<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
[X] Definitive proxy statement Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Diamond Technology Partners Incorporated
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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
DIAMOND TECHNOLOGY PARTNERS LOGO
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
875 NORTH MICHIGAN AVENUE
SUITE 3000
CHICAGO, ILLINOIS 60611
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of Diamond Technology Partners
Incorporated (the "Company") will be held at 3:00 p.m. (CDT) on Monday, August
3, 1998 at The John Hancock Center, 96th Floor, Gold Coast Room, 875 North
Michigan Avenue, Chicago, Illinois, for the purpose of:
1. Electing two directors to serve until the Annual Meeting of Stockholders
of the Company in 2001.
2. Approving the Diamond Technology Partners Incorporated 1998 Equity
Incentive Plan.
3. Confirming the appointment of KMPG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending March 31, 1999.
4. Transacting such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on June 19, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournment thereof.
We encourage you to attend the Annual Meeting in person or to vote your
shares by proxy. PLEASE PROMPTLY FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED FORM
OF PROXY IF YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES. The proxy is revocable at any time before it is
voted. Returning the proxy will in no way limit your right to vote at the Annual
Meeting if you later decide to attend and vote in person.
Christopher J. Moffitt
Secretary
July 10, 1998
THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MARCH 31, 1998 IS
BEING MAILED TO STOCKHOLDERS CONCURRENTLY HEREWITH. THE ANNUAL REPORT CONTAINS
FINANCIAL AND OTHER INFORMATION ABOUT THE COMPANY, BUT IS NOT INCORPORATED INTO
THE PROXY STATEMENT AND IS NOT DEEMED TO BE A PART OF THE PROXY SOLICITING
MATERIAL.
<PAGE> 3
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
875 NORTH MICHIGAN AVENUE
SUITE 3000
CHICAGO, ILLINOIS 60611
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 3, 1998
This Proxy Statement is furnished in connection with the solicitation by
the directors of Diamond Technology Partners Incorporated, a Delaware
corporation (the "Company"), of proxies to be used at the Annual Meeting of
Stockholders to be held on August 3, 1998 (the "Annual Meeting") at The John
Hancock Center, 96th Floor, Gold Coast Room, 875 North Michigan Avenue, Chicago,
Illinois. This Proxy Statement and the related form of proxy are being mailed to
stockholders commencing on or about July 10, 1998.
If the enclosed form of proxy is executed and returned, the shares
represented by them will be voted as directed on all matters properly coming
before the Annual Meeting for a vote. The proxies may be revoked at any time
prior to their exercise by giving notice to the Company in writing or by a later
executed proxy. Attendance at the Annual Meeting will not automatically revoke a
proxy, but a stockholder attending the Annual Meeting may request a ballot and
vote in person, thereby revoking a prior granted proxy.
Stockholders of record at the close of business on June 19, 1998 will be
entitled to vote at the Annual Meeting. On that date, the Company had
outstanding and entitled to vote 9,129,550 shares of Class A Common Stock, par
value $0.001 per share ("Class A Common"), and 4,126,158 shares of Class B
Common Stock, par value $0.001 per share ("Class B Common" and, together with
the Class A Common, the "Common Stock"). Each share of Class A Common is
entitled to one vote for a nominee for each of the two directorships to be
filled and one vote on each other matter brought before the Annual Meeting. Each
share of Class B Common is entitled to five votes for each such nominee and five
votes on each other matter brought before the Annual Meeting. The shares of
Class B Common will be voted by Melvyn E. Bergstein, Chief Executive Officer of
the Company, pursuant to an irrevocable proxy granted to Mr. Bergstein by the
holders of Class B Common.
At the Annual Meeting, in accordance with Delaware law and the Company's
By-Laws, the inspectors of election appointed by the Board of Directors for the
Annual Meeting shall determine the presence of a quorum and shall tabulate the
results of stockholder voting. As provided by Delaware law and the Company's
By-Laws, the holders of a majority of the Company's stock, issued and
outstanding, and entitled to vote at the Annual Meeting and present in person or
by proxy at the Annual Meeting, shall constitute a quorum for such meeting. The
inspectors of election will treat properly executed proxies marked "abstain" as
"present" for purposes of determining whether a quorum has been achieved at the
Annual Meeting. Such inspectors shall also treat proxies held in "street name"
by brokers that are not voted on all proposals to come before the Annual Meeting
("broker non-votes") as "present."
Class A Common and Class B Common will vote as a single class on all
matters anticipated to be brought before the Annual Meeting. In accordance with
Delaware law, nominees for election as directors receiving the greatest number
of votes will be elected directors. In accordance with Delaware law and the
Company's By-Laws, the holders of a majority of the voting power of shares of
the Company's stock which has voting power present in person or by proxy, and
which is actually voted, shall decide any other proposal which is brought before
the Annual Meeting. As a result, abstentions in respect of any proposal and
broker non-votes will not be counted for purposes of determining whether such
proposal has received the requisite approval by the Company's stockholders.
In accordance with Delaware law and the Company's By-Laws, the Company may,
by a vote of the stockholders, adjourn the Annual Meeting to a later date or
dates, without changing the record date. If the Company were to determine that
an adjournment were desirable, the appointed proxies would use the discretionary
authority granted pursuant to the proxy cards to vote in favor of such an
adjournment.
<PAGE> 4
BUSINESS TO BE TRANSACTED
The Board of Directors will present three proposals to the stockholders of
the Company at the Annual Meeting. Information concerning the first proposal,
"Election of Directors", is found on pages 2-3 of this Proxy Statement.
Information concerning the second proposal, "Approval of the Diamond Technology
Partners Incorporated 1998 Equity Incentive Plan" is found on pages 12-16.
Information concerning the third proposal, "Confirmation of Appointment of
Independent Auditors", is found on page 16 of this Proxy Statement.
1. ELECTION OF DIRECTORS
IDENTIFICATION OF DIRECTORS
The incumbent directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Melvyn E. Bergstein(1)................... 56 Chairman of the Board of Directors,
Chief Executive Officer and President
Christopher J. Moffitt(2)(5)............. 43 Senior Vice President, Secretary and
Director
Michael E. Mikolajczyk(3)................ 46 Senior Vice President, Chief Financial
and Administrative Officer, Treasurer and
Director
James C. Spira(2)(4)..................... 55 Senior Vice President and Director
Donald R. Caldwell(3)(4)(5).............. 52 Director
Edward R. Anderson(2)(5)................. 51 Director
John D. Loewenberg(1)(4)................. 58 Director
Alan C. Kay(3)........................... 58 Director
</TABLE>
- -------------------------
(1) Term expires as of the 1998 Annual Meeting of Stockholders
(2) Term expires as of the 1999 Annual Meeting of Stockholders
(3) Term expires as of the 2000 Annual Meeting of Stockholders
(4) Member of the Audit Committee
(5) Member of the Compensation Committee
NOMINEES
It is intended that shares represented by proxies in the enclosed form will
be voted for the election of the nominees identified below to serve as directors
for a term of three years and until their successors are elected, unless
contrary instructions are received. All of the nominees listed below presently
serve as directors of the Company. If an unexpected occurrence should make it
necessary, in the judgment of the proxy holders, to substitute some other person
for any of the nominees, such shares will be voted for such other person as the
proxy holders may select.
Melvyn E. Bergstein........... Mr. Bergstein co-founded the Company in January
1994 and has served as its Chairman, Chief
Executive Officer and President since that
time. Effective July 1, 1998, Mr. Bergstein
vacated the office of President in favor of
Michael E. Mikolajczyk. Prior to co-founding
the Company, Mr. Bergstein held several senior
executive positions with Technology Solutions
Company from 1991 to 1993. Prior to that time
Mr. Bergstein held several senior positions
with other consulting firms, including
twenty-one years in various positions with the
Arthur Andersen & Co.'s consulting division
(now Andersen Consulting). Mr. Bergstein serves
on the board of directors of Integrated Systems
Consulting Group, Inc.
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<PAGE> 5
John D. Loewenberg............ Mr. Loewenberg is currently managing partner
and a consultant with JDL Enterprises, a
consulting firm. Previously, Mr. Loewenberg was
an executive vice president and chief operating
officer of Connecticut Mutual from May 1995
through 1996. Prior to joining Connecticut
Mutual, Mr. Loewenberg held several senior
management positions with Aetna Life and
Casualty and its affiliates. Mr. Loewenberg was
chairman of Precision Systems, Inc. until April
1996 and is a director of CompuCom Systems,
Inc., Sanchez Computer Associates, Inc.,
DocuCorp International, Inc., and Sherwood
International, PLC-United Kingdom. Mr.
Loewenberg has been a director of the Company
since October 1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF MELVYN
E. BERGSTEIN AND JOHN D. LOEWENBERG AS DIRECTORS OF THE COMPANY.
DIRECTORS CONTINUING IN OFFICE
The following directors' terms in office continue beyond the 1998 Annual
Meeting of stockholders:
Edward R. Anderson............ Mr. Anderson has been a director of the Company
since June 1994, and has been president, chief
executive officer and a director of CompuCom
Systems, Inc. since January 1994. He joined
CompuCom as chief operating officer in August
1993. From 1988 to 1993, Mr. Anderson served as
president and chief operating officer of
ComputerLand USA. Prior to that time, Mr.
Anderson held executive and management
positions with The Computer Factory, W.R Grace
& Company, and American Express Company. Mr.
Anderson is also a member of the board of
directors of The M/A/R/C Group.
Donald R. Caldwell............ Mr. Caldwell has been a director of the Company
since June 1994 and has been the president and
chief operating officer of Safeguard
Scientifics, Inc. since February 1996 and a
director of Safeguard since May 1996. Mr.
Caldwell was an executive vice president of
Safeguard from December 1993 to February 1996.
Prior to such time, Mr. Caldwell was the
president of Valley Forge Capital Group, Ltd.
from April 1991 to December 1993. Prior to that
time, Mr. Caldwell held various executive and
management positions with a predecessor company
of Cambridge Technology Partners
(Massachusetts), Inc. and Arthur Young & Co. (a
predecessor to Ernst & Young, LLP). Mr.
Caldwell currently serves on the boards of
directors of Integrated Systems Consulting
Group, Inc., CompuCom Systems, Inc., and Quaker
Chemical Company, in addition to numerous
privately held companies and other civic
organizations.
Alan C. Kay................... Dr. Kay has been a director of the Company
since June 1996 and is currently vice president
of research and development for Walt Disney
Imagineering, Inc. and is a Disney fellow. From
1984 to 1996, Dr. Kay was an Apple fellow at
Apple Computer, Inc. Prior to that time, Dr.
Kay held scientific positions at Atari
Corporation and the Xerox Palo Alto Research
Center. He was a research associate and
lecturer in computer science at Stanford
University from 1969-1971.
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<PAGE> 6
Michael E. Mikolajczyk........ Mr. Mikolajczyk joined the Company in April
1994 and has served as Senior Vice President,
Chief Financial and Administrative Officer and
a member of its Board of Directors since that
time. Effective July 1, 1998, Mr. Mikolajczyk
became President of the Company. From 1993 to
1994, he served as senior vice president of
finance and administration and chief financial
officer for Technology Solutions Company. Prior
to that time, he held several senior financial
positions at MCI Telecommunications
Corporation.
Christopher J. Moffitt........ Mr. Moffitt co-founded the Company in January
1994 and has served as Senior Vice President,
Secretary and a member of the Board of
Directors of the Company since that time. From
1988 to 1993, he served as senior vice
president of Technology Solutions Company.
Prior to that time, Mr. Moffitt held several
consulting and senior technology positions with
Arthur Young (a predecessor to Ernst & Young
LLP), Neiman Marcus and Electronic Data
Systems.
James C. Spira................ Mr. Spira joined the Company in November 1995
and has served as Senior Vice President since
that time. He became a member of its Board of
Directors in February 1996. From 1991 to 1995,
Mr. Spira was a group vice president of the
Tranzonic Companies, Inc. Prior to that time,
Mr. Spira served as the president and chief
executive officer of Cleveland Consulting
Associates, a firm that he founded in 1974. Mr.
Spira serves on the board of directors of
CIBER, Inc., and American Greetings, Inc.
DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors has an Audit Committee, which has authority to
review and recommend to the Board internal accounting and financial controls for
the Company and accounting principles and auditing practices and procedures to
be employed in the preparation and review of financial statements. The Audit
Committee was established on February 18, 1997 and met twice during fiscal 1998.
The Board of Directors also has a Compensation Committee, which has authority to
review and recommend to the Chief Executive Officer and the Board policies,
practices and procedures relating to the compensation of managerial employees
and the establishment and administration of employee benefit plans, except for
stock option plans. The Compensation Committee was established on February 18,
1997 and met informally during fiscal 1998. All decisions regarding managerial
employee compensation were reviewed with, and made, by the Board of Directors as
a whole. The Company's By-Laws provide that a majority of the Compensation
Committee shall consist of members of the Board of Directors who are not
officers or employees of the Company or any subsidiary of the Company. The Board
of Directors has no Nominating Committee.
The Board of Directors held four meetings in fiscal 1998. All of the
directors attended at least 75 percent of the total meetings held by the Board
of Directors and by the committees on which they served during fiscal 1998.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for their services as directors,
except for reimbursement of expenses incurred in connection with attending
meetings of the Board of Directors and its committees. Directors who are not
employees of the Company or of Safeguard Scientifics, Inc. ("Safeguard") are
granted options to purchase Class A Common of the Company at the discretion of
the Board of Directors. The exercise price of each option is equal to the fair
market value of the shares on the date of grant. The options vest over periods
ranging from three to five years and have terms ranging from five years to seven
years. During fiscal \1998, the Company granted stock options to purchase 10,000
shares of Class A Common at $14.40 per
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<PAGE> 7
share to Mr. Loewenberg. See "Stock Options -- Option Grants in Last Fiscal
Year" for option grants to the employee directors of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning compensation
paid or accrued in fiscal years 1996, 1997 and 1998 with respect to the
Company's Chief Executive Officer and all of its other executive officers at
March 31, 1998 (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS--
----------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(2)
- --------------------------- ------ ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Melvyn E. Bergstein....... 1998 $506,250 $300,000 -- 47,603 $8,550
Chairman, Chief Executive 1997 503,125 -- -- -- 8,550
Officer, and President 1996 480,000 -- $127,207(3) -- 5,472
Michael E. Mikolajczyk.... 1998 400,000 240,000 36,962 3,306
Senior Vice President, 1997 383,333 -- -- 37,528 3,306
Chief Financial and 1996 360,000 -- 92,548(4) 16,500 1,938
Administrative Officer and
Treasurer
Christopher J. Moffitt.... 1998 450,000 270,000 -- 42,283 1,938
Senior Vice President and 1997 431,250 -- -- -- 1,938
Secretary 1996 400,000 -- 105,630(5) -- 1,938
James C. Spira............ 1998 460,400 270,000 -- 12,483 8,550
Senior Vice President 1997 479,169 -- -- -- 5,472
1996 208,789(6) -- -- 74,250 456
</TABLE>
- -------------------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Officers which are
available generally to all salaried employees of the Company and certain
perquisites and other personal benefits, securities or property received by
the Named Officers which do not exceed the lesser of $50,000 or 10% of the
aggregate of any such Named Officer's salary in the fiscal year.
(2) Represents excess group life insurance premiums paid in the respective year.
(3) Includes $120,000 of deferred compensation earned but not paid during the
year ended March 31, 1996 and $7,207 of interest on such cumulative amounts.
(4) Includes $90,000 of deferred compensation earned but not paid during the
year ended March 31, 1996 and $2,548 of interest on such cumulative amounts.
(5) Includes $100,000 of deferred compensation earned but not paid during the
year ended March 31, 1996 and $5,630 of interest on such cumulative amounts.
(6) Represents a partial year as Mr. Spira joined the Company in November 1995.
EMPLOYMENT AGREEMENTS
The Company entered into Employment Agreements with Mr. Bergstein, Mr.
Moffitt, Mr. Mikolajczyk and Mr. Spira that provide for annual salaries and
bonuses of up to 120% of annual salaries for the fiscal year ended March 31,
1998. The annual salaries are subject to annual reviews. The Employment
Agreements are terminable at any time by either party and contain
non-competition provisions, which last for 18 months following cessation of
employment with the Company. In addition, the Employment Agreements prohibit the
individuals from disclosing any of the Company's confidential information and
require the individuals to
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<PAGE> 8
disclose to the Company, and to grant ownership to the Company all ideas,
inventions and business plans developed during the course of employment to the
extent they relate to the business of the Company, result from work performed
for the Company or result from use of any of the Company's property. For the
fiscal year ended March 31, 1998, Mr. Bergstein's agreement provides for an
annual salary of $500,000; Mr. Moffitt's agreement provides for an annual salary
of $450,000; Mr. Mikolajczyk's agreement provides for an annual salary of
$400,000; and Mr. Spira's agreement provides for an annual salary of $450,000.
STOCK OPTIONS
The following table provides information on stock options granted by the
Company in fiscal 1998 to the Named Officers. All Company option grants depicted
below were made pursuant to the Company's Amended and Restated 1994 Stock Option
Plan and 1998 Equity Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERMS(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Melvyn E. Bergstein.......... 47,603 3% $21.45 3/11/2005 $415,684 $968,720
Michael E. Mikolajczyk....... 36,962 2% $21.45 3/11/2005 $322,763 $752,176
Christopher J. Moffitt....... 42,283 3% $21.45 3/11/2005 $369,228 $860,458
James C. Spira............... 12,483 1% $21.45 3/11/2005 $109,005 $254,029
</TABLE>
- -------------------------
(1) Consists of two grants of options to purchase Class B Common, vesting
incrementally with 10%, 15%, 25%, 25% and 25% of the option vesting on the
first through fifth anniversaries or second through sixth anniversaries of
the date of grant, respectively. The options are not transferable in any way
other than upon the death of the employee. Shares issued upon the exercise
of these options are subject to the terms and restrictions contained in the
Voting and Stock Restriction Agreement. See "Voting and Stock Restriction
Agreement."
(2) The amounts shown are calculated assuming that the Common Stock market value
was equal to the exercise price per share as of the date of grant of the
options. The dollar amounts under these columns assume a compounded annual
market price increase for the underlying shares of the Common Stock from the
date of grant to the end of the option term of 5% and 10%. This format is
prescribed by the Securities and Exchange Commission and is not intended to
forecast future appreciation of shares of the Common Stock. The actual
value, if any, a Named Officer may realize will depend on the excess of the
market price for shares of the Common Stock on the date the option is
exercised over the exercise price. Accordingly, there is no assurance that
the value realized by a Named Officer will be at or near the value estimated
above.
The following table sets forth information concerning options exercised
during fiscal 1998 and the number and the hypothetical value of certain
unexercised options of the Company held by the Named Officers as of March 31,
1998. This table is presented solely for purposes of complying with the
Commission rules and does
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<PAGE> 9
not necessarily reflect the amounts the optionees will actually receive upon any
sale of the shares acquired upon exercise of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES MARCH 31, 1998 MARCH 31, 1998
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Melvyn E. Bergstein......... -- -- -- 47,603 -- $276,097
Michael E. Mikolajczyk...... -- -- 26,804 64,187 $668,858 914,260
Christopher J. Moffitt...... -- -- -- 42,283 -- 245,241
James C. Spira.............. -- -- 18,564 68,169 77,598 305,169
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee") was established on February 18, 1997 and did not have
any formal meetings to consider executive officer compensation for the fiscal
year ended March 31, 1998. The functions of the Compensation Committee were
carried out by the full Board of Directors. The Board of Directors has furnished
the following report on executive compensation:
REPORT ON EXECUTIVE COMPENSATION
The compensation of the Named Officers and all other executive
officers was determined in accordance with the Partners' Operating
Agreement and the Partners' Compensation Program, under which the officers'
compensation was approved by the Company's Management and Management
Compensation Committees, each of which is a non-board committee composed of
Partners, and by the Board of Directors. The purpose and design of this
structure is to provide a combination of base salary, bonus and equity to
the Company's Partners that will link individual rewards to the Company's
success, motivate teamwork, encourage the Partners to maintain equity
interests in the Company and reward individual performance. Each of the
Company's officers is a Partner.
Base salaries are established on the basis of the officers' experience
and contributions to the Company. Bonuses are based on the Company's
achievement of certain targets established in its annual business plan. The
Partners' Compensation Program provides that a portion of the bonus will be
paid in cash and that a portion will be distributed as equity -- either
restricted stock, stock appreciation rights or stock options. The Named
Officers, as Partners, share in a bonus pool established pursuant to a
formula that first provides for a return on revenue and for bonuses to
non-Partner employees. Target bonuses for all Partners, as a percentage of
base salary, are established prior to the fiscal year in which they take
effect.
CEO COMPENSATION
Mr. Bergstein's salary for the year ended March 31, 1998 was $506,250,
plus a bonus of $300,000, as compared to $503,125 for the prior fiscal
year. Mr. Bergstein's compensation was based on his leadership of the
Company, the Company's dramatic growth since being founded in early 1994,
his contributions to recruiting key employees, directors and advisory board
members, and his contribution to the revenues of the Company by attracting
significant clients and by actively participating in serving the Company's
clients. As with all other Partners, Mr. Bergstein's compensation as Chief
Executive Officer is subject to the approval of the Management Committee,
the Management Compensation Committee, the Partners and the Board of
Directors. The Board of Directors believes his compensation to be
reasonable.
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<PAGE> 10
POLICY ON QUALIFYING COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), 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 Summary Compensation Table that is not
"performance-based" as defined in Section 162(m). In order for incentive
compensation to qualify as "performance-based" compensation under Section
162(m), the Company's discretion to grant awards must be strictly limited.
The Board of Directors believes that the benefit to the Company of
retaining the ability to exercise discretion under the Company's incentive
compensation plans outweighs the limited risk of loss of tax deductions
under Section 162(m). Therefore, the Company does not currently intend to
seek to qualify its incentive compensation plans under Section 162(m).
By the Board of Directors:
Edward R. Anderson
Melvyn E. Bergstein
Donald R. Caldwell
Alan C. Kay
John D. Loewenberg
Michael E. Mikolajczyk
Christopher J. Moffitt
James C. Spira
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Anderson, Mr. Caldwell
and Mr. Moffitt. Mr. Moffitt is a Named Officer of the Company. None of the
Named Officers of the Company has served on the board of directors or on the
compensation committee of any other entity, any of whose officers served either
on the Board of Directors or on the Compensation Committee of the Company. The
Compensation Committee, however, was established on February 18, 1997 and did
not have any formal meetings to consider executive officer compensation for the
fiscal year ended March 31, 1998. For fiscal 1998, recommendations concerning
the aggregate compensation of all of the Company's Partners (including its Named
Officers) (as designated by the Company) were made to the Board of Directors by
the Company's Chief Executive Officer and the Company's Management Committee,
and decisions regarding such compensation were made by the full Board of
Directors. The Management Committee is a non-board operating committee which has
been established by the Company pursuant to the terms of the Partners' Operating
Agreement. Pursuant to the terms of the Partners' Operating Agreement,
allocations among the Company's Partners (including its executive officers) were
made by the Management Committee upon approval of the aggregate amount of such
compensation by the Board of Directors and the approval of the actual
allocations by at least seventy percent of the Company's Partners. See
"Partners' Operating Agreement" on page 12.
8
<PAGE> 11
STOCK PRICE PERFORMANCE PRESENTATION
The following graph compares the Company's total annual stock price
performance on Class A Common against the total stock price performance of the
Nasdaq Market Index and the Russell 2000 Index for the periods indicated. The
Company does not believe that there is a representative published industry or
line-of-business index or a representative industry peer group of public
companies against which to measure the Company's stock price performance.
Therefore, under Securities and Exchange Commission regulations, the Company has
selected the Russell 2000 Index, an index of companies with similar market
capitalization to the Company, to use as a representative peer group. The graph
presents the year-end value of a $100 investment on February 25, 1997, in the
Company's Class A Common at the $5.50 initial offering price and in each of the
Nasdaq Market Index and the Russell 2000 Index and assumes the reinvestment of
dividends, if any.
<TABLE>
<CAPTION>
Diamond
Technology
Measurement Period Partners Nasdaq Market
(Fiscal Year Covered) Incorporated Russell 2000 Index Index
<S> <C> <C> <C>
2/25/97 100.00 100.00 100.00
3/31/97 109.09 95.28 93.54
3/31/98 495.45 135.29 141.36
</TABLE>
9
<PAGE> 12
Set forth in the following table is the indicated information as of May 31,
1998, with respect to (1) each person who is known to the Company to be the
beneficial owner of more than five percent of the Class A Common, (2) each
person who is known to the Company to be the beneficial owner of more than five
percent of the Class B Common and (3) the beneficial ownership of Class A Common
and Class B Common by the directors, and the Named Officers and all executive
officers and directors as a group. Beneficial ownership of Class A Common and
Class B Common has been determined for this purpose in accordance with Rules
13d-3 and 13d-5 of the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") which provide,
among other things, that (a) a person is deemed to be the beneficial owner of
Class A Common or Class B Common if such person, directly or indirectly, has or
shares voting power or investment power with respect to such stock or has the
right to acquire such ownership within sixty days of the date of the indicated
information (July 30, 1998) and (b) when two or more persons agree to act
together for the purpose of holding, voting or disposing of Class B Common, the
group formed thereby is deemed to be a person which has acquired beneficial
ownership of all Class B Common beneficially owned by each member of the group.
Accordingly, the amounts shown in the table do not purport to represent
beneficial ownership for any purpose other than compliance with SEC reporting
requirements. Further, beneficial ownership as determined in this manner does
not necessarily bear on the economic incidence of ownership of Class A Common or
Class B Common.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS CLASS(2) SHARES CLASS(3)
- ---------------- -------- --------- ----------
<S> <C> <C> <C>
Melvyn E. Bergstein, individually(1)(4)..................... Class A 159,288 1.7%
Class B 507,880 12.3
Melvyn E. Bergstein, as proxyholder......................... Class A -- --
Class B 3,610,036 87.7
Safeguard Scientifics, Inc.(5).............................. Class A 1,035,035 11.0
800 The Safeguard Building Class B -- --
435 Devon Park Drive
Wayne, PA 19087
Christopher J. Moffitt(1)(6)................................ Class A 40,270 **
Class B 282,117 6.9
Michael E. Mikolajczyk(1)(7)................................ Class A 3,788 **
Class B 467,925 11.3
James C. Spira(1)(8)........................................ Class A 29,588 **
Class B 179,081 4.3
John D. Loewenberg(9)....................................... Class A 16,800 **
Class B -- --
Alan Kay(10)................................................ Class A 44,001 **
Class B -- --
Donald R. Caldwell(11)...................................... Class A 46,517 **
Class B -- --
Edward R. Anderson(12)...................................... Class A 18,920 **
Class B -- --
All executive officers and directors as a group (8 Class A 359,172 3.9
persons)(13)..............................................
Class B 4,169,884 100.0
</TABLE>
- -------------------------
** Less than 1% of the class outstanding
(1) The address of each of Messrs. Bergstein, Moffitt and Mikolajczyk is 875
North Michigan Avenue, Suite 3000, Chicago, Illinois 60611.
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<PAGE> 13
(2) In the event that any share of Class B Common is transferred to any party
other than a "Permitted Holder" (an employee of the Company or the Company)
or if a beneficial or record holder of a share of Class B Common Stock
ceases to be a Permitted Holder, the share is automatically and immediately
converted into a share of Class A Common. Shares of Class A Common may not
be converted into shares of Class B Common.
(3) Solely for the purpose of determining beneficial ownership herein, the
number of shares of Common Stock deemed outstanding as of May 31, 1998 (i)
assumes 9,130,415 shares of Class A Common and 4,117,916 shares of Class B
Common were outstanding as of such date, and (ii) includes additional
shares of Common Stock issuable pursuant to options or warrants held by
such owner which may be exercised within 60 days after May 31, 1998
("presently exercisable options"), as set forth below.
(4) Excludes 199,880 shares of Class A Common held in trust for certain members
of the Bergstein family.
(5) Includes a warrant which is presently exercisable for 241,182 shares of
Class A Common. The warrant and all shares of Class A Common are held of
record by Safeguard Scientifics (Delaware), Inc., a privately held
subsidiary of Safeguard. Excludes all shares of Common Stock owned by
Cambridge Technology Partners (Massachusetts), Inc. of which Safeguard owns
approximately 21% of the voting securities. See "Certain Relationships and
Related Transactions" below.
(6) Mr. Moffitt has granted Mr. Bergstein all voting rights with respect to
these shares pursuant to an irrevocable proxy. Excludes 84,250 shares of
Class A Common held in trust for certain members of the Moffitt family.
(7) Mr. Mikolajczyk has granted Mr. Bergstein all voting rights with respect to
these shares pursuant to an irrevocable proxy. Includes 33,404 shares of
Common Stock issuable pursuant to presently exercisable options. Excludes
41,250 shares of Class A Common held in trust for certain members of the
Mikolajczyk family.
(8) Mr. Spira has granted Mr. Bergstein all voting rights with respect to these
shares of Common Stock pursuant to an irrevocable proxy. Includes 18,564
shares of Common Stock issuable pursuant to presently exercisable options.
(9) Includes 3,300 shares of Class A Common issuable pursuant to presently
exercisable options.
(10) Consists of 44,001 shares of Class A Common issuable pursuant to presently
exercisable options.
(11) Excludes all shares of Common Stock beneficially owned by Safeguard. Mr.
Caldwell serves as president and chief operating officer of Safeguard. Mr.
Caldwell disclaims beneficial ownership of such shares.
(12) Includes 3,300 shares of Class A Common issuable pursuant to presently
exercisable options. Excludes 4,000 shares of Class A Common held in trust
for certain members of the Anderson family.
(13) All holders of Class B Common have granted to Mr. Bergstein the right to
vote such shares pursuant to the terms of irrevocable proxies. As of May
31, 1998 includes 3,610,036 shares of Class B Common subject to such
proxies. Includes in the aggregate 50,601 shares of Class A Common and
51,968 shares of Class B Common issuable pursuant to presently exercisable
options held by all Directors and Named Officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a $2.0 million subordinated loan agreement with
Safeguard Scientifics, Inc. ("Safeguard") on November 8, 1996 for general
working capital purposes. In connection with this loan, the Company issued
warrants to Safeguard for the purchase of 526,597 shares of the Company's Common
Stock at $5.50 per share. The loan had a maturity date of November 1, 2001 but
was required to be repaid in full upon the consummation of the initial public
offering of Class A Common in April 1997. The Company repaid this loan on April
11, 1997 with proceeds from the initial public offering. On January 31, 1997
Safeguard transferred warrants to purchase 241,182 shares of Class A Common to
Technology Leaders L.P. and Technology Leaders Offshore C.V., affiliates of
Safeguard ("Technology Leaders"), and warrants to purchase 44,233 shares of
Class A Common to CIP Capital L.P., an affiliate of Safeguard. The rights
granted under the
11
<PAGE> 14
warrants expire on November 1, 2001. Technology Leaders exercised their warrants
and sold all of their shares of Class A Common in connection with the public
offering of Class A Common in April 1998.
PARTNERS' OPERATING AGREEMENT
Certain employees of the Company are internally designated as "Partners."
The designation does not refer to a partner of a general or limited partnership.
All of the Partners of the Company have agreed to be bound by the Partners'
Operating Agreement. Each individual proposed to be hired as, or promoted to, a
Partner, must agree to become bound by and a party to the Partners' Operating
Agreement. The Partners' Operating Agreement provides for, among other things:
(i) nomination procedures for the nomination of candidates to the office of
Chief Executive Officer; (ii) procedures for the removal and retention of the
Chief Executive Officer; (iii) procedure for the admission and removal of
Partners; and (iv) the compensation of management personnel. In addition, the
Partners' Operating Agreement provides that the Chief Executive Officer must be
selected from among the Partners pursuant to the procedures set forth in such
Agreement, subject to the right of the Company's Board of Directors to veto any
such person nominated by the Partners. The Chief Executive Officer may be
removed by the Board of Directors or for certain other specified reasons.
VOTING AND STOCK RESTRICTION AGREEMENT
Each employee-stockholder and certain other stockholders of the Company
have agreed to be bound by the Second Amended and Restated Voting and Stock
Restriction Agreement dated as of August 4, 1997 (the "Voting and Stock
Restriction Agreement"). Any employee considering purchasing shares of the Class
B Common from the Company must agree to become bound by and a party to the
Voting and Stock Restriction Agreement (to the extent not already bound).
The Voting and Stock Restriction Agreement provides for, among other
things: (i) the grant of a proxy by each employee-stockholder of the Company to
the Chief Executive Officer of the Company conveying the right to vote their
shares of Class B Common; (ii) rights of first offer of the Company to purchase
shares of Class B Common offered by employee-stockholders; (iii) certain rights
of first offer of the Company to purchase shares of Common Stock offered by
certain shareholders including Safeguard, CIP Capital L.P. and Cambridge
Technology Partners (Massachusetts), Inc.; and (iv) restrictions on the
transferability of the certain shares of Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership of such securities with the SEC and Nasdaq. Officers, directors and
greater than ten percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based upon its review of the copies of Section 16(a) forms received by it,
and upon written representations from reporting persons concerning the necessity
of filing a Form 5 -- Annual Statement of Changes in Beneficial Ownership, the
Company believes that, during fiscal 1998, all filing requirements applicable
for reporting persons were met.
2. APPROVAL OF THE DIAMOND TECHNOLOGY PARTNERS INCORPORATED
1998 EQUITY INCENTIVE PLAN
The Board of Directors has determined that, in order to give the Company
the ongoing flexibility to attract and retain the management and employee talent
necessary for the Company's continued success, selected managers, including
directors and officers, and employees should be granted equity-based incentive
compensation awards.
The Board of Directors has approved the Diamond Technology Partners
Incorporated 1998 Equity Incentive Plan (the "Plan") pursuant to which the
Company's Management Committee may grant incentive
12
<PAGE> 15
awards in the form of stock options, stock appreciation rights and stock. The
Plan authorizes 3,500,000 shares of Class B Common (including the Class A Common
Stock into which such Class B Common may be converted, the "Stock") to be
issuable or transferable pursuant to awards. The number of shares of Stock to be
issuable or transferrable under the Plan may be increased by any shares
represented by awards made pursuant to or taken into account under the 1994
Stock Option Plan that have been forfeited, expired, canceled or settled without
issuance of shares.
Certain awards of stock options and stock have been made with the approval
of the Company's Management Committee in March 1998 (the "March 1998 Awards").
For purposes of the following disclosure, the dollar value of the stock options
that are part of the March 1998 Awards is zero because the exercise price of
such stock options is the Fair Market Value at the date of grant. The stock
awards are valued at the Fair Market Value at the date of the awards. The total
number of shares constituting the March 1998 Awards (including shares underlying
stock options) was 1,202,550. The aggregate dollar value of the Company's stock
awards in connection with the March 1998 Awards was $1,041,033. The March 1998
Awards were made as follows:
<TABLE>
<CAPTION>
SHARES SUBJECT
VALUE OF TO STOCK
NAME STOCK AWARDS STOCK AWARDS OPTION AWARDS
- ---- ------------ ------------ --------------
<S> <C> <C> <C>
Melvyn E. Bergstein......................... 2,797 $ 59,996 47,603
Michael E. Mikolajczyk...................... 2,238 48,005 36,962
Christopher J. Moffitt...................... 2,517 53,990 42,283
James C. Spira.............................. 2,517 53,990 12,483
All current executive officers as a group... 10,069 215,981 139,331
All current directors who are not executive
officers as a group....................... -- -- --
All employees other than executive officers
as a group................................ 38,464 825,052 1,014,686
</TABLE>
The March 1998 Awards were intended to be made pursuant to the Plan, and
therefore stockholder approval of the Plan includes approval of the March 1998
Awards thereunder.
Assuming a quorum is present, the affirmative vote of the holders of a
majority of Common Stock present, whether in person or represented by proxy, and
voting will be required to approve the Plan. The Plan will become effective on
the date it is approved by the stockholders.
13
<PAGE> 16
SUMMARY OF THE 1998 EQUITY INCENTIVE PLAN
A summary of the Plan is set forth below. The summary is qualified in its
entirety by reference to the full text of the Plan, which is attached to this
Proxy Statement as Appendix A.
The primary purpose of the Plan is to promote the long-term success of the
Company and its stockholders by strengthening the Company's ability to attract
and retain highly competent executives, partners and other selected employees
and to provide a means to encourage stock ownership and proprietary interest in
the Company.
Any employee of (i) the Company, (ii) any entity that is directly or
indirectly controlled by the Company or (iii) any entity in which the Company
has a significant equity interest shall be eligible to receive one or more
awards under the Plan. Any Directors of the Company who are not employed by the
Company will be considered "employees" eligible to receive awards under the
Plan, but only for purposes of nonqualified stock options. As of May 31, 1998,
the Company had 233 employees.
Under the Plan, participants may receive stock options, stock appreciation
rights ("SARs") or stock awards, as discussed in greater detail below. The
Management Committee will approve the type or types of awards to be made to each
participant. Awards may be granted singly, in combination or in tandem. Awards
also may be made in combination or in tandem with, in replacement of, as
alternatives to or as the payment form for grants or rights under any other
compensation plan or individual contract or agreement of the Company, including
the plan of any acquired entity.
SARs. An SAR generally represents a right to receive a payment, in cash
and/or shares, equal to the excess of the Fair Market Value of a specified
number of shares of Stock on the date the SAR is exercised over the Fair Market
Value on the date the SAR was granted, as set forth in the applicable award
agreement. "Fair Market Value," for all purposes of the Plan, shall mean the
average of the closing price of a share of Stock on the Nasdaq National Market
for the ten trading days immediately preceding the date of the grant.
Stock Options. A stock option represents a right to purchase a specified
number of shares of the Stock during a specified period as determined by the
Management Committee. The purchase price per share for each stock option shall
be not less than 100% of Fair Market Value on the date of the grant, subject to
certain exceptions. A stock option may be in the form of an incentive stock
option ("ISO") which complies with Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") or a nonqualified stock option. The price at which
shares may be purchased under a stock option shall be paid in full by the holder
of the stock option at the time of exercise in cash or pursuant to such other
method permitted by the Management Committee, including tendering shares of
Stock, third-party exercise transactions or any combination of such methods.
Stock Awards. A stock award is a grant made or denominated in shares of
Stock or units equivalent to shares of Stock. All or part of any stock award may
be subject to conditions and restrictions established by the Management
Committee and set forth in the applicable award agreement, which may include,
but is not limited to, continuous service with the Company or the achievement of
performance goals.
The Management Committee may provide that any awards under the Plan earn
dividends or dividend equivalents. Such dividends or dividend equivalents may be
paid currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Management Committee may establish, including reinvestment in
additional shares or share equivalents.
The aggregate number of shares of Stock which may be transferred to
participants under the Plan is 3,500,000, subject to certain adjustments
relating to grants pursuant to or accounted for by the 1994 Stock Option Plan.
The aggregate number of shares of Stock that may be covered by awards granted to
any single individual under the Plan shall not exceed 150,000 shares per fiscal
year of the Company. The aggregate number of shares of Stock that may be granted
in the form of ISOs shall be 3,500,000 shares. Shares subject to awards under
the Plan which expire, terminate or are canceled prior to exercise, or in the
case of stock awards, do not vest, shall thereafter be available for the
granting of other awards under the Plan.
14
<PAGE> 17
In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation, spin-off, recapitalization or other distribution
(other than normal cash dividends) of Company assets to stockholders or any
other change affecting the shares of Stock or share price, the Management
Committee may, but is not required to, adjust (i) the aggregate number of shares
of Stock issuable under the Plan, (ii) each outstanding award made under the
Plan and (iii) the exercise price per share for any outstanding stock options,
SARs or similar awards under the Plan.
Payment of awards may be in the form of cash, shares of Stock, other awards
or combinations thereof as the Management Committee shall determine at the time
of the grant, and with such restrictions as it may impose. The Management
Committee may also require or permit participants to elect to defer the issuance
of shares or the settlement of awards in cash under such rules and procedures as
it may establish under the Plan. It also may provide that deferred settlements
include the payment or crediting of interest on the deferral amounts, or the
payment or crediting of dividend equivalents where amounts are denominated in
share equivalents.
Awards granted under the Plan shall not be transferable or assignable other
than: (i) by will or the laws of descent and distribution, (ii) by gift or other
transfer of an award to any trust or estate in which the original award
recipient or such recipient's spouse or other immediate relative has a
substantial beneficial interest, or to a spouse or other immediate relative,
provided that any such transfer is permitted by Rule 16b-3 of the Exchange Act
as in effect when the transfer occurs and the Board of Directors does not
rescind this provision prior to such transfer, or (iii) pursuant to a domestic
relations order (as defined by the Code).
The Plan may be amended by the Management Committee as it deems necessary
or appropriate to better achieve the purposes of the Plan, except that no such
amendment shall be made without the approval of the Company's stockholders if
such amendment would increase the maximum number of shares (as adjusted pursuant
to Plan provisions) issuable under the Plan. The Board of Directors may suspend
the Plan or terminate the Plan at any time; provided, that no such action shall
adversely affect any outstanding benefit.
Federal Income Tax Consequences. In general, under the Code as presently
in effect, a participant will not be deemed to receive any income for federal
income tax purposes at the time an option or SAR is granted or a restricted
stock award is made, nor will the Company be entitled to a tax deduction at that
time. However, when any part of an option or SAR is exercised, when restrictions
on restricted stock lapse, or when an unrestricted stock award is made, the
federal income tax consequences may be summarized as follows:
1. In the case of an exercise of a nonqualified option, the
participant will recognize ordinary income in an amount equal to the
difference between the option price and the Fair Market Value of the Stock
on the exercise date.
2. In the case of an exercise of a SAR, the participant will recognize
ordinary income on the exercise date in an amount equal to any cash and
unrestricted Stock received, at Fair Market Value on the exercise date.
3. In the case of an exercise of an option or SAR payable in
restricted stock, or in the case of an award of restricted stock, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the value of the Stock will not be
taxable to the recipient as ordinary income until the year in which his or
her interest in the Stock is freely transferable or is no longer subject to
a substantial risk of forfeiture. However, the recipient may elect to
recognize income when the Stock is received, rather than when his or her
interest in the Stock is freely transferable or is no longer subject to a
substantial risk of forfeiture. If the recipient makes this election, the
amount taxed to the recipient as ordinary income is determined as of the
date of receipt of the restricted stock.
4. In the case of an ISO there is no tax liability at the time of
exercise. However, the excess of the Fair Market Value of the Stock on the
exercise date over the option price is included in the participant's income
for purposes of the alternative minimum tax. If no disposition of the ISO
stock is made before the later of one year from the date of exercise or two
years from the date the ISO is granted, the participant will realize a
long-term capital gain or loss upon a sale of the stock equal to the
difference between the option price and the sale price. If the stock is not
held for the required period, ordinary income tax
15
<PAGE> 18
treatment will generally apply to the amount of any gain at sale or
exercise, whichever is less, and the balance of any gain or loss will be
treated as capital gain or loss (long-term or short-term, depending on
whether the shares have been held for more than one year).
5. Upon the exercise of a nonqualified option or SAR, the award of
stock or the recognition of income on restricted stock, the Company will
generally be allowed an income tax deduction equal to the ordinary income
recognized by the employee. The company does not receive an income tax
deduction as a result of the exercise of an ISO, provided that the ISO
stock is held for the required period as described above. When a cash
payment is made pursuant to the award, the recipient will recognize the
amount of the cash payment as ordinary income, and the Company will
generally be entitled to a deduction in the same amount.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
DIAMOND TECHNOLOGY PARTNERS INCORPORATED 1998 EQUITY INCENTIVE PLAN.
3. CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company recommends a vote for ratification of
the appointment of KPMG Peat Marwick LLP as the independent auditors of the
Company and its subsidiary to audit the books and accounts for the Company and
its subsidiary for the current fiscal year. It is intended that the shares
represented by proxies in the enclosed form will be voted for confirmation of
KPMG Peat Marwick LLP as the independent auditors, unless contrary instructions
are received. It is expected that representatives of KPMG Peat Marwick LLP will
attend the Annual Meeting, with the opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING MARCH 31, 1999.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and form of proxy relating to the Company's next
annual meeting must be received at the Company's executive offices on or before
April 3, 1999 unless, as presently contemplated, the 1999 annual meeting of
shareholders is held earlier than July 3, 1999. If the date of the 1999 annual
meeting of shareholders is advanced earlier than July 3, 1999, such proposals
will be required to be received a reasonable period of time in advance the
Company's solicitation of proxies for that meeting. Such proposals should be
submitted by certified mail, return receipt requested, addressed to the Company,
875 North Michigan Avenue, Suite 3000, Chicago, Illinois 60611 Attention:
Secretary.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from its
stockholders. In addition to the use of the mails, proxies may be solicited by
the directors, officers and employees of the Company by personal interview,
electronic mail, telephone or telegram. Such directors, officers and employees
will not be additionally compensated for such solicitation, but may be
reimbursed for out-of-pocket expenses incurred in connection therewith.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of Class A Common held of record by such persons, and the
Company will reimburse such brokerage houses, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred in connection
therewith.
16
<PAGE> 19
OTHER MATTERS
The directors know of no other matters which are likely to be brought
before the meeting, but if any such matters properly come before the meeting the
persons named in the enclosed proxy, or their substitutes, will vote the proxy
in accordance with their best judgment.
Christopher J. Moffitt
Secretary
July 10, 1998
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE MEETING ARE URGED TO FILL OUT, DATE AND MAIL THE
ENCLOSED FORM OF PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
17
<PAGE> 20
PLEASE MARK BOXES IN BLUE OR BLACK INK.
1. Election of Directors.
WITHHOLD authority
only for the WITHHOLD
FOR ALL nominee(s) which authority Nominees are: Melvyn E.
Nominees name(s) I have for all Bergstein, John D. Loewenberg
written to the right nominees
[ ] [ ] [ ] [ ]
2. To approve the Diamond Technology Partners Incorporated 1998 Equity
Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS AND, WHEN
PROPERLY EXECUTED, WILL BE VOTED FOR THE ABOVE PROPOSALS (INCLUDING ALL
DIRECTOR NOMINEES) UNLESS OTHERWISE INDICATED.
Signatures(s) should be exactly as name or names appearing on this proxy,
if shares are held jointly, each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title.
Dated:______________________, 1998
__________________________________
Signature(s)
__________________________________
Signature(s)
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
_______________________________________________________________________________
[FOLD AND DETACH HERE]
_______________________________________________________________________________
DIAMOND TECHNOLOGY PARTNERS INCORPORATED
CLASS A COMMON STOCK
The undersigned stockholder of Diamond Technology Partners Incorporated
(the "Company") hereby appoints Melvyn E. Bergstein and Michael E. Mikolajczyk
and each of them, the attorneys and proxies of the undersigned, with full power
of substitution, to vote, as indicated herein, all of the shares of Class A
Common Stock of the Company standing in the name of the undersigned at the close
of business on June 19, 1998 at the Annual Meeting of Stockholders to be held at
The John Hancock Center, 96th Floor, Gold Coast Room, 875 North Michigan Avenue,
Chicago, Illinois, commencing at 3:00 p.m. (CDT) on Monday, August 3, 1998, and
at any and all adjournments thereof, with all of the powers the undersigned
would possess if then and there personally present and especially (but without
limiting the general authorization and power hereby given) to vote as indicated
on the proposals, as more fully described in the Proxy Statement for the
meeting.
