<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
4900 Hopyard Road, Suite 200
Pleasanton, CA 94588
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, JUNE 17, 1999
AT 10:00 A.M.
To the Stockholders:
The Annual Meeting of Stockholders of BrightStar Information Technology
Group, Inc. will be held at the Park Hyatt Hotel, 333 Battery Street, San
Francisco, California on Thursday, June 17, 1999 at 10:00 a.m. for the following
reasons:
1. To elect seven directors to serve for a one-year term and until their
successors have been elected and qualified.
2. To approve an amendment of the Company's 1997 Long-Term Incentive Plan
to increase the number of shares issuable thereunder by 1,000,000 shares.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 20, 1999 are
entitled to notice of, and to vote at, the meeting and any adjournment or
postponement thereof. In accordance with Delaware law, a list of the Company's
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose germane to the meeting during normal business
hours at the Company's offices at 4900 Hopyard Road, Suite 200, Pleasanton,
California, for ten days prior to the meeting.
By Order of the Board of Directors
Donald W. Rowley
Secretary
Pleasanton, California
May 5, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
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BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
4900 Hopyard Road, Suite 200
Pleasanton, CA 94588
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors
(the "Board") of BrightStar Information Technology Group, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company to be held at 10:00 a.m. on June 17, 1999, and at any adjournment or
postponement thereof (the "Annual Meeting" or "Meeting"), for the reasons set
forth in the accompanying Notice of Annual Meeting of Stockholders. Only
stockholders of record at the close of business on April 20, 1999 are entitled
to notice of, and to vote at, the Annual Meeting. On that date, the Company had
outstanding 8,442,034 shares of Common Stock. Holders of Common Stock are
entitled to one vote for each share held.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the seven directors proposed by the Board unless the authority to vote for the
election of directors (or for any one or more nominees) is withheld and, if no
contrary instructions are given, the proxy will be voted FOR the approval of the
amendment of the Company's 1997 Long-Term Incentive Plan (the 1997 "Plan"). Any
stockholder signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to or at the Meeting. A proxy may be revoked by a
writing delivered to the Secretary of the Company stating that the proxy is
revoked, by a subsequent proxy signed by the person who signed the earlier proxy
or by attendance at the Meeting and voting in person. Votes will be tabulated by
the inspector of elections of the Meeting.
A majority of the shares entitled to vote, represented in person or by
proxy, constitutes a quorum. If a quorum is present, (i) a plurality vote of the
shares present, in person or by proxy, at the Meeting and entitled to vote is
required for the election of directors and (ii) the affirmative vote of the
majority of the shares present, in person or by proxy, at the Meeting and
entitled to vote is required for the approval of the amendment of the Plan.
Abstentions are considered shares present and entitled to vote, and therefore
have the same legal effect as a vote against a matter presented at the Meeting.
Any shares held in street name for which the broker or nominee receives no
instructions from the beneficial owner, and as to which such broker or nominee
does not have discretionary voting authority under applicable New York Stock
Exchange rules, will be considered as shares not entitled to vote and will
therefore not be considered in the tabulation of the votes. Accordingly, a
broker non-vote will have no effect with respect to any item of this Proxy
Statement.
The expense of soliciting proxies will be paid by the Company. Following
the original mailing of the proxies and soliciting materials, employees of the
Company may solicit proxies by mail, telephone, facsimile transmission and
personal interviews. The Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxies and soliciting materials
to persons for whom they hold shares of the Company's Common Stock and to
request
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authority for the exercise of proxies; in such cases, the Company will reimburse
such holders for their reasonable expenses.
This Proxy Statement was first mailed to stockholders on or about May 12,
1999.
ITEM 1 -- ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting of Stockholders, a Board of seven directors will be
elected, each to hold office until a successor is elected and qualified, or
until the death, resignation or removal of the director. Shares represented by
the accompanying proxy will be voted for the election of the seven nominees
(recommended by the Board of Directors) named in the following table, unless the
proxy is marked in such a manner as to withhold authority so to vote. All
nominees currently serve as directors of the Company. The Company has no reason
to believe that the nominees for election will not be available to serve their
prescribed terms. However, if any nominee is for any reason unable to serve or
will not serve, the proxy may be voted for such substitute nominee as the
persons appointed in the proxy may in their discretion determine.
The following table sets forth certain information concerning the nominees,
based on data furnished by them.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- --- -------------------- ---------
<S> <C> <C> <C>
George M. Siegel.................... 61 Chairman of the Board of the Company 1997
Jennifer T. Barrett................. 49 Group Leader, Data Products Division, 1998
Acxiom Corporation
Brian R. Blackmarr.................. 57 Executive Vice President, Sales and 1998
Marketing, of the Company
Michael A. Ober..................... 42 President and Chief Executive Officer 1998
of the Company
David A. Reamer..................... 46 Senior Vice President, Shared Services, 1998
The Halliburton Company
Donald W. Rowley.................... 47 Chief Financial Officer and Secretary 1999
of the Company
William A. H. Sitter................ 59 Former Senior Vice President, Allstate 1998
Insurance Company (retired)
</TABLE>
There is no family relationship between any of the foregoing nominees or
between any of such nominees and any of the Company's executive officers. The
Company's executive officers serve at the discretion of the Board of Directors.
George M. Siegel has served as Chairman of the Board of Directors of the
Company since its inception. Mr. Siegel co-founded Mindworks, a business
acquired by the Company in 1998. In 1990, he founded Dynamex Inc. (formerly
Parcelway Courier Systems, Inc.), a messenger and delivery service company and
served as its President and Chief Executive Officer until 1995.
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Jennifer T. Barrett became a director of the Company at the closing of
the Company's initial public offering in 1998. She has served since 1974 in
various capacities with Acxiom Corporation, a leading data processing and
related computer-based services and software products company. She is currently
a Group Leader in the Data Products Division. Ms. Barrett serves on the Board's
Compensation Committee.
Brian R. Blackmarr became a director of the Company at the closing of
the Company's initial public offering in April 1998. He served as President of
B.R. Blackmarr & Associates, a business acquired by the Company, since its
inception in 1979. He presently serves as the Company's Executive Vice
President.
Michael A. Ober has served as a director and as the Company's President
since September 1998, and was named Chief Executive Officer in February 1999. In
1995, Mr. Ober founded SCS America, a business acquired by the Company in 1998,
and served as its president and chief executive officer through September 1998.
Mr. Ober has worked in the software and computing industries for over 20 years.
Prior to founding SCS America, Mr. Ober was a Director of Marketing for Novell,
Inc.
David A. Reamer became a director of the Company at the closing of its
initial public offering in April 1998. He serves as Senior Vice President for
Shared Services of the Halliburton Company, a company which provides products,
services and integrated solutions for oil and gas exploration, development and
production. From 1995 to 1997, Mr. Reamer served as Vice President of
Halliburton responsible for various information technology matters, and from
1993 to 1995 he served as Region Vice President of Halliburton.
Donald W. Rowley joined the Company in January 1999 when he was
appointed its Chief Financial Officer and Secretary. Mr. Rowley was elected to
the Board at that time. Prior to that appointment, he was interim Chief
Financial Officer and a director of PetroChemNet, Inc., an Internet based
electronic distributor and communications network serving the petrochemical and
petroleum segments of the energy industry, from 1998 to 1999. From 1995 to 1998,
he was an independent management consultant and worked with several companies,
which included serving as interim Chief Financial Officer of Norand Corporation,
a public company engaged in the design and development of mobile computing
systems and wireless data networks. From 1994 to 1995 Mr. Rowley was President
and a director of VTX Electronics Corporation, a public company engaged in the
distribution of electronic components and cable, and manufacture of electronic
cable assemblies.
William H. Sitter became a director of the Company at the Closing of
its initial public offering in April 1998. From 1989 to 1995, Mr. Sitter was
employed by Allstate Insurance Company as Senior Vice President--Information
Technology and Chief Information Officer, and from 1989 to 1993 he also served
as a member of its board of directors.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met seven times during 1998. Standing
committees of the Board include an Audit Committee, and a Compensation Committee
each of which met once.
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The Audit Committee is comprised of Messrs. Reamer and Sitter. Both members
are non-employee directors. Pursuant to the Audit Committee Charter, the
Committee addresses on a regular basis matters that include, among other things,
(1) making recommendations to the Board of Directors regarding the appointment
of independent auditors, (2) reviewing with Company financial management the
plans for, and results of, the independent audit engagement, (3) reviewing the
adequacy of the Company's system of internal accounting controls, (4) monitoring
the Company's internal audit program to assure that areas of potential risk are
adequately covered, and (5) reviewing legal and regulatory matters that may have
a material effect on the Company's financial statements.
The Compensation Committee is comprised of Ms. Barrett and Mr. Sitter, both
of whom are non-employee directors. The Committee's primary functions are to
determine remuneration policies applicable to the Company's executive officers
and to determine the bases of the compensation of the Chief Executive Officer,
including the factors and criteria on which such compensation is to be based.
The Committee also administers the Company's 1997 Long-Term Incentive Plan (the
"1997 Plan").
The Board established a Nominating Committee in January 1999, comprised
of Messrs. Siegel, Reamer and Sitter. The Nominating Committee will hold its
first meeting subsequent to the Annual Meeting and will seek and consider
qualified candidates to serve on the Board. The Nominating Committee will
consider nominees recommended in writing by the Company's stockholders. Such
recommendations should be submitted to the Committee at the Company's principal
executive office.
No incumbent director during 1998 attended fewer than seventy-five
percent (75%) of the aggregate of (1) the total number of meetings of the Board
of Directors (held during the period for which the individual has been a
director) and (2) the total number of meetings held by all committees of the
Board on which the director served.
COMPENSATION OF DIRECTORS
Except for the options described below, Directors do not presently
receive compensation for their services as a director. The Company reimburses
directors for their reasonable out-of-pocket expenses with respect to board
meetings and other Company business.
Directors who are not officers of the Company participate in one equity
incentive plan, the 1997 Plan. Under the 1997 Plan, options to purchase 5,000
shares of the Company's Common Stock are automatically granted to each
non-employee director on the date such director is for the first time elected or
appointed to the Board of Directors. Thereafter, each such director is
automatically granted options to purchase 5,000 shares on the date of each
annual stockholders meeting, provided that such automatic option grants are made
only if the director was on the Board of Directors for the entire fiscal year
then ending (including the last business day of the fiscal year) and was not an
employee of the Company or any affiliate for any part of the fiscal year then
ending. The exercise price for all non-employee director options granted under
the 1997 Plan is 100% of the fair market value of the shares on the grant date.
All such options are immediately exercisable and expire no later than ten years
after the date of grant, unless sooner exercised or canceled due to termination
of service or death.
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MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 1998 by (i) persons
known to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, and their respective addresses (ii) each of the Company's current
directors, (iii) the Chief Executive Officer and each of the Company's three
other executive officers, and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-------------------------
NUMBER(1) PERCENT
------------- ----------
<S> <C> <C>
5% BENEFICIAL OWNERS:
Lord Abbett & Co. 1,015,087 12.02%
767 Fifth Avenue
New York, New York 10153
Brian R. Blackmarr 775,646 9.19
1700 Chateau Plaza
2515 McKinney Avenue, LB-17
Dallas, Texas 75201
Pilgrim Baxter & Associates Ltd. 685,800 8.12
825 Duportail Road
Wayne, Pennsylvania 19087
Capital Guardian Trust Co. (2) 580,000 6.87
11100 Santa Monica Blvd.
Los Angeles, California 90025-3384
Camelot Management Corp. (3) 482,400 5.71
10 Glenville Street
Greenwich, Connecticut 06831-3638
NON-EMPLOYEE DIRECTORS: (4)
Jennifer T. Barrett 5,000 --*
David A. Reamer 6,000 --*
William H. Sitter 5,000 --*
EXECUTIVE OFFICERS:
George M. Siegel 167,870 1.99
Michael A. Ober 104,410 1.24
Donald W. Rowley (5) -- --
Brian R. Blackmarr 775,646 9.19
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(7 PERSONS) 1,063,926(6) 12.60%
</TABLE>
- ---------------
* Less than 1%
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(1) Represents shares held directly and with sole voting and investment power,
except as noted, or with voting and investment power shared with a spouse.
(2) Capital Guardian Trust Co. disclaims beneficial ownership of these shares
in that serves as the investment manager of various institutional accounts for
whom the shares are held.
(3) Camelot Management Corp. reports that it shares voting and dispositive
power with respect to the shares it beneficially owns.
(4) As to each non-employee director, includes immediately exercisable options
to purchase 5,000 shares of Common Stock.
(5) Mr. Rowley became an executive officer after December 31, 1998, but is
included in the table for informational purposes.
(6) Includes options to purchase 15,000 shares of Common Stock immediately
exercisable by non-employee directors.
EXECUTIVE COMPENSATION
The following table contains information concerning compensation earned by
Messrs. Siegel, Ober and Blackmarr, and Marshall G. Webb, who served as the
Company's chief executive officer in 1998, and Daniel Cofall, who served as the
Company's chief financial officer in 1998, for services rendered to the Company
and its subsidiaries in all capacities during 1998 (the five individuals are
referred to hereafter as the "Named Executive Officers"). Mr. Webb's and
Mr. CoFall's employment with the Company terminated in January 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Officer Base Salary Bonus Total Cash Compensation
<S> <C> <C> <C>
George M. Siegel --- -- --
Michael A. Ober $172,891 $80,000 $252,891
Brian R. Blackmarr 229,000 40,000 269,000
Marshall Webb 200,460 -- 200,460
Daniel Cofall 162,000 -- 162,000
</TABLE>
Employment Agreements
Mr. Ober and Mr. Blackmarr entered into Executive Employment Agreements
in connection with the Company's initial public offering. The following summary
of the Executive Employment Agreements does not purport to be complete and is
qualified by reference to them, copies of which have been filed with the
Securities and Exchange Commission. Each such Executive Employment Agreement
provides for an annual base salary in an amount not less than the initial
specified amount and entitles the employee to participate in all employee
benefit plans sponsored by BrightStar in which all other executive officers of
BrightStar participate. Mr. Ober's base salary was increased to $300,000 at the
time of his election as the Company's President, and Mr. Blackmarr's base salary
is $225,000. Each of these agreements has an initial three-year term and
continues thereafter on a year-to-year basis on the same terms and conditions
existing at the time of renewal, subject to the right of BrightStar or the
employee to terminate the employee's employment at any time. If the employee's
employment is terminated by BrightStar without cause (as defined) during the
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initial three-year term, then that employee will be entitled to (i) receive his
current base salary for the period ending the later of (a) the end of the
initial three-year term of the agreement or (b) 12 months after termination of
employment, (ii) any other earned and unpaid compensation, vacation time accrued
prior to termination and an amount equal to the amount of any earned bonuses and
commissions payable to the employee with respect to the 12 calendar months
preceding termination ("Severance Payments"), and (iii) continued participation
in BrightStar's employee benefit plans (other than the granting of new awards
under the 1997 Long-Term Incentive Plan or any other performance-based plan) for
a period of 12 months following the date of termination. If an employee is
terminated without cause during any one-year extension of the initial term of
the Agreement, then that employee shall continue to receive Severance Payments
for a period of 12 months after termination of such employment and shall
continue to participate for such period in BrightStar's employee benefit plans
(other than granting of new awards under the 1997 Long-Term Incentive Plan or
any other performance-based plan). If a change of control of BrightStar occurs,
and the terms of the employment agreement are not adopted, the employee will be
entitled to receive an amount equal to 36 months of his then-current base salary
under the agreement, payable on a monthly basis. Under the Executive Employment
Agreements, a "change of control" is defined as (A) the sale of substantially
all assets of the Company or (B) a merger, consolidation, liquidation or
reorganization of the Company in which the Company or an affiliate of the
Company is not the surviving entity, or which results, in any event, in a change
of control of the Company. The Executive Employment Agreements contain covenants
limiting competition with the Company during the term of the Executive
Employment Agreement and for an additional period to be the longer of four years
from inception of the agreement, or one year after termination of employment for
cause.
Mr. Rowley and the Company entered into an Employment Agreement in
January 1999. The agreement provides for a base salary of $250,000, and a bonus
of up to $150,000 if the Company achieves certain revenue and profitability
milestones. The agreement is terminable at will, but if Mr. Rowley's employment
is terminated without cause, he is entitled to one year of additional base
salary, two years if such termination occurs following a change of control. The
agreement also provides that Mr. Rowley will be granted an option to purchase
40,000 shares of the Company's common stock at the next meeting of the Board or
Compensation Committee.
Stock Options
The following table contains information concerning the grant of stock
options to the Named Executive Officers during 1998 under the Company's 1997
Plan:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE
UNDERLYING GRANTED TO FOR OPTION TERM (a)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR PRICE($/SH) DATE
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
George M. Siegel 74,900 12.0% 13.00 4/08 $726,951
Michael A. Ober 7,500 1.2 13.00 4/08 72,792
Brian R. Blackmarr 7,500 1.2 13.00 4/08 72,792
Marshall Webb 76,000 13.0 13.00 3/01 138,665
Daniel Cofall 68,000 11.0 13.00 10/00 97,315
</TABLE>
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(a) using black-sholes model. assumes a risk free interest rate of 5.6%, price
volatility of 60% and a dividend yield of 0%
No options were exercised in 1998.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of the Company's
previous or future filings with the Securities and Exchange Commission, this
Report shall not be incorporated by reference into any such filings.
Compensation Philosophy. In developing the Company's executive compensation
policies, the Compensation Committee (the "Committee") has two principal
objectives: (1) attracting, rewarding and retaining officers who possess
outstanding talent, and (2) motivating officers to achieve Company performance
consistent with shareholder objectives. Accordingly, the Committee adopted the
following policies:
- The Company will pay compensation that is competitive with the practices
of other leading technology companies in the same or similar businesses;
- A significant portion of the officers' compensation will depend upon the
achievement of challenging performance goals for the Company and its
various business units and officers; and
- The Company will align the interests of its officers with those of the
Company's stockholders -- therefore, stock options will constitute a
significant portion of compensation.
Total Annual Compensation. Each officer's target total annual compensation
(that is, salary plus bonus) is determined after reviewing independent survey
data on the compensation paid to officers at a group of approximately 20
companies in the high technology industry. These companies strenuously compete
with the Company for executive talent and/or have revenues comparable to the
Company's revenues. The Company's goal is to set total target annual
compensation at a level that is near the median level for the officers at the
surveyed companies.
Bonuses. The actual bonus (that is, the percentage of the target bonus)
that any officer (other than the Named Executive Officers) actually receives
depends on the achievement of business unit objectives and financial performance
goals for the Company. Typical business unit objectives include both financial
and operating goals including, for example, increased profitability, customer
satisfaction, and controlling profit and gross margin.
For each year, the performance goals are set in light of general business
conditions and the Company's strategies for the year. For 1998, the Committee
directed Company management to determine the performance targets for the
officers other than Named Executive Officers, using a philosophy approved by the
Committee. The Committee developed and approved the specific performance targets
for the Named Executive Officers, as described in the following paragraph.
Stock Options. The Committee strongly believes that stock options motivate
the officers to maximize stockholder value and to remain with the Company
despite a very competitive marketplace. All Company stock options have a per
share exercise price equal to the fair market value of the Company's stock on
the grant date. The number of options granted to each officer and each option's
vesting schedule are determined based on the officer's position at the Company,
his or her individual performance, the number of options the executive already
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holds and other factors, including an estimate of the potential value of the
options.
In fiscal 1998, the Committee made these determinations for the Named
Executive Officers and other senior officers. For all other grants, the Chief
Executive Officer (that is, Mr. Ober) made these determinations, in consultation
with the Company's Human Resources organization.
Compensation of Chief Executive Officer. The Committee believes the Chief
Executive Officer's compensation should be tied directly to the performance of
the Company and in line with shareholder objectives. Consequently, Mr. Ober's
percentage of bonus to base salary is the highest of any officer.
Tax Deductibility of Executive Compensation. Under section 162(m) of the
Internal Revenue Code the Company generally receives a federal income tax
deduction for compensation paid to any of its Named Executive Officers only if
the compensation is less than $1 million during any fiscal year or is
"performance-based" under section 162(m). Both the Company's 1997 Equity
Incentive Plan and the Bonus Plan permit the Committee to pay compensation that
is "performance-based" and thus fully tax-deductible by the Company. The
Committee currently intends to continue seeking a tax deduction for all of the
Company's executive compensation, to the extent consistent with the best
interests of the Company.
Jennifer T. Barrett
David A. Reamer
COMPANY STOCK PERFORMANCE
The Company's stock commenced trading following its initial public offering on
April 16, 1998 at a price of $13.00. The closing transaction price for the stock
on December 31, 1998, was $7.875, a decline of 39.4%. During that same period,
the Standard & Poor's 500 Composite Index increased 10.9%.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, non-employee directors Jennifer T. Barrett and David A. Reamer
served as members of the Compensation Committee. None of the Compensation
Committee members or Named Executive Officers have any relationship that must be
disclosed under this caption.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and holders of more
than 10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Such
officers, directors and 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based on its review of such forms that it received, or written
representations from reporting persons that no Forms 5 were required for such
persons, the Company believes that, during fiscal 1998, all Section 16(a) filing
requirements were satisfied on a timely basis, except for Mr. Ober whose
initial statement of beneficial ownership was filed 20 days late.
ITEM 2 -- ADOPTION OF AMENDMENT OF 1997 LONG-TERM INCENTIVE PLAN
The Company's Board of Directors has approved an amendment of the 1997
Plan to increase the number of shares issuable thereunder by 1,000,000 shares.
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Adoption of the amendment is subject to the approval of a majority of the shares
of the Company's Common Stock which are present in person or by proxy and
entitled to vote at the Annual Meeting. The 1997 Plan was previously approved by
stockholders prior to the Company's initial public offering in April 1998.
GENERAL
The 1997 Plan allows the granting of stock options, stock appreciation
rights ("SARs"), restricted stock awards, performance unit awards, and
performance share awards (collectively, "Awards") to eligible 1997 Plan
participants. While the Company has no current intention to grant Awards other
than stock options, the Board of Directors believes that the ability to utilize
different types of equity compensation vehicles will give the Company the
flexibility needed to adapt most effectively over time to changes in the labor
market and in equity compensation practices.
The total number of shares currently authorized to be issued pursuant
to Awards granted under the 1997 Plan is 1,000,000. As of December 31, 1998,
603,402 shares were subject to options outstanding under the 1997 Plan, and
396,598 shares remained available for any Awards to be granted in the future.
All such outstanding options had an exercise price of $13.00 per share.
If an Award expires or is canceled without having been fully exercised
or vested, the unvested or canceled shares generally will again be available for
grants of Awards. The number of shares available for grant under the 1997 Plan,
outstanding Awards, the formula for granting non-employee director options, and
the numerical limits for individual grants will be adjusted as appropriate to
reflect any stock splits, stock dividends, recapitalizations, reorganizations or
other changes to the capital structure of the Company.
PURPOSE OF THE 1997 PLAN
The 1997 Plan is intended to attract, motivate, and retain (1)
employees of the Company and its affiliates, (2) consultants who provide
significant services to the Company and its affiliates, and (3) directors of the
Company who are employees of neither the Company nor any affiliate
("non-employee directors"). The 1997 Plan also is designed to encourage stock
ownership by participants, thereby aligning their interests with those of the
Company's stockholders.
ADMINISTRATION OF THE 1997 PLAN
The 1997 Plan is administered by the Board's Compensation Committee
(the "Committee"). The members of the Committee must qualify as "non-employee
directors" under Rule 16b-3 under the Securities Exchange Act of 1934, and as
"outside directors" under section 162(m) of the Internal Revenue Code (for
purpose of qualifying amounts received under the 1997 Plan as "performance-based
compensation" under section 162(m)).
Subject to the terms of the 1997 Plan, the Committee has the sole
discretion to determine the employees and consultants who shall be granted
Awards, the size and types of such Awards, and the terms and conditions of such
Awards. The Committee may delegate its authority to grant and administer awards
to a separate committee appointed by the Committee, but only the Committee may
make Awards to participants who are executive officers of the Company.
The non-employee director portion of the 1997 Plan will be administered
by the Board of Directors (rather than by the Committee).
ELIGIBILITY TO RECEIVE AWARDS
Employees and consultants of the Company and its affiliates (i.e. any
corporation or other entity controlling, controlled by, or under common control
with the Company) are eligible to be selected to receive one or more Awards.
12
<PAGE> 13
The actual number of employees and consultants who will receive Awards under the
1997 Plan cannot be determined because selection for participation in the 1997
Plan is in the discretion of the Committee. The 1997 Plan also provides for the
grant for the grant of stock options to the Company's non-employee directors.
Such options will be granted pursuant to an automatic nondiscretionary formula.
OPTIONS
The Committee may grant nonqualified stock options, incentive stock
options (which are entitled to favorable tax treatment) ("ISOs"), or a
combination thereof. The number of shares covered by each option will be
determined by the Committee.
The exercise price of each option is set by the Committee but generally
is not less than 100% of the fair market value of the Company's Common Stock on
the date of grant. Thus, an option will have value only if the Company's Common
Stock appreciates in value after the date of grant.
The exercise price of an ISO must be at least 110% of the fair market
value if, on the grant date, the participant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
of its subsidiaries. Also, the aggregate fair market value of the shares
(determined on the grant date) covered by ISOs which first become exercisable by
any participant during any calendar year may not exceed $100,000.
The exercise price of each option must be paid in full at the time of
exercise. The Committee also may permit payment of the exercise price through
the tender of shares of the Company's Common Stock that are already owned by the
participant, or by any other means which the Committee determines to be
consistent with the 1997 Plan's purpose. Any taxes required to be withheld must
be paid by the participant at the time of exercise.
Options become exercisable at the times and on the terms established by
the Committee. Options expire at the times established by the Committee but
generally not later than 10 years after the date of grant (13 years in the event
of the optionee's death). The Committee's current practice is to grant options
which expire no later than ten years after the date of grant.
NON-EMPLOYEE DIRECTOR OPTIONS
Pursuant to action of the Board and under the terms of the 1997 Plan,
BrightStar has previously granted Non-qualified Options to purchase 5,000 shares
of the Company's Common Stock for each of the Non-Employee Directors. Those
options have an exercise price of $13.00, the offering price in the Company's
initial public offering in April 1998. In addition, the 1997 Plan provides for
(i) the automatic grant to any Non-Employee Director of options to purchase
5,000 shares of Common Stock, effective on the date of that person's initial
election as a director, at an exercise price per share equal to the per share
fair market value of the Common Stock on the date of that grant, and (ii) the
automatic grant to each Non-Employee Director of options to purchase 5,000
shares of Common Stock at each annual meeting of stockholders thereafter at
which that director is re-elected or remains a director, unless such annual
meeting is held within three months following that person's election as a
director, at an exercise price per share equal to the per share fair market
value of the Common Stock on the date of grant. The Company has reserved 70,000
shares of Common Stock for issuance to Non-Employee Directors as set forth
above; however, the Board may revoke these automatic grants at any time. This
amount will be increased by 75,000 if the amendment is approved as provided
herein. Each option granted to the Non-Employee Directors shall be exercisable
immediately and shall expire ten years after the date of grant, unless sooner
exercised or canceled due to termination of service or death.
STOCK APPRECIATION RIGHTS
The Committee determines the terms and conditions of each SAR. SARs may
be granted in conjunction with an option, or may be granted on an independent
13
<PAGE> 14
basis. The number of shares covered by each SAR will be determined by the
Committee. To date, no SARs have been granted under the 1997 Plan.
Upon exercise of an SAR, the participant will receive payment from the
Company in an amount determined by multiplying: (1) the difference between (a)
the fair market value of a share of Company Common Stock on the date of exercise
and (b) the exercise price, times (2) the number of shares with respect to which
the SAR is exercised. The per share exercise price of an SAR cannot be less than
100% of fair market value on the date of grant. Thus, an SAR will have value
only if the Company's Common Stock appreciates in value after the date of grant.
SARs are exercisable at the times and on the terms established by the
Committee. Proceeds from SAR exercises may be paid in cash or shares of the
Company's Common Stock, as determined by Committee. SARs expire at the times
established by the Committee, but subject to the same maximum time limits as are
applicable to employee options granted under the 1997 Plan.
RESTRICTED STOCK AWARDS
Restricted stock awards are shares of the Company's Common Stock that
vest in accordance with terms established by the Committee. The number of shares
of restricted stock (if any) granted to a participant will be determined by the
Committee, but during any fiscal year of the Company. To date, no shares of
restricted stock have been granted.
In determining the vesting schedule for each Award of restricted stock,
the Committee may impose additional conditions to vesting as it determines to be
appropriate. For example, the Committee may provide that restricted stock will
vest only if one or more performance goals are satisfied. In order for the Award
to qualify as "performance-based" compensation under section 162(m) of the
Internal Revenue Code (see "Report of the Stock Option and Compensation
Committee of the Board of Directors-Tax Deductibility of Executive
Compensation"), it must use one or more of the following measures in setting the
performance goals: (1) annual revenue, (2) controllable profits, (3) customer
satisfaction management by objectives, (4) earnings per share, (5) individual
management by objectives, (6) net income, (7) new orders, (8) pro forma net
income, (9) return on designated assets, and (10) return on sales. The Committee
may apply the performance measures on a corporate or business unit basis, as
deemed appropriate in light of the participant's specific responsibilities.
PERFORMANCE AWARDS AND OTHER STOCK-BASED INCENTIVE AWARDS
The 1997 Plan permits the grant of other performance awards and
stock-based incentive awards. Such awards will be determined by the Committee.
To date, no performance shares or performance units have been granted.
Whether such an award will result in a payment to a participant will
depend upon the extent to which performance goals established by the Committee
are satisfied. In particular, the 1997 Plan permits the Committee to use the
same performance goals as are discussed above with respect to restricted stock.
After a performance or stock-based incentive award has vested (that is,
after the applicable performance goal or goals have been achieved), the
participant will be entitled to receive a payout of cash, Common Stock, or a
combination thereof, as determined by the Committee. Unvested performance
units/shares will be forfeited upon the earlier of the recipient's termination
of employment or the date set forth in the Award agreement.
OPTIONS TO BE GRANTED TO CERTAIN INDIVIDUALS AND GROUPS
As described above, the Committee has discretion to determine the
number of Awards (if any) to be granted to any individual under the 1997 Plan.
Accordingly, the actual number of Awards that any individual may receive in the
14
<PAGE> 15
future is not determinable. To date, only options have been granted under the
1997 Plan.
NONTRANSFERABILITY OF AWARDS
Awards granted under the 1997 Plan may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the applicable laws of descent and distribution. However, in the discretion
of the Committee, a participant may designate one or more beneficiaries to
receive any exercisable or Vested Awards following his or her death.
TAX ASPECTS
The following discussion is intended to provide an overview of the U.S.
federal income tax laws which are generally applicable to Awards granted under
the 1997 Plan as of the date of this Proxy Statement. People or entities in
differing circumstances may have different tax consequences, and the tax laws
may change in the future. This discussion is not to be construed as tax advice.
A recipient of a stock option or SAR will not have taxable income on
the date of grant. Upon the exercise of nonqualified options and SARs, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Any gain or loss recognized upon any later disposition of the shares generally
will be capital gain or loss.
Purchase of shares upon exercise of an ISO will not result in any
taxable income to the participant, except for purposes of the alternative
minimum tax. Gain or loss recognized by the participant on a later sale or other
disposition will either be capital gain or loss or ordinary income, depending
upon how long the participant holds the shares. Any ordinary income recognized
will be in the amount, if any, by which the lesser of (1) the fair market value
of such shares on the date of exercise or (2) the amount realized from the sale,
exceeds the exercise price.
Upon receipt of restricted stock or a performance unit/share, the
participant will not have taxable income unless he or she elects to be taxed.
Absent such election, upon vesting the participant will recognize ordinary
income equal to the fair market value of the shares or units at such time.
The Committee may permit participants to satisfy tax withholding
requirements in connection with the exercise or receipt of an Award by: (1)
electing to have the Company withhold otherwise deliverable shares, or (2)
delivering to the Company already-owned shares having a value equal to the
amount required to be withheld.
The Company generally will be entitled to a tax deduction for an Award
in an amount equal to the ordinary income realized by the participant at the
time the participant recognizes such income. Internal Revenue Code section
162(m) contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executive will be deductible
only to the extent that it does not exceed $1 million. However, the Company can
preserve the deductibility of certain compensation in excess of $1 million if it
complies with conditions imposed by section 162(m), including (1) the
establishment of a maximum number of shares with respect to which Awards may be
granted to any one employee during a specified time period, and (2) for
restricted stock and performance unit/shares, inclusion in the 1997 Plan of
performance goals which must be achieved prior to payment. The 1997 Plan has
been designed to permit the Committee to grant Awards which qualify as
performance-based compensation.
15
<PAGE> 16
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent accountants of the Company recommended by the
Audit Committee and selected by the Board of Directors for the current fiscal
year is Deloitte & Touche LLP. The Board of Directors expects that
representatives of Deloitte & Touche LLP will be present at the Annual Meeting
and will be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to bring any other business before the Annual Meeting and, as far as is
known to the Board of Directors, no matters are to be brought before the Annual
Meeting except as specified in the Notice of Annual Meeting. However, as to any
other business that may properly come before the Annual Meeting, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
STOCKHOLDER PROPOSALS -- 2000 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
stockholders' meeting if they comply with the requirements of the proxy rules.
Any proposals intended to be presented at the 2000 Annual Meeting of
Stockholders of the Company must be received at the Company's offices on or
before December 31, 1999 in order to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the 2000 Annual Meeting of Stockholders of the Company,
which proposal is not intended to be included in the Company's proxy statement
and form of proxy relating to such meeting, the stockholder should give the
Company appropriate notice no later than March 31, 2000. If the Company fails to
receive notice of the proposal by such date, the Company will not be required to
provide any information about the nature of the proposal in its proxy statement
and the proposal will not be submitted to the stockholders for approval at the
2000 Annual Meeting of Stockholders of the Company as the Company will not have
received proper notice as required by the Company's Bylaws.
Donald W. Rowley
Secretary
May 5, 1999
Pleasanton, California
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
16
<PAGE> 17
APPENDIX A
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
1997 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED JANUARY 19, 1999)
17
<PAGE> 18
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
1997 LONG-TERM INCENTIVE PLAN
<PAGE> 19
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
1997 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
SECTION DESCRIPTION
------- -----------
<S> <C>
1 Purpose of the Plan
2 Definitions
3 Types of Awards Covered
4 Administration
5 Eligibility
6 Shares of Stock Subject to the Plan
7 Non-Employee Director Awards
8 Stock Options
9 Stock Appreciation Rights
10 Restricted Stock
11 Performance Awards
12 Other Stock-Based Incentive Awards
13 Exercise of Options
14 Rights in Event of Death or Disability
15 Award Agreements
16 Tax Withholding
17 Change of Control
18 Dilution or Other Adjustment
19 Transferability
20 Amendment or Termination
21 General Provisions
22 Plan Effective Date
23 Plan Termination
</TABLE>
<PAGE> 20
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
1997 LONG-TERM INCENTIVE PLAN
(As amended effective January 19, 1999, subject to stock holder approval at the
1999 Annual Meeting of Stockholders)
SECTION 1
PURPOSE OF THE PLAN
1.1 The 1997 Long-term Incentive Plan, maintained by BrightStar Information
Technology Group, Inc., is intended to motivate key employees to
enhance shareholder value by offering incentives to its key employees
who are primarily responsible for the growth of the Company and to
attract and retain qualified employees and non-employee directors.
SECTION 2
DEFINITIONS
2.1 Unless the context indicates otherwise, the following terms, when used
in this Plan, shall have the meanings set forth in this Section:
(a) "AWARD" shall mean grants or awards under this Plan in the form
of Options, SARs, Restricted Stock, Performance Awards or
other stock-based incentive awards.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CHANGE OF CONTROL" shall be deemed to have taken place on an
occurrence of an event as defined in Section 17 of this Plan.
(d) "CODE" shall mean the Internal Revenue Code of 1986 as it may
be amended from time to time and related Treasury Regulations.
(e) "COMMITTEE" shall mean the Board, or any Committee comprised of
two or more Outside Directors, to the extent required to
qualify for an exemption pursuant to Rule 16b-3 under the
Exchange Act and to satisfy the requirements regarding
committees of "outside directors" under Section 162(m) of the
Code, that may be designated by the Board to administer the
Plan, in accordance with Section 4 hereof.
(f) "COMMON STOCK" shall mean the common stock, par value $.01, of
the Company.
<PAGE> 21
(g) "COMPANY" shall mean BrightStar Information Technology Group,
Inc.
(h) "DEFERRED SHARES" an award made pursuant to Section 12 of the
Plan of the right to receive Common Stock in lieu of cash
thereof at the end of a specified time period.
(i) "DIRECTOR" shall mean any member of the Board.
(j) "DISABILITY" shall mean permanent and total disability within
the meaning of Section 22(e)(3) of the Code.
(k) "EMPLOYEE" shall mean any full-time employee of the Company or
its Subsidiaries (including Directors who are otherwise
employed on a full-time basis by the Company or its
Subsidiaries).
(l) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
as it may be amended from time to time.
(m) "FAIR MARKET VALUE" of the Common Stock on a given date shall
be based upon either (i) if the Common Stock is listed on a
national securities exchange or quoted in an interdealer
quotation system, the last sales price or, if unavailable, the
average of the closing bid and asked prices per share of the
Common Stock on such date (or, if there was no trading or
quotation in the Common Stock on such date, on the next
preceding date on which there was trading or quotation) as
provided by one of such organizations or (ii) if the Common
Stock is not listed on a national securities exchange or
quoted in an interdealer quotation system, the price will be
equal to the Company's fair market value, as determined by the
Committee in good faith based upon the best available facts
and circumstances at the time.
(n) "GRANTEE" shall mean a person granted an Award under the Plan.
(o) "IMMEDIATE FAMILY" shall mean with respect to a given Grantee
that Grantee's spouse, children, or grandchildren (including
adopted children or grandchildren).
(p) "IPO DATE" shall mean the date of closing of the initial public
offering of the Company's Common Stock.
(q) "ISO" shall mean an Award granted pursuant to the Plan to
purchase shares of the Stock and is intended to qualify as an
<PAGE> 22
incentive stock option under Section 422 of the Code, as now or
hereafter constituted.
(r) "NON-EMPLOYEE DIRECTOR" shall mean a Director of the Company
who is not an Employee nor has been an Employee at any time
during the prior one-year period.
(s) "NQSO" shall mean an Award granted pursuant to the Plan to
purchase shares of stock and is not intended to qualify as an
incentive stock option under Section 422 of the Code, as now or
hereafter constituted.
(t) "OPTIONS" shall refer collectively to NQSOs and ISOs issued
under and subject to the Plan.
(u) "OUTSIDE DIRECTOR" shall mean a non-employee Director within
the meaning of Rule 16b-3(b)(3) under the Exchange Act, or any
successor thereto, who are also "outside directors" within the
meaning of Section 162(m) of the Code and the regulations
thereunder.
(v) "PERFORMANCE AWARDS" shall mean Awards under the Plan, payable
in cash, Common Stock, other securities or other awards and
shall confer on the holder thereof the right to receive
payments, upon the achievement of such performance goals during
such performance periods as the Committee shall establish.
(w) "PERMITTED TRANSFEREE" shall mean any individual or entity as
defined in Section 19.2 of this Plan.
(x) "PLAN" shall mean this 1997 Long-term Incentive Plan as set
forth herein and as amended from time to time.
(y) "RESTRICTED STOCK" shall mean an Award of Common Stock subject
to restrictions on transfer and/or such other restrictions on
incidents of ownership as the Committee may determine.
(z) "RULES" means Rule 16(b)(3) and any successor provisions
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(aa) "SAR" shall mean an Award constituting the right to receive,
upon surrender of the right, but without payment, an amount
payable in cash.
<PAGE> 23
(ab) "SUBSIDIARY or SUBSIDIARIES" shall mean any entity or entities
in which the Company owns a majority of the voting power.
(ac) "TEN PERCENT SHAREHOLDER" shall mean any Grantee who owns more
than 10% of the combined voting power of all classes of stock
of the Company, within the meaning of Section 422 of the Code.
SECTION 3
TYPES OF AWARDS COVERED
3.1 Awards granted, under the Plan may be:
(a) stock options ("Options") which may be designated as:
(i) nonqualified stock options ("NQSOs"); or
(ii) incentive stock options ("ISOs");
(b) stock appreciation rights ("SARs");
(c) restricted stock awards ("Restricted Stock");
(d) performance awards ("Performance Awards"); or
(e) other forms of stock-based incentive awards.
SECTION 4
ADMINISTRATION
4.1 The Plan shall be administered by the Committee. Subject to the
provisions of the Plan and applicable law, the Committee shall have
full discretion and the exclusive power to:
(a) select the Employees who will participate in the Plan and to
make Awards to such Employees;
(b) determine the time at which such Awards shall be granted and
any terms and conditions with respect to such Awards as shall
not be inconsistent with the provisions of the Plan; and
(c) resolve all questions relating to the administration of the
Plan, and applicable law.
4.2 The interpretation of and application by the Committee of any provision
of the Plan shall be final and conclusive. The Committee, in its sole
discretion, may establish such rules and guidelines relating to the
Plan as it may deem appropriate.
<PAGE> 24
4.3 The Committee may employ such legal counsel, consultants, and agents as
it may deem desirable for the administration of the Plan and may rely
upon any opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. The Committee
shall keep minutes of its actions under the Plan.
4.4 No member of the Board of Directors or the Committee shall be liable
for any action or determination made in good faith with respect to the
Plan or any Awards granted hereunder. All members of the Committee
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
SECTION 5
ELIGIBILITY
5.1 The individuals who shall be eligible to participate in the Plan shall
be officers, management, and such other key Employees of the Company
and Subsidiaries (including any directors who are also employees) as
the Committee may from time to time determine.
5.2 Directors of the Company who are not employees of the Company shall be
eligible to participate in the Plan as provided in Section 7.
5.3 An Employee or Non-Employee Director who has been granted an Award in
one year shall not necessarily be entitled to be granted Awards in
subsequent years.
SECTION 6
SHARES OF STOCK SUBJECT TO THE PLAN
6.1 Awards may be granted with respect to the Common Stock of the Company.
6.2 Shares delivered upon exercise of the Awards, at the election of the
Board of Directors of the Company, may be Common Stock that is
authorized but previously unissued, or stock reacquired by the Company,
or both.
6.3 Subject to the provisions of Section 18, the maximum number of shares
available for issuance under the Plan shall be 2,000,000. The number of
shares of Common Stock reserved under the Plan shall not be less than
the total number of shares granted, whether exercised or unexercised
for all Awards under the Plan.
6.4 Notwithstanding any other provision of the Plan to the contrary, in no
event may any Grantee in any calendar year receive more than 200,000
<PAGE> 25
Options whether they be ISOs or NQSOs, subject to adjustments as
provided in Section 18 of the Plan.
6.5 Notwithstanding any other provision of the Plan to the contrary, in no
event may any Grantee in any calendar year receive more than 500,000
SARs, subject to adjustments as provided in Section 18 of the Plan.
6.6 Notwithstanding any other provision of the Plan to the contrary, in no
event may any Grantee in any calendar year receive an award of
Performance Awards having an aggregate maximum value as of their
respective date of grant in excess of $1,000,000
6.7 Any shares of Common Stock awarded under the Plan, which Award for any
reason expires or is terminated unexercised as to such shares, shall
again be available for the grant of other Awards under the Plan;
provided, however, that forfeited shares or other securities shall not
be available for further Awards if the Grantee has realized any
benefits of ownership from such shares.
SECTION 7
NON-EMPLOYEE DIRECTOR AWARDS
7.1 The Board may grant NQSOs to Non-Employee Directors in such amounts and
at such times as the Board may determine.
7.2 Each option granted to a Non-Employee Director shall be exercisable in
full immediately upon the date of grant.
7.3 Each option granted to a Non-Employee Director may not be exercised
more than 10 years after the date such option is granted and such
option shall expire on such date unless sooner exercised or cancelled
due to termination of service or death.
7.4 Upon the termination of directorship, such Non-Employee Director's
option privileges shall be limited to the shares which were immediately
purchasable at the date of such termination of directorship and shall
expire unless exercised on or before the second annual anniversary of
the date of such termination of directorship.
7.5 If a Non-Employee Director dies while a member of the Board, his or her
option shall become fully exercisable and shall remain exercisable by
such Non-Employee Director's estate (or other successor) until the
first annual anniversary date of death, at which time they shall
expire.
<PAGE> 26
SECTION 8
STOCK OPTIONS
8.1 The Committee may grant Options, as follows, which shall be evidenced
by a stock option agreement and may be designated as (i) NQSOs or (ii)
ISOs:
(a) NQSOS
(i) A NQSO is a right to purchase a specified number of
shares of Common Stock during such time as the
Committee may determine, not to exceed ten years, at a
price determined by the Committee that is not less than
50% of the Fair Market Value of the Common Stock on the
date the option is granted.
(ii) The purchase price of the Common Stock subject to the
NQSO may be paid in cash. At the discretion of the
Committee, the purchase price may also be paid by the
tender of Common Stock or through a combination of
Common Stock and cash or through such other means as
the Committee determines are consistent with the Plan's
purpose and applicable law. No fractional shares of
Common Stock will be issued or accepted.
(iii) No NQSO may be exercised more than ten years after the
date the NQSO is granted.
(iv) Without limiting the foregoing, to the extent permitted
by law (including relevant state law):
A. the Committee may agree to accept, as full or
partial payment of the purchase price of Common
Stock issued upon the exercise of the NQSO, a
promissory note of the person exercising the
NQSO evidencing the person's obligation to make
future cash payments to the Company, which
promissory note shall be payable as determined
by the Company (but in no event later than five
years after the date thereof), shall be secured
by a pledge of the shares of Common Stock
purchased and shall bear interest at a rate
established by the Committee; and
<PAGE> 27
B. the Committee may permit the person exercising
the NQSO, either on a selective or aggregate
basis, to simultaneously exercise the NQSO and
sell the shares of Common Stock acquired,
pursuant to a brokerage or similar arrangement
approved in advance by the Committee, and use
the proceeds from sale as payment of the
exercise price of the NQSO.
(b) ISOS
(i) No ISO may be granted under the Plan to a Non-Employee
Director.
(ii) The aggregate Fair Market Value (determined at the time
of the grant of the Award) of the shares of Common
Stock subject to ISOs which are exercisable by a
Grantee for the first time during a particular calendar
year shall not exceed $100,000. To the extent that ISOs
granted to a Grantee exceed the limitation set forth in
the preceding sentence, ISOs granted last shall be
treated as NQSOs.
(iii) No ISO may be exercisable more than:
A. in the case of a Grantee who is not a Ten
Percent Shareholder, on the date the ISO is
granted, ten years after the date the ISO is
granted; and
B. in the case of a Grantee who is a Ten Percent
Shareholder, on the date the ISO is granted,
five years after the date the ISO is granted.
(iv) The exercise price of any ISO shall be determined by
the Committee and shall not be less than:
A. in the case of a Grantee who is not a Ten
Percent Shareholder on the date the ISO is
granted, the Fair Market Value of the Common
Stock subject to the ISO on such date; and
<PAGE> 28
B. in the case of an employee who is a Ten Percent
Shareholder on the date the ISO is granted, not
less than 110 percent of the Fair Market Value
of the Common Stock subject to the ISO on such
date.
(v) The Committee may provide that the option price under
an ISO may be paid by one or more of the methods
available for paying the option price of an NQSO per
Section 8.1(a)(iv).
8.2 The Committee shall specify in the stock option agreement the terms
upon which the Options shall become exercisable.
8.3 The aggregate number of shares of Common Stock to be issued pursuant to
ISOs shall not exceed 1,855,000 shares except in the event of a change
in capitalization as described in Section 18.2.
SECTION 9
STOCK APPRECIATION RIGHTS
9.1 The amount payable with respect to each SAR shall be equal in value to
the applicable percentage of the excess, if any, of the Fair Market
Value of a share of Common Stock on the exercise date over the exercise
price of the SAR. The exercise price of the SAR shall be determined by
the Committee and shall not be less than 50% of the Fair Market Value
of a share of Common Stock on the date the SAR is granted. SARs may be
granted in tandem with an Option in which event the Grantee has the
right to elect to exercise either the SAR or the Option. Upon their
election to exercise one of these Awards, the other Award is
subsequently terminated. SARs may also be granted as an independent
Award.
9.2 In the case of an SAR granted in tandem with an ISO to an employee who
is a Ten Percent Shareholder on the date of such grant, the amount
payable with respect to each SAR shall be equal in value to the
applicable percentage of the excess, if any, of the Fair Market Value
of a share of Common Stock on the exercise date over the exercise price
of the SAR, which exercise price shall not be less than 110 percent of
the Fair Market Value of a share of Common Stock on the date the SAR is
granted.
9.3 The applicable percentage and exercise price shall be established by
the Committee at the time the SAR is granted.
<PAGE> 29
SECTION 10
RESTRICTED STOCK
10.1 Restricted Stock is Common Stock of the Company that is issued to a
Grantee at a price determined by the Committee, which price may be
zero, and is subject to restrictions on transfer and/or such other
restrictions on incidents of ownership as the Committee may determine.
10.2 The Committee shall specify in the Award agreement the terms upon which
such shares of Common Stock granted to a Grantee as an Award shall
vest; provided, however that the Grantee continues to be employed by
the Company on such date.
10.3 The Committee may, in its discretion, provide for accelerated vesting
of Restricted Stock upon the achievement of specified performance goals
to be determined by the Committee.
10.4 Grantee may make the election under Section 83(b) of the Code.
SECTION 11
PERFORMANCE AWARDS
11.1 A Performance Award granted under the Plan:
(a) may be denominated or payable in cash, Common Stock,
Restricted Stock, other securities, or other Awards; and
(b) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such
performance goals during such performance periods as the
Committee shall establish.
11.2 Subject to the terms of the Plan and any applicable Award agreement,
the performance goals to be achieved during any performance period, the
length of any performance period, the amount of any Performance Award
granted and the amount of any payment or transfer to be made pursuant
to any Performance Award shall be determined by the Committee. Such
performance goals that the Committee may select are earnings before
interest and taxes, net income, gross sales, earnings per share, return
on equity, return on investment, economic value added, divisional
performance goals, etc.
<PAGE> 30
SECTION 12
OTHER STOCK-BASED INCENTIVE AWARDS
12.1 The Committee may from time to time grant Awards under this Plan that
provide a Grantee the right to purchase Common Stock or units that are
valued by reference to the Fair Market Value of the Common Stock
(including, but not limited to, phantom securities or dividend
equivalents) or to receive Deferred Shares which are stock-based
incentive grants in lieu of a cash deferral of bonuses. Such Awards
shall be in a form determined by the Committee (and may include terms
contingent upon a change of control of the Company); provided that such
Awards shall not be inconsistent with the terms and purposes of the
Plan.
12.2 The Committee shall determine the price of any Award and may accept any
lawful consideration.
SECTION 13
EXERCISE OF OPTIONS
13.1 The Committee may provide for the exercise of Options in installments
and upon such terms, conditions and restrictions as it may determine
subject to applicable law and the other requirements of this Plan.
13.2 The Committee may provide for termination of an Option in the case of
termination of employment or directorship or any other reason.
13.3 An Option granted hereunder shall be exercisable, in whole or in part,
only by written notice delivered in person or by mail to the Secretary
of the Company at its principal office, specifying the number of shares
of Common Stock to be purchased and accompanied by payment thereof and
otherwise in accordance with the stock option agreement pursuant to
which the Option was granted.
SECTION 14
RIGHTS IN EVENT OF DEATH OR DISABILITY
14.1 If a Grantee dies or becomes subject to a Disability prior to
termination of his or her right to exercise an Option in accordance
with the provisions of his or her stock option agreement without having
totally exercised the Option, the stock option agreement may provide
that the Option may be exercised, to the extent that the shares with
respect to the Option could have been exercised by the Grantee on the
date of his or her death or Disability, by (i), in the event of the
Grantee's death, the Grantee's estate or by the person who acquired the
right to exercise the Option by bequest or inheritance or (ii), in the
event of the Grantee's Disability, the Grantee or his or her personal
representative.
<PAGE> 31
14.2 In the event of the Grantee's death or Disability, the Option shall not
be exercisable after the date of its expiration or more than six months
from the date of the Grantee's death or Disability, whichever first
occurs.
14.3 The date of Disability of a Grantee shall be determined by the
Committee.
SECTION 15
AWARD AGREEMENTS
15.1 Each Award granted under the Plan shall be evidenced by an award
agreement between the Grantee to whom the Award is granted and the
Company, setting forth the number of shares of Common Stock, SARs, or
units subject to the Award and such other terms and conditions
applicable to the Award not inconsistent with the Plan as the Committee
may deem appropriate.
15.2 The award agreement for an Option shall also be referred to as a stock
option agreement.
SECTION 16
TAX WITHHOLDING
16.1 The Committee may establish such rules and procedures as it considers
desirable in order to satisfy any obligation of the Company to withhold
federal income taxes or other taxes with respect to any Award made
under the Plan. Such rules and procedures may provide:
(a) in the case of Awards paid in shares of Common Stock, the
Company may withhold shares of Common Stock otherwise issuable
upon exercise of such Award in order to satisfy withholding
obligations, unless otherwise instructed by the Grantee or
unless the Committee determines otherwise at the time of Grant;
and
(b) in the case of an Award paid in cash, that the withholding
obligation shall be satisfied by withholding the applicable
amount and paying the net amount in cash to the Grantee;
provided that the requirements of the Rules, to the extent
applicable, must be satisfied with regard to any withholding
pursuant to clause (a).
<PAGE> 32
SECTION 17
CHANGE OF CONTROL
17.1 For the purpose of the Plan, a "Change of Control" shall be deemed to
have occurred if:
(a) the Company is merged or consolidated with another corporation
and as a result of such merger or consolidation less than 50%
of the outstanding voting securities of the surviving or
resulting corporation are owned in the aggregate by the former
shareholders of the Company;
(b) the Company sells, leases or exchanges all or substantially all
of its assets to another corporation, which is not a
wholly-owned Subsidiary of the Company;
(c) any person or "group" within the meaning of Section 13(d)(3) of
the Exchange Act acquires (together with voting securities of
the Company held by such person or "group") 50% or more of
the outstanding voting securities of the Company (whether
directly, indirectly, beneficially or of record) pursuant to
any transaction or combination of transactions;
(d) there is a change of control of the Company of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such
reporting requirements; or
(e) the individuals who, at the beginning of any period of twelve
consecutive months, constituted the Board of Directors cease,
for any reason, to constitute at least a majority thereof,
unless the nomination for election or election by the
Company's shareholders of each new Director of the Company was
approved by a vote of at least two-thirds of the Directors
then still in office who either were Directors at the
beginning of such period or whose election or nomination for
election was previously so approved.
17.2 In the event of a Change of Control affecting the Company, then,
notwithstanding any provision of the Plan or of any provisions of any
Award agreements entered into between the Company and any Grantee to
the contrary, all Awards that have not expired and which are then held
by any Grantee (or the person or persons to whom any deceased Grantee's
rights have been transferred) shall, as of such Change of Control,
become fully and immediately vested and exercisable and may be
exercised for the remaining term of such Awards.
<PAGE> 33
SECTION 18
DILUTION OR OTHER ADJUSTMENT
18.1 If the Company is a party to any merger or consolidation, or undergoes
any merger, consolidation, separation, reorganization, liquidation or
the like, the Committee shall have the power to make arrangements,
which shall be binding upon the holders of unexpired Awards, for the
substitution of new Awards for, or the assumption by another
corporation of, any unexpired Awards then outstanding hereunder.
18.2 In the event of a reclassification, stock split, combination of shares,
separation (including a spin-off), dividend on shares of the Common
Stock payable in stock or other similar change in capitalization or in
the corporate structure of shares of the Common Stock, the Committee
shall conclusively determine the appropriate adjustment in the option
prices of outstanding Options, and the number and kind of shares or
other securities as to which outstanding Awards shall be exercisable,
and in the aggregate number of shares with respect to which Awards may
be granted.
18.3 The number of shares reserved under the Plan shall adjust as the number
of shares of Common Stock increase as provided in Section 6.3 of this
Plan.
SECTION 19
TRANSFERABILITY
19.1 No Award, other than an NQSO, shall be sold, pledged, assigned,
transferred, or encumbered by a Grantee other than by will or by the
laws of descent and distribution.
19.2 Only an NQSO may be pledged, assigned, transferred, or gifted by a
Grantee to another individual provided that the NQSO is pledged,
assigned, transferred or gifted without consideration by a Grantee,
subject to such rules as the Committee may adopt, to (i) a member of
the Grantee's immediate family, (ii) a trust solely for the benefit of
the Grantee and his or her immediate family or (iii) a partnership or
limited liability company whose only partners or members are the
Grantee and his or her Immediate Family (hereinafter referred to as the
Permitted Transferee); provided that the Committee is notified in
advance in writing of the terms and conditions of any proposed pledge,
assignment, transfer, or gift and the Committee determines that such
pledge, assignment, transfer or gift complies with the requirements of
the Plan and the applicable Award agreement.
<PAGE> 34
19.3 Any pledge, assignment or gift of an Award that does not comply with
the provisions of the Plan and the applicable Award agreement shall be
void and unenforceable against the Company.
19.4 All terms and conditions of a pledged, assigned, transferred or gifted
Award shall apply to the beneficiary, executor, administrator, and
Permitted Transferee, whether one or more, of the Grantee (including
the beneficiary, executor and administrator of a permitted transferee),
including the right to amend the applicable Award agreement; provided
that the Permitted Transferee shall not pledge, assign, transfer, or
gift an Award other than by will or by the laws of descent and
distribution.
SECTION 20
AMENDMENT OR TERMINATION
20.1 The Committee may at any time amend, suspend or terminate the Plan;
provided, that:
(a) no change in any Awards previously granted may be made without
the consent of the holder thereof; and
(b) no amendment, other than an amendment authorized by Section 18
or Section 6.3, may be made increasing the aggregate number of
shares of the Common Stock with respect to which ISOs may be
granted, or changing the class of employees eligible to receive
ISOs hereunder, without the approval of the holders of a
majority of the outstanding voting shares of the Company.
SECTION 21
GENERAL PROVISIONS
21.1 No Awards may be exercised by a Grantee if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of
counsel selected by the Company, contrary to law or the regulations of
any duly constituted authority having jurisdiction over the Plan.
21.2 A bona fide leave of absence approved by a duly constituted officer of
the Company shall not be considered interruption or termination of
service of any Grantee for any purposes of the Plan or Awards granted
thereunder, except that no Awards may be granted to an Employee while
he or she is on a bona fide leave of absence.
<PAGE> 35
21.3 No Grantee shall have any rights as a shareholder with respect to any
shares subject to Awards granted to him or her under the Plan prior to
the date as of which he or she is actually recorded as the holder of
such shares upon the stock records of the Company.
21.4 Nothing contained in the Plan or in an Award agreement granted
thereunder shall confer upon any Grantee any right to (i) continue in
the employ of the Company or any of its Subsidiaries or continue
serving on the Board of Directors of the Company or (ii) interfere in
any way with the right of the Company or any of its Subsidiaries to
terminate the Grantee's employment at any time or service on the Board.
21.5 Any Award agreement may provide that stock issued upon exercise of any
Awards may be subject to such restrictions, including, without
limitation, restrictions as to transferability and restrictions
constituting substantial risks of forfeiture as the Committee may
determine at the time such Award is granted.
SECTION 22
PLAN EFFECTIVE DATE
22.1 The Plan shall become effective on the date of its adoption by the
Board of Directors of the Company subject to approval of the Plan by
the holders of a majority of the outstanding voting shares of the
Company within twelve (12) months after the date of the Plan's adoption
by said Board of Directors. In the event of the failure to obtain such
shareholder approval, the Plan and any Awards granted thereunder, shall
be null and void and the Company shall have no liability thereunder.
22.2 No Award granted under the Plan shall be exercisable until such
shareholder approval has been obtained.
SECTION 23
PLAN TERMINATION
23.1 No Award may be granted under the Plan on or after December 31, 2007,
but Awards previously granted may be exercised in accordance with their
terms.
<PAGE> 36
SUPPLEMENTARY DISCLOSURE TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
SCHEDULE 14A, ITEM 10, INSTRUCTION 5:
BrightStar Information Technology Group, Inc. intends to register the shares
issuable under the foregoing Plan pursuant to a Registration Statement on Form
S-8. Such registration statement will be prepared and filed as soon as
practicable following stockholder approval of the amendment to the Plan
increasing by 1,000,000 the number of shares available for issuance thereunder.
<PAGE> 37
PROXY PROXY
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 17, 1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints George M. Siegel and Michael A. Ober, or
either of them, each with full power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of BrightStar
Information Technology Group, Inc., to be held on Thursday, June 17, 1999, at
10:00 a.m., at the Park Hyatt Hotel, 333 Battery Street, San Francisco, CA and
any adjournment or postponement thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present on the items set
forth on the reverse side and upon such other business as may properly come
before such meeting and any adjournment or postponement thereof:
(Continued and to be signed on reverse side)
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
18
<PAGE> 38
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C> <C> <C>
FOR ALL
1. ELECTION OF DIRECTORS FOR WITHHELD EXCEPT
G. Siegel, J. Barrett, B. Blackmarr, M. Ober, D. Reamer,
D. Rowley, W. Sitter [ ] [ ] [ ]
INSTRUCTIONS: To withhold authority to vote for any
individual Nominee, write that Nominee's name in the
space provided below.
FOR AGAINST ABSTAIN
- --------------------------------------------------------- [ ] [ ] [ ]
2. An amendment of the 1997 Long-Term Incentive Plan to
increase the number of shares issuable thereunder by
1,000,000 shares.
</TABLE>
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO
CHOICE IS SPECIFIED, WILL BE VOTED FOR THE SEVEN
NOMINEES FOR ELECTION AND FOR ITEM 2. (Please sign exactly as your name appears.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer, if a partnership, please sign in partnership name by
authorized person.)
- ----------------------------------------------
- ----------------------------------------------
Signature(s) Date
19
