<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
COMMISSION FILE NUMBER: 000-24539
ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 65-0632092
(State of Incorporation) (IRS Employer Identification
Number)
777 East Atlantic Avenue
Suite 200
Delray Beach, Florida
33483
(Address of principal executive offices)
(561)-243-1440
(Telephone number of registrant)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing for the past 90 days. Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
<TABLE>
<CAPTION>
Class Shares outstanding as of August 31, 1998
----- ----------------------------------------
<S> <C>
Common Stock, $.01 par value 19,391,675
Non-voting Common Stock, $.01 par value 896,431
</TABLE>
<PAGE> 2
ECLIPSYS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets - June 30, 1998
(unaudited) and December 31, 1997
Condensed Consolidated Statements of Operations - For the
Three and Six Months ended June 30, 1998 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows - For the Six
Months ended June 30, 1998 and 1997 (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. Other Information
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
PART 1.
ITEM 1.
ECLISPSYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Current Assets
Cash $ 2,778 $ 4,786
Accounts receivable 39,582 30,969
Inventory 610 866
Other current assets 8,578 1,114
--------- ---------
TOTAL CURRENT ASSETS 51,548 37,735
Fixed Assets, net 12,078 9,517
Capitalized software development costs 3,402 1,591
Acquired technology, net 22,341 25,802
Intangible assets, net 16,824 28,288
Other assets 9,524 3,832
--------- ---------
TOTAL ASSETS $ 115,717 $ 106,765
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Deferred revenue $ 37,503 $ 25,295
Current portion of long-term debt 3,794 12,794
Other current liabilities 32,810 31,150
--------- ---------
TOTAL CURRENT LIABILITIES 74,107 69,239
Deferred revenue 7,586 6,966
Long-term debt 17,000 3,794
Other long-term liabilities 3,765 9,480
Mandatorily redeemable preferred stock 30,356 35,607
Shareholders' deficit
Preferred stock 104 95
Common stock 53 42
Unearned stock compensation (214) (250)
Additional-paid-in-capital 131,757 115,777
Cumulative foreign currency translation adjustment 38 28
Retained deficit (148,835) (134,013)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (17,097) (18,321)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 115,717 $ 106,765
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------------
REVENUES 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Systems and services $ 29,125 $ 23,523 $ 56,089 $ 40,546
Hardware 3,164 744 5,494 1,366
----------------------- ----------------------------
TOTAL REVENUES 32,289 24,267 61,583 41,912
----------------------- ----------------------------
COSTS AND EXPENSES
Cost of systems and services revenues 17,761 19,970 34,404 36,834
Cost of hardware revenue 2,718 491 4,695 993
Marketing and sales 4,693 3,204 8,904 6,332
Research and development 6,311 3,329 12,423 8,027
General and administration 1,276 1,413 2,891 2,197
Depreciation and amortization 2,523 2,420 5,391 4,708
Nonrecurring charges - 6,988 7,193 99,189
----------------------- ----------------------------
TOTAL COSTS AND EXPENSES 35,282 37,815 75,901 158,280
----------------------- ----------------------------
----------------------- ----------------------------
LOSS FROM OPERATIONS (2,993) (13,548) (14,318) (116,368)
----------------------- ----------------------------
Interest expense, net 219 222 504 333
----------------------- ----------------------------
NET LOSS (3,212) (13,770) (14,822) (116,701)
----------------------- ----------------------------
DIVIDENDS AND ACCRETION OF MANDATORILY
REDEEMABLE PREFERRED STOCK (1,178) (1,568) (2,513) (2,586)
PREFERRED STOCK CONVERSION - - - (3,105)
----------------------- ----------------------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (4,390) $ (15,338) $ (17,335) $ (122,392)
----------------------- ----------------------------
BASIC AND DILUTED NET LOSS PER SHARE $ (0.89) $ (4.70) $ (3.66) $ (37.56)
----------------------- ----------------------------
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING 4,937,086 3,261,053 4,732,602 3,258,553
----------------------- ----------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (14,822) $ (116,701)
Total adjustments to reconcile net loss
to net cash provided by operating activities 25,992 116,761
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,170 60
---------- ----------
INVESTING ACTIVITIES
Purchase of property, equipment and software, net (3,471) (1,303)
Capitalized software development costs (1,811) (189)
Acquisitions, net of cash - (108,983)
Changes in other assets (21,565) -
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (26,847) (110,475)
---------- ----------
FINANCING ACTIVITIES
Borrowings 17,000 10,000
Payments on borrowings (12,794) -
Exercise of options 453 -
Sale of preferred stock 9,000 73,764
Sale of mandatorily redeemable preferred stock - 30,000
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 13,659 113,764
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 10 13
---------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,008) 3,362
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,786 4,589
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,778 $ 7,951
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART TO THESE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 6
ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
1. BASIS OF PRESENTATION
The consolidated financial statements include all adjustments that, in the
opinion of management, are necessary for a fair presentation of the
results for the periods indicated. All such adjustments are considered of
normal recurring nature. Quarterly results of operations are not
necessarily indicative of annual results.
Certain financial information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Registration Statement on Form S-1 as amended dated August 6,
1998.
2. SUBSEQUENT EVENTS
Effective August 6, 1998, Eclipsys Corporation ("the Company") completed
an initial public offering. Net proceeds from the offering were $67.4
million, including the exercise of the underwriters' over-allotment
option. The Company used the net proceeds from the offering to redeem
the outstanding shares of the Company's mandatorily redeemable preferred
stock, repay the principal balance and accrued interest on acquisition
related debt and to repay amounts outstanding under the Company's
revolving credit facility.
3. ACQUISITION
Effective January 30, 1998, the Company acquired the net asset of the
North American operations of Emtek Healthcare Systems ("Emtek"), a
division of Motorola, Inc. ("Motorola") for an aggregate purchase price of
$11.7 million, including 1,000,000 shares of common stock valued at $9.1
million and liabilities assumed of approximately $12.3 million. In
addition, Motorola agreed to pay the Company $9.6 million in cash due
within one year for working capital purposes.
Unaudited pro forma results of operations for the six months ended June
30, 1998, as if the aforementioned acquisition had occurred on January 1,
1998 is as follows (in thousands except per share data):
<TABLE>
<S> <C>
Revenues $ 62,563
Net loss (16,512)
Basic and diluted loss per share $ (3.88)
</TABLE>
4. SIMIONE INVESTMENT
In April 1998, the Company made a strategic investment in Simione
Central Holdings, Inc. ("Simione") a publicly traded company,
purchasing 420,000 shares of restricted common stock from certain
stockholders of Simione. At the time of the transaction, the common stock
represented 4.9% of Simione's outstanding common stock. The Company
accounts for its investment in these shares using the cost method. Since
the date of the investment, the market price of Simione's common stock
has declined. Currently, Management is evaluating whether there has
been a permanent impairment of this investment in light of market
conditions and other factors.
Concurrently with the investment, the Company and Simione entered into a
remarketing agreement pursuant to which the Company has certain rights
to distribute Simione software products
<PAGE> 7
PART I.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the forgoing,
the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. The
important factors discussed below under the caption "Certain Factors that
May Affect Future Operating Results/Risk Factors," among others, could
cause actual results to differ materially from those indicated by
forward-looking statements made herein and presented elsewhere by
management from time to time. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
OVERVIEW
Eclipsys Corporation is a healthcare information technology company
delivering solutions that enable healthcare providers to achieve
improved clinical, financial and administrative outcomes. The Company
offers an integrated suite of core products in four critical areas -
clinical management, access management, patient financial management and
enterprise data warehouse and analysis. These products can be purchased
in combination to provide an enterprise-wide solution or individually to
address specific needs. These solutions take many forms and can include
a combination of software, hardware, maintenance, consulting services,
remote processing services, network services and information technology
outsourcing.
The Company was formed in December 1995, but had no significant operations
until January 1997, when it acquired ALLTEL Healthcare Information
Services, Inc. ("Alltel"). The Company has grown primarily through three
strategic acquisitions. The Company acquired Alltel effective January 24,
1997, SDK Healthcare Information Systems ("SDK") effective June 26, 1997
and Emtek effective January 30, 1998, (collectively the "Acquisitions").
The Acquisitions were accounted for as purchases; accordingly, the
Company's consolidated financial statements reflect the results of
operations of these businesses from the respective dates acquired.
RESULTS OF OPERATIONS
SUMMARY
Total revenues for the quarter ended June 30, 1998 increased 33% to $32.3
million compared with $24.3 million for the second quarter 1997. For the
six months ended June 30, 1998, total revenues increased 47% to $61.6
million versus $41.9 million in the same period last year.
Total costs and expenses for the quarter ended June 30, 1998 decreased 7%
compared to the same period in 1997. For the six months ended June 30,
1998, total costs and expenses decreased 52% compared to the same period
in 1997.
These changes in revenue and expense combined to decrease operating loss
for the quarter and the six months ended June 30, 1998 by 78% to ($3.0)
million and 88% to ($14.3) million, respectively, compared to the same
periods in 1997.
Included in the reported quarterly operating losses were acquisition
related in-process research and development write-offs and amortization of
intangible assets recorded in connection with the
<PAGE> 8
Acquisitions of $4.9 million in the second quarter 1998 and $13.6 million
in the second quarter 1997. Included in the reported year-to-date
operating losses were acquisition related in-process research and
development write-offs and amortization of intangible assets recorded in
connection with the Acquisitions of $17.4 million in the six months ended
June 30, 1998 and $110.2 million in the same period in 1997.
REVENUES
System and services revenues increased 24% to $29.1 million for the second
quarter of 1998 and 38% to $56.1 million for the six months ended June 30,
1998, compared to the same periods in 1997. Contributing to this increase
was the inclusion of the results of operations of the Acquisitions
throughout the 1998 periods, as well as, new contracted business during
1998. The increase in new contracted business was a result of an increase
in marketing efforts related to the regional realignment completed in 1997
and the successful integration of the Acquisitions completed in 1997 and
1998.
Hardware revenues increased 325% to $3.2 million for the second quarter of
1998 and 302% to $5.5 million for the six months ended June 30, 1998,
compared to the same periods in 1997. The increase is primarily due to
increased volume as a result of the Acquisitions.
EXPENSES
Total cost of revenues remained consistent for the second quarter of 1998
and increased slightly for the six months ended June 30, 1998, compared to
the same periods in 1997. Increased costs of hardware associated with the
growth in hardware sales were offset by a reduction of certain expenses
and realization of cost savings during 1998 as a result of the integration
of the Acquisitions.
Sales and marketing expenses increased 46% for the second quarter of 1998
and 41% for the six months ended June 30, 1998, compared to the same
periods in 1997. The increase was primarily due to the addition of
marketing and direct sales personnel following the Acquisitions and the
regional realignment of the Company's sales force.
Total expenditures for research and development, including both
capitalized and non-capitalized expense increased 105% to $7.2 million for
the second quarter 1998 and increased 73% to $14.2 million for the six
months ended June 30, 1998, compared to the same periods in 1997. The
increase was due primarily to the inclusion in 1998 of the Acquisitions
and the continued development of an enterprise-wide, client server
platform solution. Research and development expenses capitalized for the
second quarter of 1998 and the six months ended June 30, 1998 increased to
$900,000 and $1.8 million, respectively, compared to the same periods
in 1997. Increased capitalization is primarily the result of projects
related to the development of an enterprise-wide, client server platform
solution.
General and administrative expenses decreased 10% for the second quarter
of 1998 and increased 32% for the six months ended June 30, 1998, compared
to the same periods in 1997. The quarter decrease is primarily the result
of certain integration expenses related to the Alltel acquisition incurred
during 1997 that did not recur during 1998. The six months increase is
primarily due to the addition of administrative and finance personnel
following the Acquisitions.
Depreciation and amortization increased 4% for the second quarter of 1998
and 15% for the six months ended June 30, 1998, compared to the same
periods in 1997. The increase for the quarter is primarily the result of
the inclusion of SDK goodwill amortization partially offset by a reduction
in Alltel related goodwill amortization as a result of a write-down of
goodwill due to a renegotiation with the former owner of Alltel of certain
obligations under a management and services agreement (the "Alltel
Renegotiation") during 1998. The increase in the six months
<PAGE> 9
depreciation and amortization is primarily the result of the timing of the
Acquisitions and increased depreciation on capital expenditures. This
increase is partially offset by a reduction in Alltel related goodwill
amortization as a result of the Alltel Renegotiation.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the Alltel and SDK acquisitions, the Company wrote off
in-process research and development totaling $92.2 million and $7.0
million, respectively. These amounts were expensed as non-recurring
charges on the respective acquisition dates. The Company continues to
believe that the acquired in-process research and development will be
successfully developed, but there can be no assurance that commercial
viability of these products will be achieved.
The value of the acquired in-process research and development was
determined by estimating the projected net cash flows related to such
products, including costs to complete the development of the technology
and the future revenues to be earned upon commercialization of the
products. These cash flows were discounted back to their net present
value. The resulting projected net cash flows from such projects were
based on Management's estimates of revenues and operating profits related
to such projects.
Through June 30, 1998, revenues and operating profit attributable to
acquired in-process research and development have not materially differed
from the projections used in determining its value, except for the timing
of one outsourcing contract. Management continues to believe the
projections used reasonably estimate the future benefits attributable to
the acquired in-process research and development. However, no assurance
can be given that deviations from these projections will not occur.
BALANCE SHEET
OTHER CURRENT ASSETS
Other current assets increased during the six months ended June 30, 1998
primarily related to the acquisition of Emtek, including a receivable from
Motorola of $9.6 million (as of acquisition date) that is due within one
year for working capital purposes.
INTANGIBLE ASSETS
Intangible assets decreased during the six months ended June 30, 1998
primarily due to the Alltel Renegotiation and amortization during the
period. In connection with the Alltel Renegotiation, the Company recorded
a reduction of $9.2 million to goodwill. As a result of this reduction,
the Company recorded a nonrecurring charge of $7.2 million.
OTHER ASSETS
Other assets increased during the six months ended June 30, 1998 primarily
due to a strategic minority investment in Simione, purchasing
approximately 4.9% of Simione's outstanding common stock from certain
stockholders of Simione for $5.6 million.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1998, the Company generated $11.2
million in cash flow from operations. The Company used $26.8 million in
investing activities, which was primarily the result of the payment
related to the Alltel Renegotiation. Financing activities provided an
additional $13.7 million, primarily due to net borrowings on the Company's
revolving credit facility and the sale of preferred stock.
Effective August 6, 1998, the Company completed its initial public
offering. Net proceeds from the offering including the exercise of the
underwriters' over-allotment option, were $67.4
<PAGE> 10
million. The Company used $61.2 million of the net proceeds from the
offering to redeem the outstanding shares of the Company's mandatorily
redeemable preferred stock, repay acquisition related debt and to repay
amounts outstanding under the Company's revolving credit facility.
The Company has a revolving credit facility with available borrowings up
to $50.0 million. As of June 30, 1998, amounts outstanding against the
revolving credit facility totaled $17.0 million. As a result of the
Company's use of a portion of the net proceeds from its initial public
offering to repay amounts outstanding under the credit facility, the
Company had available borrowings of $50.0 million under the credit
facility at August 31, 1998.
As of June 30, 1998, the Company had $2.8 million in cash and short-term
investments.
Management believes that its available cash and short-term investments,
anticipated cash generated from its future operations and amounts
available under the existing revolving credit facility will be sufficient
to meet the Company's operating requirements for at least the next twelve
months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS/RISK FACTORS
Limited Combined Operating History; History of Operating Losses. The
Company began operations in 1996 and has grown primarily through a series
of acquisitions completed since January 1997. Accordingly, the Company and
its acquired operations have a limited combined operating history upon
which an evaluation of the Company and its prospects can be based. The
success of the Company will depend, in part, on its ability to integrate
the operations of these acquired businesses and to consolidate its product
offerings. There can be no assurance that the operating results of the
Company will meet or exceed the combined individual operating results
achieved by the respective businesses prior to their acquisition. In
addition, the Company's senior management group has been assembled
relatively recently. There can be no assurance that the management group
will be able to oversee the combined entity and implement the Company's
operating or growth strategies effectively. The Company has incurred net
losses in each year since its inception, including net losses of $131.1
million in 1997 and $14.8 million for the first six months of 1998. At
June 30, 1998, the Company had a shareholders' deficit of $17.1 million.
The Company's losses resulted primarily from certain write-offs related to
the Alltel and SDK acquisitions which were consummated during 1997 and
charges in the first quarter of 1998 related to the Alltel Renegotiation.
The Company expects to continue to incur net losses for the foreseeable
future. There can be no assurance that the Company will achieve
profitability.
Management of Growth. The growth in the size and complexity of the
Company's business as a result of the Acquisitions has placed, and is
expected to continue to place, a significant strain on the Company's
management and other resources. The Company's ability to compete
effectively and to manage future growth, if any, will depend on its
ability to continue to implement and improve operational and financial
systems on a timely basis and to expand, train, motivate and manage its
work force. There can be no assurance that the Company's personnel,
systems, procedures and controls will be adequate to support the Company's
operations. If the Company's management is unable to manage growth
effectively, the Company's business, financial condition and results of
operations could be materially adversely affected.
Risks Associated With Future Acquisitions. An important element of the
Company's business strategy has been, and is expected to continue to be,
expansion through acquisitions. The Company's ability to continue to
expand through acquisitions depends on many factors, including the
availability of capital to purchase other businesses and to support such
growth, the successful identification and acquisition of businesses and
management's ability to effectively integrate and operate the new
businesses. The Company currently has no commitments, understandings or
arrangements with respect to any future acquisitions. There is significant
competition for
<PAGE> 11
acquisition opportunities in the information technology industry.
Competition may intensify due to consolidation in the industry, which
could increase the costs of future acquisitions. The Company competes for
acquisition opportunities with other companies, some of which may have
significantly greater financial and management resources than the Company.
Further, the anticipated benefits from any acquisition may not be achieved
unless the operations of the acquired business are successfully combined
with those of the Company. The integration of acquired businesses requires
substantial attention from management. The diversion of the attention of
management and any difficulties encountered in the transition process
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the
Company will be able to identify suitable acquisition candidates, acquire
any such candidates on reasonable terms or integrate acquired businesses
successfully. Future acquisitions could result in the issuance of
additional shares of capital stock or the incurrence of additional
indebtedness, could entail the payment of consideration in excess of book
value and could have a dilutive effect on the Company's net income per
share. Many business acquisitions must be accounted for under the purchase
method of accounting. Consequently, such acquisitions may generate
significant goodwill or other intangible assets. Consequently, acquisition
of these businesses would typically result in substantial amortization
charges to the Company. Acquisitions could also involve significant
charges reflecting write-offs of acquired in-process research and
development.
Ability to Attract and Retain Key Personnel. The Company's success
depends, in significant part, upon the continued services of its key
technical, marketing, sales and management personnel and on its ability to
continue to attract, motivate and retain highly qualified employees.
Competition for technical, marketing, sales and management employees is
intense and the process of recruiting personnel with the combination of
skills and attributes required to execute the Company's strategy can be
difficult, time-consuming and expensive. There can be no assurance that
the Company will be successful in attracting or retaining highly skilled
technical, management, sales and marketing personnel. The failure to
attract, hire, assimilate or retain such personnel could have a material
adverse effect on the Company's business, financial condition and results
of operations.
The Company believes that its ability to implement its strategic goals
depends to a considerable degree on its senior management team. The loss
of any member of that team or, in particular, the loss of Harvey J.
Wilson, the Company's founder, Chairman of the Board, President and Chief
Executive Officer, could have a material adverse effect on the Company's
business, financial condition and results of operations.
Potential Fluctuations in Quarterly Performance. The Company's revenues
and operating results have varied from quarter to quarter, primarily due
to acquisitions. The Company's quarterly operating results may continue to
fluctuate due to a number of factors, including the timing and size of
future acquisitions; the timing, size and nature of the Company's product
sales and implementations; the length of the sales cycle; implementation
efforts; market acceptance of new services, products or product
enhancements by the Company or its competitors; product and price
competition; the relative proportions of revenues derived from systems and
services and from hardware; changes in the Company's operating expenses;
personnel changes; the performance of the Company's products; and
fluctuations in economic and financial market conditions. The timing of
revenues from product sales is difficult to forecast because the Company's
sales cycle can vary depending upon factors such as the size of the
transaction, the changing business plans of the customer, the
effectiveness of the customer's management and general economic
conditions. In addition, because revenue is recognized at various points
during the term of a contract, the timing of revenue recognition varies
considerably based on a number of factors, including the type of contract,
the availability of personnel, the implementation schedule and the
complexity of the implementation process. How and when to implement,
replace, expand or substantially modify an information system, or modify
or add business processes or lines of
<PAGE> 12
business, are major decisions for healthcare organizations. The sales
cycle for the Company's systems may range from six to eighteen months or
more from initial contact to contract execution. Historically, the
Company's implementation cycle has ranged from twelve to thirty-six months
from contract execution to completion of implementation. Although the
Company believes that the migration of its products to its new Structured
Object Layered Architecture (SOLA) will significantly shorten the
implementation cycle, there can be no assurance in this regard. During
the sales cycle and the implementation cycle, the Company expends
substantial time, effort and funds preparing contract proposals,
negotiating the contract and implementing the solution. Because a
significant percentage of the Company's expenses are relatively fixed, a
variation in the timing of sales and implementations can cause
significant variations in operating results from quarter to quarter. Due
to the foregoing factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful
and that such comparisons cannot be relied upon as indicators of future
performance.
Rapid Technological Change and Evolving Market. The market for the
Company's products and services is characterized by rapidly changing
technologies, evolving industry standards and new product introductions
and enhancements that may render existing products obsolete or less
competitive. As a result, the Company's position in the healthcare
information technology market could erode rapidly due to unforeseen
changes in the features and functions of competing products, as well as
the pricing models for such products. The Company's future success will
depend in part upon the Company's ability to enhance its existing products
and services and to develop and introduce new products and services to
meet changing customer requirements. The process of developing products
and services such as those offered by the Company is extremely complex and
is expected to become increasingly complex and expensive in the future as
new technologies are introduced. The Company has recently announced the
development of, and has commenced migrating its products to, its new SOLA
architecture. There can be no assurance that the development of SOLA or
the migration of products to the SOLA architecture will be successful,
that such products will meet their scheduled release dates, that the
Company will successfully complete the development and release of other
new products or the migration of new or existing products to specific
platforms or configurations in a timely fashion or that the Company's
current or future products will satisfy the needs of potential customers
or gain general market acceptance.
Risks Associated with Development of Integrated Clinical Management Suite.
The Company is currently in the process of integrating selected features
and functionalities from a number of heritage clinical management products
acquired in the Alltel and Emtek acquisitions and licensed from Partners
Healthcare Systems, Inc. ("Partners") to create the Sunrise Clinical
Management suite. Although most of the key functionalities of the Sunrise
Clinical Management suite are currently available in heritage products,
the initial components of the integrated Sunrise Clinical Management
suite is not expected to be generally available until 1999. There can be
no assurance that the Company will be successful in completing the
integration of these functionalities on a timely basis, that field
trials will be successful or that the Sunrise Clinical Management suite,
if and when generally available, will meet the needs of the marketplace
or achieve market acceptance. Any difficulties or delays in integrating
these functionalities into the Sunrise Clinical Management suite, or the
failure of the Sunrise Clinical Management suite to gain market
acceptance, could have a material adverse effect on the Company's
business, financial condition and results of operations.
Competition. The market for the Company's products and services is
intensely competitive and is characterized by rapidly changing
technologies and user needs and the frequent introduction of new products.
The Company's principal competitors include Cerner Corp., HBO & Company,
IDX Systems Corp. and Shared Medical Systems Corporation. The Company also
faces competition from providers of practice management systems, general
decision support and database systems and other segment-specific
applications, as well as from healthcare technology
<PAGE> 13
consultants. A number of the Company's competitors are more established,
benefit from greater name recognition and have substantially greater
financial, technical and marketing resources than the Company. The Company
also expects that competition will continue to increase as a result of
consolidation in both the information technology and healthcare
industries. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely
affect its business, financial condition and results of operations.
Dependence on Relationship with Partners. The Company has an exclusive
license granted by Partners (the "Partners License") to develop,
commercialize, distribute and support certain intellectual property
relating to the BICS clinical information systems software developed at
Brigham and Women's Hospital ("Brigham"). If the Company breaches certain
terms of the license, Partners has the option to convert the license to a
non-exclusive license. Such conversion by Partners could cause the
intellectual property and the ability to develop and commercialize such
intellectual property to become more widely available to competitors of
the Company, which could have a material adverse effect on the Company's
business, financial condition and results of operations. No sales have
been made and, consequently, no royalties have been paid by the Company
pursuant to the Partners License because products based on the licensed
technology are still in field trials. The Company also works closely with
physicians and research and development personnel at Brigham and
Massachusetts General Hospital ("MGH") to develop and commercialize new
information technology solutions for the healthcare industry and to test
and demonstrate new and existing products. A breach of the terms of the
Partners License could cause the cooperative working relationship with
Brigham and MGH, including future access to products developed by
personnel at Brigham granted under the Partners License, to become
strained or to cease altogether. The loss of good relations with Brigham
or MGH could have a material adverse impact on the Company's ability to
develop new solutions and cause delays in bringing new products to the
market. Additionally, a loss of the relationship with Brigham or MGH could
result in the Company's reputation and status in the industry being
diminished. Any of these events could have a material adverse effect on
the Company's business, financial condition and results of operations.
Uncertainty in the Healthcare Industry. The healthcare industry is subject
to changing political, economic and regulatory influences that may affect
the procurement practices and operations of healthcare industry
participants. During the past several years, the U.S. healthcare industry
has been subject to an increase in governmental regulation and reform
proposals. These reforms may increase governmental involvement in
healthcare, continue to reduce reimbursement rates and otherwise change
the operating environment for the Company's customers. Healthcare industry
participants may react to these proposals and the uncertainty surrounding
such proposals by curtailing or deferring investments, including those for
the Company's products and services. In addition, many healthcare
providers are consolidating to create larger healthcare delivery
enterprises with greater market power. Such consolidation could erode the
Company's existing customer base and reduce the size of the Company's
target market. In addition, the resulting enterprises could have greater
bargaining power, which may lead to price erosion. The failure of the
Company to maintain adequate price levels or sales, or the reduction in
the size of the Company's target market, as a result of legislative or
market-driven reforms or industry consolidation could have a material
adverse effect on the Company's business, financial condition and results
of operations.
Possible Adverse Effects of Government Regulation. The United States Food
and Drug Administration (the "FDA") has issued a draft guidance document
addressing the regulation of certain computer products and
computer-assisted products as medical devices under the Federal Food,
Drug, and Cosmetic Act (the "FDC Act") and has recently indicated it may
modify such draft policy or create a new policy. The Company expects that
the FDA is likely to become increasingly active in regulating computer
software intended for use in the healthcare setting. If
<PAGE> 14
the FDA chooses to regulate any of the Company's healthcare software
systems as medical devices, it can impose extensive requirements upon the
Company, including the requirement that the Company seek either FDA
clearance of a premarket notification submission demonstrating that the
product is substantially equivalent to a device already legally marketed
or file for and obtain FDA approval of a premarket approval application
establishing the safety and effectiveness of the product. FDA regulations
also govern, among other things, the preclinical and clinical testing,
manufacture, distribution, labeling and promotion of medical devices. In
addition, the Company would be required to comply with the FDC Act's
general controls, including establishment registration, device listing,
compliance with good manufacturing practices, reporting of certain device
malfunctions and adverse device events. Noncompliance with applicable
requirements can result in, among other things, fines, injunctions, civil
penalties, recalls or product corrections, total or partial suspension of
production, failure of the government to grant premarket clearance or
approval of products, withdrawal of clearances and approvals, and criminal
prosecution. There can be no assurance that any final FDA policy governing
computer products, once issued, or future laws and regulations concerning
the manufacture or marketing of medical devices or healthcare information
systems will not increase the cost and time to market of new or existing
products.
The confidentiality of patient records and the circumstances under which
such records may be released are subject to substantial regulation by
state and federal laws and regulations, which govern both the disclosure
and use of confidential patient medical record information. Regulations
governing electronic health data transmissions are evolving rapidly and
are often unclear and difficult to apply in the rapidly restructuring
healthcare market. On August 22, 1996, President Clinton signed the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA"). This
legislation requires the Secretary of Health and Human Services (the
"Secretary") to adopt national standards for certain types of electronic
health information transactions and the data elements used in such
transactions and to adopt standards to ensure the integrity and
confidentiality of health information. There can be no assurance that
these standards, particularly those related to data security, will not
have a material adverse effect on the Company's business, financial
condition and results of operations.
The HIPAA legislation also required the Secretary to submit
recommendations to Congress for legislation to protect privacy and
confidentiality of personal health information. There can be no assurance
that such laws or regulations will not materially restrict the ability of
the Company's customers to obtain or disseminate patient information,
which could adversely affect demand for the Company's products.
Legislation governing the dissemination of medical record information is
frequently proposed and debated at both the federal and state levels. Such
legislation, if enacted, could require patient consent before even
non-individually-identifiable (e.g., coded or anonymous) patient
information maybe shared with third parties and could also require that
holders or users of such information implement specified security
measures. Any material restriction on the ability of healthcare providers
to obtain or disseminate patient information could adversely affect the
Company's business, financial condition and results of operations.
Year 2000 Issues. Although all of the products currently offered by the
Company are Year 2000 compliant, some of the products previously sold by
Alltel and Emtek and installed in the Company's customer base are not Year
2000 compliant. The Company has developed and tested solutions for these
non-compliant installed products. In addition, because the Company's
products are often interfaced with a customer's existing third-party
applications, the Company's products may experience difficulties
interfacing with third-party non-compliant applications. Any unexpected
difficulties in implementing Year 2000 solutions for the installed Alltel
or Emtek products or difficulties in interfacing with third-party products
could have a material adverse effect on the Company's business, financial
condition and results of operations. As a result of apprehension in the
marketplace over Year 2000 compliance issues, businesses, including the
Company's customers, may elect to defer significant capital investments in
information
<PAGE> 15
technology programs and software, either because they decide to focus
their capital budgets on the expenditures necessary to bring their own
existing systems into compliance or because they wish to purchase only
software with a proven ability to process data after 1999. As a result,
the Company may not achieve expected sales revenues and its business,
financial condition and results of operations could be materially
adversely affected.
Limited Protection of Proprietary Rights. The Company is dependent upon
its proprietary information and technology. There can be no assurance that
the Company's means of protecting its proprietary rights will be adequate
to prevent misappropriation. The laws of some foreign countries may not
protect the Company's proprietary rights as fully or in the same manner as
do the laws of the United States. Also, despite the steps taken by the
Company to protect its proprietary rights, it may be possible for
unauthorized third parties to copy aspects of the Company's products,
reverse engineer such products or otherwise obtain and use information
that the Company regards as proprietary. In certain limited instances,
customers can access source code versions of the Company's software,
subject to contractual limitations on the permitted use of such source
code. Although the Company's license agreements with such customers
attempt to prevent misuse of the source code, the possession of the
Company's source code by third parties increases the ease and likelihood
of potential misappropriation of such software. Furthermore, there can be
no assurance that others will not independently develop technologies
similar or superior to the Company's technology or design around the
proprietary rights owned by the Company. In addition, although the Company
does not believe that its products infringe the proprietary rights of
third parties, there can be no assurance that infringement or invalidity
claims (or claims for indemnification resulting from infringement claims)
will not be asserted or prosecuted against the Company or that any such
assertions or prosecutions will not materially adversely affect the
Company's business, financial condition and results of operations.
Regardless of the validity of such claims, defending against such claims
could result in significant costs and diversion of Company resources,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the assertion
of such infringement claims could result in injunctions preventing the
Company from distributing certain products, which could have a material
adverse effect on the Company's business, financial condition and results
of operations. If any claims or actions are asserted against the Company,
the Company may seek to obtain a license to such intellectual property
rights. There can be no assurance, however, that such a license would be
available on reasonable terms or at all.
Product Errors; Potential for Product Liability; Security Issues. Highly
complex software products, such as those offered by the Company, often
contain undetected errors or failures when first introduced or as new
versions are released. Testing of the Company's products is particularly
challenging because it is difficult to simulate the wide variety of
computing environments in which the Company's customers may deploy these
products. Despite extensive testing, the Company from time to time has
discovered defects or errors in its products. Accordingly, there can be no
assurance that such defects, errors or difficulties will not cause delays
in product introductions and shipments, result in increased costs and
diversion of development resources, require design modifications or
decrease market acceptance or customer satisfaction with the Company's
products. In addition, there can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be
found after commencement of commercial shipments, resulting in loss of or
delay in market acceptance, which could have a material adverse effect
upon the Company's business, financial condition and results of
operations. Certain of the Company's products provide applications that
relate to patient medical histories and treatment plans. Any failure of
the Company's products to provide accurate and timely information could
result in liability claims against the Company. Although the Company has
not experienced any claims to date, there can be no assurance that the
Company will not be subject to such claims in the future. The Company
attempts to limit contractually its liability for damages arising from
negligent acts, errors, mistakes or omissions in designing its products
and
<PAGE> 16
rendering its services. Despite this precaution, there can be no assurance
that the limitations of liability set forth in its contracts would be
enforceable or would otherwise protect the Company from liability for
damages. The Company maintains general liability insurance coverage,
including coverage for errors or omissions. However, there can be no
assurance that such coverage will continue to be available on acceptable
terms, or will be available in sufficient amounts to cover one or more
large claims, or that the insurer will not disclaim coverage as to any
future claim. The successful assertion of one or more large claims against
the Company that exceed available insurance coverage or changes in the
Company's insurance policies, including premium increases or the
imposition of large deductible or co- insurance requirements, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, litigation with respect to liability
claims, regardless of its outcome, could result in substantial cost to the
Company, divert management's attention from the Company's operations and
decrease market acceptance of the Company's products. Any product
liability claim or litigation against the Company could, therefore, have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has included security features in its
products that are intended to protect the privacy and integrity of
customer data. Despite the existence of these security features, the
Company's software products may be vulnerable to break-ins and similar
disruptive problems. Such computer break-ins and other disruptions may
jeopardize the security of information stored in and transmitted through
the computer systems of the Company's customers. Addressing these evolving
security issues may require significant expenditures of capital and
resources by the Company, which may have a material adverse effect on the
Company's business, financial condition and results of operations
<PAGE> 17
PART II.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company is furnishing the following information with respect to the
use of proceeds from its initial public offering of common stock, $.01 par
value per share, which closed in August 1998.
1. The effective date of the Registration Statement on Form S-1 for the
offering was August 6, 1998, and the commission file number of the
Registration Statement is 333-50781.
2. The offering commenced on August 6, 1998.
3. Not applicable
4. (i.) The offering terminated on August 17, 1998, the date of the
exercise of the underwriters' over-allotment option. All of the shares
of common stock registered for the account of the Company were sold
prior to the termination of the offering.
(ii.) The managing underwriters for the offering were Morgan Stanley
Dean Witter, Bancamerica Robertson Stephens, Lehman Brothers and
Salomon Smith Barney.
(iii.) The Company registered shares of its common stock, $.01 par
value per share, in the offering.
(iv.) The Company registered 4,830,000 shares. The aggregate offering
price of the shares registered and sold by the Company was $72,450,000
(v.) The actual expenses incurred for the account of the Company in
connection with the offering were as follows (amounts represent
estimates except for Underwriters discount):
<TABLE>
<S> <C>
Underwriting discount $ 5,071,500
SEC registration fee 40,000
NASD filing fee 10,000
NASDAQ National Market listing fee 105,000
Transfer Agent and Registrar fees 10,000
Accounting fees and expenses 400,000
Legal fees and expenses 450,000
Printing and mailing expenses 415,000
Other 270,000
-------------
$ 6,771,500
</TABLE>
Payment of expenses were to persons other than directors,
officers, general partners of the Company or their associates,
persons owning 10% or more of the equity securities of the
Company or affiliates of the Company.
(vi.) The net offering proceeds to the Company after expenses were
approximately $67.4 million.
(vii.) The Company used the proceeds as follows:
<TABLE>
<S> <C>
Redemption of mandatorily redeemable preferred stock $38,771,443
Repayment of acquisition related debt 3,926,405
Repayment of amounts outstanding under revolving
credit facility 18,500,000
Purchase of short-term investments 5,000,000
Working capital requirements 1,180,652
-----------
$67,378,500
</TABLE>
(viii.) Not applicable
<PAGE> 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended June 30, 1998, in lieu of the 1998 annual meeting
of stockholders, the Company submitted certain matters to a vote of its
stockholders through the solicitation of written consents under Section
228 of the General Corporation Law of the State of Delaware. Written
consents were received from stockholders with dates ranging from May 1,
1998 to June 1, 1998. These consents approved:
(1) the filing of an amendment to the Company's Second Amended and
Restated Certificate of Incorporation;
(2) a two-for-three reverse stock split and the filing of a second
amendment to the Second Amended and Restated Certificate of Incorporation
to effectuate the stock split;
(3) the filing of the Company's Third Amended and Restated
Certificate of Incorporation effective upon the closing of a qualifying
initial public offering of the Company's Common Stock (an "IPO");
(4) the adoption of the Company's Amended and Restated Bylaws
effective upon the closing of an IPO;
(5) the adoption of the Company's 1998 Stock Incentive Plan;
(6) the adoption of the Company's 1998 Employee Stock Purchase Plan;
(7) the reservation of an aggregate of 6,500,000 shares of Common
Stock (4,333,333 after giving effect to the reverse stock split) for
issuance in the aggregate under and pursuant to the 1998 Stock Incentive
Plan, the 1998 Employee Stock Purchase Plan and the 1996 Stock Plan; and
(8) the election of the following as directors of the Company, each
to serve until the next annual meeting of the stockholders and until their
successors are duly elected and qualified: Steven A. Denning, C. Fred
DiBona, Eugene V. Fife, William E. Ford, Jeffrey Fox*, Jay B. Pieper,
Richard D. Severns and Harvey J. Wilson.
A total of 12,710,310 votes (out of a possible 14,516,543
votes) were cast for each of these matters (such numbers do not reflect
the two-for-three reverse stock split approved in the vote).
* Subsequent to the end of the quarter, Mr. Fox was removed from the
board of directors by the stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Index to exhibits.
(b) Reports on Form 8-K: None
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECLIPSYS CORPORATION
Date: September 21, 1998 -----------------------------
Robert J. Vanaria
Chief Financial Officer
<PAGE> 20
ECLIPSYS CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<S> <C>
3.1 Third Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit
3.4 to the Registrant's Registration Statement on Form S-1, as
amended (File No. 333-50781))
10.1 Amended and Restated 1998 Employee Stock Purchase Plan.
10.2 Letter agreement amending First Amended and Restated Credit
Agreement dated May 29, 1998, by and among Eclipsys Corporation,
First Union National Bank, f/k/a First Union National Bank of North
Carolina as Agent and BankBoston, N.A., as Co-Agent.
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ECLIPSYS CORPORATION
Eclipsys Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The Corporation, originally known as Integrated Healthcare
Solutions, Inc., filed its original Certificate of Incorporation with the
Secretary of the State of Delaware on December 22, 1995, which was amended and
restated by the Amended and Restated Certificate of Incorporation filed on
January 24, 1997 (pursuant to which the Corporation's name was changed to
"Eclipsys Corporation") and the Second Amended and Restated Certificate of
Incorporation filed on February 3, 1998 and was further amended by a Certificate
of Amendment filed on June 8, 1998 and a Second Certificate of Amendment filed
on June 8, 1998.
2. At a duly called meeting of the Board of Directors of the
Corporation at which a quorum was present at all times, a resolution was duly
adopted, pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, setting forth a Third Amended and Restated Certificate of
Incorporation of the Corporation and declaring said Third Amended and Restated
Certificate of Incorporation advisable. The stockholders of the Corporation duly
approved said proposed Third Amended and Restated Certificate of Incorporation
by written consent in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware and in accordance with the provisions
of the Second Amended and Restated Certificate of Incorporation, and written
notice of such consent has been given to all stockholders who have not consented
in writing to said amendment and restatement. The resolution setting forth the
Third Amended and Restated Certificate of Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation be and
hereby is amended and restated in its entirety so that the same
shall read as follows:
<PAGE> 2
FIRST. The name of the Corporation is:
Eclipsys Corporation.
SECOND. The address of its registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805-1249 in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Prentice-Hall Corporation System, Inc.
THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 210,000,000 shares, consisting of
(i) 200,000,000 shares of Common Stock, $.01 par value per share (the "Class A
Common Stock"), (ii) 5,000,000 shares of Non-Voting Common Stock, $.01 par value
per share (the "Class B Common Stock" and, together with the Class A Common
Stock, the "Common Stock") and (iii) 5,000,000 shares of Preferred Stock, $.01
par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. Except as expressly provided by law, or unless provided
otherwise in this Third Amended and Restated Certificate of Incorporation, (a)
all voting rights shall be vested in the holders of the Class A Common Stock and
(b) the holders of the Class B Common Stock shall not be entitled or permitted
to vote on any matters required or permitted to be voted upon by the
stockholders of the Corporation. At each meeting of stockholders of the
Corporation, each holder of Class A Common Stock shall be entitled to one vote
for each such share on each matter to come before the meeting, except as
otherwise provided in this Third Amended and Restated Certificate of
Incorporation or by law. There shall be no cumulative voting.
2
<PAGE> 3
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock. With respect to payment of dividends, the Class A
Common Stock and the Class B Common Stock shall rank pari passu with each other.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock. With respect to the distribution of assets upon the dissolution
or liquidation of the Corporation, the Class A Common Stock and the Class B
Common Stock shall rank pari passu with each other.
5. Conversion.
(a) Any holder of Class B Common Stock shall have the right, at
its option, at any time and from time to time, to convert, subject to the terms
and provisions of this paragraph 5, any or all of such holder's shares of Class
B Common Stock into fully paid and non-assessable shares of Class A Common Stock
at the rate (subject to adjustment as provided below) of one share of Class A
Common Stock for each share of Class B Common Stock surrendered for conversion;
provided, however, that if the holder in any such conversion is subject to the
Bank Holding Company Act of 1956, as amended (12 U.S.C. Section 1841, et seq.)
and the regulations promulgated thereunder (collectively and including any
successor provisions, the "BHCA Act"), such conversion may be made only if (i)
the BHCA Act would not prohibit such holder from holding such shares of Class A
Common Stock and (ii) such shares of Class A Common Stock to be received upon
such conversion will be distributed or sold (v) in connection with any public
equity offering registered under the Securities Act, (w) in a "broker's
transaction" (as defined in Rule 144(g) under the Securities Act) pursuant to
Rule 144 under the Securities Act or any similar rule then in effect, (x) to a
Person or group (within the meaning of the Exchange Act) of Persons if, after
such distribution or sale, such Person or group of Persons would not, in the
aggregate, own, control or have the right to acquire more than 2% of the
outstanding securities of the Corporation entitled to vote on the election of
directors of the Corporation, (y) to a Person or group (within the meaning of
the Exchange Act) of Persons if, prior to or concurrently with such sale, such
Persons or group of Persons had control of the Corporation or (z) in any other
manner permitted under the BHCA
3
<PAGE> 4
Act; and provided further, that if the holder converts any shares of the Class B
Common Stock as provided in clauses (i) and (ii) above and any distribution or
sale of the Class A Common Stock fails to occur for any reason, such holder may
convert the Class A Common Stock into the Class B Common Stock converted in
anticipation of such distribution or sale.
(b) Such conversion right shall be exercised by the surrender to
the Corporation of the shares of the applicable Common Stock to be converted in
the manner provided above at any time during usual business hours at its
principal place of business, accompanied by written notice that the holder
elects to convert such shares of Common Stock and specifying the name or names
(with address) in which a certificate or certificates for shares of such Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to paragraph 5(d). Such written notice shall also include the representation and
warranty of the converting holder to the Corporation, on which the Corporation
shall be entitled to conclusively rely, to the effect either (i) that such
holder is not subject to the BHCA Act with respect to such conversion or (ii)
that such conversion will be made in accordance with clauses (i) and (ii) of the
preceding paragraph 5(a). As promptly as practicable after the surrender, as
herein provided, of any shares of Common Stock for conversion pursuant to
paragraph 5(a), the Corporation shall deliver to or upon the written order of
the holder of such shares of Common Stock so surrendered a certificate or
certificates representing the number of fully paid and non-assessable shares of
the Common Stock into which such shares of Common Stock may be or have been
converted in accordance with the provisions of this paragraph 5. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date that such shares of Common Stock shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to receive
the shares of Common Stock deliverable upon conversion of such shares of Common
Stock shall be treated for all purposes as having become the record holder or
holders of such shares of Common Stock at such appropriate time.
(c) So long as shares of each of the Class A Common Stock and the
Class B Common Stock are outstanding or authorized or reserved for issuance, the
Corporation shall not effect any stock split, stock dividend, reclassification,
reorganization, recapitalization or consolidation of the Class A Common Stock or
the Class B Common Stock, unless the Corporation shall also contemporaneously
effect a stock split, stock dividend, reclassification, reorganization or
consolidation on the same terms with respect to the other class of Common Stock.
The Corporation will not, by amendment of this Third Amended and Restated
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or
4
<PAGE> 5
performed hereunder by the Corporation, including, without limitation, the
adjustments required under this paragraph 5, and will at all times in good faith
assist in the carrying out of all the provisions of this paragraph 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Common Stock against dilution or other
impairment.
(d) The Corporation shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of shares of the Class A Common Stock or the Class B Common
Stock pursuant hereto; provided, however, that the Corporation shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holders in connection with any such conversion.
(e) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common
Stock and Class B Common Stock, free of preemptive rights, solely for the
purpose of effecting the conversion of the shares of Common Stock, such number
of its shares of Class A Common Stock and Class B Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares
of each class into the other class; and if at any time the number of authorized
but unissued shares of each class shall not be sufficient to effect the
conversion of all then outstanding shares of the other class, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Class A Common
Stock or Class B Common Stock, as the case may be, to such number of shares as
shall be sufficient for such purpose, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Third Amended and Restated Certificate of Incorporation.
(f) In case of any recapitalization, reorganization or
reclassification of the Capital Stock of the Corporation, any merger or
consolidation of the Corporation with or into another Person, any acquisition of
shares of the Capital Stock of the Corporation in a share exchange, or the sale
of all or substantially all of the assets of the Corporation, each share of
Class B Common Stock shall thereafter be convertible into the number of shares
of stock or other securities or property (including cash) to which a holder of
the number of shares of Class A Common Stock deliverable upon conversion of such
share of Class B Common Stock would have been entitled upon the record date of
(or date of, if no record date is fixed) such recapitalization, reorganization,
reclassification, merger, consolidation, share exchange, sale, lease or other
disposition and, in any case, appropriate adjustment (as determined by the Board
of Directors of the Corporation) shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the holders of such Class B Common Stock to the end that the provisions set
forth herein shall thereafter be applicable, as nearly as equivalent as is
practicable, in relation to
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any shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of Class B Common Stock.
6. Definitions.
As used in paragraph 5 above, the following terms shall have
the following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participation, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock and
any and all rights, warrants or options exchangeable for or convertible into
such capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Person" means any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental body or other
entity of any kind.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed herein and
in the resolution or resolutions providing for the issue of such series adopted
by the Board of Directors of the Corporation as hereinafter provided. Any shares
of Preferred Stock which may be redeemed, purchased or acquired by the
Corporation may be reissued except as otherwise provided by law. Different
series of Preferred Stock shall not be construed to constitute different classes
of shares for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting
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powers, and such designations, preferences and relative participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, including without limitation thereof, dividend rights, conversion
rights, redemption privileges and liquidation preferences, as shall be stated
and expressed in such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of Delaware. Without limiting the
generality of the foregoing, the resolutions providing for the issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred
by statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
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EIGHTH. Except to the extent that the General Corporation Law of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment. Notwithstanding any other provisions of law,
the Third Amended and Restated Certificate of Incorporation or the By-Laws of
the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article EIGHTH.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the
Right of the Corporation. The Corporation shall indemnify each person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes
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any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
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4. Notification and Defense of Claim. As a condition precedent to
his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking shall be accepted without reference to the
financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
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Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which
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an Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including
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an action by or in the right of the Corporation, to the fullest extent permitted
by any applicable portion of this Article that shall not have been invalidated
and to the fullest extent permitted by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
16. Amendments to Article. Notwithstanding any other provisions of
law, this Third Amended and Restated Certificate of Incorporation or the By-Laws
of the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article NINTH.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Third Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Third Amended and Restated Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
ELEVENTH. This Article is inserted for the management of the
business and for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation
shall not be less than three. The exact number of directors within the
limitations specified in the preceding sentence shall be fixed from time to time
by, or in the manner provided in, the Corporation's By-Laws.
2. Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors. The initial members of each
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class immediately following the filing of this Third Amended and Restated
Certificate of Incorporation shall be determined by resolution adopted by the
Board of Directors.
3. Election of Directors. Elections of directors need not be by
written ballot except as and to the extent provided in the By-Laws of the
Corporation.
4. Terms of Office. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 1999; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2000; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in the year 2001; and provided further,
that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases
or Decreases in the Number of Directors. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any
time in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the ByLaws of the
Corporation or by this Third Amended and Restated Certificate of Incorporation.
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7. Removal. Directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least seventy-five percent
(75%) of the shares of capital stock of the Corporation issued and outstanding
and entitled to vote.
8. Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the board, shall
be filled only by a vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director elected to fill
a vacancy shall be elected to hold office until the next election of the class
for which such director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc.
Advance notice of stockholder nominations for election of directors and other
business to be brought by stockholders before a meeting of stockholders shall be
given in the manner provided by the By-Laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of
law, this Third Amended and Restated Certificate of Incorporation or the By-Laws
of the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article ELEVENTH.
TWELFTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Third Amended and Restated Certificate of Incorporation or the By-Laws
of the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article TWELFTH.
THIRTEENTH. Special meetings of stockholders may be called at any
time by only the Chairman of the Board of Directors, the President or the Board
of Directors. Business transacted at any special meeting of stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of meeting. Notwithstanding any other provision of law, this Third Amended and
Restated Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article THIRTEENTH.
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be affixed hereto and this Third Amended and Restated Certificate of
Incorporation to be signed by its President this 12th day of August, 1998.
ECLIPSYS CORPORATION
By: /s/ HARVEY WILSON
---------------------------
Harvey Wilson,
President
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EXHIBIT 10.1
ECLIPSYS CORPORATION
AMENDED AND RESTATED
1998 EMPLOYEE STOCK PURCHASE PLAN
August 6, 1998
The purpose of this Plan is to provide eligible employees of
Eclipsys Corporation (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $0.01 par value
(the "Common Stock"). Subject to adjustment pursuant to Section 15, the maximum
number of shares of Common Stock which shall be made available for purchase
under this Plan shall be that number equal to (i) 4,333,333 less (ii) the sum of
(X) the number of shares as to which "Awards" have previously been made or
shares issued under the Company's 1998 Stock Incentive Plan (the "Omnibus
Plan"), as such number shall be reduced to the extent shares become reavailable
for issuance under the Omnibus Plan pursuant to Section 4(a) thereof, and (Y)
the number of shares as to which options are then outstanding under the
Company's 1996 Stock Plan (the "1996 Plan") and the number of shares previously
issued upon the exercise of options granted under the 1996 Plan and the number
of shares of restricted or unrestricted stock granted under the 1996 Plan then
outstanding.
1. Administration. The Plan will be administered by the Company's
Board of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted
nor denied contrary to the requirements of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations promulgated thereunder.
All employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are regularly employed by the Company or a
Designated Subsidiary for more than 20 hours a week and have been
employed by the Company or a Designated Subsidiary for at least 90
days prior to enrolling in the Plan; and
<PAGE> 2
(b) they are employees of the Company or a Designated
Subsidiary on the first day of the applicable Plan Period (as
defined
below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
3. Offerings. The Company will make one or more offerings
("Offerings") to employees to purchase stock under this Plan. The first Offering
will commence on the first day of the first calendar month following the closing
of a firm commitment, underwritten initial public offering by the Company (or
the first business day thereafter if such date is not a business day).
Thereafter, Offerings will begin each January 1, April 1, July 1 or October 1,
as applicable (or the first business day thereafter if such date is not a
business day). The date on which each Offering commences is referred to as an
"Offering Commencement Date." Each Offering Commencement Date will begin a
three-month period (a "Plan Period") during which payroll deductions will be
made and held for the purchase of Common Stock at the end of the Plan Period,
except that the Plan Period for the initial Offering shall end on the first
December 31, March 31, June 30 or September 30 following its commencement. The
Board or the Committee may, at its discretion, choose a different Plan Period of
twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement
Date of any Offering may participate in such Offering by completing and
forwarding a payroll deduction authorization form to the employee's appropriate
payroll office at least seven days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect.
5. Deductions. The Company will maintain payroll deduction accounts
for all participating employees. With respect to any Offering made under this
Plan, an employee may authorize a payroll deduction in a monthly amount equal to
a whole percentage (up to a maximum percentage of 15%) of his or her
Compensation for the Plan Period. The term "Compensation" means, for each Plan
Period, monthly base salary or wages as of the Offering Commencement Date plus,
in the case of commissioned salespersons, the average monthly commissions earned
during the three months preceding the Offering Commencement Date.
-2-
<PAGE> 3
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries to accrue at a rate which
exceeds $25,000 (based on the fair market value of such Common Stock determined
at the Offering Commencement Date of the Plan Period) for each calendar year in
which the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts,
except to the extent that the Board or the Committee, in its sole discretion,
elects to credit employee accounts with interest at such per annum rate as it
may from time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the
close of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each
Plan Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing (i) the product of $1,250 multiplied by the number of
months in such Plan Period by (ii) the price determined in accordance with the
formula set forth in the following paragraph but using the closing price on the
Offering Commencement Date of such Plan Period.
The purchase price for each share purchased will be 85% of the
closing price of the Common Stock on (i) the first business day of such Plan
Period or (ii) the Exercise Date, whichever closing price shall be less. Such
closing price shall be (a) the closing price on any national securities exchange
on which the Common Stock is listed, (b) the closing price of the Common Stock
on the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market,
-3-
<PAGE> 4
whichever is applicable, as published in The Wall Street Journal. If no sales of
Common Stock were made on such a day, the price of the Common Stock for purposes
of clauses (a) and (b) above shall be the reported price for the next preceding
day on which sales were made.
Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date and shall be deemed to have purchased from the Company the number
of full shares of Common Stock reserved for the purpose of the Plan that his
accumulated payroll deductions on such date will pay for pursuant to the formula
set forth above (but not in excess of the maximum number determined in the
manner set forth above).
Any balance remaining in an employee's payroll deduction account at
the end of a Plan Period will be automatically refunded to the employee, except
that any balance which is less than the purchase price of one share of Common
Stock will be carried forward into the employee's payroll deduction account for
the following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Company's sole discretion) in
the street name of a brokerage firm, bank or other nominee holder designated by
the employee.
11. Rights on Retirement, Death or Termination of Employment. In the
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option
to an employee nor the deductions from his pay shall constitute such employee a
-4-
<PAGE> 5
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
14. Application of Funds. All funds received or held by the Company
under this Plan may be combined with other corporate funds and may be used for
any corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock.
In the event of a subdivision of outstanding shares of Common Stock, or the
payment of a dividend in Common Stock, the number of shares approved for this
Plan, and the share limitation set forth in Section 9, shall be increased
proportionately, and such other adjustment shall be made as may be deemed
equitable by the Board or the Committee. In the event of any other change
affecting the Common Stock, such adjustment shall be made as may be deemed
equitable by the Board or the Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate
with another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Paragraph 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or
into another corporation which does not involve Continuity of Control, or of a
sale of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the
-5-
<PAGE> 6
participating employees; or (c) all outstanding Options may be cancelled by the
Board or the Committee as of the effective date of any such transaction,
provided that notice of such cancellation shall be given to each holder of an
Option, and each holder of an Option shall have the right to exercise such
Option in full based on payroll deductions then credited to his account as of a
date determined by the Board or the Committee, which date shall not be less than
ten (10) days preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time
to time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of
shares of Common Stock specified in elections to be purchased under any Offering
plus the number of shares purchased under previous Offerings under this Plan
exceeds the maximum number of shares issuable under this Plan, the Board or the
Committee will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time
by the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
21. Issuance of Shares. Shares may be issued upon exercise of an
Option from authorized but unissued Common Stock, from shares held in the
treasury of the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by
entering the Plan, to promptly give the Company notice of any disposition of
shares purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased.
-6-
<PAGE> 7
23. Effective Date and Approval of Shareholders. The Plan shall take
effect upon its approval by the Board, subject to approval by the shareholders
of the Company as required by Section 423 of the Code, which approval must occur
within twelve months of the adoption of the Plan by the Board.
Adopted by the Board of Directors
on April 8, 1998
Approved by the Stockholders on
June 5, 1998
Amended and Restated by the Board
of Directors on August 6, 1998
-7-
<PAGE> 1
EXHIBIT 10.2
FIRST UNION NATIONAL BANK BANKBOSTON,N.A.
August 11, 1998
Eclipsys Corporation
777 East Atlantic Avenue
Suite 200
Delray Beach, Florida 33483
ATTENTION: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to the First Amended and Restated Credit
Agreement, dated as of May 29, 1998, among Eclipsys Corporation, the lenders
party thereto, First Union National Bank, as Agent, and BankBoston, N.A., as
Co-Agent (the "Credit Agreement"). Capitalized terms used herein and not
defined shall have the meanings ascribed thereto in the Credit Agreement. We
understand that Eclipsys Corporation consummated an initial public offering of
its common stock on Friday, August 7, 1998, and that such offering was
conducted by a nationally recognized underwriter. In addition, we understand
that such offering yielded proceeds (net of the underwriter's commission and
the underwriter's expenses of the offering) of at least $58,000,000 but less
than $60,000,000. As a result, you have requested us to amend the Credit
Agreement so that the defined term "Qualified Public Offering" means such
offering.
Based upon your request and our understanding of your above-referenced
initial public offering, the Lenders hereby agree to amend the Credit Agreement
as follows:
(i) The definition of "Qualified Public Offering" in Section 1.1 of
the Credit Agreement is hereby amended to read in full as follows:
"Qualified Public Offering" shall mean the registered initial
public offering of common stock of the Borrower, consummated on August 7, 1998,
that yielded proceeds to the Borrower of at least $58,000,000 (net of
underwriter's commission and underwriter's expenses from the offering); and
(ii) The definition of "Revolving Credit Maturity Date" in Section
1.1 of the Credit Agreement is hereby amended to read in full as follows:
"Revolving Credit Maturity Date" shall mean August 7, 2001.
As a condition to this amendment, the Borrower hereby represents and
warrants to each Lender that (i) the representations and warranties contained
in the Credit Agreement and each of the other Credit Documents are true and
correct on and as of the date hereof (except to the extent such representations
and warranties expressly relate solely to an earlier date) as though made on
and as of the date hereof and (ii) no Default or Event of Default has occurred
and is continuing.
<PAGE> 2
Eclipsys Corporation
August 11, 1998
Page 2
All other terms and provisions of the Credit Agreement shall continue
in full force and effect and unchanged and are hereby confirmed in all
respects. If you are in agreement with the foregoing, please indicate your
acceptance of this amendment by signing the enclosed counterpart hereof and
returning it to the Agent. Upon your acceptance of this amendment, such
amendment will be effective with respect to the Credit Agreement and the other
Credit Documents as of the date hereof.
This letter shall be governed by and construed and enforced in
accordance with the laws of the State of North Carolina (without regard to the
conflicts of law provisions thereof). This letter may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
Sincerely,
FIRST UNION NATIONAL BANK, as Agent, as
a Lender, as Swingline Lender and
as Issuing Lender
By: /s/ JOSEPH H. TOWELL
---------------------------
Name: Joseph H. Towell
--------------------------
Title: Sr. V.P.
-------------------------
BANKBOSTON, N.A., as Co-Agent and as a
Lender
By: /s/ CHARLES C. WOODARD
----------------------------
Name: Charles C. Woodard
--------------------------
Title: Managing Director
-------------------------
Agreed to and accepted as of
the date first above written:
ECLIPSYS CORPORATION
By: /s/ ROBERT J. VANARIA
----------------------------
Name: Robert J. Vanaria
--------------------------
Title: SVP - CFO
-------------------------
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
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<ALLOWANCES> (1,855)
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<CURRENT-ASSETS> 51,548
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<TOTAL-ASSETS> 115,717
<CURRENT-LIABILITIES> 74,107
<BONDS> 17,000
30,356
104
<COMMON> 53
<OTHER-SE> (17,253)
<TOTAL-LIABILITY-AND-EQUITY> 115,717
<SALES> 32,289
<TOTAL-REVENUES> 32,289
<CGS> 20,479
<TOTAL-COSTS> 20,479
<OTHER-EXPENSES> 14,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 219
<INCOME-PRETAX> (3,212)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (3,212)
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