<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SAPIENT CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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
SAPIENT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Sapient Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, June 15, 1999, at 1:00 p.m., at the offices of the Company, One
Memorial Drive, Cambridge, Massachusetts (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect two Class III Directors for the ensuing three years;
2. To approve an amendment to the Company's 1998 Stock Incentive Plan
increasing the number of shares of Common Stock available for issuance
thereunder from 2,000,000 to 4,500,000; and
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Tuesday, April
20, 1999 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By Order of the Board of Directors,
JERRY A. GREENBERG
Secretary
May 10, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
SAPIENT CORPORATION
ONE MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02142
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sapient Corporation (the "Company") for use
at the Annual Meeting of Stockholders to be held on Tuesday, June 15, 1999, at
1:00 p.m., at the offices of the Company, One Memorial Drive, Cambridge,
Massachusetts and at any adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company. Attendance at the Meeting
will not itself be deemed to revoke a proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
proxy and vote in person.
At the close of business on April 20, 1999, the record date for the
determination of stockholders entitled to vote at the Meeting, there were
outstanding and entitled to vote an aggregate of 27,785,666 shares of Common
Stock of the Company, $.01 par value per share (the "Common Stock"). Each share
entitles the record holder to one vote on each of the matters to be voted upon
at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998 ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT MAY 10, 1999. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS ALL SUCH
REQUESTS TO THE COMPANY, ATTENTION: INVESTOR RELATIONS, ONE MEMORIAL DRIVE,
CAMBRIDGE, MASSACHUSETTS 02142. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST
AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
voting on the matter is required to approve the proposed amendment to the
Company's 1998 Stock Incentive Plan.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be voted in favor of such matter, and will also not be counted
as shares voting on such matter. Accordingly, abstentions and "broker non-votes"
will have no effect on the voting on a matter that requires the affirmative vote
of a plurality or a majority of the shares voting on a matter.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1999
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and nominee for director of the
Company, (iii) Messrs. Greenberg and Moore, the Co-Chief Executive Officers of
the Company, and the five other executive officers listed in the Summary
Compensation Table set forth under the caption "Compensation of Executive
Officers" below (the "Named Executive Officers"), and (iv) the directors and
executive officers of the Company as of March 31, 1999 as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
--------------------------------
PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES CLASS
---------------- ---------------- ----------
<S> <C> <C>
5% STOCKHOLDERS
Jerry A. Greenberg.......................................... 5,979,180(2) 21.5%
Co-Chief Executive Officer
c/o Sapient Corporation
One Memorial Drive
Cambridge, Massachusetts 02142
J. Stuart Moore............................................. 5,742,800(3) 20.7%
Co-Chief Executive Officer
c/o Sapient Corporation
One Memorial Drive
Cambridge, Massachusetts 02142
Janus Capital Corporation................................... 1,558,540(4) 5.6%
100 Fillmore Street
Denver, CO 80206
Capital Research and Management Company..................... 1,552,400(5) 5.6%
333 South Hope Street
Los Angeles, CA 90071
OTHER DIRECTORS
R. Stephen Cheheyl.......................................... 10,000 *
Darius W. Gaskins, Jr. ..................................... 11,700 *
Bruce D. Parker............................................. 11,600 *
Carl S. Sloane.............................................. 3,100 *
OTHER NAMED EXECUTIVE OFFICERS
Sheeroy D. Desai............................................ 389,504 1.4%
Susan D. Johnson............................................ 23,600 *
Desmond P. Varady........................................... 72,240 *
Preston B. Bradford......................................... 77,601 *
Christopher R. Davey........................................ 80,500 *
All executive officers and directors, as a group (12
persons).................................................. 12,401,825 44.7%
</TABLE>
- ---------------
* Less than 1%
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise noted. Includes the following number
of shares issuable within the 60-day period following March 31, 1999
pursuant to the exercise of options: Mr. Cheheyl (9,000); Mr. Gaskins
(9,000); Mr. Parker (9,000); Mr. Sloane (500); Mr. Desai (83,000); Ms.
Johnson (12,500); Mr. Varady
2
<PAGE> 5
(38,374); Mr. Bradford (28,890); Mr. Davey (10,000); and all executive
officers and directors as a group (200,264). As of March 31, 1999, there
were 27,752,999 shares of Common Stock outstanding.
(2) Includes 261,701 shares held by the Jerry A. Greenberg Three-Year Qualified
Annuity Trust-1996, 1,683,020 shares held by the Jerry A. Greenberg
Eight-Year Qualified Annuity Trust-1996 and 445,850 shares held by the Jerry
A. Greenberg Three-Year Qualified Annuity Trust-1997, of which trusts Mr.
Greenberg is a co-trustee and over which shares Mr. Greenberg shares voting
and/or investment control.
(3) Includes (i) 1,867,745 shares held by the J. Stuart Moore Eight-Year
Qualified Annuity Trust-1996, of which Mr. Moore is the sole trustee and
over which Mr. Moore has sole voting and investment control, (ii) 521,027
shares held by the J. Stuart Moore Two-Year Qualified Annuity Trust-1998 and
438,213 shares held by the J. Stuart Moore Remainder Trust, of which trusts
Mr. Moore is a co-trustee and over which shares Mr. Moore shares investment
control, (iii) 13,860 shares held by the J. Stuart Moore Irrevocable Trust,
of which Mr. Moore's wife is a co-trustee and over which shares Mr. Moore's
wife shares voting and/or investment control and (iv) 390,000 shares held by
the J. Stuart Moore Gift Trust of 1995, over which shares Mr. Moore does not
have voting or investment control but in which shares Mr. Moore's children
have a beneficial interest. Mr. Moore disclaims beneficial ownership of the
shares held by the trusts except to the extent of his proportionate
pecuniary interest therein.
(4) The information reported is based on Schedule 13Gs, dated February 12, 1999,
filed with the Securities and Exchange Commission by each of Janus Capital
Corporation ("Janus") and Thomas H. Bailey. Janus is a registered investment
advisor, in which capacity it has shared voting power over all of the shares
and shared dispositive power over all of the shares. Mr. Bailey is President
and Chairman of the Board of Directors of Janus. In addition, Mr. Bailey
owns approximately 12.2% of the outstanding stock of Janus.
(5) The information reported is based on a Schedule 13G, dated February 11,
1999, filed with the Securities and Exchange Commission by Capital Research
and Management Company ("Capital Research"). Capital Research is a
registered investment advisor, in which capacity it has sole dispositive
power over all of the shares.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently two Class I directors, whose terms expire in 2000, two Class II
directors, whose terms expire in 2001, and two Class III directors, whose terms
expire at this Meeting (in all cases subject to the election and qualification
of their successors or their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote each proxy for the
election of R. Stephen Cheheyl and Carl S. Sloane as Class III directors, unless
authority to vote for the election of either or both of the nominees is withheld
by marking the proxy to that effect. Messrs. Cheheyl and Sloane are both
currently directors of the Company.
Each Class III director will be elected to hold office until the Company's
annual meeting of stockholders to be held in 2002 and until his successor is
elected and qualified. Each of the nominees has indicated his willingness to
serve, if elected; however, if either nominee should be unable or unwilling to
stand for election, the person acting under the proxy may vote the proxy for a
substitute nominee designated by the Board of Directors. The Board of Directors
has no reason to believe that either of the nominees will be unable to serve if
elected.
3
<PAGE> 6
All of the Company's directors are listed below with their principal
occupation and business experience for the past five years, the names of other
publicly held companies of which they serve as a director, age and length of
service as a director of the Company.
<TABLE>
<CAPTION>
Principal Occupation, Other Business
Director Experience during Past Five Years and
Name Age Since Other Directorships
---- --- -------- -------------------------------------
<S> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 2002 (CLASS III DIRECTORS)
R. Stephen Cheheyl....... 53 1996 From October 1994 until he retired on December 31,
1995, Mr. Cheheyl served as Executive Vice President,
Business Operations, of Bay Networks, Inc., a
manufacturer of computer networking products, which
was formed through the merger of Wellfleet
Communications, Inc. and Synoptics Communications,
Inc. From December 1990 to October 1994, Mr. Cheheyl
served as Senior Vice President, Finance and
Administration of Wellfleet. Mr. Cheheyl is a
director of Auspex Systems, Inc. and MCMS, Inc.
Carl S. Sloane........... 62 1995 Mr. Sloane is the Ernest L. Arbuckle Professor of
Business Administration at Harvard University's
Graduate School of Business Administration, where he
has been a member of the faculty since September
1991. Mr. Sloane is a director of Ionics, Inc., The
Pittston Company and Rayonier, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS I DIRECTORS)
Jerry A. Greenberg....... 33 1991 Mr. Greenberg co-founded the Company in 1991 and has
served as Co-Chairman of the Board of Directors and
Co-Chief Executive Officer of the Company since its
inception.
Bruce D. Parker.......... 51 1995 Since December 1997, Mr. Parker has been Senior Vice
President and Chief Information Officer at United
Airlines, Inc. From September 1994 to December 1997,
Mr. Parker was Senior Vice President-Management
Information Systems and Chief Information Officer at
Ryder System, Inc., a transportation company. From
April 1993 to September 1994, Mr. Parker served as a
Vice President of American Airlines, Inc. and as
President of its Sabre Development Services Division.
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS II DIRECTORS)
Darius W. Gaskins, Jr.... 59 1995 Mr. Gaskins is a founding partner of Norbridge, Inc.
formerly Carlisle, Fagan, Gaskins & Wise, Inc., a
management consulting firm, which was formed in 1993.
Since June 1991, Mr. Gaskins has also been a partner
of High Street Associates, Inc., which owns and
manages a specialty chemical company. Mr. Gaskins is
a director of Anacomp Inc., Rohn Industries, Inc. and
Northwestern Steel and Wire Company.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
Principal Occupation, Other Business
Director Experience during Past Five Years and
Name Age Since Other Directorships
---- --- -------- -------------------------------------
<S> <C> <C> <C>
J. Stuart Moore.......... 37 1991 Mr. Moore co-founded the Company in 1991 and has
served as Co-Chairman of the Board of Directors and
Co-Chief Executive Officer of the Company since its
inception.
</TABLE>
For information relating to shares of Common Stock owned by each of the
directors, see "Security Ownership of Certain Beneficial Owners and Management."
BOARD AND COMMITTEE MEETINGS
The Board of Directors met ten times (including by telephone conference)
during 1998. All directors attended at least 75% of the meetings of the Board of
Directors and of the committees on which they served.
The Company has a standing Audit Committee, which is responsible for
reviewing the results and scope of the audit and other services provided by the
Company's independent public accountants. The Audit Committee held four meetings
during 1998. The Audit Committee is currently comprised of Messrs. Cheheyl and
Parker, each a non-employee director.
The Company has a standing Compensation Committee, which is responsible for
reviewing the Company's overall compensation policies and approving the
compensation of the Company's executive officers. The Compensation Committee
held two meetings during 1998. The current members of the Compensation Committee
are Messrs. Parker and Sloane, each a non-employee director.
DIRECTOR COMPENSATION
Each non-employee director is paid $3,000 for attendance in person at each
Board meeting and $750 for attendance in person at any committee meeting that is
not held on the same day as a Board meeting. If a director participates by
telephone, rather than in person, one-half of such amount is paid. In addition,
each non-employee director is reimbursed for expenses incurred in connection
with attending meetings. Directors receive no other cash compensation for
serving as directors.
On May 8, 1998, each of the Company's four non-employee directors was
granted a stock option under the Company's 1996 Equity Stock Incentive Plan to
acquire 2,000 shares of Common Stock at an exercise price of $40.00 per share,
which was the closing price for the Company's Common Stock on May 8, 1998. Such
options vest in four equal annual installments starting on the first anniversary
of the date of grant.
In February 1996, the Board adopted and the stockholders approved the 1996
Director Stock Option Plan (the "Director Plan"), pursuant to which each new
non-employee director elected to the Board of Directors in the future will be
granted, upon his or her initial election as a director, an option to purchase
10,000 shares of Common Stock. All options granted under the Director Plan will
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, will vest over a four year period, provided the optionholder
continues to serve as a director of the Company, and will expire ten years from
the date of grant (subject to earlier termination in the event the optionee
ceases to serve as a director of the Company). No options have ever been granted
under the Director Plan, which provides for the issuance of a maximum of 60,000
shares.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation paid in each of the last three fiscal years to the Named Executive
Officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
NUMBER OF
SHARES
ANNUAL COMPENSATION(1) UNDERLYING ALL OTHER
NAME AND ----------------------- STOCK COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)(2) (3)
------------------ ---- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Jerry A. Greenberg................. 1998 $ 50,000 $ 69,693 0 $1,250
Co-Chairman of the Board and 1997 50,000 107,396 0 470
Co-Chief Executive Officer 1996 50,000 106,567 0 0
J. Stuart Moore.................... 1998 $ 50,000 $ 69,693 0 $1,250
Co-Chairman of the Board and 1997 50,000 107,396 0 1,250
Co-Chief Executive Officer 1996 50,000 106,567 0 1,250
Sheeroy D. Desai................... 1998 $100,000 $ 41,375 50,000 $1,250
Executive Vice President 1997 50,000 109,650 0 1,250
1996 50,000 94,900 0 1,172
Susan D. Johnson................... 1998 $100,000 $ 70,800 10,000 $1,250
Chief Financial Officer 1997 60,000 67,750 40,000 1,250
1996 60,000 43,875 0 1,250
Desmond P. Varady(4)............... 1998 $100,000 $111,719 10,500 $1,250
Senior Vice President
Preston B. Bradford(4)............. 1998 $100,000 $ 84,125 4,000 $1,250
Senior Vice President
Christopher R. Davey(4)............ 1998 $100,000 $ 44,404 6,667 $1,250
Senior Vice President
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or ten percent of the total
annual salary and bonus for the Named Executive Officer for such year.
(2) The Company has never granted any stock appreciation rights.
(3) Amounts shown in this column represent the Company's matching contributions
under the Company's 401(k) Plan.
(4) The indicated Named Executive Officers became executive officers of the
Company during 1998.
Each Named Executive Officer has executed an agreement which prohibits him
or her from competing with the Company for a period of 12 months following
termination of his or her employment with the Company.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1998 by the Company to the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
OPTION EMPLOYEES OR BASE OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION ------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5% 10%
---- ---------- -------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry A.
Greenberg(4)........ -- -- -- -- -- --
J. Stuart Moore(4).... -- -- -- -- -- --
Sheeroy D. Desai...... 50,000 1.93% $ 33.94 10/13/08 $1,067,171 $2,704,422
Susan D. Johnson...... 10,000 .39% $ 44.00 12/15/08 $ 276,714 $ 701,247
Desmond P. Varady..... 10,500 .40% $ 44.00 12/15/08 $ 290,549 $ 736,309
Preston B. Bradford... 4,000 .15% $ 44.00 12/15/08 $ 110,685 $ 280,499
Christopher R.
Davey............... 6,667 .26% $ 44.00 12/15/08 $ 184,485 $ 467,521
</TABLE>
- ---------------
(1) Represents options granted pursuant to the Company's 1998 Stock Incentive
Plan, other than Mr. Desai's options, which were granted under the 1996
Equity Stock Incentive Plan. Options granted become exercisable in four
equal installments commencing on the first day of the month following the
first anniversary of the date of grant, other than Mr. Desai's option which
vests in six equal annual installments and Mr. Varady's option which vests
in five equal annual installments.
(2) The exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant.
(3) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 10-year term. These values are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate or projection of future
stock prices. Actual gains, if any, on stock option exercises will depend on
the future performance of the Company's Common Stock, the optionholder's
continued employment through the option period and the date on which the
options are exercised.
(4) Messrs. Greenberg and Moore do not participate in the Company's stock plans.
7
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table summarizes, for each of the Named Executive Officers,
the number of shares acquired on exercise of options during the fiscal year
ended December 31, 1998, the aggregate dollar value realized upon such exercise
and the number and value of unexercised options held by such officers on
December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) (1) UNEXERCISABLE(#) UNEXERCISABLE(2)
---- ----------- ---------- ------------------ --------------------
<S> <C> <C> <C> <C>
Jerry A. Greenberg(3).......... -- -- -- --
J. Stuart Moore(3)............. -- -- -- --
Sheeroy D. Desai............... 439,000 $2,324,071 83,000/128,000 $4,598,310/5,423,910
Susan D. Johnson............... 41,000 $1,598,026 12,300/ 66,500 $ 617,875/2,311,875
Desmond P. Varady.............. 67,826 $1,562,589 34,200/ 75,100 $1,733,090/2,726,550
Preston B. Bradford............ 65,900 $1,663,223 17,250/106,350 $ 829,198/4,310,683
Christopher R. Davey........... 215,000 $3,898,440 15,000/ 61,667 $ 510,000/1,795,004
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Represents the difference between the last reported sale price per share
($56.00) of the Common Stock on December 31, 1998, as reported on the Nasdaq
National Market, and the exercise price.
(3) Messrs. Greenberg and Moore do not participate in the Company's stock plans.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing the Company's overall compensation policies and, with the input of the
Company's Co-Chief Executive Officers, setting the compensation of the Company's
executive officers. Throughout 1998, the Compensation Committee was comprised
solely of two non-employee directors, Messrs. Parker and Sloane.
Compensation Philosophies and Goals
The Company's executive compensation program for 1998, which consisted of a
combination of base salary, cash bonuses and stock options, is designed in large
part to align executive incentives with the Company's strategic goals.
Accordingly, a significant portion of the total cash compensation of the
Company's senior executives was directly linked to the Company's and the
executive's satisfaction of specified goals. By tying compensation to the
achievement of the Company's core objectives and fundamental values, the Company
believes that a performance-oriented environment is created for its executives
and other employees.
The Company's executive compensation program for 1998 was also intended to
align executive and shareholder interests by providing executives with an equity
interest in the Company through the granting of stock options. Consistent with
this purpose, because Messrs. Greenberg and Moore, the Company's founders, each
already holds a significant equity stake in the Company, they do not participate
in the Company's stock option plans. The size of option grants was recommended
by the Co-Chief Executive Officers to the Compensation Committee for approval.
The Compensation Committee based its review of such recommended grants on
various factors, including the executive's responsibilities, the executive's
past, present and expected contributions to the Company and the executive's
current stock and option holdings.
8
<PAGE> 11
In addition to structuring its executive compensation program in a manner
which will reward executives for the achievement of the Company's business
objectives as well as for individual performance, the Company also seeks to
attract and retain key executives through its compensation program.
Compensation in Fiscal 1998
Cash Compensation.
In keeping with the Company's desire to create a performance-oriented
environment through its compensation programs, the bonus component is a
significant percentage of the overall cash compensation payable to the Company's
executive officers. Base salaries of the executive officers for 1998 were
determined by the Compensation Committee.
The Company adopted an executive bonus plan for 1998 which covered the
executive officers and other senior management of the Company. Under the bonus
plan, the Co-Chief Executive Officers recommended to the Compensation Committee
for approval the target amount of bonus compensation payable to each participant
for the year. Each participant's actual bonus compensation was determined based
on the Company's and the participant's, as the case may be, achievement of
specified goals in five key measurement areas: client satisfaction, market
awareness, financial performance, organizational goals and personal goals. The
weighting of each of the five measurements varied for each participant,
depending on his or her role in the Company. Also depending on a participant's
role in the Company, the achievement of certain goals was measured on a
Company-wide, industry-specific or individual office basis. Each participant's
actual bonus compensation was then determined based on the following factors:
- Client Satisfaction. Depending on a participant's role in the Company,
zero to forty percent of each participant's bonus compensation was based
on a weighted average of the Company's measurements of client
satisfaction, which are collected by the Company in writing throughout
the year in connection with each client project. Also depending on a
participant's role in the Company, the client satisfaction ratings used
to calculate a participant's bonus compensation were based on ratings
from clients on a regional, industry-specific or Company-wide basis.
- Market Awareness. Depending on a participant's role in the Company, ten
to sixty-five percent of a participant's bonus compensation was based on
market awareness ratings. The Company established marketing goals
relating to the results of surveys conducted by outside research firms
and the development and marketing of packaged service offerings. Each
participant was entitled to receive a specified percentage from zero to
120 percent of the bonus compensation allocable to this measurement based
on these ratings.
- Financial Performance. Depending on a participant's role in the Company,
ten to seventy percent of a participant's bonus compensation was based on
the Company's satisfaction of financial goals established by the Company.
The Company established financial targets relating to revenue, revenue
mix and operating margin, and each participant was entitled to receive a
specified percentage from zero to 120 percent of the bonus compensation
allocable to the specific financial goal, depending on the Company's
actual financial achievement of each goal.
- Organization. Depending on a participant's role in the Company, zero to
sixty percent of a participant's bonus compensation was based on the
achievement of specified organizational goals to be met on a Company and
individual participant basis. The Company established organizational
goals relating to hiring and retention of employees, office morale and
growth and leadership. With respect to each of these organizational
goals, each participant was entitled to receive a specified percentage
from zero to 120 percent of the bonus compensation allocable to the
specific goal, depending on the Company's or the participant's individual
performance.
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<PAGE> 12
- Personal. Depending on a participant's role in the Company, zero to
sixty percent of a participant's bonus compensation was based on the
achievement of personal goals set by the individual and his or her
immediate supervisor at the beginning of the year.
In February 1999, the Compensation Committee reviewed the Company's and
each executive officer's performance against the objective criteria described
above. Based on this review, and in accordance with the criteria described
above, bonus payments were approved to each executive officer ranging from
approximately 60% to 90% of his or her full target bonus. As indicated in the
Summary Compensation Table, Messrs. Greenberg and Moore each received a bonus of
$69,693 in 1998.
Incentive Compensation.
During 1998 the Named Executive Officers received options to purchase an
aggregate of 81,167 shares of Common Stock at a weighted average exercise price
of $38.72 per share, as indicated in the Option Grants in Last Fiscal Year
table.
Compliance with Internal Revenue Code Section 162(m).
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a federal income tax deduction to public companies for certain
compensation in excess of $1 million paid to a corporation's chief executive
officer or any of its four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Company has structured the 1998 Stock
Incentive Plan to qualify income received upon the exercise of stock options
granted under that plan as performance-based compensation. The Compensation
Committee intends to review the potential effects of Section 162(m) periodically
and in the future may decide to structure additional portions of the Company's
compensation program in a manner designed to permit unlimited deductibility for
federal income tax purposes.
Bruce D. Parker
Carl S. Sloane
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<PAGE> 13
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from April 3, 1996 (the date the Common Stock of the
Company was registered under the Securities Exchange Act of 1934, as amended)
through December 31, 1998 with the cumulative total return on (i) the Nasdaq
Composite Index and (ii) the GSTI Computer Services Index. The comparison
assumes the investment of $100 on April 3, 1996 in the Company's Common Stock
and in each of the indices and, in each case, assumes reinvestment of all
dividends.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
GSTI COMPUTER SERVICES
SAPIENT CORPORATION NASDAQ COMPOSITE INDEX INDEX
------------------- ---------------------- ----------------------
<S> <C> <C> <C>
4/3/96 100.00 100.00 100.00
12/31/96 100.30 115.70 102.90
12/31/97 145.80 140.70 117.80
12/31/98 266.70 196.50 146.80
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, Sapient performed services for HealthWatch Technologies, LLC
("HealthWatch"). HealthWatch was created by Sapient and others for the purpose
of performing Medicaid fraud, abuse and overpayment detection and collection
services to state governments, including one state government that had awarded a
service contract to Sapient to perform such services. HealthWatch was created
after Sapient's Board of Directors determined that it would not be in Sapient's
best interest to directly provide such detection and collection services.
Sapient owns approximately 38% of the outstanding limited liability company
interests of HealthWatch, and certain affiliates of the Company own
approximately 11% of the outstanding limited liability company interests of
HealthWatch. In addition, Messrs. Greenberg and Moore together have loaned
approximately $2.4 million to HealthWatch. The loan proceeds were used by
HealthWatch to help finance its start-up costs. The loans accrue interest at an
annual rate of 8%.
Sapient's fees for the services it performed during 1998, which consisted
of designing, developing and implementing HealthWatch's detection software
system, were approximately $1.8 million. In addition, HealthWatch has engaged
Sapient to provide maintenance and support services throughout 1999 for the
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<PAGE> 14
HealthWatch system for approximately $1.7 million. Sapient believes that the
prices and terms of the services for HealthWatch are no less favorable to
Sapient than those which Sapient would have received in an arms' length
transaction with an unaffiliated third party.
PROPOSAL 2 -- APPROVAL OF AN
AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN
The Board of Directors believes that the continued growth and success of
the Company depends, in large part, upon its ability to attract, retain and
motivate key employees. Accordingly, on April 23, 1999, the Board of Directors
adopted, subject to stockholder approval, an amendment to the Company's 1998
Stock Incentive Plan (the "1998 Plan") to increase the number of shares of
Common Stock available for issuance under the 1998 Plan from 2,000,000 shares to
4,500,000 shares to ensure that the Company may continue to attract and retain
key employees who are expected to contribute to the Company's growth and
success. Of the 2,000,000 shares authorized for issuance under the 1998 Plan,
options for the purchase of 638,201 shares of Common Stock, net of forfeitures,
have been granted during the one-year period since the adoption of the 1998
Plan, leaving a balance of 1,389,827 shares of Common Stock reserved for future
options grants. THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT OF THE 1998
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" THE APPROVAL OF THE AMENDMENT AND THE RESERVATION OF AN ADDITIONAL
2,500,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
SUMMARY OF THE 1998 PLAN
The following is a brief summary of the material terms of the 1998 Plan.
This summary is qualified in its entirety by reference to the 1998 Plan, a copy
of which may be obtained from the Secretary of the Company.
Description of Awards. The 1998 Plan provides for the grant of incentive
stock options intended to qualify under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), nonstatutory stock options, restricted stock
awards and other stock-based awards, including the grant of shares based upon
certain conditions, the grant of securities convertible into Common Stock and
the grant of stock appreciation rights (collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Common Stock on the date of grant. Under present law, however,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at an exercise
price less than the fair market value of the Common Stock on the date of grant
(or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power of the
Company). Options may not be granted for a term in excess of ten years (or five
years in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of the Company). The 1998 Plan permits the Board to
determine the manner of payment of the exercise price of options, including
through payment by cash, check or in connection with a "cashless exercise"
through a broker, by surrender to the Company of shares of Common Stock, by
delivery to the Company of a promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
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<PAGE> 15
Other Stock-Based Awards. Under the 1998 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights.
General Provisions Applicable to Awards. The 1998 Plan authorizes the
Board to provide for transferable Awards. However, options intended to qualify
as incentive stock options may not be transferable other than by will of by the
laws of descent and distribution. In addition, except as otherwise determined by
the Board, participants may satisfy withholding tax requirements by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation.
Eligibility to Receive Awards. Officers, employees (including individuals
who have accepted an offer for employment), directors, consultants and advisors
of the Company and its subsidiaries are eligible to be granted Awards under the
1998 Plan. Under present law, however, incentive stock options may only be
granted to employees. The maximum number of shares with respect to which Awards
may be granted to any participant under the 1998 Plan may not exceed 500,000
shares per calendar year.
All of the Company's employees, including the eight current executive
officers, and all of the Company's directors, including the four current
non-employee directors, are eligible to receive Awards under the 1998 Plan. As
of December 31, 1998, the Company had 1,450 full-time employees. The granting of
Awards under the 1998 Plan is discretionary, and the Company cannot now
determine the number or type of Awards to be granted in the future to any
particular person or group.
From the initial adoption of the 1998 Plan through March 31, 1999, options
to purchase the following number of shares had been granted under the 1998 Plan
to the following persons and groups: Jerry A. Greenberg, Co-Chairman of the
Board and Co-Chief Executive Officer (0); J. Stuart Moore, Co-Chairman of the
Board and Co-Chief Executive Officer (0); Sheeroy D. Desai, Executive Vice
President (0); Susan D. Johnson, Chief Financial Officer (10,000); Desmond P.
Varady, Senior Vice President (10,500); Preston B. Bradford, Senior Vice
President (4,000); Christopher R. Davey, Senior Vice President (6,667); R.
Stephen Cheheyl (0); Carl S. Sloane (0); all current executive officers of the
Company as a group (51,167); all current directors who are not executive
officers of the Company as a group (0); and all employees of the Company who are
not executive officers of the Company as a group (607,034).
Administration. The 1998 Plan is administered by the Board of Directors.
The Board has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the 1998 Plan and to interpret the
provisions of the 1998 Plan. Pursuant to the terms of the 1998 Plan, the Board
of Directors may delegate authority under the 1998 Plan to one or more
committees of the Board, and subject to certain limitations, to one or more
executive officers of the Company. The Board has authorized the Compensation
Committee to administer certain aspects of the 1998 Plan, including the granting
of options to executive officers, and has authorized the Co-CEO's, as a
committee of the Board, to administer certain aspects of the 1998 Plan,
including the grant of Awards to employees who are not executive officers
(subject to certain limitations on the maximum number of shares subject to any
such Award). Subject to any applicable limitations contained in the 1998 Plan,
the Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
13
<PAGE> 16
Adjustments. The Board of Directors is required to make appropriate
adjustments in connection with the 1998 Plan and any outstanding Awards to
reflect stock dividends, stock splits and certain other events. The 1998 Plan
also provides for adjustments to be made to Awards if the Common Stock of the
Company is converted into or exchanged for cash, securities or other property in
connection with a merger, consolidation or statutory share exchange transaction
(an "Acquisition Event"). In the case of options, upon the occurrence of an
Acquisition Event, or the execution by the Company of any agreement with respect
to an Acquisition Event, the Board shall provide that all outstanding options
shall be assumed, or equivalent options substituted, by the acquiring
corporation. If the acquiring corporation does not agree to assume, or
substitute for, such options, then the Board shall accelerate the exercisability
of all outstanding options or provide for a cash out of the value of such
options. In the case of restricted stock Awards, upon the occurrence of an
Acquisition Event, the 1998 Plan provides that the repurchase rights of the
Company shall continue to apply to the cash, securities or other property into
which the Common Stock is exchanged for as a result of the Acquisition Event in
the same manner and to the same extent as before the Acquisition Event.
Amendment or Termination. No Award may be made under the 1998 Plan after
March 24, 2008, but Awards previously granted may extend beyond that date. The
Board of Directors may at any time amend, suspend or terminate the 1998 Plan,
except that, after the date of such amendment, no Award that is intended to
comply with Section 162(m) of the Code shall become exercisable, realizable or
vested unless and until such amendment shall have been approved by the Company's
stockholders.
On April 20, 1999, the last reported sale price of the Company's Common
Stock on the Nasdaq National Market was $56.50.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1998 Plan and with respect to the sale of Common Stock acquired under the 1998
Plan.
Tax Consequences to Participants -- Incentive Stock Options. In general, a
participant will not recognize taxable income upon the grant or exercise of an
incentive stock option. Instead, a participant will recognize taxable income
with respect to an incentive stock option only upon the sale of Common Stock
acquired through the exercise of the option ("ISO Stock"). The exercise of an
incentive stock option, however, may subject the participant to the alternative
minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
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<PAGE> 17
Tax Consequences to Participants -- Nonstatutory Stock Options. As in the
case of an incentive stock option, a participant will not recognize taxable
income upon the grant of a nonstatutory stock option. Unlike the case of an
incentive stock option, however, a participant who exercises a nonstatutory
stock option generally will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock acquired
through the exercise of the option ("NSO Stock") on the Exercise Date over the
exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO Stock
for more than one year prior to the date of the sale.
Tax Consequences to Participants -- Restricted Stock. A participant will
not recognize taxable income upon the grant of a restricted stock Award unless
the participant makes an election under Section 83(b) of the Code (a "Section
83(b) Election"). If the participant makes a Section 83(b) Election within 30
days of the date of the grant, then the participant will recognize ordinary
compensation income, for the year in which the Award is granted, in an amount
equal to the difference between the fair market value of the Common Stock at the
time the Award is granted and the purchase price paid for the Common Stock. If a
Section 83(b) Election is not made, then the participant will recognize ordinary
compensation income, at the time that the forfeiture provisions or restrictions
on transfer lapse, in an amount equal to the difference between the fair market
value of the Common Stock at the time of such lapse and the original purchase
price paid for the Common Stock. The participant will have a tax basis in the
Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the Award is granted if a Section 83(b) Election is
made.
Tax Consequences to Participants -- Other Stock-Based Awards. The tax
consequences associated with any other stock-based Award granted under the 1998
Plan will vary depending on the specific terms of the Award. Among the relevant
factors are whether or not the Award has a readily ascertainable fair market
value, whether or not the Award is subject to forfeiture provisions or
restrictions on transfer, the nature of the property to be received by the
participant under the Award, and the participant's holding period and tax basis
for the Award or underlying Common Stock.
Tax Consequences to the Company. The grant of an Award under the 1998 Plan
generally will have no tax consequences to the Company. Moreover, in general,
neither the exercise of an incentive stock option nor the sale of any Common
Stock acquired under the 1998 Plan will have any tax consequences to the
Company. The Company generally will be entitled to a business expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the 1998 Plan, including as a result of the exercise of a
nonstatutory stock option, a Disqualifying Disposition, or a Section 83(b)
Election. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
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INDEPENDENT AUDITORS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP as
independent auditors of the Company for the current fiscal year. KPMG Peat
Marwick LLP has served as the Company's independent auditors since 1994. A
representative of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting to respond to appropriate questions, and to make a statement if he or
she so desires.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other matters are properly presented to the Meeting, it is the intention of
the persons named in the accompanying proxy to vote, or otherwise act, in
accordance with their judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. The Company will also
request brokerage houses, custodians, nominees and fiduciaries to forward copies
of the proxy material to those persons for whom they hold shares and request
instructions for voting the proxies and the Company will reimburse them for
their out-of-pocket expenses in connection with this distribution.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than 10% of the
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Based solely upon a review of reports
submitted, and representations made, to the Company, the Company believes that
during 1998 its executive officers, directors and holders of more than 10% of
the Common Stock complied with all Section 16(a) filing requirements, other than
a late filing by Ms. Johnson reporting a stock option exercise and a late filing
by Mr. Gaskins reporting an acquisition of Common Stock by a family member.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy statement and proxy card for the Company's 2000
Annual Meeting of Stockholders (the "2000 Annual Meeting") must be submitted to
the Secretary of the Company at its offices, One Memorial Drive, Cambridge,
Massachusetts 02142, no later than January 10, 2000.
If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder must
also give written notice to the Secretary of the Company at the address noted
above. The Secretary must receive such notice not less than 60 days nor more
than 90 days prior to the 2000 Annual Meeting; provided that, in the event that
less than 70 days' notice or prior public disclosure of the date of the 2000
Annual Meeting is given or made, notice by the stockholder must be received not
later than the close of business on the 10th day following the date on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. If a stockholder fails to provide timely notice of
a
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<PAGE> 19
proposal to be presented at the 2000 Annual Meeting, the proxies designated by
the Board of Directors of the Company will have discretionary authority to vote
on any such proposal.
By Order of the Board of Directors,
JERRY A. GREENBERG
Secretary
May 10, 1999
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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<PAGE> 20
SAPIENT CORPORATION
1998 STOCK INCENTIVE PLAN
-------------------------
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") of Sapient
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any present or
future subsidiary corporations of Sapient Corporation as defined in Section
424(f) of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be
administered by the Board of Directors of the Company (the "Board"). The Board
shall have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. All decisions by the Board shall be
made in the Board's sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan or in any Award. No director
or person acting pursuant to the authority delegated by the Board shall be
liable for any action or determination relating to or under the Plan made in
good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares
<PAGE> 21
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 8, Awards
may be made under the Plan for up to 2,000,000 shares of common stock, $0.01 par
value per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8, the
maximum number of shares of Common Stock with respect to which an Award may be
granted to any Participant under the Plan shall be 500,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be
an "incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or
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<PAGE> 22
any part thereof) which is intended to be an Incentive Stock Option is not an
Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at
the time each Option is granted and specify it in the applicable option
agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that no Option will be granted
for a term in excess of 10 years.
(e) EXERCISE OF OPTION. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise
of an Option granted under the Plan shall be paid for as follows:
(i) in cash or by check, payable to the order of the Company;
(ii) except as the Board may, in its sole discretion,
otherwise provide in an option agreement, (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price, (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, or (iii) delivery of shares of
Common Stock owned by the Participant valued at their fair market value as
determined by (or in a manner approved by) the Board in good faith ("Fair Market
Value"), which Common Stock was owned by the Participant at least six months
prior to such delivery;
(iii) to the extent permitted by the Board, in its sole
discretion (i) by delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) by payment of such other
lawful consideration as the Board may determine; or
(iv) any combination of the above permitted forms of payment.
6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part
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<PAGE> 23
of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) CHANGES IN CAPITALIZATION. In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed
liquidation or dissolution of the Company, the Board shall upon written notice
to the Participants
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<PAGE> 24
provide that all then unexercised Options will (i) become exercisable in full as
of a specified time at least 10 business days prior to the effective date of
such liquidation or dissolution and (ii) terminate effective upon such
liquidation or dissolution, except to the extent exercised before such effective
date. The Board may specify the effect of a liquidation or dissolution on any
Restricted Stock Award or other Award granted under the Plan at the time of the
grant of such Award.
9. ACQUISITION EVENTS
(a) DEFINITION. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(b) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code. Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not agree to assume, or
substitute for, such Options, then the Board shall, upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified time (the "Acceleration Time") prior to the
Acquisition Event and will terminate immediately prior to the consummation of
such Acquisition Event, except to the extent exercised by the Participants
before the consummation of such Acquisition Event; provided, however, that in
the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition
Price"), then the Board may instead provide that all outstanding Options shall
terminate upon consummation of such Acquisition Event and that each Participant
shall receive, in exchange therefor, a cash payment equal to the amount (if any)
by which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options.
(c) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED STOCK AWARDS.
Upon the occurrence of an Acquisition Event, the repurchase and other rights of
the Company under each outstanding Restricted Stock Award shall inure to the
benefit of the Company's successor and shall apply to the cash, securities or
other property which the Common Stock was converted into or exchanged for
pursuant to such Acquisition
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<PAGE> 25
Event in the same manner and to the same extent as they applied to the Common
Stock subject to such Restricted Stock Award.
(d) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS. The Board
shall specify the effect of an Acquisition Event on any other Award granted
under the Plan at the time of the grant of such Award.
10. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award shall be evidenced by a written
instrument in such form as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may satisfy such tax obligations in whole or
in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to a Participant.
(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and
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<PAGE> 26
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until (i)
all conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) ACCELERATION. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of restrictions in full or in part or that any other
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
11. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
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<PAGE> 27
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective
on the date on which it is adopted by the Company's stockholders. No Awards
shall be granted under the Plan after March 24, 2008, but Awards previously
granted may extend beyond that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant designated as subject to
Section 162(m) by the Board after the date of such amendment shall become
exercisable, realizable or vested, as applicable to such Award (to the extent
that such amendment to the Plan was required to grant such Award to a particular
Participant), unless and until such amendment shall have been approved by the
Company's stockholders as required by Section 162(m) (including the vote
required under Section 162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
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<PAGE> 28
AMENDMENT TO
1998 STOCK INCENTIVE PLAN
OF SAPIENT CORPORATION
The Sapient Corporation 1998 Stock Incentive Plan (the "Plan") is hereby
amended as set forth below:
1. Section 4 of the Plan is hereby amended by deleting the first sentence
thereof and substituting the following therefor:
"Subject to adjustment under Section 8, Awards may be made
under the Plan for up to 4,500,000 shares of common stock,
$.01 par value per share, of the Company (the "Common
Stock").
2. In all other respects, the Plan shall remain in full force and effect.
Adopted by the
Board of Directors on April 23, 1999
Presented to the
Stockholders for their approval on June 15, 1999
<PAGE> 29
PROXY
SAPIENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 15, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Those signing on the reverse side, revoking all prior proxies, hereby
appoint(s) Jerry A. Greenberg and J. Stuart Moore, and each of them, with full
power of substitution, as Proxies to represent and vote as designated hereon
all shares of stock of Sapient Corporation (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, June 15, 1999, at
1:00 p.m. Boston time, at the offices of the Company, One Memorial Drive,
Cambridge, Massachusetts and at any adjournment thereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE) ___________
SEE REVERSE
SIDE
___________
<PAGE> 30
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
SAPIENT CORPORATION
JUNE 15, 1999
Please Detach and Mail in the Envelope Provided
A |X| PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE CLASS
III DIRECTOR NOMINEES AND FOR PROPOSAL 2.
FOR WITHHELD
1. To elect two | | | | Nominees: R. Stephen Cheheyl
Class III Carl S. Sloane
Directors for
the ensuing
three years.
For both nominees except as noted below
| |__________________________________________
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's 1998 | | | | | |
Stock Incentive Plan increasing the number of
shares of Common Stock available for issuance
thereunder from 2,000,000 to 4,500,000 and
3. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
MARK BOX RIGHT IF COMMENTS OR ADDRESS CHANGE HAVE BEEN | |
NOTED ON THE REVERSE SIDE OF THIS CARD.
Signature:_______________________________________________ Date:_______________
Signature:_______________________________________________ Date:_______________
NOTE: Please sign exactly as name appears hereon. If the stock is registered in
the names of two of more persons, each should sign. When signing as an
executor, administrator, trustee, guardian, or attorney, please give full title
as such. If a corporation, please sign in full corporate name by an authorized
officer. If a partnership, please sign in full partnership name by an
authorized person.
