<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28074
SAPIENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 04-3130648 04-3130648
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ONE MEMORIAL DRIVE, CAMBRIDGE, MA 02142
(Address of Principal Executive (Zip Code)
Offices)
(617) 621-0200
Registrant's Telephone Number, Including Area Code
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Company was approximately $927,045,955 on March 5, 1999 based on the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
System on March 5, 1999. There were 26,843,782 shares of Common Stock
outstanding as of March 5, 1999.
---------------
<PAGE> 3
Part III of the Annual Report on Form 10-K of the Company for the fiscal
year ended December 31, 1998 is hereby amended and restated in its entirety as
follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. Directors
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING PAST FIVE YEARS AND OTHER
NAME AGE SINCE DIRECTORSHIPS
- ------------------------------------ ------- ------------ -------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1999 (CLASS III DIRECTORS)
<S> <C> <C> <C>
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.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING PAST FIVE YEARS AND OTHER
NAME AGE SINCE DIRECTORSHIPS
- ------------------------------------ ------- ------------ -------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS II DIRECTORS)
<S> <C> <C> <C>
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.
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>
B. Executive Officers of Sapient
The response to this Item is contained in Part I after Item 4 under the
heading "Executive Officers of Sapient".
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.
ITEM 11. EXECUTIVE COMPENSATION
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 $40.00 per share,
which the Board determined to be the fair market value of the Common Stock on
such date. Such options vest in four equal annual installments starting on the
first anniversary of the date of grant.
In February 1996, the Board adopted and the stockholders approved the 1996
Director Stock Option Plan (the "Director Plan"), pursuant to which each new
non-employee director elected to the Board of Directors in the future will be
granted, upon his or her initial election as a director, an option to purchase
5,000 shares of Common Stock. All options granted under the Director Plan will
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, will vest over a four year period, provided the optionholder
continues to serve as a director of the Company, and will expire ten years from
the date of grant (subject
<PAGE> 5
to earlier termination in the event the optionee ceases to serve as a director
of the Company). No options have ever been granted under the Director Plan,
which provides for the issuance of a maximum of 60,000 shares.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation paid in each of the last three fiscal years to certain executive
officers of the Company selected in accordance with SEC regulations (the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
----------------
ANNUAL
COMPENSATION(1) NUMBER OF
----------------------- SHARES ALL OTHER
SALARY BONUS UNDERLYING STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#)(2) ($)(3)
--------------------------- ---- ------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Jerry A. Greenberg ..................... 1998 50,000 69,693 0 1,250
Co-Chairman of the Board and Co- 1997 50,000 107,396 0 470
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 Varady ......................... 1998 100,000 111,719 10,500 1,250
Senior Vice President
Preston Bradford ....................... 1998 100,000 84,125 4,000 1,250
Senior Vice President
Christopher Davey ...................... 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 $50,000 or ten percent of
the total annual salary and bonus for the Named Executive Officer for
such year.
(2) The Company has never granted any stock appreciation rights.
(3) Amounts shown in this column represent the Company's matching
contributions under the Company's 401(k) Plan.
<PAGE> 6
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1998 by the Company to the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION TERM(3)
UNDERLYING GRANTED TO EXERCISE OF -----------------------------
OPTION EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/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 Varady ................ 10,500 .40% 44.00 12/15/08 290,549 736,309
Preston Bradford .............. 4,000 .15% 44.00 12/15/08 110,685 280,499
Christopher Davey ............. 6,667 .26% 44.00 12/15/08 184,485 467,521
</TABLE>
- ---------------------
(1) Represents options granted pursuant to the Company's 1996 Equity Stock
Incentive Plan or 1998 Stock Incentive Plan. Options granted become
exercisable in four equal installments commencing on the first
anniversary of the date of grant, other than Mr. Desai's option which
vests in six installments, and Mr. Varady's option which vests in five
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.
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.
<PAGE> 7
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNEXERCISED OPTIONS MONEY OPTIONS AT FISCAL YEAR-
SHARES AT FISCAL YEAR-END END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($)(1) (#) ($)(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 Varady.................... 67,826 1,562,589 34,200/ 75,100 1,733,090/2,726,550
Preston Bradford.................. 65,900 1,663,223 17,250/106,350 829,198/4,310,683
Christopher 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.
EMPLOYMENT AGREEMENTS
Each Named Executive Officer has executed agreements which prohibit
them from competing with the Company for a period of 12 months following
termination of their employment with the Company.
<PAGE> 8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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) 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)
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF 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 Varady.................................................... 72,240 *
Preston Bradford.................................................. 77,601 *
Christopher Davey................................................. 80,500 *
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
---------------- ------------------ ----------------
<S> <C> <C>
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 (38,374); Mr. Bradford
(28,890); Mr. Davey (10,000); and all executive officers and directors
as a group (189,522). 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 1,558,540 shares and shared dispositive power over 1,558,540
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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
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 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.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SAPIENT CORPORATION
By: /s/ Susan D. Johnson
-----------------------
Susan D. Johnson
Chief Financial Officer
Dated: April 30, 1999
