<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [Section]240.14a-11(c) or
[Section]240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
RENAISSANCE SOLUTIONS, 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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
RENAISSANCE SOLUTIONS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Renaissance Solutions, Inc., a Delaware corporation (the "Company"), will be
held on Wednesday, June 4, 1997 at 10:00 a.m. at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect two Class II directors to serve for the ensuing three years;
2. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation increasing the authorized number of shares
of Common Stock from 20,000,000 to 50,000,000 shares;
3. To approve the Company's 1997 Stock Incentive Plan;
4. To approve an amendment to the Company's 1995 Director Stock Option Plan
(the "Director Plan") increasing the number of shares of Common Stock
authorized under the Director Plan from 50,000 to 100,000 shares;
5. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the current year; and
6. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on April 9, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By order of the Board of Directors,
Harry M. Lasker, Secretary
April 21, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
RENAISSANCE SOLUTIONS, INC.
LINCOLN NORTH
55 OLD BEDFORD ROAD
LINCOLN, MASSACHUSETTS 01773
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Renaissance Solutions, Inc. (the "Company")
at the Annual Meeting of Stockholders to be held on Wednesday, June 4, 1997 at
10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts and at any adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company. Attendance at the Meeting
will not itself be deemed to revoke a Proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
Proxy and vote in person.
On April 9, 1997, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of 9,467,045 shares of Common Stock of the Company, $.0001 par value
per share (the "Common Stock"). Each share entitles the record holder to one
vote on each of the matters to be voted upon at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996 ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 21, 1997. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS ALL SUCH
REQUESTS TO THE COMPANY, ATTENTION OF WILLIAM T. JENKINS, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, LINCOLN NORTH, 55 OLD BEDFORD ROAD, LINCOLN,
MASSACHUSETTS 01773. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT
OF AN APPROPRIATE PROCESSING FEE.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information as of March 31, 1997
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) the directors and director nominees of the Company,
(iii) the Chief Executive Officer and the four executive officers listed in the
Summary Compensation Table below (the "Named Executive Officers"), and (iv) the
directors and executive officers of the Company as a group.
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
------------------------
NAME AND ADDRESS NUMBER OF PERCENT OF
OF BENEFICIAL OWNER SHARES CLASS
- ------------------- --------- ----------
<S> <C> <C>
O. Bruce Gupton...................................... 1,010,000 10.7%
c/o Renaissance Solutions, Inc.
100 First Stamford Place
Stamford, CT 06903-7698
Harry M. Lasker(2)................................... 850,785 9.0
c/o Renaissance Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
David A. Lubin(3).................................... 848,286 9.0
c/o Renaissance Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
Melissa E. Norton(4)................................. 850,786 9.0
c/o Renaissance Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
Putnam Investments, Inc.(5).......................... 808,095 8.5
One Post Office Square
Boston, MA 02109
RCM Capital Management, L.L.C.(6).................... 605,000 6.4
Four Embarcadero Center
San Francisco, CA 94111-4189
David P. Norton(7)................................... 850,786 9.0
Robert S. Kaplan(8).................................. 27,303 *
John F. Rockart(9)................................... 12,500 *
Ronald K. Bohlin(10)................................. -- *
Gresham T. Brebach, Jr.(11).......................... 65,524 *
All directors and executive officers as
a group (7 persons)(12)............................ 3,613,662 38.0%
- ---------------
* Less than 1%
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual
has the right to acquire within 60 days after March 31, 1997 through the
</TABLE>
2
<PAGE> 5
exercise of any stock option or other right. The inclusion herein of such
shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of such shares. Unless
otherwise indicated, each person or entity named in the table has sole
voting power and investment power (or shares such power with his or her
spouse) with respect to all shares of capital stock listed as owned by such
person or entity.
(2) Includes 108,028 shares held by The Harry M. Lasker Children's Trust, the
beneficiaries of which are Mr. Lasker's children and a trustee of which is
Mr. Lasker's spouse, as to which shares Mr. Lasker disclaims beneficial
ownership. Also includes 42,000 shares held by The Red Farm Charitable
Trust, the trustees of which are Mr. Lasker and his spouse, as to which
shares Mr. Lasker disclaims beneficial ownership.
(3) Includes 72,856 shares held by The David A. Lubin Children's Trust, the
beneficiaries of which are Mr. Lubin's children, as to which shares Mr.
Lubin disclaims beneficial ownership. Also includes 39,500 shares held by
The Pine Point Foundation, a trust the trustees of which are Mr. Lubin and
his spouse, as to which shares Mr. Lubin disclaims beneficial ownership.
(4) Ms. Norton is the spouse of David P. Norton, the President, Chief Executive
Officer and a director of the Company.
(5) The information reported is based on a Schedule 13G, dated December 31,
1996, filed with the Securities and Exchange Commission by Putnam
Investments, Inc. ("PI"), Marsh & McLennan Companies, Inc. ("MMC"), Putnam
Investment Management, Inc. ("PIM") and The Putnam Advisory Company, Inc.
("PAC"). PI is a registered investment advisor, in which capacity it
advises PIM and PAC and has shared voting power with respect to 125,489
shares and shared dispositive power with respect to 808,095 shares. PIM has
shared dispositive power with respect to 668,706 shares. PAC has shared
voting power with respect to 125,489 shares and shared dispositive power
with respect to 139,389 shares. MMC is the parent holding company of PI. PI
and MMC disclaim beneficial ownership of such shares.
(6) The information is based on a Schedule 13G, dated December 31, 1996, filed
with the Securities and Exchange Commission by RCM Capital Management,
L.L.C. ("RCM Capital"), RCM Limited L.P. ("RCM Limited"), and RCM General
Corporation ("RCM General"). RCM Capital is an investment advisor, in which
capacity it has sole voting power with respect to 529,000 shares, sole
dispositive power with respect to 574,000 shares and shared dispositive
power with respect to 31,000 shares. RCM General is the general partner of
RCM Limited, the Managing Agent of RCM Capital. Each of RCM General and RCM
Limited disclaim beneficial ownership of such shares except to the extent
each may be deemed to have beneficial ownership of securities beneficially
owned by RCM Capital.
(7) Includes 850,786 shares held by Melissa E. Norton, the spouse of Mr.
Norton, as to which shares Mr. Norton disclaims beneficial ownership.
(8) Includes 17,301 shares of Common Stock subject to outstanding stock options
which are exercisable within the 60 day period following March 31, 1997.
(9) Consists of 12,500 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following March 31,
1997.
(10) Mr. Bohlin resigned his position with the Company effective February 28,
1997.
(11) Consists of 65,524 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following March 31,
1997. Mr. Brebach resigned his position with the Company effective February
7, 1997.
(12) Includes 33,801 shares of Common Stock subject to outstanding stock options
which are exercisable within the 60 day period following March 31, 1997.
3
<PAGE> 6
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to the matter presented for stockholder approval) will be counted
for purposes of determining whether a quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding on the record date is required for the approval of the
proposed amendment to the Company's Amended and Restated Certificate of
Incorporation. The affirmative vote of a majority of the shares present or
represented and voting on the matter is required for the approval of the
adoption of the Company's 1997 Stock Incentive Plan, the amendment to the
Company's 1995 Director Stock Option Plan and the ratification of the
appointment of the Company's independent auditors.
Shares which abstain from voting, and shares held in "street name" by
brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter, will not
be counted as votes in favor of such matter, and will also not be counted as
votes cast or shares voting on such matter. Accordingly, abstentions and "broker
non-votes" will have no effect on the voting on a matter that requires the
affirmative vote of a certain percentage of the votes cast or shares voting on a
matter, such as the election of directors, approval of the 1997 Stock Incentive
Plan, approval of the amendment to the 1995 Director Stock Option Plan and the
ratification of the selection of auditors, but will have the same effect as a
vote against the proposed amendment to the Company's Amended and Restated
Certificate of Incorporation.
PROPOSAL I -- ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
directors, two Class II directors, and two Class III directors. The Class I,
Class II and Class III directors will serve until the annual meeting of
stockholders to be held in 1999, 1997 and 1998, respectively, and until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors are elected for a full term of three years to succeed
those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect, as Class II
directors, David A. Lubin and John F. Rockart, the two director nominees named
below, unless the proxy is marked otherwise. Mr. Lubin and Dr. Rockart are
currently directors of the Company.
Each Class II director will be elected to hold office until the 2000 annual
meeting of stockholders and until his successor is elected and qualified. Each
of the nominees has indicated his willingness to serve, if elected; however, if
any nominee should be unable to serve, the person acting under the proxy may
vote the proxy for a substitute nominee. The Board of Directors has no reason to
believe that either of the nominees will be unable to serve if elected.
For each member of the Board of Directors, including those who are nominees
for election as Class II directors, there follows information given by each
concerning his principal occupation and business experience
4
<PAGE> 7
for the past five years, the names of other publicly held companies of which he
serves as a director, his age and length of service as a director of the
Company.
DIRECTORS WHOSE TERMS EXPIRE IN 1999 (CLASS I DIRECTORS)
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION, OTHER BUSINESS EXPERIENCE
NAME AGE SINCE DURING PAST FIVE YEARS AND OTHER DIRECTORSHIPS
- ---- --- -------- -------------------------------------------------
<S> <C> <C> <C>
Harry M. Lasker....... 53 1992 Co-Chairman and Secretary of the Company since
December 1993; Vice President and Co-Chairman of
Spectrum Interactive, Inc. ("Spectrum"), a
multimedia technology development company, from
December 1981 to December 1991.
Robert S. Kaplan...... 56 1995 Marvin Bower Professor of Leadership Development
at Harvard Business School; Member of faculty of
Harvard Business School since September 1983.
NOMINEES FOR TERMS EXPIRING IN 2000 (CLASS II DIRECTORS)
David A. Lubin........ 46 1992 Co-Chairman of the Company since December 1993;
Treasurer of the Company since its inception in
March 1992; Vice President and Co-Chairman of
Spectrum from December 1981 to December 1991.
John F. Rockart....... 65 1995 Senior Lecturer at the Center for Information
Systems Research of the Alfred P. Sloan School of
Management of the Massachusetts Institute of
Technology since 1974; Director of Center for
Information Systems Research since 1976; Director
of ComShare, Inc. and Keane, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 1998 (CLASS III DIRECTORS)
David P. Norton....... 55 1992 President of the Company since its inception in
March 1992; Chief Executive Officer of the
Company since 1993; President of Nolan, Norton &
Co., an information technology consulting firm,
from February 1975 to February 1992; Partner of
KPMG Peat Marwick from March 1987 to February
1992.
O. Bruce Gupton....... 53 1997 Executive Vice President of the Company since
January 1997; President and Chief Executive
Officer of International Systems Services
Corporation from 1981 to December 1996.
</TABLE>
For information relating to shares of Common Stock owned by each of the
directors, see "Security Ownership of Certain Beneficial Owners and Management."
BOARD AND COMMITTEE MEETINGS
The Board of Directors met seven times during 1996. All directors attended
at least 75% of the meetings of the Board of Directors and of the committees on
which they served.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers and grants stock options pursuant
to the Company's equity incentive plans. The Compensation Committee met three
times during 1996. The members of the Compensation Committee are Mr. Kaplan and
Dr. Rockart.
5
<PAGE> 8
The Board of Directors has an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
public accountants. The Audit Committee held four meetings during 1996. The
members of the Audit Committee are Mr. Kaplan and Dr. Rockart.
The Company has no nominating committee of the Board of Directors.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives reimbursements
for expenses incurred in service of the Company as a director, receives a
quarterly retainer of $2,500 and participates in the Company's 1995 Director
Stock Option Plan. The 1995 Director Stock Option Plan is described below under
the caption "PROPOSAL 4 -- APPROVAL OF AMENDMENT TO 1995 DIRECTOR STOCK OPTION
PLAN."
COMPENSATION OF EXECUTIVE OFFICERS
Employment Agreements
The Company is a party to employment agreements (as amended to date, the
"Principals' Employment Agreements") with each of Messrs. Lasker, Lubin and
Norton (the "Principals") for the period commencing January 31, 1995 and ending
January 31, 1998. Pursuant to the Principals' Employment Agreements, each of Mr.
Lasker and Mr. Lubin is employed as a Co-Chairman of the Company and Mr. Norton
is employed as President and Chief Executive Officer of the Company. The
Principals' Employment Agreements originally provided for an annual salary of
$500,000. Effective July 1, 1996, the Principals' Employment Agreements were
amended to provide for an annual base salary of $375,000. Each Principal is also
eligible for bonuses at the discretion of the Board of Directors if the
Principal satisfies targeted performance objectives. Each Principals' Employment
Agreement also contains covenants by the Principal not to solicit any of the
Company's employees or customers or disclose or use any of the Company's
proprietary information for a period of two years following the termination of
the Principal's employment and, in the event that the Principal is terminated
for cause, not to compete with the Company during such two year period. Each
Principal has agreed to assign his right, title and interest to any inventions,
software and other works created by him or at his direction to the Company.
The Company is also a party to an employment agreement with Mr. Gupton (the
"Employment Agreement"). The Employment Agreement provides for a four year term
commencing on December 31, 1996 (the "Term") and an annual salary of $375,000
for the first year of the Term. The annual salary is subject to adjustment
thereafter, but may not be decreased without Mr. Gupton's consent. Mr. Gupton is
also eligible to receive an annual bonus based upon performance criteria
determined by the Company's Board of Directors. The maximum bonus for the first
year of the term is $125,000, which amount may be increased in subsequent years.
The Employment Agreement may be terminated by either party upon 30 days' notice,
or by the Company immediately if for "cause" (as defined in the Employment
Agreement). Pursuant to the Employment Agreement, Mr. Gupton has agreed not to
compete with the Company until (i) one year after the termination or cessation
of his employment, if such termination or cessation is (A) due to the expiration
of the Term, (B) due to Mr. Gupton suffering from a "disability" (as defined in
the Employment Agreement) or (C) at the election of the Company, not for
"cause," or (ii) the later of the expiration of the remainder of the Term and
one year after the termination or cessation of his employment, if such
termination or cessation is (A) at the election of Mr. Gupton or (B) at the
election of the Company for "cause." Mr. Gupton has also agreed not to disclose
or use any of the Company's proprietary information and to assign his right,
title and interest to any inventions, software and other works created by him or
at his direction to the Company.
6
<PAGE> 9
During 1996, the Company was also a party to employment agreements with
Messrs. Bohlin and Brebach (the "Executive Agreements"), each of whom
subsequently has resigned his respective position with the Company. The
Executive Agreements provided for annual salaries of $300,000 and $375,000 for
Messrs. Bohlin and Brebach, respectively. Under the Executive Agreements, each
officer agreed not to disclose any confidential information of the Company.
Pursuant to the Executive Agreements, all inventions and intellectual property
rights therein, developed, acquired or conceived by the officer during the term
of his employment became the exclusive property of Renaissance. Each Executive
Agreement provided that for a period of two years after the date of termination
of employment, the officer may not solicit any of the Company's employees or
customers.
In connection with his resignation and in consideration of his assistance
in orchestrating the acquisition of International Systems Services Corporation,
in February 1997 the Company awarded Mr. Brebach a bonus of $187,500.
Summary Compensation
The following table sets forth certain information with respect to the
annual and long-term compensation of each of the Named Executive Officers for
the three years ended December 31, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS/SARs COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)(3)
------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David P. Norton.................... 1996 $387,500 $ -- -- $500
President and Chief 1995 500,000(1) -- -- 500
Executive Officer 1994 250,000 473,643(2) -- 500
Harry M. Lasker.................... 1996 387,500 -- -- 500
Co-Chairman and 1995 500,000(1) -- -- 500
Secretary 1994 250,000 322,601(2) -- 500
David A. Lubin..................... 1996 387,500 -- -- 500
Co-Chairman and 1995 500,000(1) -- -- 500
Treasurer 1994 250,000 374,858(2) -- 500
Gresham T. Brebach, Jr.(4)......... 1996 375,000 46,154 50,000 --
Executive Vice President 1995 373,558 119,712 200,048 --
-- Client Services
Ronald K. Bohlin(5)................ 1996 300,000 50,000 25,000 --
Senior Vice President -- 1995 300,000 -- 100,024 --
Practice Development
- ---------------
(1) Includes $50,000 paid to the Named Executive Officer as salary in 1995 which
was repaid to the Company in 1996 in connection with the election by the
Company's Co-Chairmen and Chief Executive Officer to permanently forego a
total of $150,000 in compensation to which they were otherwise entitled in
1995.
(2) Includes amounts payable in 1995 for services rendered by the Named
Executive Officer in 1994.
(3) Represents the Company's 401(k) profit-sharing plan matching contributions.
(4) Mr. Brebach resigned his position with the Company effective February 7,
1997.
(5) Mr. Bohlin resigned his position with the Company effective February 28,
1997.
</TABLE>
7
<PAGE> 10
Option Grants
The following table sets forth certain information concerning grants of
stock options made during fiscal 1996 to each of the Named Executive Officers.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL OPTIONS EXERCISE APPRECIATION FOR
SECURITIES GRANTED TO PRICE OPTIONS TERMS(2)
UNDERLYING EMPLOYEES IN PER EXPIRATION ---------------------
NAME OPTIONS GRANTED FISCAL YEAR SHARE DATE(1) 5% 10%
- ---- --------------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
David P. Norton............. -- -- -- -- -- --
Harry M. Lasker............. -- -- -- -- -- --
David A. Lubin.............. -- -- -- -- -- --
Gresham T. Brebach,
Jr.(3).................... 50,000(4) 7.0% $14.25 1/2/06 $448,087 $1,135,542
Ronald K. Bohlin(5)......... 25,000(4) 3.5 14.25 1/2/06 224,044 567,771
- ---------------
(1) The expiration date of an option is the tenth anniversary of the date on
which the option was originally granted. The exercisability of these options
is accelerated upon the occurrence of a change in control.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the optionholders'
continued employment through the option period, and the date on which the
options are exercised.
(3) Mr. Brebach resigned his positions with the Company effective February 7,
1997.
(4) Options vest in four equal installments on each of the date of grant and the
first, second and third anniversary of the date of grant.
(5) Mr. Bohlin resigned his position with the Company effective February 28,
1997.
</TABLE>
8
<PAGE> 11
Year-End Option Table
The following table summarizes certain information regarding stock options
held as of December 31, 1996 by each of the Named Executive Officers and stock
option exercises by the Named Executive Officers during 1996.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
NAME (#) ($)(1) (#) ($)(2)
- ---- ----------- ---------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
David P. Norton.................... -- -- --/-- --/--
Harry M. Lasker.................... -- -- --/-- --/--
David A. Lubin..................... -- -- --/-- --/--
Gresham T. Brebach, Jr.(3)......... 59,500 $1,445,925 3,012/187,536 $ 91,866/$6,657,573
Ronald K. Bohlin(4)................ 31,200 812,813 25,012/ 68,762 919,191/ 2,409,816
- ---------------
(1) Represents the difference between the exercise price and the fair market value of the Common Stock on the date of
exercise.
(2) Based on the fair market value of the Common Stock as of December 31, 1996 ($44.75 per share) less the option
exercise price, multiplied by the number of shares underlying the options.
(3) Mr. Brebach resigned his position with the Company effective February 7, 1997.
(4) Mr. Bohlin resigned his position with the Company effective February 28, 1997.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by persons required
to file such reports ("Reporting Persons") pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or written
representations from certain Reporting Persons that no Form 5 filing was
required for such persons, the Company believes that during 1996 all filings
required to be made by its Reporting Persons were timely made in accordance with
the requirements of the Exchange Act, except as follows. On February 29, 1996,
Gresham T. Brebach, Jr., the Company's then Executive Vice President -- Client
Services, sold shares of Common Stock, and a Form 4 reporting such transaction
was filed on April 10, 1996.
CERTAIN TRANSACTIONS
In January 1995, Messrs. Lasker and Lubin, Melissa E. Norton (the wife of
David P. Norton), the Harry M. Lasker Children's Trust (the "Lasker Trust") and
the David A. Lubin Children's Trust (the "Lubin Trust" and with the Lasker
Trust, the "Trusts") entered into a Stockholders' Voting Agreement (the "Voting
Agreement") pursuant to which, from and after the Company's reorganization in
April 1995 and until October 31, 1998, each of Messrs. Lasker and Lubin and Ms.
Norton are entitled to designate one representative for nomination to the Board
of Directors of the Company (currently Messrs. Lasker, Lubin and Norton),
provided that, in each case, Mr. Lasker and the Lasker Trust, Mr. Lubin and the
Lubin Trust and Ms. Norton retain at least 50% of their or her respective
holdings of Common Stock as existing immediately following the closing of the
Company's initial public offering. Under the Voting Agreement, each of Messrs.
Lasker and Lubin, Ms. Norton, the Lasker Trust and the Lubin Trust agrees to
vote all of his, her or its shares of Common Stock for the election of such
nominees.
9
<PAGE> 12
In November 1996, Gemini Consulting, Inc., a Delaware corporation
("Gemini"), exercised three separate options to purchase 50,000 shares of Common
Stock (each, an "Option") which had been sold to Gemini by each of Messrs. Lubin
and Lasker and Ms. Melissa E. Norton in connection with the Company's initial
public offering in April 1995. In connection with the exercise of the Options,
Gemini paid to each of Messrs. Lubin and Lasker and Ms. Norton (i) $650,000,
representing the exercise price of each Option, and (ii) $255,454, in repayment,
with interest, of a promissory note issued by Gemini to each of Messrs. Lubin
and Lasker and Ms. Norton as the purchase price of the Option.
On December 31, 1996, the Company acquired International Systems Services
Corporation ("ISS") pursuant to an Agreement and Plan of Merger, dated as of
December 31, 1996 (the "Merger Agreement"), among the Company, Artist
Acquisition Corp., a wholly-owned subsidiary of the Company (the "Merger
Subsidiary"), ISS, and O. Bruce Gupton, the sole stockholder of ISS. Pursuant to
the Merger Agreement, the Merger Subsidiary was merged with and into ISS (the
"Merger"), whereupon ISS became a wholly-owned subsidiary of the Company. In
connection with the Merger, Mr. Gupton received 1,310,000 shares of the
Company's Common Stock. In January 1997 Mr. Gupton was elected a director and
Executive Vice President of the Company.
Concurrently with the execution of the Merger Agreement, Mr. Gupton entered
into a Registration Rights Agreement with the Company (the "Registration Rights
Agreement") pursuant to which the Company granted to Mr. Gupton registration
rights with respect to the shares of the Company's Common Stock he received in
the Merger (the "Registrable Shares"). Pursuant to the Registration Rights
Agreement, in March 1997 the Company filed a registration statement under the
Securities Act of 1933 for the purpose of registering a portion of the
Registrable Shares. In addition, pursuant to the Registration Rights Agreement,
at any time after December 31, 1997, but prior to December 31, 1998, Mr. Gupton
has the right to request that the Company file a registration statement with
respect to another portion of the Registrable Shares. If the Company files a
registration statement on its own behalf at any time prior to December 31, 2001,
it must give Mr. Gupton notice and use its best efforts to include any requested
Registrable Shares in such registration statement.
For a description of the employment agreement entered into between Mr.
Gupton and the Company in connection with the Merger, see "Compensation of
Executive Officers -- Employment Agreements."
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Director is
responsible for establishing compensation policies with respect to the Company's
executive officers, including the Chief Executive Officer, the Co-Chairmen and
the other executive officers named in the Summary Compensation Table, and
setting the compensation for these individuals.
The Compensation Committee seeks to achieve three broad goals in connection
with the Company's executive compensation programs and decisions regarding
individual compensation. First, the Compensation Committee structures executive
compensation programs in a manner that the Committee believes will enable the
Company to attract and retain key executives. In order to ensure continuity of
certain key members of management, the Company has entered into multi-year
employment contracts. Second, except as described below, the Compensation
Committee establishes compensation programs that are designed to reward
executives for the achievement by the Company of net income goals and the
achievement by the executives of certain assigned objectives. By tying
compensation in part to particular goals, the Compensation Committee believes
that a performance-oriented environment is created for the Company's executives.
Finally, the Company's executive compensation programs are intended to provide
executives with an equity interest in the
10
<PAGE> 13
Company so as to link a portion of the compensation of the Company's executives
with the performance of the Company's Common Stock.
The compensation programs for the Company's executives (other than Messrs.
Norton, Lasker and Lubin, who are the Company's founders and its Chief Executive
Officer and two Co-Chairmen) generally consist of three elements based upon the
foregoing objectives: base salary; annual cash bonus; and a stock-based equity
incentive in the form of participation in the Company's stock option plans. In
establishing base salaries for executives, the Compensation Committee monitors
salaries at other companies, particularly those that are in the same industry as
the Company or related industries and/or located in the same general geographic
area as the Company, considers historic salary levels of the individual and the
nature of the individual's responsibilities and compares the individual's base
salary with those of other executives at the Company. To the extent determined
to be appropriate, the Compensation Committee also considers general economic
conditions, the Company's financial performance and the individual's performance
in establishing base salaries of executives.
Messrs. Norton, Lasker and Lubin are parties to employment agreements with
the Company which fix the executive's annual base salary during the term of the
agreement, subject to increase (but not decrease) at the discretion of the Board
of Directors. The Compensation Committee believes that the base salary levels
provided for in these contracts establish appropriate base salary levels for the
covered individuals in light of the factors described above. Moreover, these
agreements include provisions prohibiting the executive from soliciting any of
the Company's employees or customers during the term of the agreement and for a
specified number of years thereafter.
The Compensation Committee generally structures cash bonuses by linking
them to annual net income goals and the achievement by the executives of certain
assigned objectives. The individual objectives set for executive officers of the
Company are generally both objective and subjective in nature and include such
goals as sales bookings, revenue, profit and departmental objectives. The
Compensation Committee believes that these arrangements tie the executive's
performance closely to a key measure of success of the Company or the
executive's business unit. Although their employment agreements with the Company
provide for the payment of bonuses to Messrs. Norton, Lasker and Lubin upon the
achievement of certain performance targets determined by the Board of Directors,
none of Messrs. Norton, Lasker and Lubin was entitled to a bonus in 1996. The
Compensation Committee believes that the substantial equity position in the
Company held by these executive officers provides them with adequate incentives.
Stock option grants in 1996 were designed to make a portion of the overall
compensation of the executive officers receiving such awards vary depending upon
the performance of the Company's Common Stock. As a result of the applicable
vesting arrangements, such grants also serve as a means for the Company to
retain the services of these individuals. In January 1996, the Company granted
options to each of the then executive officers of the Company, other than
Messrs. Norton, Lasker and Lubin. The Compensation Committee intends to evaluate
the merits of option awards during 1997 and is considering increasing the
proportion of overall compensation of certain executive officers consisting of
stock options and/or other equity based incentives.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1,000,000 paid to its chief executive officer
and its four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. In this regard, the Company has limited the number
of shares subject to stock options which may be granted to Company
11
<PAGE> 14
employees in a manner that complies with the performance-based requirements of
Section 162(m). Based on the compensation awarded to Messrs. Lasker, Lubin and
Norton and the other executive officers of the Company, it does not appear that
the Section 162(m) limitation will have a significant impact on the Company in
the near term. While the Committee does not currently intend to qualify its
incentive awards as a performance-based plan, it will continue to monitor the
impact of Section 162(m) on the Company.
Robert S. Kaplan
John F. Rockart
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Mr. Kaplan
and Dr. Rockart. No executive officer of the Company has served as a director or
member of the compensation committee (or other committee serving an equivalent
function) of any other entity, whose executive officers served as a director of
or member of the Compensation Committee of the Company.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the period from April 4, 1995 through December
31, 1996 with the cumulative total return on (i) the Nasdaq Composite Index, and
(ii) the Russell 2000 Index. The comparison assumes the investment of $100 on
April 4, 1995 in the Company's Common Stock and in each of the indices and, in
each case, assumes reinvestment of all dividends. Prior to April 4, 1995, the
Company's Common Stock was not registered under the Exchange Act.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RENAISSANCE NASDAQ COMPOSITE RUSSELL 2000
(FISCAL YEAR COVERED) SOLUTIONS, INC. INDEX INDEX
--------------------- --------------- ---------------- ------------
<S> <C> <C> <C>
4/4/95 100.00 100.00 100.00
12/31/95 110.00 129.00 121.00
12/31/96 344.00 159.00 138.00
</TABLE>
12
<PAGE> 15
PROPOSAL 2 -- APPROVAL OF AMENDMENT TO AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
On April 7, 1997, the Board of Directors voted to recommend to the
stockholders that the Company's Amended and Restated Certificate of
Incorporation (the "Charter") be amended in order to increase the authorized
number of shares of Common Stock from 20,000,000 to 50,000,000 shares (the
"Charter Amendment").
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE CHARTER AMENDMENT
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
The Company currently is authorized to issue 20,000,000 shares of Common
Stock. As of the April 9, 1997, there were 9,467,045 shares of Common Stock
outstanding and 2,324,386 shares of Common Stock reserved for issuance under
stock plans of the Company (excluding 1,550,000 additional shares that would be
reserved for issuance pursuant to the 1997 Stock Incentive Plan and the 1995
Director Stock Option Plan, if adopted and amended, respectively, as described
below).
The additional shares of Common Stock to be authorized would be available
for possible future financing and acquisition transactions, stock dividends or
splits and other corporate purposes. Having such shares available for issuance
in the future would give the Company greater flexibility and allow shares of
Common Stock to be issued without the expense and delay of a special
stockholders' meeting. The additional shares of Common Stock would be available
for issuance without further action by the stockholders unless any such action
is required by applicable law or the rules of any stock exchange on which the
Company's securities may be listed. The Nasdaq National Market, on which the
issued shares of Common Stock are listed currently, requires stockholder
approval as a prerequisite to listing shares in certain instances, including in
connection with acquisition transactions where the present or potential issuance
of shares could result in an increase in the number of shares of common stock
outstanding by 20% or more.
The stockholders of the Company do not have preemptive rights under the
Charter, and the stockholders of the Company will not have such rights with
respect to the additional authorized shares of Common Stock.
At the present time, there are no plans to issue shares of Common Stock for
which authorization is being sought, other than pursuant to the Company's
benefit and stock plans.
PROPOSAL 3 -- APPROVAL OF 1997 STOCK INCENTIVE PLAN
On April 7, 1997, the Board of Directors of the Company adopted, subject to
stockholder approval, the Company's 1997 Stock Incentive Plan (the "1997 Plan").
Up to 1,500,000 shares of Common Stock (subject to adjustment in the event of
stock splits and other similar events) may be issued pursuant to awards granted
under the 1997 Plan.
Currently, 479,165 shares remain available for stock option grants under
the Company's 1995 Equity Incentive Plan. The Board of Directors believes that
the continued growth and profitability of the Company depends, in large part,
upon the ability of the Company to maintain a competitive position in
attracting, retaining and motivating key personnel.
ACCORDINGLY, THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE 1997
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.
13
<PAGE> 16
SUMMARY OF THE 1997 PLAN
The following is a brief summary of the material terms of the 1997 Plan.
Description of Awards
The 1997 Plan provides for the grant of incentive stock options intended to
qualify under the Code, nonstatutory stock options, restricted stock awards and
other stock-based awards, including the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights (collectively, "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of Common Stock at some time
in the future at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Options may be
granted at an exercise price which may be less than, equal to or greater than
the fair market value of the Common Stock on the date of grant. Under present
law, however, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Common Stock
on the date of grant (or less than 110% of the fair market value in the case of
incentive stock options granted to optionees holding 10% or more of the voting
power of the Company). The 1997 Plan permits the Board of Directors to determine
the manner of payment of the exercise price of options, including through
payment by cash, check or in connection with a "cashless exercise" through a
broker, by surrender to the Company of shares of Common Stock, by delivery to
the Company of a promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
Other Stock-Based Awards. Under the 1997 Plan, the Board has the right to
grant other Awards based upon the Common Stock having such terms and conditions
as the Board of Directors may determine, including the grant of shares based
upon certain conditions, the grant of securities convertible into Common Stock
and the grant of stock appreciation rights.
Eligibility to Receive Awards
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to be granted Awards under the 1997 Plan. Under
present law, however, incentive stock options may only be granted to employees.
The maximum number of shares with respect to which an Award may be granted to
any participant under the 1997 Plan may not exceed 400,000 shares per calendar
year.
As of March 31, 1997, approximately 325 persons would have been eligible to
receive Awards under the 1997 Plan, including all of the Company's employees and
consultants and the Company's five executive officers and two non-employee
directors. The granting of Awards under the 1997 Plan is discretionary, and the
Company cannot now determine the number or type of Awards to be granted in the
future to any particular person or group.
On April 15, 1997, the last reported sale price of the Company's Common
Stock on the Nasdaq National Market was $27.00.
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<PAGE> 17
Administration
The 1997 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1997 Plan and to interpret the provisions of the 1997
Plan. Pursuant to the terms of the 1997 Plan, the Board of Directors may
delegate authority under the 1997 Plan to one or more committees of the Board,
and subject to certain limitations, to one or more executive officers of the
Company. The Board has authorized the Compensation Committee to administer
certain aspects of the 1997 Plan, including the granting of options to executive
officers. Subject to any applicable limitations contained in the 1997 Plan, the
Board of Directors, the Compensation Committee, or any other committee or
executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of options,
and (iv) the number of shares of Common Stock subject to any restricted stock or
other stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1997 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1997 Plan), the 1997
Plan provides that the vesting of all outstanding Options and other stock-based
Awards will accelerate, making them fully exercisable prior to or upon
consummation of the Acquisition Event.
If any Award expires or is terminated, surrendered, canceled or forfeited,
the unused shares of Common Stock covered by such Award will again be available
for grant under the 1997 Plan.
Amendment or Termination
No Award may be made under the 1997 Plan after April 7, 2007, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 1997 Plan, except that no outstanding
Award designated as subject to Section 162(m) of the Code by the Board of
Directors after the date of such amendment shall become exercisable, realizable
or vested (to the extent such amendment was required to grant such Award) unless
and until such amendment shall have been approved by the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1997 Plan and with respect to the sale of Common Stock acquired under the 1997
Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option may, however, subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at
15
<PAGE> 18
least two years from the date the option was granted (the "Grant Date") and one
year from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO stock for more than
one year prior to the date of the sale.
Restricted Stock Awards
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Common Stock at the time the Award is granted and the purchase price paid
for the Common Stock. If a Section 83(b) Election is not made, the participant
will recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock Award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Section 83(b) Election is not made, or just after the
Award is granted if a Section 83(b) Election is made.
16
<PAGE> 19
Other Stock-Based Awards
The tax consequences associated with any other stock-based Award granted
under the 1997 Plan will vary depending on the specific terms of such Award.
Among the relevant factors are whether or not the Award has a readily
ascertainable fair market value, whether or not the Award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the Award and the participant's holding
period and tax basis for the Award or underlying Common Stock.
Tax Consequences to the Company
The grant of an Award under the 1997 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under the 1997 Plan will have
any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the 1997 Plan, including as a result of
the exercise of a nonstatutory stock option, a Disqualifying Disposition or a
Section 83(b) Election. Any such deduction will be subject to the limitations of
Section 162(m) of the Code. The Company will have a withholding obligation with
respect to any ordinary compensation income recognized by participants under the
1997 Plan who are employees or otherwise subject to withholding.
PROPOSAL 4 -- APPROVAL OF AMENDMENT TO 1995 DIRECTOR STOCK OPTION PLAN
The Board of Directors believes that the continued growth and profitability
of the Company depends upon the ability of the Company to attract and retain
highly qualified non-employee directors. As of March 31, 1997, 25,000 shares
remained available for stock option grants under the Company's 1995 Director
Stock Option Plan (the "Director Plan"). Accordingly, on April 7, 1997, the
Board of Directors adopted, subject to stockholder approval, an amendment to the
Director Plan (the "Amendment") increasing the number of shares of Common Stock
available for issuance under the Director Plan from 50,000 to 100,000 (subject
to adjustment for certain changes in the Company's capitalization).
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AMENDMENT IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
"FOR" THE APPROVAL OF THIS PROPOSAL.
SUMMARY OF THE DIRECTOR PLAN
The Director Plan was adopted by the Board of Directors and approved by the
stockholders of the Company in January 1995. Under the terms of the Director
Plan, directors of the Company who are not employees of the Company or any
subsidiary of the Company are eligible to receive nonstatutory stock options to
purchase shares of Common Stock. As of April 15, 1997, Mr. Kaplan and Dr.
Rockart had each been granted options to purchase 10,000 shares at an exercise
price of $12.25 per share, options to purchase 2,500 shares at an exercise price
of $28.75 per share, and options to purchase 2,500 shares at an exercise price
of $27.00 per share, and 20,000 shares remained eligible for future option
grants under the Director Plan.
Each eligible director is granted an option to purchase 10,000 shares of
Common Stock on the date of his or her initial election to the Board of
Directors. Annual options to purchase 2,500 shares of Common Stock are granted
to each eligible director on April 15 of each subsequent fiscal year. The
exercise price of options granted under the Director Plan is equal to the
closing price of the Common Stock on the Nasdaq National Market on the date of
grant.
17
<PAGE> 20
Options granted under the Director Plan are not transferrable by the
optionee except by will or by the laws of descent and distribution. No option is
exercisable after the expiration of five years from the date of grant.
For a description of the federal income tax consequences of options granted
under the Director Plan see "PROPOSAL 3 -- APPROVAL OF 1997 STOCK INCENTIVE
PLAN -- Federal Income Tax Consequences -- Nonstatutory Stock Options" above.
PROPOSAL 5 -- RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as auditors of
the Company for the year ending December 31, 1997, subject to ratification by
stockholders at the Meeting. If the stockholders do not ratify the selection of
Deloitte & Touche LLP, the Board of Directors will reconsider the matter. A
representative of Deloitte & Touche LLP, which served as auditors for the year
ended December 31, 1996, is expected to be present at the Meeting to respond to
appropriate questions, and to make a statement if he or she so desires.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
offices, Lincoln North, 55 Old Bedford Road, Lincoln, Massachusetts 01773, no
later than December 22, 1997 in order to be considered for inclusion in the
Proxy Statement relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution. The
Company has also retained Corporate Investor Communications, Inc., at an
estimated expense of $4,500 plus reimbursement of expenses, to assist in the
solicitation of proxies by telephone and mail.
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<PAGE> 21
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
Harry M. Lasker, Secretary
April 21, 1997
19
<PAGE> 22
RENAISSANCE SOLUTIONS, INC.
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 4, 1997
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O
X The undersigned, revoking all prior proxies, hereby appoints Harry
Y M. Lasker, David A. Lubin and David P. Norton, and each of them, with full
power of substitution, as Proxies to represent and vote as designated
hereon all shares of stock of Renaissance Solutions, Inc. (the "Company")
which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders of the Company to be held on Wednesday,
June 4, 1997, at 10:00 a.m., Boston Time, at the offices of Hale and Dorr
LLP, 26th Floor, 60 State Street, Boston, Massachusetts and at any
adjournment thereof, with respect to the matters set forth on the reverse
side hereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POST-PAID RETURN ENVELOPE.
---------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE |
---------------
<PAGE> 23
X Please mark votes
--- as in this example.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE CLASS
II DIRECTOR NOMINEES AND FOR PROPOSALS 2, 3, 4 AND 5.
<TABLE>
<S> <C> <C>
1. To elect two Class II Directors to the Board of For ___ Withheld ___
Directors for the ensuing three years.
------------------------
NOMINEES: David A. Lubin and John F. Rockart For both nominees except as noted above
2. To approve an amendment to the For ___ Against ___ Abstain ___
Company's Amended and Restated
Certificate of Incorporation increasing the
authorized number of shares of Common
Stock from 20,000,000 to 50,000,000 shares.
3. To approve the Company's 1997 Stock For ___ Against ___ Abstain ___
Incentive Plan.
4. To approve an amendment to the For ___ Against ___ Abstain ___
Company's 1995 Director Stock Option Plan
increasing the number of shares of Common Stock
authorized under the plan from 50,000
to 100,000 shares.
5. To ratify and approve the appointment by For ___ Against ___ Abstain ___
the Board of Directors of Deloitte & Touche
LLP as the Company's independent auditors
for the current year.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT _____ THE MEETING _____
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Please sign exactly as name appears hereon. If the
stock is registered in the names of two or more
persons, each should sign. When signing as an
executor, administrator, trustee, guardian, or
attorney, please give full title as such. If a
corporation, please sign in full corporate name by an
authorized officer. If a partnership, please sign in
full partnership name by an authorized person.
Signature:___________________________ Date:_______________ Signature:___________________________ Date:_______________
</TABLE>
<PAGE> 24
APPENDIX A
RENAISSANCE SOLUTIONS, INC.
1995 DIRECTOR STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this 1995 Director Stock Option Plan (the "Plan") of
Renaissance Solutions, Inc. (the "Company") is to promote the recruiting and
retention of highly qualified outside Directors and to strengthen the
commonality of interest between directors and stockholders.
2. Administration.
--------------
The Plan will be administered by the Board of Directors of the Company,
whose construction and interpretation of the terms and provisions of the Plan
shall be final and conclusive. Grants of stock options under the Plan and the
amount and nature of the awards to be granted shall be automatic and
non-discretionary in accordance with Section 5. However, all questions of
interpretation of the Plan or of any options issued under it shall be determined
by the Board of Directors and such determination shall be final and binding upon
all persons having an interest in the Plan. No director shall be liable for any
action or determination under the Plan made in good faith.
3. Participation in the Plan.
-------------------------
Directors of the Company who are not employees of the Company shall be
eligible to be granted options under the Plan.
4. Stock Subject to the Plan.
-------------------------
(a) The maximum number of shares which may be issued under the Plan shall
be 50,000 shares of the Company's Common Stock, $.01 par value per share
("Common Stock"), subject to adjustment as provided in Section 9.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be nonstatutory options which
are not intended to meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
1
<PAGE> 25
5. Terms, Conditions and Form of Options.
-------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) OPTION GRANT DATES. Options shall be granted automatically to
all eligible directors as follows: (i) each person who becomes an eligible
director after the date of stockholder approval of the Plan shall be
granted an option to purchase 10,000 shares of Common Stock on the date of
his or her initial election to the Board of Directors; and (ii) each
eligible director shall be granted an additional option to purchase 2,500
shares of Common Stock on April 15 of each subsequent fiscal year (or the
next following business day if April 15 is not a business day), provided
he or she is then an eligible director.
(b) OPTION EXERCISE PRICE. The option exercise price per share for
each option granted under the Plan shall equal the last reported sale
price per share of the Company's Common Stock on the Nasdaq National
Market (or such other national securities exchange or trading system of
which the Common Stock may then be listed or quoted) on the date of grant
(or if no such price is reported on such date, such price is reported on
the nearest preceding date on which such price is reported).
(c) OPTIONS NON-TRANSFERABLE. Each option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by will
or by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined in Section 414(p) of the Code) and
shall be exercised during the lifetime of the optionee only by such
optionee.
(d) EXERCISE PERIOD. Each option may be exercised at any time and
from time to time, in whole or in part, prior to the fifth anniversary of
the date of grant.
(e) EXERCISE PROCEDURE. Options may be exercised only by written
notice to the Company at its principal office accompanied by payment of
the full consideration for the shares as to which they are exercised.
(f) PAYMENT OF PURCHASE PRICE. Payment of the exercise price may be
made, at the election of the optionee, (i) by delivery of cash or a check
to the order of the Company in an amount equal to the exercise price, (ii)
by delivery to the Company of shares of Common Stock of the Company
already owned and held by the optionee for at least twelve months and
having a fair market value equal in amount to the exercise price of the
options being exercised, or (iii) by any combination of such methods of
payment. The fair market value
2
<PAGE> 26
of any shares of Common Stock which may be delivered upon exercise of an
option shall be determined by the Company as of the date that such shares
are delivered.
6. Assignments.
-----------
The rights and benefits under the Plan may not be assigned except as
provided in Section 5.
7. Time for Granting Options.
-------------------------
All options for shares subject to the Plan shall be granted, if at all,
not later than five years after the date of the Board's adoption of the Plan.
8. Limitation of Rights.
--------------------
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) NO STOCKHOLDER RIGHTS FOR OPTIONS. An optionee shall have no rights as
a stockholder with respect to the shares covered by his or her option until the
date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such certificate is issued.
9. Adjustment Provisions.
---------------------
(a) RECAPITALIZATIONS. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased or decreased or are exchanged for a different number
or kind of shares or other securities of the Company, or (ii) additional shares
or new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment shall be made in (w) the
maximum number and kind of shares reserved for issuance under the Plan, (x) the
number and kind of shares or other securities subject to future option grants
under the Plan, (y) the number and kind of shares or other securities subject to
then outstanding options under the Plan, and (z) the price for each share
subject to any then outstanding options under the Plan, without changing the
aggregate purchase price as to which such options remain exercisable, provided
that no adjustment shall be made pursuant to this Section 9 if
3
<PAGE> 27
such adjustment would cause the Plan to fail to comply with Rule l6b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
("Rule l6b-3").
(b) MERGERS. In the event of a consolidation or merger in which
outstanding shares of Common Stock are exchanged for securities, cash or other
property of any other corporation or business entity or in the event of a
liquidation of the Company or sale of all or substantially all of the assets of
the Company, the Board of Directors of the Company, or the board of directors of
any corporation assuming the obligations of the Company, shall take any one or
more of the following actions, as to outstanding options: (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, or
(iii) in the event of a merger under the terms of which holders of the Common
Stock of the Company will receive upon consummation thereof a cash payment for
each share surrendered in the merger (the "Merger Price"), make or provide for a
cash payment to the optionees equal to the difference between (A) the Merger
Price times the number of shares of Common Stock subject to such outstanding
options (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such outstanding options in
exchange for the termination of such options.
10. Amendment of the Plan.
---------------------
(a) The provisions of Sections 3, 5(a) and 5(b) of the Plan shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder. Subject to the foregoing, the Board of Directors may at any time,
and from time to time, modify or amend the Plan in any respect, except that if
at any time the approval of the stockholders of the Company is required as to
such modification or amendment under Rule 16b-3, the Board of Directors may not
effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of the optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionees
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify the terms and provisions of the Plan and of any
outstanding option to the extent necessary to ensure the qualification of the
Plan under Rule l6b-3.
4
<PAGE> 28
11. Withholding.
-----------
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 11 may
only satisfy his or her withholding obligation with shares of Common Stock which
are not subject to any repurchase, forfeiture, unfulfilled vesting or other
similar requirements. Notwithstanding the foregoing, no election to use shares
for the payment of withholding taxes shall be effective unless made in
compliance with any applicable requirements of Rule 16b-3.
12. Notice.
------
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Chief Executive Officer of the Company and shall
become effective when it is received.
13. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective upon the closing of
the Company's initial public offering, but no option granted under the Plan
shall become exercisable unless and until the Plan shall have been approved by
the Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, all options
granted under the Plan shall terminate and no further options shall be granted
under the Plan. Amendments to the Plan not requiring stockholder approval shall
become effective when adopted by the Board of Directors; amendments requiring
stockholder approval (as provided in Section 10(a)) shall become effective when
adopted by the Board of Directors, but no option issued after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment to the Plan was required to enable the Company to grant such
5
<PAGE> 29
option to a particular optionee. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.
(b) TERMINATION. Unless earlier terminated pursuant to Section 9, the Plan
shall terminate upon the earlier of (i) January 31, 2000 or (ii) the date on
which all shares available for issuance under the Plan shall have been issued
pursuant to the exercise of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
14. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been deemed to require the Company to apply for or to
obtain such listing, registration or qualification, or to satisfy such
condition.
6
<PAGE> 30
15. Governing Law.
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
Adopted by the Board of Directors on
January 31, 1995.
Approved by the Stockholders on
January 31, 1995.
7
<PAGE> 31
AMENDMENT NO. 1 TO THE 1995 DIRECTOR STOCK OPTION PLAN
OF RENAISSANCE SOLUTIONS, INC.
Section 4(a) of the 1995 Director Stock Option Plan (the "Plan") of
Renaissance Solutions, Inc. is hereby amended and restated in its entirety,
subject to stockholder approval, to provide as follows:
"(a) The maximum number of shares which may be issued under the Plan
shall be 100,000 shares of the Company's Common Stock, $.0001 par
value per share ("Common Stock"), subject to adjustment as provided
in Section 9."
Adopted by the Board of Directors on
April 7, 1997
<PAGE> 32
APPENDIX B
RENAISSANCE SOLUTIONS, INC.
1997 STOCK INCENTIVE PLAN
-------------------------
1. Purpose
-------
The purpose of this 1997 Stock Incentive Plan (the "Plan") of Renaissance
Solutions, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of the Company as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code") (a "Subsidiary").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
--------------------------
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No member of the Board shall be liable
for any action or determination relating to the Plan. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination under the Plan made in good faith.
<PAGE> 33
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). For so long as the
common stock, $.0001 par value per share (the "Common Stock"), of the Company is
registered under the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall appoint one such Committee of not less than two members, each member
of which shall be an "outside director" within the meaning of Section 162(m) of
the Code and a "non-employee director" as defined in Rule 16b-3 promulgated
under the Exchange Act." All references in the Plan to the "Board" shall mean a
Committee or the Board or the executive officer referred to in Section 3(b) to
the extent that the Board's powers or authority under the Plan have been
delegated to such Committee or executive officer.
4. Stock Available for Awards
--------------------------
(a) NUMBER OF SHARES. Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to 1,500,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) PER PARTICIPANT LIMIT. Subject to adjustment under Section 4(c), the
maximum number of shares with respect to which an Award or Awards may be granted
to any Participant under the Plan shall be 400,000 per calendar year. The per
Participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code.
(c) ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding
-2-
<PAGE> 34
Option (as defined below), (iii) the repurchase price per security subject to
each outstanding Restricted Stock Award (as defined below), and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(c) applies and Section 8(e)(1)
also applies to any event, Section 8(e)(1) shall be applicable to such event,
and this Section 4(c) shall not be applicable.
5. Stock Options
-------------
(a) GENERAL. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option shall be designated a "Nonstatutory Stock Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and construed consistently with the requirements of Section 422 of
the Code. The Company shall have no liability to a Participant, or any other
party, if an Option (or any part thereof) which is intended to be an Incentive
Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
(e) EXERCISE OF OPTION. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
-3-
<PAGE> 35
(2) except as the Board may otherwise provide in an Option
Agreement, delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price;
(3) to the extent permitted by the Board and explicitly
provided in the Option Agreement (i) by delivery of shares of Common Stock owned
by the Participant valued at their fair market value as determined by the Board
in good faith ("Fair Market Value"), which Common Stock was owned by the
Participant at least six months prior to such delivery, (ii) by delivery of a
promissory note of the Participant to the Company on terms determined by the
Board, or (iii) by payment of such other lawful consideration as the Board may
determine; or
(4) any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
-4-
<PAGE> 36
7. Other Stock-based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. General Provisions Applicable to Awards
---------------------------------------
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each type
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Acquisition Events
------------------
(1) CONSEQUENCES OF ACQUISITION EVENTS. Except to the extent
otherwise provided in the instrument evidencing the Award or in any other
agreement between the Participant and the Company:
(A) Upon the occurrence of an Acquisition Event,
(i) all Restricted Stock Awards then outstanding
shall become immediately free of all restrictions; and
-5-
<PAGE> 37
(ii) all other stock-based Awards other than
Options and stock appreciation rights shall become immediately exercisable,
realizable or vested in full, or shall be immediately free of all restrictions
or conditions, as the case may be.
(B) Upon the execution by the Company of an agreement to
effect an Acquisition Event other than a Change of Control Event, all Options
and stock appreciation rights then outstanding shall become immediately
exercisable in full upon the occurrence of the Acquisition Event or such earlier
date as may be specified by the Board by written notice to the Participants, and
the Board may take one or both of the following actions with respect to then
outstanding Options and stock appreciation rights: (I) provide that such Options
and stock appreciation rights shall be assumed, or equivalent Options or stock
appreciation rights be substituted by the acquiring or succeeding corporation
(or an affiliate thereof), or (II) upon written notice to the Participants,
provide that all then unexercised Options and stock appreciation rights will
terminate to the extent not exercised by the Participants prior to the
consummation of such Acquisition Event or such earlier date as may be specified
by the Board by written notice to Participants.
(C) Upon the occurrence of a Change of Control Event,
all Options and stock appreciation rights then outstanding shall become
immediately exercisable in full.
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing (either by remaining outstanding or by being converted into
voting securities of the surviving or acquiring entity) less than 60% of the
combined voting power of the voting securities of the Company or such surviving
or acquiring entity outstanding immediately after such merger or consolidation;
(b) any sale of all or substantially all of the assets of the Company; (c) the
complete liquidation of the Company; or (d) the acquisition of "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities of
the Company representing 50% or more of the combined voting power of the
Company's then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
"person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company (an event specified in
this clause (d) being referred to as a "Change of Control Event").
(2) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a
-6-
<PAGE> 38
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(h) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(i) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. Miscellaneous
-------------
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
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<PAGE> 39
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board or (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to 162(m) by the Board after the date of such
amendment shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the Plan was required to grant such
Award to a particular Participant), unless and until such amendment shall have
been approved by the Company's stockholders.
(e) STOCKHOLDER APPROVAL. For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.
(f) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors
on April 7, 1997.
Approved by the stockholders of the
Company on ____________________.
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