SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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THE A CONSULTING TEAM, INC.
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(Name of Registrant as Specified In Its Charter)
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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 24, 2001
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 24, 2001, 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 2002 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, 2001;
3. To amend and restate the Restated Certificate of Incorporation of the
Company whereby, among other changes, the number of authorized shares of common
stock of the Company shall be increased from 10,000,000 to 30,000,000, and
actions by written consent of shareholders of less than all outstanding shares
in lieu of a meeting shall be authorized;
4. To amend the 1997 Stock Option and Award Plan to (i) increase the
number of shares of common stock of the Company reserved for issuance upon
exercise of options available for grant under such plan to 1,200,000 shares,
(ii) allow the Board of Directors of the Company to appoint a separate committee
to administer the 1997 Stock Option and Award Plan with respect to certain
persons and (iii) prohibit any employee of the Company or any subsidiary of the
Company from being granted options or share appreciation rights to purchase more
than 250,000 shares of Common Stock in any calendar year; and
5. 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 24,
2001 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,
By: /s/ LORI L. STANLEY
-------------------------------
Lori L. Stanley
Secretary
April 30, 2001
TABLE OF CONTENTS
Page
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GENERAL INFORMATION............................................................2
Solicitation and Voting of Proxies; Revocation; Record Date...........2
ELECTION OF DIRECTORS..........................................................3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS..............................4
AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION.........5
AMENDMENT NO. 2 TO THE 1997 STOCK OPTION AND AWARD PLAN........................6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................11
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES.........................12
EXECUTIVE COMPENSATION........................................................13
Summary Compensation Table.................................................13
Aggregated Option Exercises In the Year Ended December 31, 2000 and
Fiscal Year-End Option Values..........................................13
Option Repricing in the Year Ended December 31, 1998.......................14
Director Compensation......................................................14
Employment Agreements .....................................................14
Compensation Committee Interlocks and Insider Participating................15
Report of the Executive Compensation Committee of the Board of Directors...15
Performance Graph..........................................................16
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON......................16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................16
ACCOUNTANTS' ATTENDANCE.......................................................17
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................17
SHAREHOLDER PROPOSALS.........................................................17
OTHER BUSINESS................................................................17
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
24, 2001. 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) 979-8228
PROXY STATEMENT
for
Annual Meeting of Shareholders
May 24, 2001
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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 24, 2001 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, Joseph E. Imholz, Steven S. Mukamal, Reuven Battat,
and Hagay Shefi as Directors of the Company to serve until the annual meeting of
shareholders in 2002 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, 2001, (iii) to amend and
restate the Restated Certificate of Incorporation of the Company whereby, among
other changes, the number of authorized shares of common stock of the Company
shall be increased from 10,000,000 to 30,000,000, and actions by written consent
of shareholders of less than all outstanding shares in lieu of a meeting shall
be authorized, (iv) to amend the 1997 Stock Option and Award Plan (the "Plan")
to (1) increase the number of shares of common stock of the Company reserved for
issuance upon exercise of options available for grant under such plan to
1,200,000 shares, (2) allow the Board of Directors of the Company to appoint a
separate committee to administer the Plan with respect to certain persons, and
(3) prohibit any employee of the Company or any subsidiary of the Company from
being granted options or share appreciation rights to purchase more than 250,000
shares of common stock in any calendar year, and (v) 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 2000 Annual Report to Shareholders, are being mailed to shareholders
on or about April 30, 2001.
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 auditors, "FOR"
the amendment and restatement of the Company's Restated Certificate of
Incorporation, "FOR" the amendment and restatement of the Company's 1997 Stock
option and Award Plan, 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 Lori L. Stanley,
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 Mellon Investor
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 $4,500, 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 24, 2001 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of April
24, 2001, there were outstanding 7,116,872 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), (3), (4) and (5) of
the Notice of Annual Meeting of Shareholders dated April 24, 2001, 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 2002 and until their respective
successors are duly elected and qualified:
Shmuel BenTov, 46, 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.
Joseph E. Imholz, 69, 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, 61, 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, 45, 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' worldwide 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.
Hagay Shefi, 35, is being elected to the Company's Board of Directors in
2001. Mr. Shefi has a B.A. degree in Economics from the Bar-Ilan University in
Israel, 1987, and an M.B.A. in Finance from Bar-Ilan University in Israel in
1990. From 2001 to the present, Mr. Shefi is the co -founder and CEO of GoldTier
Technologies, a software provider for financial institutions. From 1997 to 2000,
Mr. Shefi was President and then CEO of SunGard Business Integration (formerly
known as MINT), a leading provider of Middleware and Integration software
solutions to the financial industry. MINT was acquired by SunGard Data Systems
in March 1999. From 1995 to 1997, Mr. Shefi was a Managing Director of SunGard
Capital Markets, a wholly owned division of SunGard Data Systems . Between 1992
and 1995, Mr. Shefi was the Manager of Derivatives Solutions ACT Financial
Systems.
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
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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.
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
(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, 2001.
AUDIT FEES. During the fiscal year ended December 31, 2000, the aggregate fees
billed by Ernst & Young LLP for the audit of the Company's financial statements
for such fiscal year and for the reviews of the Company's interim financial
statement was $______.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATIONS FEES. During the fiscal
year ended December 31, 2000, no fees were billed by Ernst & Young LLP for
information technology projects.
ALL OTHER FEES. During the fiscal year ended December 31, 2000, the aggregate
fees billed by Ernst & Young LLP for professional services other than audit and
information technology consulting fees was $_______.
The Audit Committee has determined the rendering of the information technology
consulting fees and all other non-audit services by Ernst & Young LLP is
compatible with maintaining the auditor's independence.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following is the report of the audit committee with respect to the Company's
audited financial statements for the fiscal year ended December 31, 2000, which
include the consolidated balance sheets of the Company as of December 31, 2000
and 1999, and the related consolidated statement of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2000, and the notes thereto. The information contained in this report shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the 1934
Securities Exchange Act, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
REVIEW WITH MANAGEMENT. The audit committee has reviewed and discussed the
Company's audited financial statements with management.
REVIEW AND DISCUSSIONS WITH INDEPENDENT ACCOUNTANTS. The audit committee has
discussed with Ernst & Young LLP, the company's independent accountants, the
matters required to be discussed by SAS 61 (Codification of Statement on
Accounting Standards) that includes, among other items, matters related to the
conduct of the audit of the company's financial statements. The audit committee
has also received written disclosures and the letter from Ernst & Young LLP
required by Independence Standards Board Standard No. 1 (that relates to the
accountants' independence from the Company and its related entities) and has
discussed with Ernst & Young LLP its independence form the Company.
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CONCLUSION. Based on the review and discussions referred to above, the audit
committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report of Form 10-K for
the fiscal year ended December 31, 2000.
AUDIT COMMITTEE:
Joseph Imholz, Chairman
Reuven Battat
Steven Mukamal
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, 2001.
AMENDMENT AND RESTATEMENT OF
THE RESTATED CERTIFICATE OF INCORPORATION
(Item 3 on Proxy Card)
The Board of Directors of the Company (the "Board") have authorized an
amendment and restatement of the Company's current Restated Certificate of
Incorporation whereby, among other things, the number of authorized shares of
Common Stock shall be increased from 10,000,000 to 30,000,000 and actions by
written consent of shareholders of less than all outstanding shares in lieu of a
meeting shall be authorized. The draft of the proposed form of the amended
Restated Certificate of Incorporation is attached hereto as Exhibit A.
As of the Record Date, there were 10,000,000 shares of Common Stock
authorized for issuance and 7,116,872 shares issued and outstanding. The Company
has also reserved shares of Common Stock for the following purposes:
(a) 900,000 shares currently reserved for issuance upon exercise of
options which have been granted as of the date hereof under the 1997
Stock Option and Award Plan (the "Plan"); and
(b) 2,089,284 shares for issuance pursuant to outstanding warrants to
purchase shares of Common Stock.
Accordingly, without the increase in the number of authorized shares of
Common Stock, the Company would not have a sufficient number of authorized
shares of Common Stock available to continue to attract and retain directors,
employees and consultants through the grant of options or other equity-based
awards or to consummate potential future equity financings, mergers,
acquisitions or strategic alliances or other transactions which involve the
issuance of the Company's equity.
The increase in the number of authorized shares of Common Stock is needed
to give the Board the necessary flexibility to issue shares of Common Stock and
securities exercisable and convertible into Common Stock in connection with
potential future acquisitions, financings and stock option plans and for other
general corporate purposes without the expense and delay incidental to obtaining
additional stockholder approvals at the time of each such transaction (unless
such approval is otherwise required for a particular issuance by applicable law
or by the rules of any stock exchange on which the Company's securities may then
be listed).
The increase in the number of authorized shares of Common Stock will have
no immediate dilutive effect on the proportionate voting power of present
shareholders as holders of Common Stock. Future issuances of shares
5
of Common Stock would have a dilutive effect on the proportionate voting power,
earnings per share and book value per share of all shareholders. Additional
shares could be issued by the Board in a public or private sale of securities,
potential mergers, acquisitions or similar transactions, increasing the number
of outstanding shares and thereby diluting the equity interest and voting power
of current shareholders.
The amendment to permit authorization of actions by written consent of
shareholders of less than all outstanding shares in lieu of a meeting will
enable the Company to obtain requisite approvals of shareholders without the
need to call a shareholder meeting. Under New York's Business Corporation Law,
prompt notice of an action taken by shareholders of less than all outstanding
shares by written consent in lieu of a meeting must be given by the Company to
all shareholders who have not consented in writing. The Company believes this
amendment would provide the Company the opportunity, in certain circumstances,
to reduce the expenses and delay incidental to obtaining shareholder approvals
at a meeting of shareholders.
Recommendation
The Board recommends that the shareholders vote FOR the amendment and
restatement of the Company's current Restated Certificate of Incorporation.
AMENDMENT NO. 2 TO THE
1997 STOCK OPTION AND AWARD PLAN
(Item 4 on Proxy Card)
General
The amendment (the "Plan Amendment") will not affect any provision of the
Plan, except as set forth below. A copy of the Plan Amendment is attached hereto
as Exhibit C. A copy of the Plan, prior to giving effect to the Plan Amendment,
is attached hereto as Exhibit B. The Plan was originally implemented in June
1997 and was amended in May 1998.
The Plan Amendment is being made to enable the Company and its
subsidiaries to continue to provide incentives to employees of the Company and
its subsidiaries to advance the interests of the Company and to enable the
Company and the Company's subsidiaries to continue to attract qualified new
employees in a competitive marketplace.
Increase in Authorized Shares
The Plan will be amended to increase the number of shares of Common Stock
reserved for issuance upon awards of restricted shares, performance units or
performance shares or upon the exercise of options or share appreciation rights
("SARs") available for grant under the Plan. This amendment will enable the
Company to award more restricted shares, options, SARs, performance units and
performance shares under the Plan. After giving effect to the Plan Amendment,
the number of shares of Common Stock that the Company will be able to issue
under restricted share awards, performance units or performance shares and upon
exercise of options or SARs available for grant under the Plan would be
1,200,000 (subject to adjustment for stock splits, stock dividends,
recapitalizations and similar events as provided in the Plan). This amendment
represents an increase of 300,000 shares from the 900,000 shares of Common Stock
previously reserved for issuance upon restricted share, performance units and
performance shares awards and upon the exercise of options and SARs available
for grant under the Plan.
Separate Committee Regarding Section 16 Persons
The Plan will be amended to allow the Board to appoint a separate
committee (the "Section 16 Committee") to administer the Plan with respect to
persons ("Subject 16 Persons") subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which Section 16 Committee would
have all powers and authorities of the Plan Committee (as defined below) with
respect to Section 16 Persons and would consist of (i) the Board itself or (ii)
those individuals who shall satisfy the requirements set forth under Rule 16b-3
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of the Exchange Act. The ability of the Board to appoint such a separate
committee will increase its flexibility in complying with Rule 16b-3 of the
Exchange Act.
Limit on Number of Options and SARs
The Plan will be amended to prohibit any employee of the Company or any
subsidiary of the Company from being granted options or SARs to purchase more
than 250,000 shares of Common Stock in any calendar year. This amendment will
allow the Company to take deductions under the Internal Revenue Code of 1986, as
amended (the "Code") for compensation to employees up to $1,000,000 per calendar
year without including options or SARs granted under the Plan to such employees
as part of such compensation. In the absence of such amendment, the Company is
required to include the value of options and SARs granted to employees as part
of such compensation, reducing the amount of cash and other compensation that
the Company may grant to employees as a deductible expense.
The 1997 Stock Option and Award Plan
The following is a summary of the Plan and its material provisions. The
summary is qualified by reference to the full terms of the Plan.
Purpose of the Plan
The Plan provides for awards of restricted shares and grants of options,
SARs, performance units and performance shares. The Plan is intended to increase
incentive and to encourage share ownership on the part of (1) employees of the
Company and its affiliates, (2) consultants who provide significant services to
the Company and its affiliates and (3) directors of the Company who are
employees of neither the Company nor any affiliate. The Plan also is intended to
further the growth and profitability of the Company.
The Company believes that awards of restricted shares, options, SARs,
performance units and performance shares are an important part of the
compensation package offered to its and its subsidiaries' employees and that
through awards of restricted shares, options, SARs, performance units and
performance shares its employees' interests are more closely aligned with those
of its shareholders. Generally, the Company grants options to employees subject
to minimum vesting periods and employees are required to remain with the Company
for a number of years to earn and receive the full benefit of an option grant.
Shares Subject to the Plan
The Plan was originally adopted and approved by the Company's shareholders
on June 11, 1997, and an amendment to the Plan increasing the number of shares
of Common Stock reserved for issuance under the Plan from 600,000 to 900,000
shares was approved by the Company's shareholders on May 27, 1998.
Upon approval of the Plan Amendment by the shareholders of the Company,
there will be a total of 1,200,000 shares of Common Stock reserved for issuance
upon restricted share, performance units and performance shares awards and upon
the exercise of options and SARs available for grant under the Plan. The number
of shares of Common Stock reserved for issuance upon restricted share,
performance units and performance shares awards and upon the exercise of options
and SARs granted under the Plan are subject to adjustment in the event of stock
splits, stock dividends and other situations.
Awards Outstanding
As of the Record Date, the Company had options outstanding under the Plan
to purchase an aggregate of 900,00 shares of Common Stock, at a weighted average
exercise price per share of $2.44. There are no restricted shares, SARs,
performance units or performance shares outstanding. After giving effect to the
Plan Amendment, an aggregate of 512,500 shares of Common Stock will be available
for issuance upon future awards of restricted shares, performance units or
performance shares or exercise of SARs or options available for future grant.
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Administration
The Plan is administered by a committee (the "Plan Committee"),
constituted of members appointed from time to time by the Board, except with
respect to awards of restricted shares, performance units and performance shares
and grants of SARs and options to (i) non-employee directors and (ii) after
giving effect to the Plan Amendment, Section 16 Persons, if the Board
establishes the Section 16 Committee. Awards and grants to non-employee
directors are administered by the Board. After giving effect to the Plan
Amendment, awards and grants to Section 16 Persons may be administered by the
Section 16 Committee, if established by the Board, which shall consist of (i)
the Board itself or (ii) those individuals who satisfy the requirements set
forth under Rule 16b-3 of the Exchange Act. The Plan Committee currently
consists of three members, Messrs. BenTov, Mukamal and Battat, two of whom,
Messrs. Mukamal and Battat, are non-employee directors, as defined in Rule
16b-3. The Plan Committee may delegate certain of its responsibilities to other
persons; provided, however, the Plan Committee may not delegate its authority
and powers in any way which would jeopardize the Plan's qualifications under
Rule 16b-3. The Board may fill vacancies on the Plan Committee and, after giving
effect to the Plan Amendment, the Section 16 Committee, and may from time to
time remove or add members. The Plan Committee, the Section 16 Committee and the
Board, as applicable, are hereinafter referred to as the "Committee").
Participants and Terms of Awards
Options
The Plan permits grants of incentive stock options ("ISOs") and
non-qualified stock options ( "NSO"). ISOs are intended to satisfy the
requirements of Section 422 of the Code. Only employees who are common-law
employees of the Company or its subsidiaries are eligible for the grant of ISOs.
An employee who owns more than ten percent (10%) of the total combined voting
power of all classes of outstanding shares of the Company or its subsidiaries is
not eligible for the grant of an ISO, unless the requirements set forth in
Section 422(c)(5) of the Code are satisfied.
The exercise price per share of an option may not be less than the fair
market value of a share of Common Stock as of the date of grant (or, if an ISO,
not less than 110% of the fair market value of a share of Common Stock as of the
date of grant if, on the date of grant, the employee owns shares representing
more than 10% of the total combined voting power of all classes of shares of the
Company or any of its subsidiaries). The option price must be paid in full at
the time of exercise. Payment for shares of Common Stock purchased upon the
exercise of options may be made by cash or its equivalent. The Committee may
also, in its sole discretion, also permit payment by tender of previously
acquired shares of Common Stock having an aggregate fair market value at the
time of exercise equal to the total exercise price of the option, or by any
other means which the Committee determines to both provide legal consideration
for the shares and be consistent with the purposes of the Plan.
The aggregate fair market value (determined as of the date of grant) of
shares of Common Stock with respect to which ISOs are exercisable for the first
time by an individual to whom an ISO is granted during any calendar year (under
ISO plans of the Company) may not exceed $100,000. After giving effect to the
Plan Amendment, no employee of the Company or any of its subsidiaries may be
granted options or SARs to purchase in excess of 250,000 shares of Common Stock
in any calendar year.
Options have such terms and are exercisable in such manner and at such
times as the Plan Committee may determine. Each option must expire within a
period of not more than ten (10) years from the grant date and, if such option
is (A) an ISO granted to a shareholder who owns shares representing more than
10% of the total combined voting power of all classes of shares of the Company
or any of its subsidiaries or (B) an option granted to a non-employee director,
such option must expire within a period of not more than five (5) years from the
grant date. The exercise of an option may also be subject to restrictions and
special vesting provisions determined by the Committee on the date of grant. The
exercise of an option may be accelerated in the event of the optionee's death,
disability or retirement or other events and may provide for expiration prior to
the end of its term in the event of the termination of the optionee's service
with or without cause. Such period will be established by the Committee in its
discretion on the date of grant. Options will not be transferable except upon
death (in which case they may be exercised by the decedent's executor or other
legal representative).
8
The Committee may modify, extend or renew outstanding options or may
accept the cancellation of outstanding options in return for the grant of new
options at the same or a different price, except the optionee must consent to
any modification, extension or renewal which impairs his or her rights or
increases his or her obligations under such option.
SARs
SARs entitle the participant to receive, upon exercise of the SAR, an
amount determined by multiplying: (1) the difference between (a) the fair market
value of a share of Common Stock on the date of exercise and (b) the exercise
price, times (2) the number of shares with respect to which the SAR is
exercised. SARs may be "freestanding," meaning granted independently of an
option, "affiliated," meaning granted in connection with a related option and
deemed to be exercised at the same time as the related option is exercised, or
"tandem," meaning granted in connection with a related option, the exercise of
which shall require forfeiture of the right to purchase an equal number of
shares of Common Stock under such related option, and vice versa. The exercise
price of each freestanding SAR will equal at least 100 % of the fair market
value of the shares of Common Stock covered by the award on the date of grant.
The exercise price of each tandem or affiliated SAR shall equal the exercise
price of the related option. Proceeds from SAR exercises may be paid in cash or
shares of Common Stock or a combination of both, as determined in the discretion
of the Committee.
Restricted shares
Awards of restricted shares are shares of Common Stock which are held in
escrow by the Company until any restrictions, including, without limitation,
restrictions established by the Committee lapse. For example, the Committee may
set transfer restrictions that lapse only upon the satisfaction of a continuous
employment requirement and/or the achievement of performance goals specified by
the Committee.
Performance units and performance shares
Performance units and performance shares are amounts credited to a
bookkeeping account established for the participant. Whether a performance unit
or share actually will result in a payment to a participant will depend upon the
extent to which performance goals established by the Committee are satisfied.
Payment may be in cash or shares of Common Stock or a combination of both, as
determined in the discretion of the Committee.
Lapsed Awards
If any awards of restricted shares or options, SARs, performance units or
performance shares granted under the Plan shall expire, terminate or lapse for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the shares of Common Stock subject to
such restricted share, performance unit or performance share award or option or
SAR shall again be available for grants under the Plan.
Shareholder Rights
Holders of options, SARs, performance units and performance shares have no
dividend rights, voting rights or any other rights as a shareholder with respect
to any shares of Common Stock covered by an option, SAR, performance unit or
performance share prior to the issuance of a share certificate for such Common
Stock. Recipients of awards of restricted shares may exercise full voting rights
with respect to those shares during any period of restriction, unless otherwise
specified by the Committee in its award of such restricted shares.
Amendment and Termination
The Board may, at any time and for any reason, amend or terminate the Plan
without further action by the Company's shareholders except (i) in a manner that
would alter or impair any rights or obligations under any existing award of
restricted shares, options, SARs, performance units or performance shares or
(ii) to the extent required by applicable laws, regulations or rules. The Plan
terminates by its terms on June 11, 2007, ten years after its adoption by the
Board. Following termination of the Plan, awards of restricted shares, options,
SARs,
9
performance units and performance shares may no longer be granted. Termination
of the Plan will not affect awards of restricted shares, options, SARs,
performance units or performance shares then outstanding under the Plan.
New Plan Benefits
With respect to all future grants, the Committee has full discretion to
determine the number and amount of awards of restricted shares, options, SARs,
performance units and performance shares to be granted to participants under the
Plan, subject to the limitations described above. Therefore, other than as
described in this paragraph, the benefits and amounts that will be received by
each of the officers named in the Security Ownership of Certain Beneficial
Owners and Management section set forth herein below, the directors of the
Company, the executive officers as a group and all other participants under the
Plan are not presently determinable. Each non-employee directors of the Company
is granted an option to purchase 1,000 shares of Common Stock upon first
becoming a non-employee director, and is granted an option to purchase an
additional 1,000 shares of Common Stock each time such person is re-elected to
serve as a non-employee director.
Market Price of the Common Stock. The last reported sale price of the
Common Stock on the NASDAQ National Market on April 24, 2001 was [$___________]
per share.
Federal Income Tax Consequences
The Company believes that under present law, the following are the federal
income tax consequences that arise with respect to options granted under the
Plan.
Non-Qualified Stock Options.
The grant of an NSO will create no tax consequences for the optionee and
the Company will not be entitled to a deduction in connection with the grant. In
addition, the vesting of an NSO creates no tax consequences or entitlement or a
deduction. Upon the exercise of an NSO, the amount by which the fair market
value of the shares on the date of exercise exceeds the exercise price will be
taxed to the optionee as ordinary income and the Company will be entitled to a
deduction in the same amount. In general, the optionee's tax basis in the shares
acquired by exercising an NSO is equal to the fair market value of such shares
on the date of exercise. Upon a subsequent disposition of such shares, the
optionee generally will realize capital gain or loss (long-term or short-term,
depending on whether the shares were held for more than twelve months before the
sale) in an amount equal to the difference between the optionee's basis in the
shares and the sale price. If the shares were held more than twelve months, the
applicable long-term capital gains rate is currently 20% for taxpayers whose
marginal tax rate is at least 28%, and 10% for taxpayers whose marginal rate is
less than 28%. Short-term capital gain is generally subject to the same tax
rates as ordinary income.
If the optionee pays the exercise price upon the exercise of NSOs with
previously acquired shares, the transaction is separated into two components.
First, the exchange by the optionee of the shares generally is treated as a
tax-free exchange with respect to receipt by the optionee of the same number of
shares paid by the optionee in the exchange. With respect to such number of
shares, the optionee's basis in such shares will be the same as the optionee's
basis in the shares paid by the optionee in the exchange, and the capital gain
holding period runs without interruption from the date on which the previously
held shares were acquired. Second, the optionee will be taxed as ordinary income
on the amount of the difference between the fair market value of the additional
shares received and the amount of any cash the optionee pays in the exercise
transaction. The optionee's basis in the additional shares of common stock will
be equal to the fair market value of such shares on the date the shares are
issued, and the capital gain holding period will also commence on such date.
Incentive Stock Options.
The grant and the vesting of an ISO will create no tax consequences for an
optionee or the Company. An optionee generally will have no taxable income upon
exercising an ISO within the time period set forth in such optionee's option
agreement (except that the alternative minimum tax may apply), and the Company
will receive no deduction when an ISO is exercised provided that the optionee is
still employed by the Company (or the optionee terminated employment no more
than three months before the exercise date). Additional exceptions to this
exercise
10
timing requirement apply upon death or disability of the optionee. A sale of the
shares received upon the exercise of an ISO that occurs both more than one year
after the exercise of the ISO and more than two years after the grant of the ISO
will result in the realization of long-term capital gain or loss in the amount
of the difference between the amount realized on the sale and the exercise price
for such shares (the applicable maximum long-term capital gains rate is
currently 20%). Generally, upon a sale or disposition of the shares prior to the
foregoing holding requirements (referred to as a disqualifying disposition), the
optionee will recognize ordinary income and the Company will receive a
corresponding deduction equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price or (ii) the
excess of the amount realized on the disposition over the exercise price for
such shares. Any additional gain would be treated as either a long-term or a
short-term capital gain.
The favorable tax treatment associated with ISOs is available to the
optionee only to the extent that the value of the shares (determined at the time
of grant) covered by the ISOs that are first exercisable in any single calendar
year does not exceed $100,000. If ISOs that cover an aggregate amount of shares
in excess of $100,000 become exercisable in the same calendar year, the excess
will be treated as a NSO.
If the optionee pays the exercise price upon the exercise of ISOs with
previously acquired shares, just as in the NSO context, such a surrender
transaction generally is treated as a tax-free exchange of the old shares for
the same number of new shares. With respect to such number of new shares, the
optionee's basis in such new shares is the same as the optionee's basis in the
old shares, and the capital gain holding period runs without interruption from
the date when the old shares were acquired. However, the holding period will not
be credited for purposes of the one-year holding period described above in order
for the new shares to receive ISO treatment. New shares received in excess of
the old shares surrendered will have a new holding period, and have a basis of
zero or, if any cash was paid as part of the exercise price, the excess new
shares will have a basis equal to the amount of the cash.
A special rule applies if an optionee pays all or part of the exercise
price of an ISO by surrendering shares that he or she previously acquired by
exercising any other ISO. If the optionee has not held the old shares for the
full duration of the applicable holding periods described above before
surrendering them, then the surrender of such shares to exercise the new ISO
will be treated as a disqualifying disposition of the old shares. As described
above, the result of a disqualifying disposition is the loss of favorable tax
consequences with respect to the acquisition of the old shares pursuant to the
previously exercised ISO.
Withholding Taxes
The Company will not be obligated to issue any shares under the Plan until
an optionee makes arrangements satisfactory to the Company to pay any
withholding or other taxes that may be due as a result of the exercise of an
option.
Recommendation
The Board recommends that shareholders vote FOR the proposal to amend the
Plan to (i) increase the number of shares of Common Stock reserved for issuance
upon the award of restricted shares, performance units and performance shares
and upon the exercise of options and SARs available for grant from 900,000
shares to 1,200,000 shares, (ii) allow the Board to appoint the Section 16
Committee to administer the Plan with respect to Subject 16 Persons and (iii)
prohibit any employee of the Company or any subsidiary of the Company from being
granted options or SARs to purchase more than 250,000 shares of Common Stock in
any calendar year.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2001, 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.
11
Number of Shares Percentage of
Beneficially Total Voting
Name of Shareholder Owned (1) Shares
- ------------------- ------------------- --------------
Mr. Shmuel BenTov, Chief Executive Officer,................... 3,492,500(2) 49.07%
President, and Director
Mr. Frank T. Thoelen,......................................... 52,450 *
Chief Financial Officer and Director
Mr. Joseph Judenberg, Senior Vice President................... 15,000 *
Mr. Joseph E. Imholz, Director................................ 1,625 *
Mr. Steven S. Mukamal, Director............................... 6,625 *
Mr. Reuven Battat, Director................................... 1,625 *
All directors and executive officers as a group (6 persons)... 3,569,825 50.16%
- -------------------------------
* 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 March 31, 2001. 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 51,000 shares owned for the benefit of Mr. BenTov's two minor
children and 15,000 owned by Mr. BenTov's spouse.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 2000, the Board of Directors met four
times and acted by written consent in lieu of a meeting 14 times. Four directors
attended 100% of the aggregate number of meetings of the board and its
committees on which they served. One director attended 25% 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 auditors and review with such auditors (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 Mukamal. Mr. Imholz is the Chairman.
During the year ended December 31, 2000, the Audit Committee met four times
during that period. The members of the audit committee are independent (as
independence is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers' listing standards). The Board of Directors has adopted a
written charter for the Audit Committee on May 25, 2000, a copy of which is
attached as Exhibit D hereto.
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, 2000, the Executive Compensation Committee met four times during that
period.
12
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, 2000, 1999 and 1998; the Company's Chief Financial Officer during the years
ended December 31, 2000, 1999 and 1998 and the Company's Senior Vice President
during the year ended December 31, 2000 and 1999. No other executive officer of
the Company received a total salary and bonus of $100,000 or more for such
years. Accordingly, no information is reported for such persons. No options were
granted in 2000 o the Company's Chief Executive Officer, Chief Financial Officer
or Senior Vice President.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------- -------------
Other Securities
Fiscal Annual Underlying
Name and Principal Position Year Salary($) Bonus($) Compensation ($)(1) Options (#)
- --------------------------- ---- --------- -------- ------------------- -----------
Shmuel BenTov 2000 $300,000 $ -- $4,456 --
Chairman, Chief Executive Officer 1999 $250,000 $50,000 $4,043 30,000
and President 1998 $250,000 $ -- $4,043 --
- ----------------------------------------------------------------------------------------------------------------
Frank Thoelen(2) 2000 $240,000 $ -- $ -- --
Chief Financial Officer 1999 $200,000 $50,000 $ -- 15,000
1998 $150,000 $43,750 $ -- 10,000
- ----------------------------------------------------------------------------------------------------------------
Joseph Judenberg(3) 2000 $250,000 $ -- --
Senior Vice President 1999 $166,000 $33,375 $ -- 20,000
- ----------------------------------------------------------------------------------------------------------------
(1) Includes payments with respect to life insurance, car allowance and health
insurance.
(2) Mr. Thoelen's contract expires in June 2001 and will not be renewed.
(3) Mr. Judenberg was hired in May 1999.
Aggregated Option Exercises In the Year Ended
December 31, 2000 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, 2000 December 31, 2000
Name Exercise(#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------
Shmuel BenTov -- -- 7,500/22,500 $0/$0
- ------------------------------------------------------------------------------------------------------------
Frank T. Thoelen -- -- 51,250/33,750 $0/$0
- ------------------------------------------------------------------------------------------------------------
Joseph Judenberg -- -- 5,000/15,000 $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. Only one employee has exercised his
options as of December 31, 2000, 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 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
13
employee stock options for new employee stock options having exercise prices of
$7.50 per share (equal to the fair market value of the Company's common stock on
October 14, 1998). No other changes, restrictions or amendments were made with
respect to the stock option awards. The vesting schedules and expiration dates
of the stock options were left unchanged. There is no prohibition or restriction
on exercising the stock options. Approximately 416,150 options were eligible for
repricing.
Option Repricing in the Year Ended December 31, 1998
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at New Remaining at
Options Time of Time of Exercise Date of
Name Date Repriced (#) Repricing ($) Repricing ($) Price ($) 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, 1,500 stock options in 1999 and zero stock
options in 2000.
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, a new employment
agreement was entered into by the Company and Mr. BenTov. This agreement expires
on December 31, 2001. The agreement has essentially identical items to the prior
employment agreement, with the exception of an increase in Mr. BenTov's annual
salary to $300,000.
Effective June 30, 1997, the Company and Frank 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. Mr. Thoelen's employment agreement expires June 2001.
14
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 2000. No other interlocks or insider participation required to be
disclosed under this caption occurred during 2000.
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,
2000, no cash bonuses were paid. For the year ending December 31, 2001, 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
15
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 IT and 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, 1999 and 2000.
[PERFORMANCE GRAPH OMITTED]
[The following was depicted as a line chart in the printed material.]
Aug '97 Sep '97 Dec '97 Mar '98 Jun '98 Sep '98 Dec '98 Mar '99 Jun '99 Sep '99 Dec '99
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TACT ............. $100.00 $ 96.93 $89.86 $ 94.91 $ 85.82 $ 76.74 $ 56.54 $ 56.54 $ 64.62 $ 38.37 $ 40.39
Peer Index ....... $100.00 $105.28 $98.62 $134.99 $127.09 $ 89.39 $110.91 $ 68.76 $ 71.02 $ 81.03 $158.92
Major Market Index $100.00 $ 99.16 $93.59 $123.71 $137.29 $104.61 $135.46 $163.32 $178.23 $182.21 $270.01
Mar '00 Jun '00 Sep'00 Dec '00 Mar '01
------- ------- ------ ------- -------
TACT ............. $ 80.78 $ 61.84 $ 50.48 $ 9.34 $ 8.33
Peer Index ....... $220.02 $181.55 $127.20 $ 36.84 $ 27.14
Major Market Index $249.11 $216.06 $200.08 $134.58 $100.25
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The directors and executive officers of the Company since January 1, 1999
are the individuals set forth above under "Security Ownership of Certain
Beneficial Owners and Management Section."
The number of shares of Common Stock reserved for issuance upon the
exercise of options available for grant under the Plan are being increased in
part to enable the Company to provide additional incentives to its current and
future employees, officers, non-employee directors and consultants to advance
the interests of the Company and to enable the Company to attract and retain
qualified personnel in a competitive marketplace. Awards under the Plan will
give optionees an opportunity to participate in an increase in the market value
of the Common Stock. The Board believes that the amendments will provide
incentives and flexibility for the Company in meeting competitive developments
in the marketplace for retaining and attracting qualified personnel.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a line of credit of $2,100,000 of which $2,000,000 was
outstanding at December 31, 2000. The line of credit is guaranteed by Shmuel
BenTov, the Company's principal shareholder, and bears interest
16
at a variable rate based on prime plus 1% (9.50% at December 31, 2000 and 8.50%
at December 31, 1999). Also, if the Company needs funds to repay its current
line, its principal shareholder has committed to lend funds to the Company in
order to repay up to $2.0 million of its current line of credit.
ACCOUNTANTS' ATTENDANCE
Representatives of Ernst & Young LLP, the Company's principal accountants
for the current fiscal year most recently completed fiscal year, are expected to
be present at the Annual Meeting. If such representatives are present at the
Special Meeting, they will have the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.
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.
TO THE COMPANY'S KNOWLEDGE, BASED SOLELY ON A REVIEW OF SUCH FORMS RECEIVED BY
IT AND REPRESENTATIONS BY PERSONS THAT WOULD BE REQUIRED TO FILE SUCH FORMS,
DURING THE FISCAL YEAR ENDED DECEMBER 31, 2000, ALL SECTION 16(A) FILING
REQUIREMENTS APPLICABLE TO ITS OFFICERS, DIRECTORS AND GREATER THAN TEN PERCENT
BENEFICIAL OWNERS WERE COMPLIED WITH.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2002 Annual Meeting
of Shareholders must be received by the Company at the address appearing on the
first page of this proxy statement by December 31, 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 2002 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 16, 2002.
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.
17
A COPY OF THE 2000 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THIS PROXY
STATEMENT. A COPY OF THE COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 2000,
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
ATTENTION: SECRETARY
COPIES MAY ALSO BE OBTAINED WITHOUT CHARGE THROUGH THE SEC'S WORLD WIDE
WEB SITE AT http://www.sec.gov.
18
EXHIBIT INDEX
Exhibit Name
------- ----
A Restated Certificate of Incorporation
B 1997 Stock Option and Award Plan
C Amendment No. 2 to 1997 Stock Option and Award Plan
D The Company's Audit Committee Charter
19
Exhibit A
Restated Certificate of Incorporation
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE A CONSULTING TEAM, INC.
(Pursuant to Section 807 of the Business Corporation Law)
FIRST: The name of the corporation is The A Consulting Team, Inc. (the
"Corporation"). The name under which the Corporation was originally formed was
Software Ben-Tov, Inc.
SECOND: The certificate of incorporation of Software Ben-Tov, Inc. was
filed by the Department of State of the State of New York on February 16, 1983.
THIRD: The certificate of incorporation, as amended, is hereby further
amended and changed to effect certain of the amendments and changes authorized
by the Business Corporation Law, to wit:
(a) To increase the number of authorized shares of Common Stock,
$0.01 par value, from 10,000,000 to 30,000,000.
(b) To add a provision relating to shareholder action without a
meeting.
FOURTH: To accomplish the foregoing amendments:
(a) Article IV relating to the authorized shares of the Corporation
is amended to read as set forth in the same numbered Article of the Certificate
of Incorporation of the Corporation as hereinafter restated; and
(b) A new Article VIII relating to shareholder action without a
meeting is added as set forth in the same numbered Article of the Certificate of
Incorporation of the Corporation as hereinafter restated.
1. The text of the Certificate of Incorporation, as amended, is hereby
restated as further amended and changed herein to read in its entirety as
follows:
CERTIFICATE OF INCORPORATION
OF
THE A CONSULTING TEAM, INC.
(Pursuant to Section 402 of the Business Corporation Law)
ARTICLE I
The name of the Corporation is The A Consulting Team, Inc. (the
"Corporation").
ARTICLE II
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which corporations may be organized under the Business
Corporation Law of the State of New York; provided, however, that the
Corporation is not formed to engage in any act or activity requiring the consent
or approval of any state official, department, board, agency, or other body
without such consent or approval first being obtained.
ARTICLE III
The office of the Corporation is to be located in the County of New York
in the State of New York.
ARTICLE IV
The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is 32,000,000 shares, all of which are $0.01 par
value, of which 30,000.000 shares shall be designated "Common Stock" and
2,000,000 shares of which shall be designated "Preferred Stock."
(a) Common Stock.
(1) Subject to the rights of any other class or series of
stock, the holders of shares of Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of the assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
(2) Subject to such rights of any other class or series of
securities as may be granted from time to time, the holders of shares of Common
Stock shall be entitled to receive all the assets of the Corporation available
for distribution to shareholders in the event of the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, ratably, in
2
proportion to the number of shares of Common Stock held by them. Neither the
merger or consolidation of the Corporation into or with any other corporation
nor the merger or consolidation of any other corporation into or with the
Corporation nor the sale, lease, exchange or other disposition (for cash, shares
of stock, securities or other consideration) of all or substantially all the
assets of the Corporation shall be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, of the Corporation.
(3) Subject to such voting rights of any other class or series
of securities as may be granted from time to time pursuant to this Certificate
of Incorporation, any amendment thereto, or the provisions of the laws of the
State of New York governing business corporations, voting rights shall be vested
exclusively in the holders of Common Stock. Each holder of Common Stock shall
have one vote in respect of each share of such stock held.
(b) Preferred Stock. The Board of Directors of the Corporation is
authorized, subject to limitations prescribed by law and the provisions of this
Certificate of Incorporation, to provide for the issuance of the Preferred Stock
in series, and by filing a certificate pursuant to the view York Business
Corporation Law, to establish the number of shares to be included in each such
series, and to fix the designation, relative rights, preferences and limitations
of the shares of each such series. The authority of the Board of Directors with
respect to each series shall include, but not be limited to, determination of
the following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) Whether the holders of shares of that series shall be
entitled to receive dividends and, if so, the rates of such dividends, the
conditions under which and the times such dividends may be declared or paid, any
preference of any such dividends to, and the relation to, the dividends payable
on any other class or classes of stock or any other series of the same class and
whether dividends shall be cumulative or non-cumulative and, if cumulative, from
which date or dates;
(3) Whether the holders of shares of that series have voting
rights in addition to the voting rights provided by law and, if so, the terms
and conditions of exercise of such voting rights;
(4) Whether shares of that series shall be convertible into or
exchangeable for shares of any other class, or any series of the same or any
other class, and, if so, the terms and conditions thereof, including the date or
dates when such shares shall be convertible into or exchangeable for shares of
any other class, or any series of the same or any other class, the price or
prices of or the rate or rates at which shares of such series shall be so
convertible or exchangeable, and any adjustments which shall be made, and the
circumstances in which any such adjustments shall be made, in such conversion or
exchange prices or rates;
(5) Whether the shares of the series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they
3
shall be redeemable and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different redemption
dates;
(6) Whether the shares of that series shall be subject to the
operation of a retirement or sinking fund and, if so subject, the extent to and
the manner in which it shall be applied to the purchase or redemption of the
shares of that series, and the terms and provisions relative to the operation
thereof;
(7) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and any presence of any such rights to, and the relation to, the
rights in respect thereto of any class or classes of stock or any other series
of the same class; and
(8) Any other relative rights, preferences and limitations of
that series; provided, however, that if the stated dividends and amounts payable
on liquidation with respect to shares of any series of the Preferred Stock are
not paid in full, the shares of all series of the Preferred Stocks shall share
ratably in the payment of dividends including accumulations, if any, in
accordance with the sums which would be payable on such shares if all dividends
were declared and paid in full, and in any distribution of assets (other than by
way of dividends) in accordance with the sums which would be payable on such
distribution if all sums payable were discharged in full.
ARTICLE V
The Secretary of State is designated as the agent of the Corporation upon
whom process against the Corporation may be served. The post office address to
which the Secretary of State shall mail a copy of any process against the
Corporation served upon him or her is The A Consulting Team, Inc., 200 Park
Avenue South, New York, New York 10003, Attn: Shmuel BenTov.
ARTICLE VI
No holder of any of the shares of any class of the Corporation shall have
any preemptive rights and, as such, no holder of any of the shares of any class
of the Corporation shall be entitled as of right to subscribe for, purchase, or
otherwise acquire any shares of any class of the Corporation which the
Corporation proposes to issue or any rights or options which the Corporation
proposes to grant for the purchase of shares of any class of the Corporation or
for the purchase of any shares, bonds, securities, or obligations of the
Corporation which arc convertible into or exchangeable for, or which carry any
rights, to subscribe for, purchase, or otherwise acquire shares of any class of
the Corporation; and any and all of such shares, bonds, securities, or
obligations of the Corporation, whether now or hereafter authorized or created,
may be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all of such rights and options
may be granted by the Board of Directors to such persons, firms, corporations,
and associations, and for such lawful consideration, and on
4
such terms, as the Board of Directors in its discretion may determine, without
first offering the same, or any part thereof, to any said holder.
ARTICLE VII
(a) The Corporation shall be permitted to indemnify, and advance
expenses to, any person whom it has the power to indemnify to the fullest extent
permitted by law, and, to the extent consistent therewith, shall indemnify or
advance expenses to any such person to the fullest extent required by or
pursuant to any by-law of the Corporation, agreement, resolution of directors,
resolution of shareholders, directors' officers' liability insurance policies,
or any other form of indemnification agreement.
(b) To the fullest extent now or hereafter permitted by law,
directors of the Corporation shall not be liable to the Corporation or its
shareholders for damages for any breach of duty in their capacity as directors.
ARTICLE VIII
Whenever under the provisions of the Business Corporation Law shareholders
are required or permitted to take any action by vote, such action may be taken
without a meeting on written consent, signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, in accordance with the provisions of
Section 615 of the Business Corporation Law.
FIFTH: The amendments to, and restatement of, the Certificate of
Incorporation of the Corporation herein provided for were authorized by the
unanimous written consent of the Board of Directors and by the vote of a least a
majority of the outstanding shares of the Corporation entitled to vote hereon at
a special meeting of the holders of such shares.
5
IN WITNESS WHEREOF, the undersigned has executed, signed and verified this
Restated Certificate of Incorporation this _____ day of _________, and affirm
the statements herein as true under penalty of perjury.
THE A CONSULTING TEAM, INC.
By:
--------------------------------------
Name: Shmuel BenTov
Title: Chief Executive Officer and
President
Exhibit B
1997 Stock Option and Award Plan
THE A CONSULTING TEAM, INC.
1997 STOCK OPTION
AND AWARD PLAN
THE A CONSULTING TEAM, INC.
1997 STOCK OPTION AND AWARD PLAN
SECTION 1: BACKGROUND, PURPOSE AND DURATION..................................1
1.1 Background and Effective Date....................................1
1.2 Purpose of the Plan..............................................1
SECTION 2: DEFINITIONS.......................................................1
2.1 "1934 Act".......................................................1
2.2 "Affiliate"......................................................1
2.3 "Affiliated SAR".................................................1
2.4 "Award"..........................................................1
2.5 "Award Agreemt"..................................................1
2.6 "Board"..........................................................1
2.7 "Code"...........................................................1
2.8 "Committee"......................................................2
2.9 "Company"........................................................2
2.10 "Consultant".....................................................2
2.11 "Director".......................................................2
2.12 "Disability".....................................................2
2.13 "Employee".......................................................2
2.14 "Exercise Price".................................................2
2.15 "Fair Market Value"..............................................2
2.16 "Fiscal Year"....................................................2
2.17 "Freestanding SAR"...............................................2
2.18 "Grant Date".....................................................2
2.19 "Incentive Stock Option".........................................2
2.20 "Nonemployee Director"...........................................3
2.21 "Nonqualified Stock Option"......................................3
2.22 "Option".........................................................3
2.23 "Participant"....................................................3
2.24 "Performance Share"..............................................3
2.25 "Performance Unit"...............................................3
2.26 "Period of Restriction"..........................................3
2.27 "Plan"...........................................................3
2.28 "Restricted Stock"...............................................3
2.29 "Retirement".....................................................3
2.30 "Rule 16b-3".....................................................3
2.31 "Section 16 Person"..............................................3
2.32 "Shares".........................................................3
2.33 "Stock Appreciation Right".......................................3
2.34 "Subsidiary".....................................................3
SECTION 3: ADMINISTRATION....................................................4
3.1 The Committee....................................................4
3.2 Authority of the Committee.......................................4
3.3 Delegation by the Committee......................................4
3.4 Nonemployee Directors............................................4
3.5 Decisions Binding................................................4
SECTION 4: SHARES SUBJECT TO THE PLAN.......................................4
4.1 Number of Shares.................................................5
4.2 Lapsed Awards....................................................5
4.3 Adjustments in Awards and Authorized Shares......................5
SECTION 5: STOCK OPTIONS....................................................5
5.1 Grant of Options.................................................5
5.2 Award Agreement..................................................5
5.3 Exercise Price...................................................5
5.3.1 Nonqualified Stock Options.......................................5
5.3.2 Incentive Stock Options..........................................5
5.4 Expiration of Options............................................6
5.4.1 Expiration Dates.................................................6
5.4.2 Death of Participant.............................................6
5.4.3 Committee Discretion.............................................6
5.5 Exercisability of Options........................................6
5.6 Payment..........................................................6
5.7 Restrictions on Share Transferability............................7
5.8 Certain Additional Provisions for Incentive Stock Options........7
5.8.1 Exercisability...................................................7
5.8.2 Company and Subsidiaries Only....................................7
5.8.3 Expiration.......................................................7
5.9 Grant of Reload Options..........................................7
SECTION 6: STOCK APPRECIATION RIGHTS........................................8
6.1 Grant of SARs....................................................8
6.1.1 Exercise Price and Other Terms...................................8
6.2 Exercise of Tandem SARs..........................................8
6.3 Exercise of Freestanding SARs....................................8
6.4 SAR Agreement....................................................8
6.5 Expiration of SARs...............................................8
6.6 Payment of SAR Amount............................................8
SECTION 7: RESTRICTED STOCK.................................................9
7.1 Grant of Restricted Stock........................................9
7.2 Restricted Stock Agreement.......................................9
7.3 Transferability..................................................9
7.4 Other Restrictions...............................................9
7.5 Removal of Restrictions..........................................9
7.6 Voting Rights....................................................9
7.7 Dividends and Other Distributions................................9
7.8 Return of Restricted Stock to Company...........................10
SECTION 8: PERFORMANCE UNITS AND PERFORMANCE SHARES........................10
8.1 Grant of Performance Units/Shares...............................10
8.2 Initial Value...................................................10
8.3 Performance Objectives and Other Terms..........................10
8.4 Earning of Performance Units and Performance Shares.............10
8.5 Form and Timing of Payment......................................10
8.6 Cancellation....................................................10
SECTION 9: NONEMPLOYEE DIRECTORS...........................................11
9.1 Granting of Options.............................................11
9.1.1 New Nonemployee Directors.......................................11
9.1.2 Continuing Nonemployee Directors................................11
9.2 Terms of Options................................................11
9.2.1 Option Agreement................................................11
9.2.2 Exercise Price..................................................11
9.2.3 Exercisability..................................................11
9.2.4 Expiration of Options...........................................11
9.2.5 Death of Director...............................................11
9.2.6 Not Incentive Stock Options.....................................11
9.2.7 Other Terms.....................................................12
SECTION 10: MISCELLANEOUS...................................................12
10.1 No Effect on Employment or Service..............................12
10.2 Participation...................................................12
10.3 Indemnification.................................................12
10.4 Successors......................................................12
10.5 Beneficiary Designations........................................12
10.6 Nontransferability of Awards....................................13
10.7 No Rights as Stockholder........................................13
10.8 Withholding Requirements........................................13
10.9 Withholding Arrangements........................................13
10.10 Deferrals.......................................................13
SECTION 11: AMENDMENT, TERMINATION, AND DURATION............................13
11.1 Amendment, Suspension, or Termination...........................13
11.2 Duration of the Plan............................................14
SECTION 12: LEGAL CONSTRUCTION..............................................14
12.1 Gender and Number...............................................14
12.2 Severability....................................................14
12.3 Requirements of Law.............................................14
12.4 Compliance with Rule 16b-3......................................14
12.5 Governing Law...................................................14
12.6 Captions........................................................14
THE A CONSULTING TEAM, INC.
1997 STOCK OPTION AND AWARD PLAN
THE A CONSULTING TEAM, INC., hereby adopts The A Consulting Team,
Inc. 1997 Stock Option and Award Plan, as follows:
SECTION 1
BACKGROUND, PURPOSE AND DURATION
1.1 Background and Effective Date. the Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, and Performance Shares. The Plan is effective as of June 11,
1997.
1.2 Purpose of the Plan. The Plan is intended to increase incentive and to
encourage Share ownership on the part of (1) employees of the Company and its
Affiliates, (2) consultants who provide significant services to the Company and
its Affiliates, and (3) directors of the Company who are employees of neither
the Company nor any Affiliate. The Plan also is intended to further the growth
and profitability of the Company.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.2 "Affiliate" means any corporation or any other entity (including, but
not limited to, partnerships and joint ventures) controlling controlled by, or
under common control with the Company.
2.3 "Affiliated SAR" means a SAR that is granted in connection with a
related Option, and which automatically will be deemed to be exercised at the
same time that the related Option is exercised. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
2.4 "Award" means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, or Performance Shares.
2.5 "Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under the Plan.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
2.8 "Committee" means the committee appointed by the Board (pursuant to
Section 3.1) to administer the Plan.
2.9 "Company" means The A Consulting Team, a New York corporation, or any
successor thereto.
2.10 "Consultant" means any consultant, independent contractor, or other
person who provides significant services to the Company or its Affiliates, but
who is neither an Employee nor a Director.
2.11 "Director" means any individual who is a member of the Board.
2.12 "Disability" means a permanent and total disability within the
meaning of Code section 22(e)(3), provided that in the case of Awards other than
Incentive Stock Options, the Committee in its discretion may determine whether a
permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Committee from time to time.
2.13 "Employee" means any employee of the Company or of an Affiliate,
whether such employee is so employed at the time the Plan is adopted or becomes
so employed subsequent to the adoption of the Plan.
2.14 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option.
2.15 "Fair Market Value" means the last quoted per share selling price for
Shares on the relevant date, or if there were no sales on such date, the
arithmetic mean of the highest and lowest quoted selling prices on the nearest
day after the relevant date, as determined by the Committee. Notwithstanding the
preceding, with respect to Options granted on the date of the initial public
offering of Shares, fair market value means the price at which each Share is
sold in such offering, as determined by the Committee.
2.16 "Freestanding SAR" means a SAR that is granted independently of any
Option.
2.17 "Grant Date" means, with respect to an Award, the date that the Award
was granted.
2
2.18 "Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option and is intended to meet the requirements
of section 422 of the Code.
2.19 "Nonemployee Director" means a Director who is an employee of neither
the Company nor of any Affiliate.
2.20 "Nonqualified Stock Option" means an option to purchase Shares which
is not intended to be an Incentive Stock Option.
2.21 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.22 "Participant" means an Employee, Consultant, or Nonemployee Director
who has an outstanding Award.
2.23 "Performance Share" means a Performance Share granted to a
Participant pursuant to Section 8.
2.24 "Performance Unit" means a Performance Unit granted to a Participant
pursuant to Section 8.
2.25 "Period of Restriction" means the period during which shares of
Restricted Stock are subject to forfeiture and/or restrictions on
transferability.
2.26 "Plan" means The A Consulting Team, Inc. 1997 Stock Option and Award
Plan, as set forth in this instrument and as hereafter amended from time to
time.
2.27 "Restricted Stock" means an Award granted to a Participant pursuant
to Section 7.
2.28 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as
amended, and any future regulation amending, supplementing or superseding such
regulation.
2.29 "Section 16 Person" means a person who, with respect to the Shares,
is subject to section 16 of the 1934 Act.
2.30 "Shares" means the shares of the Company's common stock, $0.01 par
value.
2.31 "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, that pursuant to Section 6 is designated as
a SAR.
2.32 "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2.33 "Tandem SAR" means a SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
an equal number of
3
Shares under the related Option (and when a Share is purchased under the Option,
the SAR shall be canceled to the same extent).
2.34 "Termination of Service" means (a) in the case of an Employee, a
cessation of the employee-employer relationship between an Employee and the
Company or an Affiliate for any reason, including, but not by way of limitation,
a termination by resignation, discharge, death, Disability, retirement, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous reemployment by the Company or an Affiliate; (b) in the case
of a Consultant, a cessation of the service relationship between a Consultant
and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous re-engagement of the consultant by the Company or an
Affiliate; and (c) in the case of a Nonemployee Director, a cessation of the
Nonemployee Director's service on the Board for any reason.
SECTION 3
ADMINISTRATION
3.1 The Committee. the Plan shall be administered by the Committee. The
members of the Committee shall be appointed from time to time by, and shall
serve at the pleasure of, the Board.
3.2 Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees and Consultants shall be granted Awards, (b)
prescribe the terms and conditions of the Awards (other than the Options granted
to Nonemployee Directors pursuant to Section 9), (c) interpret the Plan and the
Awards, (d) adopt rules for the administration, interpretation and application
of the Plan as are consistent therewith, and (e) interpret, amend or revoke any
such rules.
3.3 Delegation by the Committee. The Committee, in its sole discretion and
on such terms and conditions as it may provide, may delegate all or any part of
its authority and powers under the Plan to one or more directors or officers of
the Company; provided, however, that unless otherwise determined by the Board,
the Committee may not delegate its authority and powers in any way which would
jeopardize the Plan's qualifications under Rule 16b-3.
3.4 Nonemployee Directors. Notwithstanding any contrary provision of this
Section 3, the Board shall administer Section 9 of the Plan, and the Committee
shall exercise no discretion with respect to Section 9. In the Board's
administration of Section 9 and the Options and any Shares granted to
Nonemployee Directors, the Board shall have all of the authority and discretion
otherwise granted to the Committee with respect to the administration of the
Plan.
3.5 Decisions Binding. All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final,
4
conclusive, and binding on all persons, and shall be given the maximum deference
permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant under the Plan shall not exceed
900,000 (as amended). Shares granted under the Plan may be either authorized but
unissued Shares or treasury Shares.
4.2 Lapsed Awards. If an Award terminates, expires, or lapses for any
reason, any Shares subject to such Award again shall be available to be the
subject of an Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other change in the
corporate structure of the Company affecting the Shares, the Committee shall
adjust the number and class of Shares which may be delivered under the Plan, the
number, class, and price of Shares subject to outstanding Awards, and the
numerical limit of Section 5.1 in such manner as the Committee (in its sole
discretion) shall determine to be appropriate to prevent the dilution or
diminution of such Awards. In the case of Options granted to Nonemployee
Directors pursuant to Section 9, the foregoing adjustments shall be made by the
Board, and any such adjustments also shall apply to the future grants provided
by Section 9. Notwithstanding the preceding, the number of Shares subject to any
Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees and Consultants at any time and from time to
time as determined by the Committee in its sole discretion. The Committee, in
its sole discretion, shall determine the number of Shares subject to each
Option. The Committee may grant Incentive Stock Options, Nonqualified Stock
Options, or a combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option, and such other terms and conditions as the Committee, in its discretion,
shall determine. The Award Agreement shall specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price for each Option shall be determined by the Committee in its sole
discretion.
5
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified
Stock Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share on the Grant Date; provided, however, that if
on the Grant Date, the Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, the Exercise Price shall be not
less than one hundred and ten percent (110%) of the Fair Market Value of a Share
on the Grant Date. Substitute Options. Notwithstanding the provisions of
Sections 5.3.1 and 5.3.2, in the event that the Company or an Affiliate
consummates a transaction described in section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons who
become Employees or Consultants on account of such transaction may be granted
Options in substitution for options granted by their former employer. If such
substitute Options are granted, the Committee, in its sole discretion and
consistent with section 424(a) of the Code, shall determine the exercise price
of such substitute Options.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate no later than
the first to occur of the following events:
(a) The date for termination of the Option set forth in the
written Award Agreement; or
(b) The expiration of ten (10) years from the Grant Date; or
(c) The expiration of three (3) months from the date of the
Participant's Termination of Service for a reason other than the Participant's
death or Disability; or
(d) The expiration of one (1) year from the date of the
Participant's Termination of Service by reason of Disability.
5.4.2 Death of Participant. Notwithstanding Section 5.4.1, if a
Participant dies prior to the expiration of his or her options, the Committee,
in its discretion, may provide that his or her options shall be exercisable for
up to one (1) year after the date of death.
5.4.3 Committee Discretion. Subject to the limits of Sections 5.4.1
and 5.4.2, the Committee, in its sole discretion, (a) shall provide in each
Award Agreement when each Option expires and becomes unexercisable, and (b) may,
after an Option is granted, extend the maximum term of the Option (subject to
Section 5.8.4 regarding Incentive Stock Options).
5.5 Exercisability of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in
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its sole discretion. After an Option is granted, the Committee, in its sole
discretion, may accelerate the exercisability of the Option.
5.6 Payment. Options shall be exercised by the Participant's delivery of a
written notice of exercise to the Secretary of the Company (or its designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be payable to
the Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan.
As soon as practicable after receipt of a written notification of exercise
and full payment for the Shares purchased, the Company shall deliver to the
Participant (or the Participant's designated broker), Share certificates (which
may be in book entry form) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable, including, but not limited to, restrictions related to
applicable Federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Exercisability. The aggregate Fair Market Value (determined on
the Grant Date(s)) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by any Employee during any calendar year
(under all plans of the Company and its Subsidiaries) shall not exceed $100,000.
Termination of Service. No Incentive Stock Option may be exercised more than
three (3) months after the Participant's Termination of Service for any reason
other than Disability or death, unless (a) the Participant dies during such
three-month period, and (b) the Award Agreement or the Committee permits later
exercise.
5.8.2 Company and Subsidiaries Only. Incentive Stock Options may be
granted only to persons who are employees of the Company or a Subsidiary on the
Grant Date.
5.8.3 Expiration. No Incentive Stock Option may be exercised after
the expiration of ten (10) years from the Grant Date; provided, however, that if
the Option is granted to an Employee who, together with persons whose stock
ownership is attributed to the Employee pursuant to section 424(d) of the Code,
owns stock possessing more than 10% of the total combined voting power of all
classes of the stock of the Company or any of its Subsidiaries, the Option may
not be exercised after the expiration of five (5) years from the Grant Date.
5.9 Grant of Reload Options. The Committee may provide in an Award
Agreement that a Participant who exercises all or part of an Option by payment
of the Exercise Price with
7
already-owned Shares, shall be granted an additional option (a "Reload Option")
for a number of shares of stock equal to the number of Shares tendered to
exercise the previously granted Option plus, if the Committee so determines, any
Shares withheld or delivered in satisfaction of any tax withholding
requirements. As determined by the Committee, each Reload Option shall: (a) have
a Grant Date which is the date as of which the previously granted Option is
exercised, and (b) be exercisable on the same terms and conditions as the
previously granted Option, except that the Exercise Price shall be determined as
of the Grant Date.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of the Plan, a SAR
may be granted to Employees and Consultants at any time and from time to time as
shall be determined by the Committee, in its sole discretion. The Committee may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof. The Committee shall have complete discretion to determine the number of
SARs granted to any Participant.
6.1.1 Exercise Price and Other Terms. The Committee, subject to the
provisions of the Plan, shall have complete discretion to determine the terms
and conditions of SARs granted under the Plan. However, the exercise price of a
Freestanding SAR shall be not less than one hundred percent (100%) of the Fair
Market Value of a Share on the Grant Date. The exercise price of Tandem or
Affiliated SARs shall equal the Exercise Price of the related Option.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the pay
out with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
6.3 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable
on such terms and conditions as the Committee, in its sole discretion, shall
determine.
6.4 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
8
6.5 Expiration of SARs. A SAR granted under the Plan shall expire upon the
date determined by the Committee, in its sole discretion, and set forth in the
Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also
shall apply to SARs.
6.6 Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on
the date of exercise over the exercise price; times
The number of Shares with respect to which the SAR is exercised. At the
discretion of the Committee, payment for a SAR may be in cash, Shares or a
combination thereof.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees and Consultants in such amounts as the Committee,
in its sole discretion, shall determine. The Committee, in its sole discretion,
shall determine the number of Shares to be granted to each Participant.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, any price to be paid for the Shares, and such
other terms and conditions as the Committee, in its sole discretion, shall
determine. Unless the Committee determines otherwise, Shares of Restricted Stock
shall be held by the Company as escrow agent until the restrictions on such
Shares have lapsed.
7.3 Transferability. Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction. In no event may the restrictions on
Restricted Stock granted to a Section 16 Person lapse prior to six (6) months
following the Grant Date.
7.4 Other Restrictions. The Committee, in its sole discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate, in accordance with this Section 7.4. For example, the Committee
may set restrictions based upon the achievement of specific performance
objectives (Company-wide, divisional, or individual), applicable Federal or
state securities laws, or any other basis determined by the Committee in its
discretion. The Committee, in its discretion, may legend the certificates
representing Restricted Stock to give appropriate notice of the restrictions
applicable to such Shares.
7.5 Removal of Restrictions. Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall be released from escrow as soon
as practicable after the last day of the Period of Restriction. The Committee,
in its discretion, may accelerate the time at which any restrictions shall
lapse, and remove any restrictions. After the restrictions have
9
lapsed, the Participant shall be entitled to have any legend or legends under
Section 7.4 removed from his or her Share certificate, and the Shares shall be
freely transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless otherwise provided in the Award Agreement.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
7.8 Return of Restricted Stock to Company. On the date set forth in the
Award Agreement, the Restricted Stock for which restrictions have not lapsed
shall revert to the Company and again shall become available for grant under the
Plan.
SECTION 8.
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Employees and Consultants at any time and from time to
time, as shall be determined by the Committee, in its sole discretion. The
Committee shall have complete discretion in determining the number of
Performance Units and Performance Shares granted to any Participant.
8.2 Initial Value. Each Performance Unit shall have an initial value that
is established by the Committee on or before the Grant Date. Each Performance
Share shall have an initial value equal to the Fair Market Value of a Share on
the Grant Date.
8.3 Performance Objectives and Other Terms. The Committee shall set
performance objectives in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Units or Shares
that will be paid out to the Participants. The Committee may set performance
objectives based upon the achievement of Company-wide, divisional, or individual
goals, or any other basis determined by the Committee in its discretion. The
time period during which the performance objectives must be met shall be called
the "Performance Period". Each Award of Performance Units/Shares shall be
evidenced by an Award Agreement that shall specify the Performance Period, and
such other terms and conditions as the Committee, in its sole discretion, shall
determine.
8.4 Earning of Performance Units and Performance Shares. After the
applicable Performance Period has ended, the Participant shall be entitled to
receive a pay out of the number of Performance Units or Shares earned during the
Performance Period, depending upon the extent to which the applicable
performance objectives have been achieved. After the grant of a Performance Unit
or Share, the Committee, in its sole discretion, may reduce or waive any
performance objectives for Award; provided that Performance Periods of Awards
granted to
10
Section 16 Persons shall not be less than six (6) months (or such shorter period
as may be permissible while maintaining compliance with Rule 16b-3).
8.5 Form and Timing of Payment. Payment of earned Performance Units or
Performance Shares shall be made as soon as practicable after the expiration of
the applicable Performance Period. The Committee, in its sole discretion, may
pay such earned Awards in cash, Shares or a combination thereof.
8.6 Cancellation. On the date set forth in the Award Agreement, all
unearned or unvested Performance Units or Performance Shares shall be forfeited
to the Company, and again shall be available for grant under the Plan.
SECTION 9
NONEMPLOYEE DIRECTORS
9.1 Granting of Options.
9.1.1 New Nonemployee Directors. Each Nonemployee Director who first
becomes a Nonemployee Director on or after the effective date of the Plan
automatically shall be granted, as of the date that the individual first is
appointed or elected as a Nonemployee Director, an Option to purchase 1,000
Shares.
9.1.2 Continuing Nonemployee Directors. Each Nonemployee Director
who is re-elected to serve as a Nonemployee Director automatically shall be
granted, as of the date that the individual is re-elected as a Nonemployee
Director, an Option to purchase 1,000 Shares.
9.2 Terms of Options.
9.2.1 Option Agreement. Each Option granted pursuant to this Section
9 shall be evidenced by a written stock option agreement which shall be executed
by the Participant and the Company.
9.2.2 Exercise Price. The Exercise Price for the Shares subject to
each Option granted pursuant to this Section 9 shall be 100% of the Fair Market
Value of such Shares on the Grant Date.
9.2.3 Exercisability. Each Option granted pursuant to this Section 9
shall become exercisable in full on the first anniversary of the Grant Date.
Notwithstanding the preceding, once an Optionee ceases to be a Director, his or
her Options which are not exercisable shall not become exercisable.
9.2.4 Expiration of Options. Each Option shall terminate upon the
first to occur of the following events:
(a) The expiration of five (5) years from the Grant Date; or
11
(b) The expiration of three (3) months from the date of the
Participant's Termination of Service for a reason other the Participant's death
or Disability; or
(c) The expiration of one (1) year from the date of the
Participant's Termination of Service by reason of Disability.
9.2.5 Death of Director. Notwithstanding Section 9.2.4, if a
Director dies prior to the expiration of his or her options in accordance with
Section 9.2.4, his or her options shall terminate one (1) year after the date of
death.
9.2.6 Not Incentive Stock Options. Options granted pursuant to this
Section 9 shall not be designated as Incentive Stock Options.
9.2.7 Other Terms. All provisions of the Plan not inconsistent with
this Section 9 shall apply to Options granted to Nonemployee Directors;
provided, however, that Section 5.2 (relating to the Committee's discretion to
set the terms and conditions of Options) shall be inapplicable with respect to
Nonemployee Directors.
SECTION 10
MISCELLANEOUS
10.1 No Effect on Employment or Service. Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a Termination of Service. Employment with the Company and its Affiliates
is on an at-will basis only.
10.2 Participation. No Employee or Consultant shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
10.3 Indemnification. Each person who is or shall have been a member of
the Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
12
10.4 Successors. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business or assets of the Company.
10.5 Beneficiary Designations. If permitted by the Committee, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of the Plan and of the applicable Award Agreement, any
unexercised vested Award may be exercised by the administrator or executor of
the Participant's estate. 10.6 Nontransferability of Awards. No Award granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will, by the laws of descent and
distribution, or to the limited extent provided in Section 10.5. All rights with
respect to an Award granted to a Participant shall be available during his or
her lifetime only to the Participant.
10.7 No Rights as Stockholder. Except to the limited extent provided in
Sections 7.6 and 7.7, no Participant (nor any beneficiary) shall have any of the
rights or privileges of a stockholder of the Company with respect to any Shares
issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).
10.8 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).
10.9 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit or
require a Participant to satisfy all or part of the tax withholding obligations
in connection with an Award by (a) having the Company withhold otherwise
deliverable Shares, or (b) delivering to the Company already-owned Shares having
a Fair Market Value equal to the amount required to be withheld. The amount of
the withholding requirement shall be deemed to include any amount which the
Committee determines, not to exceed the amount determined by using the maximum
federal, state or local marginal income tax rates applicable to the Participant
with respect to the Award on the date that the amount of tax to be withheld is
to be determined. The Fair Market Value of the Shares to be withheld or
delivered shall be determined as of the date that the taxes are required to be
withheld.
10.10 Deferrals. The Committee, in its sole discretion, may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be delivered
13
to a Participant under the Plan. Any such deferral elections shall be subject to
such rules and procedures as shall be determined by the Committee in its sole
discretion.
SECTION 11
AMENDMENT, TERMINATION, AND DURATION
11.1 Amendment, Suspension, or Termination. The Board, in its sole
discretion, may amend or terminate the Plan, or any part thereof, at any time
and for any reason. The amendment, suspension, or termination of the Plan shall
not, without the consent of the Participant, alter or impair any rights or
obligations under any Award theretofore granted to such Participant. No Award
may be granted during any period of suspension or after termination of the Plan.
11.2 Duration of the Plan. The Plan shall commence on the date specified
herein, and subject to Section 11.1 (regarding the Board's right to amend or
terminate the Plan), shall remain in effect thereafter. However, without further
stockholder approval, no Incentive Stock Option may be granted under the Plan
after June 11, 2007.
SECTION 12
LEGAL CONSTRUCTION
12.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
12.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
12.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
12.4 Compliance with Rule 16b-3. Transactions under this Plan with respect
to Section 16 Persons are intended to comply with all applicable conditions of
Rule 16b-3. To the extent any provision of the Plan, Award Agreement or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee. Notwithstanding
any contrary provision of the Plan, if the Committee specifically determines
that compliance with Rule 16b-3 no longer is required, all references in the
Plan to Rule 16b-3 shall be null and void.
12.5 Governing Law. The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of New York.
12.6 Captions. Captions are provided herein for convenience only, and
shall not serve as a basis for interpretation or construction of the Plan.
14
EXECUTION
IN WITNESS WHEREOF, The A Consulting Team, Inc., by its duly authorized
officer, has executed the Plan on the date indicated below.
THE A CONSULTING TEAM, INC.
Dated as of: June 11, 1997 By: /s/ Shmuel BenTov
------------------------------------
Title: Chairman and Chief Executive
Officer
15
EXHIBIT C
Amendment No. 2 to 1997 Stock Option and Award Plan
AMENDMENT NO. 2 TO THE
1997 STOCK OPTION AND AWARD PLAN
General
The amendment (the "Plan Amendment") will not affect any provision of the
Plan, except as set forth below. A copy of the Plan Amendment is attached hereto
as Exhibit B. A copy of the Plan, prior to giving effect to the Plan Amendment,
is attached hereto as Appendix 2.
The Plan Amendment is being made to enable the Company and its
subsidiaries to continue to provide incentives to employees of the Company and
its subsidiaries to advance the interests of the Company and to enable the
Company and the Company's subsidiaries to continue to attract qualified new
employees in a competitive marketplace.
Increase in Authorized Shares
The Plan will be amended to increase the number of shares of Common Stock
reserved for issuance upon awards of restricted shares, performance units or
performance shares or upon the exercise of options or share appreciation rights
("SARs") available for grant under the Plan. This amendment will enable the
Company to award more restricted shares, options, SARs, performance units and
performance shares under the Plan. After giving effect to the Plan Amendment,
the number of shares of Common Stock that the Company will be able to issue
under restricted share awards, performance units or performance shares and upon
exercise of options or SARs available for grant under the Plan would be
1,200,000 (subject to adjustment for stock splits, stock dividends,
recapitalizations and similar events as provided in the Plan). This amendment
represents an increase of 300,000 shares from the 900,000 shares of Common Stock
previously reserved for issuance upon restricted share, performance units and
performance shares awards and upon the exercise of options and SARs available
for grant under the Plan, as amended, which originally went into effect in June
1997 and was amended in May 1998.
Separate Committee Regarding Section 16 Persons
The Plan will be amended to allow the Board to appoint a separate
committee (the "Section 16 Committee") to administer the Plan with respect to
persons ("Subject 16 Persons") subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which Section 16 Committee would
have all powers and authorities of the Plan Committee (as defined below) with
respect to Section 16 Persons and would consist of (i) the Board itself or (ii)
those individuals who shall satisfy the requirements set forth under Rule 16b-3
of the Exchange Act. The ability of the Board to appoint such a separate
committee will increase its flexibility in complying with Rule 16b-3 of the
Exchange Act.
Limit on Number of Options and SARs
The Plan will be amended to prohibit any employee of the Company or any
subsidiary of the Company from being granted options or SARs to purchase more
than 250,000 shares of Common Stock in any calendar year. This amendment will
allow the Company to take deductions under the Internal Revenue Code of 1986, as
amended (the "Code") for compensation to employees up to $1,000,000 per calendar
year without including options or SARs granted under the Plan to such employees
as part of such compensation. In the absence of such amendment, the Company is
required to include the value of options and SARs granted to employees as part
of such compensation, reducing the amount of cash and other compensation that
the Company may grant to employees as a deductible expense.
EXHIBIT D
The Company's Audit Committee Charter
THE A CONSULTING TEAM, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee shall be appointed by the Board of Directors (the
"Board") to assist the Board in monitoring (1) the integrity of the financial
statements of The A Consulting Team, Inc. and its subsidiaries (the "Company"),
(2) the compliance by the Company with legal and regulatory requirements and (3)
the independence and performance of the Company's internal and external
auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the Nasdaq Stock Market, Inc., as amended from time
to time, no later than June 14, 2000. By such date, the Audit Committee shall be
composed of a minimum of three (3) members which shall each be independent
directors of the Company. In addition, all members of the Audit Committee shall
be able to read and understand fundamental financial statements, including the
balance sheet, income statement and cash flow statement. At least one member of
the Audit Committee shall have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past position as a
chief executive or financial officer or other senior officer with financial
oversight experience.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Audit Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee. The Audit Committee may, at its option, meet with the independent
auditor without members of management or other personnel of the Company present.
The Audit Committee shall make regular reports to the Board. In addition,
the Audit Committee shall:
1. Review and reassess the adequacy of this Audit Committee Charter
annually and recommend any proposed changes to the Board for
approval.
2. Review the annual audited financial statements and any major issues
regarding accounting and auditing principles and practices, as well
as the adequacy of internal controls that could significantly affect
the Company's financial statements, with management of the Company
including, without limitation, the Chief Financial Officer and
Controller.
3. Review an analysis prepared by management of the Company and the
independent auditor of significant financial reporting issues and
judgments made in connection with the preparation of the Company's
financial statements.
4. Obtain assurance from the independent auditor that it has reviewed
the Company's quarterly financial reports within the meaning of the
procedures set
THE A CONSULTING TEAM, INC.
Audit Committee Charter
forth in Statement on Auditing Standards No. 71 prior to the filing
of the Company's Form 10-Q for each quarter.
5. Review with management of the Company and the independent auditor
the Company's quarterly financial statements prior to the filing of
the Company's Form 10-Q for each quarter and, if possible, prior to
any quarterly earnings announcement.
6. Review the financial statements contained in the annual report to
stockholders with management of the Company and the independent
auditor to determine that the independent auditor is satisfied with
the disclosure and content of the financial statements to be
presented to the stockholders of the Company.
7. Meet periodically with management of the Company to review the
Company's major financial risk exposures and the steps taken by such
management to monitor and control such exposures.
8. Review with the independent auditor, the Company's Chief Financial
Officer, Controller and other senior financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company.
9. Review any recommendations of the independent auditor, the Company's
Chief Financial Officer, Controller and other senior financial and
accounting personnel for the improvement of internal control
procedures or particular areas where new or more detailed controls
or procedures are desirable.
10. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor,
Chief Financial Officer, Controller, other senior financial and
accounting personnel or management of the Company.
11. Recommend to the Board the appointment of the independent auditor to
audit the financial statements of the Company and its subsidiaries,
which firm is ultimately accountable to the Audit Committee and the
Board, as representatives of stockholders.
12. Approve the fees to be paid to the independent auditor.
13. Receive periodically formal written reports from the independent
auditor regarding the auditor's independence consistent with
Independence Standards Board Standard 1, discuss such reports with
the auditor, and if so determined by the Audit Committee, take or
recommend that the full Board take appropriate action to oversee the
independence of the auditor.
THE A CONSULTING TEAM, INC.
Audit Committee Charter 2
14. Evaluate, together with the Board, the performance of the
independent auditor and, if so determined by the Audit Committee,
recommend that the Board replace the independent auditor.
15. Review the appointment and replacement of the Chief Financial
Officer, Controller and other senior financial and accounting
personnel.
16. Review the significant reports to management of the Company prepared
by the Chief Financial Officer and/or Controller and management's
responses.
17. Meet with the independent auditor and senior financial and
accounting personnel of the Company prior to the audit to review the
planning and staffing of the audit and the scope of the proposed
audit for the current year and the audit procedures to be utilized.
18. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934, a copy of which is attached
hereto as Exhibit A, has not been implicated.
19. Obtain reports from management of the Company, the Chief Financial
Officer, Controller and the independent auditor that the Company's
subsidiary entities are in conformity with applicable legal
requirements and the Company's code of conduct.
20. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit. Document that such discussion has taken place
noting the date, participants and place of the discussion, but not
the nature and scope of such discussion so that frank and open
communication between the Audit Committee and the independent
auditor may occur.
21. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by
the auditor and the Company's response to such letter. Such review
should include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information.
b. Any changes required in the planned scope of the internal
audit.
c. The financial and accounting department responsibilities,
budget and staffing.
22. Review and approve disclosure in the Company's annual proxy
statement regarding the Audit Committee. Such disclosure shall state
(i) whether or not the
THE A CONSULTING TEAM, INC.
Audit Committee Charter 3
Audit Committee members are independent, (ii) if a member is not
independent the reason therefor and (iii) the reasons the Board
appointed the current members of the Audit Committee to the Audit
Committee.
23. Prepare a report of the Audit Committee as required by the rules of
the Securities and Exchange Commission and include such report in
the Company's annual proxy statement. Such report shall include the
following:
a. A discussion that the Audit Committee has reviewed and
discussed the audited financial statements with management of
the Company.
b. The Audit Committee has discussed with the independent auditor
the matters covered by Statement on Auditing Standards No. 61,
as well as the independence of the independent auditor.
c. A statement that based on the Audit Committee's review and
discussions with management of the Company and the independent
auditor the Audit Committee has recommended to the Board that
the audited financial statements of the Company be included in
the Company's Form 10-K.
d. A statement that the Board has adopted a written Audit
Committee Charter, which Charter shall be appended to the
annual proxy statement at least once every three years
beginning with the first annual proxy statement issued after
December 15, 2000.
24. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations
and with the Company's code of conduct.
25. Review with the Company's Legal Department legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
26. Meet at least annually with the Chief Financial Officer, the
Controller and the independent auditor in separate executive
sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Audit Committee Charter, it is not the duty of the Audit Committee to plan
or conduct audits or to determine that the Company's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles. This is the responsibility of management of the Company and the
independent auditor. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management of the
Company and the independent auditor or to assure compliance with laws and
regulations and the Company's Code of Conduct.
THE A CONSULTING TEAM, INC.
Audit Committee Charter 4
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 2001 Annual Meeting of Shareholders of
the Company, to be held on May 24, 2001, 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 mark |_|
your votes as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 and 4. Please
mark your votes as in this example /x/.
1. Election of Directors Nominees
Shmuel BenTov FOR WITHHOLD
Joseph E. Imholz all nominees listed AUTHORITY
Steven S. Mukamal to the left (except to vote for all
Reuven Battat as marked to the nominees listed
Hagay Shefi contrary below) to the left
|_| |_|
__________________________________________________________________________
2. To ratify the appointment of Ernst & Young LLP as the independent public
accountants of the Company for the fiscal year ending December 31, 2001.
FOR AGAINST ABSTAIN
|_| |_| |_|
__________________________________________________________________________
3. To amend and restate the Restated Certificate of Incorporation of the
Company in order to increase the number of authorized shares of common
stock from 10,000,000 to 30,000,000.
FOR AGAINST ABSTAIN
|_| |_| |_|
__________________________________________________________________________
4. To amend the 1997 Stock Option and Award Plan (the "Plan") to (i) increase
the number of shares of common stock from 900,000 to 1,200,000; (ii) allow
the Board of Directors to appoint a committee to administer the Plan; and
(iii) prohibit any employee of the Company from purchasing more than
250,000 shares of common stock in any calendar year.
FOR AGAINST ABSTAIN
|_| |_| |_|
5. In his discretion, the proxy is authorized to vote upon such other matters
as may properly come before the meeting.
Signature(s)___________________________________ Dated ______________________2001
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.
Fold and detach here
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