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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
FIRST CONSULTING GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
January 20, 1999
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
First Consulting Group, Inc. to be held at 111 W. Ocean Boulevard, 4th Floor,
Long Beach, California 90802 on Friday, February 26, 1999 at 9:00 a.m. local
time.
The matters expected to be acted upon at the meeting are described in detail
in the following notice of special meeting of Stockholders and proxy statement.
It is important that you use this opportunity to take part in the affairs of
your Company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
[/S/ LUTHER J. NUSSBAUM]
Luther J. Nussbaum
CHIEF EXECUTIVE OFFICER
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[LOGO]
111 W. OCEAN BOULEVARD, 4TH FLOOR
LONG BEACH, CALIFORNIA 90802
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 26, 1999
TO THE STOCKHOLDERS OF FIRST CONSULTING GROUP, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of First
Consulting Group, Inc., a Delaware corporation ("FCG" or the "Company"), will be
held on February 26, 1999 at 9:00 a.m. local time at 111 W. Ocean Boulevard, 4th
Floor, Long Beach, California 90802, to consider and vote upon the following
proposals:
1. To approve the amendment of FCG's 1997 Equity Incentive Plan to increase
the number of shares of FCG common stock reserved for issuance thereunder
from 1,600,000 shares to 3,500,000 shares (an increase of 1,900,000
shares).
2. To approve the amendment of FCG's 1997 Non-Employee Directors' Stock
Option Plan to increase the number of shares of FCG common stock reserved
for issuance thereunder from 200,000 shares to 300,000 shares (an
increase of 100,000 shares).
3. To transact such other business as may properly come before the FCG
special meeting or any adjournment or postponement thereof.
The proposed amendments and other related matters are more fully described
in the proxy statement accompanying this notice.
Stockholders of record at the close of business on January 13, 1999 are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements thereof.
All stockholders are cordially invited to attend the Company's special
meeting in person. Whether or not you expect to attend, WE URGE YOU TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
By Order of the Board of Directors
[/S/ PATRICIA A. LOWERY]
Patricia A. Lowery
SECRETARY
Long Beach, California
January 20, 1999
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[LOGO]
111 W. OCEAN BOULEVARD, 4TH FLOOR
LONG BEACH, CALIFORNIA 90802
PROXY STATEMENT
JANUARY 20, 1999
The First Consulting Group, Inc. ("FCG" or the "Company") special meeting
will be held at FCG's principal offices, located at 111 W. Ocean Boulevard, 4th
Floor, Long Beach, California 90802, on February 26, 1999 at 9:00 a.m. local
time. The purpose of the FCG special meeting is to consider and vote upon (1) a
proposal to amend FCG's 1997 Equity Incentive Plan (the "Equity Incentive Plan")
to increase the number of shares of common stock of the Company reserved for
issuance thereunder from 1,600,000 shares to 3,500,000 (an increase of 1,900,000
shares); (2) a proposal to amend FCG's 1997 Non-Employee Directors' Stock Option
Plan (the "Non-Employee Directors' Plan") to increase the number of shares of
common stock of the Company reserved for issuance thereunder from 200,000 shares
to 300,000 (an increase of 100,000 shares); and (3) to transact such other
business as may properly come before the FCG special meeting or any adjournment
or postponement thereof. FCG stockholders of record at the close of business on
January 13, 1999 (the "Record Date") are entitled to vote upon such other
matters as may be properly brought before the FCG special meeting or any
postponements or adjournments thereof.
PROXIES
The proxy card accompanying this proxy statement is being solicited on
behalf of the FCG Board of Directors for use at the FCG special meeting. All
proxies will be voted in accordance with the instructions contained therein,
and, if no choice is specified, the proxies will be voted in favor of the
proposals set forth in the accompanying notice of the special meeting and this
proxy statement.
SOLICITATION
This proxy statement and the accompanying form of proxy were first mailed to
FCG stockholders of record on or about January 20, 1999, and constitute notice
of the FCG special meeting in conformity with the requirements of the Delaware
General Corporation Law.
FCG will pay the entire cost of the solicitation of proxies, including the
preparation, assembly, printing and mailing of the proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of FCG common stock beneficially owned
by others to forward to such beneficial owners.
Original solicitation of proxies has been by mail and may be supplemented by
telephone, telegram or personal solicitation by directors, officers or other
employees of FCG. No additional compensation will be paid to directors, officers
or other employees for such services. FCG may reimburse persons representing
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beneficial owners of FCG common stock for their expenses in forwarding
solicitation materials to such beneficial owners.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of FCG common stock at the close of business on the
Record Date are entitled to notice of and to vote at the FCG special meeting. At
the close of business on the Record Date there were shares of FCG
common stock outstanding and entitled to vote at the special meeting. The
presence, in person or by properly executed proxy, of the holders of a majority
of the outstanding shares of FCG common stock entitled to vote at the FCG
special meeting is necessary to constitute a quorum. Each holder of record of
FCG common stock on the Record Date will be entitled to one vote on all matters
to be voted upon at the FCG special meeting for each share held. Except for the
stockholders identified herein under "Security Ownership of Certain Beneficial
Owners and Management," as of the Record Date, to the knowledge of FCG, no other
person or entity beneficially owned more than 5% of the outstanding FCG common
stock.
VOTE REQUIRED
Approval of the amendment of the Equity Incentive Plan and the amendment of
the Non-Employee Directors' Plan requires the affirmative vote of the holders of
a majority of the shares present in person or represented by proxy and entitled
to vote at the FCG special meeting. All votes will be tabulated by the inspector
of election appointed for the meeting, who will separately tabulate affirmative
and negative votes, abstentions and broker non-votes. Abstentions will be
counted towards a quorum and will have the same effect as negative votes on each
proposal. Broker non-votes are also counted towards a quorum, but are not
counted for any purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
corporate secretary of FCG at FCG's principal offices a written notice of
revocation or a duly executed proxy bearing a later date. The proxy may also be
revoked by attending the FCG special meeting and voting in person. Attendance at
the FCG special meeting will not, by itself, revoke a proxy.
PROPOSAL NO. 1--APPROVAL OF AMENDMENT
TO THE 1997 EQUITY INCENTIVE PLAN
FCG stockholders are being asked to approve an amendment to the Company's
1997 Equity Incentive Plan (the "Equity Incentive Plan") to increase the number
of shares of common stock reserved for issuance thereunder from 1,600,000 shares
to 3,500,000 shares (an increase of 1,900,000 shares). The Board of Directors of
the Company (the "Board") approved the proposed amendment described above on
December 15, 1998, to be effective upon approval by the Company's stockholders.
Approval of the amendment of the Equity Incentive Plan requires the affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy and entitled to vote at the FCG special meeting.
The Board believes that the availability of additional option shares under
the Equity Incentive Plan is an important element in the overall success of the
Company. The Board believes that the Company's ability to recruit and retain
personnel with strong information technology, healthcare and consulting
expertise is critical to the Company's overall success. Given the intense
competition for such personnel, the Board believes that its ability to offer
competitive compensation packages, including those with equity-based incentive
components, is particularly important in attracting and retaining qualified
candidates.
The Board also believes that providing stock option grants under the Equity
Incentive Plan is an important element in the successful integration of
businesses acquired by FCG. The Company's strategy
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includes acquiring complementary businesses, technology and service offerings.
In order to successfully integrate such businesses, technology and service
offerings, the Company may be required to offer equity incentives under the
Equity Incentive Plan to new employees and officers. In addition, the Board
believes that equity-based incentives are favorable because such incentives
align the interests of the Company's management and employees with those of the
Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL NO. 1.
Unless otherwise indicated, the following summary of the principal
provisions of the Equity Incentive Plan assumes the approval of this Proposal
No. 1. This summary is qualified in its entirety by reference to the full text
of the Equity Incentive Plan, a copy of which is attached to this proxy
statement as APPENDIX A.
SUMMARY OF THE PROVISIONS OF THE 1997 EQUITY INCENTIVE PLAN
GENERAL
The Equity Incentive Plan was adopted by the Board on August 22, 1997, and
was approved by the Company's stockholders on January 15, 1998. The Company
adopted the Equity Incentive Plan in order to provide qualified employees,
directors and consultants with an opportunity to share in the Company's growth
and to purchase the Company's common stock. The Equity Incentive Plan also
assists the Company in obtaining qualified employees, directors and consultants
and in building a satisfying long-term relationship with existing employees,
directors and consultants through recognition of their contributions to the
Company.
The Committee believes that all employees, directors and consultants should
be compensated based on their contribution to the Company and to building
sustainable long-term value for the Company's stockholders. In determining
specific compensation programs, the Committee considers individual and group
performance, including successful achievement of business, management and
research objectives, maintenance of strong relationships with the Company's
clients, new business generation and teamwork. The Committee strives to design
compensation programs that will tie individual rewards to the Company's success
and align interests between officers and stockholders of the Company. The
Committee also strives to design compensation programs that help retain its
officers and encourage personal and professional development and growth.
The Equity Incentive Plan provides for the grant of both incentive and
nonstatutory (non-qualified) stock options. Incentive stock options granted
under the Equity Incentive Plan are intended to be "incentive stock options" as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Nonstatutory stock options granted under the Equity Incentive Plan are
intended by the Company not to qualify as incentive stock options under the
Code. In addition, the Equity Incentive Plan permits the granting of stock
appreciation rights ("SARs") appurtenant to or independent of options, as well
as stock bonuses and rights to purchase restricted stock (options, SARs, stock
bonuses and rights to purchase restricted stock are hereinafter referred to
collectively as "Stock Awards"). To date, the Company has only granted stock
options under the Equity Incentive Plan.
STOCK SUBJECT TO THE EQUITY INCENTIVE PLAN
Prior to the proposed amendment of the Equity Incentive Plan, there were
1,600,000 shares of common stock authorized for issuance under the Equity
Incentive Plan. The amendment to the Equity Incentive Plan proposed hereby would
increase the number of shares authorized under the Equity Incentive Plan to
3,500,000 shares. Subject to stockholder approval of Proposal No. 1, common
stock that may be sold pursuant to Stock Awards under the Equity Incentive Plan
shall not exceed in the aggregate 3,500,000 shares. As of December 31, 1998,
10,146 shares of common stock had been issued upon the exercise of options
granted under the Equity Incentive Plan, options to purchase 1,406,504 shares of
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common stock at a weighted average exercise price of $10.27 were outstanding,
and 183,350 shares remained available for future grant. If Stock Awards granted
under the Equity Incentive Plan expire or otherwise terminate without being
exercised, the common stock not purchased pursuant to such Stock Awards becomes
available for reissuance under the Equity Incentive Plan.
ADMINISTRATION
As authorized by the Equity Incentive Plan, the Board has delegated
administration of the Equity Incentive Plan to the Compensation and Stock Option
Committee of the Board (the "Compensation Committee"), which determines to whom
and on what dates the Stock Awards will be granted and the types of Stock Awards
to be granted, and the terms of such Stock Awards including the exercise price,
number of shares subject to the Stock Awards and the exercisability thereof. The
Compensation Committee currently consists of Stanley R. Nelson, Stephen E. Olson
and Jack O. Vance, all of whom are "disinterested persons" as that term is
defined under the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), and "outside directors" as that term is defined pursuant to Section
162(m) of the Code. The decision to grant a Stock Award is made according to
position guidelines established by the Compensation Committee on recommendation
of the internal compensation committee composed of a subset of the Company's
Operating Committee. The Compensation Committee also has the authority to
construe and interpret any of the provisions of the Equity Incentive Plan or any
Stock Awards granted thereunder. As used herein with respect to the Equity
Incentive Plan, the "Board" refers to any committee the Board shall appoint to
administer the Equity Incentive Plan as well as to the Board itself.
ELIGIBILITY
Incentive stock options and SARs appurtenant thereto may be granted under
the Equity Incentive Plan only to employees (including directors if they are
also employees) of the Company and its affiliates. Selected employees, directors
and consultants are eligible to receive Stock Awards under the Equity Incentive
Plan other than incentive stock options and SARs appurtenant thereto.
No incentive stock option may be granted under the Equity Incentive Plan to
any person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any affiliate of the Company (a "Ten Percent Shareholder"), unless the option
price is at least 110% of the fair market value on the date of grant of the
stock subject to the option, and the term of the option does not exceed five
years from the date of grant. An award to purchase restricted stock under the
Equity Incentive Plan may not be granted to a Ten Percent Shareholder unless the
purchase price is 100% of the fair market value of the stock on the date of
grant.
TERMS OF STOCK AWARDS
The following is a description of the permissible terms of Stock Awards
under the Equity Incentive Plan. Individual Stock Award grants may be more
restrictive as to any or all of the permissible terms described below.
EXERCISE PRICE OF OPTIONS; PAYMENT. The exercise price of incentive stock
options under the Equity Incentive Plan may not be less than the fair market
value of the common stock subject to the option on the date of the option grant,
and in some cases (see "Eligibility" above), may not be less than 110% of such
fair market value. The exercise price of each nonstatutory stock option under
the Equity Incentive Plan may not be less than 85% of such fair market value.
The exercise price of options granted under the Equity Incentive Plan must
be paid either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (a) by delivery of other common stock of the Company;
(b) pursuant to a deferred payment or other arrangement; or (c) in any other
form of legal consideration acceptable to the Board.
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In the event of a decline in the value of the Company's common stock, the
Board has the authority to offer optionees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Code Section 162(m), an option
repriced under the Plan is deemed to be canceled and a new option granted. Both
the option deemed to have been canceled and the new option deemed to have been
granted will be counted against the eight hundred thousand (800,000) share
limitation under the Plan. The Board also has the authority to include as part
of an option agreement a provision entitling the optionee to a further option in
the event that the optionee exercises his or her option by surrendering the
other shares of Common Stock as payment of the exercise price.
OPTION EXERCISE. Stock options granted under the Equity Incentive Plan
generally may be exercised at any time, but are subject to a repurchase right in
favor of the Company in accordance with a vesting schedule under which 20% of
the underlying shares vest one year following the date of grant, and the
remaining shares vest in equal successive monthly installments over each of the
next forty-eight (48) months until fully vested or terminated as provided in the
Equity Incentive Plan or related agreements. Shares covered by options granted
in the future under the Equity Incentive Plan may be subject to different
vesting terms (which may be based on performance or other criteria). In
addition, an option may or may not provide that the option may be exercised
prior to the stated vesting date, but in such event, the shares may be subject
to a right of repurchase in favor of the Company or to any other restriction the
Board determines to be appropriate.
TERM OF OPTIONS. The maximum term of options to be granted under the Equity
Incentive Plan is ten years, except that in certain cases (see "Eligibility")
the maximum term is five years. Options under the Equity Incentive Plan
generally are non-transferable and generally terminate three months after the
termination of the optionee's employment or relationship as a director or
consultant with the Company or any affiliate of the Company, unless (i) the
termination of employment is due to such person's permanent and total disability
(as defined in the Code), in which case the option may be exercised at any time
within 12 months of such termination; (ii) the termination of employment is due
to such person's death, in which case the option may be exercised at any time
within 18 months of such termination; or (iii) the option by its terms
specifically provides otherwise. Individual options by their terms may provide
for exercise within a longer period of time following termination of employment
or the director or consultant relationship.
STOCK AWARDS OTHER THAN OPTIONS. Any stock bonuses or restricted stock
purchase awards granted under the Equity Incentive Plan may be in such form and
may contain such terms and conditions as the Board shall deem appropriate. The
purchase price under any restricted stock purchase agreement may not be less
than eighty-five percent (85%) of the fair market value of the Company's common
stock on the date of grant. The purchase price of stock pursuant to a stock
purchase agreement must be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board, according to a deferred payment or other
arrangement with the person to whom the common stock is sold; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion. Eligible participants may be awarded stock pursuant to a stock bonus
agreement in consideration of past services actually rendered to the Company or
for its benefit.
Shares of common stock sold or awarded under the Equity Incentive Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee of or ceases to serve as a director of or
consultant to the Company or an affiliate of the Company, the Company may
repurchase or otherwise reacquire any or all of the shares of the common stock
held by that person that have not vested as of the date of termination of such
services under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person. SARs granted under the Equity
Incentive Plan may be in the form of rights granted either in connection with a
stock option (either (i) resulting in a concurrent exercise of an underlying
option with each SAR exercise; or (ii) requiring the grantee to exercise an
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underlying option or to surrender the option for an appreciation distribution)
or independent of an option. Each SAR awarded under the Equity Incentive Plan
shall otherwise contain such terms and conditions as the Board shall deem
appropriate.
The Equity Incentive Plan authorizes the following types of SARs:
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights are tied
to an underlying option and require the holder to elect whether to exercise the
underlying option or to surrender the option for an appreciation distribution
equal to the market price of the vested shares purchasable under the surrendered
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of tandem stock appreciation rights must be
made in cash.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The holder receives an appreciation
distribution equal to the market price of the vested shares purchased under the
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of concurrent stock appreciation rights must
be made in cash.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights are granted independently of any option and entitle the holder to receive
upon exercise an appreciation distribution equal to the market price of a number
of shares equal to the number of share equivalents to which the holder is vested
under the independent stock appreciation right less than fair market value of
such number of shares of stock on the date of grant of the independent stock
appreciation rights. Appreciation distributions payable upon exercise of
independent stock appreciation rights may, at the Board's discretion, be made in
cash, in shares of the common stock or a combination thereof.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Equity Incentive Plan or
subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Equity Incentive Plan and Stock Awards
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to the Equity Incentive Plan and the class and
the maximum number of shares and price per share of stock subject to outstanding
Stock Awards.
Certain adjustments in Stock Awards outstanding under the Equity Incentive
Plan may be made upon a Change in Control of the Company. The Equity Incentive
Plan defines "Change in Control" as (i) a dissolution, liquidation, or sale of
all or substantially all of the Company's assets; (ii) a merger or consolidation
in which the Company is not the surviving corporation; (iii) a reverse merger in
which the Company is the surviving corporation but the shares of common stock
outstanding immediately before the merger are converted by virtue of the merger
into other property; or (iv) the individuals who, as of August 22, 1997 are
members of the Board (the "Incumbent Board") cease for any reason to constitute
at least 50% of the Board, provided, however, that any new director whose
election or nomination by the Company's stockholders is approved by a vote of at
least 50% of the Incumbent Board shall also be considered a member of the
Incumbent Board.
Upon a Change in Control of the Company other than a 50% change in the
Incumbent Board, the surviving or acquiring corporation may assume Stock Awards
outstanding under the Equity Incentive Plan or substitute similar stock awards
for those outstanding under the Equity Incentive Plan. If the surviving or
acquiring corporation assumes such Stock Awards or substitutes similar stock
awards, and the service or employment of the holder of such awards is either
voluntarily terminated with good reason or involuntarily terminated without
cause (as those terms are defined in the Equity Incentive Plan) within one month
before, or 13 months after, the Change in Control, then the vesting of those
assumed Stock Awards or
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substituted stock awards and the time during which such awards may be exercised
will accelerate. If the surviving or acquiring corporation refuses to assume
such Stock Awards or to substitute similar stock awards for such Stock Awards,
then (i) the vesting of Stock Awards held by persons still serving the Company
or an affiliate (whether as an employee, director or consultant) and the time
during which such Stock Awards may be exercised will accelerate upon the Change
in Control and those Stock Awards will terminate if not exercised after such
acceleration and at or prior to the Change in Control; and (ii) all other Stock
Awards outstanding under the Equity Incentive Plan will terminate if not
exercised prior to the Change in Control.
Upon a Change in Control of the Company involving a 50% change in the
Incumbent Board, the vesting of Stock Awards held by persons still serving the
Company or an affiliate (whether as an employee, director or consultant) and the
time during which such Stock Awards may be exercised will accelerate upon the
Change in Control.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Equity Incentive Plan without
stockholder approval or ratification at any time. Unless sooner terminated, the
Equity Incentive Plan will terminate August 21, 2007.
The Board may also amend the Equity Incentive Plan at any time or from time
to time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption by
the Board if the amendment would: (i) modify the requirements as to eligibility
for participation (to the extent such modification requires stockholder approval
in order for the Equity Incentive Plan to satisfy Section 422 of the Code, if
applicable, or Rule 16b-3 of the Exchange Act); (ii) increase the number of
shares reserved for Stock Awards; or (iii) change any other provision of the
Equity Incentive Plan in any other way if such modification requires stockholder
approval in order to comply with Rule 16b-3 of the Exchange Act or the
requirements of Section 422 of the Code, or Nasdaq or securities exchange
listing requirements to which the Company is then subject.
RESTRICTIONS ON TRANSFER
Under the Equity Incentive Plan, Stock Awards granted are generally
non-transferable, with certain exceptions for transfers pursuant to a will or
the laws of descent and distribution, or, excepting incentive stock options,
pursuant to a domestic relations order.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the Equity Incentive
Plan are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price; or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition will
be a capital gain or loss, which will be long-term or short-term depending on
the length of time the stock was held. Capital gains
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currently are generally subject to lower tax rates than ordinary income. The
maximum long-term capital gains rate for federal income tax purposes is
currently 20% while the maximum rate applicable to ordinary income or short-term
capital gain is effectively 39.6% at the present time. Slightly different rules
may apply to optionees who acquire stock subject to certain repurchase options
or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
Equity Incentive Plan generally have the following federal income tax
consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a reporting obligation, the Company will generally be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon exercise of the option. Such gain or loss will be long-term or
short-term depending on the length of time the stock was held. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
RESTRICTED STOCK AND STOCK BONUSES. Restricted stock and stock bonuses
granted under the Equity Incentive Plan generally have the following federal
income tax consequences:
Upon acquisition of stock under a restricted stock or stock bonus award, the
recipient normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value over the purchase price, if any. However, to the
extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
recipient elects to be taxed on receipt of the stock. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the recipient. Upon disposition of the stock, the recipient will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock, if any, plus any amount
recognized as ordinary income upon acquisition (or vesting) of the stock. Such
capital gain or loss will be long-term or short-term depending on the length of
time the stock was held from the date ordinary income was measured. Slightly
different rules may apply to persons who acquire stock subject to forfeiture
under Section 16(b) of the Exchange Act.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of a stock appreciation right, but upon, exercise of the stock appreciation
right, the fair market value of the shares (or cash in lieu of shares) received
must be treated as compensation taxable as ordinary income to the recipient in
the year of such exercise. Generally, with respect to employees, the Company is
required to withhold from the payment made on exercise of the stock appreciation
right or from regular wages or supplemental wage
8
<PAGE>
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, Section 162(m) of the Code and the satisfaction
of a reporting obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income recognized by the recipient.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly-held corporation for
compensation paid to a covered employee in a taxable year to the extent that
non-performance-based compensation paid to such a covered employee exceeds $1
million. It is possible that compensation attributable to Stock Awards, when
combined with all other types of compensation received by a covered employee
from the Company, may cause this limitation to be exceeded in any particular
year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation.
Treasury regulations issued under Section 162(m) of the Code provide that
compensation attributable to stock options and stock appreciation rights will
qualify as performance-based compensation if: (i) the stock award plan contains
a per-employee limitation on the number of shares for which stock options and
stock appreciation rights may be granted during a specified period; (ii) the
per-employee limitation is approved by the stockholders; (iii) the award is
granted by a compensation committee comprised solely of "outside directors"; and
(iv) the exercise price of the award is no less than the fair market value of
the stock on the date of grant. Restricted stock and stock bonuses qualify as
performance-based compensation under these Treasury regulations only if: (i) the
award is granted by a compensation committee comprised solely of "outside
directors"; (ii) the award is granted (or exercisable) only upon the achievement
of an objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain; (iii) the compensation
committee certifies in writing prior to the granting (or exercisability) of the
award that the performance goal has been satisfied; and (iv) prior to the
granting (or exercisability) of the award, stockholders have approved the
material terms of the award (including the class of employees eligible for such
award, the business criteria on which the performance goal is based, and the
maximum amount (or formula used to calculate the amount) payable upon attainment
of the performance goal).
ERISA. The Equity Incentive Plan is not subject to any of the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
PROPOSAL NO. 2--APPROVAL OF AMENDMENT TO THE
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
FCG stockholders are also being asked to approve an amendment to the
Company's 1997 Non-Employee Directors' Stock Option Plan (the "Directors' Plan")
to increase the number of shares of common stock reserved for issuance
thereunder from 200,000 shares to 300,000 shares (an increase of 100,000
shares). The Board approved the proposed amendment described above on December
15, 1998, to be effective upon stockholder approval. Approval of the amendment
of the Director's Plan requires the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the FCG special meeting.
The Board believes that the increase in the number of shares available under
the Directors' Plan will enable the Company to attract and retain
highly-qualified non-employee directors to the Company's Board. The Board also
believes equity-based incentives are favorable because such incentives align the
interests of non-employee directors with those of the Company's stockholders.
9
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
Unless otherwise indicated, the following summary of the principal
provisions of the Directors' Plan assumes the approval of this Proposal No. 2.
This summary is qualified in its entirety by reference to the full text of the
Directors' Plan, a copy of which is attached to this proxy statement as APPENDIX
B.
SUMMARY OF THE PROVISIONS OF THE 1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
GENERAL
The Directors' Plan was adopted by the Board on August 22, 1997, and was
approved by the Company's stockholders on January 15, 1998. The Directors' Plan
was adopted to provide a means by which directors of the Company who are not
employed by the Company or an affiliate could be given an opportunity to
purchase stock in the Company through the grant of nondiscretionary options. All
of the Company's non-employee directors are eligible to participate in the
Directors' Plan.
The Directors' Plan provides for the automatic grant of nonstatutory stock
options. Nonstatutory stock options granted under the Directors' Plan are not
intended to qualify as incentive stock options under the Code. See "Federal
Income Tax Information" for a discussion of the tax treatment of nonstatutory
stock options.
STOCK SUBJECT TO THE DIRECTORS' PLAN
Prior to the proposed amendment of the Directors' Plan, there were 200,000
shares of common stock authorized for issuance under the Directors' Plan. The
amendment to the Directors' Plan proposed hereby would increase the number of
shares authorized under the Directors' Plan to 300,000 shares. Subject to
stockholder approval of Proposal No. 2, common stock that may be sold pursuant
to options under the Directors' Plan shall not exceed in the aggregate 300,000
shares. As of December 31, 1998, no shares of common stock had been issued upon
the exercise of options granted under the Plan, options to purchase 104,000
shares of common stock at a weighted average exercise price of $5.47 were
outstanding, and 96,000 shares remained available for future grant. If options
granted under the Directors' Plan expire or otherwise terminate without being
exercised, the common stock not purchased pursuant to such options reverts to
and again becomes available for issuance under the Plan.
ADMINISTRATION
As authorized by the Directors' Plan, the Board has delegated the
administration of the Directors' Plan to the Compensation Committee.
ELIGIBILITY
Options may be granted under the Directors' Plan only to Non-Employee
Directors of the Company.
NON-DISCRETIONARY GRANTS
INITIAL GRANT. The Directors' Plan provides that each person who, on the
adoption date, was then a non-employee director was automatically granted an
option to purchase 20,000 shares of the Company's Common stock on such date. In
addition, each person who is first elected as a non-employee director after the
adoption date automatically shall be granted an option to purchase 4,000 shares
of the Company's Common stock on the date of his or her initial election to the
Board.
ANNUAL GRANTS. The Directors' Plan provides that, on January 1 of each
year, each person who is then a non-employee director automatically shall be
granted shall be granted an annual option to purchase 4,000 shares of the
Company's Common stock.
10
<PAGE>
TERMS OF OPTIONS
The following is a description of the terms of options under the Directors'
Plan.
EXERCISE PRICE; PAYMENT.
The exercise price of nonstatutory stock options under the Directors' Plan
must be at least 100% of the fair market value of the Company's common stock
subject to the option on the date of grant.
The exercise price of options granted under the Directors' Plan must be paid
either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (A) by delivery of other common stock of the Company,
(B) pursuant to a deferred payment or other arrangement or (C) in any other form
of legal consideration acceptable to the Board.
In the event of a decline in the value of the Company's common stock, the
Board has the authority to offer Non-Employee Directors the opportunity to
replace outstanding higher priced nonstatutory options with new lower priced
options.
OPTION EXERCISE.
Stock options granted under the Directors' Plan may be exercised as the
shares vest according to the following vesting schedules.
Initial options granted to persons who were serving as non-employee
directors on the adoption date shall vest as to 1/5th of the shares 12 months
after the date of the grant and 1/60th of the shares each month thereafter.
Initial options granted to non-employee directors after the adoption date shall
vest as to 1/12th of the shares each month after the date of the grant. Annual
options granted under the Directors' Plan shall vest as to 1/12th of the shares
each month after the date of the grant.
The Directors' Plan also provides that the time during which an option may
be exercised shall be accelerated if a non-employee director's continuous
service with the Company (whether as a director, employee or consultant) is
terminated either (1) voluntarily (including due to death or disability) or (2)
due to an involuntary termination without cause (as defined in the Directors'
Plan).
TERM OF OPTIONS.
The term of options under the Directors' Plan is 10 years. Options under the
Directors' Plan terminate twelve months after the termination of the optionee's
employment or relationship as a director or consultant with the Company or any
affiliate of the Company (including termination due to disability), except that
an option may be exercised at any time within 18 months of such person's
termination of employment due to death.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Directors' Plan and options outstanding
thereunder will be appropriately adjusted as to the class and the maximum number
of shares subject to the Directors' Plan and the class and the maximum number of
shares and price per share of stock subject to outstanding options.
Certain adjustments in option outstanding under the Directors' Plan may be
made upon a Change in Control of the Company. The Directors' Plan defines
"Change in Control" as (i) a dissolution, liquidiation, or sale of all or
substantially all of the Company's assets; (ii) a merger or consolidation in
which the Company is not the surviving corporation; (iii) a reverse merger in
which the Company is the surviving
11
<PAGE>
corporation but the shares of common stock outstanding immediately before the
merger are converted by virtue of the merger into other property; or (iv) the
individuals who, as of August 22, 1997 are members of the Board (the "Incumbent
Board") cease for any reason to constitute at least 50% of the Board, provided,
however, that any new director whose election or nomination by the Company's
stockholders is approved by a vote of at least 50% of the Incumbent Board shall
also be considered a member of the Incumbent Board.
Upon a Change in Control of the Company, the surviving or acquiring
corporation may assume options outstanding under the Directors' Plan or
substitute similar options for those outstanding under the Directors' Plan. If
the surviving or acquiring corporation assumes such options or substitutes
similar options, and the optionee's service or employment is either voluntarily
terminated with good reason or involuntarily terminated without cause (as those
terms are defined in the Directors' Plan) within one month before, or 13 months
after, the Change in Control, then the vesting of those assumed options or
substituted options and the time during which such options may be exercised will
accelerate. If the surviving or acquiring corporation refuses to assume such
options or to substitute similar options for such options, then (i) the vesting
of options held by persons then performing services with the Company or an
affiliate (whether as an employee, director or consultant) and the time during
which such options may be exercised will accelerate upon the Change in Control
and those options will terminate if not exercised after such acceleration and at
or prior to the Change in Control; and (ii) all other options outstanding under
the Directors' Plan will terminate if not exercised prior to the Change in
Control.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Directors' Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Directors' Plan will terminate August 21, 2112.
The Board may also amend the Directors' Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders within 12 months before or after its adoption by the Board if the
amendment requires stockholder approval in order for the Directors' Plan to
comply with Rule 16b-3 of the Exchange Act or any Nasdaq or securities exchange
listing requirements.
RESTRICTIONS ON TRANSFER
Under the Directors' Plan, options generally are not transferable (except by
will or the laws of descent and distribution, pursuant to a domestic relations
order, or to a spouse, children or lineal ancestors or descendants) unless such
option expressly provides for transferability. In addition, an optionee may
designate a beneficiary who may exercise his or her option after death.
FEDERAL INCOME TAX INFORMATION
Nonstatutory stock options granted under the Directors' Plan generally have
the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory option. Upon exercise of a nonstatutory option, the
optionee normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value on the date of exercise over the option exercise
price. Subject to the satisfaction of a tax reporting obligation, the Company
will generally be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term or short-term depending on the length of time the stock was
held.
12
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of FCG common stock as of December 31, 1998 by: (i) each stockholder who is
known by FCG to own beneficially more than 5% of FCG common stock; (ii) each
named executive officer of FCG; (iii) each director of FCG; and (iv) all
directors and executive officers of FCG as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------------------------- ----------- --------
<S> <C> <C>
James A. Reep(2)....................................... 2,858,700 12.77%
David S. Lipson........................................ 2,246,767 10.03%
Associate 401(k) and Stock Ownership Plan(3)........... 1,589,544 7.10%
Brent A. Hanson(4)..................................... 826,200 3.69%
Thomas A. Reep(5)...................................... 632,872 2.83%
Frank I. Mueller....................................... 301,896 1.35%
Roy A. Ziegler(6)...................................... 207,616 *
Steven Heck(7)......................................... 173,142 *
Richard N. Kramer(8)................................... 167,292 *
Luther J. Nussbaum(9).................................. 135,120 *
Donald R. Caldwell..................................... 11,524 *
Stanley R. Nelson(10).................................. 9,033 *
Steven Lazarus(10)..................................... 9,033 *
Stephen E. Olson(10)................................... 9,033 *
Jack O. Vance(10)...................................... 9,033 *
Scott S. Parker(10).................................... 3,277 *
Frank Baldino, Jr., Ph.D(10)........................... 8,470 *
All directors and executive officers
as a group (16 persons)(3)(11)....................... 7,609,008 33.98%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
FCG common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Except as
indicated by footnote, and subject to community property laws where
applicable, FCG believes, based on information furnished by such persons,
that the persons named in the table above have sole voting and investment
power with respect to all shares of FCG common stock shown as beneficially
owned by them. Percentage of beneficial ownership is based on 22,394,170
shares of FCG common stock outstanding as of December 31, 1998. Certain
shares are subject to repurchase at the original issuance price plus a
growth factor. The growth factor is equal to the average interest rate
compounded quarterly which FCG pays to a commercial lending institution in
a calendar quarter (the "growth factor"). In the event that FCG has no
borrowings for a particular quarter then the growth factor shall be the
prime rate on the first day of the quarter, as announced in the Wall Street
Journal, or if the Wall Street Journal discontinues such announcements,
then it shall be the prime rate as announced by Bank of America.
(2) The business address of the named stockholder is c/o First Consulting
Group, Inc., 111 West Ocean Blvd., 4th Floor, Long Beach, California 90802.
All shares are held by The Reep Family LLC, of which Mr. Reep is the
Managing Member.
(3) The business address of the named stockholder is c/o First Consulting
Group, Inc., 111 West Ocean Blvd., 4th Floor, Long Beach, California 90802.
The shares are held by Union Bank as trustee of the
13
<PAGE>
ASOP. FCG allocates shares of FCG common stock as matching contributions to
certain of its executive officers. These executive officers have the right
to acquire the fair market value of the stock allocated to their respective
accounts upon termination of employment. Such stockholders also have the
right to vote such shares of FCG common stock allocated under the ASOP with
respect to the approval or disapproval of any FCG merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business, or such similar
transaction. Of the shares held by the ASOP, 9,180 shares have been
allocated to the accounts of the following named executive officers: Steven
Heck (1,520 shares); Richard N. Kramer (1,500 shares); Frank I. Mueller
(1,540 shares); James A. Reep (1,540 shares); Thomas A. Reep (1,540 shares)
and Roy A. Ziegler (1,540 shares). All other executive officers as a group
have been allocated a total of 9,280 shares.
(4) The business address of the named stockholder is c/o First Consulting
Group, Inc., 6903 Rockledge Drive, Suite 920, Bethesda, Maryland 20817. The
shares are held by The Brent A. Hanson Inter Vivos Trust, dated March 24,
1995, of which Mr. Hanson is trustee.
(5) The business address of the named stockholder is c/o First Consulting
Group, Inc., 111 West Ocean Blvd., 4th Floor, Long Beach, California 90802.
The shares are held by The Reep Family Inter Vivos Trust, dated May 27,
1992, of which Mr. Reep and his wife, Patricia A. Reep, are trustees. Of
the shares held, 73,864 are unvested shares as of October 30, 1998. Of such
unvested shares, 36,932 are subject to repurchase by FCG at a price equal
to $2.38 per share plus the growth factor and 36,932 shares are subject to
repurchase by FCG at a price equal to $4.76 per share plus the growth
factor.
(6) Of the shares held, 124,569 are unvested shares as of December 31, 1998. Of
such unvested shares, 30,594 are subject to repurchase by FCG at a price
equal to $0.44 per share plus the growth factor, 24,866 are subject to
repurchase by FCG at a price equal to $0.53 per share plus the growth
factor, 46,073 are subject to repurchase by FCG at a price equal to $0.57
per share plus the growth factor, and 23,036 are subject to repurchase by
FCG at a price equal to $2.80 per share plus the growth factor.
(7) Of the shares held, 19,238 are unvested shares as of December 31, 1998. Of
such unvested shares, 7,200 are subject to repurchase by FCG at a price
equal to $0.22 per share plus the growth factor, 5,656 are subject to
repurchase by FCG at a price equal to $0.53 per share plus the growth
factor, 4,254 are subject to repurchase by FCG at a price equal to $0.57
per share plus the growth factor and 2,128 are subject to repurchase by FCG
at a price equal to $2.80 per share plus the growth factor.
(8) Of the shares held, 117,104 are unvested as of December 31, 1998. Of such
unvested shares, 78,069 are subject to repurchase by FCG at a price equal
to $0.57 per share plus the growth factor and 39,035 are subject to
repurchase by FCG at a price equal to $2.80 per share plus the growth
factor.
(9) The shares are held by The Nussbaum Family Trust, a Revocable Living Trust,
dated March 2, 1992, of which Mr. Nussbaum is trustee. Of the shares held,
94,583 are unvested shares as of December 31, 1998. Of such unvested
shares, 63,055 are subject to repurchase by FCG at a price equal to $0.57
per share plus the growth factor and 31,528 are subject to repurchase by
FCG at a price equal to $2.80 per share plus the growth factor.
(10) Includes options exercisable within 60 days of December 31, 1998, issued
by the Company to the following directors and executive officers: Frank
Baldino, Jr. (4,620); Steven Lazarus (6,933); Stanley R. Nelson (6,933);
Stephen E. Olson (6,933); Scott S. Parker (1,933); and Jack O. Vance
(6,933).
(11) Of the shares held, 763,998 are unvested shares as of December 31, 1998.
In general, such unvested shares are subject to repurchase by FCG at a
price equal to the original purchase price plus the growth factor.
14
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
FCG currently provides annual cash compensation in the amount of $10,000 to
directors for services in such capacity. Directors are also reimbursed for
certain expenses in connection with attendance at Board of Director and
committee meetings. Directors receive automatic grants of nonstatutory stock
options under the Directors' Plan and are eligible for grants of nonstatutory
stock options under the 1997 Equity Incentive Plan. Currently, under the
Non-Employee Director Restricted Stock Plan, each non-employee director is
required to purchase and hold shares with an aggregate fair market value equal
to the annual fees paid to the directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996, certain compensation awarded or paid
to, or earned by, the Company's named executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -------
COMPENSATION(1) SECURITIES ALL OTHER
FISCAL ------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ---------------------------------------- ----- -------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
James A. Reep .......................... 1998 $410,000 $140,000 -- --
Chairman of the Board 1997 379,500 120,435 -- $ 47,634(2)(3)
1996 379,500 129,654 -- --
Luther J. Nussbaum ..................... 1998 370,000 94,500 -- --
Chief Executive Officer and 1997 324,500 127,533 -- 49,009(3)
Executive Vice President, 1996 289,500 88,200 -- 38,095(4)
Worldwide Practice Support
Steven Heck ............................ 1998 370,000 66,150 -- --
President and Executive Vice 1997 344,360 109,043 -- 171,425(3)
President, Practice 1996 344,360 105,525 -- 276,679(4)
Don M. Tompkins ........................ 1998 350,000 89,250 -- --
Vice President and Managing 1997 323,760 110,250 -- 57,328(3)
Director, Implementation Services 1996 258,760 80,000 -- 36,195(4)
Richard W. Kramer ...................... 1998 350,000 89,250 -- 49,564(5)
Vice President and Managing 1997 324,240 99,225 -- 44,560(3)
Director, East Region 1996 284,240 95,288 -- --
Roy A. Ziegler ......................... 1998 350,000 89,250 -- --
Vice President and Managing 1997 324,500 99,225 -- 51,111(3)
Director, West Region 1996 259,500 139,200 -- --
</TABLE>
- ------------------------
(1) In accordance with the Commission rules, other annual compensation in the
form of perquisites and other personal benefits has been omitted where the
aggregate amount of such perquisites and other personal benefits constitutes
less than the lesser of $50,000 or 10% of the total annual salary and bonus
for the named executive officer for the fiscal year.
(2) Reflects a premium of $28,674 paid by FCG for a life insurance policy of
which Mr. Reep is the beneficiary.
(3) Includes (i) imputed interest on interest-free loans by FCG to each of the
named executive officers (except Mr. Reep) for the purchase of shares of FCG
common stock under the 1994 Restricted Stock
15
<PAGE>
Plan; (ii) supplemental executive retirement plan contributions made on
behalf of each of the named executive officers (except Mr. Reep); (iii) an
allocation of 1,000 shares to each of the named executive officers' accounts
under the ASOP at an aggregate valuation of $1,190 per named executive
officer; (iv) FCG's 50% matching contribution of FCG common stock under the
ASOP for the account of Messrs. Reep, Heck, Nussbaum, Tompkins, Kramer and
Ziegler with an estimated valuation of $4,750, $4,680, $4,750, $4,380,
$4,620 and $4,750, respectively, and (vi) $90,700 in relocation expenses
paid to Mr. Heck in 1997 and 1996, respectively.
(4) Includes (i) imputed interest on interest-free loans by FCG to each of the
named executive officers (except Mr. Reep) for the purchase of shares of FCG
common stock under the 1994 Restricted Stock Plan; (ii) supplemental
executive retirement plan contributions made on behalf of each of the named
executive officers (except Mr. Reep); (iii) term life insurance premiums
paid by FCG; (iv) an allocation of 200 shares to each of the named executive
officers' accounts under the ASOP at an aggregate valuation of $957 per
named executive officer; (v) FCG's 50% matching contribution of FCG common
stock under the ASOP for the account of Messrs. Reep, Heck, Nussbaum,
Tompkins, Kramer and Ziegler with an estimated valuation of $4,750, $4,680,
$4,750, $4,380, $4,620 and $4,750, respectively, and (vi) $90,700 in
relocation expenses paid to Mr. Heck in 1997 and 1996, respectively.
(5) Includes (i) imputed interest on an interest-free loans by FCG for the
purchase of shares of FCG common stock under the 1994 Restricted Stock Plan;
(ii) a supplemental executive retirement plan contribution made on behalf of
Mr. Kramer; (iii) FCG's 50% matching contribution of FCG common stock under
the ASOP for the account of Mr. Kramer with an estimated valuation of
$5,000; (iv) a taxable fringe benefit in the amount of $1,192; and (v) a
term life insurance premium paid by FCG.
OPTION/SAR GRANTS AND EXERCISES
No options or stock appreciation rights were granted to or exercised by any
named executive officer during fiscal 1998.
COMPLIANCE UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Commission and the Nasdaq
National Market. Such persons are required by Commission regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and representations by the executive officers and directors, the Company
believes that all Section 16(a) filing requirements were met during the fiscal
year ending December 31, 1998, except for the filing of certain Form 4's
relating to distributions of the Company's common stock by the Company's
Associate 401(k) and Stock Ownership Plan in 1998. Under the Company's Associate
401(k) and Stock Ownership Plan, employee contributions are matched with
distributions of the Company's common stock.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Under the Company's 1994 Restricted Stock Plan (as amended, the "1994 Plan")
and form of Restricted Stock agreement ("RSA"), the Company has entered into
RSAs with each of its vice presidents. The 1994 Plan and RSAs provide that each
person, upon becoming a vice president of the Company, must purchase and hold a
specific minimum number of shares of FCG common stock. Shares purchased under
the RSAs prior to the consummation of the Company's initial public offering
effective as of February 26,
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1998 (the "IPO") are subject to a 10-year vesting period beginning the date upon
which an individual becomes a vice president and continuing upon the completion
of each year of service for such vice president. Automatic acceleration of such
vesting occurs upon death or permanent disability of a vice president and upon
certain changes in ownership of the Company. Partial acceleration of vesting may
also occur upon the vice president attaining the age of 59. Shares purchased
after the consummation of the IPO are fully vested upon purchase.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Stanley R. Nelson, Stephen E. Olson, and Jack O. Vance are members of the
Compensation Committee. Mr. Nelson is the Chairman and Chief Executive Officer
of the Scottsdale Informatics Institute, formerly a wholly-owned subsidiary of
the Company. As of December 31, 1998, the Scottsdale Institute is a separate
entity organized under section 501(c)(3) of the Internal Revenue Code.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND COMPOSITION OF THE COMMITTEE
The Compensation Committee is responsible for (i) recommending the type and
level of compensation for directors, officers and employees of the Company, (ii)
administering the Company's equity incentive plans, and (iii) granting incentive
stock options and nonstatutory stock options which are not pursuant to the
Company's equity incentive plans. The Compensation Committee is also responsible
for reviewing the performance of the Company's executive officers. Compensation
for directors, officers and employees of the Company are approved by the Board.
The Compensation Committee is composed of three members of the Board:
Stephen E. Olsen, Jack O. Vance, and Stanley R. Nelson. Messrs. Olsen and Vance
have never served as employees of the Company or its subsidiaries. Mr. Nelson is
the Chairman and Chief Executive Officer of the Scottsdale Informatics
Institute, formerly a wholly-owned subsidiary of the Company. As of December 31,
1998, the Scottsdale Institute is a separate entity organized under section
501(c)(3) of the Internal Revenue Code.
This report describes the philosophy that underlies the components of the
Company's executive compensation programs. It also describes the details of the
key elements of such programs, as well as the rationale for compensation paid to
the Company's Chief Executive Officer and its other officers.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee believes that all officers and employees should
be compensated based on their contribution to the firm and to building
sustainable long-term value for the Company's stockholders. In determining
specific compensation programs, the Compensation Committee considers individual
and group performance, including successful achievement of business, management
and research objectives, maintenance of strong relationships with the firm's
clients, new business generation and teamwork. The Compensation Committee
strives to design compensation programs that will tie individual rewards to the
Company's success and align interests between officers, employees and
stockholders of the Company. The Compensation Committee also strives to design
compensation programs that help retain its officers and employees and encourage
personal and professional development and growth.
COMPENSATION OF OFFICERS GENERALLY
Officer compensation programs typically consist of four components: base
salaries, bonuses, equity incentives and other compensation. Base salaries are
established on the basis of the officer's experience, salary history and
contribution to the Company. Bonuses are established on the basis of individual
achievement of established objectives, overall corporate performance and other
factors. Equity incentives typically consist of stock purchases and stock option
grants under the Company's equity incentive plans. The Company requires minimum
stock purchases upon a person becoming an officer with the Company.
17
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In addition, officers must hold a minimum number of shares of the Company's
common stock throughout employment. Stock options are granted as inducements to
employment with the Company, to aid in retention and to align the interest of
such officers with those of the Company's stockholders. Other compensatory
components typically consist of no-interest loans granted to vice presidents in
connection with purchases of shares of the Company's common stock under the
Company's equity incentive plans, relocation expenses, insurance premiums and
similar payments. All components are evaluated annually to ensure that such
components are appropriate and consistent with the strategic business objectives
of the Company, the corporate culture of the Company, and the enhancement of
stockholder value.
BASE SALARY
Base salary ranges and base salaries for the Company's officers are
established at competitive levels according to the salaries attributable to
comparable positions at comparable companies within the healthcare, management
consulting and information services industries. The Compensation Committee
reviews the base salary of each officer annually. The Compensation Committee
considers each officer's level of responsibility, experience and overall
contribution to the Company. The Compensation Committee also considers equity
and fairness in setting the base salary of its officers. In making salary
recommendations, the Compensation Committee exercises discretion based on the
foregoing criteria. The Compensation Committee does not apply a specific formula
to determine the weight of each factor considered.
BONUSES
Bonuses for the Company's officers are determined based on the attainment of
specific business, management and research objectives. These objectives vary
depending upon the position or role of the individual officer. The Compensation
Committee also considers each officer's contribution to the Company's financial
performance and organizational growth, including typical measurements of
operational performance such as client continuity, utilization, employee
turnover and professional development and growth. The Board establishes specific
objectives for each officer the beginning of each year.
STOCK OPTIONS AND OTHER EQUITY INCENTIVES
The Compensation Committee administers the following equity incentive plans
for the Company: (i) the 1997 Equity Incentive Plan; (ii) 1997 Non-Employee
Directors' Stock Option Plan; (iii) 1994 Restricted Stock Purchase Plan; (iv)
Non-Employee Directors' Restricted Stock Purchase Plan; and (v) Associate 401(k)
and Stock Ownership Plan. The Compensation Committee also administers the equity
incentive plans of the Company's subsidiaries. The Company's officers can
receive stock option grants and other equity-based incentives under the 1997
Equity Incentive Plan, 1994 Restricted Stock Purchase Plan and the Associate
Profit Sharing 401(k) and Stock Ownership Plan. The Company's officers may also
receive non-statutory stock option grants that are inducements to employment and
not pursuant to any of the Company's equity incentive plans.
The Compensation Committee believes that all officers should hold an equity
stake in the Company and requires its officers to purchase and hold a minimum
number of shares of the Company's common stock. Under the Company's 1994
Restricted Stock Purchase Plan, each of the Company's Vice Presidents must sign
a Restricted Stock Agreement (the "RSA"). The RSA requires each vice president
to purchase and hold a minimum number of shares of the Company's common stock
throughout employment with the Company. The number of shares required to be
purchased and held under the RSA is equal in value to a specified multiple of
such vice president's base salary. Shares of common stock purchased under the
RSAs are subject to specified vesting periods, during which the Company retains
the right to repurchase unvested shares at cost plus an amount equal to the
original aggregate purchase price multiplied by a designated interest rate.
These vesting provisions currently require that vice presidents remain with the
Company for at least three years prior to vesting in a portion of the shares
purchased under the RSA.
Options to purchase shares of the Company's common stock are granted as
incentives to the Company's officers to become employees of the Company, to aid
in the retention of such officers and to
18
<PAGE>
align the interests of such officers with those of the stockholders. Options are
granted when the officer first joins the Company, in connection with a
significant change in an officer's responsibility and, occasionally, to achieve
equity within an officer's peer group.
In 1998, the Compensation Committee established an automatic stock option
grant program to grant options to the Company's vice presidents based on the
number of shares of the Company's common stock purchased under the RSAs. In
1998, the Company's vice presidents were granted an option to purchase one share
of common stock for each share of common stock purchased under the RSAs. The
Compensation Committee also granted options to purchase 100 shares of the
Company's common stock to all non-officer employees of the Company as of January
1, 1998. The purpose of this grant was to provide an additional incentive to all
non-officer employees to assist the Company in achieving financial growth and
client satisfaction.
The Compensation Committee grants incentive stock options to officers and
employees of the Company. Individuals employed in foreign jurisdictions are
typically granted non-statutory stock options. Options generally become
exercisable over a six-year period (20% at the end of one year and 1.67% each
month thereafter). Options granted during 1998 were granted at a price equal to
the fair market value of the Company's common stock on the date of grant.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), provides in general that companies may not deduct in any taxable year
compensation in excess of $1,000,000 paid to any Named Executive Officer, except
to the extent such excess constitutes performance-based compensation. In order
for incentive compensation to qualify as performance based compensation under
Section 162(m), the Company's discretion to grant awards must be strictly
limited. The Company does not currently intend to qualify its incentive
compensation plans under Section 162(m). The policy of the Company is to qualify
future compensation arrangements to ensure deductibility, except in those cases
where stockholder value is maximized by an alternative approach.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's salary, bonus and other compensation follow
the policies set forth above.
James Reep served as the Company's Chief Executive Officer from March 1991
to October 1998. For the 1998 fiscal year, Mr. Reep's base salary was $400,000.
Mr. Reep received a bonus of $140,000. Mr. Reep also received $5,000 in matching
funds under the Company's Associate 401(k) and Stock Ownership Plan. Mr. Reep
did not receive any option grants, purchase any restricted stock or other
incentives under the Company's equity incentive plans.
Luther Nussbaum has served as the Company's Chief Executive Officer since
October 1998. Mr. Nussbaum's compensation was established in connection with his
prior position as Executive Vice President, Worldwide Practice Support. No
additional compensation was paid to Mr. Nussbaum upon his appointment as the
Chief Executive Officer of the Company. For the 1998 fiscal year, Mr. Nussbaum's
base salary was $360,000. Mr. Nussbaum received a bonus of $94,500. Mr. Nussbaum
also received $5,000 in matching funds under the Company's Associate 401(k) and
Stock Ownership Plan. Mr. Nussbaum did not receive any option grants, purchase
any restricted stock or other incentives under the Company's equity incentive
plans.
The foregoing report has been approved by all of the members of the
Committee.
THE COMPENSATION COMMITTEE
Stephen E. Olsen
Jack O. Vance
Stanley R. Nelson
19
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below includes companies required by the
Securities and Exchange Commission and shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed solicitating material or filed under such Acts.
The following graph demonstrates a comparison of cumulative total returns
based upon an initial investment of $100.00 in the Company's Common Stock as
compared with the Hambrecht & Quist Technology Index and Nasdaq Composite. The
stock price performance shown on the graph below is not necessarily indicative
of future price performance and only reflects the Company's relative stock price
on February 13, 1998 (the date the Company's Common Stock began trading on the
Nasdaq National Market) through December 31, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATE FCGI COMP HQILK DATE FCGI NASDAQ COMPOSITE H&Q TECHNOLOGY INDEX
<S> <C> <C> <C> <C> <C> <C> <C>
2/13/98 $18.31 $1,710.42 $1,338.96 2/13/98 100 100 100
2/17/98 $19.00 $1,703.43 $1,334.55 2/17/98 103.7542662 99.59132845 99.6706399
2/18/98 $19.00 $1,715.73 $1,323.19 2/18/98 103.7542662 100.3104501 98.82222023
2/19/98 $17.94 $1,727.01 $1,337.41 2/19/98 97.95221843 100.9699372 99.88423851
2/20/98 $17.88 $1,728.13 $1,352.10 2/20/98 97.6109215 101.0354182 100.9813587
2/23/98 $18.38 $1,751.76 $1,347.89 2/23/98 100.3412969 102.4169502 100.6669355
2/24/98 $18.38 $1,738.71 $1,368.34 2/24/98 100.3412969 101.6539797 102.1942403
2/25/98 $18.25 $1,766.48 $1,344.73 2/25/98 99.65870307 103.2775576 100.4309315
2/26/98 $18.63 $1,777.11 $1,379.49 2/26/98 101.7064846 103.8990423 103.0269762
2/27/98 $18.75 $1,770.51 $1,398.95 2/27/98 102.3890785 103.5131722 104.480343
3/2/98 $18.00 $1,758.54 $1,386.83 3/2/98 98.29351536 102.8133441 103.5751628
3/3/98 $17.75 $1,757.14 $1,362.46 3/3/98 96.92832765 102.7314928 101.7550935
3/4/98 $17.97 $1,759.70 $1,351.62 3/4/98 98.12286689 102.8811637 100.9455099
3/5/98 $17.97 $1,711.92 $1,358.36 3/5/98 98.12286689 100.0876978 101.4488857
3/6/98 $18.31 $1,753.49 $1,312.69 3/6/98 100 102.518095 98.03802952
3/9/98 $17.63 $1,725.16 $1,344.53 3/9/98 96.24573379 100.8617766 100.4159945
3/10/98 $19.31 $1,748.51 $1,308.15 3/10/98 105.4607509 102.2269384 97.69896039
3/11/98 $18.75 $1,756.85 $1,332.15 3/11/98 102.3890785 102.7145379 99.49139631
3/12/98 $18.75 $1,764.06 $1,348.51 3/12/98 102.3890785 103.1360718 100.7132401
3/13/98 $18.88 $1,771.66 $1,358.77 3/13/98 103.0716724 103.5804072 101.4795065
3/16/98 $18.75 $1,788.18 $1,365.50 3/16/98 102.3890785 104.5462518 101.9821354
3/17/98 $19.25 $1,779.30 $1,379.10 3/17/98 105.1194539 104.0270811 102.9978491
3/18/98 $19.44 $1,788.28 $1,364.60 3/18/98 106.1433447 104.5520983 101.914919
3/19/98 $19.63 $1,799.98 $1,371.76 3/19/98 107.1672355 105.2361408 102.4496624
3/20/98 $19.34 $1,789.16 $1,381.37 3/20/98 105.6313993 104.6035477 103.1673836
3/23/98 $19.00 $1,792.51 $1,361.83 3/23/98 103.7542662 104.799406 101.7080421
3/24/98 $19.91 $1,812.44 $1,368.73 3/24/98 108.7030717 105.9646169 102.2233674
3/25/98 $19.88 $1,824.51 $1,391.97 3/25/98 108.5324232 106.6702915 103.9590428
3/26/98 $19.88 $1,828.54 $1,399.75 3/26/98 108.5324232 106.9059062 104.5400908
3/27/98 $19.75 $1,823.62 $1,406.88 3/27/98 107.8498294 106.6182575 105.0725937
3/30/98 $20.50 $1,818.70 $1,398.20 3/30/98 111.9453925 106.3306089 104.4243293
3/31/98 $20.63 $1,835.68 $1,398.20 3/31/98 112.6279863 107.3233475 104.4243293
4/1/98 $19.88 $1,847.66 $1,398.20 4/1/98 108.5324232 108.0237602 104.4243293
4/2/98 $20.88 $1,852.96 $1,432.82 4/2/98 113.9931741 108.3336257 107.0099181
4/3/98 $20.63 $1,855.40 $1,431.82 4/3/98 112.6279863 108.4762807 106.9352333
4/6/98 $19.41 $1,829.14 $1,426.46 4/6/98 105.9726962 106.9409853 106.5349226
4/7/98 $19.13 $1,798.71 $1,404.61 4/7/98 104.4368601 105.1618901 104.9030591
4/8/98 $19.19 $1,807.01 $1,366.15 4/8/98 104.778157 105.647151 102.0306805
4/9/98 $19.31 $1,820.24 $1,378.70 4/9/98 105.4607509 106.4206452 102.9679751
4/13/98 $18.88 $1,824.95 $1,386.02 4/13/98 103.0716724 106.6960162 103.5146681
4/14/98 $19.13 $1,843.03 $1,385.23 4/14/98 104.4368601 107.7530665 103.4556671
4/15/98 $18.88 $1,863.26 $1,404.65 4/15/98 103.0716724 108.9358169 104.9060465
4/16/98 $19.13 $1,858.24 $1,442.14 4/16/98 104.4368601 108.6423218 107.7059808
4/17/98 $19.13 $1,866.60 $1,422.30 4/17/98 104.4368601 109.1310906 106.2242337
4/20/98 $23.75 $1,887.14 $1,427.60 4/20/98 129.6928328 110.3319652 106.6200633
4/21/98 $27.88 $1,903.87 $1,460.34 4/21/98 152.21843 111.3100876 109.0652447
4/22/98 $27.31 $1,917.61 $1,484.31 4/22/98 149.1467577 112.113399 110.85544
4/23/98 $26.88 $1,881.39 $1,486.69 4/23/98 146.7576792 109.9957905 111.0331899
4/24/98 $27.00 $1,868.96 $1,454.45 4/24/98 147.440273 109.2690684 108.625351
4/27/98 $24.88 $1,820.31 $1,461.03 4/27/98 135.8361775 106.4247378 109.1167772
4/28/98 $24.03 $1,831.77 $1,420.18 4/28/98 131.2286689 107.0947487 106.0659019
4/29/98 $24.44 $1,851.64 $1,431.96 4/29/98 133.447099 108.2564516 106.9456892
4/30/98 $24.00 $1,868.41 $1,452.99 4/30/98 131.0580205 109.2369126 108.5163112
5/1/98 $24.00 $1,873.44 $1,465.14 5/1/98 131.0580205 109.5309924 109.4237319
5/4/98 $24.00 $1,878.86 $1,469.17 5/4/98 131.0580205 109.8478736 109.7247117
5/5/98 $23.81 $1,864.91 $1,478.97 5/5/98 130.0341297 109.0322845 110.4566231
5/6/98 $23.50 $1,856.68 $1,471.37 5/6/98 128.3276451 108.5511161 109.8890183
5/7/98 $22.38 $1,835.14 $1,464.93 5/7/98 122.1843003 107.2917763 109.408048
5/8/98 $25.06 $1,864.37 $1,449.02 5/8/98 136.8600683 109.0007133 108.2198124
5/11/98 $25.44 $1,848.07 $1,474.41 5/11/98 138.9078498 108.047731 110.1160602
5/12/98 $25.53 $1,860.16 $1,456.01 5/12/98 139.4197952 108.7545749 108.7418594
5/13/98 $25.38 $1,866.18 $1,469.65 5/13/98 138.5665529 109.1065352 109.7605604
5/14/98 $25.44 $1,865.36 $1,480.00 5/14/98 138.9078498 109.0585938 110.5335484
5/15/98 $25.38 $1,846.77 $1,465.66 5/15/98 138.5665529 107.9717262 109.462568
5/18/98 $25.44 $1,831.62 $1,439.09 5/18/98 138.9078498 107.0859789 107.478192
5/19/98 $25.69 $1,845.87 $1,428.47 5/19/98 140.2730375 107.9191076 106.6850391
5/20/98 $24.19 $1,831.75 $1,446.34 5/20/98 132.0819113 107.0935794 108.019657
5/21/98 $23.75 $1,820.99 $1,427.64 5/21/98 129.6928328 106.4644941 106.6230507
5/22/98 $23.75 $1,805.00 $1,409.69 5/22/98 129.6928328 105.529636 105.282458
5/26/98 $22.63 $1,778.09 $1,392.59 5/26/98 123.5494881 103.9563382 104.0053474
5/27/98 $21.38 $1,781.10 $1,367.02 5/27/98 116.7235495 104.1323184 102.0956563
5/28/98 $21.50 $1,794.62 $1,371.36 5/28/98 117.4061433 104.9227675 102.4197885
5/29/98 $22.22 $1,778.87 $1,378.46 5/29/98 121.331058 104.001941 102.9500508
6/1/98 $23.50 $1,746.82 $1,358.24 6/1/98 128.3276451 102.1281323 101.4399235
6/2/98 $23.44 $1,761.79 $1,318.91 6/2/98 127.9863481 103.0033559 98.50256916
6/3/98 $23.75 $1,742.31 $1,336.22 6/3/98 129.6928328 101.8644543 99.79536357
6/4/98 $24.00 $1,769.95 $1,318.48 6/4/98 131.0580205 103.4804317 98.47045468
6/5/98 $23.88 $1,782.92 $1,350.75 6/5/98 130.3754266 104.238725 100.8805341
6/8/98 $24.00 $1,787.77 $1,367.07 6/8/98 131.0580205 104.5222811 102.0993906
6/9/98 $24.06 $1,800.76 $1,381.66 6/9/98 131.3993174 105.2817437 103.1890422
6/10/98 $23.88 $1,773.25 $1,402.88 6/10/98 130.3754266 103.6733668 104.7738543
6/11/98 $23.88 $1,749.75 $1,368.74 6/11/98 130.3754266 102.2994352 102.2241142
6/12/98 $24.25 $1,745.05 $1,340.48 6/12/98 132.4232082 102.0246489 100.1135209
6/15/98 $24.00 $1,715.75 $1,335.36 6/15/98 131.0580205 100.3116194 99.73113461
6/16/98 $24.25 $1,753.12 $1,310.99 6/16/98 132.4232082 102.4964629 97.9110653
6/17/98 $24.50 $1,776.40 $1,347.01 6/17/98 133.7883959 103.8575321 100.6012129
6/18/98 $23.75 $1,772.70 $1,353.80 6/18/98 129.6928328 103.6412109 101.1083229
6/19/98 $23.25 $1,781.29 $1,355.70 6/19/98 126.9624573 104.1434268 101.2502241
6/22/98 $23.19 $1,805.82 $1,357.80 6/22/98 126.6211604 105.5775774 101.4070622
6/23/98 $23.00 $1,844.57 $1,382.94 6/23/98 125.5972696 107.8431029 103.2846388
6/24/98 $23.00 $1,877.76 $1,417.63 6/24/98 125.5972696 109.7835619 105.8754556
6/25/98 $23.00 $1,863.25 $1,439.67 6/25/98 125.5972696 108.9352323 107.5215092
6/26/98 $23.50 $1,869.53 $1,435.60 6/26/98 128.3276451 109.3023936 107.217542
6/29/98 $23.50 $1,891.08 $1,432.82 6/29/98 128.3276451 110.562318 107.0099181
6/30/98 $26.25 $1,894.74 $1,447.73 6/30/98 143.3447099 110.7763006 108.123469
7/1/98 $25.00 $1,914.46 $1,443.58 7/1/98 136.5187713 111.9292338 107.8135269
7/2/98 $24.75 $1,894.00 $1,455.42 7/2/98 135.1535836 110.7330363 108.6977953
7/6/98 $25.00 $1,909.47 $1,425.52 7/6/98 136.5187713 111.6374925 106.4647189
7/7/98 $24.50 $1,908.11 $1,439.49 7/7/98 133.7883959 111.5579799 107.508066
7/8/98 $25.00 $1,935.39 $1,443.98 7/8/98 136.5187713 113.1529098 107.8434008
7/9/98 $24.50 $1,939.82 $1,473.65 7/9/98 133.7883959 113.4119105 110.0592998
7/10/98 $24.50 $1,943.04 $1,476.22 7/10/98 133.7883959 113.6001684 110.2512398
7/13/98 $25.00 $1,965.53 $1,474.15 7/13/98 136.5187713 114.9150501 110.0966422
7/14/98 $24.75 $1,968.41 $1,487.86 7/14/98 135.1535836 115.0834298 111.1205712
7/15/98 $24.75 $1,994.54 $1,483.66 7/15/98 135.1535836 116.6111248 110.8068949
7/16/98 $25.00 $2,000.56 $1,520.15 7/16/98 136.5187713 116.9630851 113.5321444
7/17/98 $24.25 $2,008.76 $1,531.27 7/17/98 132.4232082 117.4424995 114.3626397
7/20/98 $25.75 $2,014.25 $1,538.60 7/20/98 140.6143345 117.7634733 114.9100795
7/21/98 $25.50 $1,979.14 $1,543.72 7/21/98 139.2491468 115.7107611 115.2924658
7/22/98 $26.25 $1,969.75 $1,520.27 7/22/98 143.3447099 115.1617731 113.5411065
7/23/98 $27.13 $1,935.22 $1,496.27 7/23/98 148.1228669 113.1429707 111.7486706
7/24/98 $29.00 $1,930.99 $1,463.48 7/24/98 158.3617747 112.8956631 109.299755
7/27/98 $28.25 $1,933.26 $1,453.91 7/27/98 154.2662116 113.028379 108.5850212
7/28/98 $28.13 $1,896.53 $1,450.57 7/28/98 153.5836177 110.8809532 108.3355739
7/29/98 $28.00 $1,881.49 $1,436.62 7/29/98 152.9010239 110.001637 107.2937205
7/30/98 $27.75 $1,919.58 $1,415.68 7/30/98 151.5358362 112.2285754 105.7298202
7/31/98 $27.75 $1,872.39 $1,457.34 7/31/98 151.5358362 109.469604 108.8411902
8/3/98 $27.88 $1,851.10 $1,425.20 8/3/98 152.21843 108.2248804 106.4408197
8/4/98 $27.75 $1,785.64 $1,418.05 8/4/98 151.5358362 104.3977503 105.9068232
8/5/98 $26.88 $1,788.20 $1,368.40 8/5/98 146.7576792 104.5474211 102.1987214
8/6/98 $27.63 $1,829.51 $1,370.87 8/6/98 150.8532423 106.9626174 102.3831929
8/7/98 $27.38 $1,846.77 $1,411.79 8/7/98 149.4880546 107.9717262 105.4392962
8/10/98 $27.50 $1,839.21 $1,426.90 8/10/98 150.1706485 107.5297295 106.567784
8/11/98 $27.19 $1,792.70 $1,416.74 8/11/98 148.4641638 104.8105144 105.8089861
8/12/98 $26.56 $1,825.53 $1,375.60 8/12/98 145.0511945 106.729926 102.7364522
8/13/98 $26.00 $1,802.54 $1,408.62 8/13/98 141.9795222 105.3858117 105.2025453
8/14/98 $25.44 $1,790.19 $1,382.96 8/14/98 138.9078498 104.6637668 103.2861325
8/17/98 $25.00 $1,818.04 $1,375.45 8/17/98 136.5187713 106.2920218 102.7252494
8/18/98 $24.19 $1,855.12 $1,409.33 8/18/98 132.0819113 108.4599104 105.2555715
8/19/98 $24.00 $1,842.69 $1,445.33 8/19/98 131.0580205 107.7331883 107.9442254
8/20/98 $23.63 $1,832.45 $1,430.45 8/20/98 129.0102389 107.134505 106.8329151
8/21/98 $23.63 $1,797.61 $1,415.13 8/21/98 129.0102389 105.0975784 105.6887435
8/24/98 $23.50 $1,790.82 $1,391.45 8/24/98 128.3276451 104.7005999 103.9202067
8/25/98 $23.75 $1,798.17 $1,382.17 8/25/98 129.6928328 105.1303189 103.2271315
8/26/98 $23.75 $1,768.13 $1,386.18 8/26/98 129.6928328 103.3740251 103.5266177
8/27/98 $21.75 $1,686.41 $1,361.85 8/27/98 118.7713311 98.59625121 101.7095358
8/28/98 $19.94 $1,639.68 $1,284.65 8/28/98 108.8737201 95.86417371 95.94386688
8/31/98 $18.13 $1,499.25 $1,245.48 8/31/98 98.97610922 87.65390957 93.01846209
9/1/98 $17.75 $1,575.09 $1,120.75 9/1/98 96.92832765 92.08790823 83.70302324
9/2/98 $17.75 $1,592.85 $1,199.32 9/2/98 96.92832765 93.12624969 89.57101034
9/3/98 $17.75 $1,571.86 $1,208.19 9/3/98 96.92832765 91.89906573 90.23346478
9/4/98 $17.13 $1,566.52 $1,187.22 9/4/98 93.51535836 91.58686171 88.66732389
9/8/98 $17.75 $1,660.86 $1,185.11 9/8/98 96.92832765 97.10246606 88.5097389
9/9/98 $17.44 $1,624.55 $1,275.09 9/9/98 95.221843 94.97959565 95.22987991
9/10/98 $16.25 $1,585.33 $1,246.43 9/10/98 88.73720137 92.6865916 93.08941268
9/11/98 $15.00 $1,641.64 $1,218.31 9/11/98 81.9112628 95.97876545 90.98927526
9/14/98 $14.69 $1,665.69 $1,261.09 9/14/98 80.20477816 97.38485284 94.18429229
9/15/98 $14.38 $1,678.11 $1,280.76 9/15/98 78.49829352 98.11099028 95.65334289
9/16/98 $15.13 $1,689.91 $1,285.75 9/16/98 82.59385666 98.80087932 96.02602019
9/17/98 $15.13 $1,646.25 $1,295.59 9/17/98 82.59385666 96.24828989 96.76091892
9/18/98 $14.88 $1,663.77 $1,256.36 9/18/98 81.22866894 97.27259971 93.83103304
9/21/98 $14.69 $1,680.43 $1,259.41 9/21/98 80.20477816 98.24662948 94.05882177
9/22/98 $14.63 $1,697.80 $1,287.33 9/22/98 79.86348123 99.26216953 96.14402223
9/23/98 $14.31 $1,760.27 $1,303.21 9/23/98 78.15699659 102.9144888 97.33001733
9/24/98 $14.06 $1,720.34 $1,360.94 9/24/98 76.79180887 100.5799745 101.6415726
9/25/98 $13.88 $1,743.59 $1,323.61 9/25/98 75.76791809 101.9392898 98.85358786
9/28/98 $14.63 $1,739.22 $1,337.81 9/28/98 79.86348123 101.683797 99.91411245
9/29/98 $14.63 $1,734.05 $1,331.11 9/29/98 79.86348123 101.381532 99.41372408
9/30/98 $17.13 $1,693.84 $1,324.82 9/30/98 93.51535836 99.03064744 98.9439565
10/1/98 $16.19 $1,612.33 $1,282.60 10/1/98 88.39590444 94.26515125 95.79076298
10/2/98 $16.50 $1,614.98 $1,205.12 10/2/98 90.10238908 94.42008396 90.00418235
10/5/98 $13.13 $1,536.69 $1,205.12 10/5/98 71.67235495 89.84284562 90.00418235
10/6/98 $11.81 $1,510.89 $1,119.50 10/6/98 64.50511945 88.33444417 83.6096672
10/7/98 $9.69 $1,462.61 $1,102.09 10/7/98 52.90102389 85.51174565 82.30940431
10/8/98 $9.63 $1,419.12 $1,077.09 10/8/98 52.55972696 82.96909531 80.44228356
10/9/98 $9.31 $1,492.49 $1,047.34 10/9/98 50.85324232 87.258685 78.22040987
10/12/98 $9.63 $1,546.08 $1,117.99 10/12/98 52.55972696 90.39183358 83.49689311
10/13/98 $9.50 $1,509.45 $1,168.85 10/13/98 51.87713311 88.25025432 87.29536357
10/14/98 $9.81 $1,540.97 $1,136.40 10/14/98 53.58361775 90.09307655 84.87184083
10/15/98 $13.63 $1,611.01 $1,162.52 10/15/98 74.40273038 94.18797722 86.82260859
10/16/98 $11.63 $1,620.95 $1,227.44 10/16/98 63.48122867 94.76912103 91.67114776
10/19/98 $11.75 $1,648.73 $1,220.74 10/19/98 64.16382253 96.39328352 91.1707594
10/20/98 $11.50 $1,639.19 $1,257.25 10/20/98 62.79863481 95.83552578 93.89750254
10/21/98 $11.56 $1,674.75 $1,244.24 10/21/98 63.13993174 97.9145473 92.9258529
10/22/98 $12.56 $1,702.64 $1,271.52 10/22/98 68.60068259 99.54514096 94.96325506
10/23/98 $12.69 $1,693.86 $1,289.89 10/23/98 69.28327645 99.03181675 96.33521539
10/26/98 $12.13 $1,724.98 $1,295.81 10/26/98 66.2116041 100.8512529 96.77734958
10/27/98 $12.25 $1,717.63 $1,324.82 10/27/98 66.89419795 100.4215339 98.9439565
10/28/98 $13.88 $1,737.35 $1,322.45 10/28/98 75.76791809 101.5744671 98.76695346
10/29/98 $15.13 $1,757.19 $1,346.90 10/29/98 82.59385666 102.7344161 100.5929976
10/30/98 $16.44 $1,771.39 $1,378.56 10/30/98 89.76109215 103.5646216 102.9575193
11/2/98 $17.25 $1,800.91 $1,390.61 11/2/98 94.19795222 105.2905134 103.8574715
11/3/98 $17.38 $1,788.43 $1,416.25 11/3/98 94.88054608 104.5608681 105.7723905
11/4/98 $18.50 $1,823.57 $1,399.77 11/4/98 101.0238908 106.6153342 104.5415845
11/5/98 $19.31 $1,837.10 $1,449.77 11/5/98 105.4607509 107.406368 108.275826
11/6/98 $18.88 $1,856.56 $1,459.37 11/6/98 103.0716724 108.5441003 108.9928004
11/9/98 $18.13 $1,861.05 $1,470.96 11/9/98 98.97610922 108.8066089 109.8583976
11/10/98 $18.50 $1,865.62 $1,472.08 11/10/98 101.0238908 109.0737947 109.9420446
11/11/98 $18.13 $1,862.11 $1,467.30 11/11/98 98.97610922 108.868582 109.5850511
11/12/98 $17.88 $1,851.06 $1,473.14 11/12/98 97.6109215 108.2225418 110.0212105
11/13/98 $18.06 $1,847.99 $1,472.93 11/13/98 98.63481229 108.0430538 110.0055267
11/16/98 $18.25 $1,861.68 $1,462.04 11/16/98 99.65870307 108.843442 109.1922089
11/17/98 $18.63 $1,878.52 $1,475.77 11/17/98 101.7064846 109.8279955 110.2176316
11/18/98 $19.50 $1,897.44 $1,475.77 11/18/98 106.4846416 110.9341565 110.2176316
11/19/98 $19.88 $1,919.68 $1,521.11 11/19/98 108.5324232 112.234422 113.6038418
11/20/98 $19.63 $1,928.21 $1,542.47 11/20/98 107.1672355 112.7331299 115.1991098
11/23/98 $20.75 $1,977.42 $1,547.44 11/23/98 113.3105802 115.610201 115.5702934
11/24/98 $22.13 $1,965.88 $1,591.49 11/24/98 120.8191126 114.9355129 118.8601601
11/25/98 $22.25 $1,985.21 $1,574.74 11/25/98 121.5017065 116.0656447 117.6091892
11/27/98 $22.75 $2,016.44 $1,594.51 11/27/98 124.2320819 117.891512 119.0857083
11/30/98 $23.50 $1,949.54 $1,621.16 11/30/98 128.3276451 113.980192 121.076059
12/1/98 $23.00 $2,003.75 $1,555.81 12/1/98 125.5972696 117.149589 116.1954054
12/2/98 $22.75 $1,995.21 $1,604.49 12/2/98 124.2320819 116.6502964 119.8310629
12/3/98 $22.88 $1,954.33 $1,617.80 12/3/98 124.9146758 114.2602402 120.825118
12/4/98 $22.00 $2,003.16 $1,587.60 12/4/98 120.1365188 117.1150945 118.5696361
12/7/98 $20.63 $2,040.64 $1,631.14 12/7/98 112.6279863 119.3063692 121.8214136
12/8/98 $20.88 $2,034.75 $1,667.33 12/8/98 113.9931741 118.9620093 124.5242576
12/9/98 $19.94 $2,050.42 $1,667.87 12/9/98 108.8737201 119.8781586 124.5645874
12/10/98 $19.44 $2,015.96 $1,673.93 12/10/98 106.1433447 117.8634487 125.0171775
12/31/98 $18.63 $2,029.31 $1,622.95 12/11/98 101.7064846 118.6439588 121.2097449
12/31/98 $18.63 $1,966.92 $1,630.75 12/14/98 101.7064846 114.9963167 121.7922866
12/31/98 $19.00 $2,012.60 $1,575.52 12/15/98 103.7542662 117.6670058 117.6674434
12/31/98 $18.88 $2,009.36 $1,621.46 12/16/98 103.0716724 117.4775786 121.0984645
12/31/98 $19.00 $2,043.88 $1,608.94 12/17/98 103.7542662 119.4957964 120.1634104
12/31/98 $18.81 $2,086.14 $1,654.14 12/18/98 102.7303754 121.9665345 123.5391647
12/31/98 $18.88 $2,138.03 $1,692.67 12/21/98 103.0716724 125.0002923 126.4167712
12/31/98 $20.25 $2,120.98 $1,745.50 12/22/98 110.5802048 124.0034611 130.3623708
12/31/98 $20.63 $2,172.54 $1,730.34 12/23/98 112.6279863 127.0179254 129.2301488
12/31/98 $22.13 $2,163.03 $1,765.40 12/24/98 120.8191126 126.4619216 131.8485989
12/31/98 $21.25 $2,180.30 $1,765.40 12/28/98 116.0409556 127.4716152 131.8485989
12/31/98 $21.25 $2,181.77 $1,795.13 12/31/1998 116.0409556 127.557559 134.0689789
12/31/98 $21.00 $2,166.95 $1,790.01 12/31/1998 114.6757679 126.6911051 133.6865926
12/31/98 $20.50 $2,192.69 $1,789.78 12/31/98 111.9453925 128.1959986 133.6694151
1/4/99 $22.81 $2,208.05 $1,809.97 1/4/99 124.5733788 129.0940237 135.1773018
1/5/99 $23.00 $2,251.27 $1,815.40 1/5/99 125.5972696 131.6208884 135.5828404
</TABLE>
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy statement of FCG to be
issued in connection with the 1999 annual meeting of FCG stockholders must be
delivered to, or mailed and received at, the principal executive offices of FCG
not later than on the close of business on the sixtieth day nor earlier than the
close of business on the ninetieth day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event public
announcement of the date of such annual meeting is first made by FCG fewer than
seventy days prior to the date of such annual meeting, the close of business on
the tenth day following the day on which public announcement is first made by
FCG. The Company currently expects that its 1999 Annual Meeting of Stockholders
will be held on June 8, 1999.
OTHER BUSINESS
The Board does not currently intend to bring any other business before the
special meeting, and, so far as is known to the Board, no matters are to be
brought before the special meeting except as specified in the notice of the
special meeting. As to any business that may properly come before the special
meeting,
20
<PAGE>
however, it is intended that proxies, in the form enclosed, will be voted in
accordance with the judgment of the persons voting such proxies.
By Order of the Board of Directors
[/S/ PATRICIA A. LOWERY]
Patricia A. Lowery
SECRETARY
Long Beach, California
January 20, 1999
21
<PAGE>
APPENDIX A
FIRST CONSULTING GROUP, INC.
1997 EQUITY INCENTIVE PLAN
<PAGE>
FIRST CONSULTING GROUP, INC.
1997 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 22, 1997
APPROVED BY SHAREHOLDERS JANUARY 15, 1998
ADJUSTED FOR 4-FOR-1 STOCK SPLIT FEBRUARY 1998,
REINCORPORATION IN DELAWARE AND
CHANGE IN COMPANY NAME
TERMINATION DATE: AUGUST 21, 2007
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees, Directors and Consultants may be given an opportunity to benefit from
increases in value of the common stock of the Company ("Common Stock") through
the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options,
(iii) stock bonuses, (iv) rights to purchase restricted stock and (v) stock
appreciation rights.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "COMPANY" means First Consulting Group, Inc., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
A-1
<PAGE>
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the Participant's service to the Company or an Affiliate of the Company, whether
in the capacity of an Employee, a Director or a Consultant, is not interrupted
or terminated. The Participant's Continuous Status as an Employee, Director or
Consultant shall not be deemed to have terminated merely because of a change in
the capacity in which the Participant renders such service to the Company or an
Affiliate or the Company or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's service. The Board or its designee, in that party's sole
discretion, may determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board or its designee, including sick leave, military
leave, or any other personal leave; or (ii) transfers between locations of the
Company or between the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the Chief Executive Officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "DISABILITY" means the permanent and total disability of the Participant
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock
of the Company determined as follows (and in each case prior to the Listing
Date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations):
(1) If the Common Stock is listed on any established stock exchange, or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in Common Stock) on the trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source
as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(q) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(r) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of
A-2
<PAGE>
Regulation S-K promulgated pursuant to the Securities Act), does not possess an
interest in any other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K, and is not engaged in a business relationship as
to which disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a "non-employee director" for purposes of Rule
16b-3.
(s) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(t) "OFFICER" means (i) prior to the Listing Date, any person designated by
the Company as an officer and (ii) from and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(u) "OPTION" means a stock option granted pursuant to the Plan.
(v) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(w) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan.
(x) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(y) "PARTICIPANT" means a person to whom a Stock Award is granted pursuant
to the Plan.
(z) "PLAN" means this First Consulting Group, Inc. 1997 Plan.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(cc) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(dd) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(ee) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a Participant evidencing the terms and conditions of an individual Stock
Award grant. Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.
(ff) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
A-3
<PAGE>
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall
be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive
stock pursuant to a Stock Award; whether a person shall be permitted to
receive stock upon exercise of an Independent Stock Appreciation Right; and
the number of shares with respect to which a Stock Award shall be granted to
each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board. In the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Notwithstanding anything
in this Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate Three Million Five Hundred Thousand (3,500,000)
shares of Common Stock. Notwithstanding the foregoing and subject to the
provisions of Section 13 relating to adjustments upon changes in stock, the
stock that may be issued pursuant to Incentive Stock Options shall not exceed in
the aggregate Three Million Five Hundred Thousand (3,500,000) shares of Common
Stock. If any Stock Award shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full (or vested in the case
of Restricted Stock), the stock not acquired under such Stock Award shall revert
to and again become available for issuance under the Plan. Shares subject to
Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
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5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
to Employees, Directors and Consultants. Notwithstanding the foregoing, Stock
Appreciation Rights may be granted only after the Listing Date.
(b) Prior to the Listing Date, no person shall be eligible for the grant of
an Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant. After the Listing Date this provision shall apply
only to Incentive Stock Options.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, after the Listing Date no person shall be eligible to be
granted Options and Stock Appreciation Rights covering more than Eight Hundred
Thousand (800,000) shares of the Company's common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash or (ii) at the discretion of the Board at the
time of the grant of the Option, (A) by delivery to the Company of other Common
Stock of the Company, (B) according to a deferred payment (however, in the event
the Company reincorporates in Delaware, then payment of the common stock's "par
value," as defined in the Delaware General Corporation Law, shall not be made by
deferred payment), or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred
pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board. In the case of any deferred payment
arrangement, interest shall be compounded at least annually and shall be charged
at the minimum rate of interest necessary to avoid the treatment as interest,
under any applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. Prior to the Listing Date, an Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person. After the Listing Date, a Nonstatutory Stock Option
may
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be transferred to the extent provided in the Option Agreement; provided that if
the Option Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution or pursuant to a domestic
relations order satisfying the requirements of Rule 16 of the Exchange Act and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person or any transferee pursuant to a domestic relations
order. Notwithstanding the foregoing, the person to whom the Option is granted
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. Prior to the Listing Date and
to the extent required by applicable law, the vesting provisions of individual
Options may vary, but Options granted to persons other officers, directors or
consultants (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option, although vesting may be subject to reasonable conditions such as
continued employment. The provisions of this subsection 6(e) are subject to any
Option provisions governing the minimum number of shares as to which an Option
may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement,
which, prior to the Listing Date, shall not be less than thirty (30) days unless
such termination is for cause), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, after termination, the Optionee does
not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that, if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option as described in subsection 6(a) or (ii) the expiration of a period
of three (3) months after the termination of the Optionee's Continuous Status as
an Employee, Director or Consultant during which the exercise of the Option
would not be in violation of such registration requirements (if such provisions
would result in an extension of the time during which the Option may be
exercised beyond the period described in the first paragraph of this subsection
6(f)).
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement, which, prior to the Listing
Date, in no event shall be less than six (6) months), or (ii) the expiration of
the term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise
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his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which, prior to the Listing Date, in no event shall be
less than six (6) months), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate; provided, however,
that, prior to the Listing Date and to the extent required by applicable law,
(i) the right to repurchase at the original purchase price shall lapse at a
minimum rate of twenty percent (20%) per year over five (5) years from the date
the Option was granted, and (ii) such right shall be exercisable only within (A)
the ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the Optionee, and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Notwithstanding the foregoing, shares received on exercise of an Option
by an officer, director or consultant (within the meaning of Section 260.140.41
of Title 10 of the California Code of Regulations) may be subject to additional
or greater restrictions. Any shares repurchased pursuant to the Company's
repurchase right described in this subsection 6(i) shall be returned to and
again become available for issuance under the Plan.
(j) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option; provided, however, that, prior to the Listing Date and to the extent
required by applicable law, (i) such repurchase right shall be exercisable only
within (A) the ninety (90) day period following the termination of employment or
the relationship as a Director or Consultant (or in the case of a
post-termination exercise of the Option, the ninety (90) period following such
exercise), or (B) such longer period as may be agreed to by the Company and the
Optionee, (ii) such repurchase right shall be exercisable for less than all of
the vested shares only with the Optionee's consent and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares at a repurchase price equal to the greater of the exercise price or the
stock's Fair Market Value at the time of such termination. Notwithstanding the
foregoing, shares received on exercise of an Option by an officer, director or
consultant (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) may be subject to additional or greater
restrictions specified in the Option Agreement.
(k) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal shall be exercised by the Company no more
than thirty (30) days following receipt
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of notice of the Optionee's intent to transfer shares and must be exercised as
to all the shares the Optionee intends to transfer unless the Optionee consents
to exercise for less than all the shares offered. The purchase of the shares
following exercise shall be completed within thirty (30) days of the Company's
receipt of notice of the Optionee's intent to transfer shares, or such longer
period of time as has been offered by the person to whom the Optionee intends to
transfer the shares, or as may be agreed to by the Company and the Optionee.
Except as expressly provided in this subsection 6(k), such right of first
refusal shall otherwise comply with any applicable provisions of the Bylaws of
the Company.
(l) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionee to a further Option (a "Re-Load Option") in
the event the Optionee exercises the Option evidenced by the Option Agreement,
in whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Any such
Re-Load Option (i) shall be for a number of shares equal to the number of shares
surrendered as part or all of the exercise price of such Option; (ii) shall have
an expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (iii) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Re-Load Option on the date of exercise
of the original Option. Notwithstanding the foregoing, a Re-Load Option which is
an Incentive Stock Option and which is granted to a 10% shareholder (as
described in subsection 5(b)), shall have an exercise price which is equal to
one hundred ten percent (110%) of the Fair Market Value of the stock subject to
the Re-Load Option on the date of exercise of the original Option and shall have
a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 12(e) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board may determine which are not inconsistent with the express provisions of
the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such agreement, but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made. Notwithstanding the foregoing, the Board may determine that an
eligible person may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company for its
benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
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(c) CONSIDERATION. price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash; (ii) at the discretion of
the Board, according to a deferred payment or other arrangement with the person
to whom the stock is sold; or (iii) in any other form of legal consideration
that may be acceptable to the Board in its discretion. Notwithstanding the
foregoing, the Board to which administration of the Plan has been delegated may
award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board. Prior to the
Listing Date and to the extent required by applicable law, the applicable
agreement shall provide (i) that the right to repurchase at the original
purchase price shall lapse at a minimum rate of twenty percent (20%) per year
over five (5) years from the date the Stock Award was granted (except that a
Stock Award granted to an officer, director or consultant (within the meaning of
Section 260.140.41 of Title 10 of the California Code of Regulations) may become
fully vested, subject to reasonable conditions such as continued employment, at
any time or during any period established by the Company or of any of its
Affiliates), and (ii) such right shall be exercisable only (A) within the ninety
(90) day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Participant, and (iii) such right shall be exercisable only for
cash or cancellation of purchase money indebtedness for the shares.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) After the Listing Date, the Board or Committee shall have full power and
authority, exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees or Directors of or Consultants to, the
Company or its Affiliates. To exercise any outstanding Stock Appreciation Right,
the Participant must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing such
right. Except as provided in subsection 5(c), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option, and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to the particular Option grant to which it pertains. Tandem Stock Appreciation
Rights will require the Participant to elect between the exercise of the
underlying Option for shares of stock and the surrender, in whole or in part, of
such Option for an appreciation distribution. The appreciation distribution
payable on the exercised Tandem Right shall be in cash (or, if so provided, in
an equivalent number of shares of stock based on Fair Market Value on the date
of the Option surrender) in an amount up to the excess of (A) the Fair Market
Value (on the date of the Option surrender) of the number of shares of stock
covered by that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of
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stock to which the Concurrent Right pertains. The appreciation distribution
payable on an exercised Concurrent Right shall be in cash (or, if so provided,
in an equivalent number of shares of stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount equal to such portion
as shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will be
granted independently of any Option and shall, except as specifically set forth
in this Section 8, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess of (A)
the aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the Participant is vested under such Independent Right, and
with respect to which the Participant is exercising the Independent Right on
such date, over (B) the aggregate Fair Market Value (on the date of the grant of
the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board shall have the authority to effect, at any time and from time
to time, (i) the repricing of any outstanding Options under the Plan and/or (ii)
with the consent of any adversely affected holders of Options, the cancellation
of any outstanding Options under the Plan and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of stock, but having an exercise price per share not less than eighty-five
percent (85%) of the Fair Market Value for a Nonstatutory Stock Option, one
hundred percent (100%) of the Fair Market Value for an Incentive Stock Option
or, in the case of an Option held by a 10% shareholder (as described in
subsection 5(b)), not less than one hundred ten percent (110%) of the Fair
Market Value per share of stock on the new grant date. Notwithstanding the
foregoing, the Board may grant an Option with an exercise price lower than that
set forth above if such Option is granted as part of a transaction to which
Section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 9 shall continue
to be counted against the maximum award of Options permitted to be granted
pursuant to subsection 5(c) of the Plan. The repricing of an Option under this
Section 9, resulting in a reduction of the exercise price, shall be deemed to be
a cancellation of the original Option and the grant of a substitute Option; in
the event of such repricing, both the original and the substituted Options shall
be counted against the maximum awards of Options permitted to be granted
pursuant to subsection 5(c) of the Plan. The provisions of this subsection 9(b)
shall be applicable only to the extent required by Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan,
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the Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such Stock Awards unless and until such authority is
obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) Subject to any applicable provisions of the California Corporate
Securities Law of 1968 and related regulations relied upon as a condition of
issuing securities pursuant to the Plan, the Board shall have the power to
accelerate the time at which a Stock Award may first be exercised or the time
during which a Stock Award or any part thereof will vest, notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or a Consultant nor any person to whom a
Stock Award is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) To the extent required by applicable law, throughout the term of any
Stock Award, the Company shall deliver to the Participant, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the term of such Stock Award, a balance sheet and an income statement.
This subsection 12(c) shall not apply (i) after the Listing Date, or (ii) when
issuance is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Participant any right to continue in the
employ of the Company or any Affiliate or to continue serving as a Consultant or
a Director, or shall affect the right of the Company or any Affiliate to
terminate the employment of any Employee with or without notice and with or
without cause, or the right to terminate the relationship of any Consultant
pursuant to the terms of such Consultant's agreement with the Company or
Affiliate or service as a Director pursuant to the Company's Bylaws and the
provisions of the corporate law of the state in which the Company is
incorporated.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(f) The Company may require any person to whom a Stock Award is granted, or
any person to whom a Stock Award is transferred in accordance with the Plan, as
a condition of exercising or acquiring stock under any Stock Award, (1) to give
written assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met
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in the circumstances under the then applicable securities laws. The Company may,
upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to such person by the Company) or
by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Participant as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company".)
(b) A "Change in Control" shall mean: (1) a dissolution, liquidation, or
sale of all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the individuals who, as of the date of the
adoption of this Plan, are members of the Board (the "Incumbent Board"), cease
for any reason to constitute at least 50% of the Board, provided, however, that
if the election, or nomination for election, by the Company's shareholders of
any new director was approved by a vote of at least 50% of the Incumbent Board,
such new director shall, for purposes of this subsection 13(b), be considered as
a member of the Incumbent Board.
In the event of a Change in Control other than a 50% change in the Incumbent
Board (as described above), then: (i) any surviving or acquiring corporation
shall assume Stock Awards outstanding under the Plan or shall substitute similar
Stock Awards (including an option to acquire the same consideration paid to
shareholders in the transaction described in this subsection 13(b)) for those
outstanding under the Plan, (ii) in the event the any surviving or acquiring
corporation does assume such Stock Awards or substitute similar Stock Awards for
those outstanding under the Plan, then upon the Participant's Voluntary
Termination with Good Reason (as described in subsection 13(c)) or the
Participant's Involuntary Termination without Cause (as described in subsection
13(d)) the vesting of such Stock Awards and the time during which such Stock
Awards may be exercised shall be accelerated upon the occurrence of such event,
or (iii) in the event any surviving or acquiring corporation refuses to assume
such Stock Awards or to substitute similar Stock Awards for those outstanding
under the Plan, (A) with respect to Stock Awards held by persons then performing
services as Employees, Directors or Consultants and subject to any applicable
provisions of the California Corporate Securities Law of 1968 and related
regulations relied upon as a condition of issuing securities pursuant to the
Plan, the vesting of such Stock Awards and the
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time during which such Stock Awards may be exercised shall be accelerated prior
to such event and the Stock Awards terminated if not exercised after such
acceleration and at or prior to such event, and (B) with respect to any other
Stock Awards outstanding under the Plan, such Stock Awards shall be terminated
if not exercised prior to such event.
In the event of a Change in Control due to a 50% change in the Incumbent
Board (as described above), then with respect to Stock Awards held by persons
then performing services as Directors, Employees or Consultants, the vesting of
such Stock Awards and the time during which such Stock Awards may be exercised
shall be accelerated immediately after such event.
(c) The term "Voluntary Termination with Good Reason" means (i) the
Participant's resignation, with good reason, as an Employee, Director or
Consultant of the Company within one month prior to the Change in Control or
(ii) the Participant's resignation, with good reason, as an Employee, Director
or Consultant of the surviving or acquiring corporation which assumed the
Participant's Stock Award or substituted a similar Stock Award for the
Participant's Stock Award within 13 months after a Change in Control. "Good
reason" means any of the following:
(1) reduction of the Participant's rate of compensation as in effect
immediately prior to the Change in Control;
(2) failure to provide a package of welfare benefit plans which, taken
as a whole, provide substantially similar benefits to those in which the
Participant was entitled to participate immediately prior to the Change in
Control (except that employee contributions may be raised to the extent of
any cost increases imposed by third parties);
(3) a change in the Participant's responsibilities, authority, title or
office resulting in diminution of position, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith which
is remedied by the Company promptly after notice thereof is given by the
Participant;
(4) a request that the Participant relocate to a worksite that is more
than 35 miles from the Participant's prior worksite, unless the Participant
accept such relocation opportunity;
(5) failure or refusal of a successor to the Company to assume the
Company's obligations under this option agreement; or
(6) material breach by the Company or any successor to the Company of
any of the material provisions of the Participant's Stock Award.
(d) The term "Involuntary Termination without Cause" means (i) the
involuntary termination, without cause, of the Participant's Continuous Status
as an Employee, Director or Consultant by the Company within one month prior to
a Change in Control or (ii) the involuntary termination, without cause, of the
Participant's Continuous Status as an Employee, Director or Consultant of the
surviving or acquiring corporation which assumed the Participant's Stock Award
or substituted a similar Stock Award for the Participant's Stock Award within 13
months after a Change in Control. "Cause" means any of the following:
(1) the Participant's theft, dishonesty, or falsification of documents
or records;
(2) the Participant's improper use or disclosure of the company's
confidential or proprietary information;
(3) any action by the Participant which has a detrimental effect on the
company's reputation or business;
(4) The Participant's failure or inability to perform any reasonable
assigned duties after written notice from the company of, and a reasonable
opportunity to cure, such failure or inability;
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(5) any material breach by the Participant of any employment or service
agreement between the Participant and the company which breach is not cured
pursuant to the terms of such agreement; or
(6) the Participant's conviction (including any plea of guilty or nolo
contendere) of any criminal act which impairs the Participant's ability to
perform his or her duties with the company.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights under any Stock Award granted before amendment of the Plan shall
not be impaired by any amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Stock Award was granted and (ii) such person
consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of any
one or more Stock Awards; provided, however, that the rights under any Stock
Award shall not be impaired by any such amendment unless (i) the Company
requests the consent of the person to whom the Stock Award was granted and (ii)
such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the shareholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date adopted by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the shareholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.
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APPENDIX B
FCG ENTERPRISES, INC.
1997 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
<PAGE>
FIRST CONSULTING GROUP, INC.
1997 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
ADOPTED AUGUST 22, 1997
APPROVED BY SHAREHOLDERS JANUARY 15, 1998
ADJUSTED FOR 4-FOR-1 STOCK SPLIT FEBRUARY 1998,
REINCORPORATION IN DELAWARE AND
CHANGE IN COMPANY NAME
TERMINATION DATE: AUGUST 21, 2112
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Non-Employee
Directors may be given an opportunity to benefit from increases in value of the
common stock of the Company ("Common Stock") through the granting of
Nonstatutory Stock Options.
(b) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(c) The Company intends that the Options issued under the Plan shall be
Nonstatutory Stock Options granted pursuant to Section 6 hereof.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "ANNUAL OPTION" means a stock option granted pursuant to subsection 5(d)
of the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(f) "COMPANY" means First Consulting Group, Inc., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Optionee's service to the Company or
an Affiliate of the Company, whether in the capacity of a Director or
subsequently as an Employee or a Consultant, is not
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interrupted or terminated. The Optionee's Continuous Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders such service to the Company or an Affiliate or the Company or a
change in the entity for which the Optionee renders such service, provided that
there is no interruption or termination of the Optionee's service. The Board or
its designee, in that party's sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board or its designee, including sick leave, military leave, or
any other personal leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means the permanent and total disability of the Optionee
within the meaning of Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock
of the Company determined as follows:
(i) If the Common Stock is listed on any established stock exchange, or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in Common Stock) on the trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source
as the Board deems reliable;
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INITIAL OPTION" means a stock option granted pursuant to subsection
5(b) or subsection 5(c) of the Plan.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who is not a current Employee
or Officer of the Company or its parent or subsidiary and does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(s) "OFFICER" means (i) prior to the Listing Date, any person designated by
the Company as an officer and (ii) from and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means a stock option granted pursuant to the Plan.
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(u) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(v) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan.
(w) "PLAN" means this First Consulting Group, Inc. 1997 Non-Employee
Directors' Stock Option Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To construe and interpret the Plan and Options granted under it, and
to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan or in any Option Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(ii) To amend the Plan or an Option as provided in Section 12.
(iii) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board (and references in
this Plan to the Board shall thereafter be to the Committee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Options shall not
exceed in the aggregate Three Hundred Thousand (300,000) shares of Common Stock.
If any Option shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY AND NON-DISCRETIONARY GRANTS.
(a) Options shall be granted only to Non-Employee Directors of the Company
and of its wholly-owned subsidiary, First Consulting Group, Inc.
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(b) On August 22, 1997, the date of the approval of the Plan by the Board
(the "Adoption Date"), each person who is then a Non-Employee Director
automatically shall be granted an Initial Option to purchase Twenty Thousand
(20,000) shares of Common Stock of the Company on the terms and conditions set
forth herein.
(c) Each person who is, after the Adoption Date, elected for the first time
to be a Non-Employee Director automatically shall, upon the date of his or her
initial election to be a Non-Employee Director by the Board or shareholders of
the Company, be granted an Initial Option to purchase Four Thousand (4,000)
shares of Common Stock of the Company on the terms and conditions set forth
herein.
(d) On January 1 of each year, commencing with January 1, 1998, each person
who is then a Non-Employee Director automatically shall be granted an Annual
Option to purchase Four Thousand (4,000) shares of Common Stock of the Company
on the terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Option shall be not less than
one hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (1) in cash or (2) at the discretion of the Board at the
time of the grant of the Option, (A) by delivery to the Company of other Common
Stock of the Company, (B) according to a deferred payment (however, in the event
the Company reincorporates in Delaware, then payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not be made by
deferred payment), or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred
pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board. In the case of any deferred payment
arrangement, interest shall be compounded at least annually.
(d) TRANSFERABILITY. An Option shall be transferable only to the
extent specifically provided in the Option Agreement; provided, however, that if
the Option Agreement does not specifically provide for the transferability of
the Option, the Option shall not be transferable except by will, by the laws of
descent and distribution, pursuant to a domestic relations order satisfying the
requirements of Rule 16 of the Exchange Act or to the spouse, children, lineal
ancestors and lineal descendants of the Optionee (or to a trust or a limited
liability partnership or company created solely for the benefit of the Optionee
and/or the foregoing persons) and shall be exercisable during the lifetime of
the person to whom the Option is granted only by such person or a permitted
transferee. Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING.
(i) The total number of shares of stock subject to an Option shall be
allotted in periodic installments. The Option Agreement shall provide that
from time to time during each of such
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installment periods, the Option may become exercisable ("vest") with respect
to some or all of the shares allotted to that period, and may be exercised
with respect to some or all of the shares allotted to such period and/or any
prior period as to which the Option became vested but was not fully
exercised.
(ii) Initial Options for continuing Non-Employee Directors provided
under subsection 5(b) in each case will provide for vesting of 1/5th of the
shares 12 months after the date of the grant and 1/60th of the shares each
month thereafter; provided, however, that if the Optionee's Continuous
Service (whether as a Director, Employee or Consultant) is terminated either
(1) voluntarily (including due to death or disability) or (2) due to an
Involuntary Termination without Cause as defined in subsection 11(d), then
the vesting of such Option and the time during which such Option may be
exercised shall be accelerated upon the occurrence of such event.
(iii) Initial Options for new Non-Employee Directors provided under
subsection 5(c) in each case will provide for vesting of 1/12th of the
shares each month after the date of the grant; provided, however, that if
the Optionee's Continuous Service (whether as a Director, Employee or
Consultant) is terminated either (1) voluntarily (including due to death or
disability) or (2) due to an Involuntary Termination without Cause as
defined in subsection 11(d), then the vesting of such Option and the time
during which such Option may be exercised shall be accelerated upon the
occurrence of such event.
(iv) Annual Options provided under subsection 5(d) in each case will
provide for vesting of 1/12th of the shares each month after the date of the
grant; provided, however, that if the Optionee's Continuous Service (whether
as a Director, Employee or Consultant) is terminated either (1) voluntarily
(including due to death or disability) or (2) due to an Involuntary
Termination without Cause as defined in subsection 11(d), then the vesting
of such Option and the time during which such Option may be exercised shall
be accelerated upon the occurrence of such event.
(f) TERMINATION OF SERVICE. In the event an Optionee's Continuous
Service (whether as a Director, Employee or Consultant) terminates (other than
upon the Optionee's death), the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of termination)
but only within such period of time ending on the earlier of (i) the date twelve
(12) months after the termination of the Optionee's Continuous Service or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionee does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
If the exercise of the Option following the termination of the Optionee's
Continuous Service (other than upon the Optionee's death or disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option as
described in subsection 6(a) or (ii) the expiration of a period of twelve (12)
months after the termination of the Optionee's Continuous Service during which
the exercise of the Option would not be in violation of such registration
requirements (if such provisions would result in an extension of the time during
which the Option may be exercised beyond the period described in the first
paragraph of this subsection 6(f)).
(g) DEATH OF OPTIONEE. In the event of the death of an Optionee
during,for within a period specified in the Option after the termination of, the
Optionee's Continuous Service (whether as a Director, Employee or Consultant),
the Option may be exercised (to the extent the Optionee was entitled to exercise
the Option at the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death , or (ii) the expiration
of the term of such Option as set forth in the Option Agreement. If, at the time
of death, the Optionee was not entitled to exercise his or her entire
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Option, the shares covered by the unexercisable portion of the Option shall
revert to and again become available for issuance under the Plan. If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option.
(i) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal shall be exercised by the Company no more
than thirty (30) days following receipt of notice of the Optionee's intent to
transfer shares and must be exercised as to all the shares the Optionee intends
to transfer unless the Optionee consents to exercise for less than all the
shares offered. The purchase of the shares following exercise shall be completed
within thirty (30) days of the Company's receipt of notice of the Optionee's
intent to transfer shares, or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares, or as may be
agreed to by the Company and the Optionee. Except as expressly provided in this
subsection 6(i), such right of first refusal shall otherwise comply with any
applicable provisions of the Bylaws of the Company.
7. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board shall have the authority to effect, at any time and from time to
time, (i) the repricing of any outstanding Options under the Plan and/or (ii)
with the consent of any adversely affected holders of Options, the cancellation
of any outstanding Options under the Plan and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of stock, but having an exercise price per share not less than the Fair Market
Value for an Option. Notwithstanding the foregoing, the Board may grant an
Option with an exercise price lower than that set forth above if such Option is
granted as part of a transaction to which Section 424(a) of the Code applies.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at all
times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Options; provided, however, that this undertaking
shall not require the Company to register under the Securities Act the Plan, any
Option or any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute general
funds of the Company.
10. MISCELLANEOUS.
(a) Neither a Non-Employee Director nor any person to whom an Option is
transferred in accordance with the Plan shall be deemed to be the holder of, or
to have any of the rights of a holder with
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<PAGE>
respect to, any shares subject to such Option unless and until such person has
satisfied all requirements for exercise of the Option pursuant to its terms.
(b) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any holder of Options any right to continue
serving as a Director, Employee or Consultant, or shall affect the right of the
Company or any Affiliate to terminate the Optionee's service as a Director,
Employee or Consultant pursuant to the Company's Bylaws and the provisions of
the corporate law of the state in which the Company is incorporated.
(c) The Company may require any person to whom an Option is granted, or any
person to whom an Option is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act, or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) To the extent provided by the terms of an Option Agreement, the person
to whom an Option is granted may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Option by any of the following means (in addition to the Company's right to
withhold from any compensation paid to such person by the Company) or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Option; or (3) delivering to the Company owned and unencumbered shares
of the Common Stock of the Company.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Options will be appropriately adjusted in the class(es) and number
of shares and price per share of stock subject to such outstanding Options. Such
adjustments shall be made by the Board, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into
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<PAGE>
other property, whether in the form of securities, cash or otherwise; or (4) the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least 50%
of the Board, provided, however, that if the election, or nomination for
election, by the Company's shareholders of any new Director was approved by a
vote of at least 50% of the Incumbent Board, such new Director shall, for
purposes of this subsection 11(b), be considered as a member of the Incumbent
Board (collectively, a "Change in Control"), then: (i) any surviving or
acquiring corporation shall assume Options outstanding under the Plan or shall
substitute similar options (including an option to acquire the same
consideration paid to shareholders in the transaction described in this
subsection 11(b)) for those outstanding under the Plan, (ii) in the event the
any surviving or acquiring corporation does assume such Options or substitute
similar Options for those outstanding under the Plan, then upon the Optionee's
Voluntary Termination with Good Reason (as described in subsection 11(c)) or the
Optionee's Involuntary Termination without Cause (as described in subsection
11(d)) the vesting of such Options and the time during which such Options may be
exercised shall be accelerated upon the occurrence of such event, or (iii) in
the event any surviving or acquiring corporation refuses to assume such Options
or to substitute similar Options for those outstanding under the Plan, (A) with
respect to Options held by persons then performing services as Directors,
Employees or Consultants, the vesting of such Options and the time during which
such Options may be exercised shall be accelerated prior to such event and the
Options terminated if not exercised after such acceleration and at or prior to
such event, and (B) with respect to any other Options outstanding under the
Plan, such Options shall be terminated if not exercised prior to such event.
(c) The term "Voluntary Termination with Good Reason" in connection with a
Change in Control as described in subsection 11(b) means (i) the Optionee's
resignation, with good reason, as a Director, Employee or Consultant within one
month prior to the Change in Control or (ii) the Optionee's resignation, with
good reason, as a Director, Employee or Consultant of the surviving or acquiring
corporation which assumed the Optionee's Option or substituted a similar Option
for the Optionee's Option within 13 months after a Change in Control. "Good
reason" means any of the following to the extent applicable to the Optionee's
position as a Director, Employee or Consultant at that time:
(i) reduction of the Optionee's rate of compensation as in effect
immediately prior to the Change in Control;
(ii) failure to provide a package of benefits which, taken as a whole,
provide substantially similar benefits to those in which the Optionee was
entitled to participate immediately prior to the Change in Control;
(iii) a change in the Optionee's responsibilities, authority, title or
office resulting in diminution of position, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith which
is remedied by the Company promptly after notice thereof is given by the
Optionee;
(iv) a request that the Optionee relocate to a worksite that is more
than 35 miles from the Optionee's prior worksite, unless the Optionee accept
such relocation opportunity;
(v) failure or refusal of a successor to the Company to assume the
Company's obligations under this option agreement; or
(vi) material breach by the Company or any successor to the Company of
any of the material provisions of the Optionee's option.
(d) The term "Involuntary Termination without Cause" in connection with a
Change in Control as described in subsection 11(b) means (i) the involuntary
termination, without cause, of the Optionee's Continuous Service (whether as a
Director, Employee or Consultant) by the Company within one month prior to a
Change in Control or (ii) the involuntary termination, without cause, of the
Optionee's Continuous Service by the surviving or acquiring corporation which
assumed the Optionee's Option or
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<PAGE>
substituted a similar Option for the Optionee's Option within 13 months after a
Change in Control. "Cause" means any of the following:
(i) the Optionee's theft, dishonesty, or falsification of documents or
records;
(ii) the Optionee's improper use or disclosure of the company's
confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on the
company's reputation or business;
(iv) the Optionee's failure or inability to perform any reasonable
assigned duties after written notice from the company of, and a reasonable
opportunity to cure, such failure or inability;
(v) any material breach by the Optionee of any service agreement between
the Optionee and the company which breach is not cured pursuant to the terms
of such agreement; or
(vi) the Optionee's conviction (including any plea of guilty or nolo
contendere) of any criminal act which impairs the Optionee's ability to
perform his or her duties with the company,
12. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
(b) The Board may in its sole discretion submit any amendment to the Plan
for shareholder approval.
(c) Rights under any Option granted before amendment of the Plan shall not
be impaired by any amendment of the Plan unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
(d) The Board at any time, and from time to time, may amend the terms of any
one or more Options; provided, however, that the rights under any Option shall
not be impaired by any such amendment unless (i) the Company requests the
consent of the person to whom the Option was granted and (ii) such person
consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on August 21, 2112, which is fifteen (15)
years from the date the Plan was adopted by the Board. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on August 22, 1997, the date adopted by the
Board.
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<PAGE>
P
R
O
X
Y
FIRST CONSULTING GROUP, INC.
PROXY for Special Meeting of Stockholders
To Be Held February 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of FIRST CONSULTING GROUP, INC., a
Delaware corporation, hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement, each dated January 20, 1999, and
hereby appoints Luther J. Nussbaum and Patricia A. Lowery proxies and
attorneys-in-fact, each with full power of substitution, on behalf of the
undersigned, to represent the undersigned at the Special Meeting of
Stockholders of FIRST CONSULTING GROUP, INC., to be held at 111 W. Ocean Blvd,
4th Floor, Long Beach, CA 90802, on February 26, 1999 at 9:00 a.m. local
time, and at any adjournment or adjournments thereof, and to vote all shares
of Common Stock that the undersigned would be entitled to vote if then and
there personally present, on all matters set forth on the reverse side hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE HEREIN. IF NO SPECIFICATION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS ON THE
REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE SPECIAL MEETING OF STOCKHOLDERS AS THE PROXYHOLDER DEEMS ADVISABLE.
-----------
SEE
REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE>
/X/ Please mark your
votes as in this
example.
FOR AGAINST ABSTAIN
1. Proposal to approve the amendment of FCG's 1997
Equity Incentive Plan to increase the number of / / / / / /
shares of FCG common stock reserved for issuance
thereunder from 1,600,000 shares to 3,500,000
shares.
2. Proposal to approve the amendment of FCG's 1997
Non-Employee Directors' Stock Option Plan to / / / / / /
increase the number of shares of FCG common stock
reserved for issuance thereunder from 200,000
shares to 300,000 shares.
3. To vote or otherwise represent the shares on any
and all other business which may properly come / / / / / /
before the Special Meeting of Stockholders or any
adjournment or adjournments thereof, according to
and in the discretion of the proxyholder.
MARK HERE FOR ADDRESS
CHANGE AND NOTE NEW ADDRESS / /
IN SPACE BELOW
Please mark, sign, date and
return the proxy card promptly
using the enclosed envelope.
- -------------------- -------------------- -------
Signature Signature Date:
Note: Please sign exactly as your name appears on your stock certificate. If
the stock is registered in the names of two or more persons, each should
sign. Executors, administrators, trustees, guardians, attorneys and corporate
officers should insert their titles.
