<PAGE> 1
LOGO
Right
Associates(R)
RIGHT MANAGEMENT CONSULTANTS, INC.
1818 Market Street
Philadelphia, Pennsylvania 19103
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 4, 1995
--------------
The annual meeting of shareholders (together with any and all adjournments
and postponements, the "Meeting") of Right Management Consultants, Inc., a
Pennsylvania corporation (the "Company"), will be held on Thursday, May 4,
1995, at 10 a.m., at the Company's headquarters, 1818 Market Street, 14th
Floor, Philadelphia, Pennsylvania, for the following purposes:
1. To elect eleven directors to hold office until the annual meeting of
shareholders in 1996 and until their respective successors are duly
elected and qualified.
2. To amend and rename the Right Management Consultants, Inc. 1993
Stock Option Plan.
3. To adopt the Directors' Stock Option Plan.
4. To ratify the selection by the Board of Directors of Arthur Andersen
LLP as the Company's independent public accountants for the current fiscal
year.
5. To transact such other business as may properly come before the
Meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on March 15, 1995
as the record date for the Meeting. Only shareholders of record at that time
are entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Company. Reference is made to the
accompanying proxy statement for further information with respect to the
business to be transacted at the Meeting.
The Board of Directors urges you to sign, date and return the enclosed
proxy promptly. You are cordially invited to attend the meeting in person.
The return of the enclosed proxy will not affect your right to vote in person
if you do attend the Meeting.
By Order of the Board of Directors
Larry A. Evans
Secretary
Philadelphia, Pennsylvania
April 5, 1995
<PAGE> 2
RIGHT MANAGEMENT CONSULTANTS, INC.
1818 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 1995
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Right Management Consultants, Inc., a
Pennsylvania corporation (the "Company"), for use at the Company's annual
meeting of shareholders (together with any and all adjournments and
postponements, the "Meeting") which is scheduled to be held at 10:00 a.m.,
Eastern Daylight Savings Time, on Thursday, May 4, 1995 at the Company's
headquarters, 1818 Market Street, 14th Floor, Philadelphia, Pennsylvania.
This proxy statement, the foregoing notice and the enclosed proxy are being
sent to shareholders on or about April 5, 1995.
The Board of Directors knows of no other matters which are likely to be
brought before the Meeting other than those specified in the Notice thereof.
If any other matters properly come before the Meeting, however, the persons
named in the enclosed proxy, or their duly constituted substitutes acting at
the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters. If the enclosed proxy is
properly executed and returned prior to voting at the Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. In the absence of instructions, executed proxies will be voted "FOR"
the eleven nominees of the Board of Directors, "FOR" the amendment and
renaming of the 1993 Stock Option Plan, "FOR" adoption of the Directors'
Stock Option Plan and "FOR" the ratification of the selection by the Board of
Arthur Andersen LLP as the Company's independent certified public accountants
for the current fiscal year.
Any proxy may be revoked at any time prior to its exercise by notifying
the Secretary of the Company in writing, by delivering a duly executed proxy
bearing a later date or by attending the Meeting and voting in person.
VOTING SECURITIES, VOTING RIGHTS AND SECURITY OWNERSHIP
VOTING SECURITIES
At the close of business on March 15, 1995, the record date fixed for the
determination of shareholders entitled to notice of and to vote at the
Meeting, there were outstanding 2,646,247 shares of the Company's common
stock, par value $0.01 per share ("Common Stock"), each of which has one vote
per share. The presence at the Meeting, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast shall constitute a quorum for the purpose
of considering the matters expected to be voted on at the meeting.
Shareholders of the Company do not have the right to cumulate votes in the
election of directors or otherwise.
PRINCIPAL SHAREHOLDERS AND SHAREHOLDINGS OF MANAGEMENT
The following table sets forth certain information as of March 15, 1995
with respect to the holdings of Common Stock of each director and nominee for
director, all directors and officers as a group and each person who was known
to the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock. Except as otherwise specified, the named beneficial
owner has sole voting and investment power. As used in this table,
"beneficially owned" means the sole or shared power to vote or dispose of, or
to direct the voting or disposition of, the shares, or the right to acquire
such power within 60 days of March 15, 1995 with respect to any shares.
<PAGE> 3
A Shareholders' Agreement is in effect among the Company and all holders
of 2% or more of the outstanding shares of Common Stock of the Company who
were shareholders on September 25, 1986 and who remain shareholders,
directors or employees of the Company whereby each party has granted the
Company, and after the Company the other parties to the Agreement, certain
rights of first refusal with respect to a proposed sale of shares to a third
party by such shareholder.
All of the persons listed below are nominees for directors of the Company,
except for Mr. Bohs, who is a "named officer" as defined under "Executive
Compensation" below.
<TABLE>
<CAPTION>
Number of Percent
Shares of
Name of Shareholder Beneficially Owned Class(1)
- - --------------------------------------------------- ------------------ ---------
<S> <C> <C>
Larry A. Evans .................................... 129,979(2) 4.9%
Frank P. Louchheim ................................ 124,478(3) 4.7%
Richard J. Pinola ................................. 102,733(4) 3.7%
Nancy N. Geffner .................................. 30,120(5) 1.1%
Joseph T. Smith ................................... 24,382(6) *
G. Lee Bohs ....................................... 20,250(7) *
Robert M. Tomasko ................................. 10,667(8) *
Joseph E. Jannotta, Jr. ........................... 5,000 *
John R. Bourbeau .................................. 6,450 *
Raymond B. Langton ................................ 0 *
Rebecca Maddox .................................... 0 *
Catherine Selleck ................................. 0 *
All Directors and Officers as a Group (16 persons) 553,264(9) 20.4%
FMR Corp. ......................................... 271,400(10) 10.3%
82 Devonshire Street
Boston, MA 02019
T. Rowe Price Associates, Inc. .................... 170,500(11) 6.4%
100 E. Pratt Street
Baltimore, MD 21202
Bidwell & Riddle Investment Advisory .............. 168,050(12) 6.4%
8400 E. Prentice Ave. Suite 1401
Englewood, CO 80111
</TABLE>
- - ------
* Less than 1%.
(1) Any securities not currently outstanding but subject to options
exercisable by such shareholder within 60 days of March 15, 1995 are
deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person.
(2) The number of shares listed as held by Mr. Evans includes (a) an
aggregate of 200 shares which are held by Mr. Evans as custodian for his
two children and 6,850 shares held by his wife, as to which he disclaims
beneficial ownership, (b) currently exercisable options to purchase an
aggregate of 1,650 shares of the Company's Common Stock and (c) 6,552
shares held in the Company's 401(k) Plan.
(3) The number of shares listed as held by Mr. Louchheim includes (a) an
aggregate of 700 shares which are held by certain of his children as
custodian for a total of seven minor grandchildren of Mr. Louchheim, as
to which he disclaims beneficial ownership and (b) currently exercisable
options to purchase an aggregate of 2,667 shares of the Company's Common
Stock.
(4) The number of shares listed as held by Mr. Pinola includes currently
exercisable options to purchase an aggregate of 93,333 shares of the
Company's Common Stock.
(5) The number of shares listed as held by Ms. Geffner includes (a) an
aggregate of 1,000 shares which are held by Ms. Geffner for the benefit
of her two children, as to which she disclaims beneficial ownership and
(b) currently exercisable options to purchase an aggregate of 5,333
shares of the Company's Common Stock.
(6) The number of shares listed as held by Mr. Smith includes currently
exercisable options to purchase an aggregate of 17,333 shares of the
Company's Common Stock.
(7) The number of shares listed as held by Mr. Bohs includes currently
exercisable options to purchase an aggregate of 13,000 shares of the
Company's Common Stock.
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<PAGE> 4
(8) The number of shares listed as held by Mr. Tomasko includes currently
exercisable options to purchase an aggregate of 5,667 shares of the
Company's Common Stock.
(9) The number of shares listed as held by the Directors and Executive
Officers of the Company as a group includes, in addition to the
currently exercisable options described above, (a) currently exercisable
options to purchase an aggregate of 54,042 shares of the Company's
Common Stock and (b) 8,380 shares held in the Company's 401(k) Plan.
(10) Based on Schedule 13G dated February 13, 1995, and filed by FMR Corp.
with the Securities and Exchange Commission (the "SEC"). In such
Schedule, FMR Corp., a Massachusetts corporation, reported having sole
voting power with respect to 5,000 shares and sole dispositive power
with respect to all such shares.
(11) Based on Schedule 13G dated February 14, 1995 and filed by T. Rowe Price
Associates, Inc. ("Price Associates") with the Securities and Exchange
Commission. In such Schedule, Price Associates reported having sole
dispositive power with respect to such shares. The Schedule 13G filed by
Price Associates states the following:
"These securities are owned by various individual and institutional
investors including T. Rowe Price Small Cap Value Fund, Inc. (which owns
163,000 shares, representing 5.7% of the shares outstanding), which
Price Associates serves as investment adviser with power to direct
investments and/or shared power to vote the securities. For purposes of
the reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities."
(12) Based on Schedule 13G dated March 14, 1995, and filed by Bidwell &
Riddle Investment Advisory with the SEC.
COMPLIANCE WITH SECTION 16 (A) OF SECURITIES EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities
of the Company. Officers, directors and greater than ten percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16 (a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1994, all
Section 16 (a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were made on a timely basis;
except reports relating to one option grant for Ms. Geffner and Mr. Szwec and
one small gift of Company stock by Mr. Louchheim.
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<PAGE> 5
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
At the Meeting, the shareholders will elect eleven directors to hold
office until the annual meeting of shareholders in 1996 and until their
respective successors are duly elected and qualified. Unless contrary
instructions are given, the shares represented by the enclosed proxy will be
voted "FOR" the election of the nominees for director shown below.
The Board of Directors believes that the nominees are willing to serve as
directors. If any nominee at the time of his or her election is unable or
unwilling to serve or is otherwise unavailable for election, and as a result
another nominee is designated, the persons named in the enclosed proxy or
their substitutes will have discretionary authority to vote or to refrain
from voting for the other nominee in accordance with their judgment. The
nominees for election as directors, together with certain information about
them, are as follows:
<TABLE>
<CAPTION>
Director
Name Since Age Positions
- - ------------------- ---------- ----- ----------------------------------------
<S> <C> <C> <C>
Frank P. Louchheim . 1980 71 Founding Chairman and Director
Richard J. Pinola . 1989 49 Chairman of the Board of Directors and Chief
Executive Officer
Joseph T. Smith ... 1991 60 President, Chief Operating Officer and
Director
Larry A. Evans .... 1980 52 Executive Vice President, Secretary and
Director
Nancy N. Geffner .. 1983 55 Executive Vice President, Managing Principal
NY office and Director
Robert M. Tomasko . 1989 46 Author, business consultant and Director
Joseph E. Jannotta . -- 67 Executive Vice President, Career Management
Consulting and Director
John R. Bourbeau .. -- 50 President of Right Associates of the Great
Lakes Region, an Affiliate of the Company
Raymond B. Langton . -- 50 President and Chief Executive Officer of SKF
North America
Rebecca Maddox .... -- 41 President and Co-founder of Capital Rose,
Inc.
Catherine Selleck . -- 61 Business consultant
</TABLE>
Mr. Louchheim was one of the founders of the Company and from November
1980 until September 1987, Mr. Louchheim served as President, Chief Executive
Officer and Chairman of the Board of Directors of the Company. From January
1992 to December 31, 1993, he served as the full-time Chairman of the Board
of Directors. Effective January 1, 1994, Mr. Louchheim was appointed Founding
Chairman and continues as a Director.
Mr. Pinola was elected as a Director by the Board in October 1989. Mr.
Pinola is a Certified Public Accountant and joined Penn Mutual Life Insurance
Company in 1969 and was appointed Senior Vice President, Insurance Business,
in 1984. He was promoted to Executive Vice President of Insurance, Pensions
and Marketing in 1987 and was elected President and Chief Operating Officer
in 1988. In September 1991, he resigned from his position of President and
Chief Operating Officer of Penn Mutual Life Insurance Company. From September
1991 until July 1992, at which time he was appointed President and Chief
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<PAGE> 6
Executive Officer of the Company, Mr. Pinola was a financial consultant to
various organizations. Effective January 1, 1994, Mr. Pinola was appointed
Chairman of the Board of Directors and continues as Chief Executive Officer. Mr.
Pinola also serves as a director on the Board of K-Tron International and Robec,
Inc., both of which are publicly held companies.
From 1963 to 1980, Mr. Smith was employed at the Penn Mutual Life
Insurance Company, where he worked in increasingly responsible positions. He
was appointed Second Vice President of Administrative Services in 1973, and
in 1976 was promoted to Vice President of Administration and Human Resources.
From 1981 to 1984, Mr. Smith worked as an independent consultant offering a
range of consulting services to businesses. He joined the Company as a Senior
Consultant in Professional Services in August 1984 and, from August 1988
until September 1992 held the position of Regional Managing Principal for the
Philadelphia, Pennsylvania Company Office. Mr. Smith was elected as a
Director in May 1991. From September 1992 through December 1993, Mr. Smith
served as the Company's Chief Operating Officer. Effective January 1, 1994,
Mr. Smith was appointed President and continues as Chief Operating Officer.
Prior to May 1978, Mr. Evans was professionally involved in the
international finance and venture capital industries. From May 1978 to
November 1980, Mr. Evans was employed as an independent outplacement
consultant for Bernard Haldane Associates, Inc., reporting to Mr. Louchheim.
Since November 1980, Mr. Evans has served as Executive Vice President,
Secretary and a Director of the Company. In January 1988, Mr. Evans was named
Regional Sales Manager of the New York City Company Office, and, in January
1990, Mr. Evans was named Regional Managing Principal of the Stamford,
Connecticut Company Office. Since September 1992, Mr. Evans has held the
position of Regional Managing Principal of the Philadelphia, Pennsylvania
Company Office.
From August 1979 to February 1981, Ms. Geffner was a Career Consultant
with Bernard Haldane Associates, Inc. Since March 1981, Ms. Geffner has
served as Regional Managing Principal of the New York City Company Office. In
June 1983, Ms. Geffner was elected to the Board of Directors and in December
1983 was named an Executive Vice President of the Company. In 1993, Ms.
Geffner took on the additional responsibilities of directing the Company's
Key Executive Service program, the consulting program for senior executives,
throughout the United States and Canada.
Mr. Tomasko was elected as a Director by the Board in February 1989. From
June 1978 to March 1987, Mr. Tomasko was employed as a management consultant
with Arthur D. Little, Inc. in Cambridge, Massachusetts and in Washington,
D.C. From March 1987 to October 1988, he was a principal and consultant to
Temple, Barker & Sloane, Inc., the general management consulting subsidiary
of the Marsh & McLennan Companies. Since November 1988, he has been a
consultant to Arthur D. Little, Inc. with respect to their world-wide
organization planning practice. He is the author of Downsizing: Reshaping the
Corporation for the Future, published by the American Management Association
in 1987 and Rethinking the Corporation, published in 1993 by the same
publisher.
Mr. Joseph E. Jannotta was appointed Director by the Board in October
1994. For 25 years Mr. Jannotta worked for Jewel Companies, Inc., a
multibillion retailing conglomerate. He had roles in sales and management
development, and he spent his last five years as Vice President of Human
Resources of Osco Drug, one of the largest U.S. drug store chains. From 1975
to 1978, Mr. Jannotta was an owner and operator of a Company that introduced
Yoplait Yogurt to the U.S., until it was sold to General Mills in 1978. In
1978, Mr. Jannotta founded Jannotta, Bray & Associates, Inc. a $17 million
career management consulting firm where he served as Chairman until the
Company acquired it in September 1994.
From 1968 to 1980, Mr. Bourbeau served as the President of Bourbeau
Automotive, an automotive aftermarket company. In 1981, Mr. Bourbeau founded
Right Associates of the Great Lakes Region where he currently serves as the
Regional Managing Principal and which has offices in Southfield, Grand
Rapids, Lansing and Midland, Michigan, as well as Toledo, OH. Mr. Bourbeau
also serves as a board member for the State of Michigan Chamber of Commerce
and is a member of the Economic Club of Detroit.
Prior to joining SKF Bearing Industries, Mr. Langton held key managerial
posts with Fram Corporation (an Allied-Signal company). At Fram Corporation,
Mr. Langton served as Vice President, Marketing and Business Development;
Vice President and General Manager, Industrial Products Group; and Vice
President - Operations. In July 1987, Mr. Langton became President of SKF
Bearing Industries, where he was responsible for the manufacture and original
equipment sales of all SKF standard bearings in the U.S. Currently, Mr.
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<PAGE> 7
Langton serves as President and Chief Executive Officer of SKF USA Inc., where
he is responsible for SKF's worldwide seal and aero engine bearing businesses.
He is a member of the Board of Directors of SKF USA Inc. and a Group Executive
of AB SKF, Gothenburg Sweden, the world's largest manufacturer of bearings and
one of the leading producers of seals. In addition to Mr. Langton's
responsibilities at SKF, he is a member of the Regional Advisory Board of First
Fidelity Bank. He holds an MBA from the Wharton School, University of
Pennsylvania.
Ms. Maddox held various senior executive positions prior to joining
National Liberty Corporation, a subsidiary of Capital Holding Corporation. At
National Liberty, Ms. Maddox served as the Senior Vice President of Marketing
and was a member of the company's Strategy and Policy Committee. In 1990, Ms.
Maddox created a new division of National Liberty called Compass Rose
Development Corporation, which provided in depth training to women business
owners in all areas of business ownership. In 1993, Ms. Maddox left Compass
Rose to form a new company, Capital Rose, which provides access to financing,
information and related products and services to women-owned businesses,
where she currently serves as President and Co-founder. Ms. Maddox is also a
Certified Public Accountant, holds an MBA from Columbia University and is the
author of Inc. Your Dreams (Viking Penguin, May 1995).
Ms. Selleck spent many years with IBM, including four years as the General
Manager of IBM's Professional Services organization. Other executive
positions with IBM included Corporate Director of Office and Decision Support
Systems, U.S. Group Director of Quality and Vice President of Field
Operations for the National Distribution Division. Subsequent to her
positions with IBM, Ms. Selleck joined Metaphor, a software and services
company, where she served as President and CEO, and was responsible for a
major restructuring of the company functions. She is now an independent
business consultant to information technology companies on a wide range of
business issues. Ms. Selleck is a member of the Occidental College Board
technOlogy of Trustees and a director of the Memorex Telex Corporation.
During 1994, the Company's Board of Directors met ten times, at eight
regularly scheduled meetings and at two special meetings. Each Director has
been elected to serve for a one-year term, extending until the next annual
meeting of shareholders.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has a Compensation and Finance Committee, Options Committee,
Audit Committee and Nominating Committee. Messrs. Calvin and Tomasko serve on
the Compensation and Finance Committee, which oversees management's
recommendations for remuneration arrangements, annual budgets and the overall
financial performance of the Company. Messrs. Hainline, Calvin and Tomasko
serve on the Audit Committee, whose principal function is to oversee the
annual audit and financial reporting of the Company. Messrs. Calvin and
Tomasko, the two outside directors on the Compensation and Finance Committee
also serve on the Options Committee which evaluates the past and expected
contributions of the key employees to the success and future results of the
Company and determines whether to authorize and approve a grant of stock
options to such employees. Messrs. Louchheim, Evans, Pinola and Ms. Geffner
serve on the Nominating Committee which recommends to the Board of Directors
nominees for election or reelection as director at the next annual meeting of
shareholders.
From January 1, 1994 to May 31, 1994, Mr. Calvin served as Chairman of the
Compensation and Finance Committee and as a non-officer member of the Audit
Committee. In connection with a reorganization of the Committees, effective
June 1, 1994, Mr. Calvin became Chairman of the Audit Committee but continued
to serve as a non-officer member of the Compensation and Finance Committee.
From January 1, 1994 to May 31, 1994, Mr. Tomasko was a non-officer member of
the Compensation and Finance Committee. In connection with the reorganization
discussed above, effective June 1, 1994, Mr. Tomasko was appointed as its
Chairman and he became a member of the Audit Committee. From January 1, 1994
to May 31, 1994, Mr. Hainline served as Chairman of the Audit Committee,
after which he remained a non-officer member thereof. For these services, Mr.
Calvin, Mr. Tomasko and Mr. Hainline received $16,583, $13,706 and $6,875,
respectively. During 1994, the Compensation and Finance Committee met eleven
times, the Audit Committee met seven times and the Options Committee met four
times. No additional fees were received by members of the Nominating or
Options Committees for service thereon.
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<PAGE> 8
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the amounts reported above, Right Human Resource
Consultants, Inc. ("RHRC"), the Affiliate operation owned by Mr. Hainline,
received approximately $760,000 in fees from the Company for services his
offices performed on behalf of the Company. RHRC paid the Company
approximately $4,739,000 in royalties and fees for services the Company's
offices performed on behalf of RHRC. The fee amounts paid and received by
RHRC were in accordance with the Company's standard fee and royalty
arrangement with all of the Company's Affiliates under the Right Associates
Affiliate Agreement.
PROPOSAL TO AMEND AND RENAME THE RIGHT MANAGEMENT CONSULTANTS, INC.
1993 STOCK OPTION PLAN (THE "PLAN")
The Board of Directors believes that attracting, motivating and retaining
key personnel of the Company is essential to the Company's growth and
success. The Board also believes that important advantages to the Company are
gained by a comprehensive compensation program which includes different types
of incentives for motivating key personnel of the Company and rewards for
outstanding service. In this regard, stock options have been and will
continue to be an important element of compensation for key personnel. The
Board believes that the implementation of a restricted stock feature into the
Plan will further enable employees to acquire or increase their proprietary
interest in the Company and, along with the stock options contemplated by the
Plan, will promote a close identity of interest between employees and the
Company's shareholders. Such awards will also provide to employees an
increased incentive to expend their maximum efforts for the success of the
Company's business.
Accordingly, on March 21, 1995, the Company's Board of Directors adopted,
subject to shareholder approval, the below-described amendments to the Plan.
Authorizing grants of both stock options and restricted stock, the amended
Plan is intended to give the Company greater flexibility to respond to
rapidly changing business, economic and regulatory requirements and
conditions. In addition, such flexibility will enhance the ability of the
Company to closely link compensation to performance and to reward key
personnel for outstanding service.
Because the proposed amendment to the Plan calls for the ability of the
Company to grant restricted stock awards in addition to stock options, the
proposal also contemplates renaming the Plan. The proposed new name for the
Plan is the 1993 Stock Incentive Plan.
1. SUMMARY OF THE PLAN
The key features of the Plan, as proposed to be amended, are as follows:
(a) Plan Name. As amended, the name of the Plan shall be the 1993
Stock Incentive Plan.
(b) Eligibility. All employees and members of the Board of Directors
of the Company, and consultants who are managing principals of one or more
franchisees of the Company are eligible to receive options under the Plan.
Only employees (including employee-directors) will be eligible to receive
restricted stock under the Plan. Members of the Committee administering
the Plan (see "Administration" below) are ineligible to receive any awards
under the Plan. Currently, there are approximately 425 persons eligible to
receive awards under the Plan.
(c) Grant. As amended, the Plan will allow the Committee (as defined
below) to grant singly, or in any combination, options and restricted
stock as the Committee, in its sole discretion, may determine. Options may
be in the form of Incentive Stock Options or Non-qualified Stock Options.
(d) Shares Covered by the Plan. The maximum number of shares of common
stock reserved for issuance under the Plan (the "Plan Shares") is 700,000,
subject to adjustment upon the occurrence of a stock dividend, stock
split, recapitalization or certain other capital adjustments. Of the
700,000 Plan Shares, 408,474 remain available for future awards. If an
option granted under the Plan expires, terminates or is cancelled without
having been fully exercised for any reason or if restricted stock granted
under the Plan is forfeited for any reason, the Plan Shares underlying the
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<PAGE> 9
unexercised portion of such option or forfeited restricted stock, as the case
may be, may again be the subject of one or more awards granted pursuant to
the Plan. No more than 300,000 of the Plan Shares will be available for award
in the form of restricted stock. Furthermore, no single Plan participant may
receive, in any calendar year, awards entitling such participant to more than
10% of the Plan Shares. Prior to the date of this proxy, option grants have
been made under the Plan to the following persons and groups (with the
underlying share amounts immediately following each person or group): Richard
J. Pinola, Chairman and Chief Executive Officer (82,400); Frank P. Louchheim,
Founding Chairman and Director (7,000); Joseph T. Smith, President and Chief
Operating Officer (47,500); G. Lee Bohs, Chief Financial Officer (26,500);
Nancy N. Geffner, Executive Vice-President (7,000); all current executive
officers as a group (227,525); all current directors who are not executive
officers as a group (11,000); Larry A. Evans (2,000); Donald L. Calvin
(2,000); Alvin N. Hainline (7,000); Robert M. Tomasko (2,000); Joseph E.
Jannotta (10,000); all other employees as a group (78,167). As of March 30,
1995, the fair market value of a share of common stock of the Company was
$17.50.
(e) Administration. The Plan will be administered by a committee
composed of two or more of the Company's Directors (the "Committee"). Each
member of the Committee shall be a "disinterested person", as such term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended and an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). Subject to the
provision of the Plan, the Committee is authorized to determine the
participants to whom, and the times at which, awards under the Plan shall
be granted. Furthermore, the Committee will have the authority to
determine the type of award to be granted and the number of shares and/or
amount of restricted stock (or any combination thereof) which will
comprise such award. The Committee is authorized to determine other terms
and conditions of awards which are not inconsistent with the Plan. Any
awards granted pursuant to the Plan will be evidenced by an award document
which will set forth the terms of the award. Interpretation and
construction by the Committee of any provision of the Plan or of any award
document is final, binding and conclusive. The Company's Board of
Directors has elected Donald L. Calvin and Robert M. Tomasko to serve as
the members of the Committee, until their resignation or removal from such
Committee.
(f) Term of the Plan. No award may be granted under the Plan after
October 27, 2002.
(g) Option Provisions.
(i) Exercise Price of Options under the Plan. Under the Plan, the
Committee determines for each option grant, the exercise price for the
shares covered thereby (the "Option Shares"). The exercise price cannot
be less than 85% of the fair market value of the Option Shares at the
time of grant, provided that, with respect to all Incentive Stock
Options, the exercise price may not be less than 100% of the fair
market value of such shares on the date that the option is granted. In
addition, if an Incentive Stock Option is granted to an optionee who
then owns, directly or by attribution under Section 424(d) of the Code,
shares of the Company's stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the
exercise price must be at least 110% of the fair market value of such
shares on the date the option is granted.
(ii) Payment. Payment for shares of common stock purchased upon
exercise of options granted under the Plan may be made in cash or by
such other mode of payment as the Committee may approve.
(iii) Restriction on Exercise. An option cannot be exercised before
the later of six months from the date of grant or the expiration of any
longer period prescribed by the Committee.
(iv) Term of Options. The right of an optionee to exercise any part
of an option granted pursuant to the Plan terminates on the first to
occur of the following:
(A) Ten years after the date of grant or expiration of the option
terms specified in the option document;
(B) If an Incentive Stock Option, five years from the date of
grant if the optionee possesses more than 10% of the combined voting
power of all classes of stock of the Company;
8
<PAGE> 10
(C) Expiration of one year from the date the optionee's
employment or service terminates with the Company as a result of death
or disability;
(D) Expiration of three months from the date the optionee's
employment or service with the Company terminates for any reason other
than death, disability or those reasons specified in subsections (F)
and (G) of this paragraph;
(E) The date set by the Committee as an accelerated expiration of
termination date (which can be no earlier than 30 days after notice of
such date) in the event of a "Change of Control" (as hereinafter
defined);
(F) The date of a finding by the Committee that the optionee (a)
became employed by a competitor without the consent of the Company or
has become engaged in competition with the Company, (b) has been
dishonest or fraudulent in any matter affecting the Company, (c)
committed an act substantially detrimental to the interest of the
Company or was terminated for reasons which constitute cause under
applicable law, or (d) disclosed secret or confidential information of
the Company; and
(G) The date set by the Board as an accelerated expiration date
in the event of the liquidation or dissolution of the Company.
In the event an optionee is found to have done anything described
in clause (F), in addition to immediate termination of the option, the
optionee will automatically forfeit all Option Shares for which the
Company has not yet delivered stock certificates, upon refund by the
Company of the option price paid for such Option Shares.
(v) Transferability of Options. Options granted under the Plan are
not transferable by the optionee except by will or the laws of descent
and distribution. However, a non-qualified stock option may be
transferred pursuant to the terms of a "qualified domestic relations
order", within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of the Employee Retirement Income Security
Act of 1974, as amended.
(vi) Amendment of the Option Documents. The Committee may amend the
provisions of option documents issued to an optionee under the Plan,
subject to limitations imposed by the Plan and to the optionee's
consent if the amendment is not favorable to the optionee. Consent of
the optionee is not required for acceleration of the expiration date of
an option granted under the Plan in the event of the dissolution or
liquidation of the Company or by the occurrence of certain other
corporate transactions.
(h) Restricted Stock. As amended, the Plan will also authorize the
Committee to grant awards of restricted stock. Such restricted stock will
consist of shares which may not be sold, transferred or otherwise disposed
of by participants and which may be forfeited in the event of termination
of employment or for other reasons as determined by the Committee prior to
the end of a restriction period established by the Committee. The minimum
restriction period that may be established by the Committee shall be six
months from the grant of restricted stock. An award of restricted stock
would entitle a participant to all of the rights of a stockholder of the
Company, including the right to vote the shares and the right to receive
any dividends thereon unless otherwise determined by the Committee. The
Committee, in its sole discretion, may permit or require the payment of
any cash dividends on restricted stock to be deferred and, if the
Committee so determines, reinvested in additional restricted stock or
other investment vehicles. An award of restricted stock may contain other
restrictions or limitations at the discretion of the Committee. Unless
otherwise provided by the Committee at the time of grant or otherwise,
upon termination of employment for any reason during a restriction period,
all shares of restricted stock still subject to restriction will be
forfeited by the participant. At the expiration of each applicable
restriction period, the Company will release to the participant
certificates for the restricted stock as to which any applicable
restrictions and conditions have been satisfied.
(i) Amendments of the Plan. The Board of Directors or its executive
committee in its discretion, may amend the Plan from time to time but may
not, without obtaining shareholder approval within twelve months before or
after such action, change the class of the individuals eligible to receive
9
<PAGE> 11
an Incentive Stock Option or increase the maximum number of Plan Shares
(other than as a result of an adjustment in the event of a stock dividend,
stock split, recapitalization or certain other capital adjustments), or make
any other change or amendment as to which shareholder approval is required in
order to satisfy the conditions set forth in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. No amendment to the Plan shall
adversely affect any outstanding option or restricted stock, without the
consent of the optionee or the holder of restricted stock, as the case may
be. Subject to the provisions of the Plan, the Board of Directors may
authorize adjustments to options granted under the Plan with respect to the
number of shares subject to the options, option price, term and any
restrictions. Such adjustments may be accomplished by cancellation of
outstanding options and subsequent granting of options. The Board of
Directors may not reduce the exercise price of outstanding options other than
for adjustments in the Company's capitalization without first obtaining
shareholder approval.
(j) Change of Control. In the event of a Change of Control, all options
previously granted become immediately exercisable, and the Committee may
take whatever other action with respect to the outstanding options and
restricted stock it deems necessary or desirable. A "Change of Control"
shall be deemed to have occurred upon the earliest to occur of the
following events:
(i) Approval by the Company shareholders (or Board, if shareholder
action is not required) of a plan or arrangement relating to the
dissolution or liquidation of the Company or a definitive agreement to
sell or otherwise dispose of substantially all of the Company's assets;
(ii) Approval of a definitive agreement to merge or consolidate the
Company with or into another corporation, other than a merger or
consolidation of the Company in which holders of the Company's common
stock immediately prior to the merger or consolidation will have at
least a majority ownership of common stock (and, if one class of common
stock is not the only class of voting securities entitled to vote on
the election of directors of the surviving corporation, a majority of
the voting power of the voting securities) of the surviving corporation
immediately after the merger or consolidation, which common stock (and,
if applicable, voting securities) is to be held in the same proportion
as such holders' ownership of common stock of the Company immediately
before the merger or consolidation;
(iii) The date any entity, person or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of
1934, as amended), other than (i) the Company or any of its
subsidiaries; (ii) any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries; and
(iii) the chief executive officer immediately prior to the
determination of whether a change of control has occurred or any group
of which such chief executive officer is a member or any entity of
which such chief executive officer has voting control of 25% or more of
the voting interest, shall have become the beneficial owner of, or
shall have obtained voting control of more than 25% of the outstanding
shares of the Company's common stock; or
(iv) The first day after the date the Plan is effective when
directors are elected such that a majority of the Board of Directors
shall have been members of the Board of Directors for less than two
years unless the nomination for election of each new director who was
not a director at the beginning of such two-year period was approved by
a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
(k) Withholding of Taxes. Whenever the Company proposes or is required
to deliver restricted stock certificates or deliver or transfer shares in
connection with the exercise of an Option, or whenever the Company is
otherwise obligated to withhold taxes in connection with an option or
restricted stock, the Company has the right to require the recipient of
Option Shares or restricted stock to remit or otherwise make available to
the Company an amount sufficient to satisfy an federal, state and/or local
withholding tax requirements prior to the delivery or transfer of an
certificate or certificates for such restricted stock or Option Shares or
to take whatever action it deems necessary to protect its interests with
respect to tax liabilities.
10
<PAGE> 12
2. FEDERAL INCOME TAX MATTERS
The following discussion is intended to point out the general principles
of current federal income tax law applicable to the options and restricted
stock.
(a) Incentive Stock Options.
Incentive Stock Options granted under the Plan are intended to qualify for
the favorable federal income tax treatment currently afforded "Incentive
Stock Options" as defined under Section 422 of the Code.
Under the Code, generally no federal income tax is imposed at the time an
Incentive Stock Option is granted or exercised. While ordinarily no income is
required to be recognized at the time an Incentive Stock Option is exercised
it should be noted that, for purposes of the alternative minimum tax imposed
by Section 55 of the Code, an Incentive Stock Option is treated as a
Non-Qualified Stock Option. Therefore, the excess of the fair market value of
the shares of stock subject to the Incentive Stock Option, determined at the
time of exercise, over the exercise price constitutes ordinary income for
purposes of the alternative minimum tax. If an optionee disposes of stock
acquired pursuant to the exercise of an Incentive Stock Option within the
same taxable year as the exercise of such option, then the amount of ordinary
income recognized for alternative minimum tax purposes is the lesser of (i)
the excess of the fair market value of the shares over the exercise price at
the time the option is exercised, or (ii) the excess of the amount realized
on the sale of such stock by the optionee over the exercise price.
Accordingly, the exercise of an Incentive Stock Option by an optionee may
cause the optionee to incur some alternative minimum tax. For purposes of the
alternative minimum tax, the basis of stock acquired through the exercise of
any Incentive Stock Option is equal to the fair market value taken into
account in determining the amount of ordinary income recognized for
alternative minimum tax purposes.
If the shares of stock acquired upon the exercise of an Incentive Stock
Option are not disposed of (i) within two years after the date of the grant
of the Incentive Stock Option, or (ii) within one year after the exercise of
the Incentive Stock Option, then, generally, any gain realized upon the sale
or other disposition of such shares will be treated as long-term capital
gain. These holding periods are not applicable to Incentive Stock Options
exercise after the death of an optionee by his estate or a person who
acquired the right to exercise such Incentive Stock Option by reason of the
death of the optionee.
The optionee's tax basis in shares of stock acquired upon the exercise of
an Incentive Stock Option is equal to the exercise price paid in the event
that the entire exercise price is paid in cash. In a case where the optionee
pays all or a portion of the exercise price in the form of shares of stock of
the Company already owned by him or her, Proposed Treasury Regulations
provide that the optionee's basis and holding period in the shares of stock
acquired upon the exercise of an Incentive Stock Option are determined as
follows:
(i) For that number of shares of stock which is equal to the number of
already-owned shares of stock that are delivered to the Company in part or
in full payment of the exercise price, the basis (and holding period) is
the same as the basis and holding period of such already-owned shares; and
(ii) For any shares of stock received in excess of the number of
already-owned shares of stock that are delivered to the Company in part or
in full payment of the exercise price (the "Additional Shares"), the basis
is equal to the amount of cash, if any, paid in connection with the
exercise of the option; and the holding period for the Additional Shares
commences on the date of exercise of the Incentive Stock Option.
In the event an optionee sells or otherwise disposes of shares of stock
acquired upon the exercise of an Incentive Stock Option before the expiration
of two years after the grant of the Incentive Stock Option or before the
expiration of one year after the exercise of the Incentive Stock Option (a
"Disqualifying Disposition"), the lesser of (i) the excess of the fair market
value of the shares of stock at the time the Incentive Stock Option was
exercised over the exercise price of such shares, or (ii) the amount realized
upon such Disqualifying Disposition over the optionee's tax basis in the
shares of stock, is treated as ordinary income at the time of the sale or
other disposition. Any gain upon a Disqualifying Disposition which is not
treated as ordinary income will be treated as long-term capital gain if the
shares of stock have been held for a period of more than one year prior to
such disposition. The Company generally is entitled to a tax deduction equal
to the amount of ordinary income, if any, recognized by the optionee upon a
Disqualifying Disposition.
11
<PAGE> 13
(b) Non-Qualified Stock Options.
Non-qualified Stock Options granted under the Plan are not intended to
qualify for the favorable federal income tax treatment accorded to Incentive
Stock Options. Generally, an optionee should not recognize any income for
federal income tax purposes at the time of the grant of a Non-qualified Stock
Option under the Plan. Upon the exercise of a Non-qualified Stock Option, the
excess of the fair market value of the shares of stock acquired pursuant to
such exercise, determined at the time of the exercise, over the exercise
price, constitutes ordinary income to the optionee. The Company generally is
entitled to a corresponding income tax deduction for the taxable year in
which the optionee is required to recognize such ordinary income.
Optionees who are subject to the short-swing profit rules of Section 16(b)
of the Securities Exchange Act of 1934, as amended ("Section 16(b)"), unless
they elect within 30 days of exercising a Non-qualified Stock Option to be
taxed as of the time of such exercise (on the basis of the fair market value
of the stock at the time of such exercise), are permitted to defer the
calculation and imposition of the tax on the gain realized from the exercise
until the earlier of (i) the expiration of such six-month period, or (ii) the
first day on which the sale of such stock at a profit will not subject such
optionee to suit under Section 16(b).
(c) Restricted Stock.
Generally, a participant who receives a grant of restricted stock will
recognize ordinary income with respect to such stock in the year or years in
which such stock ceases to be subject to forfeiture. The amount of ordinary
income recognized will be equal to the fair market value of the restricted
stock on the date it ceases to be subject to forfeiture. Notwithstanding the
general rule, a participant who receives restricted stock which is subject to
forfeiture may elect, within 30 days of the issuance of such stock, to
include in his or her taxable income for the year of issuance an amount equal
to the fair market value of such restricted stock at the date of such
issuance. If a participant makes this election, no additional ordinary income
is required to be recognized at the time the risk of forfeiture for such
restricted stock lapses. However, in the event that such participant actually
forfeits the stock, such participant may not deduct the amount previously
included in income pursuant to the election. Any dividends paid to a
participant on restricted stock prior to the lapse of the risk of forfeiture
will be treated as ordinary income to the participant in whose name such
stock is registered.
The Company will be entitled to a deduction with respect to a restricted
stock award in the year in which ordinary income is recognized by the
participant on account of such award. Such deduction will be equal to the
amount of ordinary income recognized by the participant with respect to such
restricted stock.
(d) Taxation of Capital Gains and Ordinary Income.
Currently, the maximum effective rate of tax imposed on ordinary income is
39.6% and the maximum marginal rate of tax imposed on long-term capital gains
is 28%. In addition to this difference in tax rates, the distinction between
capital gains and ordinary income is relevant for a number of reasons,
including the fact that capital losses only are deductible against capital
gains and a limited amount ($3,000) of ordinary income.
The above description is a partial summary of material provisions of the
1993 Stock Option Plan, including amendments adopted by the Board of
Directors on March 21, 1995. This summary is qualified in its entirety by
reference to the full text of the Plan, as amended and renamed, which appears
as Exhibit A attached to this proxy statement.
The affirmative vote of the holders of a majority of the Company's common
stock present at the meeting in person or by proxy is required to approve the
amendments to the Plan adopted by the Board as described above. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ADOPTION OF
THE AMENDMENTS TO, AND RENAMING OF, THE 1993 STOCK OPTION PLAN.
12
<PAGE> 14
PROPOSAL TO ADOPT THE RIGHT MANAGEMENT CONSULTANTS, INC.
DIRECTORS' STOCK OPTION PLAN (THE "DIRECTORS' PLAN")
The Directors' Plan is intended to recognize the contributions made to the
Company by the non-employee members of the Board of Directors, to provide
such persons with additional incentive to devote themselves to the future
success of the Company and its Affiliates, and to improve the ability of the
Company to attract, retain and motivate individuals who may serve as members
of the Company's Board of Directors, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of rights to acquire the Company's common stock. Accordingly,
on December 14, 1994, the Board of Directors adopted, subject to shareholder
approval, the Directors' Plan.
1. SUMMARY OF THE DIRECTORS' PLAN
The key features of the Directors' Plan are as follows:
(a) Eligibility. Members of the Board of Directors of the Company who
are not employees of the Company are eligible to receive options under the
Directors' Plan. Currently, there are three (3) persons eligible to
receive such options.
(b) Shares Covered by the Directors' Plan. The aggregate maximum number
of shares for which options may be granted pursuant to the Directors' Plan
is 100,000 shares of common stock, subject to adjustment upon the
occurrence of a stock dividend, stock split, recapitalization or certain
other capital adjustments. Shares received upon exercise of an option are
hereinafter referred to as "Director Option Shares." If an option granted
under the Directors' Plan expires or terminates without having been fully
exercised for any reason, the Director Option Shares not exercised will be
available for the grant of additional options under the Directors' Plan,
to the extent additional options thereunder may be granted. The number of
shares subject to options granted under the Directors' Plan to any
individual eligible director (a "Director Optionee") is fixed at 2,000
shares per year, subject to adjustment as described above. The options
vest over a three (3) year period so that a Director Optionee will have
the right to exercise a particular option with respect to one-third of the
Director Option Shares on each of the first three anniversaries of the
grant date. The fair market value of a share of common stock of the
Company on March 30, 1995 was $17.50.
(c) Grants. During the term of the Directors' Plan, each non-employee
director will be granted, on the last business day of each calendar year,
an option to purchase 2,000 shares of common stock of the Company, subject
to adjustment as previously described. Grants under the Directors' Plan
are intended to constitute "formula awards" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 and will be in the form of
Non-qualified Stock Options.
(d) Administration. The Plan will be administered by the Company's
Board of Directors in a manner consistent with Rule 16b-3 under the
Securities Exchange Act of 1934.
(e) Term of the Directors' Plan. The Board of Directors may terminate
the Directors' Plan at any time. Unless it has been previously terminated,
the Directors' Plan shall terminate, and no further options may be granted
under the Directors' Plan after December 31, 2004.
(f) Purchase Price of Securities Under the Directors' Plan. Under the
Directors' Plan, the exercise price for the Director Option Shares (the
"Option Price") will be the fair market value of such shares on the date
the option is granted.
(g) Amendments. The Board of Directors or its Executive Committee, in
its discretion, may amend the Directors' Plan from time to time in such
manner as it may deem advisable. The Directors' Plan may not be amended
(i) more than once every six (6) months, other than to comply with changes
in the Code or the Employee Retirement Income Security Act of 1974, as
amended or (ii) without the approval of the Company's shareholders if the
amendment would (A) materially increase the benefits accruing under the
Directors' Plan, (B) materially increase the number of securities which
may be issued under the Directors' Plan, or (C) materially modify the
requirements as to eligibility for participation in the Directors' Plan.
13
<PAGE> 15
(h) Payment. Payment for shares of common stock purchased upon exercise
of options granted under the Directors' Plan may be made in cash or by
such other mode of payment as the Compensation Committee may approve,
including shares of the Company's common stock.
(i) Term of Options. The right of a Director to exercise any part of an
option granted pursuant to the Directors' Plan terminates on the first to
occur of the following: (i) five years from and including the date of
grant; (ii) expiration of three months from and including the date the
Director Optionee's employment or service with the Company terminated for
any reason other than death or disability; (iii) the expiration of one (1)
year from and including the date the Director Optionee's service as a
member of the Board of Directors terminated by reason of death or
disability.
(j) Change of Control. In the event of a Change of Control, all options
previously granted become immediately exercisable. A "Change of Control"
shall be deemed to have occurred upon the earliest to occur of the
following events: (A) approval by the Company's shareholders (or Board, if
shareholder action is not required) of a plan or arrangement relating to
the dissolution or liquidation of the Company or a definitive agreement to
sell or otherwise dispose of substantially all of the Company's assets;
(B) approval of a definitive agreement to merge or consolidate the Company
with or into another corporation, other than a merger or consolidation of
the Company in which holders of the Company's stock immediately prior to
the merger or consolidation will have at least a majority ownership of
common stock (and, if one class of common stock is not the only class of
voting securities entitled to vote on the election of directors of the
surviving corporation, a majority of the voting power of the voting
securities) of the surviving corporation immediately after the merger or
consolidation, which common stock (and if applicable, voting securities)
is to be held in the same proportion as such holders' ownership of common
stock of the Company immediately before the merger or consolidation; (C)
the date any entity, person or group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended) other than (i) the Company or any of its subsidiaries, (ii) any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries, and (iii) the chief executive officer
of the Company immediately prior to the determination of whether a Change
of Control has occurred or any group of which such chief executive officer
is a member or any entity on which such chief executive officer has voting
control of 25% or more of the voting interests, shall have become the
beneficial owner of, or shall have obtained voting control of more than
25% of the outstanding shares of the Company's common stock; or (D) the
first day after the date the Plan is effective when directors are elected
such that a majority of the Board of Directors shall have been members of
the Board of Directors for less than two years, unless the nomination for
election of each new director who was not a director at the beginning of
such two year period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period.
(k) Transferability of Options. Options granted under the Directors'
Plan are not transferable by the Director Optionee except by will or by
the laws of descent and distribution. However, an option may be
transferred pursuant to the terms of a "qualified domestic relations
order," within the meaning of Sections 401(a)(13) and 414(p) of the Code
or within the meaning of the Employee Retirement Income Security Act of
1974, as amended. During the lifetime of the person to whom an option is
granted, such option may be exercised only by such person.
(l) Withholding of Taxes. Whenever the Company proposes or is required
to deliver or transfer shares in connection with the exercise of an option
under the Directors' Plan, the Company has the right to require the
Director Optionee to remit or otherwise make available to the Company an
amount sufficient to satisfy any federal, state and/or local withholding
tax requirements prior to the delivery or transfer of any certificate or
certificates of such shares or to take whatever action it deems necessary
to protect its interests with respect to tax liabilities in connection
with the issuance of such shares.
(m) Initial Grants. The following table sets forth the options granted
to non-employee directors under the Directors' Plan prior to the date of
this proxy statement:
14
<PAGE> 16
NEW PLAN BENEFITS
DIRECTORS' STOCK OPTION PLAN
Non-employee Number of Shares Exercise Price
Director Underlying Options Per Share
----------------------- ------------------ --------------
Donald L. Calvin ........... 2,000 $ 20.25
Alvin N. Hainline .......... 2,000 20.25
Robert M. Tomasko .......... 2,000 20.25
The above awards under the Directors' Plan are subject to shareholder
approval of the Directors' Plan. In the event that shareholders do not
approve the Directors' Plan, the initial awards of options will be
canceled. Mr. Tomasko has declined to accept his award under the
Directors' Plan.
2. FEDERAL INCOME TAX MATTERS
The following discussion is intended to point out the general principles
of current federal income tax law applicable to the options to be granted
under the Directors' Plan.
(a) Non-Qualified Stock Options.
Options granted under the Directors' Plan will be in the form of
Non-qualified Stock Options. Non-qualified Stock Options granted under
the Directors' Plan are not intended to qualify for the favorable federal
income tax treatment accorded to Incentive Stock Options. Generally, a
Director Optionee should not recognize any income for federal income tax
purposes at the time of the grant of a Non-qualified Stock Option under
the Directors' Plan. Upon the exercise of a Non-qualified Stock Option,
the excess of the fair market value of the shares of stock acquired
pursuant to such exercise, determined at the time of the exercise, over
the exercise price, constitutes ordinary income to the Director Optionee.
The Company generally is entitled to a corresponding income tax deduction
for the taxable year in which the Director Optionee is required to
recognize such ordinary income.
Director Optionees who are subject to the short-swing profit rules of
Section 16(b) of the Securities Exchange Act of 1934, as amended ("Section
16(b)"), unless they elect within 30 days of exercising a Non- qualified
Stock Option to be taxed as of the time of such exercise (on the basis of
the fair market value of the stock at the time of such exercise), are
permitted to defer the calculation and imposition of the tax on the gain
realized from the exercise until the earlier of (i) the expiration of such
six-month period, or (ii) the first day on which the sale of such stock at
a profit will not subject such Director Optionee to suit under Section
16(b).
(b) Taxation of Capital Gains and Ordinary Income.
Currently, the maximum effective rate of tax imposed on ordinary income
is 39.6% and the maximum marginal rate of tax imposed on long-term capital
gains is 28%. In addition to this difference in tax rates, the distinction
between capital gains and ordinary income is relevant for a number of
reasons, including the fact that capital losses only are deductible
against capital gains and a limited amount ($3,000) of ordinary income.
The above description is a partial summary of material provisions of
the Directors' Plan which was adopted by the Board of Directors on
December 14, 1994. It is qualified in its entirety by reference to the
full text of the Directors' Plan which appears as Exhibit B attached to
this proxy statement.
The affirmative vote of the holders of a majority of the Company's
common stock present at the meeting in person or by proxy is required to
approve the adoption of the Directors' Plan. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ADOPTION OF THE
DIRECTORS' PLAN.
15
<PAGE> 17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers for
1994 (the "named officers") and the compensation paid to each such individual
for 1992 and 1993.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------ ------------------------------------------------------
Common
Restricted Stock
Other Annual Stock Underlying LTIP All other
Name Year Salary Bonus Compensation(1) Awards ($) Options (#) Payouts Compensation(2)
---- ---- ------ ----- --------------- ------------ ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard J. Pinola 1994 $350,000 $822,500 -- -- 30,000 -- $61,805
Chairman of the 1993 175,000 489,588(3) -- -- 35,000 -- 40,318
Board and CEO 1992 75,000(4) -- -- -- 115,000 -- 7,314
Frank P. Louchheim 1994 165,000 246,750 -- -- 2,000 -- $ 3,465
Founding Chairman 1993 175,000 130,557 -- -- 2,000 -- 2,249
1992 193,000 9,180 -- -- 3,000 -- 2,182
Joseph T. Smith 1994 225,000 392,400 -- -- 20,000 -- $ 3,465
President and COO 1993 175,000 280,333 36,442 -- 15,000 -- 2,249
1992 105,000 22,045 52,645 -- 12,500 -- 2,182
Nancy N. Geffner 1994 225,000 359,497 -- -- 3,000 -- $ 3,465
EVP, Managing 1993 208,000 165,971 24,244 -- 4,000 -- 2,249
Principal NY Office 1992 147,200 16,865 -- -- -- -- 2,182
G. Lee Bohs 1994 105,000 183,095 -- -- 10,000 -- $ 3,465
Chief Financial 1993 95,000 137,478 -- -- 9,000 -- 2,249
Officer 1992 81,250 3,516 -- -- 7,500 -- 2,182
</TABLE>
- - ------
(1) Consists of sales commissions.
(2) Includes amounts paid, payable or accrued in connection with retirement.
Such amounts consist of contributions and allocations to qualified and
nonqualified defined contribution plans. Matching contributions to the
qualified defined contribution plans vest at a rate of 33 1/3 % per year
from the date of hire. Contributions to the nonqualified plans vest
according to the terms in each officer's respective Employment Agreement
(see Employment Agreements).
(3) Bonus for the period July 1, 1992 through December 31, 1993.
(4) Salary for the period July 1, 1992 through December 31, 1992.
16
<PAGE> 18
STOCK OPTION GRANTS
In 1992, the Company implemented the Stock Option Plan of 1993 pursuant to
which options to purchase Common Stock of the Company were granted to
officers and other key employees of the Company and its subsidiaries. The
table below shows option grants in 1994 to the named officers.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (2)
------------------------------------------------------------------------ -------------------------------
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise Expiration
Name Granted in 1994 (1) in FY 1994 Price Date 5% 10%
- - ----------------- -------------------- -------------------- ---------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Pinola ...... 30,000 21.7% $18.13 12/13/99 $150,228 $331,965
Mr. Louchheim ... 2,000 1.4% 18.13 12/13/99 10,015 22,131
Mr. Smith ....... 20,000 14.5% 18.13 12/13/99 100,152 221,310
Ms. Geffner ..... 3,000 2.2% 18.13 12/13/99 15,023 33,196
Mr. Bohs ........ 10,000 7.2% 18.13 12/13/99 50,076 110,655
</TABLE>
- - ------
(1) All options granted to the named officers were granted on December 14,
1994 and the first one-third become exercisable December 14, 1995. The
term of all the options is five years and the options vest on a
cumulative basis, one-third each year. All options were granted at an
exercise price equal to the then current closing price of the Company's
common stock on the NASDAQ Stock Market as of the date of grant. If a
change in control (as defined in the Stock Option Plan) were to occur
before the expiration date, these options would become exercisable
immediately.
(2) The potential realizable values are based on an assumption that the stock
price of the Company's common stock will appreciate at the annual rate
shown (compounded annually) from the date of grant until the end of the
option term. These values do not take into account amounts required to be
paid as income taxes under the Code and any applicable state laws or
option provisions providing for termination of an option following
termination of employment, nontransferability or vesting over a three
year period. These amounts are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth of the shares of the
Company's common stock.
OPTION EXERCISES AND YEAR-END OPTION VALUE
The table below shows information concerning the exercise of stock options
during 1994 by each of the named officers and the year-end value of the
in-the-money unexercised options. The information below represents options
granted from the Company's Stock Option Plan of 1986 and the Company's Stock
Option Plan of 1993.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)(1)
-------------------------------- --------------------------------
Shares Acq'd. on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- - ----------------- ---------------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Pinola ...... 1,250 18,438 92,083 92,917 $1,249,462 $768,263
Mr. Louchheim ... 0 0 2,667 4,333 24,667 21,333
Mr. Smith ....... 0 0 16,333 35,167 129,458 140,167
Ms. Geffner ..... 4,500 79,875 4,333 6,667 22,458 24,417
Mr. Bohs ........ 0 0 11,750 19,750 88,156 83,344
</TABLE>
- - ------
(1) Based on the closing price ($20.25) on the NASDAQ Stock Market on
December 30, 1994.
17
<PAGE> 19
EMPLOYMENT AGREEMENTS
Effective July 1, 1992, the Company's Board of Directors elected Mr.
Pinola as the Company's President and Chief Executive Officer and the Company
entered into an Employment Agreement with him having an initial term expiring
December 31, 1995 and initially providing for a base annual salary of
$150,000 through September 30, 1993, $250,000 from October 1, 1993 through
December 31, 1994 and $300,000 for 1995. In connection with his promotion to
Chairman of the Board effective January 1, 1994, Mr. Pinola's compensation
was increased to provide an annual base salary of $350,000 for 1994. Pursuant
to the Agreement, the Company will pay to Mr. Pinola annually as incentive
compensation a cash bonus based upon the Company's financial performance for
that year in such amounts, if any, as are determined by the Company's Board
or Compensation and Finance Committee. The 1993 bonus determination relates
to the 18 month period ending December 31, 1993. Mr. Pinola is also entitled
to participate in and receive the benefits of any profit sharing, retirement
plans and insurance programs made available to other similarly situated
employees of the Company. Under his Agreement, Mr. Pinola will participate in
a deferred compensation plan to which 5% of his compensation, including base
salary and bonuses, will be credited annually. Mr. Pinola is vested in his
deferred compensation account balance at the rate of 10% a year, beginning
with his attainment of age 47. The account balance is payable as a life
annuity (based on specified mortality tables) in equal monthly installments
with interest on the unpaid balance upon his termination of service with the
Company (except for death or if he is discharged for cause) on or after age
62, subject to earlier payment in the event of death or disability prior to
termination of service, termination by the Company without cause and under
certain circumstances relating to a change in control of the Company. In the
event there is a change in control of the Company, as defined in the
Agreement, the Agreement provides that the Company shall establish a trust
and shall, from time to time, transfer into such trust sufficient assets to
meet the Company's obligation to pay the deferred compensation benefits to
Mr. Pinola and his beneficiaries. Also, in the event there is a termination
of Mr. Pinola's employment within two years after the change in control, he
shall be entitled to begin receiving his deferred compensation benefits as if
he had reached his normal retirement date prior to such termination.
Mr. Pinola's Employment Agreement is renewable for successive one year
terms unless either party gives the other party notice of non-renewal at
least 120 days prior to the expiration of the then current term. Mr. Pinola
may terminate the Agreement upon 120 days prior written notice to the
Company. In the event that Mr. Pinola's employment is terminated by the
Company without cause, his employment is not renewed at the end of the
initial term or any renewal term of his Employment Agreement, or if Mr.
Pinola terminates his employment as a result of various reasons specified in
the Agreement, he will be entitled to severance compensation equal to the
greater of $300,000 or his base salary and cash bonus paid during the 12
month period immediately preceding the termination. This amount will be
payable over the longer of the remaining term of the Agreement or 12 months
from the date of termination. Upon certain changes in control (as defined in
the Agreement) of the Company, Mr. Pinola may, upon written notice given to
the Company within 60 days thereafter, elect to either (a) continue his
employment with the Company for a period equal to the greater of the then
current term or a period which expires two years after the date of the change
in control or (b) terminate his employment and receive severance
compensation. If Mr. Pinola elects to continue to be employed by the Company,
the annual compensation payable to him shall be not less than the greater of
the total amount of the base salary and cash bonus paid to him during the 12
months immediately preceding the change in control or $300,000.
Effective January 1, 1992, the Company and Mr. Louchheim entered into an
amendment and restatement of his Employment Agreement. The restated Agreement
provided that Mr. Louchheim would serve as the Chairman of the Board of
Directors of the Company. Effective January 1, 1994, Mr. Louchheim's
responsibilities changed when he resigned as Chairman of the Board of
Directors, became Founding Chairman and continued his service as a Director.
All other terms of his agreement remain the same. Mr. Louchheim received an
annual base salary of $165,000 in 1994 and will receive $153,000 in 1995 and,
(if his Agreement is renewed beyond 1995) $163,000 in 1996. In addition, Mr.
Louchheim is entitled to a cash bonus equal to the following percentages of
the annual cash bonus, if any, payable to the Company's chief executive
officer: 100% in 1992, 40% in 1993, 30% in 1994 and, if applicable, 20% in
1995 and each year thereafter. Under the Agreement, he is entitled to
participate in and receive the benefits of any profit sharing or retirement
plans and any insurance programs made available to other similarly situated
employees of the Company. In the event that his employment is terminated by
the Company other than for cause, Mr. Louchheim will be entitled to severance
18
<PAGE> 20
compensation equal to the base salary and incentive compensation paid to him
during the 12 month period immediately preceding such termination. This amount
will be payable over the longer of the remaining term of the Agreement or 12
months from the date of termination. The term of the Agreement expires December
31, 1994, but it provides for annual renewals thereafter unless either party
gives the other party notice of termination at least 120 days prior to the end
of the then current term.
Concurrently with the execution of his amended and restated Employment
Agreement, the Company and Mr. Louchheim also entered into an agreement
modifying Mr. Louchheim's Supplemental Executive Retirement Plan with the
Company. The Plan, as modified, provides that upon Mr. Louchheim's retirement
from the Company he shall be paid each year 50% of the average of his total
annual compensation (base salary plus bonus payments) with respect to the
four consecutive years in which such four year average compensation is the
greatest during his employment with the Company. One-twelfth of such amount
(after deducting therefrom his social security payments and the amount of his
401(k) plan account with the Company attributable to the Company's matching
contributions that are payable to him in a given year, based on certain
assumptions) shall be paid to him monthly following retirement. The estimated
annual benefit to be paid to Mr. Louchheim upon retirement is $144,000, after
the deductions described above. In the event of Mr. Louchheim's death after
retirement, the Company shall pay a survivor's benefit to his spouse in
monthly installments equal to one-half of the retirement benefit he was
entitled to receive on the date of his death, and in the event of his death
prior to retirement, the Company will pay a monthly benefit to his spouse in
the same amount. In each case, the payment shall continue until the spouse's
death. In the event that there is a change of control of the Company (as
defined in the modified Plan) and Mr. Louchheim retires within two years
thereafter, the Company is required to pay to Mr. Louchheim within 30 days
after his retirement an amount equal to the net present value of the total
benefits he would have received under the Plan, with the calculation of such
amount based on specified mortality tables.
In September 1986, the Company and Ms. Geffner entered into a written
employment agreement which had terms which originally expired in September
1990 subject to annual renewal thereafter. This employment agreement provides
for base salaries and includes a bonus program, each of which is subject to
annual changes at the Company's sole discretion. This employment agreement
was renewed for 1995.
Ms. Geffner's employment agreement also provides for payments upon death
or disability. In the case of death, the employee's estate will receive
payments under the agreement for a period of three months after the end of
the week in which such employee died. In the case of disability, the Company
will continue the payment of the employee's total compensation at its then
current rate for a period of three months following the date of the onset of
the disability. The Company will have no obligation to make payments relating
to any period thereafter and may terminate her agreement without further
obligation if the disability continues for six consecutive months.
In addition, the agreement with Ms. Geffner provides that if the Company
elects to terminate the agreement at the end of any term or wrongfully
terminates the agreement prior to the end of such term, the Company shall pay
Ms. Geffner, in 12 equal monthly installments, the lesser of the amount
payable as total compensation plus all bonuses payable during the 12-month
period immediately preceding termination, or $150,000. The agreement also
provides that if the Company is involved in a merger in which it is not the
surviving corporation, sells all or substantially all of the Company's assets
or if 51% or more of the outstanding stock of the Company is sold in a single
transaction or group of related transactions, then the employee would have
the option to extend her Employment Agreement for an additional two years,
but in no event would the employee receive more than $150,000 per year in
total compensation during such extended term.
COMPENSATION OF DIRECTORS
For 1994, the Company paid all directors who were not Company officers or
employees $15,000 per year as a director's fee, plus $750 for each Board
meeting attended and $750 for each Committee meeting attended plus reasonable
out-of-pocket expenses for attending such meetings. In addition, the Company
also paid the Audit Committee and the Compensation and Finance Committee
Chairmen and the non-employee Committee members $2,500 and $1,000
respectively, per year. In addition to the amounts described above, Mr.
Tomasko received approximately $10,000 for consulting services provided to,
and speeches made for, the Company.
19
<PAGE> 21
COMPENSATION AND FINANCE COMMITTEE AND OPTIONS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Finance Committee and the Options Committee of the
Board of Directors of the Company have jointly furnished the following report
on executive compensation.
The Compensation and Finance Committee of the Board of Directors (the
"Compensation Committee") is comprised of non-employee directors of the
Company listed in this report. The Compensation Committee is responsible for
overseeing management's recommendations on the Company's executive
compensation principles, policies, and programs. In addition, the
Compensation Committee recommends to the Board of Directors, on an annual
basis, the compensation to be paid to the Chief Executive Officer ("CEO").
During 1994, in an effort to further enhance the Company's executive
compensation programs, the Compensation Committee employed an outside
compensation consultant to assess the level and effectiveness of the existing
compensation programs and to advise the Compensation Committee on executive
pay policy and recommendations for change. The results of their efforts,
together with those of the Options Committee, which include, among other
things, the proposals on the Directors' Stock Option Plan and the amendment
of the 1993 Stock Option Plan, are presented in more detail in the preceding
pages.
COMPENSATION PHILOSOPHY
This report reflects the Company's compensation philosophy as adopted by
the Compensation Committee and endorsed by the Board of Directors. The
Compensation Committee believes that the executives of the Company recognize
the need to continually improve the Company's financial performance. The
intention of the compensation programs, which the Compensation Committee has
implemented and administered, is to achieve this management focus.
The Company's compensation programs have been designed to provide its
executives and managing principals with competitive market salaries and the
opportunity to earn incentive compensation related to performance
expectations identified by the Company's management. The objectives of the
Company's executive compensation program, as developed by the Compensation
Committee and subject to periodic review, are to:
Support and reinforce the Company's business strategy and link pay
to shareholder value. Align compensation with the goals and key
performance measures of the business. Attract and retain high-
quality executives and managing principals. Reward such employees
for superior performance, as measured by financial results and key
strategic achievements.
A significant portion of executive pay is variable and tied to improvement
in earnings per share ("EPS") and, in the case of managing principals,
improvement in regional operating income. The variable, annual incentive
program is uncapped and compensation thereunder reflects management actions
that contribute toward creating shareholder value through increasing the
Company's EPS.
PAY POSITIONING
The Compensation Committee's executive compensation program is constructed
to provide an opportunity for compensation, through the three components
described below, to vary with performance relative to a peer group of
professional services companies. Competitive levels of pay for purposes of
compensation comparison are provided by compensation consultants and
published surveys. The primary companies used in the compensation comparison
are those in the peer group selected by the outside compensation consultant
retained by the Company. Privately-held professional services companies of
similar size also are considered in determining pay level opportunity.
PAY MIX AND MEASUREMENT FOR EXECUTIVES
The compensation of executives currently includes base salary, annual
incentive compensation, and long-term incentive compensation in the form of
stock option awards. The Compensation Committee considers the total
compensation of each of the named officers and the other executives in
20
<PAGE> 22
reviewing each element of compensation. In general, the proportion provided by
an executive's incentive compensation increases with the executive's level of
responsibility. Executives also receive various benefits, including life,
medical, and disability insurance, similar to those generally available to all
employees of the Company.
BASE SALARIES
The Compensation Committee, based on Company management recommendations,
seeks to set base salaries for the Company's executives at levels that are
competitive for executives with comparable roles and responsibilities within
the peer group and other comparison companies as described above. The bases
for inclusion in the peer group are discussed in the Common Stock Performance
section of this proxy statement. The Company maintains an executive salary
administration program which uses ongoing internal and periodic external
comparisons to set salary ranges at or around the upper one-third level of
the comparison companies.
Individual executive salaries are reviewed annually. Annual salary
adjustments are determined by a subjective evaluation of: (1) the position's
responsibilities, (2) competitive market rates, (3) strategic importance of
the position, and (4) individual performance and contributions. The annual
salary for executives (other than the CEO, whose salary is evaluated by the
Compensation Committee with the Board of Directors) is approved by the
Compensation Committee following a review with the CEO and Chief Operating
Officer. Salary increases granted in 1994 to the executive group resulted in
actual salaries that are consistent with the Company's compensation
philosophy as described above.
ANNUAL INCENTIVE COMPENSATION
The Compensation Committee administers an annual cash incentive plan for
executives. The annual cash incentive plan reflects the Company's belief that
a primary contribution executives make to shareholder returns comes from
maximizing earnings. The annual incentive payments for corporate executives
provide a reward the achievement of an annual corporate financial objective
(expressed as an EPS goal) that reflect targeted annual growth. Individual
award targets are established at the beginning of the year and are based on
an individual's position and contribution to the Company results.
In addition to the incentive to achieve the overall Company EPS goal as
applicable, certain executives and managing principals who are responsible
for individual territory performance are rewarded based on the achievement of
regional sales and earnings targets. No awards are made unless a threshold
EPS or regional earnings level, as applicable, is achieved that generally
reflects growth over the prior year's earnings.
The annual cash incentive plan was designed to reward for growth in
earnings. Targeted incentive amounts are earned only if the EPS and
applicable regional earnings objectives, which the Compensation Committee
believes are aligned with shareholder interests, are met. Increased awards
are made for achievement that is significantly above the objectives. Based on
actual 1994 results, the Company significantly exceeded the 1994 EPS target
which resulted in corporate executive officers receiving an incentive award
greater than their target amount.
LONG-TERM INCENTIVES ("LTI")
The Company provides executives with a stock option plan to retain and
motivate them to improve long-term stock values. Annual grants of stock
options are made to executives based on a market analysis of LTI levels
within the peer group of companies. The annual grants are intended to reflect
the individual's respective responsibilities, as well as the actual and
expected contribution of the individual to the Company's long-term success.
Stock options are granted only if the Company achieves its annual EPS target
and, in the case of managing principals, only if the region achieves its
earnings target. The size of these grants is contingent on the extent to
which the region and/or the Company exceeds its target but is subject to a
specified limit. Grants vest in equal amounts over a three year period and
are exercisable over a five year period. In 1994, the Options Committee
reviewed and established all option grants.
The Company exceeded its EPS target for 1994. The average number of shares
underlying options granted to executive officers, excluding the CEO, in 1994
was 7,000.
21
<PAGE> 23
RETIREMENT COMPENSATION
The intent of the Compensation Committee's retirement compensation policy
is to provide employees and executives with certain tax-qualified retirement
benefits. The Company maintains a defined contribution savings plan under
Section 401(k) of the Internal Revenue Code available to substantially all
employees, including executives. Under this plan, the Company contributes 25%
of the participating employee's contribution. Employee contributions are
generally limited to 10% of their compensation, subject to Internal Revenue
Code limitations. The Company also provides discretionary contributions if
the Company exceeds the EPS target. Such discretionary contributions were
made for 1994 as actual results significantly exceeded the EPS target.
In addition, the Company provides a nonqualified deferred compensation
plan for eligible employees to help them save for retirement. Under the plan,
participants may defer payment of up to 10% of their annual cash
compensation, subject to limitations and reduced by amounts contributed to
the Company's 401(k) plan.
SECTION 162 (M)
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million in a fiscal
year to the corporation's chief executive officer or to any of the four other
most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements
are met. Additionally, under Regulation 1.162-27(h), compensation pursuant to
a written employment contract which was in effect prior to February 17, 1993
is excluded from the deduction limits.
Only Mr. Pinola's compensation was in excess of $1 million for the fiscal
year ended December 31, 1994. However, because his salary and bonus
compensation (accounting for the majority of his compensation) during 1994
was pursuant to an employment agreement effective July 1, 1992, the deduction
limitations under Section 162(m) will not be applicable to Mr. Pinola's
compensation for 1994.
Income attributable to certain options previously granted under the 1993
Stock Option Plan will have to be taken into account as employee remuneration
for purposes of the Section 162(m) limitations. However, options granted
under the 1993 Stock Incentive Plan (if such plan is approved by the
shareholders of the Company) will comply with Section 162(m) and,
accordingly, any income attributable thereto will not be counted for purposes
of determining compliance with the $1 million limit in Section 162(m).
The regulations under Section 162(m) are in proposed form and may be
changed during 1995. The Compensation Committee intends to revisit the
Company's compliance with Section 162(m) on an annual basis and will defer
any final policy decisions with respect thereto at least until final
regulations are adopted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The principles guiding compensation for the Company's CEO are
substantially the same as those for other executives as previously described
in this report. During 1994, the Company's most highly compensated officer
was Richard J. Pinola, Chairman of the Board and CEO. Mr. Pinola's
performance was reviewed by the Compensation Committee which made
recommendations to the Board regarding his annual cash compensation (salary
plus annual incentive) and approved his long-term incentive (stock options)
award.
The CEO's Employment Agreement sets his base salary at $150,000 for the
period July 1, 1992 through September 30, 1993; $250,000 from October 1, 1993
through December 31, 1994; and $300,000 for 1995. Effective January 1, 1994,
in connection his promotion to Chairman of the Board of Directors, and in
recognition of the additional responsibilities associated therewith, Mr.
Pinola's annual base salary was increased to $350,000 for 1994. This increase
was approved by the Board of Directors.
Mr. Pinola received an annual cash incentive award of $822,500 in 1994
based on the Company's 1994 actual EPS results. One grant of 30,000 stock
options was made during 1994 in recognition of the Company exceeding its
target EPS levels for 1994. This grant was made at the closing market price
of the Company's common stock on December 14, 1994.
Compensation and Finance Committee Options Committee
Robert M. Tomasko, Chairman Donald L. Calvin, Chairman
Donald L. Calvin Robert M. Tomasko
22
<PAGE> 24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
During the fiscal year ended December 31, 1994, there were no interlocking
relationships between any executive officers of the Company and any entity
whose directors or executive officers serve on the Board's Compensation and
Finance Committee or Options Committee, nor did any current or past officers
of the Company serve on the Compensation and Finance Committee or Options
Committee.
COMMON STOCK PERFORMANCE
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return (assuming dividend reinvestment) of
common stock listed on the NASDAQ Stock Market and common stock issued by
companies in a peer group selected by the Company for the five year period of
December 29, 1989 through December 30, 1994. The peer group consists of the
following companies: Robert Half International, Inc., Staff Builders,
Healthcare Compare Corp., Dimark and National Tech Team. The companies
included in the peer group were selected primarily because they were
publicly-held, professional service firms with international operations, had
revenues similar to those of the Company and were in favorable financial
condition.
With the exception of Robert Half International, Inc., the peer group
selected by the Company differs from the peer group utilized in the Company's
previous fiscal year which consisted of BEI Holdings, Ltd. (which changed its
name to Amresco Inc. in May 1994), Brandon Systems Corporation, CDI
Corporation, Robert Half International, Inc. and Uniforce Temporary
Personnel. The Company believes that the present peer group compares more
effectively with the Company based on the selection criteria set forth above.
COMPARISON OF 5 YEAR CUMULATIVE RETURN AMONG THE COMPANY, NASDAQ
NATIONAL MARKET SYSTEM (U.S. COMPANIES) AND PEER GROUP
500|------------------------------------------------------------------|
| |
| |
| |
| |
400|------------------------------------------------------------------|
| |
| * |
| * & |
| & |
D 300|--------------------------&---------------------------------------|
O | * & |
L | |
L | |
A | |
R 200|------------------------------------------------------------------|
S | |
| * |
| * @ |
| @ @ # |
100|---*&#@--------&---------------------------------#-----------@----|
| @ # |
| # |
| # |
| |
0|----|----------|---------|-----------|-----------|-----------|----|
12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
------------------------------------------------------------------------
*=The Company &=1994 Peer Group #=1993 Peer Group @=NASDAQ NMS
------------------------------------------------------------------------
ASSUMES $100 INVESTED ON DECEMBER 29, 1989 AND ALL DIVIDENDS REINVESTED
23
<PAGE> 25
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Subject to the shareholders' ratification, the Board of Directors has
appointed the firm of Arthur Andersen LLP, which served as the Company's
independent public accountants for the last fiscal year, to serve as the
Company's independent public accountants for the current fiscal year. If the
shareholders do not ratify this appointment by the affirmative vote of a
majority of shares present in person or represented by proxy at the Meeting,
other independent accountants will be considered by the Board upon
recommendation of the Audit Committee.
A representative of Arthur Andersen LLP is expected to be present at the
meeting and will have the opportunity to make a statement if he desires to do
so. The representative is also expected to be available to respond to
appropriate questions.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of the independent public accountants.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Annual Meeting
of Shareholders in 1996 must be received by the Company by December 8, 1995
in order to be considered for inclusion in the Company's proxy statement and
form of proxy relating to that meeting.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited on behalf of the Board
of Directors of the Company. The expense of solicitation of proxies for the
meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone or
telegraph by directors, officers or regular employees of the Company or its
subsidiaries.
24
<PAGE> 26
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO
MS. ANDREA L. MACEY, MANAGER OF FINANCIAL REPORTING, AT THE ADDRESS OF THE
COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
By Order of the Board of Directors
Larry A. Evans
Secretary
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, SHAREHOLDERS ARE URGED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR
SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
25
<PAGE> 27
EXHIBIT A
RIGHT MANAGEMENT CONSULTANTS, INC.
1993 STOCK INCENTIVE PLAN
(FORMERLY THE "1993 STOCK OPTION PLAN")
1. Purpose. This 1993 Stock Incentive Plan (the "Plan") is intended to
recognize the contributions made to the Company by key employees (including
employees who are members of the Board of Directors) of the Company or any
Affiliate and independent contractors who are managing principals of one or
more of the Company's franchisees, to provide such persons with additional
incentive to devote themselves to the future success of the Company or an
Affiliate, and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company's sustained
growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of Restricted Stock (as defined below) of the Company and/or
rights to acquire the Company's Common Stock, par value $.01 per Share (the
"Common Stock") in accordance with the terms of the Plan. In addition, the
Plan is intended as additional incentive to directors of the Company who are
not employees of the Company or an Affiliate to devote themselves to the
future success of the Company by providing them with an opportunity to
acquire or increase their proprietary interest in the Company through the
receipt of Options to acquire Common Stock in accordance with the terms of
the Plan.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code.
(b) "Award" means an award of an Option and/or Restricted Stock granted
pursuant to the Plan.
(c) "Award Document" means either an Option Document or a Restricted Stock
Document or both.
(d) "Board of Directors" means the Board of Directors of the Company.
(e) "Change of Control" shall have the meaning as set forth in Section 9
of the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee consisting of at least two (2) members
of the Board of Directors who satisfy the requirement of Section 3(a) of the
Plan appointed by the Board of Directors from time to time to administer the
Plan pursuant to Section 3 of the Plan.
(h) "Company" means Right Management Consultants, Inc., a Pennsylvania
corporation.
(i) "Disability" means a physical or mental impairment sufficient to make
the individual eligible for benefits under the Long-Term Disability Plan of
the Company (whether or not a participant in such plan), provided such
impairment also constitutes a "disability" within the meaning of Section
22(e)(3) of the Code.
(j) "Fair Market Value" shall have the meaning set forth in Subsection
8(a)(ii) of the Plan.
(k) "ISO" means an Option granted under the Plan which is intended to
qualify as an "incentive stock option" within the meaning of Section 422(b)
of the Code.
(l) "Non-employee Director" means a member of the Board of Directors who
is not an employee of the Company or an Affiliate.
(m) "Non-qualified Stock Option" means an Option granted under the Plan
which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of section 422(b) of the Code.
(n) "Option" means either an ISO or a Non-qualified Stock Option granted
under the Plan.
(o) "Optionee" means a person to whom an Option has been granted under the
Plan, which Option has not been exercised and has not expired or terminated.
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(p) "Option Document" means the document described in Section 8(a) of the
Plan, as applicable, which sets forth the terms and conditions of each grant
of Options.
(q) "Option Price" means the price at which Shares may be purchased upon
exercise of an Option, as calculated pursuant to subsection 8(a)(ii) of the
Plan.
(r) "Participant" means a person who holds an Option or Restricted Stock.
(s) "Plan Shares" means the shares of Common Stock of the Company which
have been, or may be, issued pursuant to the Plan.
(t) "Restricted Stock" means Common Stock granted pursuant to Section 8(b)
of the Plan that is subject to a risk of forfeiture in accordance with the
terms of such grant.
(u) "Restricted Stock Document" means the document described in Section
8(b) of the Plan which sets forth the terms and conditions of each grant of
Restricted Stock.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(w) "Shares" means the shares of Common Stock of the Company which are the
subject of Options.
3. Administration of the Plan.
(a) General. The Plan shall be administered by the Committee which shall
at all times consist of two (2) or more persons, each of whom shall be
members of the Board of Directors. Each member of the Committee shall be a
disinterested person (as such term is defined in Rule 16b-3) and an "outside
director" within the meaning of Section 162(m) of the Code and applicable
interpretive authority thereunder. The Board of Directors may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled (or eliminated, consistent with
the first sentence of this Section 3(a) by the reduction of the size of the
Committee) by the Board of Directors.
(b) Meetings. The Committee shall hold meetings at such times and places
as it may determine. Acts approved at a meeting by a majority of the members
of the Committee or acts approved in writing by the unanimous consent of the
members of the Committee shall be the valid acts of the Committee.
(c) Grants. The Committee shall from time to time at its discretion grant
Awards pursuant to the terms of the Plan. The Committee shall have plenary
authority to (i) determine the individuals to whom, and the times at which,
the Awards shall be granted, (ii) determine the type of Award to be granted
and the number of Shares and/or amount of Restricted Stock subject thereto,
(iii) if an Option is granted, determine the Option Price, its terms and the
period or periods when such Option is exercisable, and (iv) approve the form
and terms and conditions of the Award Documents; all subject, however, to the
express provisions of the Plan. In making such determinations, the Committee
may take into account the nature of the individual's services and
responsibilities, the individual's present and potential contribution to the
Company's success and such other factors as it may deem relevant. The
interpretation and construction by the Committee of any provisions of the
Plan or of any Awards granted under it shall be final, binding and
conclusive. Notwithstanding the foregoing, no single individual shall
receive, in any calendar year, Awards entitling such individual to more than
10% of the Plan Shares.
(d) Exculpation. No member of the Committee shall be personally liable
for monetary damages as such for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Awards thereunder unless (i) the member of the Committee has breached or
failed to perform the duties of his office under Subchapter B of Chapter 17
of the Pennsylvania Business Corporation Law of 1988, as amended, and (ii)
the breach or failure to perform constitutes self-dealing, willful misconduct
or recklessness; provided, however, that the provisions of this Subsection
3(d) shall not apply to the responsibility or liability of a member of the
Committee pursuant to any criminal statute or to the liability of a member of
the Committee for the payment of taxes pursuant to local, state or federal
law.
(e) Indemnification. Service on the Committee shall constitute service as
a member of the Board of Directors of the Company. Each member of the
Committee shall be entitled without further act on his part to indemnity from
the Company to the fullest extent provided by applicable law and the
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Company's Articles of Incorporation and/or By-laws in connection with or arising
out of any action, suit or proceeding with respect to the administration of the
Plan or the granting of Awards thereunder in which he or she may be involved by
reason of his or her being or having been a member of the Committee, whether or
not he or she continues to be such member of the Committee at the time of the
action, suit or proceeding.
4. Grants under the Plan. The Committee may grant any of the following
types of Awards, either singly, in tandem or in any combination as the
Committee may in its sole discretion determine:
(a) Options, in the form of Non-qualified Stock Options or ISOs or any
combination thereof; and (b) Restricted Stock.
5. Eligibility. Subject to the limitations set forth in this Section 5,
all key employees and independent contractors who are managing principals of
one or more of the Company's franchisees and members of the Board of
Directors who are not then serving as members of the Committee shall be
eligible to receive Awards hereunder. The Committee, in its sole discretion,
shall determine whether an individual is eligible to be granted Awards
hereunder. Only employees or employee directors may be granted an ISO or
Restricted Stock.
6. Shares Subject to Plan. The aggregate maximum number of Plan Shares is
Seven Hundred Thousand (700,000), subject to adjustment or amendment as
provided in Sections 10 and 11 of the Plan. No more than Three Hundred
Thousand (300,000) of the Plan Shares, as such number may be adjusted as
provided in Sections 10 and 11 of the Plan, shall become permanently issued
(i.e., cease to be subject to risk of forfeiture) as a result of Awards of
Restricted Stock. Plan Shares not issued in the form of Restricted Stock
(including all or any portion of the Plan Shares available for issuance as
Restricted Stock Awards) may be issued pursuant to Options. The Plan Shares
shall be issued from authorized and unissued Common Stock or Common Stock
held in or hereafter acquired for the treasury of the Company. If an Option
terminates, is cancelled or expires without having been fully exercised for
any reason or if Restricted Stock is forfeited for any reason, the Shares
underlying the unexercised portion of the Option and/or the forfeited
Restricted Stock, as the case may be, may again be the subject of one or more
Awards granted pursuant to the Plan.
7. Term of the Plan. The Plan is effective as of October 28, 1992, the
date on which it was adopted by the Board of Directors. The Plan ws approved
by the shareholders of the Company on December 16, 1992. The amendments to
the Plan as contained herein and as approved by the Board of Directors on
March 21, 1995 shall require shareholder approval on or before March 20, 1996
(which approval shall be by a majority of the votes cast at a duly called
meeting of the shareholders at which a quorum representing a majority of all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting) or such amendments shall be deemed null and void.
8. Award Documents and Terms.
(a) Options. Each Option granted under the Plan shall be a Non-qualified
Stock Option unless the Option shall be specifically designated at the time
of grant to be an ISO for Federal income tax purposes. If any Option
designated an ISO is determined for any reason not to qualify as an ISO
within the meaning of Section 422 of the Code, such Option shall be treated
as a Non-qualified Stock Option for all purposes under the provisions of the
Plan. Options granted pursuant to the Plan shall be evidenced by the Option
Documents in such form as the Committee shall from time to time approve,
which Option Documents shall comply with and be subject to the following
terms and conditions and such other terms and conditions as the Committee
shall from time to time require which are not inconsistent with the terms of
the Plan:
(i) Number of Option Shares. Each Option Document shall state the number
of Shares to which it pertains. An Optionee may receive more than one Option,
which may include Options which are intended to be ISOs and Options which are
not intended to be ISOs, but only on the terms and subject to the conditions
and restrictions of the Plan.
(ii) Option Price. Each Option Document shall state the Option Price
which, for a Non-qualified Stock Option, may be less than, equal to, or
greater than the Fair Market Value of the Shares on the date the Option is
granted, but in no case less than eighty-five percent (85%) of such Fair
Market Value, and, for an ISO, shall be at least 100% of the Fair Market
Value of the Shares on the date the Option is granted as determined by the
Committee in accordance with this Subsection 8(a)(ii); provided, however,
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that if an ISO is granted to an Optionee who then owns, directly or by
attribution under Section 424(d) of the Code, shares possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or an Affiliate, then the Option Price shall be at least 110% of the
Fair Market Value of the Shares on the date the Option is granted. If the Common
Stock is traded in a public market, then the Fair Market Value per share shall
be, if the Common Stock is listed on a national securities exchange or included
in the NASDAQ National Market System, the last reported sale price thereof on
the date the Option is granted, or, if the Common Stock is not so listed or
included, the mean between the last reported "bid" and "asked" prices thereof on
the relevant date, reported on NASDAQ or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Committee determines.
(iii) Exercise. No Option shall be deemed to have been exercised prior to
the receipt by the Company of written notice of such exercise and of payment
in full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased and shall (unless Shares
are covered by a then current registration statement or a Notification under
Regulation A under the Securities Act of 1933, as amended (the "Act") contain
the Optionee's acknowledgment in form and substance satisfactory to the
Company that (a) such Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in the
opinion of counsel satisfactory to the Company, may be made without violating
the registration provisions of the Act), (b) the Optionee has been advised
and understands that (i) the Shares have not been registered under the Act
and are "restricted securities" within the meaning of Rule 144 under the Act
and are subject to restrictions on transfer and (ii) the Company is under no
obligation to register the Shares under the Act or to take any action which
would make available to the Optionee any exemption from such registration,
(c) such Shares may not be transferred without compliance with all applicable
federal and state securities laws, and (d) an appropriate legend referring to
the foregoing restrictions on transfer and any other restrictions imposed
under the Option Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance of
Shares should be delayed pending (A) registration under federal or state
securities laws, (B) the receipt of an opinion of counsel satisfactory to the
Company that an appropriate exemption from such registration is available,
(C) the listing or inclusion of the Shares on any securities exchange or an
automated quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection with the
issuance of such Shares, the Company may defer exercise of any Option granted
hereunder until any of the events described in this sentence has occurred.
(iv) Medium of Payment. An Optionee shall pay for Shares (i) in cash, or
(ii) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Furthermore, the Committee may
provide in an Option Document that payment may be made in whole or in part in
shares of the Company's Common Stock. If payment is made in whole or in part
in shares of the Company's Common Stock, then the Optionee shall deliver to
the Company certificates registered in the name of such Optionee representing
the shares owned by such Optionee, free of all liens, claims and encumbrances
of every kind and having an aggregate Fair Market Value on the date of
delivery that is at least as great as the Option Price of the Shares (or
relevant portion thereof) with respect to which such Option is to be
exercised by the payment in shares of Common Stock, endorsed in blank or
accompanied by stock powers duly endorsed in blank by the Optionee.
Notwithstanding the foregoing, Company Common Stock which is identified as
having been obtained through an Option under this Plan and still subject to
the holding rules applicable to ISOs under the Code may not be tendered in
payment of the Option Price. In the event that certificates for shares of the
Company's Common Stock delivered to the Company represent a number of shares
in excess of the number of shares required to make payment for the Option
Price of the Shares (or relevant portion thereof) with respect to which such
Option is to be exercised by payment in shares of Common Stock, the stock
certificate issued to the Optionee shall represent (i) the Shares in respect
of which payment is made, and (ii) such excess number of shares.
Notwithstanding the foregoing, the Committee may impose from time to time
such limitations and prohibitions on the use of shares of the Common Stock to
exercise an Option as it deems appropriate.
(v) Termination of Options.
(A) No Option shall be exercisable after the first to occur of the
following:
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(1) Expiration of the Option term specified in the Option Document, which
shall not occur after (i) ten years from the date of grant, or (ii) five
years from the date of grant of an ISO if the Optionee on the date of grant
owns, directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or an Affiliate;
(2) Expiration of three months from the date the Optionee's employment or
service with the Company or its Affiliates terminates for any reason other
than Disability or death or as otherwise specified in Subsection
8(a)(v)(A)(4) or 8(a)(v)(A)(5) below;
(3) Expiration of one year from the date such employment or service with
the Company or its Affiliates terminates due to the Optionee's Disability or
death;
(4) A finding by the Committee that the Optionee (i) has become employed
without the Company's or an Affiliate's consent by a competitor of the
Company or an Affiliate, or has become engaged in competition with the
Company or an Affiliate, (ii) has divulged without the consent of the Company
or an Affiliate any secret or confidential information belonging to the
Company or an Affiliate, (iii) has been dishonest or fraudulent in any matter
affecting the Company, (iv) committed any act which, in the sole judgment of
the Committee, has been substantially detrimental to the interests of the
Company or (v) was terminated for other reasons which would constitute cause
under applicable law. The Company shall give an Optionee written notice of
the occurrence of any such event prior to making any such determination. The
determination of the Committee as to the occurrence of any of the events
specified in this paragraph shall be conclusive and binding upon all persons
for all purposes. In the event the Committee determines that any such event
as specified in this paragraph has occurred, in addition to immediate
termination of the Options held by the Optionee, the Optionee shall
automatically forfeit all Shares for which the Company has not yet delivered
the share certificates upon refund by the Company of the Option Price.
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of any inquiry that
could lead to a finding resulting in a forfeiture.
(5) The date, if any, set by the Board of Directors as an accelerated
expiration date in the event of the liquidation or dissolution of the
Company.
(B) Notwithstanding the foregoing, the Committee may extend the period
during which all or any portion of an Option may be exercised to a date no
later than the Option term specified in the Option Document pursuant to
Subsection 8(a)(v)(A)(1), provided that any change pursuant to this
Subsection 8(a)(v)(B) which would cause an ISO to become a Non-qualified
Stock Option may be made only with the consent of the Optionee.
(vi) Transfers. No Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution. During the
lifetime of the person to whom an Option is granted, such Option may be
exercised only by him. Notwithstanding the foregoing, a Non-qualified Stock
Option may be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended.
(vii) Holding Period. No Option granted under the Plan may be exercised
before the later of (i) the expiration of six months from the date of grant,
(ii) the expiration of six months following the date the Plan is approved by
the Company's shareholders or (iii) the expiration of such greater period of
time as may be specified in the Option Documents.
(viii) Limitation on Grants. In no event shall the aggregate fair market
value of the shares of Common Stock (determined at the time the ISO is
granted) with respect to which ISOs under all incentive stock option plans of
the Company or its Affiliates are exercisable for the first time by the
Optionee during any calendar year exceed $100,000.
(ix) Other Provisions. Subject to the provisions of the Plan, the Option
Documents shall contain such other provisions including, without limitation,
provisions authorizing the Committee to accelerate the exercisability of all
or any portion of an Option granted pursuant to the Plan, and such additional
restrictions upon the exercise of the Option or additional limitations upon
the term of the Option, as the Committee shall deem advisable. Subject to
Sections 8(a)(v) and 8(a)(x) and the general limitations on Options contained
herein, the Board of Directors may authorize adjustments of an Option granted
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under the Plan with respect to the Option Price, the number of Shares, the term
and any restrictions. Such adjustments may be accomplished by cancellation of an
outstanding Option and a subsequent regranting of an Option, by amendment, or by
substitution of an outstanding Option and may result in an Option Price which is
higher but not lower than the Option Price of the prior Option, provide for a
greater or lesser number of Shares subject to the Option, or provide for a
longer or shorter term than the prior Option. The prohibition on the reduction
of the Option Price contained in the preceding sentence shall not apply to
adjustments made to reflect changes in capitalization as contemplated by
Section 10.
(x) Amendment. Subject to the provisions of the Plan, the Committee shall
have the right to amend Option Documents issued to an Optionee, subject to
the Optionee's consent if such amendment is not favorable to the Optionee,
except that the consent of the Optionee shall not be required for any
amendment made pursuant to Subsection 8(a)(v)(A)(5) or Section 10 of the
Plan, as applicable.
(b) Restricted Stock. Restricted Stock granted pursuant to the Plan shall
be evidenced by the Restricted Stock Documents (which shall include the stock
certificate(s) evidencing such Restricted Stock and such other documents as
the Committee shall determine with respect to each Award of Restricted Stock)
in such form(s) as the Committee shall from time to time approve, which
Restricted Stock Documents shall, to the extent applicable, comply with and
be subject to the following terms and conditions and such other terms and
conditions as the Committee shall from time to time require which are not
inconsistent with the terms of the Plan:
(i) Amount of Restricted Stock. The Restricted Stock Documents shall state
the amount of Restricted Stock to which they pertain.
(ii) Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in
combination at such time(s), under such circumstances, in such installments,
or otherwise, as the Committee may determine. Except to the extent restricted
under the terms of the Plan and the applicable Restricted Stock Documents, a
Participant granted Restricted Stock shall have all rights of a shareholder
of the Company with respect to the Restricted Stock issued in the name of
such Participant and then outstanding, including, without limitation, the
right to vote such Restricted Stock and the right to receive dividends
thereon.
(iii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of the employment of a Participant during a period when the
Restricted Stock of such Participant is subject to forfeiture under the
Restricted Stock Documents applicable thereto, such Restricted Stock shall be
forfeited and reacquired by the Company; provided, however, that the
Committee may provide, by rule or regulation or in any Restricted Stock
Document, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Restricted Stock.
(iv) Certificates. Restricted Stock granted under the Plan shall be
evidenced by one or more stock certificates as determined by the Committee.
Each such certificate shall be registered in the name of the Participant and
such certificates shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock. The Company
shall retain physical possession of the certificate(s) so long as the Plan
Shares evidenced thereby are subject to forfeiture and the Participant shall
(as a condition precedent to the issuance of a Restricted Stock Award)
deliver a stock power to the Company, endorsed in blank, relating to the
Restricted Stock to be issued. At the expiration of the applicable
restriction period, the Company shall release to the Participant (or the
Participant's legal representative or designated beneficiary) the
certificate(s) representing the Restricted Stock with respect to which the
applicable restrictions have been satisfied.
(v) Dividends. The Committee, in its sole discretion, may permit or
require the payment of dividends on the Restricted Stock to be automatically
reinvested in additional Restricted Stock or other investment vehicles.
Unless otherwise determined by the Committee, Common Stock distributed as a
dividend or otherwise distributed in connection with the Restricted Stock
shall be subject to the same restrictions and risk of forfeiture as the
Restricted Stock with respect to which such Common Stock has been
distributed.
(vi) Minimum Holding Period. Restricted Stock granted under the Plan may
not be transferred, sold or otherwise disposed of, by the Participant before
the later of (i) the expiration of six months from the date of grant, or (ii)
the expiration of six months following the date the amendments to the Plan
adopting the Restricted Stock provisions are approved by the Company's
Shareholders.
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Change of Control. In the event of a Change of Control, the Committee may
take whatever action it deems necessary or desirable with respect to the
Options and Restricted Stock outstanding. Such action includes, without
limitation, accelerating the expiration or termination date in the respective
Option Documents to a date no earlier than thirty (30) days after notice of
such acceleration given to the Optionees or accelerating the restriction
periods in the respective Restricted Stock Documents. In addition to the
foregoing, in the event of a Change of Control, Options granted pursuant to
the Plan shall become immediately exercisable in full.
A "Change of Control" shall be deemed to have occurred upon the earliest
to occur of the following events: (i) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated, or (ii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company, or (iii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) and the
shareholders of the other constituent corporation (or its board directors if
shareholder action is not required) have approved a definitive agreement to
merge or consolidate the Company with or into such other corporation, other
than, in either case, a merger or consolidation of the Company in which
holders of shares of the Company's Common Stock immediately prior to the
merger or consolidation will have at least a majority of the ownership of
common stock of the surviving corporation (and, if one class of common stock
is not the only class of voting securities entitled to vote on the election
of directors of the surviving corporation, a majority of the voting power of
the surviving corporation's voting securities) immediately after the merger
or consolidation, which common stock (and, if applicable, voting securities)
is to be held in the same proportion as such holders' ownership of Common
Stock of the Company immediately before the merger or consolidation, or (iv)
the date any entity, person or group, within the meaning of Section 13(d)(3)
or Section 14 (d)(2) of the Securities Exchange Act of 1934, as amended,
other than (A) the Company or any of its subsidiaries or any employee benefit
plan (or related trust) sponsored or maintained by the Company or any of its
subsidiaries or (B) the chief executive officer immediately prior to the
determination of whether a Change of Control has occurred or any "group" of
which such chief executive officer is a member or any entity of which such
chief executive officer owns 25% or more of the voting interests, shall have
become the beneficial owner of, or shall have obtained voting control over,
more than twenty-five percent (25%) of the outstanding shares of the
Company's Common Stock, or (v) the first day after the date this Plan is
effective when directors are elected such that a majority of the Board of
Directors shall have been members of the Board of Directors for less than two
(2) years, unless the nomination for election of each new director who was
not a director at the beginning of such two (2) year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
10. Adjustments on Changes in Capitalization. The aggregate number of
Shares and class of shares as to which Options may be granted hereunder, the
number and class or classes of shares covered by each outstanding Option and
the Option Price thereof, the Restricted Stock outstanding and the amount of
uncommitted Plan Shares remaining subject to the Plan shall be appropriately
adjusted in the event of a stock dividend, stock split, recapitalization or
other change in the number or class of issued and outstanding equity
securities of the Company resulting from a subdivision or consolidation of
the Common Stock and/or, if appropriate, other outstanding equity securities
or a recapitalization or other capital adjustment (not including the issuance
of Common Stock on the conversion of other securities of the Company which
are convertible into Common Stock) affecting the Common Stock which is
effected without receipt of consideration by the Company. The Committee shall
have authority to determine the adjustments to be made under this Section,
and any such determination by the Committee shall be final, binding and
conclusive. Fractional shares resulting from any adjustment pursuant to this
Section 10 may be settled in cash or otherwise as the Committee shall
determine.
11. Amendment of the Plan. The Board of Directors may amend the Plan from
time to time in such manner as it may deem advisable. Nevertheless, the Board
of Directors of the Company may not amend the Plan to (i) change the class of
individuals eligible to receive an ISO, (ii) permit the Board to reduce the
Option Price of outstanding Options other than for adjustments in
capitalization as contemplated by Section 10, (iii) increase the maximum
number of Plan Shares, or (iv) make any other change or amendments to which
shareholder approval is required in order to satisfy the conditions set forth
in Rule 16b-3 without obtaining approval of such amendments, within twelve
months before or after such action, by vote of a majority of the votes cast
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at a duly called meeting of the shareholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the matter. In the future the Plan may be
amended by the Board of Directors to provide for the granting of Options to
Non-employee Directors pursuant to a formula which satisfies the requirements of
Rule 16b-3(c)(2)(ii) of the Securities Exchange Act of 1934. No amendment to the
Plan shall adversely affect any outstanding Option or Restricted Stock, however,
without the consent of the Optionee or the holder of Restricted Stock, as the
case may be.
12. No Commitment to Retain. The grant of an Award pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company or any Affiliate to retain the
Participant in the employ of the Company or an Affiliate and/or as a member
of the Company's Board of Directors or in any other capacity.
13. Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries (on a form supplied by the Committee) to
exercise his Options and/or receive any payments as may be due under the Plan
to such beneficiary or beneficiaries in the event of the Participant's death,
and may change such designation from time to time and at any time prior to
the death of such Participant.
14. Withholding of Taxes. Whenever the Company proposes or is required to
deliver Restricted Stock certificates or deliver or transfer shares in
connection with the exercise of an Option, or whenever the Company is
otherwise obligated to withhold taxes in connection with an Option or
Restricted Stock, the Company shall have the right to (a) require the
recipient to remit or otherwise make available to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to delivery or transfer of any certificate or certificates
for such Restricted Stock or Shares or (b) take whatever other action it
deems necessary to protect its interests with respect to tax liabilities. The
Company's obligation to make any delivery of certificates in connection with
Restricted Stock or make any delivery or transfer of Shares will be
conditioned on the recipient's compliance, to the Company's satisfaction,
with any withholding requirement.
15. Interpretation.
(a) The Plan is intended to enable transactions under the Plan with
respect to directors and officers (within the meaning of Section 16(a) under
the Securities Exchange Act of 1934, as amended) to satisfy the conditions of
Rule 16b-3. To the extent that any provision of the Plan would cause a
conflict with such conditions or would cause the administration of the Plan
as provided in Section 3 to fail to satisfy the conditions of Rule 16b-3,
such provision shall be deemed null and void to the extent permitted by
applicable law. This section shall not be applicable if no class of the
Company's equity securities is then registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
(b) The Plan is intended to satisfy the applicable requirements of Code
Section 162(m) so that the tax deduction for the Company for remuneration in
respect of this Plan for services performed by employees within the purview
of Code Section 162(m) is not disallowed in whole or in part by the operation
of such Code Section. If any provision of this Plan or of any Award Document
would otherwise frustrate or conflict with the intent expressed in this
Section 15(b), that provision to the extent possible shall be interpreted and
deemed amended so as to avoid such conflict. To the extent there remains an
irreconcilable conflict with such intent, such provision shall be deemed null
and void as applicable to such employees.
A-8
<PAGE> 35
EXHIBIT B
RIGHT MANAGEMENT CONSULTANTS, INC.
DIRECTORS' STOCK OPTION PLAN
1. Purpose. Right Management Consultants, Inc. (the "Company") hereby
adopts the Right Management Consultants, Inc. Directors' Stock Option Plan
(the "Plan"). The Plan is intended to recognize the contributions made to the
Company by the non-employee members of the Board of Directors of the Company,
to provide such persons with additional incentive to devote themselves to the
future success of the Company and its Affiliates, and to improve the ability
of the Company to attract, retain, and motivate individuals who may serve as
members of the Company's Board of Directors, by providing such persons with
an opportunity to acquire or increase their proprietary interest in the
Company through receipt of rights to acquire the Company's Common Stock, par
value $.01 per Share (the "Common Stock") in accordance with the terms and
conditions hereof.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of
Section 424(a) or (f) of the Code.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Business Day" shall mean a day on which there is trading in
securities generally on the New York Stock Exchange.
(d) "Change of Control" shall have the meaning as set forth in Section 9
of the Plan.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall have the meaning set forth in Section 3 of the Plan.
(g) "Company" means Right Management Consultants Inc., a Pennsylvania
corporation.
(h) "Disability" means a physical or mental impairment sufficient to make
the individual eligible for benefits under the Long-Term Disability Plan of
the Company (whether or not a participant in such plan), provided such
impairment also constitutes a "disability" within the meaning of Section
22(e)(3) of the Code.
(i) "Fair Market Value" shall have the meaning set forth in Subsection
8(c) of the Plan.
(j) "Non-employee Director" means a member of the Board of Directors who
is not, and has not at any time in the past been, either an employee of the
Company or the owner of five percent (5%) or more of the Common Stock then
issued and outstanding.
(k) "Non-qualified Stock Option" means an Option granted under the Plan
which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of Section 422(b) of the Code.
(l) "Option" means a Non-qualified Stock Option granted under the Plan.
(m) "Optionee" means a person to whom an Option has been granted under the
Plan, which Option has not been exercised and has not expired or terminated.
(n) "Option Document" means the document described in Section 8 of the
Plan, as applicable, which sets forth the terms and conditions of each grant
of Options.
(o) "Option Price" means the price at which Shares may be purchased upon
exercise of an Option, as calculated pursuant to Subsection 8(a) of the Plan.
(p) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(q) "Shares" means the shares of Common Stock of the Company which are the
subject of Options.
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<PAGE> 36
3. Administration of the Plan. The Plan shall be administered by the Board
of Directors of the Company. The Plan is intended to be a "formula plan" for
purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and shall be
administered by the Board of Directors in a manner consistent with the
requirements of such Rule. The Board of Directors in its administrative
capacity with respect to the Plan, is referred to as the "Committee."
(a) Meetings. The Committee shall hold meetings at such times and places
as it may determine. Acts approved at a meeting by a majority of the members
of the Committee or acts approved in writing by the unanimous consent of the
members of the Committee shall be the valid acts of the Committee.
(b) Interpretation. The interpretation and construction by the Committee
of any provisions of the Plan or of any Option granted under it shall be
final, binding and conclusive.
(c) Exculpation. No member of the Committee shall be personally liable for
monetary damages as such for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Options thereunder unless (i) the member of the Committee has breached or
failed to perform the duties of his office under Subchapter B of Chapter 17
of the Pennsylvania Business Corporation Law of 1988, as amended, and (ii)
the breach or failure to perform constitutes self-dealing, willful misconduct
or recklessness; provided, however, that the provisions of this Subsection
3(c) shall not apply to the responsibility or liability of a member of the
Committee pursuant to any criminal statute or to the liability of a member of
the Committee for the payment of taxes pursuant to local, state or federal
law.
(d) Indemnification. Service on the Committee shall constitute service as
a member of the Board of Directors of the Company. Each member of the
Committee shall be entitled without further act on his part to indemnity from
the Company to the fullest extent provided by applicable law and the
Company's Articles of Incorporation and/or By-laws in connection with or
arising out of any action, suit or proceeding with respect to the
administration of the Plan or the granting of Options thereunder in which he
or she may be involved by reason of his or her being or having been a member
of the Committee, whether or not he or she continues to be such member of the
Committee at the time of the action, suit or proceeding.
4. Grants under the Plan. Grants under the Plan, which are intended to
constitute "formula awards" within the meaning of Rule 16b-3, shall be in the
form of Non-qualified Stock Options.
5. Eligibility. Each person who is a Non-employee Director as of the date
of a grant of Options pursuant to the Plan shall be eligible to receive
Options hereunder on such date in accordance with the term hereof.
6. Shares Subject to Plan. The aggregate maximum number of Shares for
which Options may be granted pursuant to the Plan is one hundred thousand
(100,000), subject to adjustment as provided in Section 10 of the Plan. The
Shares shall be issued from authorized and unissued Common Stock or Common
Stock held in or hereafter acquired for the treasury of the Company. If an
Option terminates or expires without having been fully exercised for any
reason, the Shares for which the Option was not exercised may again be the
subject of one or more Options granted pursuant to the Plan.
7. Termination of the Plan. Unless otherwise terminated in accordance with
this Section 7, the Plan shall terminate on the earlier of (i) December 31,
2004 and (ii) the first Grant Date (as defined in Subsection 8(a) on which no
Options are granted pursuant to Subsection 8(a). No Options may be granted
under the Plan after termination of the Plan. The Plan is subject to the
approval on or before December 1, 1995 by the affirmative vote of the holders
of a majority of the shares present, or represented, and entitled to vote at
a duly called meeting of the shareholders of the Company at which a quorum
representing a majority of all outstanding voting stock of the Company is,
either in person or by proxy, present and voting. If the Plan is not so
approved by the Company's shareholders on or before December 1, 1995, the
Plan shall terminate effective December 2, 1995, and each Option previously
granted under the Plan shall be null and void. The Board of Directors may, at
any time, terminate the Plan.
8. Option Documents and Terms. Options granted pursuant to the Plan shall
be granted, without any further action by the Committee, in accordance with
the terms and conditions set forth in this Section 8, and shall be evidenced
by Option Documents in such form as the Committee shall from time to time
approve, which Option Documents shall comply with and be subject to the
following terms and conditions and such other terms and conditions as the
Committee shall from time to time require which are not inconsistent with the
terms of the Plan.
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<PAGE> 37
(a) Timing of Grants; Number of Option Shares Subject to Options;
Exercisability of Options; Option Price. Commencing in 1994 and continuing
until the termination of the Plan in accordance with Section 7, each person
who is then a Non-employee Director shall be granted, on the last Business
Day of each calendar year (each a "Grant Date"), an Option to purchase Two
Thousand (2,000) Shares (which number is subject to adjustment as provided in
Section 10 of the Plan). Notwithstanding the preceding sentence, no Options
shall be granted pursuant to the Plan on or after any Grant Date on which the
number of shares of Common Stock for which additional Options might then be
granted pursuant to the Plan is less than the number of shares of Common
Stock for which Options would otherwise be granted pursuant to the Plan on
such Grant Date. Each Option granted pursuant to the Plan shall become
exercisable over a period of three (3) years, so that the Optionee shall have
the right to exercise the Option with respect to thirty four percent (34%) of
the Shares covered thereby commencing on the first anniversary of such
Option's Grant Date, and the right to exercise the Option with respect to an
additional thirty three percent (33%) of the Shares covered thereby
commencing on each of the two subsequent anniversaries of such Grant Date.
The per Share Option Price for Shares subject to an Option shall be equal to
the Fair Market Value of a share of Common Stock as determined in accordance
with Section 8(c).
(b) Termination of Options. Each Option which becomes exercisable in
accordance with Subsection 8(a) shall continue to be exercisable until the
first to occur of the following:
(i) the expiration of five (5) years from and including such Option's
Grant Date;
(ii) the expiration of three (3) months from and including the date the
Optionee's service as a member of the Board of Directors terminates for
any reason other than Disability or death; or
(iii) the expiration of one (1) year from and including the date the
Optionee's service as a member of the Board of Directors terminates by
reason of the Optionee's Disability or death.
(c) Fair Market Value. The Fair Market Value of the Shares subject to each
Option shall be determined as of such Option's Grant Date as follows: (i) if
the Common Stock is then listed on a national securities exchange or included
on the Nasdaq National Market System ("NNM"), the Fair Market Value of a
Share shall be the last reported sale price of the Common Stock, as reported
on such exchange or the NNM, as the case may be, on such Grant Date, or (ii)
if the Common Stock is not then so listed or included on the NNM, the Fair
Market Value of a Share shall be the mean between the last reported "bid" and
"asked" prices of the Common Stock on such Grant Date, as reported by the
National Association of Securities Dealers, Inc. or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc. or, if not so reported,
as reported in a customary financial reporting service, as the case may be,
on such Grant Date. Notwithstanding the preceding sentence, in the event
there is not a last reported sale price or last reported "bid" and "asked"
prices, as applicable, for the Common Stock on a Grant Date, the Fair Market
Value of a Share shall be determined in the manner provided in the preceding
sentence but as of the most recent Business Day preceding such Grant Date for
which such information is available, unless such information is not available
for any of the twenty (20) Business Days immediately preceding such Grant
Date, in which case the Fair Market Value of a Share shall be deemed to be
the book value (determined in accordance with generally accepted accounting
principles) of a share of Common Stock as of the close of the calendar year
in which the Grant Date occurs, increased (if such book value is not an even
whole dollar amount) to the next whole dollar.
(d) Exercise. No Option shall be deemed to have been exercised prior to
the receipt by the Company of written notice of such exercise and of payment
in full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased and shall (unless the
Shares are covered by a then current registration statement or a Notification
under Regulation A under the Securities Act of 1933, as amended (the "Act")
and qualified for sale under applicable state securities or "Blue Sky" laws
("Blue Sky Laws"), contain the Optionee's acknowledgement in form and
substance satisfactory to the Company that (a) such Shares are being
purchased for investment and not for distribution or resale (other than a
distribution or resale which, in the opinion of counsel satisfactory to the
Company, may be made without violating the registration provisions of the Act
and applicable Blue Sky Laws), (b) the Optionee has been advised and
understands that (i) the Shares have not been registered under the Act or
qualified for sale under applicable Blue Sky Laws and are "restricted
securities" within the meaning of Rule 144 under the Act and are subject to
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<PAGE> 38
restrictions on transfer, and (ii) the Company is under no obligation to
register the Shares under the Act or qualify the Shares for sale under
applicable Blue Sky Laws, to take any action which would make available to the
Optionee any exemption from such registration or qualification, (c) such Shares
may not be transferred without compliance with all applicable federal and state
securities laws, and (d) an appropriate legend referring to the foregoing
restrictions on transfer and any other restrictions imposed under the Option
Documents may be endorsed on the certificates. Notwithstanding the foregoing, if
the Company determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an appropriate exemption
from such registration is available, (C) the listing or inclusion of the Shares
on any securities exchange or an automated quotation system, or (D) the consent
or approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.
(e) Medium of Payment. An Optionee shall pay for Shares (i) in cash, or
(ii) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Furthermore, the Committee shall
provide in each Option Document that payment may be made in whole or in part
in shares of the Company's Common Stock. If payment is made in whole or in
part in shares of the Company's Common Stock, then Optionee shall deliver to
the Company certificates registered in the name of such Optionee representing
the shares of Common Stock owned by such Optionee, free of all liens, claims
and encumbrances of every kind and having an aggregate Fair Market Value
(determined in the manner specified in Subsection 8(c) but as of the date of
delivery) that is at least as great as the Option Price of the Shares (or the
relevant portion thereof) with respect to which such Option is to be
exercised by the payment in shares of Common Stock, endorsed in blank or
accompanied by stock powers duly endorsed in blank by the Optionee. In the
event that certificates for shares of the Company's Common Stock delivered to
the Company represent a number of shares in excess of the number of shares
required to make payment for the Option Price of the Shares (or relevant
portion thereof) with respect to which such Option is to be exercised by
payment in shares of Common Stock, the stock certificate issued to the
Optionee shall represent (i) the Shares in respect of which payment is made,
and (ii) such excess number of shares.
(f) Transfers. No Option granted under the Plan may be transferred by the
Optionee other than by will or by the laws of descent and distribution.
During the lifetime of the person to whom an Option is granted, such Option
may be exercised only by such person. Notwithstanding the foregoing, an
Option may be transferred by the Optionee pursuant to a "qualified domestic
relations order," within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
9. Change of Control. In the event of a Change of Control, Options granted
pursuant to the Plan shall become immediately exercisable in full.
A "Change of Control" shall be deemed to have occurred upon the earliest
to occur of the following events: (i) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated, or (ii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company, or (iii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) and the
shareholders of the other constituent corporation (or its board of directors
if shareholder action is not required) have approved a definitive agreement
to merge or consolidate the Company with or into such other corporation,
other than, in either case, a merger or consolidation of the Company in which
holders of shares of the Company's Common Stock immediately prior to the
merger or consolidation will have at least a majority of the ownership of
common stock of the surviving corporation (and, if one class of common stock
is not the only class of voting securities entitled to vote on the election
of directors of the surviving corporation, a majority of the voting power of
the surviving corporation's voting securities) immediately after the merger
or consolidation, which common stock (and, if applicable, voting securities)
is to be held in the same proportion as such holders' ownership of Common
Stock of the Company immediately before the merger or consolidation, or (iv)
the date any entity, person or group, within the meaning of Section 13(d)(3)
B-4
<PAGE> 39
or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, other
than an Excluded Person (as defined in this Section 9) shall have become the
beneficial owner of, or shall have obtained voting control over, more than
twenty-five percent (25%) of the outstanding shares of the Company's Common
Stock, or (v) the first day after the date this Plan is effective when directors
are elected such that a majority of the Board of Directors shall have been
members of the Board of Directors for less than two (2) years, unless the
nomination for election of each new director who was not a director at the
beginning of such two (2) year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period. For purposes of this Section 9, the term Excluded
Person means (A) the Company or any of its subsidiaries or any employee benefit
plan (or related trust) sponsored or maintained by the Company or any of its
subsidiaries or (B) the chief executive officer of the Company at the time of
the determination of a Change of Control, or any "group" (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended) of which such chief executive officer is a member or any entity of
which such chief executive officer owns 25% or more of the voting interests.
10. Adjustments on Changes in Capitalization. The aggregate number of
Shares as to which Options may be granted hereunder, the number of Option
Shares covered by Options to be granted under Section 8(a) of the Plan, the
number and class or classes of shares covered by each outstanding Option and
the Option Price thereof shall be appropriately adjusted in the event of a
stock dividend, stock split, recapitalization or other change in the number
or class of issued and outstanding equity securities of the Company resulting
from a subdivision or consolidation of the Common Stock and/or, if
appropriate, other outstanding equity securities or a recapitalization or
other capital adjustment (not including the issuance of Common Stock on the
conversion of other securities of the Company which are convertible into
Common Stock) affecting the Common Stock which is effected without receipt of
consideration by the Company. The Committee shall have authority to determine
the adjustments to be made under this Section, and any such determination by
the Committee shall be final, binding and conclusive. Fractional shares
resulting from any adjustment pursuant to this Section 10 shall be settled in
cash.
11. Amendment of the Plan. Subject to the limitations in this Section 11,
the Board of Directors or its Executive Committee may amend the Plan from
time to time in such manner as it may deem advisable. Notwithstanding any
provision to the contrary, the Plan shall not be amended (i) more than once
every six (6) months, other than to comport with changes in the Code or the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, if applicable, or (ii) without the approval of the Company's
shareholders in accordance with Rule 16b-3, if the amendment would (A)
materially increase the benefits accruing to participants under the Plan, (B)
materially increase the number of securities which may be issued under the
Plan, or (C) materially modify the requirements as to eligibility for
participation in the Plan.
12. No Commitment to Retain. The grant of an Option pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company or any Affiliate to retain the
Optionee as a member of the Board of Directors or in any other capacity.
13. Designation of Beneficiary. Each Optionee may designate a beneficiary
or beneficiaries (on a form supplied by the Committee) to exercise his
Options and/or receive any payments as may be due under the Plan to such
beneficiary or beneficiaries in the event of the Optionee's death, and may
change such designation from time to time and at any time prior to the death
of such Optionee.
14. Withholding of Taxes. Whenever the Company proposes or is required to
deliver or transfer Shares in connection with the exercise of an Option, the
Company shall have the right to (a) require the recipient to remit or
otherwise make available to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the
delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests
with respect to tax liabilities. The Company's obligation to make any
delivery or transfer of Shares shall be conditioned on the Optionee's
compliance, to the Company's satisfaction, with any withholding requirement.
15. Interpretation. The Plan is intended to grant "formula awards" within
the meaning of Rule 16b-3 to Non-employee Directors without disqualifying
such individuals as "disinterested" directors of the Company for purposes of
Rule 16b-3. The Plan is also intended to conform to the requirements of Rule
16b-3 such that awards of Options pursuant to the Plan will be exempted from
B-5
<PAGE> 40
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended. To the extent that any provision of the Plan would cause a conflict
with such requirements or would cause a Non-employee Director not to qualify as
a "disinterested" director under Rule 16b-3, such provision shall be deemed null
and void to the extent permitted by applicable law. This section shall not be
applicable if no class of the Company's equity securities is then registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
16. Governing Law. The Plan shall be construed according to the laws of
the Commonwealth of Pennsylvania and all provisions hereof shall be
administered according to and its validity shall be determined under, the
laws of such state, except where preempted by federal law.
B-6
<PAGE> 41
RIGHT MANAGEMENT CONSULTANTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Shareholders -- May 4, 1995
The undersigned shareholder of RIGHT MANAGEMENT CONSULTANTS, INC. (the
"Company"), revoking all previous proxies, hereby constitutes and appoints
RICHARD J. PINOLA and JOSEPH T. SMITH, and each of them acting as
individually, as the attorney and proxy of the undersigned, with full power
of substitution, for and in the name and stead of the undersigned, to attend
the Annual Meeting of Shareholders of the Company to be held on Thursday, May
4, 1995, at 10:00 A.M. at the Company's headquarters, 1818 Market Street,
14th Floor, Philadelphia, Pennsylvania, and to vote all shares of Common
Stock of the Company which the undersigned would be entitled to vote if
personally present at such Annual Meeting, and at any adjournment or
postponement thereof; provided that said proxies are authorized and directed
to vote as indicated with respect to the following matters:
1. / / FOR all eleven nominees for director named below.
/ / WITHHOLD AUTHORITY to vote for all eleven nominees for director
named below.
/ / FOR all eleven of the nominees for director named below, except
WITHHOLD AUTHORITY to vote for the nominee(s) whose name(s) is (are)
lined through.
Nominees: FRANK P. LOUCHHEIM, RICHARD J. PINOLA, JOSEPH T. SMITH,
LARRY A. EVANS, NANCY N. GEFFNER, ROBERT M. TOMASKO, JOSEPH E.
JANNOTTA, JOHN R. BOURBEAU, RAYMOND B. LANGTON, REBECCA MADDOX and
CATHERINE SELLECK
2. / / FOR the amendment and renaming of the Right Management
/ / AGAINST Consultants, Inc. 1993 Stock Option Plan.
/ / ABSTAIN
3. / / FOR adoption of the Directors' Stock Option Plan
/ / AGAINST
/ / ABSTAIN
4. / / FOR the ratification of the Selection by the Board of Directors
/ / AGAINST of Arthur Andersen LLP, as the Company's independent public
/ / ABSTAIN accountants for the current fiscal year.
<PAGE> 42
5. In their discretion, the proxies will vote on such other business as
may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholders. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2, 3 and 4
REFERRED TO IN THIS PROXY. This proxy also delegates discretionary authority
to vote with respect to any other business which may properly come before the
meeting or any adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ANNUAL REPORT, NOTICE
OF SAID MEETING AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH.
The undersigned also hereby ratifies all that the said attorneys and proxies
may do by virtue hereof and hereby confirms that this proxy shall be valid
and may be voted whether or not the shareholder's name is signed as set forth
below or a seal is affixed or the description, authority or capacity of the
person signing is given or other defect of signature exists.
NOTE: PLEASE MARK, DATE AND SIGN THIS
PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. Please sign this
proxy exactly as name appears in
address below. If shares are
registered in more than one name, all
owners should sign. If signing in a
fiduciary or representative capacity,
such as attorney-in-fact, executor,
administrator, trustee or guardian,
please give full title and attach
evidence of authority. Corporations
please sign with full corporate name
by a duly authorized officer and
affix the corporate seal.
Dated: , 1995
-------------------------
(SEAL)
-------------------------------
(Shareholder's Signature)
(SEAL)
-------------------------------
(Shareholder's Signature)
