bonus will vary from the amount payable to him at the target earnings
level to the same proportional extent as the variation in the bonus payable to
Group 1's chief operating officer; and (B) if COMNET disposes of its interest
in Group 1 other than in a registered public offering, then Mr. Bowen's bonus
shall be as determined by the Board, without the participation of any directors
affiliated with COMNET.
COMNET Agreement. COMNET has also entered into an amended and restated
employment agreement with Mr. Bowen, dated as of January 28, 1992, as its
President and Chief Executive Officer (the "COMNET Agreement"). The COMNET
Agreement expires on June 30, 1998, and provides for a current total base
salary of $325,770 per annum adjusted annually (effective each July 1) by the
greater of any changes in the area cost of living index or the average salary
percentage increase for COMNET employees presented to the Board as part of the
annual budget. The COMNET Agreement provides for a bonus payable to Mr. Bowen
equal to 7-1/2% of the first $1,000,000 of consolidated net income before
taxes, with certain adjustments as defined, and 10% of all such consolidated
net income in excess of $1,000,000. Consolidated net income includes all
earnings attributable to Group 1 and any of COMNET's business operations or
subsidiaries directly related to the particular lines of business engaged in by
Group 1, or any other COMNET subsidiary, as of July 1, 1991, from any source,
subject to certain specified deletions but including gain or loss on the sale
of stock or assets of COMNET and its subsidiaries. Specified deletions from
earnings include, among other items, any provision for taxes, any bonus payable
under the COMNET Agreement, any interest income from COMNET's or its
affiliates' investments net of investment expenses, any charges to income
associated with the exercise of stock options and any interest or dividend
income from, or gain from the sale of, securities held for investment at the
time Mr. Bowen joined COMNET.
The 7-1/2% and 10% calculations in the COMNET Agreement apply to gain
realized upon a sale of Group 1 and included in consolidated net income only to
the extent that such gain does not exceed an amount (the "Cap Amount") equal to
the gain that COMNET would realize on a disposition, if any, of its interest in
Group 1 at a price per share of $21.125. The COMNET Agreement provides that
with respect to any pretax gain (net of
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expenses) realized upon a disposition of Group 1 in excess of the Cap Amount,
Mr. Bowen will be entitled to the following percentages of such gain: $0 to
$3.3 million - 1%; above $3.3 to $6.6 million - 2%; above $6.6 to $9.9 million
- - 3%; above $9.9 to $13.2 million - 4%; and above $13.2 million - 5%. Further,
any bonus under the COMNET Agreement will be offset by 40% of all fees
theretofore received by Mr. Bowen under the Bowen Fee Agreement (described
below).
If Mr. Bowen terminates his employment with COMNET during the term of the
COMNET Agreement because of his disability he will be entitled to receive his
base salary and his bonuses, prorated through the date of termination, and any
options previously granted to him will, to the extent exercisable on Mr.
Bowen's date of employment, continue to be exercisable for 12 months following
such termination date. If Mr. Bowen's employment with COMNET is terminated
during the term of the COMNET Agreement because of his death, his estate will
be entitled to receive his base salary and his bonuses, prorated through the
date of termination, and any options previously granted to Mr. Bowen will, to
the extent exercisable on Mr. Bowen's date of termination of employment,
continue to be exercisable for six months following Mr. Bowen's death.
If Mr. Bowen terminates his employment with COMNET for any reason other
than death or disability or is discharged by COMNET for cause, he will be
entitled to receive his base salary, prorated through his date of termination,
and his bonus earned for any fiscal year prior to the fiscal year in which his
employment termination occurred, and all of his options will be treated as
provided in the instruments or agreements governing such options. If COMNET
terminates Mr. Bowen's employment without cause, he will be entitled to receive
his salary, as adjusted, fringe benefits and bonuses throughout the remaining
term of the COMNET Agreement, as if it had not been terminated, and all of his
options, including those that had not yet vested, will continue to vest or be
exercisable as if his employment had not been terminated but had continued for
the outstanding balance of the term of the COMNET Agreement, and he will be
afforded the maximum length of time permissible to exercise such options;
provided, however, that if such vesting of options after termination is
prohibited, COMNET shall, at such time as the options would have vested (the
"Vesting Date"), pay him in cash the difference between the average reported
price for COMNET's common stock over the 20 days immediately preceding the
Vesting Date and the exercise price of the stock options on the Vesting Date.
RONALD F. FRIEDMAN.
The Company has entered into an employment agreement dated October 31,
1990, with Ronald F. Friedman. The agreement, as amended, expires on March 31,
1999, and provides for annual base compensation of $183,400 per annum (adjusted
on April 1, 1995), which may be further adjusted annually for merit increases
upon approval of the Compensation Committee. Under his employment agreement,
Mr. Friedman is entitled to receive an annual bonus for the fiscal year ending
March 31, 1997, based on a percentage of the Company's net income before income
taxes, interest expense, management fees and bonus amounts paid to or for the
benefit of Mr. Friedman, the Company's Chief Executive Officer and Chief
Financial Officer ("Adjusted Net Income"), which bonus plan for fiscal year
1996 varied from 7.4% of Adjusted Net Income over $5.6 million, up to a maximum
of 9% of Adjusted Net Income over $9 million. The bonus is based upon both
achievement of a certain level of Adjusted Net Income and satisfactory growth
over actual prior year results in the opinion of the Compensation Committee and
the Board. If Mr. Friedman retires or becomes totally and permanently
disabled, Mr. Friedman shall be entitled to receive all earned but unpaid
bonuses and any subsequent bonus installments. In the case of death, all
earned but unpaid bonuses and subsequent bonus installments shall be paid
promptly in one sum. If Mr. Friedman is terminated for cause or resigns under
circumstances which would justify termination for cause, all unpaid bonuses
will be forfeited and no longer be payable. If a change in control of the
Company occurs, Mr. Friedman, at his option, has the right to resign his
position with the Company, and it will continue to pay his compensation and
provide him with employee benefits for one year or until the expiration date of
his employment agreement, whichever is the shorter period, and will pay Mr.
Friedman, as a lump sum, all earned but unpaid bonuses. In addition, bonuses
will be paid on a pro-rata basis for the period through the nearest full fiscal
quarter prior to resignation.
BONUS PROGRAMS TO OTHER EXECUTIVE OFFICERS
Mssrs. Crew, Forman, Miller and Slater and Ms. Campbell are entitled to an
annual incentive bonus for the fiscal year ended March 31, 1997 calculated on
the basis of the
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<PAGE> 14
Company's profit performance as compared to internal profit targets. Mr.
Weiss is entitled to an annual bonus for fiscal year ended March 31, 1997
calculated on the basis of COMNET's profit performance as compared to internal
profit targets and the achievement of certain other objectives. The Company
has agreed to reimburse COMNET for the respective portion, if any, of the bonus
paid to Mr. Weiss that is attributable to the Company's earnings.
DEFERRED COMPENSATION ARRANGEMENTS
The Company has adopted a Deferred Compensation Plan by which certain
members of senior management have the option of deferring the receipt of
amounts of their annual bonus compensation, if any, and/or their base
compensation (the "Deferred Compensation Plan"). The Deferred Compensation
Plan is intended by the Company to qualify as an unfunded plan for federal
income tax purposes and the Employee Retirement Income Security Act (ERISA).
The Deferred Compensation Plan is administered by the Company. The expenses
associated with the establishment and administration of the Deferred
Compensation Plan are borne by the Company. Any expenses of implementing any
investment option selected by a participant are charged against that
participant's account.
The compensation that is deferred is paid into a trust designated solely
to administer the Deferred Compensation Program. Currently Mr. B. Scott
Miller, Vice President, Product Development, is the only participant in the
Company's Deferred Compensation Plan.
FEE AGREEMENTS
In January, 1992, COMNET and Mr. Bowen entered into a fee agreement (the
"Bowen Fee Agreement"). Under the Bowen Fee Agreement, Mr. Bowen will be
entitled to a fee paid by COMNET of 1/2% of the total consideration payable on
acquisitions and 1/2% of the pre-tax gain (net of expenses) on dispositions of
COMNET's or its subsidiaries' businesses. However, this fee will not be paid
with respect to a disposition, if any, of the Company or any of COMNET's
business operations or subsidiaries directly related to the particular lines of
business engaged in by such companies as of July 1, 1991. Mr. Bowen's right to
any fees associated with such dispositions will remain subject to the incentive
compensation arrangements in the COMNET Agreement. The term of the Bowen Fee
Agreement extends until January 27, 2002, unless Mr. Bowen is no longer a
director, officer or employee of COMNET, provided that if Mr. Bowen's
employment is terminated without cause (as defined in the COMNET Agreement),
COMNET must either continue this agreement until January 27, 2002, or pay Mr.
Bowen the incentive bonus upon a disposition, if any, of COMNET's interests in
the Company to which Mr. Bowen would have been entitled under his employment
agreement with COMNET as in effect prior to its amendment and restatement in
January, 1992. Mr. Bowen earned $3,527 according to this fee agreement during
fiscal year 1996.
In January, 1992, COMNET entered into a fee agreement with Mr. Friedman,
pursuant to which he will be entitled to receive on disposition, if any, of
COMNET's interests in the Company, a fee in an amount equal to the following
percentages of COMNET's pre-tax gain (net of expenses) to the extent such gain
exceeds $21.125 per share of the Company: $0 to $3.3 million - 1/2%; above $3.3
to $6.6 million - 1%; above $6.6 to $9.9 million - 1-1/2%; above $9.9 to $13.2
million - 2%; and above $13.2 million - 2-1/2%. Such fee shall only be
payable, however, if the Company's net operating income increases at an average
annualized rate of 20% or more from 1991 until such disposition. If the
Company's net operating income increases at an average annualized rate of 15%
or more, but less than 20%, Mr. Friedman will be entitled to one-half the fee
set forth above. The term of this agreement extends until January 27, 2002,
unless Mr. Friedman is no longer a director, officer or employee of COMNET.
In January, 1992, COMNET entered into a fee agreement to pay Mr. James V.
Manning, Chairman of the Board of Directors of COMNET, fees of 1/2% of the
total consideration paid on acquisitions, 1/2% of the pre-tax gain (net of
expenses) on dispositions of COMNET's or its subsidiaries' businesses.
However, Mr. Manning will be entitled to such fees with respect to a
disposition, if any, by COMNET of its holdings in the Company only if, and to
the extent that, the consideration COMNET receives exceeds $50,000,000. The
term of this agreement extends until January 27, 2002, unless earlier
terminated because he is no longer a director, officer or employee of COMNET.
Mr. Manning has earned $3,527 according to this fee agreement during fiscal
year 1996.
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EXECUTIVE SUPPLEMENTARY BENEFITS
The Company provides certain of its executive officers with group health
insurance and disability insurance policies that are not available to all
salaried employees. These supplementary benefits to such executive officers
are limited to the cost of the premiums for the coverage. The aggregate cost
is less than $25,000 per year for each covered executive officer.
INDEMNIFICATION AGREEMENTS; DIRECTORS AND OFFICERS LIABILITY INSURANCE
INDEMNIFICATION AGREEMENTS. Messrs. Bowen, Friedman, Crew and Mele, as
members of the COMNET board of directors, are signatories to indemnification
agreements with COMNET (the "Indemnification Agreements"). Each
Indemnification Agreement provides that COMNET shall indemnify a director or
officer of it or of any subsidiary of it who is a party to the agreement (an
"Indemnitee") if he was or is a party to or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding (except a
derivative proceeding) by reason of the fact that he is or was a director or
officer of COMNET or any subsidiary of it, or is or was serving at its request
in certain capacities for another entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement (if such
settlement is approved in advance by COMNET) in connection with the defense or
settlement of such actions, suits or proceedings. The indemnification is
limited to instances where the Indemnitee acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of
COMNET, and with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful. With respect to derivative proceedings, the
Indemnification Agreement provides indemnification similar to that provided in
the Indemnification Agreement for non-derivative proceedings, except that
indemnification is allowed only to the extent determined to be fair and
reasonable by the court.
The Indemnification Agreement provides that if a director or officer is
entitled to indemnification for some or a portion of the expenses, judgments,
fines or penalties actually or reasonably incurred by him in the investigation,
defense, appeal or settlement of any civil or criminal action, suit or
proceeding, COMNET shall nevertheless indemnify him to the extent to which he
is entitled. By the terms of the Indemnification Agreements, the benefits are
not available for expenses or liabilities paid directly to the Indemnitee under
an applicable policy of directors and officers insurance or in several other
instances such as if a court determines that each material assertion made by
the Indemnitee in that proceeding was not made in good faith or was frivolous,
or if the claim arises from the purchase and sale by the Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, or similar successor statutes.
Messrs. Buchsbaum and Sullivan, who are directors of the Company but not
directors of COMNET, are not signatories to an Indemnification Agreement. They
receive indemnification protections, however, under the directors and officers
liability insurance policy described below, as well as the indemnification
provisions contained in the Company's Certificate of Incorporation and Bylaws.
DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company currently
maintains coverage of directors and officers liability under a policy obtained
by COMNET covering COMNET and its subsidiaries. This coverage is subject to an
aggregate limit of liability of $5,000,000. Deductibles under this policy
range from $5,000 per officer or director for each claim to $50,000 in the
aggregate for certain covered claims. This policy does not cover, among other
matters, dishonest, fraudulent, or criminal behavior.
401(k) PLAN
In January, 1994, COMNET adopted the COMNET Corporation and Subsidiaries
401(k) Retirement Savings Plan and Trust (the "401(k) Plan"). The Company, as
a subsidiary of COMNET, participates in the 401(k) Plan. The 401(k) Plan
provides for a contribution to be made by the Company and its subsidiaries out
of current operating earnings based upon the contributions made by
participating employees.
All employees of the Company or its subsidiaries who have been employed
for at least three months are eligible to participate in the 401(k) Plan.
Participants in the 401(k) Plan may contribute from 1% to 15% of their
compensation from the Company or its
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subsidiary (up to a limit of $9,500) in a calendar year. The Company or a
subsidiary will make contributions to an employee's 401(k) Plan account equal
to the sum of the following: (i) $.75 for each $1.00 a participant contributes
up to 2% of the participant's compensation and (ii) $.50 for each $1.00 the
participant contributes for the next 1% of the participant's compensation.
Participants are 100% vested in the contributions, and earnings thereon, they
make to the 401(k) Plan out of their compensation. Participants vest in
employer contributions, and earnings thereon, at a rate of 20% per year of
employment with the Company or a subsidiary, up to 100%. However, if a
participant's employment with the Company or a subsidiary terminates because of
retirement, death or disability (as defined in the 401(k) Plan), 100% of the
employer contributions, and earnings thereon, become 100% vested.
CERTAIN TRANSACTIONS
COMNET-GROUP 1 MANAGEMENT SERVICES AGREEMENT
Effective April 1, 1994, the Company renewed its Management and Services
Agreement with COMNET (the "Management Services Agreement") under which COMNET
provides to the Company certain management and other services through March 31,
1997. The Company believes that these arrangements are fair and reasonable.
By having entered into the Management Services Agreement, the Company believes
the possibility of conflicts of interest with COMNET regarding providing these
services will be minimized because the terms under which benefits and services
are to be exchanged will be generally governed by the Management Services
Agreement and need not be separately negotiated in each instance. However, no
assurance can be given that conflicts of interest will not occur.
Under the Management Services Agreement, COMNET provides on an actual or
estimated cost or usage basis, not intended to provide a profit to COMNET, all
accounting and finance support, legal and administrative support, human
resources support, office space and certain liability and property insurance
relating to this office space and its usage. The Company has retained the
right, upon 120 days notice, except for the providing of office space, to
acquire the services and benefits from a third party or to provide such
services or benefits itself.
The Company agreed to reimburse COMNET for 60% through September, 1995,
and 70% beginning October, 1995, of its salary and fringe benefit expenses for
Robert S. Bowen or his successor(s) as Chief Executive Officer of the Company
in return for Mr. Bowen's or his successor's services in such capacity. The
percentage represents the estimated portion of Mr. Bowen's professional time
presently spent on Company affairs. The Company has also agreed to reimburse
COMNET for that portion of Mr. Bowen's or his successor's incentive bonus
award, if any, that is attributable to the Company's earnings.
The Company has agreed to reimburse COMNET for a portion of its salary and
fringe benefit expenses for Charles A. Crew or his successor(s) as Chief
Financial Officer of the Company ("CFO") in return for Mr. Crew's or his
successor's services in such capacity. The portion of the CFO's salary and
fringe benefit expenses to be reimbursed will be determined as a percent of the
estimated portion of Mr. Crew's professional time spent on Company affairs.
For the year ended March 31, 1996, 80% of the CFO's salary and fringe benefit
expense was reimbursed under this formula. The Company has agreed to reimburse
COMNET for that portion of Mr. Crew's or his successor's incentive bonus award,
if any, that is attributable to the Company's earnings.
The Company has agreed to reimburse COMNET for all costs that COMNET
incurred for the benefit of the Company to deliver the services to the Company
of COMNET's Finance Department, Legal Department, Corporate Administrative
Department and Human Resources Department.
The Company has agreed to pay COMNET a management fee in recognition of
the provision by COMNET of services and benefits, including certain senior
management services, at cost. This management fee shall be based on the
Company's annual pre-tax earnings (before the cost of any management fee) as a
percentage of the Company's total annual revenues (the "Pre-Tax Margin"),
ranging from 1% of the total Company revenues if the Pre-Tax Margin is 20.99%
or under, and increasing by equal increments to 2.0% of the Company's total
revenues if the Pre-Tax Margin is 30% or more. Total amount charged by COMNET
to the Company for management and other services under the Management Services
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Agreement totaled $2,317,108 for the year ended March 31, 1996, including the
management fee paid for the fiscal year ended March 31, 1996, of $458,755.
TAX SHARING AGREEMENT
On April 1, 1991, the Company and COMNET renewed their tax sharing
agreement ("Tax Sharing Agreement"). Under current law and so long as COMNET
owns at least 80% of the total value of the stock of the Company and owns stock
possessing at least 80% of the voting power of the Company, the Company will,
at the election of COMNET, continue to be included in COMNET's consolidated
Federal income tax returns. The Company will pay to COMNET the amount of the
separate income tax liability that the Company would have been obligated to pay
had it filed a separate return. The Company's separate income tax liability
will be computed by reference to the Company's items of income, deduction and
credit in the current and prior years. For the purposes of the Tax Sharing
Agreement, carry forwards and carrybacks of losses and deductions will be
computed as if the Company had not filed consolidated income tax returns with
COMNET. In the event that, upon audit of any consolidated income tax returns
or upon the filing of any amended return or claims for refund, there are
adjustments that would have affected the Company's separate income tax
liability, the Company will make to or receive from COMNET additional payments
at the time and in the amount, including interest thereon, as would have been
paid to or received from the Internal Revenue Service had the Company filed a
separate return.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Coopers & Lybrand, L.L.P. has audited the Company's financial statements
for the fiscal years ended March 31, 1996, 1995 and 1994. A representative of
Coopers & Lybrand is expected to be present at the Meeting. The representative
will be afforded an opportunity to make a statement and will be available to
respond to appropriate questions by stockholders.
STOCKHOLDERS' PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at the Company's
next annual meeting, it must be received by the Secretary of the Company, 4200
Parliament Place, Suite 600, Lanham, Maryland 20706-1844, no later than
February 10, 1997, in order to be included in the Company's proxy statement and
form of proxy relating to that meeting.
SOLICITATION PROCEDURES
Officers and regular employees of the Company, without extra compensation,
may solicit the return of proxies by mail, telephone, telegram and personal
interview. Certain holders of record such as brokers, custodians and nominees,
are being requested to distribute proxy materials to beneficial owners and to
obtain such beneficial owner's instructions concerning the voting of proxies.
The cost of solicitation of proxies (including the cost of reimbursing banks,
brokerage houses, and other custodians, nominees and fiduciaries for their
reasonable expenses in regard to proxy soliciting material) will be paid by the
Company.
MISCELLANEOUS
Management does not intend to present any other matters at the Meeting.
If other matters are properly presented at the Meeting, the persons named as
proxies will vote them in accordance with their best judgment.
Where information contained in this Proxy Statement rests particularly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person or contained in filings made by such
person with the Securities and Exchange Commission.
By Order of the Board of Directors
/s/ Edward Weiss
--------------------
Edward Weiss
Secretary
Dated: July 29, 1996
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GROUP 1 SOFTWARE, INC.
4200 PARLIAMENT PLACE, SUITE 600
LANHAM, MARYLAND 20706-1844
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 12, 1996
The undersigned hereby appoint Edward Weiss and Charles A. Crew as true
and lawful attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned to vote and otherwise act
at the annual meeting of Stockholders of Group 1 Software, Inc. (the "Company")
to be held on Thursday, September 12, 1996, at 10:15 a.m. at Prudential
Securities, One Liberty Plaza, New York, New York 10292 and at any adjournment
thereof (the "Meeting"), with respect to all shares of Common Stock of the
Company which the undersigned would possess if personally present, on the
following matters.
1. Election of Directors
FOR all nominees listed below
---- (Except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below
----
(Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Mr. Thomas S. Buchsbaum
Mr. Ronald F. Friedman
There is no assurance that any of the Company's nominees will serve as
directors if any other nominee is elected to the Board.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED TO ELECT THE INDIVIDUALS NAMED IN PROPOSAL ONE.
In their discretion, the aforesaid proxies shall vote upon any other
matters which the persons making the solicitation do not know, a reasonable
time before the solicitation and that properly come before the Meeting or any
adjournment or postponement thereof, including the election of any person to
any office for which a nominee is named in the proxy statement and such nominee
is unable to serve for good cause.
The undersigned hereby ratifies and confirms that the aforesaid attorneys
and proxies may do hereunder.
- ------------------------------- Dated: 1996
(Signature of Stockholder) --------------,
- ------------------------------- Dated: 1996
(Signature of Stockholder) --------------,
(Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian or corporate official, please give
your full official title. If shares are held jointly, each holder should
sign.)
TO INSURE A QUORUM AND TO AVOID THE EXPENSE AND DELAY OF SENDING FOLLOW-UP
LETTERS, PLEASE FILL IN, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
17
