<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[X] Preliminary proxy statement. [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(e)(2)).
[_] Definitive proxy statement.
[_] Definitive additional materials.
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
(Name of Registrant as Specified in Its Charter)
The Metzler Group, Inc.
(Name of Person(s) Filing proxy statement, if Other Than the 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)(1) 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.
<PAGE>
[_] 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:
Notes:
<PAGE>
[METZLER GROUP LOGO]
615 N. Wabash
Chicago, Illinois 60611
June 18, 1999
Dear Shareholder:
It is my pleasure to invite you to the 1999 annual meeting of shareholders
of The Metzler Group, Inc. We will hold the meeting on Thursday, July 15,
1999, at 9:00 a.m. Chicago time at The Mid-America Club, 200 E. Randolph
Drive, Chicago, Illinois.
The accompanying notice of annual meeting of shareholders and proxy
statement describes the items of business which will be discussed during the
meeting. It is important that you vote your shares whether or not you plan to
attend the meeting. To be sure your vote is counted, we urge you to carefully
review the proxy statement and to vote your choices. Please vote your proxy on
the Internet by visiting www.proxyvote.com or mark, sign, date and return your
proxy card by mail whether or not you plan to attend the annual meeting.
If you later decide to attend the meeting, you can always revoke your proxy
at that time and vote your shares in person.
I look forward to seeing you at the meeting. On behalf of the management
and directors of The Metzler Group, Inc., I want to thank you for your
continued support and confidence.
Sincerely,
/s/ Robert P. Maher
ROBERT P. MAHER
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
[METZLER GROUP LOGO]
615 N. Wabash
Chicago, Illinois 60611
Notice Of Annual Meeting Of Shareholders
To Be Held On July 15, 1999
To the Shareholders of The Metzler Group, Inc.:
We will hold the annual meeting of shareholders of The Metzler Group, Inc.,
a Delaware corporation, at The Mid-America Club, 200 E. Randolph Drive,
Chicago, Illinois, on Thursday, July 15, 1999, at 9:00 a.m. Chicago time. The
meeting's purpose is to:
1. Elect one director to our Board of Directors to serve a term of three
years;
2. Consider and vote upon a proposed amendment to our certificate of
incorporation to increase the total authorized common stock to 250,000,000
shares;
3. Consider and vote upon a proposed amendment to our certificate of
incorporation to change our name to Navigant Consulting, Inc.;
4. Consider and vote upon re-approval of our Long-Term Incentive Plan;
and
5. To transact any other business appropriate to the meeting.
If you were a shareholder of record at the close of business on May 31,
1999, you may vote at the annual meeting. For ten days prior to the meeting,
we will keep a list of shareholders entitled to vote at the meeting with the
address and number of shares held by each at the following locations:
1. Our offices at 615 N. Wabash, Chicago, Illinois; and
2. The offices of our transfer agent, American Stock Transfer Trust
Company, located at 40 Wall Street, New York, New York.
You may inspect the stock lists at any time during usual business hours.
You may also inspect the list during the meeting.
If you cannot attend the meeting, we urge you to sign, date and otherwise
complete the enclosed proxy card and return it promptly in the envelope
provided. If you give a proxy, you have the right to revoke it at any time
before it is voted.
We have enclosed the 1998 Annual Report, including financial statements,
and the proxy statement with this notice of annual meeting.
For the Board of Directors,
/s/ Charles A. Demirjian
CHARLES A. DEMIRJIAN
Secretary
Chicago, Illinois
June 18, 1999
----------------
YOUR VOTE IS IMPORTANT.
PLEASE VOTE YOUR PROXY ON THE INTERNET BY VISITING www.proxyvote.com.
OR
MARK, SIGN, DATE AND RETURN YOUR PROXY CARD BY MAIL
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
615 N. Wabash
Chicago, Illinois 60611
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
We have sent you this proxy statement and the enclosed proxy card because
our Board of Directors is soliciting your proxy to vote at the 1999 annual
meeting of shareholders. We will hold the annual meeting on Thursday, July 15,
1999, at 9:00 a.m. Chicago time.
VOTING OF SHARES
We will begin mailing this proxy statement and the accompanying proxy card
to you, beginning on or about June 23, 1999. Each share of our common stock,
par value $0.001 per share, is entitled to one vote. Please specify your
choices by marking the appropriate boxes on the enclosed proxy card and
signing it.
Directors are elected by a plurality of the votes cast at a meeting at
which a quorum is present. A plurality means that the nominees with the
largest number of votes are elected as directors up to the maximum number of
directors to be chosen at the meeting. A quorum is 50% of the shares entitled
to vote. Any other matters voted on at the meeting shall be determined by a
majority of the votes cast.
If you mark "withhold authority" on your proxy card with respect to the
election of the nominee for director, your vote will not count either "for" or
"against" the nominee. If you mark your proxy card to "abstain" on other
matters, your vote will not be counted in determining whether a majority vote
was obtained. If you do not give directions on your proxy card and you return
the signed card, the persons named in the proxy card will vote the shares at
their discretion on all matters. If a broker or other person holding shares
for you does not vote on a proposal (broker non-votes), your shares will not
be counted in determining the number of votes cast.
If you vote by proxy, you may revoke that proxy at any time before it is
voted at the meeting by sending us a proxy bearing a later date or by
attending the meeting in person and casting a ballot.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED AND SIGNED PROXY CARD
PROMPTLY SO YOUR SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE
MEETING IN PERSON.
We solicit proxies to give all shareholders of record on May 31, 1999 an
opportunity to vote on matters to be presented at the annual meeting. Your
shares can be voted at the meeting only if you are present or represented by
proxy. As of the record date, approximately 42,400,000 shares of common stock
were issued and outstanding, and each share has one vote for the matters
referred to in this proxy statement. We have adjusted all shares and stock
prices contained in this proxy statement to reflect our three-for-two stock
split effected on April 1, 1998.
<PAGE>
BOARD OF DIRECTORS
General
The Board manages our business affairs. Members of the Board keep
themselves informed by reading various reports and documents sent to them on a
regular basis. In addition, the Chief Executive Officer and other officers
routinely present operating and financial reports at Board and committee
meetings
The Board met five times in 1998, and all members attended each meeting,
except Mr. Pond was unable to attend one meeting.
Biographical information on the director nominee and the directors serving
unexpired terms begin on page 3 of this proxy statement.
Board Committees
In October 1998, the Board created a special committee to oversee our most
recent follow-on public offering, including to negotiate and authorize the
price of our common stock in that offering. Robert P. Maher, who is the
Chairman of the Board and our President and Chief Executive Officer, was the
sole member of this committee. In January 1997, the Board formed the standing
Audit Committee and the Compensation Committee to assist the Board in carrying
out its duties.
The AUDIT COMMITTEE has four members, three of whom are independent, non-
employee directors. Peter B. Pond, Mitchell H. Saranow, James R. Thompson and
Mr. Maher currently serve on the Audit Committee. The Audit Committee reviews
our internal controls and the objectivity and integrity of financial
reporting. The Audit Committee also meets with our independent certified
public accountants and other financial personnel about these matters. This
committee met three times during 1998.
The COMPENSATION COMMITTEE has four members, three of whom are independent,
non-employee directors. Messrs. Pond, Saranow, Thompson and Maher currently
serve on the Compensation Committee. This committee monitors our compensation
programs for directors and officers, administers compensation plans for
executive officers, and oversees the employee benefit plans. This committee
also makes recommendations to the Board about compensation for directors and
officers. The Compensation Committee's Report on Executive Compensation begins
on page 9 under the caption "Compensation Committee Report on Executive
Compensation". This committee met five times during 1998.
Director Compensation
Under our Long-Term Incentive Plan, we grant each director not employed by
us an option to purchase 3,000 shares of common stock for each year of the
term to be served upon the director's initial election or re-election to the
Board. Thus, a director elected to a three-year term receives 9,000 options.
The options have an exercise price equal to the fair market value of the
common stock on the date of grant and become exercisable in equal installments
over the term to be served beginning on the first anniversary of the date of
grant, so that 3,000 options become exercisable each year. We also pay
directors who are not executive officers a fee of $1,000 for each Board
meeting attended in person. All directors are reimbursed for travel expenses
incurred in connection with attending board and committee meetings. Directors
are not entitled to additional fees for serving on committees of the Board.
From time to time, we also grant our non-employee directors additional options
after reviewing the level of compensation other companies similarly situated
to us pay their non-employee directors.
ITEM NO. 1--ELECTION OF DIRECTORS
The Board has set the current number of directors at five. Mr. Maher and
Barry S. Cain are the two employee directors on the Board. The Board is
divided into three classes with staggered terms so that the term
2
<PAGE>
of one class expires at each annual meeting of shareholders. Directors are
elected by a plurality of the votes cast. The seat held by Mr. Maher is up for
election at this annual meeting.
The Board has selected and approved the following nominee for submission to
the shareholders: Robert P. Maher, our Chief Executive Officer, President and
Chairman, to serve a three-year term expiring at the annual meeting in 2002.
If Mr. Maher becomes unable or unwilling to serve, proxies will be voted
for election of a person designated by the Board. The Board knows of no reason
why Mr. Maher should be unable or unwilling to serve.
A brief listing of the principal occupation, other major affiliations and
age of Mr. Maher and each director serving an unexpired term follows.
NOMINEE FOR ELECTION AT THIS MEETING TO A TERM EXPIRING IN 2002:
ROBERT P. MAHER, 49, has served as the Chief Executive Officer and
President of our holding company since inception and as our Chairman of the
Board since June 1996. He has been one of our directors since April 1991. From
August 1990 to December 1995, Mr. Maher held various positions in our
organization, most recently as a Senior Vice President of Metzler &
Associates, Inc., one of our subsidiaries, working primarily in the
information technology area. From 1988 to August 1990, he organized and
directed information technology engagements for the regulated segment of the
communications industry practice as a principal with the consulting practice
of Ernst & Young LLP.
The Board recommends a vote FOR Mr. Maher.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2000:
PETER B. POND, 54, has served as one of our directors since November 1996.
He has served as the Midwest Head of Investment Banking for Donaldson, Lufkin
& Jenrette Securities Corporation since June 1991. Mr. Pond is a director of
Maximus, Inc., a provider of program management and consulting services to
state, county and local government health and human services agencies.
MITCHELL H. SARANOW, 53, has served as one of our directors since November
1996. Mr. Saranow has served as Chairman of The Saranow Group L.L.C. and its
affiliated companies since October 1984. He founded Fluid Management, L.P. in
April 1987 and served as Chairman and Chief Executive Officer until January
1997. He presently also serves as a director of Lawson Products, Inc., a
distributor of expendable maintenance, repair and replacement products, and as
Chairman of Elf Machinery, L.L.C., an affiliate of The Saranow Group.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2001:
JAMES R. THOMPSON, 62, has served as one of our directors since August
1998. Governor Thompson was named Chairman of the Chicago law firm of Winston
& Strawn in January 1993. He joined the firm in January 1991 as Chairman of
the Executive committee after serving four terms as Governor of the State of
Illinois from 1977 until January 1991. Prior to his terms as Governor, he
served as U.S. Attorney for the Northern District of Illinois from 1971 to
1975. Governor Thompson served as the Chief of the Department of Law
Enforcement and Public Protection in the Office of the Attorney General of
Illinois, as an Associate Professor at Northwestern University School of Law,
and as an Assistant State's Attorney of Cook County. He is a former Chairman
of the President's Intelligence Oversight Board. Governor Thompson is
currently a member of the Boards of Directors of Union Pacific Resources,
Inc., Prime Retail, Inc., American National Can Co., Jefferson Smurfit Group,
plc, Prime Group Realty Trust, FMC Corporation, and Hollinger International.
He serves on the
3
<PAGE>
Board of the Chicago Historical Society, the Art Institute of Chicago, the
Museum of Contemporary Art, the Lyric Opera and the Illinois Math & Science
Academy Foundation.
BARRY S. CAIN, 56, has served as one of our directors since May 1998 and as
our Vice President and Chief Administrative Officer since September 1997. Mr.
Cain joined us from his position as a member of the law firm of Sachnoff &
Weaver, Ltd., where he was co-chairman of the firm's Business Group and a
member of its board of directors. Prior to joining the Company, Mr. Cain
served as our outside general counsel and outside general counsel to Metzler &
Associates, Inc. since inception.
ITEM NO. 2--AMENDMENT OF OUR CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED SHARES
In January 1999, the Board proposed and recommended for adoption by our
shareholders an amendment to our certificate of incorporation that would
increase our total authorized common stock from 75,000,000 shares to
250,000,000 shares. No change will be made to the number of authorized shares
of preferred stock, none of which is currently outstanding. We are asking you
to approve this amendment.
Discussion of the Proposal
The proposed amendment would change paragraph A of Article Four of our
certificate of incorporation to read in its entirety as follows:
AUTHORIZED SHARES. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is two hundred fifty-
three million (253,000,000), consisting of two hundred fifty million
(250,000,000) shares of common stock, $.001 par value per share (the
"Common Stock"), and three million (3,000,000) shares of Preferred Stock,
$.001 par value per share (the "Preferred Stock").
Reasons for the Proposal
As of June 1, 1999, we had issued approximately 42,400,000 shares of common
stock, and we currently have reserved approximately 12,000,000 shares for
issuance under our Stock Purchase Plan, 401(k) and our Incentive Plan.
Consequently, we have approximately 20,600,000 shares of common stock
available for future issuance as of June 1, 1999.
The Board believes we need additional authorized but unissued shares of
common stock so that we may use shares of common stock for general corporate
purposes, future acquisitions and equity financings. Your approval of the
proposed amendment now will eliminate the delays and expense which we would
otherwise incur if we need to seek your approval to increase the authorized
number of shares of common stock for possible future transactions involving
the issuance of additional shares. Additional issuances of common stock may
also increase the total number of shares traded, and therefore it would be
easier for you to buy or sell shares.
The Board may issue the additional shares of common stock in its discretion
without further approval of the shareholders, subject to certain exceptions.
You could suffer a dilution of voting rights, net income and net tangible book
value per share of the common stock as the result of any such issuance of
common stock depending on the number of shares issued and the purpose, terms
and conditions of the issuance. The additional shares of common stock could
have an "anti-takeover" effect because they could discourage a takeover by
means of a merger, tender offer, proxy contest or otherwise. In addition, the
additional shares could make the removal of our present management more
difficult. The Board could issue such shares for the purpose of making it more
difficult, time-consuming or costly for another entity or person to acquire a
controlling interest, even if such acquisition is desired by you. You have no
preemptive rights to subscribe for additional shares when issued.
4
<PAGE>
Vote Required; Directors' Recommendation
The holders of a majority of the shares of common stock outstanding as of
the record date must vote in favor of the proposed amendment for it to be
approved. The Board recommends that you vote FOR this amendment to our
certificate of incorporation to increase our total authorized common stock.
ITEM NO. 3--AMENDMENT OF OUR CERTIFICATE OF INCORPORATION TO
CHANGE OUR NAME
In May 1999, the Board proposed and recommended for adoption by our
shareholders an amendment to our certificate of incorporation that would
change our name to Navigant Consulting, Inc. We are asking you to approve this
amendment.
Discussion of the Proposal
The proposed amendment would change Article I of our certificate of
incorporation to read in its entirety as follows:
The name of the corporation is Navigant Consulting, Inc.
Reasons for the Proposal
Our name, The Metzler Group, was based on the name of our original
operating subsidiary, Metzler & Associates, whose name was in turn based on
its original founder. Since our IPO, we have added other organizations, such
as Reed Consulting Group, Peterson Worldwide, LECG and Strategic Decisions
Group. Each company retained its own name, but as we began to cross-market and
combine our service offerings, our clients began to appreciate the breadth of
services offered by our single combined organization. To take advantage of
these opportunities, we reorganized our subsidiaries into a unified company
and our Board began considering, and ultimately approved, changing our name to
help establish a common brand identity.
In the process of evaluating names, we examined the common elements of the
cultures and missions of our existing companies. We found that all of our
subsidiaries held the fundamental goals of helping clients navigate the
changing business and regulatory environment, guiding clients in formulating
and executing critical business strategies and providing clients with stalwart
advice in the face of an ever-changing business environment. Even our experts,
who must maintain independence in their testimony, seek to guide fact finders
through the nuances of the regulatory, economic and legal issues at hand.
To convey these common goals, our Board selected Navigant Consulting, Inc.
as our new name.
Vote Required; Directors' Recommendation
The holders of a majority of the shares of common stock outstanding as of
the record date must vote in favor of the proposed amendment for it to be
approved. The Board recommends that you vote FOR the amendment to our
certificate of incorporation to change our name to Navigant Consulting, Inc.
ITEM NO. 4--RE-APPROVAL OF OUR INCENTIVE PLAN
In June 1996, the Board adopted the Incentive Plan, which is attached to
this proxy statement as Annex A. The Board is now seeking re-approval of the
Incentive Plan so we can preserve our tax deduction for all awards earned
under the Incentive Plan in accordance with Section 162(m) of the Internal
Revenue Code ("Code Section 162(m)").
Discussion of Proposal
This proposal seeks to ensure that the Incentive Plan continues to meet the
statutory requirements of Code Section 162(m). Enacted in 1993, Code Section
162(m) disallows us a deduction for federal income tax purposes for
compensation to our Chief Executive Officer and the four other most highly
paid named executive officers in excess of $1 million per year that we pay;
however, if our shareholders re-approve our Incentive Plan, compensation
derived from the Incentive Plan is not subject to that limitation.
5
<PAGE>
Because a large portion of our officer's incentive compensation is derived
from option value rather than fixed salary or bonus, our officers may earn
more than $1 million if the value of our stock increases significantly. Under
Code Section 162(m), compensation that qualifies as "performance-based
compensation" is not subject to the $1 million limitation. One of the
conditions required to qualify compensation paid pursuant to grants and awards
under the Incentive Plan as "performance-based compensation" is shareholder
approval of the Incentive Plan. However, in our case, the $1 million deduction
limitation (and the shareholder approval requirement) does not apply during a
transitional period following our initial public offering because our
shareholders approved the Incentive Plan before our initial public offering.
Under this transitional rule, we must resubmit the Incentive Plan for
shareholder approval on or before our annual meeting in the year 2000 or when
we have issued more shares under the Incentive Plan than originally approved.
We have decided to submit the Incentive Plan to the shareholders at this time
to seek re-approval of the Incentive Plan. If you re-approve the Incentive
Plan, it will continue to qualify under the statutory requirements of Code
Section 162(m). If you do not re-approve the Incentive Plan, the Incentive
Plan will continue under its existing terms but we may not be able to take
advantage of tax deductions resulting from compensation under the Incentive
Plan.
As of May 17, 1999, the market value of the approximately 10,600,000 shares
available for grant under the Incentive Plan was approximately $350 million.
Description of the Plan
General
The Incentive Plan was originally adopted by the Board and approved by the
shareholders in June 1996. Under the Incentive Plan, we are authorized to make
grants of the following:
. incentive stock options;
. non-qualified (or non-statutory) stock options;
. restricted stock;
. stock appreciation rights;
. performance awards; and
. cash awards.
The Board's Compensation Committee administers the Incentive Plan. This
Committee determines which employees, consultants, non-employee directors and
independent contractors receive awards under the Incentive Plan and
establishes the terms, conditions and limitations of each award, subject to
the terms of the Incentive Plan and the applicable provisions of the Code.
The Board may amend the Incentive Plan in any respect, except that the
following changes may not be made without your approval:
. the maximum number of shares available for awards may not be increased
except upon stock splits and dividends, combinations and similar events;
. the requirements as to eligibility may not be materially modified;
. the benefit to participants may not be materially increased;
. the period during which incentive options may be granted or exercised may
not be extended; and
. the class of employees eligible to receive incentive options may not be
modified.
Terms and Conditions of Awards under the Incentive Plan
Awards under the Incentive Plan may consist of any combination of one or
more incentive or non-qualified options, restricted stock, stock appreciation
rights, performance awards or cash awards, on a stand alone,
6
<PAGE>
combination or tandem basis. The Committee may specify that awards other than
options will be paid in cash, shares of common stock, or a combination of cash
and common stock. The Committee is permitted to cancel any unexpired, unpaid,
unexercised or deferred awards at any time if a participant (a) provides
services for a competitor, (b) discloses confidential information, or (c)
fails to disclose and convey to us any invention or idea he or she developed
while employed by us and relating to our business.
If the nature or number of outstanding shares of common stock changes due
to stock split, stock dividend, reorganization or similar event, we will make
adjustments to the numbers of shares and the applicable exercise and base
prices under outstanding awards to prevent dilution or enlargement of the
awards previously granted.
We may grant both incentive and non-qualified options pursuant to the
Incentive Plan. Incentive options must have an exercise price per share equal
to at least the fair market value of a share at the time the award is granted.
As required by the Code, if an incentive option is granted to a participant
who owns more than ten percent of our issued and outstanding capital stock,
then the exercise price per share will be not less than one hundred ten
percent (110%) of fair market value on the date of grant. The Committee will
determine, in its sole discretion on the date of the grant, the exercise price
for non-qualified options, and, except as the committee determines to be
appropriate pursuant to Code Section 162(m), the exercise price may be less
than fair market value. All incentive options granted under the Incentive Plan
have a maximum term of ten years, except Incentive options granted to a 10%
shareholder have a maximum term of five years. The Committee may set the term
of non-qualified options in its discretion. At the time an option is awarded,
the Committee will specify the date or dates upon which the option, or
portions of the option, becomes exercisable. The Committee will set the manner
of payment for the purchase price upon exercise of the option in the
particular award agreement or by general rules.
A participant who ceases to be an employee or key non-employee for any
reason other than death, disability or termination "for cause" will be
permitted to exercise any option to the extent it was exercisable on the date
of such cessation, but only within three months of such cessation. A
participant who is terminated for "cause," as defined in the Incentive Plan,
will immediately lose all rights to exercise any options. In the case of
either death or disability, the option must be exercised within twelve months
after the date of death or onset of disability, and prior to the original
expiration date of the option.
The Committee may award shares of common stock on a restricted basis. The
Committee will determine the terms of a restricted stock award at the time the
award is made and the terms will be described in the award agreement. After
the restricted stock is awarded, the participant will be a shareholder with
respect to such stock, and will have rights to vote and receive dividends with
respect to such stock.
The Committee may award stock appreciation rights either alone, in tandem
or in combination with an option or other award. A stock appreciation right
will permit the participant to receive, upon exercise, cash or shares of
common stock equal in value to the excess of the fair market value of a share
of common stock as of the exercise date over the base price set by the
committee at the time the stock appreciation right is granted, multiplied by
the number of shares of common stock then being exercised under the stock
appreciation right. The base price will be at least the fair market value of a
share of common stock on the date of grant, unless the Board approves a lower
base price. Stock appreciation rights will become exercisable upon the date or
dates, or the occurrence of the events, set by the committee at the time of
grant.
Under the provisions of the Incentive Plan, all members of the Board who
are not employees will receive an option to purchase 9,000 shares. The option
will be granted on the date each director is first elected to the Board. Each
continuing non-employee member of the Board will receive an additional award
of an option to purchase 9,000 shares upon reelection and qualification as a
non-employee member of the Board. Each option issued to a non-employee member
of the Board will become exercisable in equal annual installments on the first
through third anniversaries of the date of grant; provided, however, each such
option will become immediately exercisable if the non-employee director ceases
to be a director because of death or disability.
7
<PAGE>
The Committee may award performance awards or cash awards under the
Incentive Plan, subject to restrictions and conditions and other terms as
determined by the Committee at the time of the award.
Federal Income Tax Effects
Under the Code, as presently in effect, if we grant an option under the
Incentive Plan, the participant does not receive income for federal tax
purposes and we do not receive a deduction.
Upon exercise of a non-qualified option, the participant will normally be
deemed to have received ordinary income in an amount equal to the difference
between the exercise price for the option and the fair market value of the
common stock on the exercise date. We will be entitled to a tax deduction in
the same amount as is recognized by the participant at the same time, provided
we include and report such amounts on a timely filed Form W-2 or Form 1099-
MISC. Upon a disposition of shares acquired upon exercise of a non-qualified
option, any amount received in excess of the market value of the shares at the
time of exercise of the option generally will be treated as long-term or
short-term capital gain, depending on the holding period of the shares. We
will not be entitled to any tax deduction upon such subsequent disposition.
In the case of incentive options, the participant does not recognize
ordinary income on the date of grant or exercise. If the participant holds the
stock acquired through exercise of an incentive option for one year from the
date of exercise and two years from the date of grant, the participant will
thereafter recognize capital gain or loss upon a subsequent sale of the stock,
based on the difference between the incentive option's exercise price and the
sale price. If the stock is sold before the requisite holding period, the
participant will recognize ordinary income based upon the difference between
the exercise price and the lesser of the sales price or the fair market value
upon the date of exercise. We generally will be allowed a business expense
deduction only if, and to the extent, the participant recognizes ordinary
income.
Vote Required; Directors' Recommendation
Re-approval of the Incentive Plan requires the affirmative vote of the
holders of a majority of the shares of common stock outstanding and present in
person or by proxy at the annual meeting. If the Incentive Plan is not re-
approved, the Board may nonetheless continue to grant awards under the
Incentive Plan. In such event, however, payments made to certain of our
executive officers may not be deductible for federal income tax purposes under
Code Section 162(m). The Board recommends that you vote FOR re-approval of the
Incentive Plan.
OTHER MATTERS TO COME BEFORE MEETING
If a shareholder properly brings any matter not described in this proxy
statement before the meeting, the persons named in the proxy card will vote
the shares at their discretion. At the time this proxy statement went to
press, we did not know of any other matters which might be presented for
shareholder action at the annual meeting.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board:
. establishes compensation programs for our executive officers designed to
attract, motivate and retain key executives responsible for our success;
. administers and maintains the compensation programs in a manner that will
benefit both our long-term interests and those of our shareholders; and
. determines the compensation of our Chief Executive Officer.
Four directors serve on the committee. We have never employed three of
these directors. The fourth member of the committee is our President, Chief
Executive Officer and Chairman, Robert P. Maher.
This report describes the philosophy that underlies the cash and equity-
based components of our executive compensation program. It also describes the
details of each element of the program and the rationale for compensation paid
to our Chief Executive Officer and our executive officers in general.
Compensation Philosophy and Objectives
The committee believes that our executive officer compensation should be
competitive and based on overall financial results, individual contributions
and teamwork that help build value for you. Within this overall philosophy,
the committee bases the compensation program on the following principles:
. Compensation levels for executive officers are benchmarked to the outside
market, using information from proxy materials of companies included in
the performance graph contained herein. The committee refers to
information in this material regarding two groups of companies: companies
with annual revenues of $250 million to $1 billion, with which we are
expected to compete for executive talent, and the companies included in
the performance graph, with which we can expect to compete for investors.
. The committee targets the total compensation opportunity to the upper
range of these companies. Executive officers may earn incremental amounts
above or below that level depending upon corporate and individual
performance. The committee considers it essential to our vitality that
the total compensation opportunity for executive officers remains
competitive with similar companies in order to attract and retain the
talent needed to manage and build our business.
. Compensation is tied to performance. A significant part of the total
compensation opportunity may only be earned if specific goals are met.
. The committee designs incentive compensation to reinforce the achievement
of both short- and long-term corporate objectives.
. Executives' interest in the business should be directly linked to the
interests and benefits received by our shareholders.
Process and Compensation Components
The committee determines the compensation for our Chief Executive Officer
by using its subjective judgment and taking into account both qualitative and
quantitative factors. No weights are assigned to such factors with respect to
any compensation component. The Chief Executive Officer makes the compensation
decisions for our other key executive officers. However, the committee may
make recommendations concerning these other officers.
In making compensation decisions, the committee considers compensation
practices and financial performance of companies in the Peer Group, as well as
other companies with annual revenues of $250 million to $1 billion. This
information provides guidance to the committee, but the committee does not
target total
9
<PAGE>
executive compensation or any component of executive compensation to any
particular point within, or outside, the range. However, the committee
believes it is appropriate to use the base salaries, total cash compensation
and long-term incentive awards as a framework for its compensation decisions.
Specific compensation for individual officers will vary because of subjective
factors considered by the committee unrelated to compensation practices of the
as described in the section above entitled "Compensation Philosophy and
Objectives."
The Peer Group is comprised of the following companies: American Management
Systems, Cambridge Technology Partners, Ciber, Inc., Computer Horizons
Corporation, Gartner Group, Inc., Diamond Technology Partners Incorporated,
Keane, Inc., Meta Group, Inc., Sapient Corporation, Technology Solutions
Company, and Whittman-Hart, Inc. The committee compares compensation and
financial performance to various groupings of these companies. All of these
companies are included in the performance peer group used for the shareholder
return performance graph contained herein.
The compensation program has three elements:
. annual base salary;
. annual bonuses, which are based on certain performance objectives; and
. awards under the Incentive Plan, which are based on both our performance
and individual performance.
The committee has approved these elements of compensation to ensure our
total compensation program is comparable to and competitive with that of other
companies of similar size.
Annual Compensation
Base Salary. Base salaries for executive officers are established based on
the scope of the duties and responsibilities of each officer's position. Peer
Group compensation practices are also taken into account. The base salary of
each executive officer is adjusted in or around April of each year.
Annual Bonuses. In July 1996, the Board approved a new compensation program
for executive officers based on certain financial performance criteria,
including revenue growth, profitability and percentage performance of target
goals. Executive officers can earn bonuses equal to between 0% to 125% of
their respective base salaries. The bonus payable, if any, is contingent upon
the attainment of objectives determined by the committee. Other senior
managers have similar bonus arrangements.
Bonuses are paid in cash as soon as determinable after the end of the
calendar year in which they were earned, but prior to March 15. The bonus is
forfeited if employment is terminated before the last day of the calendar year
in which it was earned.
Incentive Plan. The committee believes that stock options and other forms
of equity compensation are an important method of rewarding and motivating
management. In addition, equity compensation aligns management's interests
with those of our shareholders on a long-term basis. The committee recognizes
that we conduct our business in an increasingly competitive industry. In order
to remain highly competitive and at the same time pursue a high-growth
strategy, we must employ the best and most talented executives and managers
who possess demonstrated skills and experience. The committee believes that
stock options and other forms of equity compensation have given and continue
to give us a significant advantage in attracting and retaining such employees.
The committee believes the Incentive Plan is an important feature of our
executive compensation package. Under the Incentive Plan, options and other
forms of equity compensation may be granted to executive officers who are
expected to make important contributions to our future success. In determining
the size of stock option and other equity grants, the committee focuses
primarily on our performance and the perceived role of each executive in
accomplishing our performance objectives, as well as the satisfaction of
individual performance objectives.
10
<PAGE>
The committee intends to continue using stock options and other forms of
equity compensation as the primary long-term incentive for our executive
officers. Stock options and other equity awards generally provide rewards to
executives only to the extent our stock price increases after they are
granted. Thus, the committee feels that stock options and other equity awards
granted under the Incentive Plan provide executives with incentives that
closely align their interests with yours and encourage them to promote our
ongoing success.
Policy on Deductibility of Compensation
Code Section 162(m) prohibits us from deducting for federal income tax
purposes any amount paid in excess of $1,000,000 to either the chief executive
officer or any of the other four most highly paid executive officers.
Compensation above $1,000,000 may be deducted if it is "performance-based
compensation" within the meaning of the Code. The committee believes that our
current compensation arrangements, which are primarily based on performance,
are appropriate and in our best interest and your best interest, without
regard to tax considerations. Thus, if the tax laws or their interpretation
change or other circumstances occur which might make some portion of the
executive compensation non-deductible for federal tax purposes, the committee
does not plan to make significant changes in the basic philosophy and
practices reflected in our executive compensation program.
The committee believes our performance since our stock has been publicly
traded reflects the wisdom of our compensation philosophy.
Chief Executive Officer Compensation
The Chief Executive Officer's salary, bonus and long-term awards follow the
policies described above. For the 1998 fiscal year, Mr. Maher received
$463,000 in base salary payments. He was granted an option to acquire 375,000
shares of common stock under the Incentive Plan. Mr. Maher was awarded no
other bonus and received no matching payments and profit sharing under our
401(k) Plan.
The committee also approved the compensation of our other executive
officers for 1998, following the principles and procedures outlined in this
report/1/.
COMPENSATION COMMITTEE
Robert P. Maher
Peter B. Pond
Mitchell H. Saranow
- --------
/1/Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the
Securities and Exchange Commission, neither the "Compensation Committee Report
on Executive Compensation" nor the material under the caption "Shareholder
Return Performance Graph" shall be deemed to be filed with the SEC for
purposes of the Securities Exchange Act of 1934, as amended, nor shall such
report or such material be deemed to be incorporated by reference in any past
or future filing by the Company under the Exchange Act or the Securities Act
of 1933, as amended.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Maher has been a member of the Compensation Committee since January
1997. We did not have a Compensation Committee prior to January 1997. Prior to
January 1997, the entire Board made decisions with respect to executive officer
compensation.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on our common stock against The Nasdaq Stock Market U.S.
Index (the "Nasdaq Index") and the Peer Group. The graph assumes that $100 was
invested on October 4, 1996 (the effective date of our initial public offering)
at the initial public offering price of $10.67 per share, in each of our common
stock, the Nasdaq Index and the Peer Group. The graph also assumes that all
dividends were reinvested.
Note: The stock price performance shown below is not necessarily indicative
of future price performance.
Comparison of Cumulative Total Returns
Performance Graph for The Metzler Group, Inc.
Prepared by Media General Financial Services
Produced on April 16, 1999, including data to December 31, 1998
<TABLE>
<CAPTION>
Nasdaq Peer The Metzler
Measurement Period Index Group Group, Inc.
- ------------------ ------- ------- -----------
<S> <C> <C> <C>
Measurement Point--10/4/96.......................... $100.00 $100.00 $100.00
FYE 12/31/96........................................ $104.71 $106.27 $158.75
FYE 12/31/97........................................ $128.08 $137.02 $200.63
FYE 12/31/98........................................ $180.64 $124.70 $364.97
</TABLE>
- --------
Note: (a) The Peer Group is weighted by market capitalization.
(b) Two members of the Peer Group at FYE 12/31/97 ceased to be publicly traded
in 1998. Accordingly, Claremont Technology Group Inc. and Computer
Management SCI are not included in the current Peer Group.
12
<PAGE>
EXECUTIVE OFFICERS
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Robert P. Maher......... 49 Chairman of the Board, President, Chief Executive
Officer and nominee for director
Timothy D. Kingsbury.... 42 Chief Financial Officer and Treasurer
Barry S. Cain........... 56 Vice President and Chief Administrative Officer and
Director
Stephen J. Denari....... 46 Vice President--Corporate Development
Charles A. Demirjian.... 34 Vice President, General Counsel and Secretary
</TABLE>
Robert P. Maher has served as the Chief Executive Officer and President of
our holding company since inception and as our Chairman of the Board since
June 1996. From August 1990 to December 1995, Mr. Maher held various positions
with us, most recently as a Senior Vice President of Metzler & Associates,
Inc., one of our subsidiaries, working primarily in the information technology
area. From 1988 to August 1990, he organized and directed information
technology engagements for the regulated segment of the communications
industry practice as a principal with the consulting practice of Ernst & Young
LLP.
Timothy D. Kingsbury joined us in 1982 and has served as our Chief
Financial Officer and Treasurer since May 1999. Prior to becoming our Chief
Financial Officer, Mr. Kingsbury served as our Chief Accounting Officer and,
prior to that, as the Chief Financial Officer of Peterson Worldwide LLC, which
combined with us in a pooling transaction in August 1998. Mr. Kingsbury is a
certified public accountant.
Barry S. Cain has served as our Vice President and Chief Administrative
Officer since September 1997 and as a director since May 1998. Mr. Cain joined
us from his position as a member of the law firm of Sachnoff & Weaver, Ltd.,
where he was co-chairman of the firm's Business Group and a member of its
board of directors. Prior to joining us, Mr. Cain served as our outside
general counsel since inception.
Stephen J. Denari has served as our Vice President--Corporate Development
since June 1997. Prior to joining us, Mr. Denari served as a turn-around
specialist for a variety of companies, including Harley Davidson, DBMS, Inc.,
American Capital Enterprises, and First National Entertainment. Mr. Denari has
also assisted us since 1990 in various specialized projects for our clients.
Charles A. Demirjian has served as our General Counsel, Vice President and
Secretary since September 1997. Mr. Demirjian joined us from his position as a
member of the law firm of Sachnoff & Weaver, Ltd. Prior to joining Sachnoff &
Weaver, Ltd. in March 1996, Mr. Demirjian was an associate with the law firm
of Neal Gerber & Eisenberg.
13
<PAGE>
MANAGEMENT COMPENSATION
General
The following table sets forth compensation awarded or earned by our
President and Chief Executive Officer and the four other most highly paid
executive officers who earned more than $100,000 during the year ended
December 31, 1998:
Summary Compensation Table
<TABLE>
<CAPTION>
Options All Other
Name and Principal Fiscal Other Annual (No. of Compensation
Position Year Salary Bonus Compensation Shares) (1)
- ------------------ ------ -------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Maher......... 1996 $281,000 -- $ 15,648(2) -- $859,961
Chairman, President and 1997 411,250 -- 1,500(2) 150,000 --
Chief Executive Officer 1998 462,060 -- -- 375,000 --
Timothy D. Kingsbury.... 1996 192,708 2,400 -- -- --
Chief Financial Officer
and 1997 223,958 168,994 4,500(2) -- --
Treasurer (3) 1998 225,000 85,619 4,500(2) 6,000 --
Barry S. Cain........... 1997 150,000 --
Chief Administrative
Officer (4) 1998 300,000 -- 654,563(5) 37,500 --
Stephen J. Denari....... 1997 87,195 -- -- 153,000 --
Vice President--Corpo-
rate 1998 175,000 -- 1,425,813(5) 75,000 --
Development (6)
Charles A. Demirjian.... 1997 29,167 -- -- 75,000 --
Vice President and 1998 175,000 -- 654,563(5) 75,000 --
General Counsel (7)
James F. Hillman........ 1996 118,750 -- -- 115,500 --
Chief Financial 1997 206,250 -- 625(2) 37,500 --
Officer (8) 1998 250,000 -- 1,994,063(5) 75,000 --
</TABLE>
- --------
(1) Represents the proportionate share of our net income for the period
January 1, 1996 through October 3, 1996. Prior to January 1, 1996, we
operated as a C-corporation. Effective January 1, 1996, the shareholders
elected to be taxed under Subchapter S of the Code. As an S-corporation,
our profits are distributed to shareholders and we are not subject to
federal (and some state) income taxes. The S-corporation election
terminated in connection with the consummation of our initial public
offering of common stock on October 4, 1996.
(2) Represents matching payments and profit sharing under applicable 401(k)
Plan.
(3) Mr. Kingsbury became our Chief Financial Officer and Treasurer in May
1999. Prior to that, he was our Chief Accounting Officer and, prior to
that, the Chief Financial Officer and Treasurer of Peterson Worldwide LLC,
which combined with us in a pooling transaction in August 1998.
(4) Mr. Cain began his employment with us in September 1997.
(5) Consists of compensation resulting from the exercise of stock options.
(6) Mr. Denari began his employment with us in June 1997.
(7) Mr. Demirjian began his employment with us in September 1997.
(8) Mr. Hillman began his employment with us on April 15, 1996 and was our
Chief Financial Officer and Treasurer in 1998.
14
<PAGE>
Executive Option Grants
The following table sets forth the stock option grants we made to each of
the named executive officers in 1998.
Options Grants in Fiscal 1998
Individual Grants
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted to Exercise Grant
Options Employees in Price per Expiration Date
Name Granted Fiscal 1998 Share Date Value (1)
- ---- ---------- ------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Robert P. Maher......... 225,000(2) 6.34 $24.00 1/16/08 1,923,000
150,000(3) 4.23 29.13 10/7/08 1,555,000
Timothy D. Kingsbury(4). 6,000 0.16 28.00 9/1/08 62,000
Barry S. Cain........... 37,500(3) 1.06 29.13 10/7/08 390,000
Stephen J. Denari....... 37,500(5) 1.06 28.83 3/3/08 385,000
37,500(3) 1.06 29.13 10/7/08 390,000
Charles A. Demirjian.... 37,500(5) 1.06 28.83 3/3/08 385,000
37,500(3) 1.06 29.13 10/7/08 390,000
James F. Hillman........ 37,500(5) 1.06 28.83 3/3/08 385,000
37,500(3) 1.06 29.13 10/7/08 390,000
</TABLE>
- --------
(1) The fair value of the option grant is estimated as of the date of grant
using the Black-Scholes option pricing model. The following assumptions
were used:
<TABLE>
<S> <C>
Expected Volatility.............................................. 45%
Risk-free interest rate.......................................... 5.0%
Dividend yield................................................... 0%
Expected life.................................................... 3 years
Forfeiture rate.................................................. 20%
</TABLE>
(2) The options were granted on January 16, 1998 at the fair market value of
common stock on that date; 50% of these options became exercisable on
April 1, 1999, and the remainder become exercisable 25% on January 16,
2001 and 25% on January 16, 2002.
(3) The options were granted on October 8, 1998 at the fair market value of
common stock on that date and become exercisable 50% on October 8, 2000,
25% on October 8, 2001 and 25% on October 8, 2002.
(4) The options were granted on September 1, 1998 at the fair market value of
common stock on that date and become exercisable 50% on September 1, 2000,
25% on September 1, 2001 and 25% on September 1, 2002.
(5) The options were granted on March 3, 1998 at the fair market value of
common stock on that date and become exercisable 50% on March 3, 2000, 25%
on March 3, 2001 and 25% on March 3, 2002.
15
<PAGE>
Option Exercises and Holdings
The following table sets forth the value of unexercised options held by the
named executive officers on December 31, 1998. The named executive officers
exercised options to purchase 225,000 shares of common stock in 1998. The
approximate values for in-the-money options (which represent the positive
spread between the exercise price of any existing stock options and $48.69 per
share, the closing price of the common stock as reported by the Nasdaq
National Market on December 31, 1998) are also included.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Value of
Shares Underlying Unexercised
Shares Unexercised Options In-The-Money Options
Acquired on at Fiscal Year End (#) at Fiscal Year End ($)
Exercise Value ------------------------- -------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Maher......... -- -- -- 525,000 -- 13,792,000
Timothy D. Kingsbury.... -- -- -- 6,000 -- 124,000
Barry S. Cain........... 37,500 654,563 -- 150,000 -- 3,661,000
Stephen J. Denari....... 75,000 1,425,813 -- 153,000 -- 4,054,000
Charles A. Demirjian.... 37,500 654,563 -- 112,500 -- 2,454,000
James F. Hillman........ 75,000 1,994,063 -- 153,000 -- 4,227,000
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Peter B. Pond, one of our directors, is a principal of Donaldson, Lufkin &
Jenrette Securities Corporation. DLJ sometimes provides and in the past has
provided us with investment banking services. DLJ served as the lead manager
in our secondary offerings that were completed in March 1998 and November
1998. In connection with these offerings, the underwriting syndicates, of
which DLJ was a part, received underwriting fees equal to approximately $5.0
million. In addition, DLJ served as an advisor on certain transactions last
year and was paid fees of approximately $3.8 million for these services. In
April 1999, we agreed to accept notes for some or all of the exercise price of
vested options exercised by Messrs. Cain, Demirjian and Maher. The notes will
be delivered upon issuance of the shares, and amount of the notes and the
interest rate will be determined at that time.
16
<PAGE>
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND PRINCIPAL HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as of June 1, 1999 by: (i) each person we know to
own beneficially more than five percent of the outstanding shares of common
stock; (ii) each of our directors and nominees; (iii) each of the named
executive officers; and (iv) all of our directors and executive officers as a
group. (Each person named below has an address in care of our principal
executive offices.) We believe that each person named below has sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by such holder, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Shares Beneficially
Owned (1)
----------------------
Officers, Directors and 5% Shareholders Number Percent
--------------------------------------- ----------- ----------
<S> <C> <C>
Robert P. Maher(2)................................ 813,765 1.9%
Timothy D. Kingsbury.............................. 78,123 *
Barry S. Cain..................................... 19,884 *
Stephen J. Denari(3).............................. 1,500 *
Charles A. Demirjian.............................. 18,975 *
James F. Hillman(3)............................... 18,750 *
Peter B. Pond(3).................................. 24,750 *
Mitchell H. Saranow(4)............................ 27,750 *
James R. Thompson................................. -- *
All directors and executive officers as a group (8
persons)......................................... 984,747 2.3%
</TABLE>
- --------
* less than 1%
(1) Applicable percentage of ownership as of June 1, 1999 is based upon
approximately 42,400,000 shares of common stock outstanding. Beneficial
ownership is a technical term determined in accordance with the rules of
the SEC. Beneficial ownership generally means that a Shareholder can vote
or sell the stock either directly or indirectly.
(2) Excludes shares held by Mr. Maher's children, for which he disclaims
beneficial ownership.
(3) Consists of shares of common stock subject to options that are or become
exercisable within 60 days of June 1, 1999.
(4) Includes 24,750 shares of common stock subject to options that are or
become exercisable within 60 days of June 1, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act requires our directors and
executive officers, and any persons who own more than ten percent of our
common stock, to file with the SEC initial reports of ownership and reports of
changes in ownership of common stock. Such persons are required by SEC
regulations to send us copies of all Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports sent
to us and written representations that no other reports were required, during
the year ended December 31, 1998, all such Section 16(a) filing requirements
were complied with, except that Governor Thompson inadvertently filed his
Initial Statement of Beneficial Ownership on Form 3 late, filing it with the
Statement of Changes in Beneficial Ownership on Form 5 filed by our other
directors and executive officers in February 1999.
17
<PAGE>
SHAREHOLDER PROPOSALS FOR THE 1999 PROXY STATEMENT
If you wish to submit a proposal to be included in the proxy statement for
the 2000 annual meeting of Shareholders, you should submit the proposal in
writing to Secretary, The Metzler Group, Inc., to 615 N. Wabash, Chicago,
Illinois 60611. We must receive a proposal by February 22, 2000 in order to
consider it for inclusion in the proxy statement for the 2000 annual meeting
of Shareholders.
VOTING PROCEDURES
We count abstentions and broker non-votes to determine how many votes are
present at the annual meeting. You may vote either in favor of the nominee for
director or withhold your vote. You may vote for, against or abstain with
respect to the other matters to be voted upon at the Annual Meeting. Votes
that are withheld and broker non-votes will be excluded entirely from the vote
and will have no effect on the outcome.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick L.L.P., our independent public accountants, has audited
our financial statements for the fiscal year ended December 31, 1998. We
expect representatives of KPMG Peat Marwick L.L.P. to be present at the
meeting and to be available to respond to your questions. The KPMG Peat
Marwick L.L.P. representatives will be given an opportunity to make a
statement if they desire.
OTHER INFORMATION
If you would like a copy of our Annual Report on Form 10-K that we filed
with the SEC for 1998 (excluding exhibits), we will send you one without
charge. Please write to:
Investor Relations
The Metzler Group, Inc.
615 N. Wabash
Chicago, Illinois 60611
SOLICITATION OF PROXIES
We are soliciting the proxies solicited by this proxy statement. We will
pay all expenses incident to such solicitation of proxies. In addition to the
solicitation of proxies by mail, our directors, officers and/or employees may
solicit proxies in person or by telephone without additional compensation. We
also ask banks, brokers and other institutions, nominees and fiduciaries to
forward the proxy material to their principles to obtain authority to execute
proxies. We reimburse them for their expenses.
The above notice of annual meeting and proxy statement are sent by order of
the Board.
CHARLES A. DEMIRJIAN
Secretary
Chicago, Illinois
June 18, 1999
18
<PAGE>
ANNEX A
THE METZLER GROUP, INC.
LONG-TERM INCENTIVE PLAN
As Amended Through June 1, 1999
I. Purpose
The Metzler Group, Inc. Long-Term Incentive Plan is adopted June 30, 1996.
The Plan is designed to attract and retain selected Key Employees and Key Non-
Employees of the Company and its Affiliates, and reward them for making major
contributions to the success of the Company and its Affiliates. These
objectives are accomplished by making long-term incentive awards under the
Plan that will offer Participants an opportunity to have a greater proprietary
interest in, and closer identity with, the Company and its Affiliates and
their financial success.
The Awards may consist of:
(i) Incentive Options;
(ii) Nonstatutory Options;
(iii) Formula Options;
(iv) Restricted Stock;
(v) Rights;
(vi) Performance Awards; or
(vii) Cash Awards
or any combination of the foregoing, as the Committee may determine.
The Plan is intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code to the extent deemed
appropriate by the Committee. The Plan and the grant of Awards hereunder are
expressly conditioned upon the Plan's approval by the stockholders of the
Company. If such approval is not obtained, then this Plan and all Awards
hereunder shall be null and void ab initio.
II. Definitions
A. Affiliate means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association or other entity (other
than the Company) that, for purposes of Section 422 of the Code, is a parent
or subsidiary of the Company, direct or indirect.
B. Award means the grant to any Key Employee or Key Non-Employee of any
form of Option, Restricted Stock, Right, Performance Award, or Cash Award,
whether granted singly, in combination, or in tandem, and pursuant to such
terms, conditions, and limitations as the Committee may establish in order to
fulfill the objectives of the Plan.
C. Award Agreement means an agreement entered into between the Company and
a Participant under which an Award is granted and which sets forth the terms,
conditions, and limitations applicable to the Award.
D. Board means the Board of Directors of the Company.
E. Cash Award means an Award of cash, subject to the requirements of
Article XII and such other restrictions as the Committee deems appropriate or
desirable.
F. Code means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.
A-1
<PAGE>
G. Committee means the committee to which the Board delegates the power to
act under or pursuant to the provisions of the Plan, or the Board if no
committee is selected. If the Board delegates powers to a committee, and if the
Company is or becomes subject to Section 16 of the Exchange Act, then, if
necessary for compliance therewith, such committee shall consist initially of
not less than two (2) members of the Board, each member of which must be a
"non-employee director," within the meaning of the applicable rules promulgated
pursuant to the Exchange Act. If the Company is or becomes subject to Section
16 of the Exchange Act, no member of the Committee shall receive any Award
pursuant to the Plan or any similar plan of the Company or any Affiliate while
serving on the Committee, unless the Board determines that the grant of such an
Award satisfies the then current Rule 16b-3 requirements under the Exchange
Act. Notwithstanding anything herein to the contrary, and insofar as it is
necessary in order for compensation recognized by Participants pursuant to the
Plan to be fully deductible to the Company for federal income tax purposes,
each member of the Committee also shall be an "outside director" (as defined in
regulations or other guidance issued by the Internal Revenue Service under Code
Section 162(m)).
H. Common Stock means the common stock of the Company.
I. Company means, on the date the Plan is adopted, Metzler & Associates,
Inc., an Illinois corporation, provided, however, that The Metzler Group, Inc.
shall become the Company upon, or as soon as practicable after, the effective
date of the reorganization of the Company (pursuant to which reorganization
Metzler & Associates, Inc. shall become a one hundred percent (100%) subsidiary
of The Metzler Group, Inc.). For all purposes hereunder, Company includes any
successor or assignee corporation or corporations into which the Company may be
merged, changed, or consolidated; any corporation for whose securities the
securities of the Company shall be exchanged; and any assignee of or successor
to substantially all of the assets of the Company.
J. Disability or Disabled means a permanent and total disability as defined
in Section 22(e)(3) of the Code.
K. Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute thereto.
L. Fair Market Value means, if the Shares are listed on any national
securities exchange, the closing sales price, if any, on the largest such
exchange on the valuation date, or, if none, on the most recent trade date
immediately prior to the valuation date provided such trade date is no more
than thirty (30) days prior to the valuation date. If the Shares are not then
listed on any such exchange, the fair market value of such Shares shall be the
closing sales price if such is reported, or otherwise the mean between the
closing "Bid" and the closing "Ask" prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for the
valuation date, or if none, on the most recent trade date immediately prior to
the valuation date provided such trade date is no more than thirty (30) days
prior to the valuation date. If the Shares are not then either listed on any
such exchange or quoted in NASDAQ, or there has been no trade date within such
thirty (30) day period, the fair market value shall be the mean between the
average of the "Bid" and the average of the "Ask" prices, if any, as reported
in the National Daily Quotation System for the valuation date, or, if none, for
the most recent trade immediately prior to the valuation date provided such
trade date is no more than thirty (30) days prior to the valuation date. If the
fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Committee.
M. Formula Option means a Nonstatutory Option granted automatically to a
Non-Employee Board Member upon his or her initial election, and any subsequent
re-election, as a Non-Employee Board Member.
N. Incentive Option means an Option that, when granted, is intended to be an
"incentive stock option," as defined in Section 422 of the Code.
O. Key Employee means an employee of the Company or of an Affiliate who is
designated by the Committee as being eligible to be granted one or more Awards
under the Plan.
A-2
<PAGE>
P. Key Non-Employee means a Non-Employee Board Member, consultant, advisor
or independent contractor of the Company or of an Affiliate who is designated
by the Committee as being eligible to be granted one or more Awards under the
Plan.
Q. Non-Employee Board Member means a director of the Company who is not an
employee of the Company or any of its Affiliates.
R. Nonstatutory Option means an Option that, when granted, is not intended
to be an "incentive stock option," as defined in Section 422 of the Code.
S. Option means a right or option to purchase Common Stock, including
Restricted Stock if the Committee so determines.
T. Participant means a Key Employee or Key Non-Employee to whom one or more
Awards are granted under the Plan.
U. Performance Award means an Award subject to the requirements of Article
XI, and such performance conditions as the Committee deems appropriate or
desirable.
V. Plan means The Metzler Group, Inc. Long-Term Incentive Plan, as amended
from time to time.
W. Restricted Stock means an Award made in Common Stock or denominated in
units of Common Stock and delivered under the Plan, subject to the
requirements of Article IX, such other restrictions as the Committee deems
appropriate or desirable, and as awarded in accordance with the terms of the
Plan.
X. Right means a stock appreciation right delivered under the Plan, subject
to the requirements of Article X and as awarded in accordance with the terms
of the Plan.
Y. Shares means the following shares of the capital stock of the Company as
to which Options or Restricted Stock have been or may be granted under the
Plan and upon which Rights or units of Restricted Stock may be based: treasury
or authorized but unissued Common Stock, no par value, of the Company (or,
following the reorganization of the Company, treasury or authorized but
unissued Common Stock, $.01 par value, of the Company), or any shares of
capital stock into which the Shares are changed or for which they are
exchanged within the provisions of Article XVIII of the Plan.
III. Shares Subject to the Plan
The aggregate number of Shares as to which Awards may be granted from time
to time shall be 25% of the issued and outstanding shares of capital stock of
the Company from time to time outstanding; provided that no change in the
issued and outstanding capital stock shall cause the number of Shares as to
which Awards may be granted to decrease; provided, further, that no more than
5,500,000 Shares (as adjusted for stock splits, stock dividends and other
similar events) shall be available for the grant of Incentive Options
hereunder.
In accordance with Code Section 162(m), if applicable, the aggregate number
of Shares as to which Awards may be granted in any one calendar year to any
one Key Employee shall not exceed three hundred thousand (300,000) Shares
(subject to adjustment for stock splits, stock dividends, and other
adjustments described in Article XVIII hereof).
From time to time, the Committee and appropriate officers of the Company
shall take whatever actions are necessary to file required documents with
governmental authorities and stock exchanges so as to make Shares available
for issuance pursuant to the Plan. Shares subject to Awards that are
exercised, are forfeited, terminated, expired unexercised, canceled by
agreement of the Company and the Participant, settled in cash in lieu of
Common Stock or in such manner that all or some of the Shares covered by such
Awards are not issued to a
A-3
<PAGE>
Participant, or are exchanged for Awards that do not involve Common Stock,
shall immediately become available for Awards. Awards payable in cash shall
not reduce the number of Shares available for Awards under the Plan.
Except as otherwise set forth herein, the aggregate number of Shares as to
which Awards may be granted shall be subject to change only by means of an
amendment of the Plan duly adopted by the Company and approved by the
stockholders of the Company within one year before or after the date of the
adoption of the amendment.
IV. Administration of the Plan
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum at any meeting thereof (including by
telephone conference) and the acts of a majority of the members present, or
acts approved in writing by a majority of the entire Committee without a
meeting, shall be the acts of the Committee for purposes of this Plan. The
Committee may authorize one or more of its members or an officer of the
Company to execute and deliver documents on behalf of the Committee. A member
of the Committee shall not exercise any discretion respecting himself or
herself under the Plan. The Board shall have the authority to remove, replace
or fill any vacancy of any member of the Committee upon notice to the
Committee and the affected member. Any member of the Committee may resign upon
notice to the Board. The Committee may allocate among one or more of its
members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines. Subject to the provisions of the Plan, the
Committee is authorized to:
A. Interpret the provisions of the Plan and any Award or Award
Agreement, and make all rules and determinations that it deems necessary or
advisable to the administration of the Plan;
B. Determine which employees of the Company or an Affiliate shall be
designated as Key Employees and which of the Key Employees shall be granted
Awards;
C. Determine the Key Non-Employees to whom Awards, other than Incentive
Options and Performance Awards for which Key Non-Employees shall not be
eligible, shall be granted;
D. Determine whether an Option to be granted shall be an Incentive
Option or Nonstatutory Option;
E. Determine the number of Shares for which an Option or Restricted
Stock shall be granted;
F. Determine the number of Rights, the Cash Award or the Performance
Award to be granted;
G. Provide for the acceleration of the right to exercise any Award,
other than an Award for Formula Options, which may not be accelerated; and
H. Specify the terms, conditions, and limitations upon which Awards may
be granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be made
and prescribed in the context of preserving the tax status of the Incentive
Options as incentive stock options within the meaning of Section 422 of the
Code.
The Committee may delegate to the chief executive officer and to other
senior officers of the Company or its Affiliates its duties under the Plan
pursuant to such conditions or limitations as the Committee may establish,
except that only the Committee may select, and grant Awards to, Participants
who are subject to Section 16 of the Exchange Act. All determinations of the
Committee shall be made by a majority of its members. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Award.
The Committee shall have the authority at any time to cancel Awards for
reasonable cause and to provide for the conditions and circumstances under
which Awards shall be forfeited.
A-4
<PAGE>
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company
and the Participants. No determination shall be subject to de novo review if
challenged in court.
V. Eligibility for Participation
Awards may be granted under this Plan only to Key Employees and Key Non-
Employees of the Company or its Affiliates. The foregoing notwithstanding, each
Participant receiving an Incentive Option must be a Key Employee of the Company
or of an Affiliate at the time the Incentive Option is granted.
The Committee may at any time and from time to time grant one or more Awards
to one or more Key Employees or Key Non-Employees and may designate the number
of Shares, if applicable, to be subject to each Award so granted, provided,
however that no Incentive Option shall be granted after the expiration of ten
(10) years from the earlier of the date of the adoption of the Plan by the
Company or the approval of the Plan by the stockholders of the Company, and
provided further, that the Fair Market Value of the Shares (determined at the
time the Option is granted) as to which Incentive Options are exercisable for
the first time by any Key Employee during any single calendar year (under the
Plan and under any other incentive stock option plan of the Company or an
Affiliate) shall not exceed One Hundred Thousand Dollars ($100,000). To the
extent that the Fair Market Value of such Shares exceeds One Hundred Thousand
Dollars ($100,000), the Shares subject to Option in excess of One Hundred
Thousand Dollars ($100,000) shall, without further action by the Committee,
automatically be converted to Nonstatutory Options.
Notwithstanding any of the foregoing provisions, the Committee may authorize
the grant of an Award to a person not then in the employ of, or engaged by, the
Company or of an Affiliate, conditioned upon such person becoming eligible to
be granted an Award at or prior to the execution of the Award Agreement
evidencing the actual grant of such Award.
VI. Awards Under this Plan
As the Committee may determine, the following types of Awards may be granted
under the Plan on a stand alone, combination, or tandem basis:
A. Incentive Option
An Award in the form of an Option that shall comply with the requirements of
Section 422 of the Code. Subject to adjustments in accordance with the
provisions of Article XVIII, the aggregate number of Shares that may be subject
to Incentive Options under the Plan shall not exceed one million three hundred
thousand (1,300,000).
B. Nonstatutory Option
An Award in the form of an Option that shall not be intended to comply with
the requirements of Section 422 of the Code.
C. Formula Option
An Award in the form of an Option granted to a Non-Employee Board Member at
the time of his or her initial election to the Board, or any subsequent re-
election.
A-5
<PAGE>
D. Restricted Stock
An Award made to a Participant in Common Stock or denominated in units of
Common Stock, subject to future service and such other restrictions and
conditions as may be established by the Committee, and as set forth in the
Award Agreement, including but not limited to continuous service with the
Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance.
E. Stock Appreciation Right
An Award in the form of a Right to receive the excess of the Fair Market
Value of a Share on the date the Right is exercised over the Fair Market Value
of a Share on the date the Right was granted.
F. Performance Awards
An Award made to a Participant that is subject to performance conditions
specified by the Committee, including but not limited to continuous service
with the Company or its Affiliates, achievement of specific business
objectives, increases in specified indices, attaining growth rates, and other
measurements of Company or Affiliate performance.
G. Cash Awards
An Award made to a Participant and denominated in cash, with the eventual
payment subject to future service and such other restrictions and conditions as
may be established by the Committee, and as set forth in the Award Agreement.
Each Award under the Plan shall be evidenced by an Award Agreement. Delivery of
an Award Agreement to each Participant shall constitute an agreement between
the Company and the Participant as to the terms and conditions of the Award.
VII. Terms and Conditions of Incentive Options and Nonstatutory Options
Each Option shall be set forth in an Award Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is granted.
Except for the setting of the Option price under Paragraph A, no Option shall
be granted and no purported grant of any Option shall be effective until such
Award Agreement shall have been duly executed on behalf of the Company and by
the Participant. Each such Award Agreement shall be subject to at least the
following terms and conditions:
A. Option Price
The purchase price of the Shares covered by each Option granted under the
Plan shall be determined by the Committee. The Option price per share of the
Shares covered by each Nonstatutory Option shall be at such amount as may be
determined by the Committee in its sole discretion on the date of the grant of
the Option. In the case of an Incentive Option, if the Participant owns
directly or by reason of the applicable attribution rules ten percent (10%) or
less of the total combined voting power of all classes of share capital of the
Company, the Option price per share of the Shares covered by each Incentive
Option shall be not less than the Fair Market Value of the Shares on the date
of the grant of the Incentive Option. In all other cases of Incentive Options,
the Option price shall be not less than one hundred ten percent (110%) of the
Fair Market Value on the date of grant.
B. Number of Shares
Each Option shall state the number of Shares to which it pertains.
A-6
<PAGE>
C. Term of Option
Each Incentive Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Award Agreement may
provide, and shall be subject to earlier termination as herein provided,
except that if the Option price is required under Paragraph A of this Article
VII to be at least one hundred ten percent (110%) of Fair Market Value, each
such Incentive Option shall terminate not more than five (5) years from the
date of the grant thereof, and shall be subject to earlier termination as
herein provided. The Committee shall determine the time at which a
Nonstatutory Option shall terminate.
D. Date of Exercise
Upon the authorization of the grant of an Option, or at any time
thereafter, the Committee may, subject to the provisions of Paragraph C of
this Article VII, prescribe the date or dates on which the Option becomes
exercisable, and may provide that the Option become exercisable in
installments over a period of years, or upon the attainment of stated goals.
E. Medium of Payment
The Option price shall be payable upon the exercise of the Option, as set
forth in Paragraph I. It shall be payable in such form (permitted by Section
422 of the Code in the case of Incentive Options) as the Committee shall,
either by rules promulgated pursuant to the provisions of Article IV of the
Plan, or in the particular Award Agreement, provide.
F. Termination of Employment
1. A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate for any reason other than death, Disability, or
termination "for cause," as defined in subparagraph (2) below, may exercise
any Option granted to such Participant, to the extent that the right to
purchase Shares thereunder has become exercisable on the date of such
termination, but only within three (3) months after such date, or, if
earlier, within the originally prescribed term of the Option. A
Participant's employment shall not be deemed terminated by reason of a
transfer to another employer that is the Company or an Affiliate.
2. A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate "for cause" shall, upon such termination, cease
to have any right to exercise any Option. For purposes of this Plan, cause
shall mean (i) a Participant's theft or embezzlement, or attempted theft or
embezzlement, of money or property of the Company, a Participant's
perpetration or attempted perpetration of fraud, or a Participant's
participation in a fraud or attempted fraud, the Company or a Participant's
unauthorized appropriation of, or a Participant's attempt to
misappropriate, any tangible or intangible assets or property of the
Company; (ii) any act or acts of disloyalty, dishonesty, misconduct, moral
turpitude, or any other act or acts by a Participant injurious to the
interest, property, operations, business or reputation of the Company;
(iii) a Participant's commission of a felony or any other crime the
commission of which results in injury to the Company; or (iv) any violation
of any restriction on the disclosure or use of confidential information of
the Company or on competition with the Company or any of its businesses as
then conducted. The determination of the Committee as to the existence of
cause shall be conclusive and binding upon the Participant and the Company.
3. A Participant who is absent from work with the Company or an
Affiliate because of temporary disability (any disability other than a
Disability), or who is on leave of absence for any purpose permitted by any
authoritative interpretation (i.e., regulation, ruling, case law, etc.) of
Section 422 of the Code, shall not, during the period of any such absence,
be deemed, by virtue of such absence alone, to have terminated his or her
employment or relationship with the Company or with an Affiliate, except as
the Committee may otherwise expressly provide or determine.
4. Paragraph F(1) shall control and fix the rights of a Participant
who ceases to be an employee or Key Non-Employee of the Company or of an
Affiliate for any reason other than Disability, death, or
A-7
<PAGE>
termination "for cause," and who subsequently becomes Disabled or dies.
Nothing in Paragraphs G and H of this Article VII shall be applicable in
any such case except that, in the event of such a subsequent Disability or
death within the three (3) month period after the termination of employment
or, if earlier, within the originally prescribed term of the Option, the
Participant or the Participant's estate or personal representative may
exercise the Option permitted by this Paragraph F within twelve (12) months
after the date of Disability or death of such Participant, but in no event
beyond the originally prescribed term of the Option.
G. Total and Permanent Disability
A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate by reason of Disability may exercise any Option
granted to such Participant (i) to the extent that the right to purchase Shares
thereunder has become exercisable on or before the date such Participant
becomes Disabled as determined by the Committee, and (ii) if the Option becomes
exercisable periodically, to the extent of any additional rights that would
have become exercisable had the Participant not become so Disabled until after
the close of business on the next periodic exercise date.
A Disabled Participant shall exercise such rights, if at all, only within a
period of not more than twelve (12) months after the date that the Participant
became Disabled as determined by the Committee (notwithstanding that the
Participant might have been able to exercise the Option as to some or all of
the Shares on a later date if the Participant had not become Disabled) or, if
earlier, within the originally prescribed term of the Option.
H. Death
In the event that a Participant to whom an Option has been granted ceases to
be an employee or Key Non-Employee of the Company or of an Affiliate by reason
of such Participant's death, such Option, to the extent that the right is
exercisable but not exercised on the date of death, may be exercised by the
Participant's estate or personal representative within twelve (12) months after
the date of death of such Participant or, if earlier, within the originally
prescribed term of the Option, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later
date if the Participant were alive and had continued to be an employee or Key
Non-Employee of the Company or of an Affiliate.
I. Exercise of Option and Issuance of Stock
Options shall be exercised by giving written notice to the Company. Such
written notice shall: (i) be signed by the person exercising the Option, (ii)
state the number of Shares with respect to which the Option is being exercised,
(iii) contain the warranty required by paragraph M of this Article VII, if
applicable, and (iv) specify a date (other than a Saturday, Sunday or legal
holiday) not less than five (5) nor more than ten (10) days after the date of
such written notice, as the date on which the Shares will be purchased. Such
tender and conveyance shall take place at the principal office of the Company
during ordinary business hours, or at such other hour and place agreed upon by
the Company and the person or persons exercising the Option. On the date
specified in such written notice (which date may be extended by the Company in
order to comply with any law or regulation that requires the Company to take
any action with respect to the Option Shares prior to the issuance thereof),
the Company shall accept payment for the Option Shares in cash, by bank or
certified check, by wire transfer, or by such other means as may be approved by
the Committee and shall deliver to the person or persons exercising the Option
in exchange therefor an appropriate certificate or certificates for fully paid
nonassessable Shares or undertake to deliver certificates within a reasonable
period of time. In the event of any failure to take up and pay for the number
of Shares specified in such written notice on the date set forth therein (or on
the extended date as above provided), the right to exercise the Option shall
terminate with respect to such number of Shares, but shall continue with
respect to the remaining Shares covered by the Option and not yet acquired
pursuant thereto.
If approved in advance by the Committee, payment in full or in part also may
be made (i) by delivering Shares already owned by the Participant having a
total Fair Market Value on the date of such delivery equal to
A-8
<PAGE>
the Option price; (ii) by the execution and delivery of a note or other
evidence of indebtedness (and any security agreement thereunder) satisfactory
to the Committee; (iii) by authorizing the Company to retain Shares that
otherwise would be issuable upon exercise of the Option having a total Fair
Market Value on the date of delivery equal to the Option price; (iv) by the
delivery of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise indicated an intent
to exercise an Option (in accordance with part 220, Chapter II, Title 12 of the
Code of Federal Regulations, a so-called "cashless" exercise); or (v) by any
combination of the foregoing.
J. Rights as a Stockholder
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to such
Shares as have been registered in the Company's share register in the name of
such Participant upon the due exercise of the Option and tender of the full
Option price.
K. Assignability and Transferability of Option
Unless otherwise permitted by the Code and by Rule 16b-3 of the Exchange
Act, if applicable, and approved in advance by the Committee, an Option granted
to a Participant shall not be transferable by the Participant and shall be
exercisable, during the Participant's lifetime, only by such Participant or, in
the event of the Participant's incapacity, his guardian or legal
representative. Except as otherwise permitted herein, such Option shall not be
assigned, pledged, or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process and any attempted transfer, assignment, pledge, hypothecation or other
disposition of any Option or of any rights granted thereunder contrary to the
provisions of this Paragraph K, or the levy of any attachment or similar
process upon an Option or such rights, shall be null and void.
L. Other Provisions
The Award Agreement for an Incentive Option shall contain such limitations
and restrictions upon the exercise of the Option as shall be necessary in order
that such Option can be an "incentive stock option" within the meaning of
Section 422 of the Code. Further, the Award Agreements authorized under the
Plan shall be subject to such other terms and conditions including, without
limitation, restrictions upon the exercise of the Option, as the Committee
shall deem advisable and which, in the case of Incentive Options, are not
inconsistent with the requirements of Section 422 of the Code.
M. Purchase for Investment
If Shares to be issued upon the particular exercise of an Option shall not
have been effectively registered under the Securities Act of 1933, as now in
force or hereafter amended, the Company shall be under no obligation to issue
the Shares covered by such exercise unless and until the following conditions
have been fulfilled. The person who exercises such Option shall warrant to the
Company that, at the time of such exercise, such person is acquiring his or her
Option Shares for investment and not with a view to, or for sale in connection
with, the distribution of any such Shares, and shall make such other
representations, warranties, acknowledgements, and affirmations, if any, as the
Committee may require. In such event, the person acquiring such Shares shall be
bound by the provisions of the following legend (or similar legend) which shall
be endorsed upon the certificate(s) evidencing his or her Option Shares issued
pursuant to such exercise.
"The shares represented by this certificate have been acquired for
investment and they may not be sold or otherwise transferred by any person,
including a pledgee, in the absence of an effective registration statement
for the shares under the Securities Act of 1933 or an opinion of counsel
satisfactory to the Company that an exemption from registration is then
available."
"The shares of stock represented by this certificate are subject to all
of the terms and conditions of a certain Stockholders' Agreement dated as
of , 199 , among the Company and certain of its
A-9
<PAGE>
stockholders. A copy of the Agreement is on file in the office of the
Secretary of the Company. The Agreement provides, among other things, for
restrictions upon the holder's right to transfer the shares represented
hereby, and for certain prior rights to purchase and certain obligations to
sell the shares of common stock evidenced by this certificate at a
designated purchase price determined in accordance with certain procedures.
Any attempted transfer of these shares other than in compliance with the
Agreement shall be void and of no effect. By accepting the shares of stock
evidenced by this certificate, any permitted transferee agrees to be bound
by all of the terms and conditions of said Agreement."
Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any action or obtaining any consent
that the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
VIII. Formula Options
A. Each Non-Employee Board Member shall be granted automatically a Formula
Option to purchase nine thousand (9,000) Shares upon his or her initial
election and qualification for a three (3) year term as a Non-Employee Board
Member, and, thereafter, shall be granted automatically a Formula Option to
purchase nine thousand (9,000) Shares upon each re-election and qualification
as a Non-Employee Board Member. The foregoing notwithstanding, and in lieu
thereof, each Non-Employee Board Member whose election is for a term of less
than three (3) years shall be granted automatically a Formula Option to
purchase three thousand (3,000) Shares for each year of his or her term.
B. The purchase price of the Shares subject to the Formula Option shall be
equal to one hundred percent (100%) of the Fair Market Value as of the date of
grant.
C. The Shares subject to the Formula Option granted to a Non-Employee Board
Member shall become exercisable cumulatively, in accordance with the following
schedule:
<TABLE>
<CAPTION>
Cumulative Number of Shares
for Which Formula Option
Years Elapsed Since Date of Grant May be Exercised
--------------------------------- ---------------------------
<S> <C>
Less than 1................................... 0
1............................................. 3,000
2............................................. 6,000
3 or more..................................... 9,000
</TABLE>
The foregoing schedule notwithstanding, if a Non-Employee Board Member shall
cease to be a director of the Company because of death or Disability, all
Shares for which a Formula Option has been granted shall become immediately
exercisable and shall be exercisable in accordance with Paragraphs G and H of
Article VII. If a Non-Employee Board Member ceases to be a director of the
Company for any reason other than death or Disability, his or her right to
exercise the Formula Option, and the timing of such exercise, shall be governed
by the applicable provisions of Paragraph F of Article VII.
D. Formula Options shall be evidenced by an Award Agreement which shall
conform to the requirements of the Plan, and may contain such other provisions
not inconsistent therewith, as the Committee shall deem advisable. The
provisions of Article VII governing Nonstatutory Options, and the exercise and
issuance thereof, shall apply to Formula Options to the extent such provisions
are not inconsistent with this Article VIII.
IX. Required Terms and Conditions of Restricted Stock
A. The Committee may from time to time grant an Award in Shares of Common
Stock or grant an Award denominated in units of Common Stock, for such
consideration, if any, as the Committee deems appropriate (which amount may be
less than the Fair Market Value of the Common Stock on the date of the Award),
and subject to such restrictions and conditions and other terms as the
Committee may determine at the time of the
A-10
<PAGE>
Award (including, but not limited to, continuous service with the Company or
its Affiliates, achievement of specific business objectives, increases in
specified indices, attaining growth rates, and other measurements of Company
or Affiliate performance), and subject further to the general provisions of
the Plan, the applicable Award Agreement, and the following specific rules.
B. If Shares of Restricted Stock are awarded, such Shares cannot be
assigned, sold, transferred, pledged, or hypothecated prior to the lapse of
the restrictions applicable thereto, and, in no event, prior to six (6) months
from the date of the Award. The Company shall issue, in the name of the
Participant, stock certificates representing the total number of Shares of
Restricted Stock awarded to the Participant, as soon as may be reasonably
practicable after the grant of the Award, which certificates shall be held by
the Secretary of the Company as provided in Paragraph G.
C. Restricted Stock issued to a Participant under the Plan shall be
governed by an Award Agreement that shall specify whether Shares of Common
Stock are awarded to the Participant, or whether the Award shall be one not of
Shares of Common Stock but one denominated in units of Common Stock, any
consideration required thereto, and such other provisions as the Committee
shall determine.
D. Subject to the provisions of Paragraphs B and E hereof and the
restrictions set forth in the related Award Agreement, the Participant
receiving an Award of Shares of Restricted Stock shall thereupon be a
stockholder with respect to all of the Shares represented by such certificate
or certificates and shall have the rights of a stockholder with respect to
such Shares, including the right to vote such Shares and to receive dividends
and other distributions made with respect to such Shares. All Common Stock
received by a Participant as the result of any dividend on the Shares of
Restricted Stock, or as the result of any stock split, stock distribution, or
combination of the Shares affecting Restricted Stock, shall be subject to the
restrictions set forth in the related Award Agreement.
E. Restricted Stock awarded to a Participant pursuant to the Plan will be
forfeited, and any Shares of Restricted Stock or units of Restricted Stock
sold to a Participant pursuant to the Plan may, at the Company's option, be
resold to the Company for an amount equal to the price paid therefor, and in
either case, such Restricted Stock shall revert to the Company, if the Company
so determines in accordance with Article XIV or any other condition set forth
in the Award Agreement, or, alternatively, if the Participant's employment
with the Company or its Affiliates terminates, other than for reasons set
forth in Article XIII, prior to the expiration of the forfeiture or
restriction provisions set forth in the Award Agreement.
F. The Committee, in its discretion, shall have the power to accelerate the
date on which the restrictions contained in the Award Agreement shall lapse
with respect to any or all Restricted Stock awarded under the Plan.
G. The Secretary of the Company shall hold the certificate or certificates
representing Shares of Restricted Stock issued under the Plan, properly
endorsed for transfer, on behalf of each Participant who holds such Shares,
until such time as the Shares of Restricted Stock are forfeited, resold to the
Company, or the restrictions lapse. Any Restricted Stock denominated in units
of Common Stock, if not previously forfeited, shall be payable in accordance
with Article XV as soon as practicable after the restrictions lapse.
H. The Committee may prescribe such other restrictions, conditions, and
terms applicable to Restricted Stock issued to a Participant under the Plan
that are neither inconsistent with nor prohibited by the Plan or the Award
Agreement, including, without limitation, terms providing for a lapse of the
restrictions of this Article or any Award Agreement in installments.
X. Required Terms and Conditions of Stock Appreciation Rights
If deemed by the Committee to be in the best interests of the Company, a
Participant may be granted a Right. Each Right shall be granted subject to
such restrictions and conditions and other terms as the Committee
A-11
<PAGE>
may specify in the Award Agreement at the time the Right is granted, subject to
the general provisions of the Plan, and the following specific rules.
A. Rights may be granted, if at all, either singly, in combination with
another Award, or in tandem with another Award. At the time of grant of a
Right, the Committee shall specify the base price of Common Stock to be used in
connection with the calculation described in Paragraph B below, provided that
the base price shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share of Common Stock on the date of grant, unless approved
by the Board.
B. Upon exercise of a Right, which shall be not less than six (6) months
from the date of the grant, the Participant shall be entitled to receive in
accordance with Article XV, and as soon as practicable, the excess of the Fair
Market Value of one Share of Common Stock on the date of exercise over the base
price specified in such Right, multiplied by the number of Shares of Common
Stock then subject to the Right, or the portion thereof being exercised.
C. Notwithstanding anything herein to the contrary, if the Award granted to
a Participant allows him or her to elect to cancel all or any portion of an
unexercised Option by exercising an additional or tandem Right, then the Option
price per Share of Common Stock shall be used as the base price specified in
Paragraph A to determine the value of the Right upon such exercise and, in the
event of the exercise of such Right, the Company's obligation with respect to
such Option or portion thereof shall be discharged by payment of the Right so
exercised. In the event of such a cancellation, the number of Shares as to
which such Option was canceled shall become available for use under the Plan,
less the number of Shares, if any, received by the Participant upon such
cancellation in accordance with Article XV.
D. A Right may be exercised only by the Participant (or, if applicable under
Article XIII, by a legatee or legatees of such Right, or by the Participant's
executors, personal representatives, or distributees).
XI. Performance Awards
A. A Participant may be granted an Award that is subject to performance
conditions specified by the Committee. The Committee may use business criteria
and other measures of performance it deems appropriate in establishing any
performance conditions (including, but not limited to, continuous service with
the Company or its Affiliates, achievement of specific business objectives,
increases in specified indices, attaining growth rates, and other measurements
of Company or Affiliate performance), and may exercise its discretion to reduce
or increase the amounts payable under any Award subject to performance
conditions, except as otherwise limited under Paragraphs C and D, below, in the
case of a Performance Award intended to qualify under Code Section 162(m).
B. Any Performance Award will be forfeited if the Company so determines in
accordance with Article XIV or any other condition set forth in the Award
Agreement, or, alternatively, if the Participant's employment with the Company
or its Affiliates terminates, other than for reasons set forth in Article XIII,
prior to the expiration of the time period over which the performance
conditions are to be measured.
C. If the Committee determines that a Performance Award to be granted to a
Key Employee should qualify as "performance-based compensation" for purposes of
Code Section 162(m), the grant and/or settlement of such Performance Award
shall be contingent upon achievement of preestablished performance goals and
other terms set forth in this Paragraph C.
1. Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to such criteria, as
specified by the Committee consistent with this Paragraph C. Performance
goals shall be objective and shall otherwise meet the requirements of Code
Section 162(m), including the requirement that the level or levels of
performance targeted by the Committee result in the performance goals being
"substantially uncertain." The Committee may determine that more than one
performance goal must be achieved as a condition to
A-12
<PAGE>
settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.
2. Business Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified Affiliates or
business units of the Company (except with respect to the total stockholder
return and earnings per share criteria), shall be used exclusively by the
Committee in establishing performance goals for such Performance Awards:
(1) total stockholder return; (2) such total stockholder return as compared
to the total return (on a comparable basis) of a publicly available index
such as, but not limited to, the Standard & Poor's 500 or the Nasdaq-U.S.
Index; (3) net income; (4) pre-tax earnings; (5) EBITDA; (6) pre-tax
operating earnings after interest expense and before bonuses, service fees,
and extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating income, excluding the effect of charges for
acquired in-process technology and before payment of executive bonuses;
(13) earnings per share, excluding the effect of charges for acquired in-
process technology and before payment of executive bonuses; (14) working
capital; and (15) total revenues. The foregoing business criteria also may
be used in establishing performance goals for Cash Awards granted under
Article XII hereof.
3. Compensation Limitation. No Key Employee may receive a Performance
Award in excess of $2,400,000 for any three (3) year period.
D. Achievement of performance goals in respect of such Performance Awards
shall be measured over such periods as may be specified by the Committee.
Performance goals shall be established on or before the dates that are required
or permitted for "performance-based compensation" under Code Section 162(m).
E. Settlement of Performance Awards may be in cash or Shares, or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards, but may not exercise discretion to
increase any such amount payable in respect of a Performance Award subject to
Code Section 162(m).
XII. Required Terms and Conditions of Cash Awards
A. The Committee may from time to time authorize the award of cash payments
under the Plan to Participants, subject to such restrictions and conditions and
other terms as the Committee may determine at the time of authorization
(including, but not limited to, continuous service with the Company or its
Affiliates, achievement of specific business objectives, increases in specified
indices, attaining growth rates, and other measurements of Company or Affiliate
performance), and subject to the general provisions of the Plan, the applicable
Award Agreement, and the following specific rules.
B. Any Cash Award will be forfeited if Company so determines in accordance
with Article XIV or any other condition set forth in the Award Agreement, or,
alternatively, if the Participant's employment with the Company or its
Affiliates terminates, other than for reasons set forth in Article XIII, prior
to the attainment of any goals set forth in the Award Agreement or prior to the
expiration of the forfeiture or restriction provisions set forth in the Award
Agreement, whichever is applicable.
C. The Committee, in its discretion, shall have the power to change the date
on which the restrictions contained in the Award Agreement shall lapse, or the
date on which goals are to be measured, with respect to any Cash Award.
D. Any Cash Award, if not previously forfeited, shall be payable in
accordance with Article XV as soon as practicable after the restrictions lapse
or the goals are attained.
E. The Committee may prescribe such other restrictions, conditions, and
terms applicable to the Cash Awards issued to a Participant under the Plan that
are neither inconsistent with nor prohibited by the Plan or the Award
Agreement, including, without limitation, terms providing for a lapse of the
restrictions, or a measurement of the goals, in installments.
A-13
<PAGE>
XIII. Termination of Employment
Except as may otherwise be (i) provided in Article VII for Options, (ii)
provided for under the Award Agreement, or (iii) permitted pursuant to
Paragraphs A through C of this Article XIII (subject to the limitations under
the Code for Incentive Options), if the employment of a Participant terminates,
all unexpired, unpaid, unexercised, or deferred Awards shall be canceled
immediately.
A. Retirement under a Company or Affiliate Retirement Plan. When a
Participant's employment terminates as a result of retirement as defined under
a Company or Affiliate retirement plan, the Committee may permit Awards to
continue in effect beyond the date of retirement in accordance with the
applicable Award Agreement, and/or the exercisability and vesting of any Award
may be accelerated.
B. Resignation in the Best Interests of the Company or an Affiliate. When a
Participant resigns from the Company or an Affiliate and, in the judgment of
the chief executive officer or other senior officer designated by the
Committee, the acceleration and/or continuation of outstanding Awards would be
in the best interests of the Company, the Committee may (i) authorize, where
appropriate, the acceleration and/or continuation of all or any part of Awards
granted prior to such termination and (ii) permit the exercise, vesting, and
payment of such Awards for such period as may be set forth in the applicable
Award Agreement, subject to earlier cancellation pursuant to Article XIV or at
such time as the Committee shall deem the continuation of all or any part of
the Participant's Awards are not in the Company's or its Affiliate's best
interests.
C. Death or Disability of a Participant
1. In the event of a Participant's death, the Participant's estate or
beneficiaries shall have a period up to the earlier of (i) the expiration
date specified in the Award Agreement, or (ii) the expiration date
specified in Paragraph H of Article VII, within which to receive or
exercise any outstanding Awards held by the Participant under such terms as
may be specified in the applicable Award Agreement. Rights to any such
outstanding Awards shall pass by will or the laws of descent and
distribution in the following order: (a) to beneficiaries so designated by
the Participant; (b) to a legal representative of the Participant; or (c)
to the persons entitled thereto as determined by a court of competent
jurisdiction. Awards so passing shall be made at such times and in such
manner as if the Participant were living.
2. In the event a Participant is determined by the Company to be
Disabled, and subject to the limitations of Paragraph G of Article VII,
Awards may be paid to, or exercised by, the Participant, if legally
competent, or by a legally designated guardian or other representative if
the Participant is legally incompetent by virtue of such Disability.
3. After the death or Disability of a Participant, the Committee may in
its sole discretion at any time (i) terminate restrictions in Award
Agreements; (ii) accelerate any or all installments and rights; and/or
(iii) instruct the Company to pay the total of any accelerated payments in
a lump sum to the Participant, the Participant's estate, beneficiaries or
representative, notwithstanding that, in the absence of such termination of
restrictions or acceleration of payments, any or all of the payments due
under the Awards ultimately might have become payable to other
beneficiaries.
XIV. Cancellation and Rescission of Awards
Unless the Award Agreement specifies otherwise, the Committee may cancel any
unexpired, unpaid, unexercised, or deferred Awards at any time if the
Participant is not in compliance with the applicable provisions of the Award
Agreement, the Plan, or with the following conditions:
A. A Participant shall not breach any protective agreement entered into
between him or her and the Company or any Affiliates, or render services for
any organization or engage directly or indirectly in any business which, in the
judgment of the chief executive officer of the Company or other senior officer
designated by the Committee, is or becomes competitive with the Company, or
which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company. For a Participant whose employment has
terminated, the judgment of the chief executive officer
A-14
<PAGE>
shall be based on terms of the protective agreement, if applicable, or on the
Participant's position and responsibilities while employed by the Company or
its Affiliates, the Participant's post-employment responsibilities and position
with the other organization or business, the extent of past, current, and
potential competition or conflict between the Company and other organization or
business, the effect of the Participant's assuming the post-employment position
on the Company's or its Affiliate's customers, suppliers, investors, and
competitors, and such other considerations as are deemed relevant given the
applicable facts and circumstances. A Participant may, however, purchase as an
investment or otherwise, stock or other securities of any organization or
business so long as they are listed upon a recognized securities exchange or
traded over-the-counter, and such investment does not represent a substantial
investment to the Participant or a greater than one percent (1%) equity
interest in the organization or business.
B. A Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company or its Affiliates, or use in
other than the Company's or Affiliate's business, any confidential information
or materials relating to the business of the Company or its Affiliates,
acquired by the Participant either during or after employment with the Company
or its Affiliates.
C. A Participant shall disclose promptly and assign to the Company all
right, title, and interest in any invention or idea, patentable or not, made or
conceived by the Participant during employment with the Company or an
Affiliate, relating in any manner to the actual or anticipated business,
research, or development work of the Company or its Affiliates, and shall do
anything reasonably necessary to enable the Company or its Affiliates to secure
a patent, trademark, copyright, or other protectable interest where appropriate
in the United States and in foreign countries.
Upon exercise, payment, or delivery pursuant to an Award, the Participant shall
certify on a form acceptable to the Committee that he or she is in compliance
with the terms and conditions of the Plan, including the provisions of
Paragraphs A, B or C of this Article XIV. Failure to comply with the provisions
of Paragraphs A, B or C of this Article XIV prior to, or during the one (1)
year period after, any exercise, payment, or delivery pursuant to an Award
shall cause such exercise, payment, or delivery to be rescinded. The Company
shall notify the Participant in writing of any such rescission within two (2)
years after such exercise, payment, or delivery. Within ten (10) days after
receiving such a notice from the Company, the Participant shall pay to the
Company the amount of any gain realized or payment received as a result of the
rescinded exercise, payment, or delivery pursuant to the Award. Such payment
shall be made either in cash or by returning to the Company the number of
Shares of Common Stock that the Participant received in connection with the
rescinded exercise, payment, or delivery.
XV. Payment of Restricted Stock, Rights, Performance Awards and Cash Awards
Payment of Restricted Stock, Rights, Performance Awards and Cash Awards may
be made, as the Committee shall specify, in the form of cash, Shares of Common
Stock, or combinations thereof; provided, however, that a fractional Share of
Common Stock shall be paid in cash equal to the Fair Market Value of the
fractional Share of Common Stock at the time of payment.
XVI. Withholding
Except as otherwise provided by the Committee,
A. The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local taxes required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan; and
B. In the case of payments of Awards, or upon any other taxable event
hereunder, a Participant may elect, subject to the approval in advance by the
Committee, to satisfy the withholding requirement, if any, in whole or in part,
by having the Company withhold Shares of Common Stock that would otherwise be
transferred to the
A-15
<PAGE>
Participant having a Fair Market Value, on the date the tax is to be
determined, equal to the minimum marginal tax that could be imposed on the
transaction. All elections shall be made in writing and signed by the
Participant.
XVII. Savings Clause
This Plan is intended to comply in all respects with applicable law and
regulations, including, (i) with respect to those Participants who are
officers or directors for purposes of Section 16 of the Exchange Act, Rule
16b-3 of the Securities and Exchange Commission, if applicable, and (ii) with
respect to executive officers, Code Section 162(m). In case any one or more
provisions of this Plan shall be held invalid, illegal, or unenforceable in
any respect under applicable law and regulation (including Rule 16b-3 and Code
Section 162(m)), the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the
invalid, illegal, or unenforceable provision shall be deemed null and void;
however, to the extent permitted by law, any provision that could be deemed
null and void shall first be construed, interpreted, or revised retroactively
to permit this Plan to be construed in compliance with all applicable law
(including Rule 16b-3 and Code Section 162(m)) so as to foster the intent of
this Plan. Notwithstanding anything herein to the contrary, with respect to
Participants who are officers and directors for purposes of Section 16 of the
Exchange Act, if applicable, and if required to comply with rules promulgated
thereunder, no grant of, or Option to purchase, Shares shall permit
unrestricted ownership of Shares by the Participant for at least six (6)
months from the date of grant or Option, unless the Board determines that the
grant of, or Option to purchase, Shares otherwise satisfies the then current
Rule 16b-3 requirements.
XVIII. Adjustments upon Changes in Capitalization; Corporate Transactions
In the event that the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value, stock
split-up, combination of shares or dividends payable in capital stock, or the
like, appropriate adjustments to prevent dilution or enlargement of the Awards
granted to, or available for, Participants shall be made in the manner and
kind of Shares for the purchase of which Awards may be granted under the Plan,
and, in addition, appropriate adjustment shall be made in the number and kind
of Shares and in the Option price per share subject to outstanding Options.
The foregoing notwithstanding, no such adjustment shall be made in an
Incentive Option which shall, within the meaning of Section 424 of the Code,
constitute such a modification, extension, or renewal of an Option as to cause
it to be considered as the grant of a new Option.
Notwithstanding anything herein to the contrary, the Company may, in its
sole discretion, accelerate the timing of the exercise provisions of any Award
in the event of a tender offer for the Company's Shares, the adoption of a
plan of merger or consolidation under which a majority of the Shares of the
Company would be eliminated, or a sale of all or any portion of the Company's
assets or capital stock. Alternatively, the Company may, in its sole
discretion, cancel any or all Awards upon any of the foregoing events and
provide for the payment to Participants in cash of an amount equal to the
value or appreciated value, whichever is applicable, of the Award, as
determined in good faith by the Committee, at the close of business on the
date of such event. The preceding two sentences of this Article XVIII
notwithstanding, the Company shall be required to accelerate the timing of the
exercise provisions of any Award if (i) any such business combination is to be
accounted for as a pooling-of-interests under APB Opinion 16 and (ii) the
timing of such acceleration does not prevent such pooling-of-interests
treatment.
Upon a business combination by the Company or any of its Affiliates with
any corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees or directors of, or consultants or advisors
to,
A-16
<PAGE>
the Company or its Affiliates. The number of Shares subject to such substitute
Options shall be determined in accordance with the terms of the transaction by
which the business combination is effected. Notwithstanding the other
provisions of this Plan, the other terms of such substitute Options shall be
substantially the same as or economically equivalent to the terms of the
options for which such Options are substituted, all as determined by the Board
or by the Committee, as the case may be. Upon the grant of substitute Options
pursuant hereto, the options to purchase securities of such other corporation
or entity for which such Options are substituted shall be cancelled
immediately.
XIX. Dissolution or Liquidation of the Company
Upon the dissolution or liquidation of the Company other than in connection
with a transaction to which Article XVIII is applicable, all Awards granted
hereunder shall terminate and become null and void; provided, however, that if
the rights of a Participant under the applicable Award have not otherwise
terminated and expired, the Participant may, if the Committee, in its sole
discretion, so permits, have the right immediately prior to such dissolution or
liquidation to exercise any Award granted hereunder to the extent that the
right thereunder has become exercisable as of the date immediately prior to
such dissolution or liquidation.
XX. Termination of the Plan
The Plan shall terminate (10) years from the earlier of the date of its
adoption by the Board or the date of its approval by the stockholders. The Plan
may be terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any Award
Agreements executed prior to the effective date of such termination.
Notwithstanding anything in this Plan to the contrary, any Options granted
prior to the effective date of the Plan's termination may be exercised until
the earlier of (i) the date set forth in the Award Agreement, or (ii) in the
case of an Incentive Option, ten (10) years from the date the Option is
granted; and the provisions of the Plan with respect to the full and final
authority of the Committee under the Plan shall continue to control.
XXI. Amendment of the Plan
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any amendment
that (i) increases the numbers of Shares that may be granted under this Plan,
other than as provided by Article XVIII, (ii) materially modifies the
requirements as to eligibility to participate in the Plan, (iii) materially
increases the benefits to Participants, (iv) extends the period during which
Incentive Options may be granted or exercised, or (v) changes the designation
of the class of employees eligible to receive Incentive Options, or otherwise
causes the Incentive Options to no longer qualify as "incentive stock options"
as defined in Section 422 of the Code, also shall be subject to the approval of
the stockholders of the Company within one (1) year either before or after such
adoption by the Board, subject to the requirements of Article XVII of the Plan.
XXII. Employment Relationship
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to prevent a
Participant from terminating the Participant's employment with the Company or
an Affiliate.
XXIII. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken by them as directors or members of the Committee and against all amounts
paid by them in
A-17
<PAGE>
settlement thereof (provided such settlement is approved by the Board) or paid
by them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that the director or Committee member is liable for gross
negligence or willful misconduct in the performance of his or her duties. To
receive such indemnification, a director or Committee member must first offer
in writing to the Company the opportunity, at its own expense, to defend any
such action, suit or proceeding.
XXIV. Unfunded Plan
Insofar as it provides for payments in cash in accordance with Article XV,
or otherwise, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Common
Stock, or rights thereto under the Plan, any such accounts shall be used
merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common
Stock, or rights thereto, nor shall the Plan be construed as providing for
such segregation, nor shall the Company, the Board, or the Committee be deemed
to be a trustee of any cash, Common Stock, or rights thereto to be granted
under the Plan. Any liability of the Company to any Participant with respect
to a grant of cash, Common Stock, or rights thereto under the Plan shall be
based solely upon any contractual obligations that may be created by the Plan
and any Award Agreement; no such obligation of the Company shall be deemed to
be secured by any pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be created
by the Plan.
XXV. Mitigation of Excise Tax
If any payment or right accruing to a Participant under this Plan (without
the application of this Article XXV), either alone or together with other
payments or rights accruing to the Participant from the Company or an
Affiliate, would constitute a "parachute payment" (as defined in Section 280G
of the Code and regulations thereunder), such payment or right shall be
reduced to the largest amount or greatest right that will result in no portion
of the amount payable or right accruing under the Plan being subject to an
excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code. The determination of whether any reduction in
the rights or payments under this Plan is to apply shall be made by the
Company. The Participant shall cooperate in good faith with the Company in
making such determination and providing any necessary information for this
purpose.
XXVI. Effective Date
This Plan shall become effective upon adoption by the Board, provided that
the Plan is approved by the stockholders of the Company before or at the
Company's next annual meeting, but in no event shall stockholder approval be
sought more than one (1) year after such adoption by the Board.
XXVII. Governing Law
This Plan shall be governed by the laws of the State of Illinois and
construed in accordance therewith.
Adopted this 30th day of June, 1996.
A-18
<PAGE>
PROXY PROXY
The Metzler Group, Inc.
615 N. Wabash, Chicago, Illinois 60611
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert P. Maher as the undersigned's proxy,
with full power of substitution, to represent and to vote, as designated below,
all of the undersigned's common stock in The Metzler Group, Inc. at the annual
meeting of shareholders of The Metzler Group, Inc. to be held on Thursday, July
15, 1999, and at any adjournment thereof, with the same authority as if the
undersigned were personally present.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholders. If no specific direction is made, this proxy
will be voted in the discretion of the policy holder on all matters. The Board
favors a vote "FOR" each of:
. The election of the nominated director.
. The approval of the amendment to The Metzler Group, Inc.'s Amended and
Restated Certificate of Incorporation to increase the total number of
authorized shares of common stock to 250,000,000.
. The approval of the amendment to The Metzler Group, Inc.'s Amended and
Restated Certificate of Incorporation to change the name of The Metzler
Group, Inc. to Navigant Consulting, Inc.
. The re-approval of The Metzler Group, Inc.'s Long-Term Incentive Plan.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE RETURN
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
THE METZLER GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Director For Against
Robert P. Maher [_] [_]
2. Amendment to Amended and Restated Certificate For Against Abstain
of Incorporation to increase total authorized
common stock to 250,000,000 shares [_] [_] [_]
3. Amendment to Amended and Restated Certificate For Against Abstain
of Incorporation to change our name to
Navigant Consulting, Inc. [_] [_] [_]
4. Re-approval of Incentive Plan For Against Abstain
[_] [_] [_]
5. In their discretion, the Proxies are
authorized to vote upon such other business as
may properly come before the meeting.
Dated: _________________ , 1999
Signature(s)___________________________
_______________________________________
Please sign exactly as name appears
hereon. For joint accounts, all tenants
should sign. Executors, administrators,
trustees, etc., should so indicate when
signing.
PLEASE VOTE, SIGN, DATE AND RETURN
THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
