<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
(Rule 14a-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] CONFIDENTIAL, FOR USE OF THE
Check the appropriate box: COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
-----------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
NOT APPLICABLE
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
NOT APPLICABLE
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
NOT APPLICABLE
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
NOT APPLICABLE
--------------------------------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
NOT APPLICABLE
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
NOT APPLICABLE
--------------------------------------------------------------------------
(3) Filing Party:
NOT APPLICABLE
--------------------------------------------------------------------------
(4) Date Filed:
NOT APPLICABLE
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
304 VASSAR STREET
CAMBRIDGE, MASSACHUSETTS 02139
___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
___________________
To The Stockholders:
The Annual Meeting of Stockholders of Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), will be held on
May 13, 1998 at 10:00 A.M. at the Downtown Club, State Street Bank Building,
225 Franklin Street, 33rd Floor, Boston, Massachusetts, for the following
purposes:
1. To elect a Board of Directors for the ensuing year.
2. To consider and act upon a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock, par value $.01 per share (the "Common
Stock"), from 120,000,000 shares to 250,000,000 shares.
3. To consider and act upon a proposal to amend the Company's 1991 Stock
Option Plan (the "1991 Plan") to increase the number of shares of Common
Stock available for issuance under the 1991 Plan by 4,000,000 shares.
4. To ratify the selection of the firm of Coopers & Lybrand L.L.P. as
independent accountants for the fiscal year ending December 31, 1998.
5. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on March 23, 1998, the record date
fixed by the Board of Directors for such purpose. A list of such stockholders
will be available during regular business hours at the offices of Testa,
Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts for the ten
days before the meeting for inspection by any stockholder for any purpose
germane to the meeting.
By Order of the Board of Directors,
JAMES P. O'HARE
Secretary
Cambridge, Massachusetts
April 6, 1998
STOCKHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
<PAGE>
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
304 VASSAR STREET
CAMBRIDGE, MASSACHUSETTS 02139
----------------
PROXY STATEMENT
APRIL 6, 1998
Proxies in the form enclosed with this proxy statement are solicited by the
Board of Directors of Cambridge Technology Partners (Massachusetts), Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held on May 13, 1998, at 10:00 A.M., at the Downtown Club, State Street Bank
Building, 225 Franklin Street, 33rd Floor, Boston, Massachusetts, or at any
adjournments thereof.
An Annual Report to Stockholders, containing financial statements for the
fiscal year ended December 31, 1997, is being mailed together with this proxy
statement to all stockholders entitled to vote. It is anticipated that this
proxy statement and the accompanying proxy will be first mailed to
stockholders on or about April 15, 1998.
Only stockholders of record as of the close of business on March 23, 1998
(the "Record Date") will be entitled to vote at the meeting and any
adjournments thereof. As of the Record Date, 56,060,473 shares of Common Stock
of the Company were issued and outstanding. Each share outstanding as of the
Record Date will be entitled to one vote, and stockholders may vote in person
or by proxy. Execution of a proxy will not in any way affect a stockholder's
right to attend the meeting and vote in person. Any stockholder delivering a
proxy has the right to revoke it by written notice to the Secretary at any
time before it is exercised.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee for election as director, as well as abstentions and
broker "non-votes" with respect to all other matters being submitted to
stockholders, are counted as present or represented for purposes of
determining the presence or absence of a quorum for the meeting. A "non-vote"
occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because, in respect of such
other proposal, the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner.
The election of directors by the stockholders shall be determined by a
plurality of the votes cast by stockholders entitled to vote. Votes may be
cast in favor of or withheld from each nominee. Approval of the proposal to
amend the Company's Amended and Restated Certificate of Incorporation (the
"Charter") to increase the number of authorized shares of Common Stock from
120,000,000 shares to 250,000,000 shares requires an affirmative vote of a
majority of the outstanding shares entitled to vote on such proposal.
Abstentions and broker "non-votes" will have the practical effect of voting
against the proposal to amend the Charter since they are included in the
number of shares entitled to vote on such proposal. On each other matter being
submitted to stockholders, an affirmative vote of a majority of the shares
represented in person or by proxy and voting in favor or against such matter
is required for approval. On such other matters being submitted to
stockholders, abstentions and broker "non-votes" with respect to a particular
matter are not considered to have been voted with respect to such matter and
have the practical effect of reducing the number of affirmative votes required
to achieve a majority for such matter by reducing the total number of shares
from which the majority is calculated.
<PAGE>
Each of the persons named as proxies in the proxy is a director and/or
officer of the Company. All properly executed proxies returned in time to be
cast at the meeting will be voted. With respect to the election of a Board of
Directors, any stockholder submitting a proxy has a right to withhold
authority to vote for any individual nominee or group of nominees to the Board
of Directors by writing the name of such individual or group in the space
provided on the proxy. The proxies will be voted as stated below and under
"Election of Directors." In addition to the election of directors, the
stockholders will act upon proposals to amend the Company's Charter to
increase the number of authorized shares of Common Stock of the Company from
120,000,000 shares to 250,000,000 shares, to amend the Company's 1991 Stock
Option Plan (the "1991 Plan") to increase the number of shares of Common Stock
available for issuance under the 1991 Plan by 4,000,000 shares and to ratify
the selection of auditors. Where a choice has been specified on the proxy with
respect to these matters, the shares represented by the proxy will be voted in
accordance with the specification and will be voted FOR if no specification is
indicated.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as proxies in the proxies.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of the Record Date the name of each person
who, to the knowledge of management, beneficially owned more than 5% of the
shares of Common Stock of the Company outstanding at such date, the number of
shares owned by each of such persons, and the percentage of the outstanding
shares represented thereby.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) CLASS
------------------- ------------------------- ----------
<S> <C> <C>
Safeguard Scientifics, Inc. (2).......... 8,597,389 15.3%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Pilgrim Baxter & Associates (3).......... 4,788,300 8.5%
1255 Drummers Lane, Suite 300
Wayne, PA 19087
</TABLE>
- --------
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares.
(2) Shares are held of record by Safeguard Scientifics (Delaware), Inc., a
wholly-owned subsidiary of Safeguard Scientifics, Inc. ("Safeguard").
(3) Pilgrim Baxter & Associates has sole investment power with respect to all
shares shown and sole voting power with respect to 4,425,900 of the shares
shown. Pilgrim Baxter & Associates does not have any voting power with
respect to 362,400 of the shares shown. Information obtained from Schedule
13G filed by Pilgrim Baxter & Associates with the Securities and Exchange
Commission (the "Commission") on or about February 17, 1998 and from
Pilgrim Baxter & Associates.
2
<PAGE>
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office until the
next annual meeting of stockholders and until their successors shall have been
elected and qualified. Shares represented by all proxies received by the Board
of Directors and not so marked as to withhold authority to vote for any
individual director or for any group of directors will be voted (unless one or
more nominees are unable or unwilling to serve) for the election of the
nominees named below. The Board of Directors knows of no reason why any such
nominee should be unable or unwilling to serve, but if such should be the
case, proxies will be voted or not voted in accordance with the judgment of
the persons named as proxies in the proxies.
The nominees for director are James K. Sims, Warren V. Musser, Robert E.
Keith, Jr., Jack L. Messman, John W. Poduska, Sr., Ph.D., James I. Cash, Jr.,
Ph.D. and James D. Robinson III. All seven nominees are currently directors of
the Company.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James K. Sims (1)......... 51 Chief Executive Officer, President and Director
Arthur M. Toscanini....... 55 Executive Vice President, Finance, Chief
Financial Officer and Treasurer
William A. Seibel......... 46 Executive Vice President, Operations--Americas
Timothy A. Ramos.......... 34 Executive Vice President, Enterprise Resource
Solutions
Quentin J.F. Baer......... 49 Executive Vice President, Cambridge Management
Consulting
Ian P. Clarkson........... 43 Executive Vice President, Cambridge Management
Consulting
Gordon R. Brooks.......... 40 Senior Vice President, Sales
Chester A. Ciccarelli..... 54 Senior Vice President, Field Operations,
Enterprise Resource Solutions
Malcolm M. Frank.......... 31 Senior Vice President, Marketing
James P. O'Hare........... 39 Senior Vice President, General Counsel and
Secretary
John Piccone.............. 37 Senior Vice President, Mid-Atlantic and New York
Theo Schnitfink........... 39 Senior Vice President, Central and Southern
Europe
I. Allen Shaheen.......... 35 Senior Vice President, European Operations
Laura Zak................. 33 Senior Vice President, Human Resources
Warren V. Musser (1)(2)... 71 Chairman of the Board and Director
James I. Cash, Jr., Ph.D. 50 Director
(3)......................
Robert E. Keith, Jr. 56 Director
(1)(3)...................
Jack L. Messman (3)(4).... 57 Director
John W. Poduska, Sr., 60 Director
Ph.D. (2)................
James D. Robinson III (4). 62 Director
</TABLE>
- --------
(1) Member of Executive Committee.
(2) Member of Management Resource Committee.
(3) Member of Audit Committee.
(4) Member of Nominating Committee.
3
<PAGE>
JAMES K. SIMS joined the Company in February 1991 and since that time has
served as its Chief Executive Officer, President and as a director. From
September 1990 until February 1991, Mr. Sims was an independent management
consultant. From October 1985 until September 1990, Mr. Sims served as Chief
Executive Officer and President of Concurrent Computer Corporation, a computer
hardware manufacturer ("Concurrent"). From September 1988 until March 1991,
Mr. Sims also served as Chairman of the Board of Concurrent. Mr. Sims is also
a director of C.P. Clare Corporation and Security Dynamics Technologies, Inc.
ARTHUR M. TOSCANINI joined the Company in November 1991 and serves as its
Executive Vice President, Finance, Chief Financial Officer and Treasurer. From
November 1991 to October 1996, Mr. Toscanini served as the Company's Senior
Vice President, Finance. From July 1985 until November 1991, Mr. Toscanini
served as Vice President, Controller of Concurrent.
WILLIAM A. SEIBEL joined the Company in January 1992 and serves as its
Executive Vice President, Operations-Americas. From July 1995 to October 1996,
Mr. Seibel served as the Company's Senior Vice President of International
Operations. From January 1992 until July 1995, Mr. Seibel served as the
Company's Vice President of Operations. From June 1991 until January 1992, Mr.
Seibel served as Senior Vice President of Operations for AGS Management
Systems, a project management and methodology tools company. From October 1989
until June 1991, Mr. Seibel served as Senior Vice President of Technology and
Product Development for Intersolv, Inc. (formerly Index Technology), a
computer software corporation. From January 1988 until October 1989, Mr.
Seibel served as Vice President of Development for Dun & Bradstreet Software
(formerly McCormack & Dodge), a computer software corporation.
TIMOTHY A. RAMOS joined the Company in November 1996 in connection with the
Company's acquisition of Ramos & Associates, Inc. and serves as the Company's
Executive Vice President, Enterprise Resource Solutions. From December 1991 to
November 1996, Mr. Ramos served as President and Chief Executive Officer of
Ramos & Associates, Inc.
QUENTIN J.F. BAER joined the Company in November 1997 in connection with the
Company's acquisition of Peter Chadwick Holdings Limited, a strategic
management consulting company (now a wholly-owned subsidiary of the Company)
("Peter Chadwick") and serves as the Company's Executive Vice President,
Cambridge Management Consulting. He is also Chairman of Peter Chadwick. Prior
to joining the Company Mr. Baer was Chairman of Peter Chadwick from 1990 to
November 1997.
IAN P. CLARKSON joined the Company in November 1997 in connection with the
Company's acquisition of Peter Chadwick and serves as the Company's Executive
Vice President, Cambridge Management Consulting. Prior to joining the Company,
Mr. Clarkson was Chief Executive Officer of Peter Chadwick from 1987 to 1997.
GORDON R. BROOKS joined the Company in June 1991 and serves as its Senior
Vice President, Sales. From November 1992 to October 1996, Mr. Brooks served
as the Company's Vice President, Sales North America. From June 1991 to
November 1992, Mr. Brooks served as the Company's Regional Sales Manager.
CHESTER A. CICCARELLI joined the Company in November 1996 in connection with
the Company's acquisition of Ramos & Associates, Inc. and serves as the
Company's Senior Vice President, Field Operations, Enterprise Resource
Solutions. From November 1996 to November 1997, Mr. Ciccarelli served as the
Company's Vice President, Field Operations, Enterprise Resource Solutions.
From March 1995 to November 1996, Mr. Ciccarelli served as General Manager of
Sales and Delivery for Ramos & Associates, Inc., an
4
<PAGE>
enterprise systems implementation and consulting company. From December 1991
to March 1995, Mr. Ciccarelli was Vice President of Sales and Marketing, North
America for TRW Financial Systems, a financial services company.
MALCOLM M. FRANK joined the Company in 1992 and serves as its Senior Vice
President, Marketing. From January 1997 to February 1998, Mr. Frank served as
the Company's Vice President, Network and Educational Services. From January
1994 to December 1996, Mr. Frank served as the Company's Vice President,
Marketing. From 1992 until January 1994, Mr. Frank served as the Company's
Director of Marketing.
JAMES P. O'HARE joined the Company in November 1996 and serves as its Senior
Vice President, General Counsel and Secretary. From January 1990 to November
1996, Mr. O'Hare was a partner in the law firm of Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts where he was an associate attorney from August 1985
to December 1989. From September 1983 to June 1985, Mr. O'Hare was an
associate attorney in the law firm of Mayer, Brown & Platt, Chicago, Illinois.
JOHN PICCONE joined the Company in November 1993 and serves as its Senior
Vice President, Mid-Atlantic and New York. From October 1996 to November 1997,
Mr. Piccone served as the Company's Regional Business Manager of the Mid-
Atlantic Region. From January 1995 to October 1996, Mr. Piccone served as the
Company's Group Business Manager-New York Group. From November 1993 to January
1995, Mr. Piccone served the Company as a Client Partner. From January 1991
until November 1993, Mr. Piccone was Chief Information Officer of Subaru of
America, an automobile manufacturer.
THEO SCHNITFINK joined the Company in January 1994 and serves as its Senior
Vice President, Central and Southern Europe. From January 1995 to January
1997, Mr. Schnitfink served as the Company's Vice President, Central Europe.
From January 1994 to January 1995, Mr. Schnitfink served as the Company's
Managing Director of Cambridge Technology Partners (Benelux). From 1991 to
1994, Mr. Schnitfink was Vice President of the consulting organization of
Getronics, a technology consulting firm.
I. ALLEN SHAHEEN joined the Company in September 1991 and serves as its
Senior Vice President, European Operations. From October 1992 to October 1996,
Mr. Shaheen served as the Company's Vice President, Western Operations. From
September 1991 to October 1992, he served as Director of Operations and
Director of Operations Planning. From April 1989 to July 1991, Mr. Shaheen
served as manager, BBN Software Products Corporation, a software development
and technology consulting firm.
LAURA ZAK joined the Company in February 1991 and serves as its Senior Vice
President, Human Resources. From January 1997 to November 1997, Ms. Zak served
as the Company's Senior Vice President, Domains. From November 1996 to January
1997, Ms. Zak served as the Company's Vice President, Domains. From October
1993 to November 1996, Ms. Zak served as the Company's Vice President of
Operations Planning. From May 1995 to October 1995, she also served as Group
Manager for the Company's Lansing, Michigan office. From February 1991 to
October 1993, Ms. Zak held many positions with the Company, including Client
Partner and Director of Operations Planning.
WARREN V. MUSSER became a director in March 1991 and Chairman of the Board
in December 1992 and has been Chairman of the Board and Chief Executive
Officer of Safeguard Scientifics, Inc., an entrepreneurial technology company,
since 1968 and President from November 1993 until February 1996. Mr. Musser is
also a director of CompuCom Systems, Inc., Coherent Communication Systems
Corporation and National Media Corporation. Mr. Musser is also a member of the
executive committee of Technology Leaders Management L.P. and Radnor Venture
Management Company.
5
<PAGE>
JAMES I. CASH, JR., PH.D. became a director in September 1995 and has been
the James E. Robison Professor of Business Administration at the Graduate
School of Business Administration at Harvard University since 1988. From 1992
until 1995, Dr. Cash served as the Chairman of the Harvard University MBA
Program. Dr. Cash is also a director of Knight-Ridder, Inc., State Street
Boston Corporation, Tandy Corp., The Chubb Corporation, WinStar
Communications, Inc., and General Electric Corporation. Mr. Cash serves on the
Compensation Committee of Tandy Corp.
ROBERT E. KEITH, JR. became a director in March 1991 and has been a Managing
Director since December 1991 and a General Partner since 1995 of Technology
Leaders Management L.P., a venture capital fund, and a Managing Director and
General Partner of Technology Leaders Management II L.P., a venture capital
fund, since December 1994. Mr. Keith has also been a member of the executive
committee of Radnor Venture Management Company, the general partner of Radnor
Venture Partners, L.P., since July 1989. From July 1991 until February 1996,
Mr. Keith was President and Chief Operating Officer of Technology Leaders
Management, Inc. and since February 1996 he has been President and Chief
Executive Officer. Since July 1989, Mr. Keith has been a member of the
executive committee of Technology Leaders Management, L.P., a General Partner
of Technology Leaders, L.P., since December 1991. Mr. Keith is also President,
Chief Executive Officer and a Managing Director of TL Ventures III LLC, the
management company for TL Ventures III L.P., a venture capital fund, and its
associated venture capital funds. Mr. Keith served as Vice Chairman of
Fidelity Bank, N.A., a national bank and a subsidiary of First Fidelity
BanCorp, from February 1987 to July 1989. Mr. Keith is also a director of Sun
Source, Inc., Safeguard Scientifics, Inc. and National Media Corporation.
JACK L. MESSMAN is the Chairman, Chief Executive Officer and a director of
Union Pacific Resources Group, Inc., an oil and gas exploration and production
company ("UPRG"). Mr. Messman has been the Chairman and Chief Executive
Officer of UPRG since October 1996. From May 1991 to October 1996, Mr. Messman
was the President and Chief Executive Officer of Union Pacific Resources
Company. From 1988 to May 1991, Mr. Messman was Chairman of the Board of
Directors, and Chief Executive Officer of USPCI, Inc., a former subsidiary of
Union Pacific Corporation. Prior to joining USPCI, he was a Managing Director
of Mason Best Company of Houston, an investment banking firm, from 1986 to
1988, and also served as Chairman of the Board of Directors and Chief
Executive Officer of Somerset House Corporation, a publishing company owned by
Mason Best. From 1983 to 1986, Mr. Messman was Executive Vice President and a
member of the Board of Directors of Warner Amex Cable Communications, Inc. He
was Executive Vice President and a member of the Board of Directors of
Safeguard Scientifics, Inc., from 1981 to 1983, and also served as President
and Chief Executive Officer of Novell, Inc. from 1982 to 1983. Mr. Messman
currently is also a director of Novell, Inc., Safeguard Scientifics, Inc.,
Tandy Corp. and USDATA Corporation. Mr. Messman serves on the Compensation
Committee of Tandy Corp. Mr. Messman has been a director of the Company since
October 1992.
JOHN W. PODUSKA, SR., PH.D. became a director in September 1992 and has been
the Chairman of Advanced Visual Systems, Inc., a provider of visualization
software, since January 1992. From December 1989 until December 1991, Dr.
Poduska was President and Chief Executive Officer of Stardent Computer, Inc.,
a computer manufacturer. From December 1985 until December 1989, Dr. Poduska
was founder, Chairman and Chief Executive Officer of Stellar Computer, Inc., a
computer manufacturer and the predecessor of Stardent Computer, Inc. Prior to
founding Stellar Computer, Inc., Dr. Poduska founded Apollo Computer Inc. and
Prime Computer Inc. Dr. Poduska is also a director of Union Pacific Resources
Group, Inc. and Safeguard Scientifics, Inc.
JAMES D. ROBINSON III became a director in December 1995 and is Chairman and
Chief Executive Officer of RRE Investors, LLC, a private venture investment
firm, and Chairman of Violy Byorum & Partners Holdings,
6
<PAGE>
LLC, a private firm specializing in financial advisory and investment banking
activities in Latin America. He is Chairman, Chief Executive Officer and sole
shareholder of J.D. Robinson Incorporated, a strategic consulting company. He
previously served as Chairman and Chief Executive Officer of American Express
Company from 1977 to 1993, a financial services company. Mr. Robinson is a
director of Bristol-Myers Squibb Company, The Coca-Cola Company, First Data
Corporation, Union Pacific Corporation and The Coleman Company.
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company held four meetings during 1997. The
Management Resource Committee, of which Mr. Musser and Dr. Poduska are the
current members, reviews and recommends the compensation arrangements for
senior management of the Company, including salaries, bonuses and grants of
options to purchase shares under the Company's 1991 Plan. The Management
Resource Committee also administers the Company's 1991 Plan and recommends
option grants pursuant to such plan, subject to the approval of the Board of
Directors. The Management Resource Committee held eight meetings during 1997.
The Executive Committee, of which Messrs. Sims, Musser and Keith are members,
has the authority to perform functions on behalf of the full Board of
Directors between meetings, except those functions that are required by law to
be performed by the full Board of Directors, and held two meetings during
1997. The Audit Committee, of which Messrs. Keith, Cash and Messman are
members, recommends the firm to be appointed as independent accountants to
audit the Company's financial statements, discusses the scope and results of
the audit with the independent accountants and reviews with management and the
independent accountants the Company's interim and year-end operating results.
The Audit Committee also considers the adequacy of the internal accounting
controls and audit procedures of the Company and reviews the non-audit
services to be performed by the independent accountants. The Audit Committee
held three meetings during 1997. The Nominating Committee, of which Messrs.
Messman and Robinson are members, reviews and makes recommendations regarding
candidates for service on the Company's Board of Directors. The Nominating
Committee will consider nominees recommended by stockholders. Any such
recommendations should be submitted in writing to the Secretary of the Company
at the Company's principal executive offices in accordance with the nominating
procedures set forth in the Company's By-laws. The Nominating Committee was
established in March 1998 and, accordingly, held no meetings in 1997. The
current membership of the Committees was determined by the Board of Directors
on March 23, 1998. During 1997, no director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors and
(ii) the total number of meetings held by all committees of the Board on which
such director served.
7
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information as of the Record Date with respect to
beneficial ownership of shares of the Company's Common Stock by all directors
and all executive officers named in the Summary Compensation Table set forth
below under "Compensation and Other Information Concerning Executive Officers
and Directors--Executive Compensation" individually, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS (2)
- ---------------- ------------------------ ----------
<S> <C> <C>
James K. Sims (3).......................... 2,266,327 4.0%
Arthur M. Toscanini (4).................... 220,785 *
William A. Seibel (5)...................... 124,128 *
Chester A. Ciccarelli (6).................. 44,301 *
Christopher H. Greendale (7)............... 87,576 *
Warren V. Musser (8)....................... 390,517 *
James I. Cash, Jr., Ph.D. (9).............. 96,874 *
Robert E. Keith, Jr. (10).................. 102,906 *
Jack L. Messman (11)....................... 71,124 *
John W. Poduska, Sr., Ph.D. (12)........... 207,749 *
James D. Robinson III (13)................. 50,811 *
All directors and executive officers as a
group (20 persons)(14).................... 5,464,190 9.4%
</TABLE>
- --------
* Less than one percent.
(1) Unless otherwise indicated, the named person possesses sole voting and
investment power with respect to the shares. The shares shown include
shares issuable pursuant to options held by the respective person that
may be exercised within 60 days after the Record Date ("Presently
Exercisable Options").
(2) Percentages of ownership are based upon 56,060,473 shares of Common Stock
issued and outstanding as of the Record Date. Shares of Common Stock
issuable pursuant to Presently Exercisable Options are deemed outstanding
for computing the percentage ownership of the person holding such
Presently Exercisable Options, but are not deemed outstanding for the
percentage ownership of any other person.
(3) Includes 818,429 shares issuable pursuant to Presently Exercisable
Options.
(4) Includes 140,773 shares issuable pursuant to Presently Exercisable
Options.
(5) Includes 113,857 shares issuable pursuant to Presently Exercisable
Options.
(6) Includes 3,854 shares issuable pursuant to Presently Exercisable Options.
(7) Includes 28,634 shares issuable pursuant to Presently Exercisable
Options. Mr. Greendale ceased to be an executive officer of the Company
as of January 1, 1998.
(8) Includes 2,500 shares issuable pursuant to Presently Exercisable Options.
Does not include 8,597,389 shares beneficially owned by Safeguard. Mr.
Musser disclaims beneficial ownership of the shares beneficially owned by
Safeguard.
(9) Includes 96,874 shares issuable pursuant to Presently Exercisable
Options.
(10) Includes 2,500 shares issuable pursuant to Presently Exercisable Options.
Does not include 8,597,389 shares beneficially owned by Safeguard. Mr.
Keith disclaims beneficial ownership of the shares beneficially owned by
Safeguard.
(11) Includes 65,624 shares issuable pursuant to Presently Exercisable
Options. Does not include 8,597,389 shares beneficially owned by
Safeguard. Mr. Messman disclaims beneficial ownership of the shares
beneficially owned by Safeguard.
8
<PAGE>
(12) Includes 131,249 shares issuable pursuant to Presently Exercisable
Options. Does not include 8,597,389 shares beneficially owned by
Safeguard. Dr. Poduska disclaims beneficial ownership of the shares
beneficially owned by Safeguard.
(13) Includes 47,811 shares issuable pursuant to Presently Exercisable
Options.
(14) Includes 1,885,297 shares issuable pursuant to Presently Exercisable
Options. Does not include 87,576 shares owned by, or issuable pursuant to
Presently Exercisable Options to, Mr. Greendale, who was not an executive
officer of the Company as of the Record Date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1997, Cambridge Technology Capital Fund I L.P. (the "Fund"), a
venture capital investment partnership, was formed with committed capital of
approximately $25 million. The Fund intends to invest in expansion stage,
private companies providing products and services within areas of the
Company's strategic expertise. The Company sponsored the Fund to take
advantage of investment opportunities in emerging technology companies which
the Fund can identify and evaluate by leveraging the information the Company
obtains through its continued evaluation of new and emerging technologies. The
Fund is a limited partnership, and a wholly-owned subsidiary of the Company
acts as the sole general partner of the Fund's general partner. In general,
twenty percent of the cumulative net profits of the Fund will be paid to the
Fund's general partner, of which the Company and the Fund's managing director
are the sole limited partners. Capital commitments to the Fund are expected to
be called by the Fund over a three-year period. The Company's capital
commitment to the Fund is approximately $6 million. The balance of the Fund's
capital commitments have been provided primarily by institutional investors
and directors, officers and employees of the Company, including capital
commitments directly or through an affiliated entity by the following
executive officers and directors of the Company in the following amounts:
Quentin J.F. Baer ($250,000 by a trust of which Quentin Baer is a
beneficiary); Gordon R. Brooks ($250,000); James I. Cash, Jr. ($50,000); Ian
P. Clarkson ($250,000 by a trust of which Ian Clarkson and his family members
are beneficiaries); Malcolm M. Frank ($100,000); Christopher H. Greendale (a
former executive officer of the Company, $300,000); Jack L. Messman
($200,000); James P. O'Hare ($100,000); John Piccone ($50,000); John W.
Poduska, Sr. ($1,000,000 by the Poduska Family Limited Partnership, a
partnership of which Dr. Poduska is a limited partner and President of the
general partner); Timothy A. Ramos ($250,000); James D. Robinson III
($100,000); Theo Schnitfink ($100,000); William A. Seibel ($250,000); James K.
Sims ($701,526); Jean C. Tempel (a former director of the Company,
$1,000,000); Arthur M. Toscanini ($250,000); and Laura Zak ($100,000). SSI
Partnership Holdings, Inc., a wholly-owned subsidiary of Safeguard (which is a
holder of 15.3% of the Company's Common Stock as of the Record Date), has made
a capital commitment of $5 million to the Fund. TL Ventures III L.P. and two
related funds (the "TL Ventures Funds") have made an aggregate capital
commitment of $2,316,000 to the Fund. Mr. Keith, a director of the Company, is
President, Chief Executive Officer and a Managing Director of the entity which
serves as the management company for the TL Ventures Funds and as the direct
or indirect general partner for two of the TL Ventures Funds.
In June 1992, the Company entered into a lease for its Cambridge,
Massachusetts headquarters. Payments by the Company under this lease for 1997
were $859,000. The approximate minimum payments due from the Company under
this lease for 1998 are $900,000. These payments include base rent charges, a
management fee equal to one percent of base rent and a monthly parking charge.
Annual increases in base rent under the lease are based on increases in the
Consumer Price Index--Urban Wage Earners and Clerical Workers, U.S. City
Average, All Items. The Company is also responsible for all operating
expenses, real estate taxes and utility charges, and most insurance and
maintenance obligations for the leased premises. The leased premises include
approximately 62,000 square feet of rentable floor space. The lease term is
for an initial term of fifteen years,
9
<PAGE>
with two options to extend for periods of five years each. This facility is
owned by a trust of which Mr. Musser, a director of the Company, is the sole
beneficiary. The Company's Board of Directors believes the lease terms are no
less favorable to the Company than could be obtained by the Company from an
unrelated third party.
During 1997, the Company received consulting services from J.D. Robinson
Incorporated. The Company paid $200,000 for these services. Mr. Robinson, a
director of the Company, is Chairman and Chief Executive Officer and the sole
shareholder of J.D. Robinson Incorporated. J.D. Robinson Incorporated is
continuing to provide consulting services to the Company in 1998.
In April 1997, the Company, with the approval of the Management Resource
Committee and the Board of Directors, made loans to Messrs. Toscanini and
Seibel, executive officers of the Company, in the amount of $565,464 and
$376,000, respectively, to enable such persons to pay taxes due in April 1997
resulting from option exercises during 1996. The interest rate on such loans
was 5.91% and such loans were payable in full in October 1997. The full
amounts of such loans and accrued interest thereon were repaid to the Company
by Messrs. Toscanini and Seibel in May 1997 and July 1997, respectively.
10
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table shows compensation information with respect to services
rendered to the Company in all capacities during the years ended December 31,
1997, 1996 and 1995 for the Chief Executive Officer and the four other most
highly compensated executive officers of the Company in 1997 (with the Chief
Executive Officer, collectively, the "Named Officers"). In April of 1997, in
order to re-establish the incentive nature of outstanding stock options with
exercise prices greater than the then current fair market value of the
Company's Common Stock, the Company offered to each holder of an outstanding
stock option granted under the 1991 Plan during the period from October 1996
to March 1997 the opportunity to exchange that option for an option covering
an equivalent number of shares with an exercise price equal to such then
current fair market value of the Company's Common Stock (the "April 1997
Option Grants"). Options granted under the 1991 Plan generally vest 25% on the
first anniversary of the date of grant and 2.083% per month thereafter. The
vesting schedule of options granted in the April 1997 Option Grants was re-
started so that they vest based on the April 24, 1997 grant date rather than
the date of grant of the original option which was exchanged in connection
with the April 1997 Option Grants. In addition, options granted in the April
1997 Option Grants expire in equal installments on each of the fifth, sixth,
seventh and eighth anniversaries of the April 24, 1997 grant date, rather than
ten years from the date of grant, as was the case with the original options
which were exchanged in connection with the April 1997 Option Grants. See "--
Report of Management Resource Committee on Executive Compensation" and "--
April 1997 Option Grants." In accordance with the rules of the Commission,
option grants shown in the column "Long Term Compensation--Options" for 1997
in the Summary Compensation Table below include both the number of stock
options granted in 1997 and the number of stock options issued in the April
1997 Option Grants in exchange for outstanding options granted prior to 1997.
Executive officers of the Company elected to waive their individual bonuses
for 1997 in order to increase the cash bonus pool available to the other
employees of the Company. The Management Resource Committee supported this
1997 bonus allocation decision. This allocation decision did not increase or
decrease the aggregate amount of bonuses paid to employees under the Company's
1997 bonus plans. See "--Report of Management Resource Committee on Executive
Compensation--Executive Bonus Plan."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION(2)
FISCAL ----------------- --------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) OPTIONS(#) COMPENSATION
--------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
James K. Sims.......... 1997 $500,000 $ -- 325,000 $10,295(4)
Chief Executive
Officer and President 250,000(*)
1996 450,000 420,750 250,000 9,570(4)
1995 365,000 365,000 375,000 160,035(5)
William A. Seibel...... 1997 $260,000 $ -- 85,000(**) $ 9,983(6)
Executive Vice
President,
Operations-- 100,000(*)
Americas 1996 226,500 120,913 100,000 3,988(6)
1995 170,000 85,000 180,000 1,700(6)
Arthur M. Toscanini.... 1997 $250,000 $ -- 65,000(**) $ 7,428(7)
Executive Vice
President, Finance, 50,000(*)
Chief Financial
Officer and Treasurer 1996 231,250 117,938 50,000 6,741(7)
1995 185,000 110,000 150,000 2,867(7)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION(2)
FISCAL ----------------- --------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) OPTIONS(#) COMPENSATION
--------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Christopher H.
Greendale (8)......... 1997 $225,000 $ -- 3,000(**) $8,837(9)
Executive Vice
President, Marketing 30,000(*)
1996 210,000 107,000 30,000 6,914(9)
1995 175,000 110,000 120,000 3,062(9)
Chester A. Ciccarelli
(10).................. 1997 $175,000 $67,128(11) 40,000 $2,906(12)
Senior Vice President,
Field Operations,
Enterprise Resource
Solutions
</TABLE>
- --------
(*) Represents stock options that were issued in the April 1997 Option Grants
in exchange for an equivalent number of previously outstanding stock
options granted in October or December of 1996 which had an exercise
price greater than the fair market value of the Company's Common Stock on
April 24, 1997. The vesting schedule for these options issued in the
April 1997 Option Grants were re-started based on the April 24, 1997
grant date. See "--Report of Management Resource Committee on Executive
Compensation" and "--April 1997 Option Grants."
(**) The number of stock options shown as granted to Messrs. Seibel, Toscanini
and Greendale excludes options for 10,000, 5,000 and 3,000 shares,
respectively, which were granted in 1997 and which were exchanged in
connection with the April 1997 Option Grants for an equivalent number of
stock options (which are shown as granted in the table) with an exercise
price equal to the fair market value of the Company's Common Stock on
April 24, 1997 and a re-started vesting schedule. See "--Report of
Management Resource Committee on Executive Compensation" and "--April
1997 Option Grants."
(1) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted in those
instances where the aggregate amount of such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total of annual salary and bonus for the executive officer for such
year.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts during
1997, 1996 or 1995.
(3) Represents payments under the Company's Executive Bonus Plan, except with
respect to Mr. Ciccarelli.
(4) Includes Company contribution of $4,750 to 401(k) plan in each of 1997
and 1996. Includes premiums paid by the Company for supplemental
disability insurance of $5,545 and $4,820 in 1997 and 1996, respectively.
(5) Includes Company contribution of $2,310 to 401(k) plan. Includes $4,575
premium paid by the Company for supplemental disability insurance. In
December 1991, the Company loaned Mr. Sims $104,150, under a promissory
note of Mr. Sims accruing interest at an annual rate of 7.1%. In April
1992, the Company loaned Mr. Sims an additional $49,000 under a
promissory note accruing interest at an annual rate of 5.2%. These notes
were paid in full in February 1995 pursuant to an agreement providing for
the payment to Mr. Sims (or to the Company with respect to these loans)
of $153,150 in satisfaction of a contractual condition to be employed by
the Company on February 28, 1995.
(6) Includes Company contributions to 401(k) plan of $4,750, $3,988 and
$1,700 in 1997, 1996 and 1995, respectively. Includes premium paid by the
Company for supplemental disability insurance of $5,233 in 1997.
(7) Includes Company contributions to 401(k) plan of $4,750, $4,063 and
$1,850 in 1997, 1996 and 1995, respectively. Includes premiums paid by
the Company for supplemental disability insurance of $2,678, $2,678 and
$1,017 in 1997, 1996 and 1995, respectively.
(8) Mr. Greendale ceased to be an executive officer of the Company as of
January 1, 1998.
(9) Includes Company contributions to 401(k) plan of $4,500 and $3,688 in
1997 and 1996, respectively. Includes premiums paid by the Company for
supplemental disability insurance of $4,337, $3,226 and $3,062 in 1997,
1996 and 1995, respectively.
12
<PAGE>
(10) Mr. Ciccarelli was appointed an executive officer of the Company in
November 1997 and was not an employee of the Company in 1995.
(11) Mr. Ciccarelli's bonus relates to the period in 1997 during which Mr.
Ciccarelli was not an executive officer of the Company.
(12) Represents Company contribution to 401(k) plan.
Mr. Sims is entitled to payments equal to twelve months' salary at his then
current base salary upon the termination of his employment with the Company,
payable over a twelve month period. Mr. Toscanini is entitled to payments
equal to six months' salary at his then current base salary upon the
termination of his employment with the Company, payable over a six month
period. In the event of a merger, consolidation, liquidation or sale of
substantially all of the assets of the Company, options granted to executive
officers become fully exercisable immediately prior to such event and
terminate immediately after such event.
OPTION GRANTS IN 1997
The following table shows information regarding grants of stock options to
the Named Officers during the year ended December 31, 1997. The Company did
not grant any stock appreciation rights in 1997. In accordance with the rules
of the Commission, option grants shown in the following table include both the
number of stock options granted in 1997 and the number of stock options issued
in the April 1997 Option Grants in exchange for outstanding options granted
prior to 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
POTENTIAL
PERCENT OF REALIZABLE VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(5)
OPTIONS FISCAL PRICE PER EXPIRATION ----------------------------
NAME GRANTED(1) YEAR(2) SHARE (3) DATE (4) 5% 10%
- ---- ---------- ------------- --------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James K. Sims............... 325,000 5.5% $35.000 12/15/02-12/15/05 $ 4,268,278 $ 9,880,259
250,000(6) 4.2% 22.875 4/24/02-4/24/05 2,145,865 4,967,273
William A. Seibel........... 75,000 1.3% $35.000 12/15/02-12/15/05 $ 984,987 $ 2,280,060
10,000(7) 0.2% 22.875 4/24/02-4/24/05 85,835 198,691
100,000(6) 1.7% 22.875 4/24/02-4/24/05 858,345 1,986,929
Arthur M. Toscanini......... 60,000 1.0% $35.000 12/15/02-12/15/05 $ 787,990 $ 1,824,048
5,000(7) 0.1% 22.875 4/24/02-4/24/05 42,917 99,345
50,000(6) 0.8% 22.875 4/24/02-4/24/05 429,173 993,455
Christopher H. Greendale(8). 3,000(7) 0.1% $22.875 4/24/02-4/24/05 $ 25,750 $ 59,607
30,000(6) 0.5% 22.875 4/24/02-4/24/05 257,504 596,073
Chester A. Ciccarelli....... 40,000 0.7% $35.000 12/15/02-12/15/05 $ 525,327 $ 1,216,032
</TABLE>
- --------
(1) Each option granted in 1997 to the Named Officers becomes vested and
exercisable with respect to 25% of the shares of Common Stock subject to
such option as of the first anniversary of the date of grant, and an
additional 2.083% of the shares subject to such option become vested and
exercisable as of each calendar month thereafter, so that each such option
becomes exercisable in full as of the fourth anniversary of the date of
grant. In addition, such options become fully exercisable immediately
prior to the merger, consolidation, liquidation or sale of substantially
all of the assets of the Company and terminate immediately after the
effective date of such merger, consolidation, liquidation or sale. Such
options granted to a Named Officer generally terminate three months after
the Named Officer ceases to be employed by the Company, except in cases of
death or disability.
13
<PAGE>
(2) For purposes of this calculation, the total number of options granted to
employees in 1997 excludes options granted during 1997 which were
exchanged in connection with the April 1997 Option Grants, but includes
options issued in the April 1997 Option Grants in exchange for outstanding
options granted prior to 1997.
(3) The exercise price per share of each option was determined by the
Management Resource Committee to be equal to the fair market value per
share of Common Stock on the date of grant.
(4) Each option will expire with respect to 25% of the shares subject to such
option on each of the fifth, sixth, seventh and eighth anniversaries of
the date of grant, with such expiration to apply to shares subject to the
option in the order in which they vest.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options if each portion of the option were exercised just prior
to its expiration. These gains are based on assumed rates of appreciation
of 5% and 10% compounded annually from the date the respective options
were granted to their expiration dates. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the options or sale of the
underlying shares. The actual gains, if any, on the stock option exercises
will depend on the future performance of the Common Stock, the
optionholder's continued employment through the option period, the date on
which the options are exercised and the date on which the underlying
shares of Common Stock are sold.
(6) Represents stock options that were issued in the April 1997 Option Grants
with an exercise price equal to the fair market value of the Company's
Common Stock ($22.875) on the date of the April 1997 Option Grants (April
24, 1997) in exchange for an equivalent number of previously outstanding
stock options granted in October or December of 1996 which had an exercise
price greater than the fair market value of the Company's Common Stock on
April 24, 1997. See "--Report of Management Resource Committee on
Executive Compensation" and "--April 1997 Option Grants."
(7) Represents stock options that were issued in the April 1997 Option Grants
with an exercise price equal to the fair market value of the Company's
Common Stock ($22.875) on the date of the April 1997 Option Grants (April
24, 1997) in exchange for an equivalent number of previously outstanding
stock options granted in 1997 (the "March 1997 Options") which had an
exercise price greater than the fair market value of the Company's Common
Stock on April 24, 1997, but does not re-count the March 1997 Options. See
"--Report of Management Resource Committee on Executive Compensation" and
"--April 1997 Option Grants."
(8) Mr. Greendale ceased to be an executive officer of the Company as of
January 1, 1998.
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information regarding stock option exercises by
the Named Officers and the number and value of the Named Officers' unexercised
options at December 31, 1997.
AGGREGATED OPTION EXERCISES DURING 1997 AND OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James K. Sims........... 355,427 $9,085,335 669,992 875,008 $16,943,502 $15,382,886
William A. Seibel....... 0 0 144,016 290,014 $ 4,263,163 $ 5,283,182
Arthur M. Toscanini..... 140,000 $3,562,513 169,996 220,004 $ 5,207,895 $ 4,316,155
Christopher H. Greendale
(3).................... 122,450 $3,793,265 218,048 115,502 $ 7,453,240 $ 2,875,672
Chester A. Ciccarelli... 0 0 2,784 47,496 $ 40,200 $ 372,755
</TABLE>
- --------
(1) Calculated as the difference between the fair market value of the
underlying securities at the exercise date of the options and the
aggregate exercise price. Actual gains on stock option exercises depend on
the value of the underlying securities on the date such securities are
actually sold.
14
<PAGE>
(2) Value is based on the difference between the option exercise price and the
fair market value of the Company's Common Stock on December 31, 1997
($41.625 per share, the last reported sales price of the Company's Common
Stock on the Nasdaq National Market on December 31, 1997) multiplied by
the number of shares underlying the option. The actual gains, if any, on
the stock option exercises will depend on the future performance of the
Common Stock, the optionholder's continued employment through the option
period the date on which the options are exercised and the date on which
the underlying shares of Common Stock are sold.
(3) Mr. Greendale ceased to be an executive officer of the Company as of
January 1, 1998.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for their services as directors,
except for reimbursement of expenses incurred in connection with attending
meetings of the Board of Directors and its committees. The Company's non-
employee directors are entitled to participate in the Company's 1995 Non-
Employee Director Stock Option Plan (the "Director Plan"). See "--Non-Employee
Director Stock Options".
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
Non-employee directors of the Company are eligible to participate in the
Company's Director Plan. The Director Plan authorizes the grant of options for
a maximum of 150,000 shares of Common Stock. The number of shares of Common
Stock issuable under the Director Plan or subject to outstanding options is
subject to adjustment for changes in the Company's Common Stock. Each non-
employee director who is not an employee or officer of Safeguard Scientifics,
Inc., or an affiliate of Technology Leaders II L.P. or any related entity,
automatically receives an option for 30,000 shares of Common Stock upon the
date such person is first elected to the Board of Directors. Twenty-five
percent (25%) of each option vests one year after the date of grant and an
additional 2.083% vests monthly thereafter.
The exercise price per share of options granted under the Director Plan is
100% of the fair market value of the Company's Common Stock on the date the
option is granted. Options expire on the tenth anniversary of the date of the
option grant. Options may not be assigned or transferred except by will or by
the laws of descent or distribution and are exercisable only while the
optionee is serving as a director of the Company or within 90 days after the
optionee ceases to serve as a director of the Company (except that if a
director dies or becomes disabled while serving as a director of the Company,
the option is exercisable until the scheduled expiration date of the option).
On December 15, 1997, each non-employee director received an option for
10,000 shares of Common Stock pursuant to the Company's 1991 Plan at an
exercise price equal to the fair market value of the Company's Common Stock on
such date. These options are exercisable as to 25% of such shares one year
after the date of grant and an additional 2.083% vests monthly thereafter.
These options expire with respect to 25% of the shares subject to such options
on each of the fifth, sixth, seventh and eighth anniversaries of the date of
grant, with such expiration to apply to shares subject to the option in the
order in which they vest. In addition, each non-employee director other than
Mr. Musser exchanged an option for 10,000 shares of Common Stock which was
granted to such non-employee director under the 1991 Plan in December 1996 and
which had an exercise price greater than the fair market value of the
Company's Common Stock on April 24, 1997 for an option to purchase an
equivalent number of shares of Common Stock with an exercise price equal to
the fair market value of the Company's Common Stock on April 24, 1997 in
connection with the April 1997 Option Grants. The vesting and expiration
provisions of the options issued to non-employee directors in the April 1997
Option Grants are the same as those described above for the grants made in
December 1997, with the vesting schedule for such options being re-started so
that it is based on the date of the April 1997 Option Grants.
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Jean C. Tempel, a former director of the Company, and John W.
Poduska, Sr. served on the Management Resource Committee of the Board of
Directors, which committee is responsible for setting and administering the
policies which govern executive compensation and the stock ownership programs
of the Company within guidelines and plans approved by the Board of Directors.
Ms. Tempel has made a capital commitment of $1,000,000 to Cambridge Technology
Capital Fund I L.P. (the "Fund"). The Poduska Family Limited Partnership, a
partnership of which Dr. Poduska is a limited partner and President of the
general partner, has made a capital commitment of $1,000,000 to the Fund. See
"Election of Directors--Certain Relationships and Related Transactions."
16
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock for the period beginning
with the Company's initial public offering on April 12, 1993 through December
31, 1997, with the cumulative total return for the Nasdaq Market Index and a
SIC Index that includes organizations in the Company's Standard Industrial
Classification (SIC) code number 7373-Computer Integrated System Design. The
comparison assumes $100 was invested on April 12, 1993 in the Company's Common
Stock and in each of the foregoing indices and assumes reinvestment of
dividends, if any.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-------------------
COMPANY 1993 1993 1994 1995 1996 1997
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CAMBRIDGE TECH PARTNERS 100 315.00 445.00 1150.00 2013.78 2497.50
INDUSTRY INDEX 100 116.26 111.22 179.35 190.36 227.49
BROAD MARKET 100 113.70 119.37 154.84 192.41 235.36
</TABLE>
17
<PAGE>
REPORT OF MANAGEMENT RESOURCE COMMITTEE ON EXECUTIVE COMPENSATION
General
The Company was organized in 1991 to provide information technology
consulting and software development services to organizations with large scale
information processing and distribution needs that are utilizing or migrating
to open systems computing environments. In May 1993, the Company completed its
initial public offering of Common Stock, and in April 1994, the Company
completed its second public offering of Common Stock. The Management Resource
Committee is responsible for setting and administering the policies which
govern executive compensation and the stock ownership programs of the Company
within guidelines and plans approved by the Board of Directors.
Compensation Philosophy and Review
The Company's executive compensation philosophy is to design a compensation
program that enables the Company to attract, retain and motivate high quality
executive officers capable of maximizing stockholder value. The current
compensation program includes three components: base salary; performance-based
cash bonus; and equity incentives. This program rewards executive officers for
long-term strategic management and enhancement of stockholder value by:
providing an opportunity to acquire equity ownership in the Company;
emphasizing both annual and long-term performance; and supporting a
performance-based environment to promote a team-oriented focus for executive
officers. The Management Resource Committee based its recommendations for 1997
in part on its review of compensation survey information compiled by a
management consulting firm concerning base salary, annual incentive
compensation and long-term incentive compensation for the five highest paid
officers at selected companies, including service companies with revenues
between $150 and $300 million.
Annual Base Salary
Base salaries for executive officers are targeted at competitive market
levels for their respective positions, levels of responsibility and
experience. In December 1996, the Management Resource Committee approved the
following base salaries for 1997: Mr. Sims, $500,000; Mr. Seibel, $260,000;
Mr. Toscanini, $250,000; and Mr. Greendale, $225,000.
Executive Bonus Plan
An executive cash bonus plan was established in 1991 and is reviewed and
updated annually. In December 1996, the Management Resource Committee set the
terms for the 1997 Executive Bonus Plan. This Plan established a target for
pre-tax income for 1997 and a cash bonus pool for executive officers based on
achieving target levels. The percentage of the bonus pool available to
executive officers for 1997 depended on the extent to which the pre-tax income
target for 1997 was met. If 1997 pre-tax income equaled or exceeded the
target, 100% of the bonus pool would be available for bonuses; if 1997 pre-tax
income was less than the target but greater than 1996 pre-tax income, a pro-
rated portion of the bonus pool would be made available. No bonuses would be
payable if 1997 pre-tax income was less than the 1996 level. The 1996 pre-tax
income level was exceeded by the Company in 1997 and a portion, but not 100%,
of the bonus pool was available as a result of 1997 performance. Nonetheless,
the executive officers of the Company elected to waive their individual
bonuses for 1997 in order to increase the cash bonus pool available to the
other employees of the Company. The Management Resource Committee supported
this 1997 bonus allocation decision. This allocation decision did not increase
or decrease the aggregate amount of bonuses paid under the Company's 1997
bonus plans.
Equity Incentives
The Management Resource Committee believes that equity compensation aligns
employees' long-term objectives with those of stockholders in striving to
maximize the Company's value. The Company's 1991 Stock
18
<PAGE>
Option Plan provides all employees with the opportunity to receive stock
options. These options typically vest ratably over a four year period. Each
executive officer was granted stock options at the time of hiring and
periodically thereafter.
April 1997 Option Grants
In March 1997 and April 1997, the Management Resource Committee reviewed the
stock options held by the Company's employees (including executive officers)
and directors and concluded that the broad decline of the price of the
Company's Common Stock had resulted in stock options granted pursuant to the
Company's 1991 Stock Option Plan during the fourth quarter of 1996 and early
1997 having exercise prices well above the recent trading prices for the
Common Stock (the "Affected Options"). The Management Resource Committee
considered the following: recent employee turnover; compensation packages
appearing less attractive due to option exercise prices well above the current
market price; intensity in competition for experienced talent in the
information technology marketplace; and the effect on employees of a stock
price decline in light of strong revenue and profit growth. The Management
Resource Committee concluded that the disparity between the exercise price of
the Affected Options and the then current market price of the Company's Common
Stock no longer provided the desired incentive to option holders.
The Management Resource Committee determined it to be in the best interest
of the Company and its stockholders to restore the incentive nature of
Affected Options held by employees (including executive officers) and
directors by offering holders of the Affected Options the opportunity to
exchange the Affected Options for new options with an exercise price equal to
the then current market price of $22.875 per share. The new options have the
same length of vesting periods as the Affected Options (4 years), however, the
vesting re-commenced for the new options beginning on the date of their grant.
Additionally, the new options expire in equal installments on each of the
fifth, sixth, seventh and eighth anniversaries of the date of grant, whereas
the Affected Options expired ten years from the date of grant. The Management
Resource Committee recognized that new vesting periods for these options would
incentives employees to continue employment with the Company. All other terms
and conditions applicable to the Affected Options remained the same.
Inquiries conducted by the Management Resource Committee indicated that
other companies in the high technology industry have been confronted with this
problem and have made similar adjustments to stock options in order to
motivate their employees. The Management Resource Committee also concluded
that the loss of key employees could have a significant adverse impact on the
Company's performance. More than 750 of the Company's employees participated
in the option exchange.
Other Compensation Plans
In December 1997, the Management Resource Committee and the Board of
Directors approved a Deferred Compensation Plan for executive officers and all
vice presidents of the Company. Under the Deferred Compensation Plan, eligible
employees may defer either 5% or 10% of eligible bonus compensation, beginning
with bonus compensation for 1998, which amount the Company will match on a
100% basis. Deferrals and matching amounts are credited to an unfunded account
maintained on the books of the Company and treated as notionally invested in
Common Stock of the Company, based on the average of the closing prices of
such stock over the ten business days immediately preceding the crediting
date. The matching portion vests in 25% installments on each of the next four
anniversaries of the date the match was credited to the account, provided that
the participant has been continuously employed since the crediting date. With
certain exceptions, the vested portion of a participant's account will be paid
in a single payment upon termination of employment.
19
<PAGE>
The Company also has various broad-based employee benefit plans, including
401(k), insurance and other benefit plans for its employees. The Company
offers the 1994 Employee Stock Purchase Plan pursuant to the provisions of
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
under which employees may purchase up to 3,000 shares of Common Stock annually
at a discount to market price; provided, that no employee is allowed to
purchase more than $25,000 of fair market value of such stock in any calendar
year. The 1994 Employee Stock Purchase Plan was approved by the Company's
stockholders at the 1995 Annual Meeting of Stockholders.
Compensation of the Chief Executive Officer
The 1997 base salary for Mr. Sims, the Company's Chief Executive Officer and
President, was set by the Management Resource Committee in December 1996 in
connection with setting the base salaries for the other executive officers as
described above. Like the other executive officers, Mr. Sims was granted stock
options at the time of hiring and periodically thereafter. See "Compensation
and Other Information Concerning Executive Officers and Directors -- Option
Grants in 1997" for a description of option grants to Mr. Sims in 1997. Mr.
Sims, like the other executive officers, elected to waive his cash bonus for
1997 in order to increase the size of the cash bonus pool available to non-
executive employees. Mr. Sims' performance continues to be exceptional on a
quantitative and qualitative basis.
Net income for 1997 was $32,929,000 compared to $24,025,000 in 1996 and
$15,658,000 in 1995. In addition, net revenues increased to $406,672,000 from
$272,878,000 in 1996 and $179,667,000 in 1995. These comparative income and
revenue amounts have been adjusted to give retroactive effect to (i) the
acquisition of Peter Chadwick Holdings Limited in the fourth quarter of 1997;
(ii) the acquisition of NatSoft S.A. and Ramos & Associates, Inc. in the
fourth quarter of 1996; and (iii) the acquisitions of The Systems Consulting
Group, Inc. and Axiom Management Consulting, Inc. in the third and fourth
quarters of 1995, respectively. Return on average stockholders' equity was
26.3% in 1997. The Management Resource Committee believes that, under Mr.
Sims' direction, the Company continues to effectively meet the challenges of
the rapidly changing global demand for information technology consulting,
software development and systems integration services. The Company has
continued to make significant progress toward the achievement of its business
goals, including growth of revenues, new business development through
acquisitions and global expansion, the addition of qualified personnel, and
strengthening of its capital base.
Deductibility of Executive Compensation Expenses
In general, under Section 162(m) of the Code, the Company cannot deduct, for
federal income tax purposes, compensation in excess of $1,000,000 paid to any
Named Officer, except to the extent such excess constitutes performance-based
compensation. The policy of the Company is to qualify future compensation
arrangements to ensure deductibility, except in those limited cases where
stockholder value is maximized by an alternate approach.
THE MANAGEMENT RESOURCE COMMITTEE
John W. Poduska, Sr.
Warren V. Musser
20
<PAGE>
APRIL 1997 OPTION GRANTS
In April of 1997, in order to re-establish the incentive nature of
outstanding stock options with exercise prices greater than the then current
fair market value of the Company's Common Stock, the Company offered to each
holder of an outstanding stock option granted under the 1991 Plan during the
period from October 1996 to March 1997 the opportunity to exchange that option
for an option covering an equivalent number of shares with an exercise price
equal to such then current fair market value of the Company's Common Stock.
Options granted under the 1991 Plan generally vest 25% on the first
anniversary of the date of grant and 2.083% per month thereafter. The vesting
schedule of options granted in the April 1997 Option Grants was re-started so
that they vest based on the April 24, 1997 grant date rather than the date of
grant of the original option which was exchanged in connection with the April
1997 Option Grants. In addition, options granted in the April 1997 Option
Grants expire in equal installments on each of the fifth, sixth, seventh and
eighth anniversaries of the April 24, 1997 grant date, rather than ten years
from the date of grant, as was the case with the original options which were
exchanged in connection with the April 1997 Option Grants. The following table
sets forth information concerning the repricing of stock options held by
executive officers for the one time such repricing has occurred since the
Company's initial public offering in April 1993, including (i) the date of the
repricing (April 24, 1997), (ii) the number of shares subject to such options,
(iii) the market price at the time of repricing ($22.875), (iv) the exercise
price prior to repricing, (v) the new exercise price ($22.875, the market
price at the time of repricing), and (vi) the original option term remaining
at the date of repricing. The Company has not issued, repriced or amended any
stock appreciation rights. See "--Report of Management Resource Committee on
Executive Compensation."
21
<PAGE>
OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE EXERCISE PRICE REMAINING
OPTIONS OF STOCK AT TIME AT TIME OF NEW AT DATE OF
REPRICED OR OF REPRICING OR REPRICING EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT OR AMENDMENT PRICE AMENDMENT
---- ------- ----------- ---------------- -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
James K. Sims........... 4/24/97 250,000 $22.875 $28.125 $22.875 9.7 years
Chief Executive
Officer, President and
Director
William A. Seibel....... 4/24/97 100,000 $22.875 $ 34.00 $22.875 9.4 years
Executive Vice 10,000 $22.875 $25.00 $22.875 (1)
President, Operations--
Americas
Arthur M. Toscanini..... 4/24/97 50,000 $22.875 $34.00 $22.875 9.4 years
Executive Vice 5,000 $22.875 $25.00 $22.875 (1)
President, Finance,
Chief Financial Officer
and Treasurer
Gordon R. Brooks........ 4/24/97 50,000 $22.875 $34.00 $22.875 9.4 years
Senior Vice President, 5,000 $22.875 $25.00 $22.875 (1)
Sales
Malcolm Frank........... 4/24/97 20,000 $22.875 $34.00 $22.875 9.4 years
Senior Vice President, 52,000 $22.875 $25.00 $22.875 (1)
Marketing
James P. O'Hare......... 4/24/97 90,000 $22.875 $27.25 $22.875 9.5 years
Senior Vice President,
General Counsel and
Secretary
Theo Schnitfink......... 4/24/97 30,000 $22.875 $34.00 $22.875 9.4 years
Senior Vice President, 13,000 $22.875 $25.00 $22.875 (1)
Central and Southern
Europe
I. Allen Shaheen........ 4/24/97 60,000 $22.875 $34.00 $22.875 9.4 years
Senior Vice President, 6,000 $22.875 $25.00 $22.875 (1)
European Operations
Laura Zak............... 4/24/97 55,000 $22.875 $34.00 $22.875 9.4 years
Senior Vice President, 2,000 $22.875 $25.00 $22.875 (1)
Human Resources
Christopher H. 4/24/97 30,000 $22.875 $ 34.00 $22.875 9.4 years
Greendale.............. 3,000 $22.875 $25.00 $22.875 (1)
Executive Vice
President, Marketing(2)
Michael A. Korchinsky... 4/24/97 22,000 $22.875 $ 34.00 $22.875 9.4 years
Senior Vice President,
Cambridge Technology
Partners--Cambridge
Management
Consulting(2)
Susan J. Loker.......... 4/24/97 20,000 $22.875 $28.125 $22.875 9.7 years
Senior Vice President,
Human Resources(2)
</TABLE>
- -------
(1) These options were to expire with respect to 25% of the shares subject to
such options on March 12 of each of 2002, 2003, 2004 and 2005, with such
expiration to apply to shares subject to the options in the order in which
they vest.
(2) This person is no longer an executive officer or employee of the Company.
The options issued to this person in the April 1997 Option Grants expired
unexercised because no portion of the options had vested at the time such
person ceased to be an employee of the Company.
22
<PAGE>
PROPOSAL TO AMEND THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The Board of Directors has voted to recommend to the stockholders that the
Company amend its Amended and Restated Certificate of Incorporation (the
"Charter") to increase the number of authorized shares of the Company's Common
Stock, par value $.01 per share, from 120,000,000 shares to 250,000,000
shares. Shares of the Company's Common Stock, including the additional shares
proposed for authorization, do not have preemptive or similar rights.
The Board of Directors believes that the authorized number of shares of
Common Stock should be increased to provide sufficient shares for such
corporate purposes as may be determined by the Board of Directors to be
necessary or desirable. These purposes may include, without limitation:
facilitating broader ownership of the Company's Common Stock by effecting a
stock split or issuing a stock dividend; acquiring other businesses in
exchange for shares of the Company's Common Stock; and raising capital through
the sale of the Company's Common Stock. The Company has no commitments,
agreements or undertakings to issue any such additional shares. The Board of
Directors considers the authorization of additional shares of the Company's
Common Stock advisable to ensure availability of shares for issuance should
the occasion arise. As of the Record Date, there were 56,060,473 shares of
Common Stock issued and outstanding and 12,906,684 shares (16,906,684 shares
if the proposal to amend the Company's 1991 Stock Option Plan (the "1991
Plan") is approved) of Common Stock reserved for issuance pursuant to the 1991
Plan and the Company's other stock-related plans. If the amendment to the
Charter is approved, the Board of Directors will have the authority to issue
approximately 181,032,843 additional shares of Common Stock (177,032,843
additional shares if the proposal to amend the Company's 1991 Plan is
approved), generally without further stockholder approval.
The issuance of additional shares of the Company's Common Stock could have
the effect of diluting earnings per share and book value per share, which
could adversely affect the Company's existing stockholders. Issuance of shares
of the Company's Common Stock could be used to make a change in control of the
Company more difficult or costly by diluting the stock ownership of persons
seeking to obtain control of the Company. The Company is not aware, however,
of any pending or threatened efforts to obtain control of the Company.
Approval of the proposal to amend the Company's Charter will require an
affirmative vote of a majority of the outstanding shares of Common Stock of
the Company entitled to vote on the proposal. The Board of Directors
recommends a vote FOR the proposal to amend the Company's Charter to increase
the number of authorized shares of Common Stock from 120,000,000 shares to
250,000,000 shares.
PROPOSAL TO AMEND THE 1991 STOCK OPTION PLAN
The 1991 Stock Option Plan (the "1991 Plan") was adopted by the Company's
Board of Directors and approved by the Company's stockholders in June 1991 and
May 1992, respectively. The Board of Directors has approved and recommended to
the stockholders that they approve an amendment to increase the number of
shares authorized for issuance pursuant to the 1991 Plan by 4,000,000 to
23,000,000 shares.
Since June 1991, when the 1991 Plan was originally approved, the number of
employees at the Company has increased from approximately 125 to approximately
3,100 through December 31, 1997. The Company relies on stock options as an
essential part of the compensation packages necessary for the Company to
attract and
23
<PAGE>
retain experienced officers and employees and motivate employees to maximize
stockholder value. As of the Record Date, approximately 17,000 shares of
Common Stock remained available for issuance pursuant to the 1991 Plan, taking
into account shares subject to outstanding options. The Board of Directors of
the Company believes that the proposed increase in the number of shares
available under the 1991 Plan is essential to permit the Company to continue
to provide long-term, equity-based incentives to present and future key
employees. The Board of Directors has determined that any future option grants
resulting from the proposed increase will be at minimum exercise prices equal
to at least fair market value at the time of grant, except in those limited
cases where stockholder value would be maximized by an alternate approach.
Accordingly, the value of the future options granted under the 1991 Plan will
be tied to the future performance of the Company's stock and will provide
value to the recipient only to the extent that stockholders as a whole have
benefited from an increase in the market value of the Company's Common Stock.
In 1997, the Company granted options under the 1991 Plan at fair market
value exercise prices as follows: to the Named Officers, Mr. Sims, 325,000
shares; Mr. Seibel, 85,000 shares; Mr. Toscanini, 65,000 shares; Mr.
Ciccarelli, 40,000 shares; Mr. Greendale, 3,000 shares; all current executive
officers as a group, 838,000 shares; non-employee directors, 70,000 shares;
and all other employees, 3,582,702 shares. In addition, in April 1997, the
Company made option grants as described under "Compensation and Other
Information Concerning Executive Officers and Directors -- April 1997 Option
Grants." The April 1997 Option Grants had no effect on the number of shares of
Common Stock available for future issuance under the 1991 Plan. See
"Compensation and Other Information Concerning Executive Officers and
Directors --Executive Compensation, --Option Grants in 1997, --Report of
Management Resource Committee on Executive Compensation, and --April 1997
Option Grants."
The Company has not at the present time determined who will receive options
to purchase the additional shares of Common Stock that will be authorized for
issuance under the 1991 Plan, if the proposed amendment is approved. Approval
of the proposal to amend the Company's 1991 Plan will require an affirmative
vote of a majority of the shares of Common Stock of the Company represented in
person or by proxy at the Annual Meeting and voting in favor or against the
proposal. The Board of Directors recommends a vote FOR the proposal to amend
the Company's 1991 Plan to increase the number of shares of Common Stock
available for issuance under the 1991 Plan by 4,000,000 to 23,000,000 shares.
DESCRIPTION OF THE 1991 PLAN
The purpose of the 1991 Plan is to provide incentives to officers and other
employees of the Company by providing them with opportunities to purchase
stock of the Company. The text of the 1991 Plan, amended as proposed above, is
attached to this proxy statement as Appendix A. The following is a summary of
the 1991 Plan and should be read together with the full 1991 Plan text.
Under the 1991 Plan, employees of the Company may be awarded incentive stock
options ("ISO" or "ISOs"), as defined in Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and directors, officers,
employees and consultants of the Company may be granted options which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). ISOs and
Non-Qualified Options are sometimes collectively referred to as "Options." As
of March 23, 1998, the closing price of the Company's Common Stock on the
Nasdaq National Market was $50.00.
The 1991 Plan is administered by the Management Resource Committee (the
"Committee") of the Board of Directors of the Company. Subject to the terms of
the 1991 Plan and generally subject to approval by the Board of Directors, the
Committee has the authority to: determine the Options to be granted to
eligible persons
24
<PAGE>
under the 1991 Plan; prescribe the terms and provisions of each Option granted
under the 1991 Plan; determine the exercise price of shares subject to each
Option; and determine whether each Option granted shall be an ISO or a Non-
Qualified Option. The interpretation and construction by the Committee of any
provision of the 1991 Plan or any Option granted under the 1991 Plan is final
unless otherwise determined by the Board of Directors.
Options may be granted under the 1991 Plan at any time prior to May 6, 2002.
The exercise price per share of ISOs and, unless otherwise specified by the
Committee, Non-Qualified Options granted under the 1991 Plan cannot be less
than the fair market value of the Common Stock on the date of grant (or, in
the case of ISOs granted to employees holding more than 10% of the voting
stock of the Company, 110% of the fair market value of the Common Stock on the
date of grant). The 1991 Plan also provides that each Option shall expire on
the date specified in the Option agreement, but no more than ten years from
its date of grant and five years in the case of ISOs granted to an employee or
officer holding more than 10% of the voting stock of the Company. All options
granted since January 1, 1997 expire in equal installments on the fifth,
sixth, seventh and eighth anniversaries of the date of grant. The Company
intends to continue to grant options with such expiration periods.
Unless otherwise specified by the Committee, each Option granted under the
1991 Plan shall become exercisable with respect to 25% of the shares of Common
Stock subject to such Option as of the first anniversary of the date of grant
and, thereafter, with respect to an additional 2.083% of the shares subject to
such Option on the same day of each calendar month thereafter. Each Option may
be exercised from time to time, in whole or in part, up to the total number of
shares with respect to which it is then exercisable. The Committee shall have
the right to accelerate the date of exercise of any installment of any Option
(subject to the $100,000 per year limitation on the fair market value of stock
subject to ISOs granted to any employee which become exercisable in any
calendar year).
Payment of the exercise price of an Option granted under the 1991 Plan may
be made in cash or by tendering Common Stock of the Company, if authorized by
the Committee.
Generally, only the optionee may exercise an Option; no assignments or
transfers are permitted except by will or by the laws of descent and
distribution. However, the Committee may, in its discretion, permit a Non-
Qualified Option holder to transfer such Option to family members or other
persons for estate planning purposes. In connection with permitting transfers,
the Committee may require that (i) no consideration is given or payment is
made for any such transfer, (ii) the stock option agreement pursuant to which
such Option is granted must be approved by the Committee, and must expressly
provide for transferability at the date of grant in a manner consistent with
the 1991 Plan, and (iii) subsequent transfers of the transferred Option shall
be prohibited except by will or the laws of descent and distribution.
Following any such transfer, any such Options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to the
transfer.
If an ISO optionee ceases to be employed by the Company other than by reason
of death or disability, no further installments of his or her ISOs will become
exercisable, and the ISOs shall terminate after the passage of three months
from the date of termination of employment (but no later than their specified
expiration dates). If an optionee is disabled, any ISO held by the optionee
may be exercised by the optionee within twelve months thereafter (but not
later than its specified expiration dates), whether or not exercisable at the
time of such termination of employment. If an optionee dies, any ISO held by
the optionee may be exercised by the optionee's executor or administrator
within twenty-four months thereafter (but not later than its specified
expiration dates), whether or not exercisable at the time of such termination
of employment. Non-Qualified Options are subject to such termination and
cancellation provisions as may be determined by the Committee. If an optionee
transfers Non-Qualified Options pursuant to the 1991 Plan, the events of
termination of employment as specified in the terms of the transferred Option
shall continue to be applied with respect to the original optionee, following
which the Option shall be exercisable by the transferee only to the extent,
and for the periods for which, the Option could have been exercised by the
original optionee.
25
<PAGE>
Option holders are protected against dilution in the event of a stock
dividend, recapitalization, stock split or similar transaction. The Board of
Directors may from time to time adopt amendments to the 1991 Plan, certain of
which are subject to stockholder approval, and may terminate the 1991 Plan at
any time (although such action shall not affect Options previously granted).
Any shares subject to an Option granted under the 1991 Plan, which for any
reason expires or terminates unexercised, may again be available for future
Option grants.
The following general rules are applicable under current federal income tax
law to ISOs under the 1991 Plan.
1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and no tax deduction is allowed to the Company upon either grant
or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years following the date the Option was granted or (ii) one year
following the date the shares are issued to the optionee pursuant to the
ISO exercise, the difference between the amount realized on any subsequent
disposition of the shares and the exercise price will generally be treated
as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of before the
expiration of one or both of the requisite holding periods (a
"Disqualifying Disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the ISO over the exercise price or (ii) the actual gain on disposition will
be treated as compensation to the optionee and will be taxed as ordinary
income in the year of such disposition.
4. In any year that an optionee recognizes compensation income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Company generally should be entitled to a corresponding deduction for
income tax purposes.
5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be
treated as capital gain.
6. Capital gain or loss recognized on a disposition of shares will be
long-term capital gain or loss if the optionee's holding period for the
shares exceeds one year. An optionee may be entitled to a reduced long-term
capital gain rate if the holding period for the shares exceeds eighteen
months.
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price,
if the optionee's ISO agreement so provides. If an optionee exercises an
ISO in such a manner, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
ISOs may result in a further "minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a rate of 26% or 28%) will
be applied against a taxable base which is equal to "alternative minimum
taxable income," reduced by a statutory exemption. In general, the amount
by which the value of the Common Stock received upon exercise of the ISO
exceeds the exercise price is included in the optionee's alternative
minimum taxable income. A taxpayer is required to pay the higher of his
regular tax liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax attributable to the exercise of an ISO may be
entitled to a tax credit against his or her regular tax liability in later
years.
The following general rules are applicable under current federal income tax
law to Non-Qualified Options under the 1991 Plan.
1. The optionee generally does not realize any taxable income upon the
grant of a Non-Qualified Option, and the Company is not allowed a business
expense deduction by reason of such grant.
26
<PAGE>
2. The optionee generally will recognize ordinary compensation income at
the time of exercise of a Non-Qualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price.
3. When the optionee sells the shares, he or she generally will recognize
a capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
stock (generally, the exercise price plus the amount taxed to the optionee
as compensation income). If the optionee's holding period for the shares
exceeds one year, such gain or loss will be a long-term capital gain or
loss. An optionee may be entitled to a reduced long-term capital gain rate
if the holding period for the shares exceeds eighteen months.
4. The Company generally should be entitled to a tax deduction when
compensation income is recognized by the optionee.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Company's Common Stock to the Company in payment
of the exercise price. If an optionee exercises a Non-Qualified Option in
such fashion, special rules will apply.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand L.L.P.,
independent accountants, to serve as auditors for the fiscal year ending
December 31, 1998. Coopers & Lybrand L.L.P. has served as the Company's
auditors and outside accountants since 1991. It is expected that a member of
the firm will be present at the Annual Meeting of Stockholders with the
opportunity to make a statement if so desired and will be available to respond
to appropriate questions. Ratification of the selection of auditors is not
required under the laws of the State of Delaware but will be considered by the
Board of Directors in selecting auditors for future years. The directors
recommend a vote FOR ratification of this selection.
27
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and holders of more than 10% of the Company's
Common Stock (collectively, "Reporting Persons") to file with the Commission
initial reports of ownership and reports of changes in ownership of Common
Stock of the Company. Such persons are required by regulations of the
Commission to furnish the Company with copies of all such filings. Based on
its review of the copies of such filings received by it with respect to the
fiscal year ended December 31, 1997, the Company believes that all Reporting
Persons complied with all Section 16(a) filing requirements with respect to
the fiscal year ended December 31, 1997, except as set forth below. The
following Reporting Persons did not report certain transactions on a timely
basis and filed late reports as indicated: (i) Mr. Sims did not report one
transaction on a timely basis and filed a late report with respect to this
transaction; (ii) Mr. Brooks did not report on a timely basis six situations
in which he exercised stock options and sold the underlying shares of stock
and four other transactions (for a total of sixteen transactions) and filed
four late reports with respect to these transactions; (iii) Mr. Greendale, a
former executive officer of the Company, did not report two transactions on a
timely basis and filed one late report with respect to these transactions;
(iv) Ms. Zak did not report one transaction on a timely basis and filed a late
report with respect to this transaction; (v) Mr. Shaheen did not report four
transactions on a timely basis and filed two late reports with respect to
these transactions; (vi) Mr. Messman did not report one transaction on a
timely basis and filed a late report with respect to this transaction; (vii)
Mr. Musser did not report one transaction on a timely basis and filed a late
report with respect to this transaction; (viii) Mr. Keith did not report one
transaction on a timely basis and filed a late report with respect to this
transaction; (ix) Mr. Poduska did not report one transaction on a timely basis
and filed a late report with respect to this transaction; (x) Ms. Tempel, a
former director of the Company, did not report one transaction on a timely
basis and filed a late report with respect to this transaction; and (xi) Mr.
Ciccarelli did not file his Form 3, Initial Statement of Beneficial Ownership
of Securities, within the requisite period after first becoming an executive
officer of the Company.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to
be furnished to all stockholders entitled to vote at the next annual meeting
of the Company must be received at the Company's principal executive offices
no later than December 5, 1998. In order to curtail controversy as to the date
on which a proposal was received by the Company, it is suggested that
proponents submit their proposals by Certified Mail--Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Company may
also be made of some stockholders in person or by mail, telephone or telegraph
following the original solicitation. The Company may retain a proxy
solicitation firm to assist in the solicitation of proxies in connection with
the Annual Meeting. If the Company retains a proxy solicitation firm, it will
pay such firm customary fees, expected to be approximately $10,000, plus
expenses.
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APPENDIX A
CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
1991 STOCK OPTION PLAN
1. PURPOSE
The name of this plan is the Cambridge Technology Partners (Massachusetts),
Inc. 1991 Stock Option Plan (the "Plan"). The purpose of the Plan is to
promote the long-term success of Cambridge Technology Partners
(Massachusetts), Inc., a Delaware corporation (the "Company"), by providing
financial incentives to the officers, employees, directors and consultants of
the Company who are in positions to make significant contributions toward such
success. The Plan is designed to attract individuals of outstanding ability to
become or to continue as officers, employees, directors or consultants of the
Company, to enable such individuals to acquire or increase proprietary
interests in the Company through the ownership of shares of Common Stock of
the Company, and to render superior performance during their associations with
the Company. The Company intends that this purpose will be effected by the
granting pursuant to the Plan of options for shares of the Company's Common
Stock (hereinafter referred to as "Options") that either do meet the
definition of "incentive stock options" ("Incentive Options") in Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"), or do
not meet such definition ("Nonqualified Options").
References herein to "the Company" shall include any successor corporation
to the Company and also any subsidiary of the Company (such that, if the
Company has one or more subsidiaries, individuals who are officers or key
employees thereof are eligible to be granted Options under the Plan).
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options. An Option shall not be considered to be an Incentive
Option unless designated as such at the time of grant or in the option
agreement relating to such option, and any option that is not so designated
(or even if so designated fails to meet the definition of "incentive stock
option" under Section 422(b) of the Code) shall be a Nonqualified Option.
Unless otherwise specified in a particular grant, Options granted under the
Plan are intended to qualify as performance-based compensation to the extent
required under Section 162(m) of the Code and the regulations thereunder.
(b) The Plan shall be administered by a committee (the "Option Committee")
of not less than two members of the Board of Directors of the Company selected
by and from the members of the Company's Board of Directors in accordance with
the provisions of the Company's By-Laws relating to the appointment of
Committees; provided, however, that the Plan shall be administered so that
Options granted under the Plan will qualify for the benefits provided by Rule
16b-3 (or any successor rule to the same effect) under the Securities Exchange
Act of 1934 and by Section 162(m) of the Code (or any successor provision to
the same effect) and the applicable regulations thereunder. Subject to the
provisions of this Plan, the Option Committee shall exercise all powers under
the Plan, unless and until other action is taken by the Company's Board of
Directors. Action by the Option Committee shall require the affirmative vote
of a majority of all its members, and a further vote of the Company's Board of
Directors shall be required for the approval of any and all grants of Options
recommended by the Option Committee.
(c) Subject to the terms and conditions of the Plan, the Option Committee
shall have the power:
(i) To determine from time to time the Options to be granted to eligible
persons under the Plan, and to prescribe the terms and provisions (which
need not be identical) of each Option granted under the Plan to
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such persons, and to recommend the grant of Options to the Board of
Directors of the Company for its approval;
(ii) To construe and interpret the Plan and Options granted thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Option Committee may
correct any defect or supply any omission, or reconcile any inconsistency
in the Plan, or in any option agreement, in the manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective. All
decisions and determinations by the Option Committee and, with respect to
the grant of Options, by the Board of Directors of the Company in the
exercise of this power shall be final and binding upon the Company and all
optionees; and
(iii) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
3. STOCK SUBJECT TO THE PLAN
(a) The stock subject to the Options granted under the Plan shall be shares
of the Company's authorized but unissued common stock, par value $.01 per
share (the "Common Stock"), or previously issued shares of Common Stock that
have been reacquired and reserved by the Company's Board of Directors for
resale upon exercise of Options granted under the Plan. The total number of
shares of Common Stock that may be issued pursuant to Options granted under
the Plan shall not exceed an aggregate of 23,000,000 shares of Common Stock.
Such number shall be subject to adjustment as provided in Section 9 hereof.
(b) Whenever any outstanding Option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such Option may again be the subject
of Options under the Plan.
(c) No employee of the Company may be granted Options to acquire, in the
aggregate, more than 3,000,000 shares of Common Stock under the Plan. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable
in whole or in part, the unpurchased shares subject to such Option shall be
included in the determination of the aggregate number of shares of Common
Stock deemed to have been granted to such employee under the Plan.
4. STOCK OPTION GRANTS
(a) Incentive Options may be granted only to persons who are employees of
the Company, including members of the Board of Directors who are also
employees of the Company. Nonqualified Options may be granted to officers and
employees of the Company, to directors of the Company, whether or not they are
also employees of the Company, to consultants to the Company who are not
employees, and to such other persons as the Option Committee shall select from
time to time. The determination of the persons eligible to receive grants, the
number of shares of Common Stock for which Options are granted and the
determination of whether an Option shall be an Incentive Option or a
Nonqualified Option shall be made by the Option Committee, subject to the
approval of the Board of Directors of the Company.
(b) No person shall be eligible to receive any Incentive Option under the
Plan if at the date of grant such person beneficially owns (or would own upon
the exercise of any Options held, or which upon such grant would be held, by
such person) in excess of ten percent (10%) of the outstanding shares of
Common Stock, unless (i) the exercise price is at least 110% of the fair
market value (determined as provided in Section 5(c) hereof at the
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time the Incentive Option is granted) of the shares of Common Stock subject to
the Option and (ii) such Option by its terms is not exercisable after the
expiration of five (5) years from the date such Option is granted.
(c) The aggregate fair market value (determined as provided in Section 5(c)
hereof at the time the Incentive Option is granted) of shares of Common Stock
with respect to which any Incentive Option is exercisable for the first time
by the optionee during any calendar year (plus the value of any other such
shares of Common Stock first purchasable in such year under any other Option
under the Plan or any other plan of the Company or any parent or subsidiary
thereof intended to be an "incentive stock option" under Section 422 of the
Code) shall not exceed $100,000, and no person shall be eligible to receive an
Incentive Option for shares of Common Stock in excess of such limitation.
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement for Options granted under the Plan shall contain such
provisions as the Option Committee shall from time to time deem appropriate.
Option agreements need not be identical, but each option agreement by
appropriate language, or by reference to this Section 5 of the Plan, shall
include the substance of all of the following provisions:
(a) Expiration. Each Option shall expire on the date specified in the option
agreement, which date shall not be later than the tenth anniversary of the
date on which the Option was granted. Each Incentive Option shall in any event
expire not later than three months after the optionee is for any reason no
longer employed by the Company, except (i) if such termination of employment
results from optionee's disability (within the meaning of Section 22(e)(3) of
the Code), an Option may be exercised within twelve months thereafter, whether
or not exercisable at the time of such termination, and (ii) if such
termination of employment results from the optionee's death, an Option may be
exercised by his executors or administrators within twenty-four months
thereafter, whether or not exercisable at the time of such termination.
(b) Exercise. Unless the Option Committee shall otherwise determine at the
time an Option is granted, each Option shall become vested and exercisable
with respect to 25% of the shares of Common Stock subject to such Option as of
the first anniversary of the date of grant and, thereafter, with respect to an
additional 2.083% of the shares subject to such Option as of the same day (or
the immediately preceding day if a month does not have such day) of each
calendar month thereafter, so that such Option shall be exercisable in full as
of the fourth anniversary of the date of grant. Unless otherwise provided in
the vote of either the Option Committee or the Board of Directors of the
Company, for this purpose the date of the grant of an Option shall be the date
on which the Board of Directors approves the grant. To the extent not
exercised, vested installments shall accumulate and be exercisable in whole or
in part at any time after becoming exercisable, but not later than the date
the Option expires or terminates.
(c) Purchase Price. Unless the Option Committee shall otherwise determine at
the time the Option is granted, the purchase price per share of Common Stock
under each Option shall be not less than the fair market value of a share of
Common Stock on the date the Option is granted. For the purposes of the Plan,
the fair market value of the shares of Common Stock shall be determined by the
Option Committee with the approval of the Board of Directors of the Company.
6. LIMITATION ON RIGHTS OF OPTIONEES
(a) Transferability of Options. Except as set forth below, (i) no Option
shall be transferable by any optionee other than by will or by the laws of
descent and distribution and (ii) Options may be exercised during
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the optionee's lifetime only by the optionee (or, if the optionee is disabled
and so long as the Option remains exercisable, by the optionee's duly
appointed guardian or other legal representative). However, the Committee may,
in its discretion, permit a Non-qualified Option holder to transfer the Non-
qualified Option to family members or other persons for estate planning
purposes. In connection with permitting transfers, the Committee may require
that (i) no consideration be given or payment made for any such transfer, (ii)
the stock option agreement pursuant to which such Option is granted must be
approved by the Committee, and must expressly provide for transferability at
the date of grant in a manner consistent with the Plan, and (iii) subsequent
transfers of the transferred Option shall be prohibited except those in
accordance with this Section. Following any such transfer, any such Options
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of
Sections 2, 6(b)--(d), 7, 8, 9 and 12 hereof the term "optionee" shall be
deemed to refer to the transferee. The events of termination of employment set
forth in an optionee's option agreement shall continue to be applied with
respect to the original optionee, following which the Options shall be
exercisable by the transferee only to the extent and for the periods specified
in such option agreement.
(b) No Shareholder Rights. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii)
the Company shall have issued and delivered the shares to the optionee, and
(iii) the optionee's name shall have been entered as a shareholder of record
on the books of the Company. Thereupon, the optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common
Stock.
(c) No Employment Rights. Neither the Plan nor the grant of any Option
thereunder shall be deemed to confer upon any optionee any rights of
employment with the Company, including without limitation any right to
continue in the employ of the Company, or affect the right of the Company to
terminate the employment of an optionee at any time, with or without cause.
(d) Authority of Company. The existence of the Options shall not affect: the
right or power of the Company or its shareholders to make adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business; any issue of bonds, debentures, preferred or prior
preference stock affecting the Common Stock or the rights thereof; the
dissolution or liquidation of the Company, or sale or transfer of any part of
its assets or business; or any other act, whether of a similar character or
otherwise.
7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Notice of Exercise. Any Option granted under the Plan may be exercised
by the optionee by delivering to the Chief Financial Officer of the Company
(or such other representative of the Company as the Option Committee may
designate) on any business day a written notice specifying the number (which
shall be consistent with the provisions of Section 5(b) hereof) of shares of
Common Stock the optionee then desires to purchase (the "Notice").
(b) Payment. Payment for the shares of Common Stock purchased pursuant to
the exercise of an Option shall be made either (i) in cash or by check
representing good funds in an amount equal to the option price for the number
of shares of Common Stock specified in the Notice (the "Total Option Price"),
or (ii) if authorized by the applicable option agreement, by the valid and
properly completed transfer to the Company of a number of shares of Common
Stock having a fair market value, determined as provided in Section 5(c)
hereof, equal to or less than the Total Option Price, plus cash or check in an
amount equal to the excess, if any, of the Total Option Price over the fair
market value of such shares of Common Stock.
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8. NOTICE OF DISPOSITION; WITHHOLDING; ESCROW
An optionee shall immediately notify the Company in writing of any sale,
transfer, assignment or other disposition (or action constituting a
disqualifying disposition within the meaning of Section 421 of the Code) of
any shares of Common Stock acquired through exercise of an Incentive Option,
within two (2) years after the grant of such Incentive Option or within one
(1) year after the acquisition of such shares of Common Stock, setting forth
the date and manner of disposition, the number of shares of Common Stock
disposed of and the price at which such shares of Common Stock were disposed
of. The Company shall be entitled to withhold from any compensation or other
payments then or thereafter due to the optionee such amounts as may be
necessary to satisfy any withholding requirements of federal or state law or
regulation and, further, to collect from the optionee any additional amounts
which may be required for such purpose as a condition of delivering the shares
of Common Stock acquired pursuant to an Option. The Option Committee may, in
its discretion, require shares of Common Stock acquired by an optionee upon
exercise of an Incentive Option to be held in an escrow arrangement for the
purpose of enabling compliance with this Section 8.
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Events for Adjusting Number and Price. If the shares of Common Stock as
a whole are changed into or exchanged for a different number or kind of shares
or securities of the Company, whether through reorganization,
recapitalization, reclassification, stock dividend or other distribution,
split, combination of interests, exchange of interests, change in corporate
structure or the like, an appropriate and proportionate adjustment shall be
made in the number and kind of shares of Common Stock subject to the Plan and
in the number, kind, and per share exercise price of shares of Common Stock
subject to unexercised Options or portions thereof granted prior to any such
change. In the event of any such adjustment in an outstanding Option, the
optionee thereafter shall have the right to purchase the number of shares of
Common Stock under such Option at the per share price, as so adjusted, which
the optionee could purchase at the total purchase price applicable to the
Option immediately prior to such adjustment.
(b) Option Committee and Board Action. Adjustments under this Section 9
shall be determined by the Option Committee and approved and ratified by the
Board of Directors of the Company, and such determinations shall be
conclusive. The Option Committee shall have the discretion, and power in any
such event to determine and to make effective provision for acceleration of
the time or times at which any Option or portion thereof shall become
exercisable. No fractional interests shall be issued under the Plan on account
of any adjustment specified above.
10. AMENDMENT OR TERMINATION OF PLAN.
The Board of Directors of the Company may modify, revise or terminate this
Plan at any time and from time to time, except that, other than as provided in
Section 9 hereof, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations
at an annual or special meeting held within twelve (12) months before or after
the date of adoption of such amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which Options may
be granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum purchase price of Incentive Options to be granted
under the Plan;
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(d) increase the maximum term of Options provided herein; or
(e) otherwise materially increase the benefits accruing to participants
under the Plan.
Except as provided in Section 9 hereof, rights and obligations under any
Option granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the optionee.
11. EFFECTIVE DATE; NONEXCLUSIVITY
(a) Effective Date. This Plan will be deemed to have been adopted and to be
effective when approved by the stockholders of the Company in compliance with
Temporary Regulation (S)14a-422A-2 under the Code.
(b) Nonexclusivity. The adoption of the Plan shall not be construed as
creating any limitations on the power of the Board of Directors of the Company
to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of options otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) Securities Laws. If in the opinion of legal counsel for the Company the
issuance or sale of any shares of Common Stock pursuant to the exercise of an
Option would not be lawful for any reason, including without limitation the
inability of the Company to obtain from any governmental authority or
regulatory body having jurisdiction the authority deemed by such counsel to be
necessary to such issuance or sale, the Company shall not be obligated to
issue or sell any shares of Common Stock pursuant to the exercise of an Option
to an Optionee or any other authorized person unless a registration statement
that complies with the provisions of the Securities Act of 1933, as amended,
(the "Act") in respect of such shares of Common Stock is in effect at the time
thereof, or other appropriate action has been taken under and pursuant to the
terms and provisions of the Act, or the Company receives evidence satisfactory
to such counsel that the issuance and sale of such shares of Common Stock, in
the absence of an effective registration statement or other appropriate
action, would not constitute a violation of the Act or any applicable state
securities law. The Company is in no event obligated to register any such
shares of Common Stock, to comply with any exemption from registration
requirements or to take any other action which may be required in order to
permit, or to remedy or remove any prohibition or limitation on, the issuance
or sale of such shares of Common Stock of any optionee or other authorized
person.
(b) Withholding Taxes. As a condition of exercise of an Option, the Company
may, in its sole discretion, withhold or require the optionee to pay or
reimburse the Company for any taxes which the Company determines are required
to be withheld in connection with the grant or any exercise of an Option.
(c) Governing Law. The Plan shall be interpreted such that all options
hereunder intended to be Incentive Options shall meet the requirements
therefor set forth in Section 422 of the Code (and any applicable regulations,
rulings or judicial decisions interpreting said Section). Otherwise, the Plan
shall be governed by and interpreted under the laws of the State of Delaware.
13. TERMINATION OF GRANTING OF OPTIONS UNDER THE PLAN
No Option may be granted under the Plan after the tenth anniversary of the
effective date of the Plan.
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CAMBRIDGE TECHNOLOGY PARTNERS (MASSACHUSETTS), INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 13, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James K. Sims and Arthur M. Toscanini and
each or both of them, proxies, with full power of substitution to vote all
shares of stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Cambridge Technology Partners (Massachusetts),
Inc. to be held on May 13, 1998, at 10:00 A.M., at the Downtown Club, State
Street Bank Building, 225 Franklin Street, 33rd Floor, Boston, Massachusetts,
and at any adjournment thereof, upon matters set forth in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated April 6, 1998, a copy of which
has been received by the undersigned. The proxies are further authorized to
vote, in their judgment, upon such other business as may properly come before
the meeting or any adjournment thereof.
(Continued on the reverse side)
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THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AS DESCRIBED IN
ITEM 1, FOR THE PROPOSALS IN ITEMS 2, 3 AND 4, AND IN THE JUDGMENT OF THE
PROXIES NAMED HEREIN WITH RESPECT TO ITEM 5.
Please Mark your
votes as indicated in this
example.
/ X /
1. To elect a Board of Directors for the ensuing year:
FOR WITHHELD Nominees: James K. Sims, Warren V. Musser, Robert E.
[ ] [ ] Keith, Jr., Jack L. Messman, John W. Poduska, Sr., James
I. Cash, Jr., James D. Robinson III
----------------------------------------------------------
FOR (except vote withheld from above nominee(s)).
2. To amend the Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock, par value $.01 per
share (the "Common Stock"), from 120,000,000 shares to 250,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To amend the 1991 Stock Option Plan (the "1991 Plan") to increase the number
of shares of Common Stock available for issuance under the 1991 Plan by
4,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the selection of the firm of Coopers & Lybrand L.L.P. as
independent accountants for the fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To transact such other business as may properly come before the meeting and
any adjournments thereof.
Dated: , 1998
------------
Signature(s) of Stockholder(s)
---------------------------------------------
---------------------------------------------
Print Name(s)
(If signing as attorney, executor, trustee or
guardian, please give your full title as such. If
shares are held jointly, each holder should sign.)
/ / Check this box if you plan on attending
the Annual Meeting of Stockholders in person.
