SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE A CONSULTING TEAM, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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:
THE A CONSULTING TEAM, INC.
200 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 25, 2000
To the Holders of the Common Stock of THE A CONSULTING TEAM, INC.
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of The A
Consulting Team, Inc. (the "Company") will be held at 10:00 a.m. (local time),
on May 25, 2000, at the Company's principal office at 200 Park Avenue South,
Suite 1511, New York, New York 10003 for the following purposes:
1. To elect the Board of Directors of the Company to serve until the annual
meeting of shareholders in 2001 and until their respective successors are duly
elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the year ending December 31, 2000; and
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
Only holders of the Common Stock at the close of business on April 10, 2000
will be entitled to notice of and to vote at this meeting and any adjournment or
postponement thereof.
You are cordially invited to attend the meeting. Whether or not you plan to
attend the meeting, please complete, sign, date and return the enclosed proxy
card promptly. This will insure that your shares are voted in accordance with
your wishes. Your cooperation is appreciated since a majority of the outstanding
shares entitled to vote must be represented, either in person or by proxy, to
constitute a quorum for the purposes of conducting business at the meeting.
By Order of the Board of Directors,
/s/ Daniel E. McGurn
Daniel E. McGurn
Secretary
April 25, 2000
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION........................................................................................ 1
SOLICITATION AND VOTING OF PROXIES; REVOCATION; RECORD DATE................................................ 1
ELECTION OF DIRECTORS...................................................................................... 1
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS................................................ 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 3
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES...................................................... 4
EXECUTIVE COMPENSATION..................................................................................... 4
Summary Compensation Table............................................................................ 4
Option Grants for the Year Ended December 31, 1999.................................................... 5
Aggregated Option Exercises in the Year Ended December 31, 1999 and Fiscal Year-End Option Values..... 5
Option Repricing in the Year Ended December 31, 1998.................................................. 6
Director Compensation................................................................................. 6
Employment Agreements................................................................................. 6
Compensation Committee Interlocks and Insider Participation........................................... 7
Report of the Executive Compensation Committee of the Board of Directors.............................. 7
Performance Graph..................................................................................... 8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................................................... 9
SHAREHOLDER PROPOSALS...................................................................................... 9
OTHER BUSINESS............................................................................................. 9
i
THE A CONSULTING TEAM, INC.
200 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10003
Dear Shareholder:
You are cordially invited to attend the Company's annual meeting on May 25,
2000. The meeting will begin promptly at 10:00 a.m. at the offices of The A
Consulting Team, Inc. 200 Park Avenue South, Suite 1511, New York, New York
10003.
The official Notice of Meeting, proxy statement and form of proxy are
included with this letter. The matters listed in the Notice of Meeting are
described in detail in the proxy statement.
The vote of every shareholder is important. Please sign, date and promptly
mail your proxy. The Board of Directors and management look forward to greeting
those shareholders who are able to attend.
Sincerely,
THE A CONSULTING TEAM, INC.
/s/ Shmuel BenTov
Shmuel BenTov
President and Chief Executive Officer
THE A CONSULTING TEAM, INC.
200 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10003
(212) 549-8228
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 2000
------------------------
This proxy statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of The A
Consulting Team, Inc., a New York corporation (the "Company"), to be voted at
its Annual Meeting of Shareholders which will be held at 10:00 a.m. (local
time), on May 25, 2000 at the offices of The A Consulting Team, Inc., 200 Park
Avenue South, Suite 1511, New York, New York 10003 and at any postponements or
adjournments thereof (the "Annual Meeting").
At the Annual Meeting, the Company's shareholders will be asked (i) to
elect Messrs. Shmuel BenTov, Frank T. Thoelen, Joseph E. Imholz, Steven S.
Mukamal and Reuven Battat as Directors of the Company to serve until the annual
meeting of shareholders in 2000 and until their respective successors are duly
elected and qualified, (ii) to ratify the appointment of Ernst & Young LLP as
the Company's independent auditors for the year ending December 31, 2000 and
(iii) to take such other action as may properly come before the Annual Meeting
or any adjournments thereof.
This proxy statement and the accompanying form of proxy, together with the
Company's 1999 Annual Report to Shareholders, are being mailed to shareholders
on or about April 25, 2000.
GENERAL INFORMATION
SOLICITATION AND VOTING OF PROXIES; REVOCATION; RECORD DATE
Shares represented by each properly executed and returned proxy card will
be voted (unless earlier revoked) in accordance with the instructions indicated.
If no instructions are indicated on the proxy card, all shares represented by
valid proxies received pursuant to this solicitation (and not revoked before
they are voted) will be voted "FOR" the election of the nominees for director
named below "FOR" the ratification of the Company's independent public
accountants and by the proxies in their discretion on any other matters to come
before the Annual Meeting.
A shareholder may revoke a proxy at any time before it is exercised by
filing with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the meeting. Any written
notice revoking the proxy should be sent to the attention of Daniel E. McGurn,
Secretary, The A Consulting Team, Inc., 200 Park Avenue South, New York, New
York 10003, (212) 979-8228.
Proxies may be solicited by mail, and may also be made by personal
interview, telephone and facsimile transmission, and by directors, officers and
employees of the Company (without special compensation). The expenses for the
preparation of proxy materials and the solicitation of proxies for the Annual
Meeting will be paid by the Company. The Company has retained ChaseMellon
Shareholder Services to assist in the solicitation. In accordance with the
regulations of the Securities and Exchange Commission, the Company will
reimburse, upon request, banks, brokers and other institutions, nominees and
fiduciaries for their expenses incurred in sending proxies and proxy materials
to the beneficial owners of the Company's Common Stock. Expenses for the
solicitation are estimated to be approximately $3,500, plus other reasonable
expenses.
Only holders of record of the Company's Common Stock, $0.01 par value per
share ("Common Stock"), at the close of business on April 10, 2000 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of
April 14, 2000, there were outstanding 5,877,855 shares of Common Stock. Under
the Company's By-Laws, the presence at the Annual Meeting, in person or by duly
authorized proxy, of the holders of a majority of the total number of
outstanding shares of Common Stock entitled to vote constitutes a quorum for the
transaction of business. Each share is entitled to one vote.
New York's Business Corporation Law provides that, a quorum being present,
nominees for the office of director are to be elected by a plurality of votes
cast at the meeting. Only shares affirmatively voted in favor of a nominee will
be counted toward the achievement of a plurality. Votes withheld (including
broker non-votes) are counted as present for the purpose of determining a quorum
but are not counted as votes cast in determining a plurality.
With respect to the items described in clauses (2) and (3) of the Notice of
Annual Meeting of Shareholders dated April 25, 2000, New York's Business
Corporation Law provides that, a quorum being present, approval is to be
determined by a majority of the votes cast at the meeting. Abstentions and
broker non-votes are counted in determining the existence of a quorum but are
not counted as votes cast for the proposals as to which the shareholder
abstained or the broker withheld authority. Abstentions and broker non-votes
have the effect of reducing the number of affirmative votes required to achieve
a majority of the votes cast.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Pursuant to the Company's By-Laws, the Board of Directors shall be
comprised of not less than three, unless all of the outstanding shares are owned
beneficially and of record by less than three shareholders. At each annual
meeting of shareholders, directors shall be elected for the ensuing year.
NOMINEES STANDING FOR ELECTION
The following nominees are standing for election to serve as Directors
until the annual meeting of shareholders in 2000 and until their respective
successors are duly elected and qualified:
SHMUEL BENTOV, 48, is the founder, Chairman of the Board, Chief Executive
Officer and President of the Company. Mr. BenTov received a B.Sc. in Economics
and Computer Science in 1979 from the Bar-Ilan University in Israel and founded
the Company in 1983. From 1979 to 1983, Mr. BenTov was a consultant Database
Administrator and then an Account Manager with Spiridellis & Associates. From
1972 to 1979, Mr. BenTov served with the Israeli Defense Forces as a Programmer,
Analyst, Project Manager, Database Administrator and Chief Programmer.
FRANK T. THOELEN, 51, is the Chief Financial Officer of the Company.
Mr. Thoelen is a C.P.A. and received a B.S. in Public Accounting in 1971 from
the University at Albany, New York. Prior to joining the Company in June 1997,
Mr. Thoelen was President of FTT Consulting Inc., his own consulting firm. From
1971 to 1996, Mr. Thoelen was with Arthur Andersen LLP, an international
consulting and business advisory firm. From 1989 to 1996, he was the Division
Head for the Business Systems Consulting and Computer Risk Management Business
Unit. Prior to that, he was an Audit and Business Advisory Partner, serving a
variety of global companies.
JOSEPH E. IMHOLZ, 68, has been a director of the Company since 1997. Mr.
Imholz received a B.S. in Management in 1957 from Hofstra University. From 1987
until his retirement in 1995, Mr. Imholz was Vice President and Chief
Information Officer of the Property and Casualty Division of Metropolitan Life
Insurance Co. ("MetLife"). From 1985 to 1987, Mr. Imholz was Executive Director
and Chief Information Officer of Albany Life Insurance, a subsidiary of MetLife.
From 1981 to 1985, Mr. Imholz was Vice President of Corporate Information
Systems of MetLife, and from 1974 to 1981 he was the officer in charge of the
MetLife Computer Center in Greenville, South Carolina. From 1957 to 1974, Mr.
Imholz served in various capacities with MetLife, including Analyst, Programmer
and Manager of Information Systems.
STEVEN S. MUKAMAL, 60, has been a director of the Company since 1997.
Mr. Mukamal received a B.A. in 1962 from Michigan State University and a
J.D./L.L.B. in 1965 from Brooklyn Law School. Since 1965, he has been a member
and senior partner of the law firm Barst & Mukamal LLP. Mr. Mukamal specializes
in the areas of immigration and nationality law, consular law and real estate
and debt restructuring.
REUVEN BATTAT, 44, has been a director of the Company since 1997. Mr.
Battat recently became President and CEO of ProcureNet Inc. Mr. Battat was the
Senior Vice President and General Manager of Global Marketing for Computer
Associates International, Inc. and from 1995 through 1999 was responsible for
Computer Associates' world-wide marketing activities and long-term planning of
product development in new and emerging markets. From 1981 to 1987, Mr. Battat
was Manager of key systems management projects at IBM Corporation. Mr. Battat is
an expert in the field of enterprise management and object technologies.
Proxies are solicited in favor of the Director nominees and it is intended
that the proxies will be voted for the nominees unless otherwise specified.
Should a nominee become unable to serve for any reason, unless the Board of
Directors by resolution provides for a lesser number of directors, the person
named in the enclosed proxy will vote for the election of a substitute nominee.
The Board of Directors has no reason to believe that the nominees will be unable
to serve.
RECOMMENDATION
The Board of Directors recommends that stockholders vote FOR each of the
nominees.
2
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2 ON PROXY CARD)
The Audit Committee has recommended to the Board of Directors of the
Company the selection of Ernst & Young LLP ("Ernst & Young") as independent
auditors of the Company for the year ending December 31, 2000.
A representative of Ernst & Young will be present at the meeting. The
representative will be given the opportunity to make a statement at the meeting
and will be available to respond to appropriate questions.
RECOMMENDATION
The Board of Directors recommends that the shareholders RATIFY the
selection of Ernst & Young LLP to be the independent auditors of the Company for
the year ending December 31, 2000.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 11, 2000, certain information
regarding the beneficial ownership of TACT Common Stock by (i) each of the
Company's directors, (ii) each of the executive officers named in the Summary
Compensation Table, (iii) all directors and officers of the Company as a group
and (iv) each person known by the Company to own beneficially more than 5% of
the Common Stock. Unless otherwise indicated in the table below, each person or
entity named below has an address in care of the Company's principal office. All
share amounts are rounded to the nearest whole share.
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY TOTAL
NAME OF SHAREHOLDER OWNED(1) VOTING SHARES
- --------------------------------------------------------------------------------- ---------------- -------------
Mr. Shmuel BenTov, Chief Executive Officer, President, and Director.............. 3,435,000(2) 62.6%
Mr. Frank T. Thoelen, Chief Financial Officer and Director....................... 38,700 *
Mr. Joseph Judenberg, Senior Vice President...................................... 0 *
Mr. Joseph E. Imholz, Director................................................... 750 *
Mr. Steven S. Mukamal, Director.................................................. 750 *
Mr. Reuven Battat, Director...................................................... 750 *
All directors and executive officers as a group (6 persons)...................... 3,475,950 63.4%
- ------------------
* indicates less than 1%
(1) As used in the tables above, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition
of any security. A person is deemed to have "beneficial ownership" of any
security that such person has a right to acquire within 60 days of the date
of this annual statement. Any security that any person named above has the
right to acquire within 60 days is deemed to be outstanding for purposes of
calculating the ownership of such person but is not deemed to be outstanding
for purposes of calculating the ownership percentage of any other person.
Unless otherwise noted, each person listed has the sole power to vote, or
direct the voting of, and power to dispose, or direct the disposition of,
all such shares.
(2) Includes 20,000 shares owned for the benefit of Mr. BenTov's two minor
children.
3
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1999, the Board of Directors met four
times and acted by written consent in lieu of a meeting ten times. Four
directors attended 100% of the aggregate number of meetings of the board and its
committees on which they served. One director attended 50% of the aggregate
number of meetings of the board and its committees on which he served.
The following are the current members and functions of the standing
committees of the Board of Directors:
Audit Committee. The Audit Committee is authorized to engage the
Corporation's independent public accountants and review with such public
accountants (i) the scope and timing of their audit services and any other
services they are asked to perform, (ii) their report on the Company's financial
statements following completion of their audit and (iii) the Company's policies
and procedures with respect to internal accounting and financial controls. The
Audit Committee is composed of Messrs. Imholz, Battat and BenTov. Mr. Imholz is
the Chairman. During the year ended December 31, 1999, the Audit Committee met
four times during that period.
Executive Compensation Committee. The Executive Compensation Committee is
authorized and empowered to approve appointments and promotions of executive
officers of the Company and fix salaries for such officers; provided that all
actions of the Executive Compensation Committee must be ratified by the full
Board of Directors within six months of the subject action. The Executive
Compensation Committee is also authorized to administer the Company's 1997 Stock
Option Plan. The Executive Compensation Committee is composed of Messrs. BenTov,
Mukamal and Battat. Mr. Mukamal is the Chairman. During the year ended December
31, 1999, the Executive Compensation Committee met four times during that
period.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer during the years ended
December 31, 1999, 1998 and 1997; the Company's Chief Financial Officer during
the year ended December 31, 1999, 1998 and 1997 and the Company's Senior Vice
President during the year ended December 31, 1999. No other executive officer of
the Company received a total salary and bonus of $100,000 or more for such
years. Accordingly, no information is reported for such persons.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#)
- ------------------------------------------ ------ --------- -------- ------------------ ------------
Shmuel BenTov ............................ 1999 $ 250,000 $ 50,000 $4,043 30,000
Chairman, Chief Executive Officer 1998 $ 250,000 $ -- $4,043 --
and President 1997 $ 250,000 $ -- $6,636 --
Frank Thoelen(2) ......................... 1999 $ 200,000 $ 50,000 $ -- 15,000
Chief Financial Officer 1998 $ 150,000 $ 43,750 $ -- 10,000
1997 $ 87,500 $ 50,000 $ -- 60,000
Joseph Judenberg(3) ...................... 1999 $ 166,000 $ 33,375 $ -- 20,000
Senior Vice President
(Footnotes on next page)
4
(Footnotes from previous page)
- ------------------
(1) Includes payments with respect to life insurance, car allowance and health
insurance.
(2) Mr. Thoelen was hired in June 1997.
(3) Mr. Judenberg was hired in May 1999.
The following table provides certain information regarding the stock
options granted during the year ended December 31, 1999 to the executive
officers named in the Summary Compensation Table who owned options as of
December 31, 1999.
OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 1999
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OF OPTION TERM(2)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION ------------------
NAME GRANTED(#) IN FISCAL YEAR(1) $/SHARE DATE 5% 10%
- -------------------------- ---------- ----------------- ----------- ------------------ ------- -------
Shmuel BenTov............. 30,000 11.74% $ 3.875 December 1, 2004 $32,118 $70,972
Frank T. Thoelen.......... 15,000 5.87% $ 3.875 December 1, 2004 $16,059 $35,486
Joseph Judenberg.......... 20,000 7.83% $ 4.875 October 1, 2004 $21,412 $47,315
- ------------------
(1) Based on an aggregate of 255,550 options granted to employees of the Company
for the year ended December 31, 1999.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciations are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
The following table sets forth certain information for the executive
officers named in the Summary Compensation Table who owned options as of
December 31, 1999, with respect to the exercise of options to purchase Common
Stock during the year ended December 31, 1999 and the number and value of
securities underlying unexercised options held by such executive officer as of
December 31, 1999.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
DECEMBER 31, 1999 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE AT DECEMBER 31, 1999 DECEMBER 31, 1999
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------- ----------- --------- -------------------------- --------------------------
Shmuel BenTov.......................... -- -- 0/30,000 $0/$0
Frank T. Thoelen....................... -- -- 37,500/47,500 $0/$0
Joseph Judenberg....................... -- -- 0/20,000 $0/$0
Since the initial granting of stock options by the Company in August and
December of 1997, the Company's stock price has fluctuated, and the Company's
stock has been trading at a price below the stock price as of the Company's
initial public offering on August 8, 1997. No employees exercised any options as
of December 31, 1999, despite the fact that a significant number of employee
options had vested. In November, 1998, the Board of Directors approved a stock
option repricing program pursuant to which all employees of the Company
(including
5
the only executive officer to receive options, Frank T. Thoelen,
Chief Financial Officer) who received stock option awards on August 8, 1997 and
December 17, 1997 may elect to exchange their then-outstanding employee stock
options for new employee stock options having exercise prices of $7.50 per share
(equal to the fair market value of the Company's common stock on October 14,
1998). No other changes, restrictions or amendments were made with respect to
the stock option awards. The vesting schedules and expiration dates of the stock
options were left unchanged. There is no prohibition or restriction on
exercising the stock options. Approximately 416,150 options were eligible for
repricing.
OPTION REPRICING IN THE YEAR ENDED DECEMBER 31, 1998
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK EXERCISE PRICE NEW TERM REMAINING
OPTIONS AT TIME OF AT TIME OF EXERCISE AT DATE
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) OF REPRICING
- --------------------------- -------- ------------- ------------ -------------- -------- -----------------
Frank T. Thoelen........... 10/14/98 50,000 $ 7.50 $12.00 $ 7.50 3 Yrs., 8 Mos.
10/14/98 10,000 $ 7.50 $10.25 $ 7.50 4 Yrs., 2 Mos.
DIRECTOR COMPENSATION
All of the outside directors of the Company are compensated for their
services provided as a director. Each outside director is paid $4,000 a year and
all reasonable expenses relating to the business of the Company are paid by the
Company. In addition, each outside director was awarded 1,000 stock options in
1997, 1000 stock options in 1998, and 1,500 stock options in 1999.
EMPLOYMENT AGREEMENTS
On August 7, 1997, the Company and Shmuel BenTov entered into a two-year
employment agreement providing for his employment as the Company's Chairman of
the Board, President and Chief Executive Officer with an annual base salary of
$250,000. Mr. BenTov and the Company agreed during the two year term of his
employment agreement not to (i) increase Mr. BenTov's compensation (including
base salary and bonus) or (ii) otherwise amend the terms of Mr. BenTov's
employment agreement. The employment agreement provides that in the event of
termination: (i) without cause, Mr. BenTov will receive a lump sum severance
allowance in an amount equal to 2.00 times his then annual base salary; (ii) as
a result of the disability or incapacity of Mr. BenTov, Mr. BenTov will be
entitled to receive his then annual base salary during the two years following
the termination notice; and (iii) as a result of the death of Mr. BenTov,
Mr. BenTov's estate will be entitled to receive a lump sum payment equal to his
then annual base salary. The agreement includes a two-year non-compete covenant
commencing on the termination of employment. In August 1999, the agreement
was extended for the remainder of 1999 and it terminated on December 31, 1999. A
new two-year employment agreement was entered into by the Company and
Mr. BenTov effective January 1, 2000. The agreement has essentially identical
items to the prior employment agreement.
Effective June 30, 1997, the Company and Mr. Thoelen entered into a three-
year employment agreement providing for his employment as the Company's Chief
Financial Officer at an initial base salary of $150,000. The employment
agreement provides that in the event of termination due to a change of control
or without cause, Mr. Thoelen will receive a lump sum severance allowance in an
amount equal to his then annual base salary. The agreement includes a one-year
non-compete covenant commencing on the termination of employment. Pursuant to
the employment agreement, Mr. Thoelen received a one-time signing bonus of
$25,000 and five-year options to purchase an aggregate 50,000 shares of Common
Stock at $12.00 per share, 20,000 of which options vest after one year and
30,000 of which vest ratably over the following three years. The options expire
in five years. The purchase price of all 50,00 options was changed to $7.50 per
share (the market price of the Company's Common Stock as of the close of
business on October 15, 1998) pursuant to resolutions of the Company's Board of
Directors.
6
Effective May 3, 1999, the Company and Joseph Judenberg entered into an
at-will employment agreement. Under the agreement, Mr. Judenberg is provided an
annual base salary of $250,000, with a sign-on bonus of $33,375 for 1999.
Mr. Judenberg also received an award of options to purchase an aggregate of
20,000 shares of the Company's Common Stock with an exercise price at
approximately $4.88 a share (the market price of the Company's Common Stock as
of the close of business on October 1, 1999). The options vest at a rate of 25%
per year and they expire in five years from the date of issuance. Mr. Judenberg
will be eligible to receive additional compensation in 2000 based on his and the
Company's performance performance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATING
Shmuel BenTov, Chairman of the Board, Chief Executive Officer and President
of TACT, served as a member of the Executive Compensation Committee during 1999.
No other interlocks or insider participation required to be disclosed under this
caption occurred during 1999.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Executive Compensation Committee of the Board of Directors has
responsibility for establishing and monitoring compensation programs of the
Company's executive officers, which include the Company's President and Chief
Executive Officer and Chief Financial Officer. The Executive Compensation
Committee is composed of Shmuel BenTov, Reuven Battat and Steven S. Mukamal.
Compensation arrangements for the Company's executive officers are usually
negotiated on an individual basis between the Chief Executive Officer and
President and each executive. Although these arrangements are, by and large,
subjective, objective measurements such as industry comparisons, compensation
history and other significant factors were also taken into account. From the
Company's point of view, these compensation arrangements are invariably designed
to attract talented executives to a challenging and demanding environment and to
retain such executives for the long-term benefit of the Company. In furtherance
of such goals and to provide incentives to enhance stockholder value, the
Company's compensation arrangements with its executive officers often provide
for equity participation in the Company. The Company believes the interests of
its shareholders are well served if part of the compensation of the Company's
executives is tied to the performance of the Company.
The compensation package of the Chief Executive Officer and President and
the Chief Financial Officer are set forth in employment agreements with the
Company. See "Employment Agreements." The Company's executive officers are
entitled to participate in a bonus program that is administered by the
non-employee directors of the Executive Compensation Committee.
In determining bonus compensation, the Executive Compensation Committee
seeks to create a direct link between the bonus payable to each executive
officer and the financial performance of the Company as a whole. Factors which
may be considered in determining the amount of individual bonus awards include
earnings per share targets and individual performance compared to predetermined
strategic, financial and operational objectives. For the year ended December 31,
1999, the Chief Financial Officer received $50,000 as a cash bonus award and
the Chief Executive Officer and President received $50,000 as a cash bonus
award. This award was approved by the Executive Compensation Committee. For the
year ending December 31, 2000, the Chief Executive Officer and President may be
entitled to receive a cash bonus not to exceed one percent of the Company's
total revenues for the year subject to approval by the non-employee directors of
the Executive Compensation Committee and further subject to the Company meeting
certain financial performance criteria.
The Executive Compensation Committee:
Shmuel BenTov
Reuven Battat
Steven S. Mukamal
7
PERFORMANCE GRAPH
The following graph depicts the performance of $100 invested on August 8,
1997, (the date of the Company's initial public offering), in the Company's
Common Stock on (i) a Peer Index of selected e-Services companies and (ii) the
Nasdaq(R) Major Market Computer and Data Processing Services Index. The
comparison assumes reinvestment of all dividends on a quarterly basis for the
years ended December 31, 1997, 1998 and 1999 and at March 31, 2000.
COMPARISON OF CUMULATIVE TOTAL RETURN
[GRAPH]
Aug '97 Sep '97 Dec '97 Mar '98 Jun '98 Sep '98
TACT $ 100.00 $ 96.93 $ 89.86 $ 94.91 $ 85.82 $ 76.74
Peer Index $ 100.00 $105.28 $ 98.62 $ 134.99 $ 127.09 $ 89.39
Major Market Index $ 100.00 $ 99.16 $ 93.59 $ 123.71 $ 137.29 $104.61
Dec '98 Mar '99 Jun '99 Sep '99 Dec '99 Mar '00
TACT $ 56.54 $ 56.54 $ 64.62 $ 38.37 $ 40.39 $ 80.78
Peer Index $ 110.91 $ 68.76 $ 71.02 $ 81.03 $ 158.92 $102.46
Major Market Index $ 135.46 $163.32 $178.23 $ 182.21 $ 270.01 $303.42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a $2,100,000 line of credit with Citibank, N.A. Shmuel
BenTov, the Chairman, Chief Executive Officer and President of the Company, is a
personal guarantor of the line of credit. The Company had nothing outstanding
under this line of credit as of December 31, 1999. The line of credit bears
interest at a variable rate based on prime plus 1% (8.50% at December 31, 1999).
On August 7, 1997, the Company and Mr. BenTov entered into the S
Corporation Termination, Tax Allocation and Indemnification Agreement (the
"Termination Agreement") "Termination Agreement") providing, among other things,
that the Company will be indemnified by Mr. BenTov with respect to any federal,
state or local corporate income taxes (plus interest and penalties) as a result
of the Company's failure to qualify as an S Corporation with respect to tax
returns in which the Company reported its income as an S Corporation.
Mr. BenTov's liability under the Termination Agreement will be limited to the
aggregate amount of all distributions received by Mr. BenTov from the Company
during such S Corporation reporting period, net of taxes paid or payable by
Mr. BenTov with respect to such distributions. The Termination Agreement
provides that the Company will indemnify Mr. BenTov on an after-tax basis with
respect to any federal, state or local income taxes (plus interest and
penalties) paid or required to be paid by Mr. BenTov, and Mr. BenTov will pay to
the Company any refunds of federal, state or local income taxes (including
interest received thereon) received by (or credited to) Mr. BenTov, as a result
of a subsequent adjustment in income of the Company with respect to any tax
return in which the Company reported its income as an S Corporation. The
Termination Agreement provides that
8
Mr. BenTov shall have the option to control the filing of the current year's
tax returns and control or participate in audits and certain other matters
for any period in which the Company reported its income as an S Corporation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Directors, officers and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based on a review of such timely filed forms received by it and
representations by persons that would be required to file such forms, the
Company believes that all required filings by current executive officers and
directors have been timely filed, except that (i) a Form 3 statement for Joseph
Judenberg for October 1999, (ii) Form 4 statements for December 1998 of Shmuel
BenTov, Frank T. Thoelen, Joseph Imholz, Reuven Battat, and Steven Mukamal
(iii) a Form 4 statement for Joseph Judenberg for October 1999 and (iv) Form 4
statements for December 1999 of Shmuel BenTov, Frank T. Thoelen, Joseph Imholz,
Reuven Battat, and Steven Mukamal have not been filed. The Company has been
informed each individual intends to file such Forms promptly. The Form 3
statement will report one transaction, and each Form 4 statement will report one
transaction.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2001 Annual Meeting
of Shareholders must be received by the Company at the address appearing on the
first page of this proxy statement by January 26, 2001 in order to be considered
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.
Shareholders who intend to present a proposal at the 2001 Annual Meeting of
Shareholders without inclusion of such proposal in the Company's proxy materials
are required to provide notice of such proposal to the Company no later than
March 5, 2001.
OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters to
come before the Annual Meeting. If any other matter should come before the
meeting, the persons named in the enclosed proxy intend to vote the proxy
according to their best judgment.
A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1999, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE UPON REQUEST. PLEASE WRITE TO:
THE A CONSULTING TEAM, INC.
200 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10003
9
THE A CONSULTING TEAM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, hereby appoints Frank T. Thoelen, Chief Financial Officer
of The A Consulting Team, Inc., a New York corporation (the "Company") as proxy
for the undersigned, with full power of substitution, for and in the name of the
undersigned to act for the undersigned and to vote, as designated below, all of
the shares of common stock, $0.01 par value per share, of the Company that the
undersigned is entitled to vote at the 2000 Annual Meeting of Shareholders of
the Company, to be held on May 25, 2000, at 10:00 a.m. (local time), at the
offices of The A Consulting Team, Inc., 200 Park Avenue South, Suite 1511, New
York, New York 10003 and at any adjournments or postponements thereof, in
accordance with the directions as follows with respect to the following matters:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
OR, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES NAMED BELOW AND FOR PROPOSAL 2.
Please /x/
mark
your
votes as
indicated
in
this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. Please mark your
votes as in this example /x/.
1. Election of Directors Nominees.
Shmuel BenTov FOR WITHHOLD
Frank T. Thoelen ALL NOMINEES AUTHORITY
Joseph E. Imholz LISTED TO VOTE FOR
Steven S. Mukamal TO THE LEFT ALL
Reuven Battat (EXCEPT NOMINEES
AS MARKED TO THE LISTED
CONTRARY BELOW) TO THE LEFT
/ / / /
2. To ratify the FOR AGAINST ABSTAIN
appointment of Ernst & / / / / / /
Young LLP as the
independent public
accountants of the
Company for the fiscal
year ending
December 31, 2000.
3. In his discretion, the
proxy is authorized to
vote upon such other
matters as may
properly come before
the meeting.
Signature(s)________________ ________________ Dated ________________, 2000
NOTE: Please sign exactly as the name appears on this card. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.