<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. )
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Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cysive, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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<PAGE> 2
[CYSIVE LOGO]
April , 2000
Dear Fellow Stockholder:
You are cordially invited to attend the 2000 annual meeting of stockholders
of Cysive, Inc., on Monday, April 24, 2000, at 10:00 a.m., local time, at the
Reston Hyatt, 1800 Presidents Street, Reston, Virginia 20190.
In addition to electing one Class I director and ratifying the appointment
of our independent auditors for the coming year, we are asking for stockholder
approval of an amendment to our Amended and Restated 1994 Stock Option Plan to
increase the number of shares of our common stock reserved for issuance under
the plan by 6,000,000 shares, to a total of 17,575,000 shares. We believe that
by increasing the number of shares of common stock reserved for issuance under
the plan, we will be able to attract and retain quality employees and officers
to grow and succeed in the future. We are also asking for stockholder approval
of an amendment to our certificate of incorporation to increase the authorized
shares of common stock to 500,000,000 shares from 75,000,000 shares. We believe
that by increasing our authorized shares of common stock, we will have more
flexibility to meet our future business needs.
All items on the agenda are described in the accompanying Notice and Proxy
Statement. Included with these soliciting materials is a proxy card for voting,
an envelope, postage prepaid, in which to return your proxy, instructions for
voting by telephone or on the Internet and a copy of our Annual Report to
Stockholders.
It is important that your shares be represented at the meeting, even if you
cannot attend the meeting and vote your shares in person. Please give careful
consideration to the items to be voted upon, complete and sign the proxy card
and return it in the envelope provided or vote by telephone or by Internet as
instructed. If you return a proxy card or vote by telephone or by Internet and
decide to attend the meeting, you may revoke your proxy at the meeting and vote
your shares in person.
We look forward to receiving your vote and seeing you at the meeting.
Sincerely,
/s/ NELSON A. CARBONELL, JR.
Nelson A. Carbonell, Jr.
Chairman, President and
Chief Executive Officer
<PAGE> 3
[CYSIVE LOGO]
10790 PARKRIDGE BOULEVARD
SUITE 400
RESTON, VIRGINIA 20191
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, APRIL 24, 2000
---------------------
To our Stockholders:
The 2000 annual meeting of stockholders of Cysive, Inc. will be held at the
Reston Hyatt, 1800 Presidents Street, Reston, Virginia 20190, (703) 709-1234, on
April 24, 2000, beginning at 10:00 a.m., local time. At the meeting, the holders
of Cysive's outstanding common stock will act on the following matters:
(1) Election of one Class I director for a term of three years;
(2) Ratification of the appointment of Ernst & Young LLP as
independent auditors for Cysive for the year ending December 31, 2000;
(3) Approval to amend Cysive's Amended and Restated 1994 Stock Option
Plan to increase the number of shares of Cysive's common stock reserved for
issuance under the plan by 6,000,000 shares, to a total of 17,575,000
shares;
(4) Approval to amend Cysive's Certificate of Incorporation to
increase the authorized shares of common stock to 500,000,000 shares from
75,000,000 shares; and
(5) Any other matters that properly come before the meeting.
All holders of record of shares of Cysive's common stock at the close of
business on March 15, 2000 are entitled to vote at the meeting or any
postponements or adjournments of the meeting.
IF YOU CANNOT ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR BY INTERNET AS
INSTRUCTED.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ JOHN R. LUND
JOHN R. LUND
Chief Financial Officer, Treasurer
and Secretary
April , 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE MEETING........................................... 1
What is the purpose of the annual meeting?................ 1
Who is entitled to vote at the meeting?................... 1
What are the voting rights of our stockholders?........... 1
Who can attend the meeting?............................... 1
What constitutes a quorum?................................ 1
How do I vote?............................................ 2
Can I vote by telephone or electronically?................ 2
Can I change my vote after I return my proxy card?........ 2
What are the Board's recommendations?..................... 2
What vote is required to approve each item?............... 2
STOCK OWNERSHIP............................................. 3
Who are the largest owners of our stock?.................. 3
How much stock do our directors, executive officers and
key employee own?...................................... 3
Section 16(a) Beneficial Ownership Reporting Compliance... 4
ITEM 1 -- ELECTION OF ONE CLASS I DIRECTOR.................. 4
Class I Director Standing for Election.................... 4
Directors Continuing in Office............................ 4
Related Party Transactions................................ 6
Executive Compensation.................................... 6
Report of the Compensation Committee................... 6
Employment Agreements.................................. 7
Summary Compensation Table............................. 8
1999 Option Exercises and Fiscal Year-End Option
Values................................................ 9
Option Grants in 1999.................................. 10
Comparison of Cumulative Total Returns................. 11
ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS.................................................. 11
ITEM 3 -- APPROVAL OF AMENDMENT OF OUR AMENDED AND RESTATED
1994 STOCK OPTION PLAN.................................... 12
Description of the Stock Option Plan...................... 12
Federal Income Tax Consequences........................... 15
ITEM 4 -- APPROVAL OF AMENDMENT OF OUR CERTIFICATE OF
INCORPORATION............................................. 18
Possible Effects of the Proposed Amendment of our
Certificate of Incorporation........................... 18
OTHER MATTERS............................................... 20
ADDITIONAL INFORMATION...................................... 20
EXHIBIT A -- FORM OF SECOND AMENDED AND RESTATED 1994 STOCK
OPTION PLAN............................................... A-1
EXHIBIT B -- FORM OF CERTIFICATE OF AMENDMENT TO CERTIFICATE
OF INCORPORATION.......................................... B-1
</TABLE>
<PAGE> 5
[CYSIVE Logo]
10790 PARKRIDGE BOULEVARD
SUITE 400
RESTON, VIRGINIA 20191
---------------------
PROXY STATEMENT
---------------------
This proxy statement contains information related to the annual meeting of
stockholders of Cysive, Inc. to be held on Monday, April 24, 2000, beginning at
10:00 a.m., local time, at the Reston Hyatt, 1800 Presidents Street, Reston,
Virginia 20190, and at any postponements or adjournments thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, stockholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, including the
election of one Class I director, ratification of our independent auditors,
approving an amendment to our Amended and Restated 1994 Stock Option Plan and
approving an amendment to our Certificate of Incorporation. In addition, our
management will report on our performance during 1999 and respond to questions
from stockholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only stockholders of record at the close of business on the record date,
March 15, 2000, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the meeting, or any
postponements or adjournments of the meeting.
WHAT ARE THE VOTING RIGHTS OF OUR STOCKHOLDERS?
Holders of our common stock may vote on all matters to be acted upon at the
annual meeting. Each outstanding share of our common stock will be entitled to
one vote on each matter to be voted upon at the meeting.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Please note that if you
hold your shares in "street name" (that is, through a broker or other nominee),
you will need to bring a copy of a brokerage statement reflecting your stock
ownership as of the record date and check-in at the registration desk at the
meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 11,645,362 shares of our common stock were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
<PAGE> 6
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to us, it will be voted as you direct. If you are a registered stockholder and
attend the meeting, you may deliver your completed proxy card in person. "Street
name" stockholders who wish to vote at the meeting will need to obtain a proxy
form from the institution that holds their shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you are a registered stockholder (that is, if you hold your shares in
certificate form), you may vote by telephone or electronically through the
Internet, by following the instructions included with your proxy card.
If your shares are held in "street name," please check your proxy card or
contact your broker or nominee to determine whether you will be able to vote by
telephone or electronically.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a properly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board. The Board's recommendation is presented together with the
description of each item in this proxy statement. In summary, the Board
recommends a vote:
- for election of the nominated director (see page 4);
- for ratification of the appointment of Ernst & Young LLP as our
independent auditors for the year ending December 31, 2000 (see page 11);
- for approval of an amendment to our Amended and Restated 1994 Stock
Option Plan increasing the number of shares of our common stock reserved
for issuance under the plan by 6,000,000 shares, to a total of 17,575,000
shares (see page 12); and
- for approval of an amendment to our Certificate of Incorporation
increasing the number of authorized shares of common stock to 500,000,000
shares from 75,000,000 shares (see page 18).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation
is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of the Director. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of the director. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of the
director will not be voted with respect to the director, although it will be
counted for purposes of determining whether there is a quorum.
Other Items. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote on
the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some matters which may come up at the
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<PAGE> 7
meeting. Thus, if you do not give your broker or nominee specific instructions,
your shares may not be voted on those matters and will not be counted in
determining the number of shares necessary for approval. Shares represented by
such "broker non-votes" will, however, be counted in determining whether there
is a quorum.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF OUR STOCK?
Except as set forth below under "How much stock do our directors, executive
officers and key employee own?", we know of no single person or group that is
the beneficial owner of more than 5% of our common stock.
HOW MUCH STOCK DO OUR DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEE OWN?
The table below shows the amount of our common stock beneficially owned,
unless otherwise indicated, by our directors, our executive officers and key
employee individually and as a group. Except as otherwise indicated, all
information is as of February 24, 2000.
Unless indicated otherwise below, the address for each listed director,
officer and key employee is Cysive, Inc., 10790 Parkridge Boulevard, Suite 400,
Reston, Virginia 20191. Except as indicated by footnote, the persons named in
the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. The total number of shares of
common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying options held by that
person that are exercisable within 60 days of February 24, 2000 but excludes
shares of common stock underlying options held by any other person.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME BENEFICIALLY OWNED OWNERSHIP
- ---- ------------------ ----------
<S> <C> <C>
Nelson A. Carbonell, Jr.(1)............................... 6,995,209 54.2%
Eric J. Magleby(2)........................................ 1,730,500 14.9
John R. Lund(3)........................................... 452,813 3.8
Michael E. Price(4)....................................... 284,063 2.4
Joseph M. Rymsza(4)....................................... 233,438 2.0
Robert C. Rubinstein(4)................................... 146,251 1.3
John Sabin(5)............................................. 36,000 *
Jon Korin(6).............................................. 33,950 *
John Saaty(7)............................................. 28,126 *
Penny J. Jobin(4)......................................... 43,594 *
All executive officers, key employee and directors as a
group (10 persons)...................................... 9,983,944 70.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding common stock.
(1) Includes 5,729,500 shares of common stock owned in joint tenancy by Mr.
Carbonell and his wife, Michele Carbonell, and 1,265,709 shares of common
stock issuable upon the exercise of stock options.
(2) Includes 1,630,500 shares of common stock owned in joint tenancy by Mr.
Magleby and his wife, Monette Magleby, and 100,000 shares of common stock
held by The Eric Magleby Annuity Trust.
(3) Includes 452,613 shares of common stock issuable upon the exercise of stock
options.
(4) Represents shares of common stock issuable upon the exercise of stock
options.
(5) Includes 31,000 shares of common stock issuable upon the exercise of stock
options.
(6) Includes 33,750 shares of common stock issuable upon the exercise of stock
options and 200 shares owned by his children.
(7) Includes 27,976 shares of common stock issuable upon the exercise of stock
options.
3
<PAGE> 8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and certain stockholders to file reports with the
SEC regarding transactions in our securities. Based upon a review of filings
with the SEC and written representations that no other reports were required,
other than a Form 4 for Jon S. Korin and a Form 4 for John R. Lund, each
relating to one transaction, we believe that all of our directors and executive
officers complied during 1999 with the reporting requirements of Section 16(a)
of the Securities Exchange Act of 1934.
ITEM 1 -- ELECTION OF ONE CLASS I DIRECTOR
CLASS I DIRECTOR STANDING FOR ELECTION
The Board is currently divided into three classes, having terms that expire
in successive years. At each annual meeting of stockholders beginning in 2000,
directors will be elected for terms of three years each.
The current term of office of directors in Class I expires at the 2000
annual meeting. The Board proposes that the nominee described below, who is
currently serving as a Class I director, be re-elected for a new term of three
years or until his successor is duly elected and qualified. We do not intend to
nominate anyone for election at the meeting to serve as the second member of the
class whose term expires in 2003. The Board may fill the vacancy by its vote at
some future date.
The nominee has consented to serve a three-year term. If he becomes
unavailable to serve as a director, the Board may designate a substitute
nominee. In that case, the persons named as proxies will vote for the substitute
nominee designated by the Board.
Class I Director. The director standing for election is:
Nelson A. Carbonell, Jr. Director since 1994
Nelson A. Carbonell, Jr. founded Cysive and has served as Chairman of the Board,
President and Chief Executive Officer since Cysive commenced operations in 1994.
From February 1991 until March 1994, Mr. Carbonell served as Director of
Commercial Systems, Inc. at PRC, Inc., now a subsidiary of Litton Industries.
PRC, Inc. is a leading provider of information technology and systems-based
solutions for the United States government and commercial customers. Mr.
Carbonell serves on the Executive Committee of the Washington-Baltimore Young
President's Organization. Mr. Carbonell received a B.S. in Electrical
Engineering from George Washington University in 1985.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF NELSON A.
CARBONELL, JR. AS THE CLASS I DIRECTOR.
DIRECTORS CONTINUING IN OFFICE
Class II Directors. The following Class II directors have terms ending in
2001:
John R. Lund Director since 1999
John R. Lund has served as our Treasurer since December 1995, our Chief
Financial Officer since April 1997 and our Secretary since April 1999. From
December 1995 until April 1997, Mr. Lund served as our Vice President of
Finance. From December 1994 until December 1995, Mr. Lund was Vice President of
Finance for Public Sector, Inc., a subsidiary of PRC, Inc. Mr. Lund received a
B.S. in Accounting from Brigham Young University in June 1986.
4
<PAGE> 9
John M. Sabin Director since 1997
John M. Sabin has served as a Director since April 1997. Since January 2000, Mr.
Sabin has served as Chief Financial Officer and General Counsel of Oceanix
Biosciences Corporation, a bioinformatic and biotechnology company. From
September 1999 to January 2000, Mr. Sabin acted as a business consultant in the
hotel and lodging industry. From May 1998 until September 1999, Mr. Sabin served
as Executive Vice President and Chief Financial Officer of Hudson Hotels
Corporation, a publicly traded hotel ownership and management company. From
February 1997 until May 1998, Mr. Sabin served as Senior Vice President and
Treasurer of Vistana, Inc., a publicly traded company that owns, operates and
develops time share resorts, and served as Chief Financial Officer of Vistana
from February 1997 until November 1997. From June 1996 until February 1997, Mr.
Sabin served as Vice President of Finance of Choice Hotels International, Inc.,
a publicly traded hotel franchisor, and served as Vice President of Mergers and
Acquisitions from June 1995 to February 1997. From December 1993 until October
1996, he served as Vice President of Finance and Assistant Treasurer of
ManorCare, Inc., the former parent of Choice Hotels International, Inc. Mr.
Sabin is a Director and non-Executive Chairman of the Board of Competitive
Technologies, Inc., a publicly traded technology licensing and transfer company.
Mr. Sabin received his B.S., M.Acc. and M.B.A. degrees from Brigham Young
University and a J.D. degree from the J. Reuben Clark Law School at Brigham
Young University.
Class III Director. The following Class III director has a term ending in
2002:
Jon S. Korin Director since 1997
Jon S. Korin has served as a Director since April 1997. Mr. Korin has served as
vice president of strategic development for PRC, Inc. since June 1993. He is a
board member and past president of the National Capital chapter of the
Association for Corporate Growth and a board member of the IT Services Division
of the Information Technology Association of America. Mr. Korin received a B.S.
from The Wharton School of the University of Pennsylvania in May 1976 and
attended the New York University Graduate School of Business.
HOW ARE DIRECTORS COMPENSATED?
Each non-employee director currently receives $1,000 of cash compensation
and reimbursement for reasonable travel expenses for each board meeting
attended. In addition, upon their first election to office after October 1999,
each director will receive an option to purchase 60,000 shares of our common
stock that will vest equally over the three-year term of each director. Until
their election, the Class II directors will receive an option to purchase 20,000
shares of our common stock in April 2000 that will vest in one year. The Class
III director will receive an option to purchase 40,000 shares of our common
stock in April 2000 that will vest equally over two years.
HOW OFTEN DID THE BOARD MEET DURING 1999?
The Board met seven times during 1999 and took action by unanimous written
consent twice. Each director attended more than 75% of the total number of
meetings of the Board and committees on which he served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has an audit committee, a compensation committee and
an executive committee.
Audit committee. The audit committee assists the board of directors in
fulfilling its responsibilities of ensuring that management maintains an
adequate system of internal controls. The audit committee also:
- recommends an independent audit firm to audit financial statements and to
perform services related to the audit;
- reviews the scope and results of the audit with the independent auditors;
- considers the adequacy of the internal accounting control procedures; and
- considers the auditors' independence.
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<PAGE> 10
The audit committee consists of Messrs. Sabin and Korin. In 1999, the audit
committee met once.
Compensation committee. The compensation committee determines the salaries
and incentive compensation of our officers and provides recommendations for the
salaries and incentive compensation of other employees and software engineers.
The compensation committee also administers our various incentive compensation,
stock and benefit plans. The compensation committee consists of Messrs. Sabin,
Magleby and Korin. In 1999, the compensation committee met twice.
Executive committee. The executive committee determines the objectives and
performance criteria of each member of our management team. The executive
committee consists of Messrs. Carbonell and Lund. In 1999, the executive
committee took action by unanimous written consent once.
RELATED PARTY TRANSACTIONS
In 1999, Nelson A. Carbonell, Jr., Chairman of the Board, President and
Chief Executive Officer, and Eric J. Magleby, a director, exercised options to
purchase shares of our common stock in the following amounts and exercise
prices:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE
PURCHASED PER SHARE
--------- --------------
<S> <C> <C>
Nelson A. Carbonell, Jr. ............................ 1,237,500 $0.81
Eric J. Magleby...................................... 112,500 $0.81
</TABLE>
Messrs. Carbonell and Magleby funded the exercise prices for their
exercised options through cash distributions from us made when we operated as an
S corporation. On September 30, 1999, our stockholders revoked our S corporation
status.
EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graph included elsewhere in this proxy statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other of our filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent we specifically incorporate this Report or the
performance graph by reference in the specified filing.
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board has furnished the following report
on executive compensation for 1999.
WHAT IS OUR PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
Our compensation program for executive officers consists primarily of three
key elements:
- base salary;
- company and individual performance-based quarterly bonus; and
- periodic grants of stock options.
The compensation committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables us to meet
the requirements of the highly competitive environment in which we operate while
ensuring that our executive officers are compensated in a way that advances both
the short- and long-term interests of stockholders. Under this approach,
compensation for these executive officers involves a significant proportion of
pay that is "at risk" -- namely, the annual bonus and stock options. The annual
variable bonus permits individual performance to be recognized on an annual
basis, and is based, in significant part, on an evaluation of the contribution
made by the officer to Company performance. Stock
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<PAGE> 11
options relate a significant portion of long-term remuneration directly to stock
price appreciation realized by all of our stockholders.
Base Salary. Base salaries for our executive officers, as well as changes
in these salaries, are based upon recommendations by the compensation committee
taking into account factors such as competitive industry salaries; a subjective
assessment of the nature of the position; the contribution and experience of the
officer and the length of the officer's service.
Annual Bonus. Annual bonuses for our executive officers are awarded based
upon individual and company-wide performance criteria established by the Board
based upon recommendations of the compensation committee. In accordance with
each officer's employment agreement, the officer will receive annual bonuses in
amounts determined by the compensation committee. In addition, if the Company
and the individual exceed their performance criteria, the employee may receive
an additional bonus equal to a portion of the Company's revenues in excess of
the target.
Stock Options. During 1999, the compensation committee approved grants of
stock options pursuant to the Amended and Restated 1994 Stock Option Plan. In
granting stock options to the named executive officers, the compensation
committee considers a number of factors including company and individual
performance and the extent to which our named executive officers have unvested
options.
HOW IS OUR CHIEF EXECUTIVE OFFICER COMPENSATED?
Mr. Carbonell, our Chief Executive Officer, has an annual base salary of
$185,000 pursuant to his employment agreement. Mr. Carbonell is eligible for a
bonus based upon his performance and the Company's performance based on criteria
established by the compensation committee. For 1999, Mr. Carbonell was awarded a
bonus of $326,700 and additional compensation of 1,462,500 stock options.
HOW ARE WE ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year. However,
the statute exempts qualifying performance-based compensation from the deduction
limit if specified requirements are met. The compensation committee currently
intends to structure performance-based compensation, including stock option
grants and annual bonuses, to executive officers who may be subject to Section
162(m) in a manner that satisfies those requirements. For 1999, none of our
executive officers' compensation subject to the deductibility limits exceeded
$1,000,000.
The Board and the compensation committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding our efforts, that compensation intended
by the Company to satisfy the requirements for deductibility under Section
162(m) does in fact do so.
John M. Sabin
Eric J. Magleby
Jon S. Korin
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Messrs. Carbonell, Lund,
Price, Rubinstein, Rymsza and Saaty and Ms. Jobin. Each agreement has an initial
term of four years and will be extended for two additional years unless we or
the employee elects to terminate the agreement 60 days prior to the fourth
anniversary of the effective date of the employment agreements. Under these
agreements, each person will receive an annual base salary established by our
chief executive officer, or, in the case of our chief executive officer,
established by the Board, as recommended by the compensation committee. In
addition to the
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<PAGE> 12
compensation referenced below, each employee is eligible to receive an annual
bonus, conditioned upon individual and company-wide performance criteria
established by the Board, as recommended by the compensation committee. In
addition, if company and employee performance criteria are exceeded, the
employee may receive an additional bonus equal to a portion of the company's
revenues in excess of the original targets.
If, during the term of one of these agreements, we terminate the employee's
employment without cause or the employee terminates his employment for good
reason, the employee will be entitled to receive his base salary and all
employee benefits for a period of one year from the date of the termination of
employment. Under the terms of these agreements, these employees have agreed to
preserve the confidentiality and the proprietary nature of all information
relating to our business during the term of the agreement and for three years
after the term of the agreement ends. In addition, each of these employees has
agreed to non-competition and non-solicitation provisions that will be in effect
during the term of his agreement and for one year, with respect to
non-competition, and, with respect to non-solicitation, two years, after the
term of the agreement ends.
The following table summarizes the compensation paid to or earned by our
Chief Executive Officer and all other executive officers whose salary and bonus
for services rendered in all capacities for the years ended December 31, 1998
and 1999 exceeded $100,000. We use the term "named executive officers" to refer
to these people in this proxy statement.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------------------ ---- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Nelson A. Carbonell, Jr. ........ 1999 $185,226 $326,700 1,462,500 --
Chairman, President and 1998 167,500 143,422 -- --
Chief Executive Officer
Joseph M. Rymsza................. 1999 172,387(1) 116,012 33,750 $11,943(2)
Vice President, Sales 1998 151,139 25,000 337,500 --
John R. Lund..................... 1999 133,462 128,270 375,000 --
Chief Financial Officer 1998 118,077 58,144 135,000 --
Michael E. Price................. 1999 125,226 97,643 146,250 --
Chief Technical Officer 1998 118,221 58,144 135,000 --
Robert C. Rubinstein............. 1999 93,919 52,201 225,000 35,000(3)
Chief Operating Officer 1998 -- -- -- --
John M. Saaty.................... 1999 110,577 47,048 123,750 32,443(2)
Vice President, Marketing 1998 4,244 -- 101,100 --
</TABLE>
- ---------------
(1) Includes sales commissions earned in the amount of $47,387.
(2) Represents moving expenses.
(3) Mr. Rubinstein joined Cysive as Chief Operating Officer on March 22, 1999.
Represents sign-on bonus.
8
<PAGE> 13
1999 OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table presents summary information with respect to stock
options owned by the named executive officers at December 31, 1999, and with
respect to stock options exercised by the named executive officers during the
fiscal year ended December 31, 1999. The values of unexercised in-the-money
options shown below have been calculated on the basis of $72.063 per share, the
last reported sale price for our common stock on the Nasdaq National Market on
December 31, 1999, multiplied by the number of shares underlying those options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Nelson A. Carbonell,
Jr. ..................... 1,237,500 $878,625 1,200,110 262,390 $85,341,601 $18,470,391
Joseph M. Rymsza........... -- -- 168,750 202,500 11,949,805 14,330,667
John R. Lund............... 200 14,175 382,300 330,000 27,023,359 21,320,186
Michael E. Price........... -- -- 236,250 247,500 16,830,484 16,287,378
Robert C. Rubinstein....... -- -- 33,750 258,750 2,404,114 18,333,511
John M. Saaty.............. 150 10,403 25,163 199,687 1,775,074 14,065,054
</TABLE>
9
<PAGE> 14
OPTION GRANTS IN 1999
The following table shows grants of stock options to each of our named
executive officers during the year ended December 31, 1999. The percentages in
the table below are based on options to purchase 3,785,387 shares of common
stock granted under our stock option plan in the year ended December 31, 1999 to
our employees and directors. The exercise price per share of each option was
equal to the fair market value of the common stock on the date of grant as
determined by the Board. Potential realizable values are net of exercise price
before taxes and are based on the assumption that our common stock appreciates
at the annual rate shown, compounded annually, from the date of grant until the
expiration of the 5-year or 10-year term. These numbers are calculated based on
the requirements of the SEC and do not reflect our estimate of future stock
price growth.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---- ---------- -------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nelson A. Carbonell,
Jr. .................. 327,987 8.7% $ 1.67 04/19/04 $ 151,330 $ 334,400
1,134,513 30.0 0.91 04/19/09 649,275 1,645,391
Joseph M. Rymsza........ 33,750 0.9 1.52 04/19/09 32,262 81,759
John R. Lund............ 56,250 1.5 1.89 04/19/09 66,859 169,435
22,500 0.6 1.89 04/19/09 26,744 67,774
146,250 3.9 1.89 04/19/09 173,834 440,530
140,751 3.7 14.45 10/15/09 1,279,079 3,241,436
9,249 0.2 17.00 10/15/09 98,883 250,589
Michael E. Price........ 9,675 0.3 0.91 04/19/09 5,537 14,032
46,575 1.2 1.52 04/19/09 44,522 112,827
78,866 2.1 14.45 10/15/09 716,697 1,816,251
11,134 0.3 17.00 10/15/09 119,036 301,660
Robert C. Rubinstein.... 131,193 3.5 1.52 03/22/09 125,410 317,814
93,807 2.5 0.91 03/22/09 53,685 136,049
John M. Saaty........... 11,250 0.3 1.52 04/19/09 10,754 27,253
26,525 0.7 1.13 07/19/09 18,850 47,770
85,975 2.3 1.89 07/19/09 102,191 258,972
</TABLE>
10
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURNS
The following graph compares the performance of our common stock with the
performance of the Nasdaq Composite Index and an index of publicly traded
companies in the software industry based on Standard Industrial Classification
7371 from October 15, 1999, when our common stock began trading publicly through
December 31, 1999. The graph assumes that $100 was invested on October 15, 1999
in our common stock, the Nasdaq Composite Index and the peer group index, and
that all dividends, if any, were reinvested.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING OCTOBER 15, 1999
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Nasdaq
Cysive SIC 7371 Composite
<S> <C> <C> <C>
10/15/99 100.00 100.00 100.00
12/31/99 190.90 166.41 145.84
</TABLE>
ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
We have appointed Ernst & Young LLP as our independent auditors for the
year ending December 31, 2000. Ernst & Young LLP has served as our independent
auditors since we commenced operations in 1994. Services provided to us by Ernst
& Young LLP in 1999 included the examination of our financial statements,
limited reviews of quarterly reports, services related to filings with the SEC,
including our initial public offering, and consultations on various tax,
information services and business process matters.
Representatives of Ernst & Young LLP will be present at the annual meeting
to respond to appropriate questions and to make such statements as they may
desire.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 2000.
In the event stockholders do not ratify the appointment, the appointment
will be reconsidered by the audit committee and the Board.
11
<PAGE> 16
ITEM 3 -- APPROVAL OF AMENDMENT TO OUR AMENDED AND RESTATED 1994 STOCK
OPTION PLAN
We are asking stockholders to approve an amendment to our Amended and
Restated 1994 Stock Option Plan, or the stock option plan, which increases the
maximum number of shares of common stock authorized to be awarded under the
stock option plan by 6,000,000 shares. As a matter of convenience, we are also
restating the stock option plan to reflect:
(1) our reincorporation from a Virginia corporation to a Delaware
corporation on September 24, 1999;
(2) our 2.25-for-1 stock split in the form of a stock dividend on September
24, 1999;
(3) an increase in the maximum number of shares of common stock authorized
to be awarded under the stock option plan from 10,350,000 shares to
11,350,000 shares;
(4) the provision in our stock option plan whereby the number of shares of
common stock reserved for issuance under the stock option plan is
automatically increased by 15% of any increase in our outstanding
shares of common stock, other than increases resulting from issuances
of stock under the stock option plan; and
(5) the increase in the maximum number of shares of common stock authorized
to be awarded under the stock option plan being approved by the
stockholders in this proxy statement.
If the amendment to the stock option plan is approved, there will be
17,575,000 shares reserved for issuance under the stock option plan (including
225,000 shares relating to the increase in our outstanding shares on March 22,
2000 in a public offering of 1,500,000 shares).
The Board has approved the amendment to the stock option plan and its
restatement, as presented in our Second Amended and Restated 1994 Stock Option
Plan which is attached to this proxy statement as Exhibit A, and recommended
that the amendment be submitted to the stockholders for approval.
At February 24, 2000, there were 3,229,521 shares of common stock available
for grant under the stock option plan. On March 15, 2000, the closing price of
our common stock was $99.00 per share. The purpose of amending the stock option
plan is to increase the number of shares of common stock available for issuance
under the stock option plan. The proposed amendment to the stock option plan
will not otherwise result in any new plan benefits to our directors, executive
officers or other employees.
The number of persons who are currently participants under the stock option
plan is approximately 200. Because participation and the types of awards under
the stock option plan are subject to the discretion of the compensation
committee, the benefits or amounts that will be received by any participant or
group of participants if the amendment to the stock option plan is approved are
not currently determinable.
The Board believes that the amendment to increase the number of shares
available for grant under the stock option plan is necessary to provide for
future grants under the stock option plan and is intended to further the purpose
of the stock option plan, which is to attract and to encourage the continued
employment and service of, and maximum efforts by, officers, key employees and
other individuals by facilitating their purchase of a stock interest in Cysive.
In the Board's judgment, an initial or increased grant under the stock option
plan will be a valuable incentive and will serve to the ultimate benefit of
stockholders by aligning the interests of stock option plan participants more
closely with those of the stockholders.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO OUR
STOCK OPTION PLAN.
DESCRIPTION OF THE STOCK OPTION PLAN
A description of the provisions of the stock option plan is presented
below. This summary is qualified in its entirety by the detailed provisions of
the stock option plan, a copy of which is attached as Exhibit A to this proxy
statement. The stock option plan is administered by the compensation committee.
The stock option plan permits the granting of options to purchase shares of
common stock intended to qualify as incentive stock options under the Internal
Revenue Code and stock options that do not qualify as
12
<PAGE> 17
incentive stock options. The exercise price of each non-qualified stock option
is determined by the compensation committee but may not be less than 85% of the
fair market value of our common stock on the date of grant. For incentive stock
options, the exercise price may not be less than 100%, or 110% in the case of
10% stockholders, of the fair market value of our common stock on the date of
grant.
The term of each stock option is fixed by the compensation committee and
may not exceed 10 years from the date of grant. The compensation committee
determines at what time or times each option may be exercised and the period of
time, if any, after retirement, death, disability or termination of employment
during which options may be exercised. Options may be made exercisable in
installments. The exercisability of options may be accelerated by the
compensation committee.
On January 19, 2000, we filed a registration statement on Form S-8 to
register 40,923 shares of common stock issuable upon the exercise of stock
options granted to certain of our employees.
The maximum number of shares subject to options that can be awarded under
the stock option plan to any one person is 1,800,000 per year. The maximum
number of shares that can be awarded under the stock option plan to any person,
other than pursuant to an option, is 337,500 per year. The maximum amount that
may be earned as an annual incentive award or other cash award in any fiscal
year by any one person is $300,000, and the maximum amount that may be earned as
a performance award or other cash award in respect of a performance period by
any one person is $900,000.
The compensation committee may also award:
- shares of common stock to participants. These stock awards may be
conditioned on the achievement of performance goals and/or continued
employment with us through a specified restricted period.
- deferred stock units, which are ultimately payable in the form of
unrestricted shares of common stock. A deferred stock award may be
conditioned or restricted in whatever manner the compensation committee
may determine. These conditions and restrictions may include the
achievement of performance goals and/or continued employment with us
through a specified restricted period.
- shares of common stock at no cost or for a purchase price determined by
the compensation committee which are free from any restrictions under the
stock option plan. Unrestricted shares of common stock may be issued to
participants in recognition of past services or other valid
consideration, and may be issued in lieu of cash compensation to be paid
to participants.
- dividend equivalent rights entitling the recipient to receive credits for
dividends that would be paid if the recipient had held a specified number
of shares of common stock. Dividend equivalent rights may be granted as a
component of another award or as a freestanding award. Dividend
equivalent rights credited under the stock option plan may be paid
currently or be deemed to be reinvested in additional shares of common
stock, and may accrue additional dividend equivalent rights after
reinvestment at fair market value at the time of deemed reinvestment.
Dividend equivalent rights may be settled in cash, common stock or a
combination of cash and shares, in a single installment or installments,
as specified in the award. Awards payable in cash on a deferred basis may
provide for crediting and payment of interest equivalents.
- a right to receive a number of shares or, in the discretion of the
compensation committee, an amount in cash or a combination of shares and
cash, based on the increase in the fair market value of the shares
underlying the right during a stated period specified by the compensation
committee. The compensation committee may approve the grant of these
stock appreciation rights related or unrelated to stock options.
Other stock-based awards. The compensation committee is authorized to grant
to participants other awards that may be based on or related to our common
stock, including:
- convertible or exchangeable debt securities;
- other rights convertible or exchangeable into shares;
13
<PAGE> 18
- purchase rights for shares;
- incentive awards with value and payment contingent upon performance; and
- incentive awards valued by reference to the performance of specified
subsidiaries or business units.
Effect of specified corporate transactions. Specified change of control
transactions involving us, such as a sale of the company, may cause awards
granted under the stock option plan to vest, unless the awards are continued or
substituted in connection with the change of control transaction.
Adjustments for stock dividends and similar events. The compensation
committee will make appropriate adjustments in outstanding awards and the number
of shares available for issuance under the stock option plan, including the
individual limitations on awards, to reflect common stock dividends, stock
splits and other similar events.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits publicly-held companies such as Cysive to an annual
deduction for federal income tax purposes of $1,000,000 for compensation paid to
their chief executive officer and the four highest compensated executive
officers (other than the chief executive officer) determined at the end of each
year, referred to in this Item 3 as the covered employees. However,
performance-based compensation is excluded from this limitation. To satisfy this
definition,
(i) the compensation must be paid solely on account of the attainment
of one or more preestablished, objective performance goals;
(ii) the performance goal under which compensation is paid must be
established by a compensation committee comprised solely of two or more
directors who qualify as outside directors for purposes of the exception;
(iii) the material terms under which the compensation is to be paid
must be disclosed to and subsequently approved by stockholders of the
corporation before payment is made in a separate vote; and
(iv) the compensation committee must certify in writing before payment
of the compensation that the performance goals and any other material terms
were in fact satisfied.
In the case of compensation attributable to stock options, the performance
goal requirement (summarized in (i) above) is deemed satisfied, and the
certification requirement (summarized in (iv) above) is inapplicable, if
(1) the grant or award is made by the compensation committee;
(2) the plan under which the option is granted states the maximum
number of shares with respect to which options may be granted during a
specified period to an employee; and
(3) under the terms of the option, the amount of compensation is based
solely on an increase in the value of the stock after the date of grant.
Under the Internal Revenue Code, a director is an "outside director" if he
or she is not a current employee of the corporation; is not a former employee
who receives compensation for prior services, other than under a qualified
retirement plan; has not been an officer of the corporation; and does not
receive, directly or indirectly, including amounts paid to an entity that
employs the director or in which the director has at least a five percent
ownership interest, remuneration from the corporation in any capacity other than
as a director. The regulations provide that the material terms of a performance
goal will be approved by stockholders for purposes of the foregoing rules if, in
a separate vote, affirmative votes are cast by a majority of the voting shares.
By submitting the amendment for stockholder approval at the annual meeting,
we intend to comply with the requirements for obtaining a deduction for the full
amount to which we are entitled with respect to awards granted under the stock
option plan. See "Federal Income Tax Consequences," below.
14
<PAGE> 19
Performance and annual incentive awards. Our stock option plan authorizes
the compensation committee to grant multi-year and annual incentive awards based
upon achievement of pre-established performance goals, including awards that
qualify as "performance-based compensation" for purposes of Section 162(m) of
the Internal Revenue Code. The grant, exercise and/or settlement of a
performance award may be made contingent upon achievement of pre-established
performance goals. Achievement of performance goals will be measured over a
performance period of up to 10 years, as specified by the compensation
committee. The time and manner of determining performance goals for any covered
employee must comply with the requirement that payments to such employees
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code.
The amount of an incentive award is based upon the achievement of a
performance goal or goals based upon business criteria during a given
performance period specified by the compensation committee. One or more of the
following business criteria, on a consolidated basis, and/or with respect to
specified subsidiaries or business units (except with respect to the total
stockholder return and earnings per share criteria), will be used exclusively by
the compensation committee in establishing performance goals for performance and
annual incentive awards:
(1) total stockholder return;
(2) such total stockholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but not limited
to, the Standard & Poor's 500 Stock Index;
(3) total revenue, revenue growth and net income;
(4) pretax earnings;
(5) earnings before interest expense, taxes, depreciation and
amortization;
(6) pretax operating earnings after interest expense and before
bonuses, service fees and extraordinary or special items;
(7) gross and operating margins;
(8) earnings per share;
(9) return on equity;
(10) return on capital;
(11) return on investment;
(12) operating earnings;
(13) working capital; and
(14) ratio of debt to stockholders' equity.
The compensation committee may specify the amount of the incentive award as
a percentage of these business criteria, a percentage in excess of a threshold
amount or as another amount which need not bear a strictly mathematical
relationship to these business criteria. The compensation committee may modify,
amend or adjust the terms of each award and performance goal; provided, that the
compensation committee may not take any action with respect to a covered
employee that would cause any payment to such employee to fail to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The grant of an option will not be a taxable event
for the grantee or for us. A grantee will not recognize taxable income upon
exercise of an incentive stock option (except that the alternative minimum tax
may apply), and any gain realized upon a disposition of our common stock
received pursuant to the exercise of an incentive stock option will be taxed as
long-term capital gain if the grantee holds the shares for at least two years
after the date of grant and for one year after the date of exercise (the
"holding
15
<PAGE> 20
period requirement"). We will not be entitled to any business expense deduction
with respect to the exercise of an incentive stock option, except as discussed
below.
For the exercise of an option to qualify for the foregoing tax treatment,
the grantee generally must be our employee or an employee of our subsidiary from
the date the option is granted through a date within three months before the
date of exercise of the option. In the case of a grantee who is terminated due
to a disability, the three-month period for exercise following termination of
employment is extended to one year. In the case of an employee who dies, both
the time for exercising incentive stock options after termination of employment
and the holding period for common stock received pursuant to the exercise of the
option are waived.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the grantee will recognize ordinary income upon the
disposition of the common stock in an amount generally equal to the excess of
the fair market value of the common stock at the time the option was exercised
over the option exercise price (but not in excess of the gain realized on the
sale). The balance of the realized gain, if any, will be capital gain. We will
be allowed a business expense deduction to the extent the grantee recognizes
ordinary income, subject to Section 162(m) of the Internal Revenue Code. Under
Section 162(m) of the Internal Revenue Code, if the grantee is one of the
specified executive officers, then, unless specified exceptions apply, the
employer is not entitled to deduct compensation with respect to the grantee,
including compensation related to the exercise of shares options, to the extent
such compensation in the aggregate exceeds $1,000,000 for the taxable year. The
options are intended to comply with the exception to Section 162(m) for
performance-based compensation.
If a grantee exercises an incentive stock option by tendering common stock
with a fair market value equal to part or all of the option exercise price, the
exchange of shares will be treated as a nontaxable exchange, except that this
treatment would not apply if the grantee had acquired the shares being
transferred pursuant to the exercise of an incentive stock option and had not
satisfied the holding period requirement summarized above. If the exercise is
treated as a tax free exchange, the grantee would have no taxable income from
the exchange and exercise, other than minimum taxable income as discussed above,
and the tax basis of the shares exchanged would be treated as the substituted
basis for the shares received. If the grantee used shares received pursuant to
the exercise of an incentive stock option, or another statutory option, as to
which the grantee had not satisfied the applicable holding period requirement,
the exchange would be treated as a taxable disqualifying disposition of the
exchanged shares.
Non-Qualified Options. The grant of an option will not be a taxable event
for the grantee or for us. Upon exercising a non-qualified option, a grantee
will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the common stock on the date of
exercise, except that, if the grantee is subject to specified restrictions
imposed by the securities laws, the measurement date will be deferred, unless
the grantee makes a special tax election within 30 days after exercise. Upon a
subsequent sale or exchange of shares acquired pursuant to the exercise of a
non-qualified option, the grantee will have taxable gain or loss, measured by
the difference between the amount realized on the disposition and the tax basis
of the shares, generally, the amount paid for the shares plus the amount treated
as ordinary income at the time the option was exercised.
If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
If the grantee surrenders common stock in payment of part or all of the
exercise price for non-qualified options, no gain or loss will be recognized
with respect to the shares surrendered (regardless of whether the shares were
acquired pursuant to the exercise of an incentive stock option) and the grantee
will be treated as receiving an equivalent number of shares pursuant to the
exercise of the option in a nontaxable exchange. The basis of the shares
surrendered will be treated as the substituted tax basis for an equivalent
number of option shares received and the new shares will be treated as having
been held for the same holding period as had expired with respect to the
transferred shares. The difference between the aggregate option exercise price
and the aggregate fair market value of the shares received pursuant to the
exercise of the option will be taxed as
16
<PAGE> 21
ordinary income. The grantee's basis in the additional shares will be equal to
the amount included in the grantee's income.
Restricted Stock. A grantee who is awarded restricted stock will not
recognize any taxable income for federal income tax purposes in the year of the
award, provided that the shares of common stock are subject to restrictions,
that is, the restricted stock is nontransferable and subject to a substantial
risk of forfeiture. If a grantee is subject to Section 16(b) of the Securities
Exchange Act of 1934, by reason of such grantee's status as a director,
executive officer or greater than 10% stockholder of us, on the date of the
award, the common stock generally will be deemed to be subject to restrictions,
in addition to the restrictions imposed by the award, for at least six months
following the date of the award. However, the grantee may elect under Section
83(b) of the Internal Revenue Code to recognize compensation income in the year
of the award in an amount equal to the fair market value of the common stock on
the date of the award, determined without regard to the restrictions. If the
grantee does not make such a Section 83(b) election, the fair market value of
the common stock on the date the restrictions lapse will be treated as
compensation income to the grantee and will be taxable in the year the
restrictions lapse. We generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
Unrestricted Common Stock. Participants who are awarded unrestricted common
stock will be required to recognize ordinary income in an amount equal to the
fair market value of the shares on the date of the award, reduced by the amount,
if any, paid for such shares. We generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
Upon a grantee's disposition of unrestricted common stock, any gain
realized in excess of the amount reported as ordinary income will be reportable
by the grantee as a capital gain, and any loss will be reportable as a capital
loss. Capital gain or loss will be long-term if the grantee has held the shares
for at least one year. Otherwise, the capital gain or loss will be short-term.
Deferred Common Stock. There are no immediate tax consequences of receiving
an award of deferred common stock under the stock option plan. A grantee who is
awarded deferred common stock will be required to recognize ordinary income in
an amount equal to the fair market value of shares issued to such grantee at the
end of the deferral period, reduced by the amount, if any, paid for the shares.
We generally will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the grantee in the year the grantee is
taxed on the income.
Upon a grantee's disposition of deferred common stock, any gain realized in
excess of the amount reported as ordinary income will be reportable by the
grantee as a capital gain, and any loss will be reportable as a capital loss.
Capital gain or loss will be long-term if the grantee has held the shares for at
least one year. Otherwise, the capital gain or loss will be short-term.
Stock Appreciation Rights. There are no immediate tax consequences of
receiving an award of stock appreciation rights under the stock option plan.
Upon exercising a stock appreciation right, a grantee will recognize ordinary
income in an amount equal to the difference between the exercise price and the
fair market value of the common stock on the date of exercise. If we comply with
applicable reporting requirements and with the restrictions of Section 162(m) of
the Internal Revenue Code, we will be entitled to a business expense deduction
in the same amount and generally at the same time as the grantee recognizes
ordinary income.
Performance Share Awards. There are no immediate tax consequences of
receiving an award of performance shares under the stock option plan. A grantee
who is awarded performance shares will be required to recognize ordinary income
in an amount equal to the fair market value of shares issued to such grantee
pursuant to the award, reduced by the amount, if any, paid for such shares. We
generally will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the grantee in the year the grantee is
taxed on the income.
17
<PAGE> 22
Upon a grantee's disposition of performance shares, any gain realized in
excess of the amount reported as ordinary income will be reportable by the
grantee as a capital gain, and any loss will be reportable as a capital loss.
Capital gain or loss will be long-term if the grantee has held the shares for at
least one year. Otherwise, the capital gain or loss will be short-term.
Performance and Annual Incentive Awards. The award of a performance or
annual incentive award will have no immediate tax consequences for us or for the
grantee. The payment of the award is taxable to a grantee as ordinary income. If
we comply with applicable reporting requirements and with the restrictions of
Section 162(m) of the Internal Revenue Code, we will be entitled to a business
expense deduction in the same amount and generally at the same time as the
grantee recognizes ordinary income.
Dividend Equivalent Rights. Participants who receive dividend equivalent
rights will be required to recognize ordinary income in an amount distributed to
the grantee pursuant to the award. We generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
ITEM 4 -- APPROVAL OF AMENDMENT OF OUR
CERTIFICATE OF INCORPORATION
The Board has determined that it is in our best interests and the best
interests of our stockholders to amend our certificate of incorporation to
increase the number of authorized shares of our common stock from 75,000,000 to
500,000,000 shares. The number of authorized shares of preferred stock will not
change. Accordingly, the Board has approved the proposed certificate of
amendment to the certificate of incorporation, substantially in the form
attached to this proxy statement as Exhibit B, and recommended that the
amendment be submitted to the stockholders for approval. If the stockholders
approve the amendment, the Board currently intends to file the certificate of
amendment with the Secretary of State of the State of Delaware as soon as
practicable following the approval of the stockholders. If the amendment is not
approved by the stockholders, the existing certificate of incorporation will
continue in effect.
The Board believes that it is in our best interests and the best interests
of our stockholders to increase the number of authorized but unissued shares of
our common stock to have additional shares available for maximum flexibility in
meeting our future business needs as they arise and as opportunities present
themselves. Immediately prior to our initial public offering, we effected a
2.25-for-1 stock split. On February 22, 2000, we announced a 2-for-1 stock split
to be effected in the form of a stock dividend to be paid on May 8, 2000 to
stockholders of record on April 27, 2000. In the event the Board was to
determine that another stock split would be in our best interests, without the
increase in the authorized but unissued shares of our common stock, we would be
unable to effect a stock split. At this time, however, the Board has no
intention of declaring a stock split or issuing any of the additional authorized
shares of common stock.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
If the stockholders approve the proposed amendment, the Board can issue
additional shares of our common stock without a vote of the stockholders, except
as provided under the Delaware General Corporation Law or under the rules of any
securities exchange on which our shares of common stock are then listed or
quoted. Current stockholders have no prior right to purchase any new issue of
our common stock to maintain their relative ownership in us. Therefore, the
issuance of additional shares of our common stock would decrease the
proportionate equity interest of our current stockholders, could result in the
possible dilution to the interests of any person attempting to obtain control of
us and, depending on the price paid for the additional shares issued, could
result in dilution to our current stockholders.
While the proposed amendment to our certificate of incorporation could,
under some circumstances, have an anti-takeover effect, that is not our
intention. Some of the potential anti-takeover effects include:
(1)the ability of our management to frustrate efforts of stockholders
seeking to remove management;
18
<PAGE> 23
(2)limitations on stockholder participation in transactions like
mergers or tender offers, whether or not the transactions are
favored by incumbent management; or
(3)the ability of the Board to issue shares privately in transactions
that could frustrate proposed mergers, tender offers or other
transactions, even if those transactions are at a substantial
market premium and are favored by a majority of the independent
stockholders.
Our certificate of incorporation currently includes the following
anti-takeover provisions which will not be changed by approval of the amendment:
(1)CLASSIFIED BOARD: Our certificate of incorporation provides for the
division of our Board into three classes of directors, each class
serving a staggered three-year term. Our certificate of
incorporation also provides that the approval of holders of at
least two-thirds of the shares entitled to vote and the approval of
a majority of our entire Board are necessary for the alteration,
amendment or repeal of sections of our certificate of incorporation
relating to the election and classification of our Board,
limitation of director liability, indemnification and the vote
requirements for these amendments to our certificate of
incorporation.
(2)REMOVAL OF DIRECTORS; VACANCIES: Our certificate of incorporation
provides that directors may be removed only for cause. In addition,
vacancies and newly created directorships resulting from any
increase in the size of the Board may be filled only by the
affirmative vote of a majority of the directors then in office,
even if they do not constitute a quorum, or by a sole remaining
director. These provisions would prevent stockholders from removing
incumbent directors without cause and filling the resulting
vacancies with their own nominees.
(3)ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER
NOMINATIONS OF DIRECTORS: As described under "Additional
Information," there are procedures in our bylaws that must be
followed whenever a stockholder wishes to nominate a person for the
Board or bring a matter before an annual meeting of stockholders.
These advance notice provisions may have the effect of precluding a
nomination for the election of directors or precluding the conduct
of business at a particular annual meeting if the proper procedures
are not followed or may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of us, even if
this solicitation or the attempt to obtain control might be
beneficial to us and our stockholders.
(4) SPECIAL STOCKHOLDERS' MEETINGS: Our certificate of incorporation
and our bylaws provide that special meetings of stockholders,
unless otherwise prescribed by statute, may be called only by the
Board, our chairperson, chief executive officer or president or by
the holders of at least a majority of our securities outstanding
and entitled to vote generally in the election of directors.
(5) LIMITATIONS ON STOCKHOLDER ACTION BY WRITTEN CONSENT: Our
certificate of incorporation and bylaws provide that any action
required or permitted to be taken at a stockholders' meeting may
be taken without a meeting, without prior notice and without a
vote, if the action is taken by persons who would be entitled to
vote at a meeting and who hold shares having voting power equal to
not less than the minimum number of votes of each class or series
that would be necessary to authorize or take the action at a
meeting at which all shares of each class or series entitled to
vote were present and voted.
(6) SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW: We are
subject to Section 203 of the Delaware General Corporation Law
which regulates corporate acquisitions by prohibiting publicly
held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for three years
after the date of the transaction in which the person became an
interested stockholder, unless the business combination is
approved in the prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years did own, 15% or more
of the corporation's outstanding voting stock.
19
<PAGE> 24
All of the above provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be
presented for consideration at the annual meeting other than the items referred
to above. If any other matter is properly brought before the meeting for action
by stockholders, proxies in the enclosed form returned to us will be voted in
accordance with the recommendation of the Board or, in the absence of such a
recommendation, in accordance with the judgment of the proxy holder.
ADDITIONAL INFORMATION
Advance Notice Procedures. Under our bylaws, no business may be brought
before an annual meeting unless it is specified in the notice of the meeting,
which includes stockholder proposals that the Company is required to include in
its proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, or is otherwise brought before the meeting by or at the direction of the
Board or by a stockholder entitled to vote who has delivered notice to the
Company, containing the information specified in the bylaws, not less than 60 or
more than 90 days prior to the first anniversary of the preceding year's annual
meeting. These requirements are separate from and in addition to the SEC's
requirements that a stockholder must meet in order to have a stockholder
proposal included in our proxy statement.
Stockholder Proposals for the 2001 Annual Meeting. Stockholders interested
in submitting a proposal for inclusion in the proxy materials for our annual
meeting of stockholders in 2001 may do so by following the procedures prescribed
in SEC Rule l4a-8. To be eligible for inclusion, stockholder proposals must be
received by our Secretary no later than December 23, 2000.
Proxy Solicitation Costs. The proxies being solicited hereby are being
solicited by us. The cost of soliciting proxies in the enclosed form will be
borne by us. We have retained Mackenzie Partners, Inc. to aid in the
solicitation. For these services, we will pay Mackenzie Partners, Inc. a fee of
$5,000 and reimburse it for certain out-of-pocket disbursements and expenses.
Our officers and regular employees may, but without compensation other than
their regular compensation, solicit proxies by further mailing or personal
conversations, or by telephone, telex, facsimile or electronic means. We will,
upon request, reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation material to the beneficial owners of stock.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ JOHN R. LUND
JOHN R. LUND
Chief Financial Officer, Treasurer
and Secretary
April , 2000
20
<PAGE> 25
EXHIBIT A
CYSIVE, INC.
FORM OF
SECOND AMENDED AND RESTATED 1994 STOCK OPTION PLAN
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. PURPOSE..................................................................... A-1
2. DEFINITIONS................................................................. A-1
3. ADMINISTRATION OF THE PLAN.................................................. A-3
3.1. Board................................................................ A-3
3.2. Committee............................................................ A-3
3.3. Awards............................................................... A-4
3.4. No Liability......................................................... A-4
4. STOCK SUBJECT TO THE PLAN................................................... A-4
5. EFFECTIVE DATE AND TERM OF THE PLAN......................................... A-4
5.1. Effective Date....................................................... A-4
5.2. Term................................................................. A-5
6. OPTION GRANTS............................................................... A-5
6.1. Company or Subsidiary Employees; Service Providers; Other Persons.... A-5
6.2. Successive Awards.................................................... A-5
6.3. Reload Options....................................................... A-5
7. LIMITATIONS ON GRANTS....................................................... A-5
7.1. Limitation on Shares of Stock Subject to Grants and Cash Awards...... A-5
7.2. Limitations on Incentive Stock Options............................... A-5
8. AWARD AGREEMENT............................................................. A-6
9. OPTION PRICE................................................................ A-6
10. VESTING, TERM AND EXERCISE OF OPTIONS....................................... A-6
10.1. Vesting and Option Period............................................ A-6
10.2. Term................................................................. A-6
10.3. Acceleration......................................................... A-6
10.4. Termination of Employment or Other Relationship...................... A-6
10.5. Rights in the Event of Death......................................... A-7
10.6. Rights in the Event of Disability.................................... A-7
10.7. Limitations on Exercise of Option.................................... A-7
10.8. Method of Exercise................................................... A-7
10.9. Delivery of Stock Certificates....................................... A-8
11. STOCK APPRECIATION RIGHTS................................................... A-8
11.1. Right to Payment..................................................... A-8
11.2. Other Terms.......................................................... A-8
12. TRANSFERABILITY OF OPTIONS.................................................. A-8
12.1. Transferability of Options........................................... A-8
12.2. Family Transfers..................................................... A-8
13. RESTRICTED STOCK............................................................ A-9
13.1. Grant of Restricted Stock or Restricted Stock Units.................. A-9
13.2. Restrictions......................................................... A-9
13.3. Restricted Stock Certificates........................................ A-9
13.4. Rights of Holders of Restricted Stock................................ A-9
13.5. Rights of Holders of Restricted Stock Units.......................... A-9
13.6. Termination of Employment or Other Relationship...................... A-10
13.7. Rights in the Event of Death......................................... A-10
13.8. Rights in the Event of Disability.................................... A-10
13.9. Delivery of Stock and Payment Therefor............................... A-10
14. DEFERRED STOCK AWARDS....................................................... A-10
14.1. Nature of Deferred Stock Awards...................................... A-10
14.2. Election to Receive Deferred Stock Awards in Lieu of Compensation.... A-11
</TABLE>
i
<PAGE> 27
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14.3. Rights as a Stockholder.............................................. A-11
14.4. Restrictions......................................................... A-11
14.5. Termination.......................................................... A-11
15. UNRESTRICTED STOCK AWARDS................................................... A-11
15.1. Grant or Sale of Unrestricted Stock.................................. A-11
16. PERFORMANCE STOCK AWARDS.................................................... A-11
16.1. Nature of Performance Stock Awards................................... A-11
16.2. Rights as a Stockholder.............................................. A-12
16.3. Termination.......................................................... A-12
16.4. Acceleration, Waiver, Etc............................................ A-12
17. DIVIDEND EQUIVALENT RIGHTS.................................................. A-12
17.1. Dividend Equivalent Rights........................................... A-12
17.2. Interest Equivalents................................................. A-12
17.3. Termination.......................................................... A-12
18. CERTAIN PROVISIONS APPLICABLE TO AWARDS..................................... A-13
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards............... A-13
18.2. Term of Awards....................................................... A-13
18.3. Form and Timing of Payment Under Awards; Deferrals................... A-13
18.4. Performance and Annual Incentive Awards.............................. A-13
18.4.1. Performance Conditions...................................... A-13
18.4.2. Performance Awards Granted to Designated Covered
Employees................................................... A-13
18.4.3. Annual Incentive Awards Granted to Designated Covered
Employees................................................... A-15
18.4.4. Written Determinations...................................... A-15
18.4.5. Status of Section 18.4.3 and Section 18.4.2 Awards Under
Code Section 162(m)......................................... A-16
19. REPURCHASE RIGHTS........................................................... A-16
19.1. Nontransferability of Shares......................................... A-16
19.2. Repurchase Rights.................................................... A-16
19.3. Installment Payments................................................. A-17
19.4. Publicly Traded Stock................................................ A-17
19.5. Legend............................................................... A-17
20. PARACHUTE LIMITATIONS....................................................... A-17
21. REQUIREMENTS OF LAW......................................................... A-18
21.1. General.............................................................. A-18
21.2. Rule 16b-3........................................................... A-18
22. AMENDMENT AND TERMINATION OF THE PLAN....................................... A-18
23. EFFECT OF CHANGES IN CAPITALIZATION......................................... A-19
23.1. Changes in Stock..................................................... A-19
23.2. Reorganization in Which the Company is the Surviving Entity and in
Which no Change of Control Occurs.................................... A-19
23.3. Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control.................................................... A-19
23.4. Adjustments.......................................................... A-20
23.5. No Limitations on the Company........................................ A-20
24. DISCLAIMER OF RIGHTS........................................................ A-20
25. NONEXCLUSIVITY OF THE PLAN.................................................. A-20
26. WITHHOLDING TAXES........................................................... A-20
27. POOLING..................................................................... A-21
28. CAPTIONS.................................................................... A-21
29. OTHER PROVISIONS............................................................ A-21
30. NUMBER AND GENDER........................................................... A-21
31. SEVERABILITY................................................................ A-21
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
32. BLUE SKY PROVISIONS......................................................... A-21
32.1. California Provisions................................................ A-21
32.2. Florida, Virginia and Missouri Provisions............................ A-22
33. GOVERNING LAW............................................................... A-23
</TABLE>
iii
<PAGE> 29
CYSIVE, INC.
FORM OF
SECOND AMENDED AND RESTATED 1994 STOCK OPTION PLAN
(ORIGINALLY EFFECTIVE NOVEMBER 30, 1994
AS AMENDED AND RESTATED THROUGH APRIL 24, 2000)
The Board of Directors of Cysive, Inc., a Delaware corporation (the
"Company"), has determined that it is desirable and in the best interests of the
Company to amend and restate its 1994 Stock Option Plan (the "Plan") for a
second time, originally effective November 30, 1994, as amended on November 2,
1995, April 8, 1997 and July 12, 1997, and amended and restated on September 1,
1999 and amended by Amendment No. 1 thereto on September 24, 1999. The amended
and restated provisions of the "Plan" to be effective as of April 24, 2000 are
as follows:
1. PURPOSE
The purpose of the Plan is to enhance the Company's ability to attract,
retain, and compensate highly qualified officers, key employees and other
persons, and to motivate such officers, key employees and other persons to serve
the Company and its affiliates (as defined herein) and to expend maximum effort
to improve the business results and earnings of the Company, by providing to
such officers, key employees and other persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company and with other financial incentives. To this end, the Plan provides
for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, deferred stock awards, unrestricted stock awards,
performance stock awards, dividend equivalent rights, performance awards and
annual incentive awards in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is
under common control with such person within the meaning of Rule 405 of
Regulation C under the Securities Act.
2.2 "Annual Incentive Award" means a conditional right granted to a
Grantee under Section 18.4.3 hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of
a specified fiscal year.
2.3 "Award" means a grant of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Deferred Stock, Unrestricted
Stock, Performance Stock, Dividend Equivalent Rights, Performance or Annual
Incentive Award under the Plan.
2.4 "Award Agreement" means the stock option agreement, stock
appreciation rights agreement, restricted stock agreement, restricted stock
unit agreement, deferred stock award agreement, unrestricted stock award
agreement, performance stock award agreement, dividend equivalent rights
agreement, performance award agreement, annual incentive award agreement or
other written agreement between the Company and a Grantee that evidences
and sets out the terms and conditions of an Award.
2.5 "Benefit Arrangement" shall have the meaning set forth in Section
20 hereof.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended.
2.8 "Committee" means a committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two
members of the Board, none of whom shall be an officer or other salaried
employee of the Company or any affiliate of the Company.
2.9 "Company" means Cysive, Inc.
<PAGE> 30
2.10 "Covered Employee" means a Grantee who is a Covered Employee
within the meaning of Section 162(m)(3) of the Code.
2.11 "Deferred Stock" means a right, granted to a Grantee under
Section 14 hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
2.12 "Dividend Equivalent" means a right, granted to a Grantee under
Section 17 hereof, to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
2.13 "Effective Date" means September 1, 1999, the date on which the
Plan was adopted by the Board.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
2.15 "Fair Market Value" means the value of a share of Stock,
determined as follows: if on the Grant Date or other determination date the
Stock is listed on an established national or regional stock exchange, is
admitted to quotation on the NASDAQ National Market, or is publicly traded
on an established securities market, the Fair Market Value of a share of
Stock shall be the closing price of the Stock on such exchange or in such
market (the highest such closing price if there is more than one such
exchange or market) on the Grant Date or such other determination date (or
if there is no such reported closing price, the Fair Market Value shall be
the mean between the highest bid and lowest asked prices or between the
high and low sale prices on such trading day) or, if no sale of Stock is
reported for such trading day, on the next preceding day on which any sale
shall have been reported. If the Stock is not listed on such an exchange,
quoted on such system or traded on such a market, Fair Market Value shall
be the value of the Stock as determined by the Board in good faith.
2.16 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, of the Grantee, any
person sharing the Grantee's household (other than a tenant or employee), a
trust in which these persons have more than fifty percent of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent of the voting interests.
2.17 "Grant" means an award of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Deferred Stock, Unrestricted
Stock, Performance Stock, or Dividend Equivalent Rights under the Plan.
2.18 "Grant Date" means, as determined by the Board or authorized
Committee, (i) the date as of which the Board or such Committee approves an
Award, (ii) the date on which the recipient of such Award first became an
employee of or otherwise entered into a relationship with the Company or an
affiliate of the Company or (iii) such other date as may be specified by
the Board or such Committee.
2.19 "Grantee" means a person who receives or holds a grant of an
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Deferred Stock, Unrestricted Stock, Performance Stock, Performance or
Annual Incentive Awards, or Dividend Equivalent Rights under the Plan.
2.20 "Incentive Stock Option" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding provision of
any subsequently enacted tax statute, as amended from time to time.
2.21 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.22 "Option Period" means the period during which Options may be
exercised as set forth in Section 10 hereof.
2.23 "Option Price" means the purchase price for each share of Stock
subject to an Option.
A-2
<PAGE> 31
2.24 "Other Agreement" shall have the meaning set forth in Section 20
hereof.
2.25 "Performance Stock Award" means an Award granted pursuant to
Section 16.
2.26 "Plan" means this Cysive, Inc. Second Amended and Restated 1994
Stock Option Plan.
2.27 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.28 "Restricted Period" means the period during which Restricted
Stock or Restricted Stock Units are subject to restrictions or conditions
pursuant to Section 13.2 hereof.
2.29 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 13 hereof, that are subject to restrictions and to a
risk of forfeiture.
2.30 "Restricted Stock Unit" means a unit awarded to a Grantee
pursuant to Section 13 hereof, which represents a conditional right to
receive a share of Stock in the future, and which is subject to
restrictions and to a risk of forfeiture.
2.31 "Securities Act" means the Securities Act of 1933, as now in
effect or as hereafter amended.
2.32 "Service Provider" means a consultant or adviser to the Company,
a manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the
foregoing, as such persons may be designated from time to time by the Board
pursuant to Section 6 hereof.
2.33 "Stock" means the common stock, no par value, of the Company.
2.34 "Stock Appreciation Rights" or "SAR" means a right granted to a
Grantee under Section 11 hereof.
2.35 "Subsidiary" means any "subsidiary corporation" of the Company
within the meaning of Section 424(f) of the Code.
2.36 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 10.2 hereof.
2.37 "Unrestricted Stock Award" means any Award granted pursuant to
Section 15.
3. ADMINISTRATION OF THE PLAN
3.1. BOARD.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's articles of incorporation and by-laws
and applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Award or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board of Directors or an executive officer of the
Company.
3.2. COMMITTEE.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the
A-3
<PAGE> 32
Corporation and applicable law. In the event that the Plan, any Award or any
Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section.
Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate its authority under the Plan to a
member of the Board of Directors or an executive officer of the Company.
3.3. AWARDS.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Awards to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to an Award, (iv) to establish the terms and
conditions of each Award (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of an Award or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing an Award, and (vi)
to amend, modify, or supplement the terms of any outstanding Award. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Award, the Board shall have the right,
at its discretion, to require Grantees to return to the Company Awards
previously made under the Plan. Subject to the terms and conditions of the Plan,
any such new Award shall be upon such terms and conditions as are specified by
the Board at the time the new Award is made.
3.4. NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award or
Award Agreement.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 23 hereof, the number of
shares of Stock available for issuance under the Plan shall be Seventeen Million
Five Hundred Seventy Five Thousand (17,575,000) shares plus 15 percent (15%) of
any increase in the Company's outstanding shares (other than increases resulting
from the stock issuances under the Plan) of which no more than 3,100,000 shares
may be issued pursuant to awards of other than Options and no more than
17,575,000 of which may be issued pursuant to awards of Incentive Stock Options.
Stock issued or to be issued under the Plan shall be authorized but unissued
shares. If any shares covered by a Grant are not purchased or are forfeited, or
if a Grant otherwise terminates without delivery of any Stock subject thereto,
then the number of shares of Stock counted against the aggregate number of
shares available under the Plan with respect to such Grant shall, to the extent
of any such forfeiture or termination, again be available for making Grants
under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of shareholders, provided that the total votes
cast represent a majority of all shares entitled to vote. Upon approval of the
Plan by the shareholders of the Company as set forth above, all Awards made
under the Plan on or after the Effective Date shall be fully effective as if the
shareholders of the Company had approved the Plan on the Effective Date. If the
shareholders fail to approve the Plan within one year after the Effective Date,
any Awards made hereunder shall be null and void and of no effect.
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5.2. TERM.
The Plan has no termination date; however, no Incentive Stock Option may be
granted on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1. COMPANY OR SUBSIDIARY EMPLOYEES; SERVICE PROVIDERS; OTHER PERSONS.
Awards (including Grants of Incentive Stock Options subject to Section 7.2)
may be made under the Plan to: (i) any employee of, or a Service Provider to,
the Company or of any Subsidiary, including any such employee who is an officer
or director of the Company or of any Subsidiary, as the Board shall determine
and designate from time to time, and (ii) any other individual whose
participation in the Plan is determined to be in the best interests of the
Company by the Board.
6.2. SUCCESSIVE AWARDS.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
6.3. RELOAD OPTIONS.
At the discretion of the Board and subject to such restrictions, terms and
conditions as the Board may establish, Options granted under the Plan may
include a "reload" feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with Section 10.8
hereof would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Stock on the date the additional
Option is granted and with such other terms as the Board may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the original Option with an Option term equal to the remainder of the
original Option term unless the Board otherwise determines in the Option Award
Agreement for the original grant.
7. LIMITATIONS ON GRANTS
7.1. LIMITATION ON SHARES OF STOCK SUBJECT TO GRANTS AND CASH AWARDS.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, the maximum number of shares of Stock
subject to Options that can be awarded under the Plan to any person eligible for
a Grant under Section 6 hereof is One Million Eight Hundred Thousand (1,800,000)
per year. During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, the maximum number of shares
that can be awarded under the Plan, other than pursuant to an Option to any
person eligible for a Grant under Section 6 hereof is Three Hundred Thirty Seven
Thousand Five Hundred (337,500) per year. The maximum amount that may be earned
as an Annual Incentive Award or other cash Award in any fiscal year by any one
Grantee shall be $300,000 and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Grantee shall be $900,000.
7.2. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
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8. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
a Grant of Options shall specify whether such Options are intended to be
non-qualified stock options or Incentive Stock Options, and in the absence of
such specification such options shall be deemed non-qualified stock options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price for an Incentive
Stock Option shall be the aggregate Fair Market Value on the Grant Date of the
shares of Stock subject to the Option; provided, however, that in the event that
a Grantee would otherwise be ineligible to receive an Incentive Stock Option by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to ownership of more than ten percent of the Company's outstanding Stock), the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than the greater of the par value of a
share of Stock or 110 percent of the Fair Market Value of a share of Stock on
the Grant Date. In no case shall the Option Price of any Option not intended to
be an Incentive Stock Option be less than 85 percent of the Fair Market Value on
the Grant Date of the shares of stock subject to the Option.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. VESTING AND OPTION PERIOD.
Subject to Sections 10.2 and 23.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this Section 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The period during which
any Option shall be exercisable shall constitute the "Option Period" with
respect to such Option.
10.2. TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3. ACCELERATION.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in Section 5.1 hereof.
10.4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Option or portion
thereof held by such Grantee that has not vested in accordance with the
provisions of
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Section 10.1 hereof shall terminate immediately, and any Option or portion
thereof that has vested in accordance with the provisions of Section 10.1 hereof
but has not been exercised shall terminate at the close of business on the 90th
day following the Grantee's termination of employment or other relationship,
unless the Board, in its discretion, extends the period during which the Option
may be exercised (which period may not be extended beyond the original term of
the Option). Upon termination of an Option or portion thereof, the Grantee shall
have no further right to purchase shares of Stock pursuant to such Option or
portion thereof. Whether a leave of absence or leave on military or government
service shall constitute a termination of employment or other relationship for
purposes of the Plan shall be determined by the Board, which determination shall
be final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter a director of the Company.
10.5. RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by or providing services to the Company,
all Options granted to such Grantee shall fully vest on the date of death, and
the executors or Boards or legatees or distributees of such Grantee's estate
shall have the right, at any time within one year after the date of such
Grantee's death (or such longer period as the Board, in its discretion, may
determine prior to the expiration of such one-year period) and prior to
termination of the Option pursuant to Section 10.2 above, to exercise any Option
held by such Grantee at the date of such Grantee's death.
10.6. RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee terminates employment or other relationship with the Company
by reason of the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Grantee, such Grantee's Options shall continue to
vest, and shall be exercisable to the extent that they are vested, for a period
of one year after such termination of employment or service (or such longer
period as the Board, in its discretion, may determine prior to the expiration of
such one-year period), subject to earlier termination of the Option as provided
in Section 10.2 above. Whether a termination of employment or service is to be
considered by reason of "permanent and total disability" for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive.
10.7. LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in Section 23 hereof which results in termination of the Option.
10.8. METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of shares of Stock, which shares, if acquired from the Company, shall
have been held for at least six months and which shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their Fair Market Value on the date of exercise; or (iii) by a combination of
the methods described in (i) and (ii). The Board may provide, by inclusion of
appropriate language in an Award Agreement, that payment in full of the Option
Price need not accompany the written notice of exercise provided that the notice
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of exercise directs that the certificate or certificates for the shares of Stock
for which the Option is exercised be delivered to a licensed broker acceptable
to the Company as the agent for the individual exercising the Option and, at the
time such certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the Option
Price for the shares of Stock purchased pursuant to the exercise of the Option
plus the amount (if any) of federal and/or other taxes which the Company may in
its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Unless otherwise stated
in the applicable Award Agreement, an individual holding or exercising an Option
shall have none of the rights of a shareholder (for example, the right to
receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock ) until
the shares of Stock covered thereby are fully paid and issued to him. Except as
provided in Section 23 hereof, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such issuance.
10.9. DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
11. STOCK APPRECIATION RIGHTS
The Board each is authorized to grant SARs to Grantees on the following
terms and conditions:
11.1. RIGHT TO PAYMENT.
A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one share of
Stock on the date of exercise over (B) the grant price of the SAR as determined
by the Board. The grant price of an SAR shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as provided in Section
18.1.
11.2. OTHER TERMS.
The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of employment or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR. SARs may be
either freestanding or in tandem with other Awards.
12. TRANSFERABILITY OF OPTIONS
12.1. TRANSFERABILITY OF OPTIONS
Except as provided in Section 12.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
Section 12.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
12.2. FAMILY TRANSFERS.
If authorized in the applicable Award Agreement, a Grantee may transfer,
not for value, all or part of an Option which is not an Incentive Option to any
Family Member. For the purpose of this Section 12.2, a "not for value" transfer
is a transfer which is (i) a gift, (ii) a transfer under a domestic relations
order in settlement
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of marital property rights; or (iii) a transfer to an entity in which more than
fifty percent of the voting interests are owned by Family Members (or the
Grantee) in exchange for an interest in that entity. Following a transfer under
this Section 12.2, any such Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer.
Subsequent transfers of transferred Options are prohibited except to Family
Members of the original Grantee in accordance with this Section 12.2 or by will
or the laws of descent and distribution. The events of termination of the
employment or other relationship of Section 10.4 hereof shall continue to be
applied with respect to the original Grantee, following which the Option shall
be exercisable by the transferee only to the extent, and for the periods
specified in Sections 10.4, 10.5 or 10.6.
13. RESTRICTED STOCK
13.1. GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Awards under Section 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
13.2. RESTRICTIONS.
At the time a Grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
The Board may, in its sole discretion, at the time a Grant of Restricted Stock
or Restricted Stock Units is made, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance objectives, which may be applicable to
all or any portion of the Restricted Stock or Restricted Stock Units in
accordance with Sections 18.4.1 and 18.4.2. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Stock or Restricted Stock Units.
13.3. RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
legend or legends that complies with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
13.4. RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any,
received by a Grantee with respect to Restricted Stock as a result of any stock
split, stock dividend, combination of shares, or other similar transaction shall
be subject to the restrictions applicable to the original Grant.
13.5. RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a Grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive,
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upon the Company's payment of a cash dividend on its outstanding Stock, a cash
payment for each Restricted Stock Unit held equal to the per-share dividend paid
on the Stock. Such Award Agreement may also provide that such cash payment will
be deemed reinvested in additional Restricted Stock Units at a price per unit
equal to the Fair Market Value of a share of Stock on the date that such
dividend is paid.
13.6. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect
to which all applicable restrictions and conditions have not lapsed, shall
immediately be deemed forfeited, unless the Board, in its discretion, determines
otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the
Grantee shall have no further rights with respect to such Grant, including but
not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock or Restricted Stock Units.
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment, service or
other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
13.7. RIGHTS IN THE EVENT OF DEATH.
Unless otherwise provided in the Award Agreement, if a Grantee dies while
employed by the Company, all Restricted Stock or Restricted Stock Units granted
to such Grantee shall fully vest on the date of death, and the shares of Stock
represented thereby shall be deliverable in accordance with the terms of the
Plan to the executors, administrators, legatees or distributees of the Grantee's
estate.
13.8. RIGHTS IN THE EVENT OF DISABILITY.
Unless otherwise provided in the Award Agreement, if a Grantee terminates
employment or other relationship with the Company by reason of the "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code) of
such Grantee, such Grantee's Restricted Stock or Restricted Stock Units shall
continue to vest in accordance with the applicable Award Agreement for a period
of one year after such termination of employment or service (or such longer
period as the Board, in its discretion, may determine prior to the expiration of
such one-year period), subject to the earlier forfeiture of such Restricted
Stock or Restricted Stock Units in accordance with the terms of the applicable
Award Agreement. Whether a termination of employment or service is to be
considered by reason of "permanent and total disability" for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive.
13.9. DELIVERY OF STOCK AND PAYMENT THEREFOR.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, unless otherwise provided in the Award Agreement, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units
(or such other higher purchase price determined by the Board), a stock
certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee's beneficiary or estate, as the case may be.
14. DEFERRED STOCK AWARDS
14.1. NATURE OF DEFERRED STOCK AWARDS.
A Deferred Stock Award is an Award of phantom Stock units to a Grantee,
subject to restrictions and conditions as the Board may determine at the time of
grant. Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
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objectives. The grant of a Deferred Stock Award is contingent on the Grantee
executing the Deferred Stock Award Agreement. The terms and conditions of each
such agreement shall be determined by the Board, and such terms and conditions
may differ among individual Awards and Grantees. At the end of the deferral
period, the Deferred Stock Award, to the extent vested, shall be paid to the
Grantee in the form of shares of Stock.
14.2. ELECTION TO RECEIVE DEFERRED STOCK AWARDS IN LIEU OF COMPENSATION.
The Board may, in its sole discretion, permit a Grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such Grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Board and in accordance with rules and procedures established
by the Board. The Board shall have the sole right to determine whether and under
what circumstances to permit such elections and to impose such limitations and
other terms and conditions thereon as the Board deems appropriate.
14.3. RIGHTS AS A STOCKHOLDER.
During the deferral period, a Grantee shall have no rights as a
Stockholder; provided, however, that the Grantee may be credited with Dividend
Equivalent Rights with respect to the phantom Stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Board may
determine.
14.4. RESTRICTIONS.
A Deferred Stock Award may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of during the deferral period.
14.5. TERMINATION.
Except as may otherwise be provided by the Board either in the Award
Agreement or, in writing after the Award Agreement is issued, a Grantee's right
in all Deferred Stock Awards that have not vested shall automatically terminate
upon the Grantee's termination of employment or other relationship with the
Company for any reason.
15. UNRESTRICTED STOCK AWARDS
15.1. GRANT OR SALE OF UNRESTRICTED STOCK.
The Board may, in its sole discretion, grant (or sell at par value or such
other higher purchase price determined by the Board) an Unrestricted Stock Award
to any Grantee pursuant to which such Grantee may receive shares of Stock free
of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock
Awards may be granted or sold as described in the preceding sentence in respect
of past services or other valid consideration, or in lieu of any cash
compensation due to such Grantee.
16. PERFORMANCE STOCK AWARDS
16.1. NATURE OF PERFORMANCE STOCK AWARDS.
A Performance Stock Award is an Award entitling the recipient to acquire
shares of Stock upon the attainment of specified performance goals. The Board
may make Performance Stock Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine whether and to whom Performance Stock Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Stock; provided, however, that the Board
may rely on the performance goals and other standards applicable to other
performance unit plans of the Company in setting the standards for Performance
Stock Awards under the Plan.
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16.2. RIGHTS AS A STOCKHOLDER.
A Grantee receiving a Performance Stock Award shall have the rights of a
Stockholder only as to shares actually received by the Grantee under the Plan
and not with respect to shares subject to the Award but not actually received by
the Grantee. A Grantee shall be entitled to receive a Stock certificate
evidencing the acquisition of Stock under a Performance Stock Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Stock Award (or in a performance plan adopted by the Board).
16.3. TERMINATION.
Except as may otherwise be provided by the Board either in the Award
Agreement in writing after the Award Agreement is issued, a Grantee's rights in
all Performance Stock Awards shall automatically terminate upon the Grantee's
termination of employment or other relationship with the Company and its
Subsidiaries for any reason.
16.4. ACCELERATION, WAIVER, ETC.
At any time prior to the Grantee's termination of employment (or other
business relationship) by the Company and its Subsidiaries, the Board may in its
sole discretion accelerate, waive or amend any or all of the goals, restrictions
or conditions imposed under any Performance Stock Award.
17. DIVIDEND EQUIVALENT RIGHTS
17.1. DIVIDEND EQUIVALENT RIGHTS.
A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award. The terms and conditions of Dividend
Equivalent Rights shall be specified in the grant. Dividend Equivalents credited
to the holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Stock, which may thereafter
accrue additional equivalents. Any such reinvestment shall be at Fair Market
Value on the date of reinvestment. Dividend Equivalent Rights may be settled in
cash or Stock or a combination thereof, in a single installment or installments,
all determined in the sole discretion of the Board. A Dividend Equivalent Right
granted as a component of another Award may provide that such Dividend
Equivalent Right shall be settled upon exercise, settlement, or payment of, or
lapse of restrictions on, such other award, and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as such
other award. A Dividend Equivalent Right granted as a component of another Award
may also contain terms and conditions different from such other award.
17.2. INTEREST EQUIVALENTS.
Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide in the grant for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the grant.
17.3. TERMINATION.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of employment or other relationship
with the Company and its Subsidiaries for any reason.
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18. CERTAIN PROVISIONS APPLICABLE TO AWARDS
18.1 STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Subsidiary, or any business entity to be acquired by the Company or
a Subsidiary, or any other right of a Grantee to receive payment from the
Company or any Subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for the grant of the new Award. In addition, Awards may
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Subsidiary, in which the value
of Stock subject to the Award is equivalent in value to the cash compensation
(for example, Deferred Stock or Restricted Stock), or in which the exercise
price, grant price or purchase price of the Award in the nature of a right that
may be exercised is equal to the Fair Market Value of the underlying Stock minus
the value of the cash compensation surrendered (for example, Options granted
with an exercise price "discounted" by the amount of the cash compensation
surrendered).
18.2. TERM OF AWARDS.
The term of each Award shall be for such period as may be determined by the
Board; provided that in no event shall the term of any Option or SAR exceed a
period of ten years (or such shorter term as may be required in respect of an
ISO under Section 422 of the Code).
18.3. FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS.
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Subsidiary upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as the
Board shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Board or upon occurrence of one or more specified
events. Installment or deferred payments may be required by the Board or
permitted at the election of the Grantee on terms and conditions established by
the Board. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
18.4. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
18.4.1. PERFORMANCE CONDITIONS
The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 18.4.2 and 18.4.3 hereof in the case of a Performance Award or
Annual Incentive Award intended to qualify under Code Section 162(m). If and to
the extent required under Code Section 162(m), any power or authority relating
to a Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.
18.4.2. PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES
If and to the extent that the Committee determines that a Performance Award
to be granted to a Grantee who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for purposes
of Code Section 162(m), the grant, exercise and/or settlement of such
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Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 18.4.2.
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
18.4.2. Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations thereunder
including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals
being "substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Grantee or to different
Grantees.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used exclusively by the Committee in establishing performance goals for
such Performance Awards: (1) total stockholder return; (2) such total
stockholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard
& Poor's 500 Stock Index; (3) total revenue, revenue growth and net
income; (4) pretax earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) gross and operating margins; (8)
earnings per share; (9) return on equity; (10) return on capital; (11)
return on investment; (12) operating earnings; (13) working capital; and
(14) ratio of debt to stockholders' equity. One or more of the foregoing
business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered
Employee under Section 18.4.3 hereof that are intended to qualify as
"performance-based compensation" under Code Section 162(m).
(iii) Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Performance Awards. The
amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 18.4.2(ii) hereof during the
given performance period, as specified by the Committee in accordance
with Section 18.4.2(iii) hereof. The Committee may specify the amount of
the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Grantee prior
to the end of a performance period or settlement of Performance Awards.
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18.4.3. ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES
If and to the extent that the Committee determines that an Annual Incentive
Award to be granted to a Grantee who is designated by the Committee as likely to
be a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Annual Incentive Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 18.4.3.
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in 18.4.2(ii) hereof
during the given performance period, as specified by the Committee in
accordance with 18.4.2(iii) hereof. The Committee may specify the amount
of the Annual Incentive Award pool as a percentage of any such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end of
the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 18.4.3(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 18.4.2(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all cases,
the maximum Annual Incentive Award of any Grantee shall be subject to
the limitation set forth in Section 7.1 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Grantee in the Annual Incentive
Award pool, or (B) the amount of potential Annual Incentive Award
otherwise payable to each Grantee. The Committee may, in its discretion,
determine that the amount payable to any Grantee as an Annual Incentive
Award shall be reduced from the amount of his or her potential Annual
Incentive Award, including a determination to make no Award whatsoever.
The Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of termination
of employment by the Grantee prior to the end of a fiscal year or
settlement of such Annual Incentive Award.
18.4.4. WRITTEN DETERMINATIONS
All determinations by the Committee as to the establishment of performance
goals, the amount of any Performance Award pool or potential individual
Performance Awards and as to the achievement of performance goals relating to
Performance Awards under Section 18.4.2, and the amount of any Annual Incentive
Award pool or potential individual Annual Incentive Awards and the amount of
final Annual Incentive Awards under Section 18.4.3, shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). To the
extent required to comply with Code Section 162(m), the Committee may delegate
any responsibility relating to such Performance Awards or Annual Incentive
Awards.
18.4.5. STATUS OF SECTION 18.4.3 AND SECTION 18.4.2 AWARDS UNDER CODE
SECTION 162(m)
It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 18.4.2 and Section 18.4.3 hereof granted to
persons who are designated by the Committee as likely to
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be Covered Employees within the meaning of Code Section 162(m) and regulations
thereunder shall, if so designated by the Committee, constitute "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, the terms of Section 18.4.2 and Section
18.4.3, including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Grantee will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any agreement relating to such Performance Awards
or Annual Incentive Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.
19. REPURCHASE RIGHTS
19.1.NONTRANSFERABILITY OF SHARES.
Subject to Section 19.4 below, a Grantee (or such other individual who is
entitled to exercise an Option or to hold a Grant under the Plan) shall not
sell, pledge, assign, gift, transfer, or otherwise dispose of any shares of
Stock acquired pursuant to such Grant to any person or entity without first
offering such shares to the Company for purchase on the same terms and
conditions as those offered the proposed transferee. The Company may assign its
right of first refusal under this Section 19.1 in whole or in part, to (1) any
holder of stock or other securities of the Company (a "Stockholder"), (2) any
affiliate or (3) any other person or entity that the Board of Directors of the
Company determines has a sufficient relationship with or interest in the
Company. The Company shall give reasonable written notice to the Grantee of any
such assignment of its rights. The restrictions of this Section 19.1 apply to
any person to whom Stock that was originally acquired pursuant to a Grant is
sold, pledged, assigned, bequeathed, gifted, transferred or otherwise disposed
of, without regard to the number of such subsequent transferees or the manner in
which they acquire the Stock, but the restrictions of this Section 19.1 do not
apply to a transfer of Stock that occurs as a result of the death of the Grantee
or of any subsequent transferee (but shall apply to the executor, the
administrator or personal representative, the estate, and the legatees,
beneficiaries and assigns thereof).
19.2. REPURCHASE RIGHTS.
(a) Subject to Section 19.4 below, upon the termination of a Grantee's
employment or other relationship with the Company or an affiliate (whether
as an employee, a director, an independent contractor providing services to
the Company, a Subsidiary or an affiliate, or otherwise), the Company shall
have the right, for a period of up to twelve months following such
termination, to repurchase any or all of the shares acquired by the
individual pursuant to this Plan under a Grant (including shares that were
previously transferred pursuant to Sections 12.1, 12.2 or 19.1 above,
unless otherwise specified in the Award Agreement), at a price equal to the
Fair Market Value of such shares on the date of termination.
(b) Upon the exercise of an Option (or the Grantee's acquisition of
shares pursuant to a Grant other than an Option) following termination of a
Grantee's employment or other relationship with the Company or an affiliate
(whether as an employee, a director, an independent contractor providing
services to the Company, a Subsidiary or any affiliate, or otherwise), the
Company shall have the right, for a period of up to twelve months following
such exercise or other acquisition of shares, to repurchase any or all such
shares of Stock acquired by the Grantee pursuant to such Option or other
Grant at a price that is equal to the Fair Market Value of such shares
(including shares that were previously transferred pursuant to Sections
12.1, 12.2 or 19.1 above) on the date of exercise or other acquisition (or
at such other price or the Fair Market Value on such other date as shall
have been specified by the Board at the time of grant and set out in the
appropriate Award Agreement with respect to the grant).
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(c) In the event that the Company determines that it cannot or will
not exercise its rights to purchase Stock under this Section 19.2 and the
applicable Award Agreement, in whole or in part, the Company may assign its
rights, in whole or in part, to (1) any Stockholder (2) any affiliate or
(3) any other person or entity that the Board of Directors of the Company
determines has a sufficient relationship with or interest in the Company.
The Company shall give reasonable written notice to the individual of any
assignment of its rights.
19.3. INSTALLMENT PAYMENTS.
In the case of any purchase of Stock or an Option or other Grant under this
Section, the Company or its permitted assignee may pay the Grantee, transferee
of the Option or other registered owner of the Stock the purchase price in three
or fewer annual installments. Interest shall be credited on the installments at
the applicable federal rate (as determined for purposes of Section 1274 of the
Code) in effect on the date on which the purchase is made. The Company or its
permitted assignee shall pay at least one-third of the total purchase price each
year, plus interest on the unpaid balance, with the first payment being made on
or before the 60th day after the purchase.
19.4. PUBLICLY TRADED STOCK.
If the Stock is listed on an established national or regional stock
exchange or is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System, or is publicly traded in an established
securities market, the foregoing transfer restrictions of Sections 19.1 and 19.2
shall terminate as of the first date that the Stock is so listed, quoted or
publicly traded.
19.5. LEGEND.
In order to enforce the restrictions imposed upon shares of Stock under
this Plan or as provided in an Award Agreement, the Board may cause a legend or
legends to be placed on any certificate representing shares issued pursuant to
this Plan that complies with the applicable securities laws and regulations and
makes appropriate reference to the restrictions imposed under it.
20. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those
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rights, payments, or benefits under this Plan, any Other Agreements, and any
Benefit Arrangements that should be reduced or eliminated so as to avoid having
the payment or benefit to the Grantee under this Plan be deemed to be a
Parachute Payment.
21. REQUIREMENTS OF LAW
21.1. GENERAL.
The Company shall not be required to sell or issue any shares of Stock
under any Award if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to an Award
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an
Award, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Award, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
21.2. RULE 16b-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced,
the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features
of, the revised exemption or its replacement.
22. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Awards have not been
made; provided, however, that the Board shall not, without approval of the
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul an Award if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 22 or
Section 23 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Award theretofore awarded under the Plan.
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23. EFFECT OF CHANGES IN CAPITALIZATION
23.1. CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of an Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
23.2. REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND IN WHICH
NO CHANGE OF CONTROL OCCURS.
Subject to Section 23.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities, any Option theretofore granted pursuant to the Plan
shall pertain to and apply to the securities to which a holder of the number of
shares of Stock subject to such Option would have been entitled immediately
following such reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the Option Price per share so that the aggregate
Option Price thereafter shall be the same as the aggregate Option Price of the
shares remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation. Subject to any contrary language in an Award Agreement
evidencing an Award, any restrictions applicable to such Grant shall apply as
well to any replacement shares received by the Grantee as a result of the
reorganization, merger or consolidation.
23.3. REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH INVOLVES A CHANGE OF
CONTROL.
(a) Upon the dissolution or liquidation of the Company or upon a
merger, consolidation, or reorganization of the Company with one or more
other entities in which the Company is not the surviving entity, or upon a
sale of substantially all of the assets of the Company to another entity,
or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving entity) approved by
the Board that results in any person or entity (or person or entities
acting as a group or otherwise in concert, owning fifty percent (50%) or
more of the combined voting power of all classes of securities of the
Company) (other than persons who are shareholders or affiliates of the
Company at the time the Plan is approved by the Company's shareholders, (i)
all outstanding shares subject to Grants shall be deemed to have vested,
and all restrictions and conditions applicable to such shares subject to
Grants shall be deemed to have lapsed, immediately prior to the occurrence
of such event, and (ii) all Options outstanding hereunder shall become
immediately exercisable for a period of fifteen days immediately prior to
the scheduled consummation of the event. Any exercise of an Option during
such fifteen-day period shall be conditioned upon the consummation of the
event and shall be effective only immediately before the consummation of
the event. Upon consummation of any such event, the Plan and all
outstanding but unexercised Options shall terminate. The Board shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company
gives notice thereof to its shareholders.
(b) Notwithstanding the foregoing, the provisions of Section 23.3(a)
shall not apply to the extent that (A) provision is made in writing in
connection with a transaction described in Section 23.3(a) for the
continuation of the Plan or the assumption of the Awards theretofore
granted, or for the substitution for such Awards of new awards covering the
stock of a successor entity, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, in which
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event the Plan and the Awards theretofore granted shall continue in the
manner and under the terms so provided or (B) a majority of the full Board
determines that such an event shall not trigger application of the
provisions of Section 23.3(a) subject to Section 27.
23.4. ADJUSTMENTS.
Adjustments under this Section 23 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other securities
shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share.
23.5. NO LIMITATIONS ON THE COMPANY.
The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
24. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any Grantee or beneficiary under
the terms of the Plan. No Grantee shall have any of the rights of a shareholder
with respect to the shares of Stock subject to an Option except to the extent
the certificates for such shares of Stock shall have been issued upon the
exercise of the Option.
25. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
26. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to
the Company or the Subsidiary, as the case may be, any amount that the Company
or the Subsidiary may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company or the
Subsidiary, which may be withheld by the Company or the Subsidiary, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Subsidiary
to withhold shares of Stock otherwise issuable to the Grantee or (ii) by
delivering to the Company or the Subsidiary shares of Stock already owned by the
A-20
<PAGE> 49
Grantee. The shares of Stock so delivered or withheld shall have an aggregate
Fair Market Value equal to such withholding obligations. The Fair Market Value
of the shares of Stock used to satisfy such withholding obligation shall be
determined by the Company or the Subsidiary as of the date that the amount of
tax to be withheld is to be determined. A Grantee who has made an election
pursuant to this Section 26 may satisfy his or her withholding obligation only
with shares of Stock that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements.
27. POOLING
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction involving
the Company and such transaction is contingent upon pooling of interests
accounting, then that provision shall be deemed amended or revoked to the extent
required to preserve such pooling of interests. The Company may require in an
Award Agreement that a Grantee who receives an Award under the Plan shall, upon
advice from the Company, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of interests accounting is
available.
28. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
29. OTHER PROVISIONS
Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
30. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
31. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
32. BLUE SKY PROVISIONS
32.1. CALIFORNIA PROVISIONS.
Notwithstanding the foregoing sections unless and until the Company
completes its initial public offering of its common stock, any Award made under
the Plan to a Grantee who is a resident of the state of California on the Grant
Date shall be subject to the following additional terms and conditions:
A. For the purpose of Awards which are not Incentive Stock Options,
Fair Market Value shall be determined in a manner not inconsistent with
Section 260.140.50 of the California Code of Regulations or any successor
statute.
B. Awards may not be made under the Plan to Grantees ten years after
the earlier of: (i) the date the Plan was adopted by the Board or (ii) the
date the Plan was approved by the shareholders of the Company.
C. The Option Price shall be no less than 100% of the Fair Market
Value of a share of Stock on the Grant Date; provided, however, an Option
granted under the Plan to a Grantee who is a person who owns stock
possessing more than ten percent of the combined voting power of all
classes of stock of the
A-21
<PAGE> 50
Company or its parent or its Subsidiary corporations shall have an Option
Price of at least 110% of the Fair Market Value of a share of Stock on the
Grant Date.
D. Any Option granted under the Plan to a Grantee who is not an
officer, director, or consultant of the Company or its affiliates shall
become exercisable at a rate of at least twenty percent (20%) of the shares
of Stock subject to such Award per year for a period of five years from the
Grant Date; provided, that, such Option shall be subject to such reasonable
forfeiture conditions as the Board may choose to impose and which are not
inconsistent with Section 260.140.41 of the California Code of Regulations
or any successor statute.
E. The Company shall deliver to the Grantee financial statements on an
annual basis regarding the Company. The financial statements so provided
shall comply with Section 260.140.46 of the California Code of Regulations
or any successor statute, but need not comply with Section 260.613 of the
California Code of Regulations or any successor statute.
F. Any transfer of an Option granted under the Plan authorized by the
Board in an Award Agreement must comply with Section 260.140.41(d) of the
California Code of Regulations or any successor statute.
G. An Award which authorizes a Grantee to purchase Stock under the
Plan (other than a non-incentive stock option) shall not be transferable
other than by will or the laws of descent and distribution.
H. Unless a Grantee's employment is terminated for cause as defined by
applicable law, the Grantee shall have the right to exercise an Option,
prior to the termination of the Option in accordance with Section 10.2 and
only to the extent that the Grantee was entitled to exercise such Option on
the date employment terminates, as follows: (i) at least six (6) months
from the date of termination if the termination was caused by the Grantee's
death or "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code), and (ii) at least thirty (30) days from the date of
termination if termination was caused by other than death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of
the Grantee.
I. The purchase price for an Award of Restricted Stock or Restricted
Stock Units shall be at least 85% of the Fair Market Value of the Stock on
the Grant Date and at least 100% of the Fair Market Value of Stock on the
Grant Date in the case of a person who owns stock possessing more than ten
percent of the combined voting power of all classes of stock of the Company
or its parent or its Subsidiary corporations. J. At no time shall the total
number of shares of Stock issuable upon exercise of all outstanding Options
and the total number of shares provided for under all stock bonus or
similar plans of the Company exceed the applicable percentage as calculated
in accordance with the conditions and exclusions of Section 260.140.45 of
the California Code of Regulations or any successor statute.
32.2. FLORIDA, VIRGINIA AND MISSOURI PROVISIONS.
Notwithstanding Section 6.1, a resident of Florida, Virginia, or Missouri
who is not an employee of the Company or an employee of any wholly-owned
subsidiary of the Company shall not be eligible to receive an Award under the
Plan.
33. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Awards granted hereunder shall be governed by the laws of the State of
Delaware (without giving effect to the choice of law provisions thereof).
A-22
<PAGE> 51
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the 14th day of March, 2000.
/s/ JOHN R. LUND
------------------------------------
John R. Lund
Secretary
The Plan was duly approved by the stockholders of the Company on the day
of , 2000.
------------------------------------
John R. Lund
Secretary
A-23
<PAGE> 52
EXHIBIT B
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF CYSIVE, INC.
Cysive, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation, a
resolution was duly adopted proposing to amend the Certificate of Incorporation
of this Corporation, declaring said amendment to be advisable and in the best
interests of this Corporation and its stockholders, and authorizing the
appropriate officers of this Corporation to solicit the consent of the
stockholders therefor, which resolution setting forth the proposed amendment is
as follows:
"RESOLVED, that the Certificate of Incorporation of this Corporation be
amended by replacing the Article 4.1 thereof so that such Article shall be and
read as follows:
"The total number of shares of all classes of stock that the Corporation
shall have the authority to issue is 510,000,000, of which 500,000,000 of such
shares shall be Common Stock having a par value of $0.01 per share ("COMMON
STOCK"), and 10,000,000 of such shares shall be Preferred Stock, having a par
value of $0.01 per share ("PREFERRED STOCK")."
SECOND: That thereafter said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware by obtaining a majority vote of the Common Stock in favor of said
amendment in the manner set forth in Section 222 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment of the Certificate of
Incorporation has been signed by the President and the Secretary of the
Corporation this day of April, 2000.
CYSIVE, INC.
By:
------------------------------------
Nelson A. Carbonell, Jr.
Chairman of the Board,
President and Chief Executive
Officer
ATTEST:
By:
-------------------------------------------------------------
John R. Lund
Chief Financial Officer, Treasurer
and Secretary
<PAGE> 53
------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
QUICK * * * EASY * * * IMMEDIATE
------------------------------------------------
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
VOTE BY PHONE: YOU WILL BE ASKED TO ENTER A CONTROL NUMBER LOCATED IN THE BOX.
- -------------------------------------------------------------------------------
OPTION A: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS:
PRESS 1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OPTION B: IF YOU CHOOSE TO VOTE ON EACH ITEM SEPARATELY, PRESS 0. YOU WILL
HEAR THESE INSTRUCTIONS:
- -------------------------------------------------------------------------------
ITEM 1: TO VOTE FOR ALL NOMINEES, PRESS 1; TO WITHHOLD FOR
ALL NOMINEES, PRESS 9
TO WITHHOLD FOR AN INDIVIDUAL NOMINEE, PRESS 0 AND LISTEN
TO THE INSTRUCTIONS
ITEM 2: TO VOTE FOR, PRESS 1; AGAINST, PRESS 9; ABSTAIN,
PRESS 0. THE INSTRUCTIONS ARE THE SAME FOR ALL REMAINING
ITEMS TO BE VOTED.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IS HTTP://WWW.DIRECTVOTE.COM/CYSV
IF YOU VOTE BY PHONE OR INTERNET - DO NOT MAIL THE PROXY CARD
THANK YOU FOR VOTING
--------------------------
| |
| |
CALL ** TOLL FREE ** ON A TOUCH TONE TELEPHONE --------------------------
1-800-216-1307 - ANYTIME CONTROL NUMBER FOR
THERE IS NO CHARGE TO YOU FOR THIS CALL TELEPHONIC/INTERNET VOTING
<PAGE> 54
[CYSIVE LOGO]
The undersigned hereby appoints John R. Lund, with full power of substitution,
as proxy to vote all shares of Cysive, Inc. held of record by the undersigned at
the close of business on March 15, 2000 and entitled to vote at the Annual
Meeting of Stockholders of Cysive, Inc. to be held on April 24, 2000, at 10:00
a.m., local time, at the Reston Hyatt, 1800 Presidents Street, Reston, Virginia,
on the matters identified and as directed on the reverse side of this card, or,
if not so directed, in accordance with the recommendations of the Board, and
upon such other matters as may properly come before the meeting or any
adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF CYSIVE, INC.
This proxy will be voted as directed. If no
direction is given, this proxy will be voted
FOR Nelson A. Carbonell, Jr. as Director and
FOR Proposals 2, 3 and 4 and in the
discretion of the proxy for any other matters
properly presented at the meeting.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage paid envelope we've
provided or return it to Cysive, Inc., 10790
Parkridge Blvd., Suite 400, Reston, Virginia
20191.
If you vote by phone or vote using the
Internet, please do not mail this proxy card.
THANK YOU FOR VOTING
<PAGE> 55
\/ FOLD AND DETACH HERE AND READ REVERSE SIDE \/
CYSIVE, INC.
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
For multiple accounts only!! - Mark this box to discontinue annual report
mailing for this account [ ]
THE BOARD RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4
(1) ELECTION OF DIRECTOR:
(01) Nelson A. Carbonell, Jr.;
<TABLE>
<S> <C>
FOR ALL WITHHOLD ALL FOR ALL EXCEPT: To withhold authority to vote, mark "For
All Except" and write the nominee's number
[ ] [ ] [ ] on the line below.
-----------------------------------------
(2) TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP FOR AGAINST ABSTAIN
AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2000. [ ] [ ] [ ]
(3) TO APPROVE THE AMENDMENT TO CYSIVE'S AMENDED AND RESTATED 1994 STOCK OPTION FOR AGAINST ABSTAIN
PLAN TO INCREASE THE NUMBER OF SHARES OF CYSIVE'S COMMON STOCK [ ] [ ] [ ]
RESERVED FOR ISSUANCE UNDER THE PLAN.
(4) TO APPROVE THE AMENDMENT TO CYSIVE'S CERTIFICATE OF INCORPORATION FOR AGAINST ABSTAIN
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK [ ] [ ] [ ]
- ------------------------------------------------------------------------------- -----------------------------------------------
Signature Date Signature of Co-Owner (if any) Date
</TABLE>
PLEASE DATE; SIGN EXACTLY AS YOUR NAME APPEARS ON THE MAILING LABEL, UNLESS
YOUR MAILING LABEL NAME IS PRINTED INCORRECTLY.
