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SCHEDULE 14A
FILE NO. 0-22001
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
DELTEK SYSTEMS, INC.
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(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:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid: $
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[DELTEK SYSTEMS LETTERHEAD]
April 21, 1999
Dear Deltek Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
Deltek Systems, Inc. on Thursday, May 20, 1999. The meeting will begin promptly
at 10:00 a.m. local time, at the McLean Hilton, 7920 Jones Branch Drive, McLean,
Virginia.
The following items are included with this letter: (1) the official notice of
the meeting, (2) the proxy statement, (3) the proxy form, (4) the 1998 Annual
Report on Form 10-K, (5) the 1998 Annual Review, and (6) reservation request
form. The matters listed in the notice of meeting are described in detail in the
proxy statement. The Annual Report includes a financial review of Deltek's
performance in 1998.
If you plan to attend the Annual Meeting, please complete and return to us the
meeting reservation request form.
Your vote is important. Whether or not you plan to attend the Annual Meeting, I
urge you to complete, sign and date the enclosed proxy card and return it in the
accompanying envelope as soon as possible so that your stock may be represented
at the meeting.
Sincerely,
/s/ Kenneth E. deLaski
Kenneth E. deLaski
President and Chief Executive Officer
ADDRESS
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DELTEK SYSTEMS, INC.
Principal Executive Offices:
8280 Greensboro Drive
McLean, VA 22102
NOTICE OF ANNUAL MEETING
To be held May 20, 1999
The 1999 annual meeting of shareholders (the "Annual Meeting") of Deltek
Systems, Inc., a Virginia corporation (the "Company" or "Deltek") will be held
at the McLean Hilton, 7920 Jones Branch Drive, McLean, Virginia, on Thursday,
May 20, 1999, at 10:00 a.m. local time, and thereafter as it may from time to
time be adjourned for the following purposes:
1. To elect two Class II Directors for three years or until their
successors have been duly elected and qualified;
2. To ratify the amendment of the 1996 Stock Option Plan to increase the
maximum number of shares issuable from 900,000 shares to 2,100,000
shares;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for its current fiscal year; and
To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
Holders of record of Deltek common stock on April 12, 1999, are entitled to
notice of and to vote at the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE DATE
AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
By order of the Board of Directors,
/s/ Alan R. Steware
Alan R. Stewart
Secretary
McLean, Virginia
April 21, 1999
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DELTEK SYSTEMS, INC.
Principal Executive Offices:
8280 Greensboro Drive
McLean, VA 22102
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement and the accompanying proxy card and 1998 annual report
are furnished in connection with the solicitation of proxies by the board of
directors (the "Board") of Deltek Systems, Inc. ("Deltek" or the "Company") for
the annual meeting of shareholders to be held on Thursday, May 20, 1999, at
10:00 a.m., or at any adjournments thereof, at the McLean Hilton, 7920 Jones
Branch Drive, McLean, Virginia (the "Annual Meeting"). These proxy materials are
first being sent to shareholders on or about April 21, 1999. Only shareholders
of record on April 12, 1999 (the "Record Date") are entitled to notice of, and
to vote at, the Annual Meeting.
VOTING OF PROXIES
Your vote is important. Shares can be voted at the Annual Meeting only if
you are present in person or represented by proxy. Even if you plan to attend
the Annual Meeting, you are urged to sign, date and return the accompanying
proxy card.
When the enclosed proxy card is properly signed, dated, and returned, the
stock represented by the proxy will be voted in accordance with your directions.
You can specify your voting instructions by marking the appropriate boxes on the
proxy card. If your proxy card is signed and returned without specific voting
instructions, your shares of Deltek common stock will be voted as recommended by
the directors: "FOR" the election of the nominees for director named on the
proxy card (Proposal No. 1), "FOR" the ratification of the amendment to the
Company's 1996 Stock Option Plan (Proposal No. 2) and "FOR" the ratification of
the independent auditors appointed by the Board (Proposal No. 3).
You may revoke your proxy at any time before it is exercised by (a)
delivering to the Company's secretary at the Company's principal executive
offices either (i) written notice of revocation of the proxy or (ii) a duly
executed later-dated proxy, or by (b) voting by ballot at the Annual Meeting.
VOTES REQUIRED
The presence, in person or by proxy, of the holders of at least a majority
of the shares of Deltek common stock outstanding on the Record Date is necessary
to have a quorum for the Annual Meeting. Abstentions and broker "non-votes" are
counted as present for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares of Deltek common stock for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Less than a quorum may adjourn a
meeting.
As of the Record Date, 17,895,151 shares of Deltek common stock were
outstanding. Each shareholder is entitled to one vote on each item at the Annual
Meeting, in person or by proxy, for each share of common stock held of record by
such shareholder on the Record Date. Election of the nominees for the Board
(Proposal No. 1) will require the plurality of the votes cast by shares entitled
to vote in the election. Should either of the nominees become unavailable to
accept nomination or election as a director, the individuals named as proxies on
your proxy card will vote the shares represented by your proxy card for the
election of such other person as the Board may recommend. The Board knows of no
reason why the nominees will be unavailable or unable to serve. Ratification of
the amendment of the 1996 Stock Option Plan (Proposal No. 2) will be approved if
the votes cast favoring ratification exceed the votes cast in opposition.
Ratification of the appointment of independent auditors (Proposal No. 3) will be
approved if the votes cast favoring ratification exceed the votes cast in
opposition. Proxies solicited by the Board will be voted "FOR" each item, unless
otherwise instructed on your proxy card. Shares not voted by abstention and
broker non-votes will not be
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counted either for or against an item, and such abstentions and broker non-votes
will not affect the outcome of the vote on such item.
SOLICITATION OF PROXIES
Solicitation of proxies may be made by use of the mails and may also be
made in person or by telephone or other electronic communications. The cost of
soliciting proxies in the accompanying form will be borne by the Company. The
Company may reimburse brokerage firms and others for their expenses in
forwarding proxy materials to the beneficial owners and soliciting them to
execute the proxies.
ANNUAL MEETING ATTENDANCE
Admission to the Annual Meeting is limited to shareholders of record or
their proxy, beneficial owners of Deltek common stock having evidence of
ownership, and guests of Deltek. If you are a registered owner of Deltek common
stock and plan to attend the Annual Meeting in person, please complete and
return to Deltek's Corporate Secretary the meeting reservation request form
printed on the back of this proxy statement. Shareholders who have not obtained
a reservation for the Annual Meeting will be admitted upon verification of
ownership at the Annual Meeting. Results of the Annual Meeting will be included
in Deltek's next quarterly report filed with the Securities and Exchange
Commission.
PROCEDURE FOR SHAREHOLDER PROPOSALS AND NOMINATIONS
The Board currently performs the functions of a nominating committee, and
will consider director nominees recommended by shareholders for election at an
annual meeting, in accordance with the procedures set forth in the Company's
Bylaws. Under the Bylaws, written notice of a shareholder's intent to make such
a nomination generally must be received at the Company's principal executive
offices not less than 120 calendar days in advance of the date that the
Company's proxy statement was released to the shareholders in connection with
the previous year's annual meeting of shareholders. The notice must contain the
information required by the Company's Bylaws.
The Bylaws also provide that no business shall be conducted at any meeting
of shareholders unless specified in the notice of the meeting (or any supplement
thereto) by or at the direction of the Board, otherwise brought before the
meeting by or at the direction of the Board, or properly brought before the
meeting by a shareholder of the Company who complies with certain notice
procedures set forth in the Bylaws. These requirements are separate and apart
from, and in addition to, the Securities and Exchange Commission's requirements
for the inclusion of a shareholder's proposal in the Company's proxy statement.
Proposals of shareholders intended to be presented at the 2000 annual
meeting must be received by the Company's Corporate Secretary at the Company's
principal executive offices no later than December 1, 1999, for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Such
proposals must also meet the requirements set forth in the rules and regulations
of the Securities and Exchange Commission in order to be eligible for inclusion
in the Company's 2000 proxy materials.
The Company's Bylaws are incorporated herein by this reference. A copy of
the Bylaws may be obtained by following the instructions set forth on the last
page of this proxy statement.
DISSENTERS' RIGHTS OF APPRAISAL
The Board has not proposed any action for which the laws of the State of
Virginia, the Certificate of Incorporation or ByLaws of the Company provide a
right of a shareholder to dissent and obtain payment for shares.
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OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The Board does not know of any matters which will be brought before the
Annual Meeting other than those specifically set forth in the notice of meeting
and this proxy statement. If any other matters are properly introduced at the
Annual Meeting for consideration, including, among other things, consideration
of a motion to adjourn the meeting to another time or place, the individuals
named on the proxy card will vote in accordance with their best judgment.
PROPOSAL 1
TO ELECT TWO CLASS II DIRECTORS
EACH TO SERVE FOR THREE YEARS OR UNTIL HIS
SUCCESSOR HAS BEEN DULY ELECTED AND QUALIFIED
The Company's Board currently consists of Kenneth E. deLaski, Donald
deLaski, Robert E. Gregg, Darrell J. Oyer and Charles W. Stein. The Company's
Articles of Incorporation and Bylaws provide that, commencing with the 1997
annual meeting of shareholders, the Board shall be divided into three classes
with each class containing one third of the total number of directors, as nearly
equal in number as possible. At the 1997 Annual Meeting, directors of the second
class (Class II), Donald deLaski and Darrell J. Oyer, were elected to hold
office for a term expiring at the 1999 annual meeting of shareholders, and
directors of the third class (Class III), Kenneth E. deLaski and Robert E.
Gregg, were elected to hold office for a term expiring at the 2000 annual
meeting of shareholders. At the 1998 Annual Meeting, a director of the first
class (Class I), Charles W. Stein, was elected to hold office for a term
expiring at the 2001 annual meeting of shareholders.
The Board has concluded that the re-election of Donald deLaski and Darrell
J. Oyer as Class II directors is in the best interest of the Company and
recommends approval of their election. Biographical information concerning
Messrs. deLaski and Oyer can be found under "Executive Officers and Directors."
The remaining directors will continue to serve in their positions for the
remainder of their terms.
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors are as follows:
NAME AGE POSITION
---- --- --------
Kenneth E. DeLaski.................... 41 President, Chief Executive Officer and
Director
Donald deLaski........................ 67 Chairman of the Board of Directors and
Treasurer and Class II Director
Nominee
Eric F. Brown......................... 34 Executive Vice President and Chief
Operating Officer
Alan R. Stewart....................... 44 Chief Financial Officer and Secretary
Robert E. Gregg....................... 51 Director
Darrell J. Oyer....................... 58 Director and Class II Director Nominee
Charles W. Stein...................... 58 Director
Kenneth E. deLaski was a co-founder of the Company in November 1983 and has
served as a director of the Company since its inception. Mr. deLaski also has
served as the Company's President since May 1990 and as its Chief Executive
Officer since February 1996. From May 1990 to February 1996, he served as the
Company's Chief Operating Officer. Mr. deLaski is a certified public accountant.
He is the son of Donald deLaski, Chairman of the Board of Directors and
Treasurer of the Company.
Eric F. Brown was a co-founder of the Company in November 1983. He served
as the Company's Vice President, Operations from May 1990 to January 1997, was
appointed Executive Vice President in January 1997 and assumed the additional
office of Chief Operating Officer in May 1998. Prior to May 1990, Mr. Brown held
various technical and management positions within the Company, including
management of
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the Company's Technical Services Division, which provides custom programming
services to the Company's customers, and various of the Company's product groups
responsible for development and maintenance of the Company's core software
products.
Alan R. Stewart joined the Company in July 1992 as Chief Financial Officer
and has served as its Secretary since February 1996. Prior to joining the
Company, he was employed as director of accounting at BTG, Inc., a government
contractor, as Controller and Treasurer of Tempest Technologies, Inc., a systems
integrator primarily dealing with the federal government, as Assistant
Controller of C3, Inc., a systems integrator primarily dealing with the federal
government, as a staff accountant with the U.S. Securities and Exchange
Commission, and as a senior accountant with Touche Ross and Co., a public
accounting firm. Mr. Stewart is a certified public accountant.
Donald deLaski was a co-founder of the Company in November 1983 and has
served as Chairman of the Board of Directors and Treasurer of the Company since
its inception. Mr. deLaski also served as the Company's Chief Executive Officer
from its inception until February 1996. Mr. deLaski is a certified public
accountant. He is the father of Kenneth E. deLaski, President and Chief
Executive Officer of the Company. Mr. deLaski has been nominated for reelection
as a Class II Director.
Robert E. Gregg has served as a director of the Company since September
1986. He has been a shareholder in Hazel & Thomas, P.C., counsel to the Company,
since Hazel & Thomas' inception in 1987.
Darrell J. Oyer became a director of the Company in February 1997. Since
June 1991, Mr. Oyer has served as President of Darrell J. Oyer and Company, a
consulting company. Mr. Oyer was previously a partner with Deloitte and Touche
and was previously the Assistant Director of several functional areas of the
Defense Contract Audit Agency. Mr. Oyer has been nominated for reelection as a
Class II Director.
Charles W. Stein became a director of the Company on April 1, 1997. Since
August 1997, Mr. Stein has served as president of Stein Venture Management, a
consulting firm. From February 1987 until January 1997, Mr. Stein served as
President and Chief Executive Officer of Netrix Corporation, a wide area network
product and systems company. Mr. Stein also was a director of Netrix Corporation
and its Chairman until he resigned from the board of directors on March 31,
1997.
The Board of Directors is divided into three classes serving staggered
three-year terms. Deltek's executive officers are appointed annually by, and
serve at the discretion of, the Board of Directors. Each executive officer is a
full-time employee of the Company. Other than the relationship between Donald
deLaski and Kenneth E. deLaski described herein, there are no family
relationships between any director or executive officer of the Company.
THE BOARD OF DIRECTORS
The Board is responsible for overseeing the overall performance of the
Company. Members of the Board are kept informed of the Company's business
through discussions with the Chairman and other members of the Company's
management and staff, by reviewing materials provided to them and by
participating in board and committee meetings. During 1998, the Board met seven
times.
COMMITTEES OF THE BOARD
The Company has audit and compensation committees, but not a nominating
committee, of the Board. The Audit Committee is responsible for reviewing with
management the financial controls, accounting, credit and reporting activities
of the Company. The Audit Committee reviews the qualifications of the Company's
independent auditors, makes recommendations to the Board regarding the selection
of independent auditors, reviews the scope, fees and results of any audit, and
reviews non-audit services and related fees provided by the independent
auditors. The members of the Audit Committee are Darrell J. Oyer and Charles W.
Stein, both of whom are independent directors. Two meetings were held during the
last fiscal year.
The Compensation Committee is responsible for the administration of all
salary and incentive compensation plans for the officers and key employees of
the Company, including bonuses. The Compensation
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Committee may also administer the Company's 1996 Stock Option Plan and 1996
Employee Stock Purchase Plan. The members of the Compensation Committee are
Darrell J. Oyer and Charles W. Stein, both of whom are independent directors.
The Compensation Committee met one time during the last fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no interlocking relationships or other transactions
involving any of its Compensation Committee members that are required to be
reported by the Securities and Exchange Commission rules and no current or
former officer of the Company serves on its Compensation Committee.
DIRECTOR COMPENSATION
Prior to the Company's initial public offering in February 1997, directors
received no compensation for their services as members of the Board. Currently
directors who are not employees of the Company receive $1,000 for each meeting
of the Board or any committee thereof attended in person and $500 for each such
meeting attended telephonically, except that if a committee meeting is held on
the same day as a meeting of the full Board, the compensation for attendance at
such committee meeting is $300. The Company reimburses outside directors for any
travel expenses incurred in connection with attending Board or committee
meetings. Each of the outside directors has been granted nonqualified options
under the Company's 1996 Stock Option Plan to purchase 8,000 shares of the
Company's Common Stock at prices ranging from $8.875 to $11.00 per share.
Directors who are employees of the Company will receive no additional cash
compensation for their services as members of the Board of Directors or
committees thereof other than reimbursement for travel expenses incurred in
connection with attending Board and committee meetings.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following table sets forth information concerning the compensation
earned during the years ended December 31, 1996, 1997 and 1998 by the Company's
Chief Executive Officer and each of the Company's other most highly compensated
executive officers who were serving as executive officers at December 31, 1998
(collectively, the "Named Executive Officers"):
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------- ------------------------- ----------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OPTIONS/ LTIP
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(1) SARS(#) PAYOUTS(#)
------------------ ---- ---------- -------- --------------- ------------ ---------- ----------
Kenneth E. deLaski,.... 1998 179,042 -- -- -- -- --
President and Chief 1997 161,413 -- -- -- -- --
Executive Officer 1996 156,667 -- -- -- -- --
Donald deLaski,........ 1998 71,667 -- -- -- -- --
Chairman and 1997 109,198 -- -- -- -- --
Treasurer 1996 135,013 -- -- -- -- --
Eric F. Brown,......... 1998 150,125 -- -- -- 10,000 --
Executive Vice 1997 132,813 -- -- -- -- --
President and Chief 1996 126,667 -- -- -- 30,000 --
Operating Officer
Alan R. Stewart........ 1998 115,500 -- 28,800(3) -- 4,000 --
Chief Financial 1997 101,417 -- 122,537(3) -- 15,000 --
Officer and Secretary 1996 104,362 -- -- -- -- --
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION($)(2)
------------------ ------------------
Kenneth E. deLaski,.... 4,000
President and Chief 4,000
Executive Officer 4,000
Donald deLaski,........ 4,000
Chairman and 4,000
Treasurer 4,000
Eric F. Brown,......... 4,000
Executive Vice 4,000
President and Chief 4,000
Operating Officer
Alan R. Stewart........ 4,000
Chief Financial 4,000
Officer and Secretary 4,000
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(1) The Named Executive Officer did not hold restricted stock awards as of the
end of the fiscal year. The number and value of the aggregate restricted
stock holdings for Messrs. K. deLaski, D. deLaski, Brown and Stewart at the
end of the last fiscal year, based on the closing bid price of the Company's
Common Stock on the Nasdaq National Market on December 31, 1998, were
4,624,200, 3,781,900, 361,200, and 4,000 shares, respectively, with values
of $78,033,375, $63,819, 562, $6,095,250 and $67,500, respectively, without
giving effect to the consideration paid by the Named Executive Officer.
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(2) Does not include pro rata distributions of S Corporation dividends to the
individual as a shareholder. Includes for each individual for 1996, 1997 and
1998 a 401(k) plan profit sharing contribution of $4,000. Does not include
other prerequisites and personal benefits the aggregate amount of which did
not exceed 10% of the total annual salary and bonus reported for the Named
Executive Officer.
(3) Represents the dollar value of non-cash compensation from the exercise of
options to convert to Common Stock during the fiscal year.
Option Grants in Last Fiscal Year
The following table sets forth information concerning grants of options to
purchase the Company's common stock made during the year ended December 31, 1998
to the Named Executive Officers.
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------
NAME GRANTED FISCAL YEAR(1) SHARE DATE 5% 10%
---- ---------- -------------- --------- ---------- -------- --------
Kenneth E. deLaski.......................... -- -- -- -- -- --
Donald deLaski.............................. -- -- -- -- -- --
Eric F. Brown............................... 10,000 1.6% $16.875 12/31/08 106,126 268,944
Alan R. Stewart............................. 4,000 0.6% $16.875 12/31/08 42,450 107,578
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(1) The Company granted options to purchase an aggregate of 623,108 shares of
the Company's Common Stock to employees during the year ended December 31,
1998.
(2) The potential realizable value is based on the term of the option at the
time of grant (ten years). Potential gains are net of the exercise price but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future common stock price. Actual gains, if any, on stock
option exercises are dependant on the future financial performance of the
Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into account
any appreciation in the price of the common stock from the date of grant to
the date hereof.
Option Exercises and 1998 Fiscal Year-End Option Values
The following table sets forth information concerning the exercise of stock
options during the year ended December 31, 1998 and the value of options held as
of such date by the Named Executive Officers:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED VALUE ----------------------------- ---------------------------
NAME UPON EXERCISE RECEIVED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ------------ -------------- ----------- -------------
Kenneth E. deLaski... -- -- -- -- -- --
Donald deLaski....... -- -- -- -- -- --
Eric F. Brown........ -- -- 12,000 28,000 154,500 231,750
Alan R. Stewart...... 1,800 28,688 3,000 21,400 11,625 116,025
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(1) "Value Realized" represents the fair market value of the underlying common
stock on the exercise date minus the aggregate exercise price of such
options.
(2) Based upon the closing bid price on Nasdaq of the Company's common stock as
of December 31, 1998 of $16.875 per share, minus the aggregate exercise
price of such options.
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1996 Stock Option Plan
For a discussion of the 1996 Stock Option Plan, see "Proposal 2."
Employee Time Accelerated Stock Option Plan
Deltek's Time Accelerated Stock Option Plan (the "Accelerated Plan") was
adopted by the Company's Board and approved by its shareholders in April 1996. A
total of 1,500,000 shares of Common Stock originally were reserved for issuance
under the Accelerated Plan. In December 1996, the Company's Board reduced the
number of shares of common stock reserved for issuance under the Accelerated
Plan to 679,500, the number of shares of common stock issuable upon the exercise
of options then outstanding. The Accelerated Plan provides for grants of
nonstatutory options to key employees of the Company. The Accelerated Plan was
discontinued at the time of the adoption of the 1996 Option Plan, and no
additional options will be granted under the Accelerated Plan. Options
previously granted under the Accelerated Plan will continue to be governed by
the terms of the Accelerated Plan, which will be administered by the Board.
The exercise price of options granted under the Accelerated Plan must be
not less than the fair market value of the common stock on the date of grant.
The term of options granted under the Accelerated Plan is ten years, subject to
certain exceptions. All of the options granted under the Accelerated Plan become
exercisable on January 1, 2004. Any options that are fully vested at the time an
optionee's employment with the Company terminates for any reason (other than
death, disability or retirement) terminate three months after the date of
termination unless earlier exercised.
As of December 31, 1998, options to purchase 471,250 shares of common
stock, at a weighted average exercise price of $4.00 per share, were outstanding
under the Accelerated Plan and 146,350 of such options were exercisable.
1987 Employee Stock Option Plan
Deltek's 1987 Employee Stock Option Plan (the "1987 Option Plan") was
adopted by the Company's Board and approved by its shareholders in December
1987. A total of 900,000 shares of common stock originally were reserved for
issuance under the 1987 Option Plan. In December 1996, the Company's Board
reduced the number of shares of common stock reserved for issuance under the
1987 Option Plan to 388,500, the number of shares of common stock issuable upon
the exercise of options outstanding as of September 30, 1996. The 1987 Option
Plan provides for grants of nonstatutory options to key employees of the
Company. The 1987 Option Plan was discontinued at the time of the adoption of
the 1996 Option Plan, and no additional options will be granted under the 1987
Option Plan. Options previously granted under the 1987 Option Plan will continue
to be governed by the terms of the 1987 Option Plan, which will be administered
by the Board.
The exercise price of options granted under the 1987 Option Plan is based
on the book value of the common stock at the end of the fiscal year immediately
prior to the year in which the option is granted, as reflected in the Company's
audited financial statements, reduced by any dividend declared by the Company
with respect to the previous fiscal year. The term of options granted under the
1987 Option Plan is ten years, subject to certain exceptions. Generally, options
granted under the 1987 Option Plan become exercisable pursuant to a five-year
vesting schedule provided the optionee remains employed full time by the Company
and are subject to a right of repurchase by the Company upon the termination of
the optionee's employment.
As of December 31, 1998, options to purchase 136,250 shares of common
stock, at a weighted average exercise price of $0.40 per share, were outstanding
under the 1987 Option Plan. Options to purchase 111,050 shares were fully vested
and exercisable as of December 31, 1998.
1996 Employee Stock Purchase Plan
Deltek's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board in November 1996 and approved by its shareholders
in December 1996. A total of 400,000 shares of common stock are reserved for
issuance under the Purchase Plan. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, is administered by the Board or a
committee thereof. Employees
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(including officers and employee directors of the Company) are eligible to
participate in the Purchase Plan if they are customarily employed for more than
20 hours per week five months per year. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, which may not
exceed 10% of an employee's compensation. The price at which stock may be
purchased under the Purchase Plan is equal to 85% of the lower of the fair
market value of the common stock on the first day of the offering period or the
last day of the offering period. Employees may end their participation in the
offering at any time during the offering period, and participation ends
automatically on termination of a participant's employment with the Company. In
addition, participants may not purchase shares of common stock having a value
(measured at the beginning of the offering period) greater than $25,000 in any
calendar year.
As of December 31, 1998, 68,152 shares of common stock have been issued
under the Purchase Plan.
Performance Graph
Line Graph
'Deltek 'S&P Smallcap
Systems' 'S&P 500' 'Peer Group' 600'
'February 1997' 100.00 100.00 100.00 100.00
'December 1997' 143.75 125.52 93.80 123.53
'December 1998' 153.41 161.39 68.24 126.90
Assumes initial investment of $100
* Total Return assumes reinvestment of dividends
Note: Total Returns based on market capitalization
The above graph assumes a $100 investment on February 20, 1997 and
reinvestment of all dividends, in the Company's common stock, the S&P 600 Index,
and a composite peer group consisting of the following companies: Aspen
Technology, Inc., J.D. Edwards & Co., HNC Software Inc., Infinium Software,
Inc., JDA Software Group, Inc., Lightbridge, Inc., Manugistics Group, Inc.,
Pegasus Systems, Inc., Project Software & Development, Inc., Remedy Corp., Symix
Systems, Inc., and The Vantive Corp.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (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 equity
securities of the Company with the Securities and Exchange Commission and Nasdaq
National Market. Officers, directors and greater than ten percent stockholders
are required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) form that they file.
Based solely upon a review of Forms 3 and 4 furnished to the Company during
its most recent fiscal year and Forms 5 furnished to the Company with respect to
its most recent fiscal year, as well as written representations of each
reporting person, all reporting persons satisfied the reporting requirements
except that one Form 4, reporting one transaction, was inadvertently filed late
by Alan R. Stewart.
CERTAIN TRANSACTIONS
From 1987 until February 25, 1997 (the "Termination Date"), Deltek elected
to be treated for federal and certain state income tax purposes as an S
Corporation under Subchapter S of the Internal Revenue Code of 1986. As a
result, the Company's earnings for prior tax years and through February 24, 1996
were taxed, with certain exceptions, for federal and certain state income tax
purposes directly to Deltek's shareholders. Prior to its initial public
offering, Deltek and its pre-IPO shareholders entered into a Tax Indemnification
Agreement, which generally provides that those shareholders will be responsible
for any federal and certain state income taxes imposed upon the Company for all
taxable periods ending prior to the Termination Date and that the Company will
be responsible for all federal and state income taxes arising on or after the
Termination Date. All executive officers and directors (other than Messrs.
Gregg, Oyer and Stein who were not shareholders prior to the initial public
offering) executed the Tax Indemnification Agreement.
Robert E. Gregg, a director of the Company, is a shareholder in Hazel &
Thomas, P.C., a law firm that the Company has retained. The legal fees paid to
Hazel & Thomas by the Company did not exceed 5% of Hazel & Thomas' gross
revenues during the firm's last full fiscal year.
The Company has entered into indemnification agreements with its executive
officers and directors setting forth certain procedures and other conditions
applicable for claims for indemnification pursuant to the Company's articles of
incorporation and agreeing, subject to certain limitations, to obtain and
maintain directors' and officers' liability insurance coverage for its directors
and officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During its fiscal year ended December 31, 1998, the Company's decisions on
executive officer compensation were made in an effort to attract and retain
highly qualified personnel and to recognize individual performance through the
use of incentives, including equity-based incentives, that reward the creation
of shareholder value and the achievement of key Company objectives.
EXECUTIVE COMPENSATION POLICY
The executive compensation policy of the Compensation Committee is to offer
compensation to its executive officers in such forms and at such levels that
will attract, retain, and motivate the management talent that is necessary for
the Company's continued success, and to create incentives for executive officers
to continuously improve the Company's financial performance, customer
satisfaction, and shareholder value.
To implement this policy, the Compensation Committee believes that the
compensation of the Company's executive officers should be competitive in
relation to similar software companies and closely related to both personal and
Company performance. The Compensation Committee also believes that compensation
should include components such as stock options designed to align the interests
of executive officers and shareholders.
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As part of its executive compensation policy, the Compensation Committee
will review executive compensation, including that of its Chief Executive
Officer, in light of its relationship to corporate performance. The Compensation
Committee will consider measures of corporate performance including software
sales, earnings per share, and the trading price of the Company's common stock
and, in light of the Harper and Shuman acquisition, the extent to which the
Company is successful in integrating Harper and Shuman.
ROLE OF THE COMPENSATION COMMITTEE
Consistent with past practices, the Company's Chairman, Donald deLaski, and
President, Kenneth E. deLaski, reviewed the performance of the Company's senior
management and recommended to the Compensation Committee specific adjustment to
their compensation. The Compensation Committee considered the salary changes as
recommended by the Chairman and President, taking into account the Company's
interest in attracting, retaining, and motivating the management and
technological talent that is crucial to the Company's success, as well as the
performance of the Company and the personal performance of each of the foregoing
officers and key employees. The Compensation Committee also considered the fact
that the Company had historically used stock options to supplement salaries and
would continue to use options to compensate and motivate managers. The Committee
found that the proposed salary adjustments were reasonable and appropriate,
including an increase in salary from $172,000 to $185,000 for Kenneth deLaski,
President and Chief Executive Officer, and a decrease in salary from $100,000 to
$60,000 for Donald deLaski, Chairman of the Board, both of whom owned
substantial amounts of stock and the Committee having been advised by the
President that his personal salary was not critical as motivation because of his
stock ownership. The Compensation Committee therefore recommended that the Board
of Directors ratify, confirm and approve the foregoing salary adjustments.
The Compensation Committee:
Darrell J. Oyer
Charles W. Stein
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PROPOSAL 2
TO RATIFY THE AMENDMENT TO THE
1996 STOCK OPTION PLAN TO INCREASE THE
MAXIMUM NUMBER OF SHARES ISSUABLE TO 2,100,000
The Board of Directors has approved an amendment (the "Plan Amendment") to
the Company's 1996 Stock Option Plan (the "Plan") to increase the maximum number
of shares of common stock that may be awarded under the Plan from 900,000 shares
to 2,100,000 shares. In order for the Plan Amendment to take effect,
stockholders must approve it at the 1999 Annual Meeting.
The Board believes that the Plan is an important way to attract, retain and
motivate key employees, and that it is appropriate to increase the number of
shares available for awards under the Plan. Approval of the proposed Plan
Amendment will ensure that enough shares are available under the Plan to
encourage stock ownership by executive officers and key employees and to help
the Company attract and retain individuals who will contribute to the Company's
success.
THE PLAN
Deltek's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by the
Company's Board in November 1996 and approved by the Company's shareholders in
December 1996. A total of 900,000 shares of common stock have been reserved for
issuance under the 1996 Option Plan. The 1996 Option Plan is administered by the
Board or a committee thereof. The 1996 Option Plan provides for grants of
"incentive stock options," within the meaning of Section 422 of the Code, to
employees (including officers and employee directors), and for grants of
nonstatutory options to employees, non-employee directors and consultants. The
1996 Option Plan will terminate in December 2006, unless terminated sooner by
the Board.
The exercise price of stock options granted under the 1996 Option Plan must
be not less than the fair market value of the common stock on the date of grant.
With respect to any optionee who owns stock representing more than 10% of the
voting power of all classes of the Company's outstanding capital stock, the
exercise price of any incentive stock option must be equal to at least 110% of
the fair market value of the common stock on the date of grant, and the term of
the option must not exceed five years. The terms of all other options may not
exceed ten years. The aggregate fair market value of common stock (determined as
of the date of the option grant) for which an incentive stock option may for the
first time become exercisable in any calendar year may not exceed $100,000. The
Board or any committee administering the 1996 Option Plan has discretion to
determine exercise schedules and vesting requirements, if any, of all option
grants under the 1996 Option Plan.
Currently, all of the Company's approximately 555 employees are eligible to
participate in the Plan, including two executive officers. As of December 31,
1998, options to purchase an aggregate of 867,600 shares were outstanding under
the 1996 Option Plan, at exercise prices ranging from $8.00 per share to $18.687
per share and 61,800 options were exercisable as of December 31, 1998. In 1998,
options totaling 14,000 shares were granted to current executive officers as a
group under the Plan, and options totaling 609,108 shares were granted under the
Plan to all employees (excluding executive officers) as a group. Options
generally become exercisable in five annual installments beginning one year
after the date of the option grant.
Information about options granted in 1998 under the Plan to the Chief
Executive Officer and the three other most highly compensation executive
officers can be found in the table under the heading "Option Grants in Last
Fiscal Year" on page 6 of this Proxy Statement.
On December 11, 1998, the Company repriced 383,050 options, which had
exercise prices between $18.75 and $24.50 per share to the then current market
price of $18.687 per share. This was the Company's first repricing of options
and did not benefit executive officers, affiliates or major shareholders. No
stock appreciation rights or other types of awards are outstanding under the
Plan.
No information can be provided with respect to options or awards that may
be granted in the future under the Plan, as amended by the Plan Amendment. Such
awards are within the discretion of the Board.
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15
On April 12, 1999, the closing price of the common stock traded on the
National Market System was $9.50 per share.
THE PLAN AMENDMENT
As of the Record Date, awards covering 900,000 shares were outstanding and
no shares were available for grant under the Plan. If stockholders approve the
Plan Amendment at the 1999 Annual Meeting, the estimated maximum number of
shares that may be issued under the Plan would be increased to 2,100,000 shares
including the additional 1,200,000 shares authorized by the Plan Amendment.
Either authorized but unissued shares or reacquired shares of common stock
may be issued in connection with awards under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the federal income tax consequences to
participants who receive options under the Plan. This summary is based upon the
provisions, regulations, and interpretations of the Code in effect as of January
1, 1999.
Non-Qualified Stock Options. A participant who is granted a non-qualified
stock option will not have income and the Company will not be allowed a
deduction at the time the option is granted. When a participant exercises a
non-qualified stock option, the difference between the option price and any
higher market value of the stock on the date of exercise (the "stock option
gains") will be ordinary income to the participant and will be allowed as a
deduction for federal income tax purposes to the Company or a subsidiary. The
capital gain holding period of the shares acquired will begin one day after the
date the stock option is exercised. When a participant disposes of shares
acquired by the exercise of the option, any amount received that is more than
the fair market value of the shares on the exercise date will be treated as
short-term or long-term capital gain, depending upon the holding period of the
shares. If the amount received is less than the market value of the shares on
the exercise date, the loss will be treated as short-term or long-term capital
loss, depending upon the holding period of the shares.
Incentive Stock Options. A participant who is granted an incentive stock
option also will not have income and the Company will not be allowed a deduction
at the time the option is granted. When a participant exercises an incentive
stock option while employed by the Company or a subsidiary or within the
three-month period (one-year period, in the case of disability) after his or her
employment ends, the participant will not recognize any ordinary income at that
time. However, any excess of the fair market value of the shares acquired by
such exercise over the option price will be an item of tax preference for
purposes of any federal alternative minimum tax applicable to individuals. If
the shares acquired upon exercise are disposed of more than two years after the
date of grant and one year after the date of transfer of the shares of the
participant ("statutory holding periods"), any sale proceeds that are more than
the total option price of these shares will be long-term capital gain. Except in
the event of death, if the shares are disposed of prior to the expiration of the
statutory holding periods (a "Disqualifying Disposition"), generally, the amount
by which the fair market value of the shares at the time of exercise is more
than the total option price will be ordinary income at the time of such
Disqualifying Disposition. If a Disqualifying Disposition occurs, the Company
will be entitled to a federal tax deduction for a similar amount.
Payment of Option Price in Shares. If a participant pays the exercise
price of a non-qualified or incentive stock option with previously owned shares
of Company common stock and the transaction is not a Disqualifying Disposition,
the shares received equal to the number of shares surrendered are treated as
having been received in a tax-free exchange. The shares received in excess of
the number surrendered will not be taxable if an incentive stock option is being
exercised. The participant does not recognize income and the Company receives no
deduction as a result of the tax-free portion of the exchange transaction. If
the use of previously-acquired incentive stock option shares to pay the exercise
price of another incentive stock option constitutes a "Disqualifying
Disposition," the tax results are as described under the heading "Incentive
Stock Options."
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Stock Appreciation Rights. A participant who receives stock appreciation
rights will not recognize income and the Company will not be allowed a deduction
at the time such stock appreciation rights are granted. When a participant
exercises stock appreciation rights, the amount of cash and the fair market
value of the shares of common stock of the Company received will be ordinary
income to the participant and will be allowed as a deduction for federal income
tax purposes to the Company or its subsidiary.
RECOMMENDATION;VOTE REQUIRED
Approval of the Plan Amendment requires that the votes cast in favor of the
Plan Amendment exceed the votes cast in opposition.
The Board of Directors recommends that stockholders vote FOR the proposal
to ratify the amendment of the 1996 Stock Option Plan.
PROPOSAL 3
TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT AUDITORS
FOR ITS CURRENT FISCAL YEAR
Subject to ratification by the shareholders, the Board has reappointed
Arthur Andersen LLP as independent accountants to audit the consolidated
financial statements of the Company for its fiscal year ending 1999. The Board
recommends a vote in favor of ratification of the reappointment of Arthur
Andersen.
Arthur Andersen LLP has served as the Company's independent accountants to
audit the financial statements of the Company for the past 10 years.
Representatives from Arthur Andersen LLP are expected to be present at the
Annual Meeting, and they will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
The ratification of independent accountants is not a matter required to be
submitted to a vote of the shareholders, but is being submitted because of the
Company's general policy of submitting the appointment of independent
accountants to shareholder ratification. The Company believes this policy may
provide the auditors with a greater degree of independence from management. In
the event of a negative vote by the shareholders, the Board would reconsider the
reappointment of Arthur Andersen LLP.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table contains information regarding the beneficial ownership
of the Company's common stock as of the Record Date by (i) each person known by
the Company to own beneficially 5% or more of the
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17
common stock, (ii) each of the Company's Named Executive Officers, (iii)
directors and director nominees, and (iv) executive officers and directors as a
group:
NAME OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- -------------- ---------------- ----------------------- ----------------
Common Stock Kenneth deLaski 4,599,200(2) 25.70
Common Stock Donald deLaski 3,781,900(3) 21.13
Common Stock Eric F. Brown 379,200(4) 2.12
Common Stock Alan R. Stewart 10,800(5) *
Common Stock Robert E. Gregg 4,000(6) *
Common Stock Darrell J. Oyer 6,819(6)(7) *
Common Stock Charles W. Stein 4,000(6) *
Common Stock William Blair & Company L.L.C. 2,952,200(8) 16.51
Common Stock All directors, director nominees 8,785,919 49.09
and executive officers as a group
(7 persons)
- ---------------
* Represents less than one percent.
(1) Unless otherwise indicated and subject to community property laws where
applicable, the persons named in this table have sole voting and sole
investment power with respect to the shares shown as beneficially owned by
them. Beneficial ownership is determined in accordance with Rule 13d-3 under
the Exchange Act.
(2) Includes 36,700 shares held by various trusts for which Kenneth E. deLaski
and his spouse serve as the trustees and 926,250 shares held of record or
beneficially by Kenneth E. deLaski's spouse, Tena R. deLaski. Excludes
188,000 shares held by a foundation established by Kenneth E. deLaski for
which Kenneth E. deLaski and his spouse serve as the directors and officers.
Mr. deLaski disclaims beneficial ownership of such shares.
(3) Excludes 570,000 shares held by a foundation established by Donald deLaski
for which Donald deLaski and his spouse serve as the directors and officers.
Mr. deLaski disclaims beneficial ownership of such shares.
(4) Includes 18,000 shares issuable upon exercise of vested options and excludes
22,000 shares issuable upon exercise of unvested options.
(5) Includes 6,800 shares issuable upon exercise of vested options and excludes
17,600 shares issuable upon exercise of unvested options.
(6) Includes 4,000 shares issuable upon exercise of vested options and excludes
4,000 shares issuable upon exercise of unvested options.
(7) Includes 319 shares owned by Mr. Oyer's spouse. Mr. Oyer's shares are held
in a pension trust for which he serves as trustee.
(8) As reported on a Schedule 13G filed by William Blair & Company, L.L.C. on
March 17, 1999. According to such Schedule 13G, William Blair & Company,
L.L.C. has sole voting power with respect to 525,500 of these shares, and
sole dispositve power with respect to all 2,952,200 of these shares. The
address of this stockholder is 222 West Adams Street, Chicago, IL 60606.
THE COMPANY'S BYLAWS ARE INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF
THE COMPANY'S BYLAWS WITHIN ONE BUSINESS DAY OF THE RECEIPT OF SUCH REQUEST, BY
FIRST CLASS MAIL OR EQUALLY PROMPT MEANS. ANY SUCH REQUEST SHOULD BE DIRECTED TO
THE COMPANY'S INVESTOR RELATIONS DEPARTMENT AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE, 8280 GREENSBORO DRIVE, MCLEAN, VA 22102, (703) 734-8606.
PUBLICATIONS OF INTEREST TO DELTEK SHAREHOLDERS ARE AVAILABLE, FREE OF CHARGE.
THESE INCLUDE ANNUAL AND QUARTERLY REPORTS TO SHAREHOLDERS, AS WELL AS OTHER
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS MATERIAL MAY BE
OBTAINED BY WRITTEN REQUEST TO THE COMPANY'S INVESTOR RELATIONS DEPARTMENT SENT
TO THE COMPANY'S PRINCIPAL EXECUTIVE OFFICE.
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DELTEK SYSTEMS, INC.
1999 ANNUAL SHAREHOLDERS MEETING
RESERVATION REQUEST FORM
Detach Here
-------------------------------------------------------------------------------
Complete the following information and return it to Corporate Secretary, Deltek
Systems, Inc., 8280 Greensboro Drive, McLean, VA 22102, for admission to the
1999 Annual Meeting of Shareholders of Deltek Systems, Inc.
Shareholder's Name and Address:
-----------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Number of Shares of Deltek
Common Stock held:
------------------------------------------------------
If the shares listed above are not registered in your name, identify the
name of the shareholder of record below and bring with you to the Annual Meeting
evidence that you beneficially own the shares.
Shareholder of Record:
--------------------------------------------------
THIS IS NOT A PROXY CARD
DLTK-PS-99
19
DELTEK SYSTEMS, INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS OF
DELTEK SYSTEMS, INC.
ON MAY 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth E. deLaski, Donald deLaski and Robert E.
Gregg, and each of them, proxies, with power of substitution, to vote all shares
of the undersigned at the Annual Meeting of Shareholders of Deltek Systems,
Inc., a Virginia corporation (the "Company"), to be held on May 20, 1999 at
10:00 a.m. at the McLean Hilton, 7920 Jones Branch Drive, McLean, Virginia, or
at any adjournment thereof, upon the matters set forth in the Proxy Statement
for such meeting, and in their discretion, upon such other business as may
properly come before the Annual Meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
THE SHARES REPRESENTED BY ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH
THE CHOICES SPECIFIED ON SUCH PROXIES. THE SHARES REPRESENTED BY A PROXY WILL BE
VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID
PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE BOARD OF DIRECTORS WITH
RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING.
1. TO ELECT TWO CLASS II DIRECTORS TO SERVE FOR THREE YEARS OR UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND SHALL QUALIFY.
Nominees: Donald deLaski and Darrell J. Oyer
[ ] FOR [ ] WITHHELD
[ ] ________________
For all nominees except as noted above
2. TO RATIFY THE AMENDMENT OF THE 1996 STOCK OPTION PLAN TO INCREASE THE
MAXIMUM NUMBER OF SHARES ISSUABLE FROM 900,000 SHARES TO 2,100,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
20
3. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR ITS CURRENT FISCAL YEAR.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Mark here for address change and note at
left [ ]
NOTE: When shares are held by joint
tenants, both should sign. Persons
signing as Executor, Administrator,
Trustee, etc. should so indicate. Please
sign exactly as the name appears on the
proxy.
PLEASE MARK, SIGN AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: ____________ Date: ________ Signature: ____________ Date: ________