<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ATLANTIC DATA SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MASSACHUSETTS 7379 04-2696393
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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ATLANTIC DATA SERVICES, INC.
ONE BATTERYMARCH PARK
QUINCY, MASSACHUSETTS 02169
(617) 770-3333
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT W. HOWE, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
ATLANTIC DATA SERVICES, INC.
ONE BATTERYMARCH PARK
QUINCY, MASSACHUSETTS 02169
(617) 770-3333
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
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STEPHEN A. HURWITZ, ESQ. PETER B. TARR, ESQ.
MITCHELL S. BLOOM, ESQ. HALE AND DORR LLP
TESTA, HURWITZ & THIBEAULT, LLP 60 STATE STREET
125 HIGH STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 526-6000
(617) 248-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, $.01 par value........ 2,875,000 shares $15.00 $43,125,000 $12,721.88
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(1) Includes 375,000 shares which the Underwriters have the option to purchase
from certain Selling Stockholders to cover over allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 26, 1998
[LOGO] ATLANTIC DATA SERVICES, INC.
2,500,000 SHARES
COMMON STOCK
Of the 2,500,000 shares of Common Stock offered hereby, 2,000,000 shares
are being sold by Atlantic Data Services, Inc. ("ADS" or the "Company") and
500,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholders. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price of the Common Stock will be between $13.00 and $15.00 per share.
See "Underwriting" for information relating to the method of determining the
initial public offering price. Application has been made to have the Common
Stock approved for listing on the Nasdaq National Market under the symbol
"ADSC."
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2)(3) STOCKHOLDERS(3)
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Per Share................................. $ $ $ $
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Total(3).................................. $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters as stated herein (the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting offering expenses payable by the Company, estimated at
$750,000.
(3) Certain stockholders of the Company have granted to the Underwriters a
30-day option to purchase an aggregate of up to an additional 375,000 shares
of Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If this option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Selling Stockholders will be $ , $ and $ ,
respectively. See "Underwriting."
----------------------
The shares of Common Stock are offered by the Underwriters as stated
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of such
shares will be made through the offices of BancAmerica Robertson Stephens, San
Francisco, California, on or about May , 1998.
BANCAMERICA ROBERTSON STEPHENS
BT ALEX. BROWN
ADAMS, HARKNESS & HILL, INC.
The date of this Prospectus is May , 1998
<PAGE> 3
[A diagram depicting the interrelationship among the Company's core
competencies, tools,
methodologies, quality assurance program and practice areas.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 6
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Dilution.................................................... 16
Selected Consolidated Financial Data........................ 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 25
Management.................................................. 34
Certain Transactions........................................ 42
Principal and Selling Stockholders.......................... 43
Description of Capital Stock................................ 45
Shares Eligible for Future Sale............................. 49
Underwriting................................................ 51
Legal Matters............................................... 53
Experts..................................................... 53
Additional Information...................................... 53
Index to Consolidated Financial Statements.................. F-1
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The Company was incorporated in Massachusetts in 1980 under the name
Atlantic Data Services, Inc. As used in this Prospectus, references to the
"Company" and "ADS" refer to Atlantic Data Services, Inc. The Company's
principal executive offices are located at One Batterymarch Park, Quincy,
Massachusetts 02169, and its telephone number is (617) 770-3333. The Company
intends to furnish to all of its stockholders an annual report containing
consolidated financial statements audited by its independent accountants for
each fiscal year and quarterly reports containing unaudited financial data for
each of the first three quarters of each fiscal year.
Atlantic Data Services, ADS and the A-D-S logo are service marks of the
Company. Trade names and trademarks of other companies appearing in this
Prospectus are the property of their respective owners.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including information set forth in "Risk Factors" and the
Consolidated Financial Statements and Notes thereto, appearing elsewhere in this
Prospectus. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ materially from
those results discussed in these forward-looking statements and from the results
historically experienced. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
THE COMPANY
Atlantic Data Services, Inc. ("ADS" or the "Company") provides information
technology ("IT") strategy consulting and systems integration services to
customers exclusively in the financial services industry, primarily banks. ADS
offers rapid, cost-effective IT solutions to the business challenges faced by
financial services companies through its in-depth financial services experience,
technological expertise and project management skills. The Company's service
offerings are organized around five practice areas: IT Strategy Consulting,
Consolidations and Conversions, Year 2000 Resolution, Application Outsourcing,
and Electronic Commerce and Home Banking. Since its founding in 1980, ADS has
developed an in-depth knowledge of the banking and financial services industry
and of its changing market and technology dynamics.
The business challenges created by deregulation and consolidation coupled
with the need to maintain existing systems and incorporate new technologies have
forced banks to turn to third party IT providers for assistance in developing IT
solutions to meet their changing needs. Because of the critical importance of
their IT systems, banks seek to engage IT service providers who have in-depth
knowledge of their systems and business processes and who can assume
responsibility for project management and delivery. IT service providers working
with banks must possess extensive experience in the financial services industry
and be fluent in both traditional legacy systems and newer technologies.
However, there is a shortage of professionals who have this combination of
skills. While many banks are concluding that using outside specialists enables
them to develop better IT solutions in less time and to reduce implementation
risks, most IT consulting firms do not have the specialized knowledge of the
financial services industry necessary to assist banks in rapidly and
cost-effectively meeting their business challenges.
ADS enables its customers to leverage their existing IT systems and
personnel to compete more effectively, to rapidly assimilate changing
technologies and to meet their evolving business needs in a timely and
cost-effective manner. The Company works closely with its customers' management
and IT personnel from diagnostic and strategic planning through project
completion. The Company's IT professionals have extensive experience in the
diverse technical environments, legacy hardware platforms, programming
languages, and software used by banks, as well as newer technologies including
client/server applications and the Internet. In addition, the Company has
developed proprietary tools and methodologies designed to reduce the risks
inherent in complex systems implementations. The Company works closely with its
customers to determine the appropriate resources and staffing to assign to their
projects and deploys its staff from throughout the United States to meet a
customer's needs.
The Company seeks to become the leading IT consulting and systems
integration service provider to the financial services industry. Key elements of
this strategy include developing long-term relationships with customers,
particularly large banks that are expanding their operations and service
offerings; leveraging the Company's vertical market expertise into additional
financial services channels; developing new service offerings to meet customers'
evolving needs; entering into relationships with leading software providers to
the financial services industry to increase customer referrals and enhance
industry recognition; and expanding the Company's expertise and market share in
the financial services industry through selective acquisitions.
The Company markets and sells its services directly through its
professional sales staff and senior management. The Company's customers include
ABN-AMRO Information Technology Services, Associated Banc-Corp., BankBoston,
N.A., Canadian Imperial Bank of Commerce, Citizens Savings Bank & Citizens Trust
Company, Fleet Services Corporation, National City Corporation, NationsBank
Corporation (Barnett Bank) and SunTrust Services Corp.
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THE OFFERING
Common Stock Offered by the Company........... 2,000,000 shares
Common Stock Offered by the Selling
Stockholders.................................. 500,000 shares
Common Stock to be Outstanding after the
offering(1)................................... 12,670,840 shares
Use of Proceeds............................... For general corporate purposes,
including working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market Symbol........ ADSC
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
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1993 1994 1995 1996 1997 1996 1997
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CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenues............................... $9,504 $11,872 $14,624 $20,052 $23,843 $17,158 $28,219
Gross profit........................... 3,203 3,852 5,054 7,675 8,625 5,900 11,967
Income from operations................. 713 682 1,536 2,627 3,185 2,110 5,546
Discontinued operations, net of tax.... 812 1,483 1,245 780 100 100 --
Net income............................. 1,055 1,398 2,131 2,343 2,041 1,384 3,277
Pro forma earnings per common share
(unaudited)(2)....................... $0.20 $0.32
Pro forma earnings per common share --
assuming dilution (unaudited)(2)..... $0.20 $0.31
Shares used in computing pro forma
earnings per common share
(unaudited)(2)....................... 10,235 10,325
Shares used in computing pro forma
earnings per common share -- assuming
dilution (unaudited)(2).............. 10,235 10,429
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DECEMBER 31, 1997
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ACTUAL AS ADJUSTED(3)
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CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents................................... $ 5,355 $30,645
Working capital............................................. 5,868 31,158
Total assets................................................ 13,900 39,190
Total stockholders' equity.................................. 6,874 32,164
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(1) Based on shares outstanding as of December 31, 1997. Excludes 376,000 shares
of Common Stock issuable upon the exercise of options outstanding as of such
date at a weighted average exercise price of $0.91 per share, all of which
were then exercisable. Also does not include 2,000,000 additional shares
reserved for future grants or issuances under the Company's stock option and
stock purchase plans. See "Capitalization," "Management -- Equity Plans,"
"-- Director Compensation" and Notes 10-12 of Notes to Consolidated
Financial Statements.
(2) See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of pro forma earnings per common share.
(3) Adjusted to reflect the sale of 2,000,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $14.00 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
Except as otherwise indicated, the information contained in this Prospectus
(i) assumes no exercise of the Underwriters' over-allotment option; (ii) assumes
conversion on a 1-for-1 basis of all of the shares of Special Common Stock and
Class A Common Stock into Common Stock of the Company upon the closing of this
offering; and (iii) reflects a 28-for-1 stock split effected by the Company on
November 6, 1997.
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RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements and from the results
historically experienced as a result of certain factors including, without
limitation, those set forth under "Risk Factors" and elsewhere in this
Prospectus. In addition to the other information in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing shares of the Common Stock offered hereby.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in the Company's revenues and operating results have occurred
from quarter to quarter and may continue to occur as a result of a number of
factors. Quarterly revenues and operating results can depend on the number, size
and scope of customer projects commenced and completed during a quarter,
employee utilization rates, billing rates, the number of working days in a
quarter, the timing of introduction of new service offerings, both by the
Company and its competitors, changes in pricing, both by the Company and its
competitors, and general economic conditions. The timing of revenues is
difficult to forecast because the Company's sales cycle is relatively long and
may depend on factors such as the size and scope of projects or other factors
that adversely impact the financial services industry and general economic
conditions.
Because a high percentage of the Company's expenses are relatively fixed, a
variation in the timing of the initiation or the completion of customer
projects, particularly at or near the end of a quarter, can cause significant
variations in operating results from quarter to quarter and could result in
losses. The Company attempts to manage its personnel utilization rates by
closely monitoring project timetables and staffing requirements for new
projects. While professional staff must be adjusted to reflect active projects,
the Company must maintain a sufficient number of senior professionals to oversee
existing customer projects and participate with the Company's sales force in
securing new customer projects. In addition, the Company expects to increase its
operating expenses by increasing its staff. The Company expects to experience a
significant time lag between the date professional staff are hired and the date
such personnel become fully productive. The rate at which new professional staff
become productive could cause material fluctuations in quarterly results of
operations. Furthermore, to the extent such increased operating expenses precede
or are not subsequently followed by increased revenues, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, many of the Company's projects are, and may be in the
future, terminable without customer penalty. An unanticipated termination of a
major project or loss of a major customer could require the Company to maintain
or terminate underutilized employees, resulting in a higher than expected number
of unassigned persons or higher than expected severance expenses.
Due to all of the foregoing factors, it is possible that in some future
periods the Company's results of operations will be below the expectations of
public market analysts and investors. In such event, the price of the Company's
Common Stock could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON THE FINANCIAL SERVICES INDUSTRY
Substantially all of the Company's revenues are derived from customers in
the financial services industry, primarily banks, and the Company expects it
will continue to derive substantially all of its revenues from customers in the
financial services industry for the foreseeable future. Accordingly, unfavorable
economic conditions adversely impacting the financial services industry could
have a material adverse effect on the Company's business, financial condition
and results of operations. For example, the financial services industry has
experienced and may continue to experience cyclical fluctuations in
profitability, which may affect the willingness or ability of participants in
this industry
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to fund projects such as those for which the Company may be engaged. In
addition, because a significant portion of the Company's revenues are derived
from services related to deregulation and consolidation activities in the
financial services industry, changes in the regulatory environment or a
reduction in consolidation activity could have a material adverse effect on the
Company's business, financial condition and results of operations.
CONCENTRATION OF REVENUES; DEPENDENCE ON MAJOR CUSTOMERS
The Company has derived and expects to continue to derive a significant
portion of its revenues from a relatively limited number of customers. For
example, the Company's five largest customers in the first nine months of fiscal
1998 accounted for approximately 62.8% of revenues. During that same period,
Associated Banc-Corp., First Security Information Technology, Inc. and
NationsBank Corporation (Barnett Bank) accounted for approximately 20.2%, 12.3%
and 11.7%, respectively, of revenues. In fiscal 1997, the Company's five largest
customers accounted for approximately 54.0% of revenues, and during the same
period First Security Information Technology, Inc. and Citizens Savings Bank &
Citizens Trust Company accounted for approximately 18.8% and 12.4%,
respectively, of revenues. Revenues and earnings can fluctuate from quarter to
quarter based on the number of major projects engaged in by the Company and the
requirements of these projects. The loss of a major customer or termination of a
major project as a result of an acquisition of a customer by an organization to
which the Company does not currently provide services could have a material
adverse effect on the Company's business, financial condition and results of
operations. Although the Company's largest customers have varied from period to
period, the Company anticipates that its results of operations in any given
period will continue to depend to a significant extent upon revenues from a
small number of customers. There is no assurance that the Company's major
customers will continue to purchase services from the Company at current levels,
if at all, or that the Company will be able to replace revenues from such
customers with revenues from other customers. The loss of, or a significant
reduction in revenues from, any of the Company's major customers could have a
material adverse effect on its business, financial condition and results of
operations. See "Business -- Customers."
MANAGEMENT OF GROWTH
The Company is currently experiencing a period of growth which has placed,
and could continue to place, a strain on the Company's financial and human
resources. From December 31, 1996 through December 31, 1997, the size of the
Company's staff increased from 165 to 254 full-time employees, and further
significant increases are expected to occur in the foreseeable future. The
Company's ability to manage its staff growth effectively will require it to
continue to improve its operational, financial, and other internal systems, and
to attract, train, motivate, manage and retain its employees. If the Company's
management is unable to manage growth effectively or new employees are unable to
achieve anticipated performance levels, the Company's business, financial
condition and results of operations could be materially adversely affected.
Potential investors should consider the risks, expenses and difficulties
frequently encountered in connection with the operation and development of an
expanding business.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon a number of key
management personnel, principally its Chairman and Chief Executive Officer,
Robert W. Howe, and its President and Chief Operating Officer, William H.
Gallagher, the loss of either of whom could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company has employment agreements with each of these individuals, and with its
Senior Vice President, Finance and Administration and Chief Financial Officer,
Paul K. McGrath, its Executive Vice President and Director of Operations, Peter
A. Cahill, and its Executive Vice President and Director of Business
Development, David E. Olsson. The Company does not have non-competition
agreements with any of its executive officers or other employees. The Company
has purchased $5.5 million in key man
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insurance policies on the life of each of Messrs. Howe and Gallagher. See
"Management -- Employment Agreements."
AVAILABILITY OF PROFESSIONAL STAFF
The Company's business involves the delivery of professional services and
is therefore labor-intensive. The Company's success will depend in large part on
its ability to attract, train, motivate and retain highly skilled employees.
Qualified project managers are in especially great demand and are likely to
remain a limited resource for the foreseeable future. There is no assurance that
the Company will continue to attract sufficient numbers of highly skilled
employees and to retain its existing project managers and other senior
personnel. The loss of some or all of the Company's senior staff could have a
material adverse effect on its business, financial condition and results of
operations, including its ability to secure and complete customer projects on a
timely basis.
COMPETITION
The IT and systems integration market, especially in the financial services
industry, includes a large number of competitors and is subject to rapid
technological and market changes. The Company competes for customer projects and
experienced personnel with a number of companies having significantly greater
financial, technical and marketing resources and revenues than the Company. Many
of these competitors also have greater name recognition in the financial
services industry. ADS's competitors operate in a variety of market segments
including systems consulting and integration, application software, professional
services (such as computer equipment companies like International Business
Machines Corporation), multinational accounting firms, and general management
consulting firms (such as Andersen Consulting, Computer Sciences Corporation and
Electronic Data Systems Corporation). In addition, the custom software
development market is highly fragmented with numerous firms, many of which focus
on their respective local markets. The Company also faces competition from
internal IT departments of its customers.
The Company expects to experience increasing competition from companies
offering established integration services and new service offerings and
technologies. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
others, thereby increasing their ability to expand or increase their service
offerings to address the needs of ADS's existing or prospective customers.
Accordingly, it is possible that new competitors or alliances among current and
new competitors may emerge and rapidly gain significant market share. Increased
competition could result in lower utilization rates, billing rate reductions,
fewer customer engagements, reduced gross margins, and loss of market share for
the Company, any of which could materially adversely affect its business,
financial condition and results of operations.
To be successful in the future, the Company must respond promptly and
effectively to customer demands, technological changes and competitors'
innovations. The Company's competitors may be able to respond more quickly than
the Company to new or emerging technologies and changes in customer requirements
and devote greater resources to the development, promotion and sale of new
service offerings to prospective customers. There is no assurance that the
Company will be able to compete successfully with existing or new competitors or
that competition will not have a material adverse effect on its business,
financial condition and results of operations.
RAPID TECHNOLOGICAL CHANGE
The Company's success will depend in part on its ability to develop IT
solutions that keep pace with rapid changes in computing technology, evolving
industry standards and changing customer needs and preferences. In particular,
the Company's future success will depend upon its ability to develop and
introduce new service offerings, improve existing service offerings and develop
and maintain skills necessary to keep pace with changing technologies. There is
no assurance that the Company will be successful in developing, introducing and
marketing such service offerings on a
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timely and cost-effective basis, or that such service offerings, if developed,
will be accepted in the market. In addition, there is no assurance that
products, technologies or service offerings developed by others will not render
the Company's services uncompetitive or obsolete. The Company's failure to
address these challenges could have a material adverse effect on its business,
financial condition and results of operations.
RISK OF FIXED PRICE CONTRACTS
Revenues from fixed price contracts represented approximately 11.6% and
13.9% of the Company's revenues for fiscal 1997 and for the first nine months of
fiscal 1998, respectively. In the future, the Company's strategy is to increase
the percentage of revenues generated by fixed price contracts. In making
proposals for fixed price contracts, the Company relies on its estimated costs
for completing the projects. These estimates reflect, among other factors,
judgments as to the effectiveness of the Company's technology and services as
applied to a particular project. Any unexpected costs or unanticipated delays in
connection with the performance of fixed price contracts could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON THE YEAR 2000 MARKET
A portion of the growth in the Company's revenues in fiscal 1997 and in the
first nine months of fiscal 1998 resulted from increased demand for the
Company's services relating to the diagnosis and resolution of the Year 2000
problem. Although the Company believes the market for products and services
relating to the Year 2000 problem will continue to grow, there can be no
assurance that this market will develop to the extent anticipated by the
Company. In addition, while the Company believes that demand for Year 2000
services will continue after the turn of the century, this demand is expected to
begin to diminish after the year 2000 as many Year 2000 solutions are
implemented and tested. After the overall demand for Year 2000 solutions has
been addressed, there is no assurance that the demand for the Company's other
services will not be materially adversely affected. In addition, there is no
assurance that the Company's existing and potential customers will be willing or
able to allocate the resources, financial or otherwise, to address the Year 2000
problem or that existing or potential customers will understand or acknowledge
the problem. Many organizations may attempt to resolve the problem internally
rather than contract with outside Year 2000 service providers such as the
Company. Due to these factors, the market for Year 2000 products and services is
uncertain and unpredictable. If the market for the Year 2000 products and
services fails to grow, or grows more slowly than anticipated, the Company's
business, financial condition and results of operations could be materially
adversely affected.
POTENTIAL FOR CONTRACT LIABILITY; PROJECT RISKS
The Company's services, especially solutions addressing the Year 2000
problem, involve key aspects of customers' businesses and computer systems.
Failures in a customer's system could result in a claim for substantial damages
against the Company, regardless of the Company's actual responsibility for such
failures. The Company attempts to limit contractually its liability for damages
arising from negligent acts, errors, mistakes or omissions in 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. Additionally,
the Company maintains general liability insurance coverage, including coverage
for errors and omissions in excess of the applicable deductible amount. However,
there is 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 deny coverage as to any future
claim. The successful assertion of one or more large claims against the Company
that exceed available insurance coverage, or the occurrence of changes in the
Company's insurance policies including premium increases or the imposition of
large deductible or co-insurance requirements, could each have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, litigation, regardless of its
9
<PAGE> 11
outcome, could result in substantial cost to the Company and divert management's
attention from the Company's operations. Any contract liability claim or
litigation against the Company could, therefore, have a material adverse effect
on its business, financial condition and results of operations. Because many of
the Company's projects are mission-critical projects for major financial
institutions, a failure or inability to meet a customer's expectations could
seriously damage the Company's reputation and affect its ability to attract new
business.
CONTROL BY MANAGEMENT
After the offering, the executive officers and directors of the Company
(and their affiliates) will beneficially own approximately 71.3% of the
outstanding Common Stock (approximately 68.7% if the Underwriters'
over-allotment option is exercised in full). As a result, while there is no
agreement among the executive officers and directors of the Company as to the
voting of their Common Stock, if they vote together, they can effectively
control the outcome of matters requiring a stockholder vote, including the
election of directors, adopting or amending provisions of the Company's Articles
of Organization and By-laws, and approving mergers or other similar
transactions, such as sales of substantially all of the Company's assets.
Control by the executive officers and directors could have the effect of
discouraging certain types of transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
Common Stock might otherwise receive a premium for their shares over then
current market prices. In addition, the possibility of such persons exercising
such control may limit the price that certain investors may be willing to pay in
the future for shares of the Company's Common Stock. Purchasers in this offering
will become minority stockholders of the Company and will be unable to control
the management or business policies of the Company. The Company's Articles of
Organization do not provide for cumulative voting in the election of directors.
See "Management" and "Principal and Selling Stockholders."
POTENTIAL ACQUISITIONS
In the normal course of its business, the Company evaluates potential
acquisitions of businesses and technologies that could complement or expand its
business. Acquisitions may involve difficulties in the retention of personnel,
diversion of management's attention, unexpected liabilities and tax and
accounting issues. If the Company were to complete an acquisition, there is no
assurance that the Company would be able to successfully integrate the acquired
business or technologies into the Company's existing business and operations. In
addition, there is no assurance that an acquisition of any business or
technology will lead to the successful development of new service offerings, or
that any such service offerings, if developed, will achieve market acceptance or
be profitable. If the Company consummates one or more significant acquisitions
in which the consideration consists of stock, or is financed with the net
proceeds of the issuance of stock, stockholders of the Company could suffer a
significant dilution of their equity interests. In addition, if the Company were
to complete an acquisition to expand internationally, the Company's business may
be subject to a variety of risks affecting international operations, including
difficulties in collecting accounts receivable, potentially longer payment
cycles, increased costs associated with maintaining international marketing
efforts, currency fluctuations, exchange rates, changes in regulatory
requirements, and difficulties in enforcement of contractual obligations and
intellectual property rights. There is no assurance that such factors will not
have a materially adverse effect on the Company's business, financial condition
or results of operations.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent upon certain proprietary methodologies
and software tools, including its Engagement Management Methodology, Conversion
Productivity Tool and Year 2000 Methodology, that it uses in providing services
to customers. The Company's business also includes developing custom software
for various customers. Ownership of such software is generally assigned to the
customer, and the Company retains no right, title or interest in it.
10
<PAGE> 12
The Company relies on a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws to protect its
proprietary rights. It currently holds no patents or registered copyrights. The
Company generally enters into confidentiality agreements with its consultants,
customers and potential customers and limits access to and distribution of its
proprietary information. While the Company does not usually enter into
confidentiality agreements with its employees, such employees are generally
required to sign confidentiality agreements in connection with specific client
engagements. There is no assurance that these steps will be adequate to deter
misappropriation of proprietary information of the Company or its customers or
that it will be able to detect unauthorized use of and take appropriate steps to
enforce its intellectual property rights.
In the future, litigation may be necessary to enforce and protect the
Company's trade secrets, copyrights and other intellectual property or
proprietary rights. The Company may also be subject to litigation to defend
against claimed infringement or to determine the scope and validity of the
intellectual property or proprietary rights of others. In the event of
litigation involving the Company's use of technology, the Company could be
required to expend significant resources to develop non-infringing technology or
to obtain licenses to technology involved in litigation. There is no assurance
that the Company would be successful in any such development or that any such
licenses would be available on commercially reasonable terms, if at all.
Although the Company is not aware that its services, trademarks or other
proprietary rights infringe the proprietary rights of others, there is no
assurance that third parties will not assert infringement claims against the
Company and that such claims will not result in a material adverse effect on its
business, financial condition and results of operations. Any litigation
concerning the Company's use of technology could result in substantial cost in
defending such action and divert management's attention from the Company's
operations, either of which could have a material adverse effect on its
business, financial condition and results of operations. Adverse determinations
in such litigation could result in the loss of the Company's proprietary rights,
subject it to significant liabilities, or prevent it from selling its services,
any of which could have a material adverse effect on its business, financial
condition and results of operations. See "Business -- Intellectual Property
Rights."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the shares of
the Common Stock, and there can be no assurance that an active public market for
the shares of Common Stock will develop or be sustained after the offering. The
initial public offering price will be determined through negotiations among the
Company, the Selling Stockholders and the Underwriters based upon several
factors. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The market price of the shares of
Common Stock may be highly volatile and could be subject to wide fluctuations in
response to variations in operating results, announcements of technological
innovations or new services by the Company or its competitors, changes in
financial estimates by securities analysts or other events or factors. In
addition, the financial markets have experienced significant price and volume
fluctuations that have especially affected the market prices of equity
securities of many IT companies and that often have been unrelated to the
operating performance of such companies or have resulted from the failure of the
operating results of such companies to meet market expectations in a particular
quarter. Broad market fluctuations, or any failure of the Company's operating
results to meet market expectations in a particular quarter, may materially
adversely affect the market price of the shares of Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such
company. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
11
<PAGE> 13
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Company's Common Stock in
the public market following this offering, or the perception that such sales
could occur, could materially adversely affect the prevailing market price of
the Common Stock. Immediately after completion of this offering, the Company
will have 12,783,830 shares of Common Stock outstanding, of which the 2,500,000
shares offered hereby will be eligible for sale without regard to volume or
other limitations pursuant to Rule 144 ("Rule 144") under the Securities Act,
unless purchased by "affiliates" of the Company as that term is defined under
Rule 144. The Company, its executive officers, directors and certain
stockholders, who in the aggregate own beneficially 10,169,030 of the remaining
outstanding shares of Common Stock and stock options exercisable for an
additional 335,000 shares of Common Stock have agreed pursuant to lock-up
agreements that they will not sell or otherwise dispose of any shares of Common
Stock beneficially owned by them for a period of 180 days from the date of this
Prospectus. Such agreements provide that BancAmerica Robertson Stephens may, in
its sole discretion and at any time without notice, release all or a portion of
the shares subject to these lock-up agreements. Upon the expiration of these
lock-up agreements, all of such outstanding shares will become immediately
eligible for sale in the public market, subject in some cases to the volume and
other restrictions of Rule 144 or Rule 701 under the Securities Act. Promptly
after the date of this Prospectus, the Company intends to register on one or
more registration statements on Form S-8 all shares of Common Stock issuable
under its stock option and stock purchase plans. Shares covered by such
registration statements will be eligible for sale in the public market after the
effective date of such registration. In addition, the holders of 9,452,040
shares of Common Stock are entitled to certain registration rights with respect
to such shares. If such holders, by exercising their registration rights, cause
a large number of shares to be registered and sold in the public market, such
sales may have a material adverse effect on the market price of the Common
Stock. See "Management -- Executive Compensation," and "-- Equity Plans,"
"Description of Capital Stock" and "Shares Eligible for Future Sale."
POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER EFFECT OF ARTICLES OF
ORGANIZATION AND BY-LAW PROVISIONS AND MASSACHUSETTS LAW
Upon the closing of this offering, the Company's Board of Directors will
have the authority to issue up to 1,000,000 shares of Preferred Stock and to fix
the rights, preferences, privileges and restrictions of such shares without any
further vote or action by the Company's stockholders. Although the Company has
no current plans to issue shares of Preferred Stock, the potential issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company, may discourage bids for the Common Stock at a
premium over the market price of the Common Stock and may materially adversely
affect the market price of, and the voting and other rights of the holders of,
Common Stock.
The Company's Board of Directors is divided into three classes, each of
which serves for a staggered three-year term. Such staggered Board may make it
more difficult for a third party to gain control of the Company's Board of
Directors. In addition, certain provisions of the Company's Articles of
Organization and By-laws and of Massachusetts corporate law may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which certain
stockholders may deem to be in their best interests). See "Description of
Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in this offering will experience an immediate
dilution of $11.48 per share in the pro forma net tangible book value of their
Common Stock from an assumed initial public offering price of $14.00 per share.
Additional dilution is likely to occur upon the exercise of outstanding stock
options. See "Dilution."
12
<PAGE> 14
DISCRETIONARY USE OF PROCEEDS
The Company has no current specific plan for the use of a significant
portion of the estimated net proceeds from this offering. As a consequence, the
Company's management will have the discretion to allocate a large percentage of
the net proceeds to uses that stockholders may not consider desirable, and there
can be no assurance that the net proceeds can or will be invested to yield a
significant return. See "Use of Proceeds."
NO EXPECTATION OF DIVIDENDS
The Company does not expect to pay cash dividends on its Common Stock in
the foreseeable future. See "Dividend Policy."
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$25,290,000, assuming an initial public offering price of $14.00 per share and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company. The Company expects to use the net proceeds for
general corporate purposes, including working capital. However, the Company has
not allocated any specific portion of the net proceeds to such purposes, and
management will have the ability to allocate such proceeds at its discretion.
From time to time in the ordinary course of business, the Company evaluates the
potential acquisition of businesses and technologies that complement the
Company's business, for which a portion of the net proceeds may be used.
Currently, the Company does not have any commitments or agreements with respect
to any such acquisitions. Pending use of the net proceeds for the above
purposes, the Company intends to invest such funds in interest-bearing,
investment-grade securities. The Company will not receive any proceeds from the
sale of shares by the Selling Stockholders.
DIVIDEND POLICY
In fiscal 1996 and fiscal 1997, the Company paid aggregate cash dividends
of $4.0 million and $1.5 million, respectively, and on January 26, 1998, the
Company paid aggregate cash dividends of $3.0 million, in each case to holders
of the Company's Special Common Stock and Common Stock. The Company does not
anticipate that it will pay any cash dividends in the foreseeable future. The
payment of any future dividends will be at the discretion of the Company's Board
of Directors and will depend upon, among other things, future earnings,
operations, capital requirements of the Company, business conditions and
contractual restrictions on payment of dividends, if any.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth as of December 31, 1997 (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the Company
after giving effect to the conversion into Common Stock of all of the
outstanding shares of Special Common Stock and Class A Common Stock upon the
closing of this offering, and (iii) the as adjusted capitalization of the
Company after giving effect to the sale by the Company of 2,000,000 shares of
Common Stock at an assumed initial public offering price of $14.00 per share and
the application of the estimated net proceeds therefrom. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Common Stock, $.01 par value; 11,746,840 shares authorized,
6,847,960 shares issued and outstanding, actual;
60,000,000 shares authorized, 10,670,840 issued and
outstanding, pro forma; 60,000,000 shares authorized,
12,670,840 shares issued and outstanding, as adjusted..... $ 68 $ 107 $ 127
Class A Common Stock, $.01 par value; 1,694,800 shares
authorized, 830,800 shares issued and outstanding, actual;
no shares issued and outstanding, pro forma and as
adjusted(1)............................................... 8 -- --
Special Common Stock, $.01 par value; 3,104,080 shares
authorized, 3,104,080 shares issued and outstanding,
actual; no shares issued and outstanding, pro forma and as
adjusted.................................................. 31 -- --
Preferred Stock, $.01 par value; no shares authorized,
actual; 1,000,000 shares authorized, no shares issued and
outstanding, pro forma and as adjusted.................... -- -- --
Additional paid-in capital.................................. 2,058 2,058 27,328
Retained earnings........................................... 4,734 4,734 4,734
Less treasury Class A Common Stock at cost,
112,000 shares............................................ (25) (25) (25)
Total stockholders' equity................................ 6,874 6,874 32,164
------ ------ -------
Total capitalization.............................. $6,874 $6,874 $32,164
====== ====== =======
</TABLE>
- ---------------
(1) Does not include 376,000 shares of Class A Common Stock issuable at a
weighted average exercise price of $0.91 per share upon exercise of stock
options outstanding as of December 31, 1997 under the Company's stock option
and stock purchase plans, all of which were then exercisable, and an
additional 2,000,000 shares reserved for future grants under the Company's
stock option and stock purchase plans. See "Management -- Director
Compensation" and "-- Equity Plans" and Notes 10-12 of Notes to Consolidated
Financial Statements.
15
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company as of December 31,
1997, assuming the conversion into Common Stock of all outstanding shares of
Special Common Stock and Class A Common Stock, was $6,651,000, or $0.62 per
share of Common Stock. Pro forma net tangible book value per share is equal to
the Company's total tangible assets less total liabilities, divided by the
number of shares of Common Stock outstanding on a pro forma basis at that date.
After giving effect to the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price of
$14.00 per share and after deducting underwriting discounts and commissions and
estimated offering expenses), the pro forma net tangible book value of the
Company as of December 31, 1997 would have been approximately $31,941,000, or
$2.52 per share. This represents an immediate increase in net tangible book
value of $1.90 per share to existing stockholders and an immediate dilution of
$11.48 per share to new investors in this offering. The following table
illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share as of
December 31, 1997..................................... $ 0.62
Increase per share attributable to new investors....... 1.90
------
Pro forma as adjusted net tangible book value per share
after this offering....................................... 2.52
------
Dilution per share to new investors......................... $11.48
======
</TABLE>
The following table summarizes on a pro forma basis as of December 31, 1997
the differences between the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company, and the average price paid
per share by existing stockholders and by the new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... 10,670,840 84.2% $ 1,755,000 5.9% $ 0.16
New investors.............. 2,000,000 15.8 28,000,000 94.1 $14.00
---------- ----- ----------- -----
Total............ 12,670,840 100.0% $29,755,000 100.0%
========== ===== =========== =====
</TABLE>
- ------------
(1) Sales by the Selling Stockholders in this offering will cause the number of
shares held by existing stockholders to be reduced to 10,170,840 shares or
80.3% (9,795,840 shares or 77.3% if the Underwriters' over-allotment option
is exercised in full) of the total number of shares of Common Stock to be
outstanding after this offering, and will increase the number of shares held
by new investors to 2,500,000 shares or 19.7% (2,875,000 shares or 22.7% if
the Underwriters' over-allotment option is exercised in full) of the total
number of shares of Common Stock to be outstanding after this offering. See
"Principal and Selling Stockholders."
The calculation of pro forma net tangible book value and the other
computations above assume no exercise of stock options outstanding as of
December 31, 1997. As of December 31, 1997, there were options outstanding to
purchase a total of 376,000 shares of Class A Common Stock at a weighted average
exercise price of $0.91 per share. To the extent that any of these options are
exercised, there will be further dilution to new investors. See
"Capitalization," "Management -- Equity Plans," "Description of Capital Stock,"
"Shares Eligible for Future Sale" and Notes 10-12 of Notes to Consolidated
Financial Statements.
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data as of March 31, 1996 and March 31,
1997 and for the fiscal years ended March 31, 1995, 1996 and 1997, have been
derived from the Company's Consolidated Financial Statements, which have been
audited by Ernst & Young LLP, independent auditors, and are included elsewhere
in this Prospectus. The selected financial data as of March 31, 1993, 1994 and
1995 and for the fiscal years ended March 31, 1993 and March 31, 1994 have been
derived from financial statements which have been audited. The selected
financial data as of December 31, 1997 and for the nine months ended December
31, 1996 and 1997 are derived from unaudited Consolidated Financial Statements
included elsewhere in the Prospectus which, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial data of such periods. The results of
the operations for the nine months ended December 31, 1997 are not necessarily
indicative of the results to be expected for the full year or any future period.
This data should be read in connection with the Consolidated Financial
Statements and Notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenues.............................. $9,504 $11,872 $14,624 $20,052 $23,843 $17,158 $28,219
Cost of revenues...................... 6,301 8,020 9,570 12,377 15,218 11,258 16,252
------ ------- ------- ------- ------- ------- -------
Gross profit.......................... 3,203 3,852 5,054 7,675 8,625 5,900 11,967
Operating expenses:
Sales and marketing................. 383 592 683 1,173 1,493 1,050 2,147
General and administrative.......... 2,107 2,578 2,835 3,875 3,947 2,740 4,274
------ ------- ------- ------- ------- ------- -------
Total operating expenses......... 2,490 3,170 3,518 5,048 5,440 3,790 6,421
------ ------- ------- ------- ------- ------- -------
Income from operations................ 713 682 1,536 2,627 3,185 2,110 5,546
Interest income....................... 21 39 129 199 120 78 109
Interest expense...................... (61) (25) (4) (2) (5) (4) (4)
------ ------- ------- ------- ------- ------- -------
Income from continuing operations
before provision for income taxes
and minority interest............... 673 696 1,661 2,824 3,300 2,184 5,651
Provision for income taxes............ 294 375 691 1,261 1,359 900 2,374
------ ------- ------- ------- ------- ------- -------
Income from continuing operations..... 379 321 970 1,563 1,941 1,284 3,277
Discontinued operations, net of tax... 812 1,483 1,245 780 100 100 --
Minority interest..................... (136) (406) (84) -- -- -- --
------ ------- ------- ------- ------- ------- -------
Net income............................ $1,055 $ 1,398 $ 2,131 $ 2,343 $ 2,041 $ 1,384 $ 3,277
====== ======= ======= ======= ======= ======= =======
Pro forma earnings per common share(1):
Income from continuing operations............................... $ 0.19 $ 0.32
Discontinued operations, net of tax............................. 0.01
------- -------
Net income........................................................ $ 0.20 $ 0.32
======= =======
Pro forma earnings per common share -- assuming dilution(1):
Income from continuing operations............................... $ 0.19 $ 0.31
Discontinued operations, net of tax............................. 0.01
------- -------
Net income........................................................ $ 0.20 $ 0.31
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997
------ ------ ------ ------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents............... $1,583 $2,718 $4,436 $2,231 $2,653 $5,355
Working capital......................... 2,842 4,458 6,595 4,641 5,069 5,868
Total assets............................ 8,451 7,653 9,196 7,470 8,201 13,900
Total stockholders' equity.............. $3,403 $4,801 $6,932 $5,275 $5,816 $6,874
</TABLE>
- ---------------
(1) See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of pro forma earnings per common share.
17
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
OVERVIEW
ADS provides IT strategy consulting and systems integration services to
customers exclusively in the financial services industry, primarily banks. The
Company's service offerings are organized around five practice areas: IT
Strategy Consulting, Consolidations and Conversions, Year 2000 Resolution,
Application Outsourcing, and Electronic Commerce and Home Banking.
The Company was organized in Massachusetts in 1980 to provide consulting
services to banks and bank service bureaus. In 1990, the Company acquired a
majority of the outstanding common stock of Data Management Systems, Inc.
("DMS"), a bank service bureau. In fiscal 1992, the Company sold the item
processing division of DMS and in fiscal 1995, the Company purchased the
remaining minority interest in DMS. Later in fiscal 1995, the Company approved a
plan to sell DMS's remaining business line, the on-line processing division.
Accordingly, the results of operations of the on-line processing division are
included as discontinued operations in the Company's consolidated financial
statements for fiscal 1995, 1996 and 1997 and the nine months ended December 31,
1996. See Note 6 of Notes to Consolidated Financial Statements.
The Company's revenues are derived primarily from professional fees billed
to customers on a time and materials or, in certain instances, on a fixed price
basis. Included in revenues are reimbursable contract-related travel and
entertainment expenses which are separately billed to clients. Substantially all
of the Company's contracts, other than fixed price contracts, are terminable by
the customer following limited notice and without significant penalty to the
customer. Time and materials revenues are recognized as services are performed.
Fixed price revenues are recognized using the percentage-of-completion method
based on the ratio of costs incurred to total estimated project costs. The
Company's strategy is to increase in future years the percentage of revenues
represented by fixed price contracts. Any unexpected costs or unanticipated
delays in connection with the performance of fixed price contracts could have a
material adverse effect on the Company's business, financial condition and
results of operations. The cumulative impact of any revisions to the estimate of
the percentage-of-completion of any fixed price contract is reflected in the
quarter in which such impact becomes known.
Revenues from the Company's five largest customers in fiscal 1995, 1996 and
1997 were 74.4%, 66.0% and 54.0%, respectively, as a percentage of revenues.
Revenues from the Company's five largest customers for the nine months ended
December 31, 1996 and 1997 were 59.2% and 62.8%, respectively, as a percentage
of revenues. In fiscal 1995, Citizens Savings Bank & Citizens Trust Company,
Manufacturers and Traders Trust Company and Fleet Services Corporation accounted
for approximately 26.4%, 16.9% and 15.8%, respectively, of revenues. In fiscal
1996, Citizens Savings Bank & Citizens Trust Company and Fleet Services
Corporation accounted for approximately 22.0% and 18.1%, respectively, of
revenues. In fiscal 1997, First Security Information Technology, Inc. and
Citizens Savings Bank & Citizens Trust Company accounted for approximately 18.8%
and 12.4%, respectively, of revenues. For the nine months ended December 31,
1996, First Security Information Technology, Inc. and Citizens Savings Bank &
Citizens Trust Company accounted for approximately 18.6% and 17.2%,
respectively, of revenues. For the nine months ended December 31, 1997,
Associated Banc-Corp., First Security Information Technology, Inc. and
NationsBank Corporation (Barnett Bank) accounted for approximately 20.2%, 12.3%
and 11.7%, respectively, of revenues. See "Risk Factors -- Concentration of
Revenues; Dependence on Major Customers." Substantially all of the Company's
revenues are derived from customers located in North America.
18
<PAGE> 20
Cost of revenues consists primarily of salaries and employee benefits for
personnel dedicated to customer assignments, fees paid to subcontractors for
work performed in connection with customer assignments and reimbursable
contract-related travel and entertainment expenses incurred by the Company in
connection with the delivery of its services. Customer project margins and
personnel utilization percentages are the most significant variables in
determining the Company's income from continuing operations. ADS manages its
personnel utilization rates by monitoring its personnel needs and generally
adjusts personnel levels based on specific project requirements. The number of
staff assigned to particular projects may vary widely depending on the size,
duration, degree of completion and complexity of each engagement. Delays in
project completion and in implementation may result in periods when personnel
are not assigned to active projects and, accordingly, result in lower average
utilization rates during such periods, which could have a materially adverse
effect on the Company's operating results. In addition, the Company must
maintain appropriate numbers of senior professionals both to oversee existing
engagements and for business development activities.
Sales and marketing expenses consist primarily of salaries, employee
benefits, travel expenses and promotional costs. General and administrative
expenses consist primarily of expenses associated with the Company's management,
finance and administrative groups, including recruiting, training, depreciation
and amortization, and occupancy costs.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as a percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------------- -------------
1993 1994 1995 1996 1997 1996 1997
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 66.3 67.6 65.4 61.7 63.8 65.6 57.6
----- ----- ----- ----- ----- ----- -----
Gross profit............................ 33.7 32.4 34.6 38.3 36.2 34.4 42.4
Operating expenses:
Sales and marketing................... 4.0 5.0 4.7 5.9 6.3 6.1 7.6
General and administrative............ 22.2 21.7 19.4 19.3 16.6 16.0 15.1
----- ----- ----- ----- ----- ----- -----
Total operating expenses........... 26.2 26.7 24.1 25.2 22.9 22.1 22.7
----- ----- ----- ----- ----- ----- -----
Income from operations.................. 7.5 5.7 10.5 13.1 13.3 12.3 19.7
Interest income......................... 0.2 0.3 0.9 1.0 0.5 0.4 0.3
Interest expense........................ (0.6) (0.2) -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Income from continuing operations before
provision for income taxes and
minority interest..................... 7.1 5.8 11.4 14.1 13.8 12.7 20.0
Provision for income taxes.............. 3.1 3.1 4.8 6.3 5.7 5.2 8.4
----- ----- ----- ----- ----- ----- -----
Income from continuing operations....... 4.0 2.7 6.6 7.8 8.1 7.5 11.6
Discontinued operations, net of tax..... 8.5 12.5 8.5 3.9 0.5 0.6 --
Minority interest....................... (1.4) (3.4) (0.6) -- -- -- --
----- ----- ----- ----- ----- ----- -----
Net income.............................. 11.1% 11.8% 14.5% 11.7% 8.6% 8.1% 11.6%
===== ===== ===== ===== ===== ===== =====
</TABLE>
19
<PAGE> 21
NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996
Revenues
Revenues for the first nine months of fiscal 1998 increased 64.4% over the
comparable period of fiscal 1997, from $17.2 million to $28.2 million. This
increase was primarily due to an increase in volume of services delivered to
customers and an increase in the average billing rate.
Cost of Revenues
Cost of revenues increased 44.3% from $11.3 million for the first nine
months of fiscal 1997, to $16.3 million for the comparable period of fiscal
1998, representing 65.6% and 57.6% of revenues, respectively. The dollar
increase in cost of revenues was primarily due to an increase in billable
personnel from 139 at December 31, 1996 to 219 at December 31, 1997. The
decrease in cost of revenues as a percentage of revenues is due to increased
utilization rates and billing rate increases.
Sales and Marketing
Sales and marketing expenses increased 104.5% from $1.1 million for the
first nine months of fiscal 1997 to $2.1 million for the comparable period of
fiscal 1998, representing 6.1% and 7.6% of revenues, respectively. This increase
resulted primarily from the Company's decision to expand its sales and marketing
group from 4 employees at December 31, 1996 to 13 employees at December 31,
1997. The Company expects its sales and marketing expenses to increase in
absolute dollars as the Company adds sales and marketing staff.
General and Administrative
General and administrative expenses increased 56.0% from $2.7 million for
the first nine months of fiscal 1997 to $4.3 million for the comparable period
of fiscal 1998, representing 16.0% and 15.1% of revenues, respectively. This
increase is primarily due to increases in recruiting, occupancy and equipment
costs to support the Company's expansion. The Company expects that general and
administrative expenses will increase in absolute dollars as personnel and
facilities are added to support the Company's growth and as the Company incurs
costs associated with being a public company.
Income Tax Provision
The income tax provision pertaining to continuing operations increased
163.8% from $0.9 million for the first nine months of fiscal 1997 to $2.4
million for the comparable period of fiscal 1998, resulting in effective tax
rates of 41.2% and 42.0%, respectively. The Company's effective tax rate may
vary from period to period based on its expansion into areas with varying
country, state and local statutory income tax rates. See Note 8 of Notes to
Consolidated Financial Statements.
YEARS ENDED MARCH 31, 1997 AND 1996
Revenues
Revenues increased 18.9% for fiscal 1997 over fiscal 1996, from $20.1
million to $23.8 million. This increase was principally due to an increase in
volume of services delivered to customers and an increase in the average billing
rate.
Cost of Revenues
Cost of revenues increased 22.9% from $12.4 million for fiscal 1996 to
$15.2 million for fiscal 1997, representing 61.7% and 63.8% of revenues,
respectively. The dollar increase was primarily due to increased reimbursable
expenses and, to a lesser extent, an increase in the average number of billable
personnel in fiscal 1997 compared to fiscal 1996. Cost of revenues as a
percentage of revenues for fiscal 1997 increased primarily due to a decrease in
utilization rates.
20
<PAGE> 22
Sales and Marketing
Sales and marketing expenses increased 27.3% from $1.2 million for fiscal
1996 to $1.5 million for fiscal 1997, representing 5.9% and 6.3% of revenues,
respectively. Sales and marketing expenses increased primarily as a result of
the Company's decision to expand its sales and marketing group, which grew from
5 employees at the end of fiscal 1996 to 13 employees at the end of fiscal 1997.
General and Administrative
General and administrative expenses remained constant at $3.9 million for
fiscal 1996 and 1997, representing 19.3% and 16.6% of revenues, respectively.
The decrease in general and administrative expenses as a percentage of revenues
reflects the increase in revenues for fiscal 1997 compared to fiscal 1996.
Income Tax Provision
The income tax provision pertaining to continuing operations increased 7.8%
from $1.3 million in fiscal 1996 to $1.4 million for fiscal 1997, resulting in
effective tax rates of 44.7% and 41.2%, respectively. The decrease in the
effective tax rate is primarily due to differences in applicable state income
tax rates. See Note 8 of Notes to Consolidated Financial Statements.
YEARS ENDED MARCH 31, 1996 AND 1995
Revenues
Revenues increased 37.1% for fiscal 1996 over fiscal 1995 from $14.6
million to $20.1 million. This increase is principally due to an increase in
volume of services delivered to customers and an increase in the average billing
rate.
Cost of Revenues
Cost of revenues increased 29.3% from $9.6 million for fiscal 1995 to $12.4
million for fiscal 1996, representing 65.4% and 61.7% of revenues, respectively.
The dollar increase in such costs in fiscal 1995 and 1996 was primarily due to
an increase in billable personnel from 122 at the end of fiscal 1995 to 145 at
the end of fiscal 1996. Cost of revenues as a percentage of revenues for fiscal
1996 compared to fiscal 1995 decreased primarily due to an increase in
utilization rates.
Sales and Marketing
Sales and marketing expenses increased 71.7% from $0.7 million for fiscal
1995 to $1.2 million for fiscal 1996, representing 4.7% and 5.9% of revenues,
respectively. Sales and marketing expenses increased primarily as a result of
increased bonus and commission payments to the Company's sales and marketing
group.
General and Administrative
General and administrative expenses increased 36.7% from $2.8 million for
fiscal 1995 to $3.9 million for fiscal 1996, representing 19.4% and 19.3% of
revenues, respectively. The increase in the absolute amounts is due to increases
in recruiting, occupancy and depreciation expense resulting from the Company's
expansion.
Income Tax Provision
The income tax provision pertaining to continuing operations increased
82.5% from $0.7 million for fiscal 1995 to $1.3 million for fiscal 1996,
resulting in effective tax rates of 41.6% and 44.7%, respectively. The increase
in the effective tax rate is primarily due to differences in applicable state
income tax rates. See Note 8 of Notes to Consolidated Financial Statements.
21
<PAGE> 23
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly statements of
income data in absolute terms and as a percentage of revenues for each of the
periods indicated. In the opinion of management, this information has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this Prospectus, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results when read in conjunction with the
audited Consolidated Financial Statements and Notes thereto. The operating
results for any quarter are not necessarily indicative of results of any future
period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
JUNE SEPT. DEC. MARCH JUNE SEPT. DEC.
1996 1996 1996 1997 1997 1997 1997
------ ------ ------ ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................................ $5,588 $5,763 $5,807 $6,685 $8,231 $9,118 $10,870
Cost of revenues................................ 3,627 3,748 3,883 3,960 4,751 5,265 6,236
------ ------ ------ ------ ------ ------ -------
Gross profit.................................... 1,961 2,015 1,924 2,725 3,480 3,853 4,634
Operating expenses:
Sales and marketing........................... 291 324 435 443 579 685 883
General and administrative.................... 972 843 925 1,207 1,275 1,384 1,615
------ ------ ------ ------ ------ ------ -------
Total operating expenses.................... 1,263 1,167 1,360 1,650 1,854 2,069 2,498
------ ------ ------ ------ ------ ------ -------
Income from operations.......................... 698 848 564 1,075 1,626 1,784 2,136
Interest income................................. 18 24 36 42 28 29 52
Interest expense................................ (2) (1) (1) (1) (2) (1) (1)
------ ------ ------ ------ ------ ------ -------
Income from continuing operations before
provision for income taxes.................... 714 871 599 1,116 1,652 1,812 2,187
Provision for income taxes...................... 294 359 247 459 694 761 919
Discontinued operations, net of tax............. 100 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ -------
Net income...................................... $ 520 $ 512 $ 352 $ 657 $ 958 $1,051 $ 1,268
====== ====== ====== ====== ====== ====== =======
Revenues........................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................................ 64.9 65.0 66.9 59.2 57.7 57.7 57.4
------ ------ ------ ------ ------ ------ -------
Gross profit.................................... 35.1 35.0 33.1 40.8 42.3 42.3 42.6
Operating expenses:
Sales and marketing........................... 5.2 5.6 7.5 6.6 7.0 7.5 8.1
General and administrative.................... 17.4 14.7 15.9 18.1 15.5 15.2 14.9
------ ------ ------ ------ ------ ------ -------
Total operating expenses.................... 22.6 20.3 23.4 24.7 22.5 22.7 23.0
------ ------ ------ ------ ------ ------ -------
Income from operations.......................... 12.5 14.7 9.7 16.1 19.8 19.6 19.6
Interest income................................. 0.3 0.4 0.6 0.6 0.3 0.3 0.5
Interest expense................................ -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ -------
Income from continuing operations before
provision for income taxes.................... 12.8 15.1 10.3 16.7 20.1 19.9 20.1
Provision for income taxes...................... 5.3 6.2 4.2 6.9 8.4 8.4 8.4
Discontinued operations, net of tax............. 1.8 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ -------
Net income...................................... 9.3% 8.9% 6.1% 9.8% 11.7% 11.5% 11.7%
====== ====== ====== ====== ====== ====== =======
</TABLE>
22
<PAGE> 24
The Company's revenues increased in each of the seven quarters presented
primarily due to increases in the volume of services delivered to customers and
to increases in the average billing rate. Cost of revenues increased in absolute
terms due to an increased number of project personnel to support an increased
number of projects. Cost of revenues as a percentage of revenues decreased
significantly in the last several quarters, reflecting revenue growth as well as
higher utilization rates and an increase in the average billing rate.
Variability in utilization rates for project personnel has resulted in some
quarterly fluctuations in project personnel costs as a percentage of revenues.
For the quarters ended June 30, September 30, and December 31, 1996, utilization
rates were lower because of a decrease in the number of billable hours caused by
the loss of a major customer, which negatively impacted gross margins. For the
quarters ended March 31, June 30, September 30, and December 31, 1997,
utilization rates, the average billing rate and the number of billable hours all
increased over the prior three quarters. In the future, utilization rates and
gross margins may vary from quarter to quarter based on a number of factors,
including training schedules, vacation and holiday schedules, recruiting
requirements, customer start-up of new projects and other administrative
requirements of existing project personnel.
Sales and marketing expenses generally increased in the seven quarters
presented as the Company expanded its sales and marketing staff. General and
administrative expenses have fluctuated in absolute terms from quarter to
quarter and at times as a percentage of revenues.
Variations in the Company's revenues and operating results have occurred
from quarter to quarter and may continue to occur as a result of a number of
factors. Quarterly revenues and operating results can depend on the number, size
and scope of customer projects commenced and completed during a quarter,
employee utilization rates, billing rates, the number of working days in a
quarter, the timing of introduction of new service offerings, both by the
Company and its competitors, changes in pricing, both by the Company and its
competitors, and general economic conditions. The timing of revenues is
difficult to forecast because the Company's sales cycle is relatively long and
may depend on factors such as the size and scope of projects or other factors
that adversely impact the financial services industry and general economic
conditions.
Because a high percentage of the Company's expenses are relatively fixed, a
variation in the timing of the initiation or the completion of customer
projects, particularly at or near the end of a quarter, can cause significant
variations in operating results from quarter to quarter and could result in
losses. The Company attempts to manage its personnel utilization rates by
closely monitoring project timetables and staffing requirements for new
projects. While professional staff must be adjusted to reflect active projects,
the Company must maintain a sufficient number of senior professionals to oversee
existing customer projects and participate with the Company's sales force in
securing new customer projects. In addition, the Company expects to increase its
operating expenses by increasing its staff. The Company expects to experience a
significant time lag between the date professional staff are hired and the date
such personnel become fully productive. The rate at which new professional staff
become productive could cause material fluctuations in quarterly results of
operations. Furthermore, to the extent such increased operating expenses precede
or are not subsequently followed by increased revenues, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, many of the Company's projects are, and may be in the
future, terminable without customer penalty. An unanticipated termination of a
major project or loss of a major customer could require the Company to maintain
or terminate underutilized employees, resulting in a higher than expected number
of unassigned persons or higher than expected severance expenses.
Due to all of the foregoing factors, it is possible that in some future
periods the Company's results of operations will be below the expectations of
public market analysts and investors. In such event, the price of the Company's
Common Stock could be materially adversely affected. See "Risk Factors --
Variability of Quarterly Operating Results."
23
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations principally
from cash flow from operations and, to a lesser extent, from the private sale of
equity securities. In 1988, General Atlantic Partners II, L.P. purchased
3,104,080 shares from the Company and certain stockholders for an aggregate
purchase price of approximately $2.8 million, of which approximately $1.4
million was paid to the Company.
The Company has no long-term debt and continues to operate primarily
debt-free. Working capital increased to $5.9 million at December 31, 1997
compared to $5.0 million at March 31, 1997. This increase was due primarily to
an increase in accounts receivable and proceeds from the exercise of stock
options partially offset by cash used for capital expenditures to support new
employees and the growth of the Company. On January 28, 1998, the Company paid
an aggregate $3.0 million in dividends on its Common Stock and Special Common
Stock. Net cash provided by operating activities for fiscal 1997 was
approximately the same as for fiscal 1996 and was $0.4 million less than in
fiscal 1995.
Capital expenditures of approximately $0.1 million, $0.2 million and $0.2
million, for fiscal 1995, 1996, and 1997, respectively, and $0.4 million for the
nine months ended December 31, 1997, were used principally for computer
equipment to upgrade employee workstations and leasehold improvements related to
the Company's growth. Capital expenditures for the remainder of fiscal 1998 and
for fiscal 1999 are expected to be approximately $0.2 million and $0.9 million,
respectively, and will be used principally for computer and other equipment.
The Company believes that proceeds from the sale of the Common Stock
offered hereby together with cash provided from operations will be sufficient to
meet the Company's working capital and capital expenditure requirements for at
least the next 12 months. To the extent the Company is unable to fund its
operations from cash flows, the Company may need to obtain financing from
external sources in the form of either additional equity or indebtedness. There
can be no assurance that additional financing will be available at all, or that,
if available, such financing will be obtainable on terms favorable to the
Company.
To date, inflation has not had a material impact on the Company's financial
results.
IMPACT OF YEAR 2000
The Company has installed Year 2000 compliant software in many of its major
systems. The Company is in the process of either modifying or replacing software
used in the Company's systems. The cost of these efforts is not expected to be
material. The Company presently believes that the Year 2000 issue will not pose
significant operational problems. However, Year 2000 issues could have a
significant impact on the Company's operations and its financial results if
modifications cannot be completed on a timely basis, unforeseen needs or
problems arise, or the systems operated by its customers, vendors or
subcontractors are not Year 2000 compliant.
24
<PAGE> 26
BUSINESS
OVERVIEW
Atlantic Data Services, Inc. ("ADS" or the "Company") provides information
technology ("IT") strategy consulting and systems integration services to
customers exclusively in the financial services industry, primarily banks. ADS
offers rapid, cost-effective IT solutions to the business challenges faced by
financial services companies through its in-depth financial services experience,
technological expertise and project management skills. The Company's service
offerings are organized around five practice areas: IT Strategy Consulting,
Consolidations and Conversions, Year 2000 Resolution, Application Outsourcing,
and Electronic Commerce and Home Banking. Since its founding in 1980, ADS has
developed an in-depth knowledge of the banking and financial services industry
and of its changing market and technology dynamics.
The Company markets and sells its services directly through its
professional sales staff and senior management. The Company's customers include
ABN-AMRO Information Technology Services, Associated Banc-Corp., BankBoston,
N.A., Canadian Imperial Bank of Commerce, Citizens Savings Bank & Citizens Trust
Company, Fleet Services Corporation, National City Corporation, NationsBank
Corporation (Barnett Bank) and SunTrust Services Corp.
INDUSTRY BACKGROUND
Deregulation and consolidation in the financial services industry are
rapidly reshaping the business environment and causing significant changes in
the ways large banks operate and compete. These industry trends have allowed
banks to dramatically expand their service offerings to include products and
services competing with mutual funds, brokerage services, insurance offerings
and investment banking services. The development, customization and integration
of these new service offerings have challenged and strained banks' internal IT
capabilities and resources. Deregulation in the financial services industry has
also resulted in the entry of new competitors offering products and services
traditionally marketed by banks, resulting in increased competition and margin
pressure. Consolidation, which has been driven in part by deregulation, has
forced banks to focus on the successful integration of acquisitions and
consolidation of redundant operations to meet their strategic objectives and
increase profitability.
At the same time that they are addressing the challenges of deregulation
and consolidation, banks have increasingly focused on the widespread deployment
of technologies to reduce costs and deliver new products and services. Banks
rely primarily on centralized mainframe or minicomputer systems and have large
legacy applications that must be regularly maintained and supported. While
maintaining these large and complex systems, banks are also integrating newer
technologies, including distributed architecture and client/server technologies.
This trend has forced banks to rapidly adopt new technologies from multiple
vendors and implement complex hardware, software and networking solutions
throughout their organizations to remain competitive. In addition, diagnosing
and designing solutions to manage and solve Year 2000 problems and the advent of
the new European Monetary Union have added to the already large number of
complex projects facing banks' overburdened internal IT staffs.
The onset of the electronic marketplace has also forced banks to expand
traditional customer delivery channels to include automated teller machines,
telephone banking, and home banking via personal computers and the Internet to
meet changing customer needs. These changing delivery channels and customer
preferences have also caused banks to significantly change their business
practices in addition to expanding their technology infrastructure.
The business challenges created by deregulation and consolidation coupled
with the need to maintain existing systems, incorporate new technologies and
meet changing customer preferences have forced banks to turn to third party IT
providers for assistance in developing IT solutions to meet their changing
needs. Industry sources estimate that total expenditures for IT services,
consisting of
25
<PAGE> 27
consulting and education, systems integration and development and systems
management services, in the financial services market were approximately $5.5
billion in 1996 and will reach approximately $9.5 billion by the year 2000. This
represents a compound annual growth rate of approximately 14.7% between 1996 and
2000.
Designing, developing, implementing and maintaining IT solutions that
address the challenges faced by banks requires highly skilled professionals
trained in diverse technologies and business practices. Many banks are reluctant
to expand their IT departments through additional staffing, especially at a time
when they are seeking to minimize fixed costs and reduce workforces. Because of
the critical importance of their IT systems, banks seek to engage service
providers who have in-depth knowledge of their IT systems and business processes
and who can assume responsibility for project management and delivery. IT
consultants working with banks must also possess experience in the financial
services industry and be fluent in both traditional legacy systems and newer
technologies. However, there is a shortage of professionals who have this
combination of skills. While many banks are concluding that using outside
specialists enables them to develop better IT solutions in less time and to
reduce implementation risks, most IT consulting firms do not have the
specialized knowledge of the financial services industry necessary to assist
banks in rapidly and cost-effectively meeting their business challenges.
THE ADS SOLUTION
ADS provides rapid, cost-effective IT solutions to the business challenges
faced by financial services companies through its in-depth financial services
experience, technological expertise and project management skills. The Company's
service offerings are organized around five practice areas: IT Strategy
Consulting, Consolidations and Conversions, Year 2000 Resolution, Application
Outsourcing, and Electronic Commerce and Home Banking. ADS enables its customers
to leverage their existing IT systems and personnel to compete more effectively,
to rapidly assimilate changing technologies and to meet their evolving business
needs in a timely and cost-effective manner. The main elements of the ADS
solution include:
In-depth Knowledge of the Financial Services Industry. Since its founding
in 1980, ADS has developed an in-depth knowledge of the financial services
industry and of the changing market and technology dynamics in that industry.
Further, ADS has accumulated expertise in many areas of business operations in
the banking environment as well as a broad knowledge of the multiple products
and services offered by large banks. ADS currently works with banks having from
$10 billion to over $150 billion in assets and understands the full range of
business and technological challenges banks face as they grow in size and
complexity. As a result, the Company can offer its customers scaleable solutions
as they change and expand and can help them evaluate and restructure their
operations, practices, activities and, in some cases, policies to compete more
effectively.
Highly Developed Project Management Skills. The Company works closely with
its customers' management and IT personnel from diagnostic and strategic
planning through project completion. Each project team is staffed with
experienced IT professionals who, in addition to their knowledge of the banking
industry, have comprehensive business, functional and technical expertise. Every
engagement is headed by an experienced project manager who takes ownership and
accountability for the project and manages the project team to meet the
customer's goals on-time, within budget and according to agreed specifications.
In addition, the project manager provides concise and timely updates on the
project's status to the customer's management and IT personnel.
Expertise in Multiple Technologies. Banks' information and operating
systems are complex and fully integrated into all facets of banks' daily
operations. As a result, IT consultants working in financial services must have
enterprise-wide knowledge of a bank's IT systems and operations to design and
integrate new components. The Company's IT professionals have extensive
experience in the diverse technical environments, legacy hardware platforms,
programming languages, and software used by banks, as well as newer technologies
including client/server applications and the Internet. In addition,
26
<PAGE> 28
the Company has accumulated expertise on technologies specific to banks'
products and services including automated teller, electronic funds transfer and
item processing systems. Because of its in-depth technical knowledge, ADS can
help customers select the best business solutions tailored to their specific
technological needs.
Proprietary Methodologies and Tools. The Company applies its proprietary
Engagement Management Methodology to each customer project across all its
practice areas. This methodology allows ADS's professional staff to focus on
project management, project control and reporting, and a phased implementation
that is designed to ensure that customer projects are completed on time, within
budget, and according to agreed specifications. This methodology also allows the
Company to deliver its services in a consistent manner across all levels of its
organization. To further increase productivity and efficiency, the Company has
developed additional proprietary tools and methodologies such as the Conversion
Productivity Tool and the Year 2000 Methodology. The Company's tools and
methodologies are used at customer locations and are designed to reduce the
risks inherent in complex systems implementations.
Geographically Distributed Organization. The Company's professional staff
is located throughout the United States. The Company works closely with its
customers to determine the appropriate resources and staffing to assign to
customers' projects. Once the project parameters are defined and the geographic
locations are identified, ADS is able to rapidly deploy its staff from
throughout the United States to meet a customer's needs. The appropriate project
team is assigned to the customer's site(s) to operate on the project in tandem
with the customer's staff. The Company facilitates this operational model by
investing in software, hardware and infrastructure to support its employees'
remote access to the Company's internal information systems.
STRATEGY
The Company seeks to become the leading IT consulting and systems
integration service provider in the financial services industry. Key elements of
this strategy include:
Establish Long-Term Relationships with Customers. A key component of ADS's
strategy is the development of long-term relationships with customers,
particularly large banks that are expanding their operations and their service
offerings. ADS partners with its customers by working on a consultative basis to
understand their business needs, by working closely with their management and IT
staff to achieve consensus on solution strategies, and by delivering customized
solutions on time, within budget and according to agreed specifications. ADS
believes this strategy will allow it to expand the length and scope of its
customer engagements and to grow with its customers' requirements.
Leverage Customer Base. The Company believes that as banks expand their
product lines into brokerage, insurance, Internet banking and other areas,
additional opportunities will arise for ADS both within its existing customer
base and with new customers. The Company seeks to leverage its vertical market
expertise into these developing financial services channels. The Company also
believes its emphasis on long-term relationships and customer service
facilitates the sale of additional service offerings and will increase the
number of IT projects it performs for existing customers.
Extend Practice Areas. ADS believes opportunities exist to develop
additional service offerings to meet the changing business and technological
needs of its customers. The Company works closely with its customers to identify
emerging industry trends and develops service offerings to meet those needs. For
example, the Company is currently developing a practice methodology and tools to
offer its customers test and reintegration services. This service offering will
enable ADS's customers to determine whether new hardware and software systems
they deploy will meet applicable accounting, audit, legal and other operational
requirements.
Enter into Alliances with Leading Software Vendors. The Company believes
that relationships with leading software providers to the financial services
industry may result in increased direct customer referrals and enhanced industry
recognition. ADS also believes these relationships will
27
<PAGE> 29
enable it to broaden its customer base, increase its competitiveness and
maintain its technological leadership through access to the most current
information and training on leading software and information systems. The
Company intends to continue to pursue these relationships, and may seek to form
alliances with other developers and vendors of IT technologies.
Pursue Strategic Acquisitions. The Company believes the fragmented nature
of the IT services industry provides opportunities to expand its expertise in
the financial services industry through the selective acquisition of IT
consulting firms with a complementary vertical market focus. In addition, where
appropriate, the Company may consider acquisitions that expand its market share,
particularly with an emphasis on international expansion. While the Company from
time to time considers acquisition opportunities, it currently has no
agreements, understandings or commitments to effect any acquisition.
PRACTICE AREAS
ADS offers and delivers its services through five practice areas that
address the major areas of interest and activity of its customers and capitalize
on the business and technology skills of the ADS staff. These five practice
areas are IT Strategy Consulting, Consolidations and Conversions, Year 2000
Resolution, Application Outsourcing, and Electronic Commerce and Home Banking.
The following diagram depicts the interrelationship among the Company's core
competencies, tools, methodologies, quality assurance program, and practice
areas:
[A DIAGRAM DEPICTING THE INTERRELATIONSHIP AMONG
THE COMPANY'S CORE COMPETENCIES, TOOLS, METHODOLOGIES,
QUALITY ASSURANCE PROGRAM, AND PRACTICE AREAS.]
IT Strategy Consulting. ADS provides business solutions that assist
customers in managing change within their operational and technical
environments. ADS's solutions-oriented consulting begins with an overall
assessment of the customer's current situation and identifies potential IT
risks, opportunities and alternatives. Once the initial evaluation is complete,
ADS creates an itemized list of deliverables and tasks and assumes
responsibility for the delivery of the targeted solution. ADS's project
managers, practice managers, business analysts and technical specialists work in
close cooperation with the customer's IT staff to create, manage and execute the
specific plans designed to meet the project objectives. Throughout the process,
ADS provides ongoing review and reporting on the schedule,
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<PAGE> 30
deliverables and budget agreed upon at project commencement. For example, ADS
was engaged by a large mid-western bank to upgrade its branch technological
systems and to evaluate and restructure its internal communication systems. This
project involved reviewing and evaluating the customer's existing facilities and
determining capacities and exposure to failure. ADS made specific
recommendations and assisted in the deployment of an IT solution specific to the
customer's needs.
Consolidations and Conversions. ADS has accumulated extensive experience
in systems conversion and related activities based on numerous projects for
financial services customers over the past 18 years. ADS assists customers that
have acquired other institutions to consolidate redundant operations or upgrade
legacy systems to new technology applications. In these projects, ADS focuses on
a business solution to consolidations and systems conversions. ADS has developed
the Conversion Productivity Tool ("CPT"), a proprietary software program that
automates the most important aspects of the data conversion process. CPT assists
the ADS business analysts in mapping the customer's business products and the
data elements of the application. The business analyst uses CPT to input the
conversion rules, to perform analysis of the relationship between the inbound
and target systems, and to test and execute the conversion automatically. ADS
also uses a comprehensive conversion project methodology that allows the project
team to interact with the customer's staff and bring a set of professional
disciplines and methodologies to these complex projects.
In addition to assisting customers with integrating the technological
changes necessitated by conversions and consolidations, the Company also helps
its customers to manage operational issues. Through mergers and acquisitions,
two or more banks combine to create a much larger institution. The resulting
larger institution must evaluate and restructure its operations, practices,
activities and, in some cases, policies to compete more effectively. By
capitalizing on the Company's experience, a bank can reposition its operations
and technologies and achieve the economies of scale and competitive advantages
of a larger, more complex institution.
Year 2000 Resolution. ADS has developed a set of proprietary tools and
methodologies addressing not only a customer's data processing requirements, but
also the risks that the Year 2000 problem presents to the customer's entire
business. The Company's Year 2000 projects are divided into three phases, each
of which has specified activities and deliverables: (i) Risk Assessment and
Project Definition; (ii) Component Remediation; and (iii) Component Testing and
Reintegration. ADS reviews the risks in each functional area of the customer's
operations to determine where and how a Year 2000 failure could occur and its
expected impact on the customer. From these findings, a triage analysis is made
to prioritize the possible failures that could have the greatest customer
impact. Remediation solutions are then defined and ADS's Year 2000 Methodology
determines an appropriate resolution, which may include a customized solution, a
replacement strategy or a third party "factory" solution. In all cases, ADS's
Year 2000 Methodology tracks the issues through resolution. Finally, ADS's Year
2000 Methodology creates a comprehensive user-based testing and reintegration
process for each business area affected. The ADS Year 2000 Methodology tests the
entire user process, including all automated, manual and third party interface
components, rather than merely testing the corrected component. Throughout the
entire Year 2000 engagement, ADS focuses on the impact to the business unit, the
enterprise-wide solution and the mitigation of risk to the institution.
Application Outsourcing. Competitive pressures in the financial services
industry and the need to reinvest in newer applications make application
outsourcing an attractive alternative to internal staffing. In these
engagements, ADS takes responsibility for core system performance, maintenance
and enhancement through a designated project team. ADS assumes all
responsibility for the outsourced application from intervention on production
failures to major reinvestments and enhancements to the application. In these
engagements, the Company's customers occasionally transfer their staff to the
ADS staff, thus shifting the staffing levels of the customer. ADS also provides
management reporting on service levels achieved on all applications covered by
the outsourcing contract. For example, ADS currently provides outsourcing
services on an international trade finance system for a multi-national financial
institution.
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<PAGE> 31
Electronic Commerce and Home Banking. ADS has begun to focus on providing
consulting and application development services to financial services
institutions in the emerging field of electronic commerce and home banking.
Electronic commerce and home banking is intended to provide fully integrated
financial services to the consumer by offering access to financial products and
services from a wide variety of delivery channels. ADS assists customers
undertaking this migration by providing consulting services in four major areas:
(i) identification or experimentation with new electronic delivery channels,
including Internet-based offerings through home computers; (ii) merging of new
service offerings as market trends and customer focused solutions become
apparent and available; (iii) integration of new offerings into the financial
institution's complex environment of core applications, payment systems and
settlement and accounting operations; and (iv) restructuring of a customer's
backroom operations to reflect and support the changing mix of transactions and
delivery channels.
PROJECT MANAGEMENT METHODOLOGY AND QUALITY ASSURANCE
For each customer engagement and across all of its practice areas, ADS
employs its Engagement Management Methodology and Quality Assurance Program to
monitor the adherence to and the successful use of ADS's practice area tools and
methodologies.
Engagement Management Methodology. ADS has developed a comprehensive
methodology consisting of a company wide discipline and best practices that
cover the entire customer engagement cycle. The Engagement Management
Methodology provides ongoing project reporting designed to ensure that standard
project sizing and pricing is used and project risk is assessed and managed.
This methodology also defines how project changes are identified, sized,
proposed, approved and tracked. The Engagement Management Methodology provides
guidelines and procedures throughout the engagement and across all of the
Company's functions. This methodology provides that functions within the Company
in the areas of business development, operations, recruiting and accounting are
integrated and synchronized throughout an engagement.
Quality Assurance Program. The Company employs a Quality Assurance Program
throughout the customer engagement that determines three measurable items: (i)
the effective utilization of the Engagement Management Methodology and other
practice area tools and methodologies; (ii) the quality level, completion time
and budget projections for project deliverables and goals; and (iii) the level
of customer satisfaction and approval rating of ADS in the project. ADS's
Quality Assurance Program is executed by its senior management not directly
involved in the customer engagement, with the direct input and participation of
customer management. The Company's bonus program is based, in part, on the
results of the Quality Assurance Program.
CUSTOMERS
The Company's customers consist primarily of banks and other financial
services companies located in the United States and Canada. The following is a
list of representative customers during fiscal 1997 and the first nine months of
fiscal 1998.
<TABLE>
<S> <C>
ABN-AMRO Information Technology Services Great Financial Corporation
Associated Banc-Corp. Intranet, Inc.
BankBoston, N.A. Magna Data Services, Inc.
Canadian Imperial Bank of Commerce National City Corporation
Citizens Savings Bank & Citizens Trust Company NationsBank Corporation (Barnett Bank)
EDS -- Banking and Securities Signet Bank
Electronic Payment Systems, Inc. SunTrust Services Corp.
First Commercial Corporation UST Data Services, Inc.
First Security Information Technology, Inc. Visa Interactive
Fleet Services Corporation
</TABLE>
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<PAGE> 32
Substantially all of the Company's revenues are from customers in the
financial services industry, primarily banks, and the Company expects it will
continue to derive substantially all of its revenues from customers in the
financial services industry for the foreseeable future. Accordingly, unfavorable
economic conditions adversely impacting the financial services industry could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Risk Factors -- Dependence on Financial Services
Industry."
The Company has derived and expects to continue to derive a significant
portion of its revenues from a relatively limited number of customers. For
example, the Company's five largest customers in the first nine months of fiscal
1998 accounted for approximately 62.8% of revenues. During that same period,
Associated Banc-Corp., First Security Information Technology, Inc. and
NationsBank Corporation (Barnett Bank) accounted for 20.2%, 12.3% and 11.7%,
respectively, of revenues. In fiscal 1997, the Company's five largest customers
accounted for approximately 54.0% of revenues, and during the same period, First
Security Information Technology, Inc. and Citizens Savings Bank & Citizens Trust
Company accounted for 18.8% and 12.4%, respectively, of revenues. There is no
assurance that the Company's major customers will continue to purchase services
from it at current levels, if at all, or that the Company will be able to
replace revenues from such customers with revenues from other customers. See
"Risk Factors -- Concentration of Revenues; Dependence on Major Customers."
SALES AND MARKETING
The Company markets and sells its services directly through its
professional sales and marketing staff and senior management operating
principally from the Company's offices in Quincy, Massachusetts. As of December
31, 1997, ADS had 13 persons engaged in sales and marketing activities.
ADS's senior business development representatives are assigned to a limited
number of customers to foster an in-depth understanding of each customer's
individual needs and build a long-term customer relationship. Many of the
Company's customer relationships begin as small, focused projects, with
subsequent projects increasing in size and complexity. The Company develops such
relationships through a carefully coordinated effort between its sales and
professional services staff. Initial sales calls are made at the customers'
senior management level and followed up by detailed presentations targeted to
their specific needs.
The Company employs a variety of business development and marketing
techniques to communicate directly with current and prospective customers,
including targeted print and direct mail advertisements; participation in
financial services industry trade shows and conferences; and the Company's web
site. In addition, ADS maintains relationships with key industry research groups
such as the Tower Group, the American Bankers Association, and the Information
Technology Association of America.
As part of its sales and marketing strategy, the Company intends, from time
to time, to partner with other IT consulting firms, including in some instances
its competitors, and to explore relationships with certain third party software
providers to the financial services market. The Company believes these
relationships may result in increased direct client referrals and enhanced
industry recognition. ADS also believes these relationships will enable it to
broaden its customer base, increase its competitiveness and maintain its
technological leadership through access to the most current information and
training on leading software and information systems.
COMPETITION
The IT and systems integration market, especially in the financial services
industry, includes a large number of competitors and is subject to rapid
technological and market changes. The Company competes for customer projects and
experienced personnel with a number of companies having significantly greater
financial, technical and marketing resources and revenues than the Company. Many
of these competitors also have greater name recognition in the financial
services industry. ADS's competitors operate in a variety of market segments
including systems consulting and integration, application software, professional
services (such as computer equipment companies like International
31
<PAGE> 33
Business Machines Corporation), multinational accounting firms, and general
management consulting firms (such as Andersen Consulting, Computer Sciences
Corporation and Electronic Data Systems Corporation). In addition, the custom
software development market is highly fragmented with numerous firms, many of
which focus on their respective local markets. The Company also faces
competition from internal IT departments of its customers.
The Company expects to experience increasing competition from companies
offering established integration services and new service offerings and
technologies. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
others, thereby increasing their ability to expand or increase their service
offerings to address the needs of ADS's existing or prospective customers.
Accordingly, it is possible that new competitors or alliances among current and
new competitors may emerge and rapidly gain significant market share. Increased
competition could result in lower utilization rates, billing rate reductions,
fewer customer engagements, reduced gross margins, and loss of market share for
the Company, any of which could materially adversely affect its business,
financial condition and results of operations.
The Company believes the principal competitive factors in its market are
knowledge of the financial services industry, responsiveness to customer needs,
quality of service, project management capability, technical expertise and
price. ADS believes it competes favorably in most of these areas and excels in
the depth of industry knowledge and experience it brings to its financial
services customers. The Company believes its ability to compete also depends in
part on factors outside its control, including the ability of its competitors to
attract, motivate and retain project managers and other personnel.
To be successful in the future, the Company must respond promptly and
effectively to customer demands, technological changes and competitors'
innovations. The Company's competitors may be able to respond more quickly than
the Company to new or emerging technologies and changes in customer requirements
and devote greater resources to the development, promotion and sale of new
service offerings to prospective customers. There is no assurance that the
Company will be able to compete successfully with existing or new competitors or
that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent on certain proprietary methodologies and
software tools, including its Engagement Management Methodology, CPT and Year
2000 Methodology, that it uses in providing services to customers. The Company's
business also includes developing custom software for various customers.
Ownership of such software is generally assigned to the customer, and the
Company retains no right, title or interest in it.
The Company relies on a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws to protect its
proprietary rights. The Company currently holds no patents or registered
copyrights. The Company generally enters into confidentiality agreements with
its consultants, customers and potential customers and limits access to and
distribution of its proprietary information. While ADS does not usually enter
into confidentiality agreements with its employees, such employees are generally
required to sign confidentiality agreements in connection with specific client
engagements. There is no assurance that these steps will be adequate to deter
misappropriation of proprietary information of the Company or its customers or
that the Company will be able to detect unauthorized use of and take appropriate
steps to enforce its intellectual property rights.
In the future, litigation may be necessary to enforce and protect the
Company's trade secrets, copyrights and other intellectual property or
proprietary rights. The Company may also be subject to litigation to defend
against claimed infringement or to determine the scope and validity of the
intellectual property or proprietary rights of others. In the event of
litigation involving the Company's use of technology, the Company could be
required to expend significant resources to develop non-infringing technology or
to obtain licenses to technology involved in litigation. There is no assurance
that the Company would be successful in any such development or that any such
licenses would be
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<PAGE> 34
available on commercially reasonable terms, if at all. Although ADS is not aware
that its services, trademarks or other proprietary rights infringe upon the
proprietary rights of others, there is no assurance that third parties will not
assert infringement claims against the Company and that such claims will not
result in a material adverse effect on its business, financial condition and
results of operations. Any litigation concerning the Company's use of technology
could result in substantial cost to the Company in defending such actions and
divert management's attention from the Company's operations, either of which
could have a material adverse effect on its business, financial condition and
results of operations. Adverse determinations in such litigation could result in
the loss of the Company's proprietary rights, subject it to significant
liabilities, or prevent it from selling its services, any one of which could
have a material adverse effect on its business, financial condition and results
of operations. See "Risk Factors -- Intellectual Property Rights."
HUMAN RESOURCES
As of December 31, 1997, the Company employed 254 people, with 219 in
professional services and consulting, 13 in sales and marketing, and 22 in
general and administrative. As of December 31, 1997, the Company also utilized
10 individuals under independent contracts. None of the Company's employees is
represented by a labor union, and the Company has never experienced a work
stoppage. The Company considers its relations with its employees to be good.
The Company's success depends in large part on its ability to attract,
train, motivate, and retain highly skilled technical employees. Qualified
technical employees are in great demand and are likely to remain a limited
resource for the foreseeable future. ADS also needs to recruit technicians
knowledgeable in financial services, further complicating the recruiting task.
ADS dedicates significant resources to recruiting employees with IT consulting
and financial services industry experience. Many of the Company's employees are
hired from large IT, accounting and other professional services organizations
and from the financial services industry.
The Company believes its success in attracting, motivating and retaining
highly skilled technical employees is in part attributable to its commitment to
provide a work environment featuring continuous and extensive professional
development opportunities and diverse and challenging work projects. The Company
has historically experienced turnover rates that it believes are below industry
averages for IT professional services companies; however, there is no assurance
that these rates will continue. ADS has comprehensive and specialized training
programs focusing on industry knowledge, project management skills, relationship
building skills, and ADS's culture and history. The Company provides an
extensive training program for employees including in-house instruction and a
specialized management training program offered twice annually in conjunction
with Babson College. ADS believes its management structure, corporate culture,
human resources organization and comprehensive benefits package are designed to
maximize its ability to efficiently expand the Company's consulting staff in
response to customer needs. The Company's success will depend in part on its
continued ability to attract, motivate and retain highly qualified personnel in
a competitive market for project managers, professional services staff, and
sales and marketing personnel. See "Risk Factors -- Dependence on Key
Personnel," "-- Availability of Professional Staff."
FACILITIES
The Company's headquarters and administrative, sales and marketing
operations are in Quincy, Massachusetts in a leased facility consisting of
approximately 23,742 square feet. The Company has a right of first refusal to
lease any additional space becoming available in part of the premises. Although
this lease expires on March 31, 2000, the Company has an option to extend it for
an additional five-year term upon nine months' notice prior to the lease term's
expiration. ADS anticipates that additional space may be required as its
business expands.
LEGAL PROCEEDINGS
The Company is not a party to any litigation it believes could have a
material adverse effect on its business, financial condition and results of
operations.
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<PAGE> 35
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
the date of this Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert W. Howe...................... 51 Chief Executive Officer and Chairman of the Board
William H. Gallagher................ 50 President, Chief Operating Officer, Assistant Clerk
and Director
Paul K. McGrath..................... 51 Senior Vice President, Finance and Administration,
and Chief Financial Officer
Peter A. Cahill..................... 43 Executive Vice President and Director of Operations
David E. Olsson..................... 46 Executive Vice President and Director of Business
Development
Lee M. Kennedy(1)................... 63 Director
David C. Hodgson(1)(2).............. 41 Director
George F. Raymond(2)................ 61 Director
Richard D. Driscoll(1).............. 66 Director
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Robert W. Howe has been Chief Executive Officer and Chairman of the Board
of Directors of the Company since January 1994 and a Director since March 1980.
From March 1980 to January 1994, Mr. Howe served as President of the Company; he
served as Treasurer from March 1980 to July 1991. Prior to forming the Company
in March 1980 with Mr. Gallagher, Mr. Howe served as Executive Vice President of
Savings Management Computer Corporation, a bank service bureau. Mr. Howe
received his B.A. from Boston College.
William H. Gallagher has been President and Chief Operating Officer of the
Company since January 1994 and a Director since March 1980. From March 1980 to
January 1994, Mr. Gallagher served as Executive Vice President and Clerk of the
Company. Prior to forming the Company in March 1980 with Mr. Howe, Mr. Gallagher
served as Vice President of Savings Management Computer Corporation. Mr.
Gallagher attended Harvard University Extension School.
Paul K. McGrath has been Senior Vice President, Finance and Administration,
and Chief Financial Officer of the Company since January 1998. Prior to joining
the Company, Mr. McGrath served as Vice President, Chief Financial Officer and
Treasurer of Pivotpoint, Inc., an enterprise resource planning software company,
from December 1995 to January 1998. From April 1990 to January 1995, Mr. McGrath
served as Vice President, Chief Financial Officer and Treasurer of Bachman
Information Systems, Inc., a public software company in the computer aided
software engineering industry. Mr. McGrath is a Certified Public Accountant and
received his M.S. from Northeastern University and his B.A. from St. Anselm
College.
Peter A. Cahill has been Executive Vice President and Director of
Operations of the Company since October 1995. From April 1992 to October 1995,
Mr. Cahill served as Senior Vice President of Operations of the Company, and
from April 1989 to April 1992, Mr. Cahill served as Vice President of
Operations. Mr. Cahill also served in a number of technical positions at the
Company from April 1980 to April 1989. Prior to joining the Company in April
1980, Mr. Cahill served as Senior Technician at Savings Management Computer
Corporation. Mr. Cahill attended Bridgewater State College.
David E. Olsson has been Executive Vice President and Director of Business
Development of the Company since August 1996. Prior to joining the Company, Mr.
Olsson served as Senior Vice President and General Manager of Logica plc, an IT
consulting services company, from December 1994 to August
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<PAGE> 36
1996. From January 1991 to July 1994, Mr. Olsson served as Senior Vice President
of Business Development and Marketing at Boston Technology, Inc., a
telecommunications company. Mr. Olsson received his M.B.A. from Bentley College,
his Ed.M. from Boston University and a B.A. from the University of Massachusetts
at Amherst.
David C. Hodgson has been a Director of the Company since July 1988. Mr.
Hodgson has been a managing member of General Atlantic Partners, LLC ("GAP
LLC"), the general partner of General Atlantic Partners II, L.P., a private
equity investment firm, or a general partner of its predecessor partnerships
since February 1989. Mr. Hodgson is also a director of Baan Company N.V.,
ProBusiness Services, Inc., and several private information technology
companies. Mr. Hodgson received his M.B.A. from Stanford University and his A.B.
from Dartmouth College.
Lee M. Kennedy has been a Director of the Company since March 1980. Mr.
Kennedy served as President of Lee Kennedy Co., Inc., a general contracting
company, from February 1978 until July 1995, and has served as Chairman and
Chief Executive Officer since August 1995. Mr. Kennedy attended Curry College
and the Boston Architectural Center.
George F. Raymond has been a Director of the Company since April 1991. Mr.
Raymond retired as the President and Founder of Automatic Business Centers, Inc.
in 1990. Mr. Raymond is also a director of BMC Software, Inc., Docucorp
International, Inc. and several private information technology companies. Mr.
Raymond received his B.A. from the University of Massachusetts.
Richard D. Driscoll has been a Director of the Company since February 1998.
Mr. Driscoll served as President and Chief Executive Officer of the
Massachusetts Bankers Association from November 1990 to January 1997. From April
1987 to January 1990, Mr. Driscoll served as the Chairman and Chief Executive
Officer of The Bank of New England, N.A. Mr. Driscoll is also a director of
Chittenden Corporation and the Massachusetts Business Development Corporation.
Mr. Driscoll received his M.B.A. from Harvard Business School and his A.B. from
Boston College.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until their successors are duly elected and qualified.
Messrs. Howe, Gallagher and Hodgson were selected as Directors of the Company
pursuant to a Shareholders' Agreement dated July 15, 1988 between the Company
and certain of its shareholders, which agreement will terminate as of the
effective date of this offering. There are no family relationships among any of
the executive officers or directors of the Company.
Upon the closing of the offering, the Company's Board of Directors will be
divided into three classes, with the members of each class of directors serving
for staggered three-year terms. Messrs. Hodgson and Driscoll will serve in the
class the term of which expires in 1999; Messrs. Kennedy and Gallagher will
serve in the class the term of which expires in 2000; and Messrs. Howe and
Raymond will serve in the class the term of which expires in 2001. Upon the
expiration of the term of each class of directors, nominees for such class will
be elected for a three-year term at the next annual meeting of stockholders. The
Company's adoption of a classified Board of Directors could have the effect of
increasing the length of time necessary to change the composition of a majority
of the Board of Directors. In general, at least two annual meetings of
stockholders will be necessary for stockholders to effect a change in a majority
of the members of the Board of Directors. See "Description of Capital
Stock -- Massachusetts Law and Certain Provisions of the Company's Second
Amended and Restated Articles of Organization and Second Amended and Restated
By-Laws."
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee consists of Messrs. Hodgson and Raymond. The
Compensation Committee reviews and evaluates the compensation and benefits of
all officers of the Company, reviews general policy matters relating to
compensation and benefits of employees of the Company and make recommendations
concerning these matters to the Board of Directors. The Compensation
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<PAGE> 37
Committee also administers the Company's stock option and stock purchase plans.
See "-- Equity Plans."
The Audit Committee consists of Messrs. Kennedy, Hodgson and Driscoll. The
Audit Committee reviews, with the Company's independent auditors, the scope and
timing of their audit services and any other services they are asked to perform,
the auditors' report on the Company's consolidated financial statements
following completion of their audit, and the Company's policies and procedures
with respect to internal accounting and financial controls. In addition, the
Audit Committee will make annual recommendations to the Board of Directors for
the appointment of independent auditors for the ensuing year.
DIRECTOR COMPENSATION
Directors who are not employees of the Company (also referred to as
"outside directors"), who currently consist of Messrs. Kennedy, Hodgson, Raymond
and Driscoll, receive an annual retainer fee of $10,000 and a fee of $750 for
attending regular meetings of the Board of Directors and for meetings of any
committees of the Board of Directors on which they serve, if such meetings are
held separately. Directors are also reimbursed for reasonable out-of-pocket
expenses incurred in attending such meetings. Outside directors are also
eligible for participation in the Company's 1997 Stock Plan. See "-- Equity
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Hodgson and Raymond. No
member of the Compensation Committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Board or Compensation Committee.
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EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth the compensation
earned by Robert W. Howe, the Company's Chief Executive Officer, and the
Company's three other most highly compensated executive officers who were
serving as executive officers at the end of fiscal 1997 (together with the Chief
Executive Officer, the "Named Executive Officers") for services rendered in all
capacities to the Company in fiscal 1997. No other executive officer of the
Company received salary and bonus of $100,000 or more in fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
----------------------------------------- SECURITIES ALL OTHER
NAME AND OTHER ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION(1) SALARY($) BONUS($) COMPENSATION($)(2) OPTIONS(#)(3) ($)(1)(4)
- --------------------- --------- -------- ------------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Robert W. Howe.................. 317,708 77,398 41,297(5) -- 1,125
Chief Executive Officer
and Chairman of the Board
William H. Gallagher............ 317,708 77,398 -- -- 1,219
President and Chief Operating
Officer
Peter A. Cahill................. 140,000 77,398 -- 210,000 875
Executive Vice President and
Director of Operations
David E. Olsson................. 108,814 123,750 -- 420,000 1,094
Executive Vice President and
Director of Business
Development
</TABLE>
- ---------------
(1) Mr. McGrath, the Senior Vice President, Finance and Administration, and
Chief Financial Officer of the Company, who commenced employment with the
Company in January 1998, would have been among the five most highly
compensated individuals had he been with the Company during fiscal 1997. Mr.
McGrath's base salary is $160,000; upon joining the Company, Mr. McGrath was
granted an incentive stock option to purchase 66,666 shares of Class A
Common Stock at an exercise price of $4.25 per share and a non-qualified
stock option to purchase 23,334 shares of Class A Common Stock at an
exercise price of $4.25 per share.
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits,
securities or property has been omitted for certain Named Executive Officers
because such perquisites and other personal benefits, securities or property
constituted in the aggregate less than the lesser of $50,000 or 10% of such
persons' salary and bonus shown in the table.
(3) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive payments during fiscal
1997 to its executive officers. Options granted to the Named Executive
Officers were granted at fair market value as determined by the Board of
Directors based on all factors available to them on the grant date.
(4) Represents matching contributions paid by the Company on behalf of the Named
Executive Officers under the Company's 401(k) Plan.
(5) The Company provides a leased vehicle and automobile insurance to Mr. Howe.
The total cost to the Company for the automobile lease and insurance in
fiscal 1997 was $11,929.
37
<PAGE> 39
Option Grants. The following table provides information concerning grants
of stock options made during fiscal 1997 by the Company to each of the Named
Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
----------------------------------------------------- ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE/ EXPIRATION ---------------------
NAME(3) GRANTED(#)(1) FISCAL 1997 SHARE(1) DATE 5% 10%
------- ------------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter A. Cahill.......... 210,000 31.25% $0.91 10/31/06 $120,182 $304,564
David E. Olsson.......... 210,000 31.25 0.91 8/28/06 120,182 304,564
210,000 31.25 0.91 10/31/06 120,182 304,564
</TABLE>
- ------------
(1) All options were granted pursuant to the Company's Amended and Restated 1992
Incentive Stock Option Plan (the "1992 Plan") at not less than fair market
value as determined by the Board of Directors of the Company as of the date
of grant. All options were incentive stock options to the extent the
aggregate fair market value (determined at the time such options were
granted) of the shares with respect to which the options were exercisable
for the first time by such optionee during any calendar year did not exceed
$100,000. All options vested immediately upon grant. The options expire 10
years from the date of grant. No stock options were exercised by these Named
Executive Officers in fiscal 1997.
(2) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming that the stock price on the date of grant appreciates
at the specified annual rates of appreciation, compounded annually over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the time of such
exercise and the future performance of the Company's Common Stock.
(3) Mr. McGrath, the Senior Vice President, Finance and Administration, and
Chief Financial Officer of the Company, who commenced employment with the
Company in January 1998, would be among the five most highly compensated
individuals had he been with the Company during fiscal 1997. On January 11,
1998, Mr. McGrath was granted an incentive stock option to purchase 66,666
shares of Class A Common Stock at an exercise price of $4.25 per share and a
non-qualified stock option to purchase 23,334 shares of Class A Common Stock
at an exercise price of $4.25 per share. One-third of each of Mr. McGrath's
incentive stock option and non-qualified stock option, or 22,222 and 7,778
shares, respectively, vested immediately upon grant and the remaining shares
underlying each option vest in equal installments on the first and second
anniversary of the date of grant.
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<PAGE> 40
Unexercised Option Holdings. The following table provides information
regarding unexercised stock options held as of March 31, 1997 by each of the
Named Executive Officers. Such persons did not exercise any stock options in
fiscal 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES OF CLASS A COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)(1)
------------------------------ --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Peter A. Cahill..................... 266,000 -- 0 --
David E. Olsson..................... 420,000 -- 0 --
</TABLE>
- ---------------
(1) There was no public trading market for the Common Stock as of March 31,
1997. Accordingly, these values have been calculated by determining the
difference between the fair market value of the securities underlying the
option as of March 31, 1997 ($0.91 per share as determined by the Board of
Directors) and the exercise price of the Named Executive Officer's options.
EQUITY PLANS
Key Person Stock Plan. The Company's Key Person Stock Plan (the "Key
Person Plan") was adopted by the Board of Directors in March 1985. Under the Key
Person Plan, the Company is authorized to award shares of Class A Common Stock
to officers and other employees of and consultants to the Company. The aggregate
number of shares of Class A Common Stock which may be issued under the Key
Person Plan is 560,000. To date, 394,800 shares have been awarded under the Key
Person Stock Plan, of which an aggregate of 112,000 shares were repurchased by
the Company on October 11, 1991 pursuant to a stockholder's agreement between
the Company and a former employee. The Company does not intend to award any
further shares of Class A Common Stock under the Key Person Plan.
Amended and Restated 1992 Incentive Stock Option Plan. The Company's 1992
Incentive Stock Option Plan was adopted by the Board of Directors and approved
by the Company's voting stockholders in January 1993 and amended and restated by
the Board of Directors and stockholders in October 1997 (the "1992 Plan"). Under
the 1992 Plan, the Company is authorized to grant incentive stock options
("ISOs") to purchase shares of Class A Common Stock to officers and other
employees of and consultants to the Company. The 1992 Plan provides for the
accelerated vesting of options if the Company is consolidated with or acquired
by another entity in a merger or there is a sale of all or substantially all of
the Company's assets. The aggregate number of shares of Class A Common Stock
which may be issued under the 1992 Plan is 812,000. To date, options for all
authorized shares have been granted under the 1992 Plan. The Company does not
intend to award any further options under the 1992 Plan.
1997 Stock Plan. The Company's 1997 Stock Plan (the "1997 Plan") was
adopted by the Board of Directors and approved by the Company's voting
stockholders in October 1997. The aggregate number of shares of Class A Common
Stock which may be issued under the 1997 Plan is 500,000. In March 1998, the
Board of Directors voted to amend and restate the 1997 Plan, subject to
stockholder approval, to provide, effective immediately prior to the closing of
this offering, that all shares of the Class A Common Stock reserved for issuance
under the 1997 Plan be converted into shares of Common Stock in accordance with
the Company's Amended and Restated Articles of Organization and that the number
of shares reserved for issuance under the 1997 Plan be increased from 500,000
shares of Class A Common Stock to 1,500,000 shares of Common Stock. Under the
1997 Plan, the Company is authorized to grant ISOs and non-qualified stock
options ("NQSOs") (collectively, "Stock Options"), as well as awards of Class A
Common Stock ("Awards") and opportunities to make direct purchases of Class A
Common Stock ("Purchases") to employees, consultants, directors and officers of
the Company.
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<PAGE> 41
The 1997 Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the provisions of the 1997 Plan, the Compensation
Committee has the authority to select the participants and determine the terms
of the Stock Options, Awards and Purchases granted under the 1997 Plan,
including: (i) the time or times at which Stock Options, Awards and Purchases
may be granted; (ii) whether a Stock Option will be an ISO or a NQSO; (iii) the
number of shares subject to each Stock Option, Award and Purchase; (iv) when the
Stock Option becomes exercisable; (v) the exercise price of the Stock Option,
which in the case of an ISO cannot be less than the fair market value of the
Class A Common Stock as of the date of grant, or not less than 110% of the fair
market value in the case of an ISO granted to an employee or officer holding 10%
or more of the voting stock of the Company; (vi) the duration of the Stock
Option; and (vii) the time, manner and form of payment upon exercise of a Stock
Option. A Stock Option is not transferable by the recipient except by will or by
the laws of descent and distribution, or in the case of a NQSO, only to the
extent set forth in the agreement relating to such option or pursuant to a valid
domestic relations order. Generally, no ISO may be exercised more than 30 days
following termination of employment, and no Stock Option may be exercised
following termination of employment for cause. However, in the event that
termination is due to death or disability, the Stock Option is exercisable for a
maximum of one year after such termination. To date, the Company has granted
Stock Options to purchase an aggregate of 371,000 shares of Class A Common Stock
pursuant to the 1997 Plan (not including 175,500 shares which will be granted as
of the effective date of this offering at an exercise price equal to the initial
public offering price).
1998 Employee Stock Purchase Plan. The 1998 Employee Stock Purchase Plan
(the "1998 Purchase Plan") was adopted by the Board of Directors in March 1998,
subject to stockholder approval, to be effective immediately prior to the
closing of this offering. The 1998 Purchase Plan provides for the issuance of a
maximum of 500,000 shares of Common Stock pursuant to the exercise of
nontransferable options granted to participating employees.
The 1998 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
for more than 20 hours per week and for more than three months in any calendar
year are eligible to participate in the 1998 Purchase Plan. Outside Directors
and employees who would own 5% or more of the total combined voting power or
value of the Company's stock immediately after the grant may not participate in
the 1998 Purchase Plan. To participate in the 1998 Purchase Plan, an employee
must authorize the Company to deduct an amount (not less than one percent nor
more than 10 percent of a participant's total cash compensation) from his or her
pay during six-month payment periods (each, a "Payment Period"). The first
Payment Period will commence upon the registration of the Company's Common Stock
under the Securities Exchange Act of 1934, as amended, and will end on the
earlier of the following September 30 or March 31. Thereafter, the Payment
Periods will commence on the six-month periods commencing on April 1 and October
1, respectively, and ending on the following September 30 and March 31,
respectively, of each year, but in no case shall an employee be entitled to
purchase more than 500 shares in any one Payment Period. The exercise price for
the option granted in each Payment Period is 85% of the lesser of the average
market price of the Common Stock on the first or last business day of the
Payment Period, in either event rounded up to the nearest cent to avoid
fractions of a dollar other than 1/4, 1/2 and 3/4. If an employee is not a
participant on the last day of the Payment Period, such employee is not entitled
to exercise his or her option, and the amount of his or her accumulated payroll
deductions will be refunded. Options granted under the 1998 Purchase Plan may
not be transferred or assigned. An employee's rights under the 1998 Purchase
Plan terminate upon his or her voluntary withdrawal from the plan at any time or
upon termination of employment. No options have been granted to date under the
1998 Purchase Plan.
401(K) PLAN
The Company has a Section 401(k) Profit Sharing Plan (the "401(k) Plan").
The 401(k) Plan is a tax-qualified plan covering Company employees who are over
21 years of age. Under the 401(k) Plan,
40
<PAGE> 42
participants may elect to defer a portion of their compensation, subject to
certain limitations. In addition, at the discretion of the Board of Directors,
the Company may make matching contributions into the 401(k) Plan for all
eligible employees. During fiscal 1997 the Company contributed $83,062 to the
401(k) Plan.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Agreements") with
each of its Named Executive Officers and Mr. McGrath, the Company's Senior Vice
President, Finance and Administration, and Chief Financial Officer. The
Agreements set forth the base salaries of each such executive officer and such
officer's entitlement to participate in the Company's standard benefits package
generally available for all other officers of the Company similarly situated.
Generally, these employees are entitled to a cash severance payment upon
termination by the Company of their employment without "cause" or upon
termination by the employee of his or her employment for any reason following a
"change of control" (as defined in the Agreements). Such lump-sum severance
payment is equal to 12 months' salary at the employee's then current base rate,
payable in the same manner as such salary was payable during the period of such
employee's employment. In addition, upon a change of control, the Company is
obligated to continue the employee's health benefits for a 12 month period from
the date of such change of control.
The Agreements also include certain restrictive covenants for the benefit
of the Company relating to non-disclosure by the employee of the Company's
confidential business information and the Company's right to inventions and
technical improvements made by the employee. The Agreements also contain a
provision prohibiting the employee from soliciting employees or customers of the
Company for a period of two years after any termination of the employee's
employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The By-laws of the Company provide that the directors and officers of the
Company shall be indemnified by the Company to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with service for or
on behalf of the Company. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the By-laws, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. The Company
intends to obtain insurance which insures the directors and officers of the
Company against certain losses and which insures the Company against certain of
its obligations to indemnify such directors and officers. In addition, the
Articles of Organization of the Company provide that the directors of the
Company will not be personally liable for monetary damages to the Company for
breaches of their fiduciary duty as directors, unless they violate their duty of
loyalty to the Company or its stockholders, act in bad faith, or engage in
intentional misconduct or a knowing violation of law, authorize illegal
dividends or redemptions or derive an improper personal benefit from their
actions as directors. Such limitations of personal liability under the
Massachusetts Business Corporation Law do not apply to liabilities arising out
of certain violations of the federal securities laws. While non-monetary relief
such as injunctive relief, specific performance and other equitable remedies may
be available to the Company, such relief may be difficult to obtain or, if
obtained, may not adequately compensate the Company for its damages.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification by the Company
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
41
<PAGE> 43
CERTAIN TRANSACTIONS
Lee Kennedy Co., Inc., whose Chairman and Chief Executive Officer, Lee M.
Kennedy, is a director of the Company, has provided certain construction
services to the Company at its Quincy, Massachusetts facility. The aggregate
value of these services in fiscal 1995, 1996 and 1997 was $11,211, $66,555 and
$59,958, respectively.
The Company has contracted with the J. Barry Driscoll Insurance Agency for
insurance coverage for certain of the Company's executive officers and for
certain corporate polices. J. Barry Driscoll, the Chairman of the Board of
Directors of J. Barry Driscoll Insurance Agency, is the brother of Richard D.
Driscoll, a director of the Company. The aggregate cost of the insurance
coverage provided through the J. Barry Driscoll Insurance Agency to the Company
in fiscal 1996 and 1997 was $66,169 and $64,124, respectively.
The Company believes the transactions set forth above were made on terms no
less favorable to the Company than would have been obtained from unaffiliated
third parties. The Company has adopted a policy whereby all future transactions
between the Company and its officers, directors and affiliates will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties and will be approved by a majority of the disinterested members of the
Company's Board of Directors.
42
<PAGE> 44
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of the date of
this Prospectus and as adjusted to reflect the sale of the shares of Common
Stock offered hereby by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock; (ii) each of the
Company's directors; (iii) each Named Executive Officer (see
"Management -- Executive Compensation"); (iv) all executive officers and
directors as a group; and (v) each Selling Stockholder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) AFTER OFFERING(1)(2)
------------------------ ----------------------
NUMBER OF SHARES NUMBER OF
NAME OF BENEFICIAL OWNER(3) SHARES PERCENTAGE OFFERED(4) SHARES PERCENTAGE
--------------------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
General Atlantic Partners II,
L.P.(5)............................. 3,104,080 28.8% -- 3,104,080 24.3%
Robert W. Howe(6)..................... 2,329,740 21.6 250,000 2,079,740 16.3
William H. Gallagher(7)............... 2,329,740 21.6 250,000 2,079,740 16.3
Paul K. McGrath....................... 30,000 * -- 30,000 *
Peter A. Cahill(8).................... 439,000 4.0 -- 439,000 3.4
David E. Olsson(9).................... 425,000 3.9 -- 425,000 3.3
Lee M. Kennedy(10).................... 1,068,400 9.9 -- 1,068,400 8.4
David C. Hodgson(11).................. 3,104,080 28.8 -- 3,104,080 24.3
George F. Raymond(12)................. 42,000 * -- 42,000 *
Richard D. Driscoll(13)............... 15,000 * -- 15,000 *
Edward B. Gardner, Jr.(14)............ 542,360 5.0 -- 542,360 4.2
All executive officers and directors
as a group (9 persons)(15).......... 9,782,960 88.8% 500,000 9,282,960 71.3%
</TABLE>
- ---------------
* Indicates less than 1%.
(1) Assumes conversion of all of the Company's outstanding shares of Special
Common Stock and Class A Common Stock on a 1-for-1 basis into Common Stock.
Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned. Shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days from the date of this
Prospectus are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
(2) Assumes that the Underwriters' over-allotment option to purchase up to an
additional 375,000 shares from certain Selling Stockholders is not
exercised.
(3) See "Management -- Executive Officers and Directors." Unless otherwise
indicated, the address for each beneficial owner is c/o Atlantic Data
Services, Inc., One Batterymarch Park, Quincy, MA 02169.
(4) If the Underwriters exercise their over-allotment option to purchase up to
an additional 375,000 shares, then the following stockholders will sell up
to the following number of additional shares: Robert W. Howe, 55,800
shares; Howe Family Limited Partnership, 35,000 shares; Robert W. Howe
Grantor Retained Annuity Trust, 20,000 shares; William H. Gallagher, 55,800
shares; Gallagher Family Limited Partnership, 35,000 shares; William H.
Gallagher Grantor Retained Annuity Trust, 20,000 shares; Peter A. Cahill,
45,000 shares; Lee M. Kennedy, 68,400 shares; and Edward B. Gardner, Jr.,
40,000 shares.
(5) The address of General Atlantic Partners II, L.P. ("GAP II") is c/o General
Atlantic Service Corporation, 3 Pickwick Plaza, Greenwich, CT 06830.
(6) Includes 258,860 shares held by the Howe Family Limited Partnership. Mr.
Howe disclaims beneficial ownership of these shares except to the extent of
his proportionate pecuniary interest
43
<PAGE> 45
therein, which interest is a 1% general partnership interest. Does not
include 258,860 shares held by Stephen A. Hurwitz as Trustee of the Robert
W. Howe Grantor Retained Annuity Trust. Mr. Howe retains the right to an
annual annuity payment from this trust payable in each of 1998 through 2002
which may result in certain of the 258,860 shares being returned to him.
(7) Includes 258,860 shares held by the Gallagher Family Limited Partnership.
Mr. Gallagher disclaims beneficial ownership of the shares except to the
extent of his proportionate pecuniary interest therein, which interest is a
1% general partnership interest. Does not include 258,860 shares held by
Stephen A. Hurwitz as Trustee of the William H. Gallagher Grantor Retained
Annuity Trust. Mr. Gallagher retains the right to an annual annuity payment
from this trust which may result in certain of the 258,860 shares being
returned to him.
(8) Includes 198,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 100,000 shares held by the Peter & Andrea Cahill
Family Limited Partnership. Mr. Cahill has shared voting and investment
power with his spouse with respect to such shares. Mr. Cahill disclaims
beneficial ownership of these shares except to the extent of his
proportionate pecuniary interest therein, which interest is a 1% general
partnership interest held by each of Mr. Cahill and his spouse.
(9) Includes 5,000 shares of Common Stock issuable upon exercise of stock
options.
(10) Mr. Kennedy's address is c/o Lee Kennedy Co., Inc., 1792 Dorchester Avenue,
Boston, MA 02124. Does not include 20,000 shares held by Mary Elizabeth
Kennedy and Jennifer C. Snyder, and their Successors, as Trustees of the
Lee M. Kennedy 1997 Irrevocable Trust f/b/o Eugene Kennedy dated November
6, 1997; 20,000 shares held by Mary Elizabeth Kennedy and Jennifer C.
Snyder, and their Successors, as Trustees of the Lee M. Kennedy 1997
Irrevocable Trust f/b/o Lee Michael Kennedy dated November 6, 1997; and
20,000 shares held by Mary Elizabeth Kennedy and Jennifer C. Snyder, and
their Successors, as Trustees of the Lee M. Kennedy 1997 Irrevocable Trust
f/b/o Shaila Kennedy dated November 6, 1997 (collectively, the "Trusts").
(11) Mr. Hodgson's address is c/o General Atlantic Service Corporation, 3
Pickwick Plaza, Greenwich, CT 06830. Consists of 3,104,080 shares held by
GAP II. Mr. Hodgson is a managing member of GAP LLC, the general partner of
GAP II. Mr. Hodgson disclaims beneficial ownership of these shares except
to the extent of his proportionate pecuniary interest therein.
(12) Mr. Raymond's address is 210 E. Oak Avenue, Morristown, NJ 08057. Consists
of 42,000 shares of Common Stock issuable upon exercise of options pursuant
to the Company's 1992 Plan.
(13) Mr. Driscoll's address is 116 Laurel Road, Chestnut Hill, MA 02167.
(14) Includes 128,000 shares of Common Stock held by the Gardner Family Limited
Partnership. Mr. Gardner has shared voting and investment power with his
spouse with respect to such shares. Mr. Gardner disclaims beneficial
ownership of these shares except to the extent of his proportionate
pecuniary interest therein, which interest is a 1% general partnership
interest held by each of Mr. Gardner and his spouse.
(15) Includes 245,000 shares of Common Stock issuable upon exercise of stock
options.
44
<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering and the filing of the Company's
Second Amended and Restated Articles of Organization (the "Second Amended and
Restated Articles"), the authorized capital stock of the Company will consist of
60,000,000 shares of common stock, $.01 par value per share (the "Common
Stock"), and 1,000,000 shares of preferred stock, $.01 par value per share (the
"Preferred Stock").
Prior to the closing of this offering and in accordance with the Company's
Amended and Restated Articles of Organization as currently in effect (the
"Amended and Restated Articles"), the Company is authorized to issue up to
11,746,840 shares of Common Stock, $.01 par value per share, of which 6,847,960
shares are issued and outstanding; 3,104,080 shares of Special Common Stock,
$.01 par value per share, of which 3,104,080 shares are issued and outstanding;
and 1,694,800 shares of Class A Common Stock, of which 816,790 shares are issued
and outstanding. Upon the closing of this offering, all shares of Special Common
Stock and Class A Common Stock will be converted into an equivalent number of
shares of Common Stock.
The following summary of certain provisions of the Common Stock, the
Special Common Stock and the Class A Common Stock does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of
applicable law and by the Company's Second Amended and Restated Articles and
Amended and Restated Articles, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
As of December 31, 1997, there were 10,670,840 shares of Common Stock
outstanding on a pro forma basis (giving effect to the conversion of all
outstanding Special Common Stock and Class A Common Stock upon the closing of
this offering), held of record by 19 stockholders. Based upon the pro forma
number of shares outstanding as of that date and giving effect to the issuance
of the 2,000,000 shares of Common Stock offered hereby, there will be 12,670,840
shares of Common Stock outstanding upon the closing of this offering.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, do not have cumulative voting
rights and, prior to this offering, vote together with the Special Common Stock
as a single class. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor; prior to this offering, this right is subject to any
preferential dividend rights of outstanding shares of Special Common Stock. Upon
the liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities; prior to this offering,
this right is subject to the prior rights of any outstanding shares of Special
Common Stock. Holders of the Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares offered by the Company in this offering will be, when issued and paid
for, fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future as set forth in the Company's
Second Amended and Restated Articles.
SPECIAL COMMON STOCK
Upon the closing of this offering, all outstanding shares of Special Common
Stock will be converted into shares of Common Stock. Holders of Special Common
Stock are entitled to one vote for each share held on all matters submitted to a
vote of stockholders and do not have cumulative voting rights. Holders of
Special Common Stock and Common Stock vote together as a single class on all
matters; provided, however, that the affirmative vote of the holders of Special
Common Stock is required to authorize any action which alters or changes the
rights, preferences or privileges of the
45
<PAGE> 47
Special Common Stock, increases the authorized number of shares of Special
Common Stock, Common Stock or Class A Common Stock or creates any new class of
shares having preference over or on a parity with the Special Common Stock.
Holders of Special Common Stock are not entitled to dividends; however, if the
Board of Directors declares a dividend or other distribution payable upon any
other class of the outstanding shares of Common Stock, the holders of Special
Common Stock are entitled to receive ratably such dividends. Upon the
liquidation, dissolution or winding up of the Company, the holders of Special
Common Stock are entitled to receive ratably the net assets of the Company
available after the payment of all debts and other liabilities and prior to any
payment to the holders of the Common Stock or the Class A Common Stock. Shares
of Special Common Stock are convertible at any time, subject to certain
requirements, into an equivalent number of shares of Common Stock, and will be
so converted upon the closing of this offering.
CLASS A COMMON STOCK
Upon the closing of this offering, all outstanding shares of Class A Common
Stock will be converted into Common Stock in accordance with the Company's
Amended and Restated Articles. Holders of Class A Common Stock are entitled to
the same powers, preferences and special rights as are holders of Common Stock,
except that holders of Class A Common Stock have no voting rights (other than
the right under Massachusetts law to vote separately as a class on any
amendment, repeal or modification of any provision of the Amended and Restated
Articles or on any merger that would adversely affect their powers, preferences
or special rights as holders of Class A Common Stock) and are not entitled to
receive or share in dividends. Shares of Class A Common Stock are not included
in determining the shares entitled to vote on any matter on which the
stockholders of the Company are entitled to vote. Shares of Class A Common Stock
are convertible at any time, subject to certain requirements, into an equivalent
number of shares of Common Stock, and will be so converted upon the closing of
this offering.
PREFERRED STOCK
Upon the closing of this offering, the Company's Board of Directors will be
authorized, subject to certain limitations prescribed by law, without further
stockholder approval, to issue from time to time up to an aggregate of 1,000,000
shares of Preferred Stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations of
such series. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S SECOND AMENDED AND
RESTATED ARTICLES OF ORGANIZATION AND SECOND AMENDED AND RESTATED BY-LAWS
Following the closing of this offering, the Company expects that it will
have more than 200 stockholders, thus making it subject to Chapter 110F of the
Massachusetts General Laws, an anti-takeover law. In general, this statute
prohibits a publicly-held Massachusetts corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
Board of Directors prior to becoming an interested stockholder, (ii) the
interested stockholder acquires 90% of the outstanding voting stock of the
corporation (excluding shares held by certain affiliates of the corporation) at
the time it becomes an interested stockholder, or (iii) the business combination
is approved by both the Board of Directors and the holders of two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder). An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 5% or more of the outstanding
46
<PAGE> 48
voting stock of the corporation. A "business combination" includes a merger, a
stock or asset sale, and certain other transactions resulting in a financial
benefit to the interested stockholder. By a vote of a majority of its
stockholders, the Company may elect not to be governed by Chapter 110F, but such
an amendment would not be effective for 12 months and would not apply to a
business combination with any person who became an interested stockholder prior
to the adoption of the amendment. The Company has not elected to opt out of this
coverage.
Massachusetts General Laws Chapter 156B, Section 50A generally requires
that publicly-held Massachusetts corporations have a classified board of
directors consisting of three classes as nearly equal in size as possible,
unless the corporation elects to opt out of the statute's coverage. The Board of
Directors has opted out of the statute's coverage. The Company's Second Amended
and Restated Articles do, however, contain a provision providing for a staggered
board of directors.
The Company's proposed Second Amended and Restated By-Laws to be effective
upon the closing of this offering include a provision excluding the Company from
the applicability of Massachusetts General Laws Chapter 110D, entitled
"Regulation of Control Share Acquisitions." In general, this statute provides
that any stockholder of a corporation subject to this statute who acquires 20%
or more of the outstanding voting stock of a corporation may not vote such stock
unless the stockholders of the corporation so authorize. The Board of Directors
may amend the Company's Second Amended and Restated By-Laws at any time to
subject the Company to this statute prospectively.
The Second Amended and Restated By-Laws require that a stockholder seeking
to have any business conducted at a meeting of stockholders, including
nominations for the Board of Directors, give notice to the Company not less than
60 and not more than 90 days prior to the scheduled meeting, provided in certain
circumstances that a 10-day notice rule applies. The notice from the stockholder
must describe the proposed business to be brought before the meeting and include
information about the stockholder making the proposal, any beneficial owner on
whose behalf the proposal is made and any other stockholder known to be
supporting the proposal. The Second Amended and Restated By-Laws require the
Company to call a special stockholders meeting at the request of stockholders
holding at least 40% of the voting power of the Company.
The Second Amended and Restated By-laws provide that the directors and
officers of the Company shall be indemnified by the Company to the fullest
extent authorized by Massachusetts law, as it now exists or may in the future be
amended, against all expenses and liabilities reasonably incurred in connection
with services for or on behalf of the Company. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the Second Amended
and Restated By-laws, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. The Company intends to obtain insurance which
insures the directors and officers of the Company against certain losses and
which insures the Company against certain of its obligations to indemnify such
directors and officers. In addition, the Second Amended and Restated Articles
provide that the directors of the Company will not be personally liable for
monetary damages to the Company for breaches of their fiduciary duty as
directors, unless they violate their duty of loyalty to the Company or its
stockholders, act in bad faith, knowingly or intentionally violate the law,
authorize illegal dividends or redemptions or derive an improper personal
benefit from their actions as directors. Such limitations of personal liability
under the Massachusetts Business Corporation Law do not apply to liabilities
arising out of certain violations of the federal securities laws. While
non-monetary relief such as injunctive relief, specific performance and other
equitable remedies may be available to the Company, such relief may be difficult
to obtain or, if obtained, may not adequately compensate the Company for its
damages.
The Second Amended and Restated Articles provide that any amendment to the
Second Amended and Restated Articles, the sale, lease or exchange of all or
substantially all of the Company's property and assets or the merger or
consolidation of the Company into or with any other corporation may be
authorized by the approval of the holders of a majority of the shares of each
class of stock entitled to
47
<PAGE> 49
vote thereon, rather than by two-thirds as otherwise provided by statute,
provided that the transactions have been authorized by a majority of the members
of the Board of Directors and the requirements of any other applicable
provisions of the Second Amended and Restated Articles have been met.
In addition, the Second Amended and Restated Articles provide that shares
of the Company's Preferred Stock may be issued in the future without stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. See "-- Preferred
Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe
Limited Partnership.
48
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 12,783,830 shares
of Common Stock outstanding (based upon shares of Common Stock outstanding as of
March 26, 1998, the conversion of all outstanding shares of Special Common Stock
and Class A Common Stock, and assuming no exercise of outstanding stock
options). Of these shares, the 2,500,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations of
Rule 144 described below. The remaining 10,283,830 shares of Common Stock (the
"Restricted Shares") held by existing stockholders upon completion of this
offering will be "restricted" securities within the meaning of Rule 144 and may
not be sold except in compliance with the registration requirements of the
Securities Act or an applicable exemption under the Securities Act, including an
exemption pursuant to Rule 144.
SALES OF RESTRICTED SHARES
Beginning 90 days after the date of this Prospectus, approximately 114,800
Restricted Shares will become eligible for sale in the public market pursuant to
Rule 144 or Rule 701 under the Securities Act. Beginning 180 days after the date
of this Prospectus, approximately 10,169,030 additional Restricted Shares
subject to lock-up agreements (the "Lock-up Agreements") between the
Underwriters and certain stockholders, including officers and directors, will
become eligible for sale in the public market pursuant to Rule 144(k), Rule 144
or Rule 701. In addition, certain existing holders of an aggregate of 9,452,040
shares of Common Stock have the right to require registration of their shares
under certain circumstances. However, such stockholders have entered into the
Lock-up Agreements with respect to all shares owned by them and not sold in this
offering, which provide that they will not sell or otherwise dispose of any
shares of Common Stock (except for shares sold in this offering) without the
prior written consent of BancAmerica Robertson Stephens for a period of 180 days
from the date of this Prospectus. BancAmerica Robertson Stephens may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to the Lock-up Agreements. See "-- Registration Rights"
and "Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least one year (including the holding period of certain
prior owners) is entitled to sell in "brokers' transactions" or to market
makers, within any three-month period commencing 90 days after the Company
becomes subject to the reporting requirements of Section 13 of the Exchange Act,
a number of such shares that does not exceed the greater of (i) one percent of
the then outstanding shares of Common Stock (approximately 127,838 shares
immediately after this offering) or (ii) the average weekly trading volume in
the Common Stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of such sale is filed. Sales under Rule 144
are also subject to certain limitations on manner of sale, notice requirements
and availability of current public information about the Company. In addition,
under Rule 144(k), a person who is not an Affiliate and has not been an
Affiliate for at least three months prior to the sale and who has beneficially
owned Restricted Shares for at least two years may resell such shares without
regard to the limitations described above. In meeting the one and two year
holding periods described above, a holder of Restricted Shares can include the
holding periods of a prior owner who was not an Affiliate. Further, Rule 144A
under the Securities Act as currently in effect permits the immediate sale of
restricted shares to certain qualified institutional buyers without regard to
the volume restrictions described above.
STOCK OPTIONS
In general, under Rule 701 of the Securities Act as currently in effect,
any employee, consultant or advisor of the Company who purchased shares from the
Company in connection with a compensatory stock or option plan or other written
compensatory agreement is entitled to resell such shares without
49
<PAGE> 51
having to comply with the public-information, holding-period, volume-limitation
or notice provisions of Rule 144, and Affiliates are entitled to sell their Rule
701 shares under Rule 144 without having to comply with Rule 144's
holding-period restrictions, in each case commencing 90 days after the Company
becomes subject to the reporting requirements of Section 13 of the Exchange Act.
Rule 701 is available for stockholders of the Company as to all shares issued
pursuant to exercise of options granted prior to the offering.
As of March 26, 1998, the Board of Directors has authorized an aggregate of
up to 2,308,010 shares of Common Stock for issuance pursuant to the Company's
stock option and stock purchase plans. As of March 26, 1998, and assuming the
conversion of all shares of Class A Common Stock reserved for issuance under the
Company's stock option plans into Common Stock, options to purchase a total of
649,510 shares of Common Stock were outstanding; 145,750 of the shares issuable
pursuant to such options are not yet exercisable; and an additional 1,628,500
shares of Common Stock are available for future grants under the Company's stock
option and stock purchase plans. In addition, options to purchase 175,500 shares
will be granted as of the effective date of this offering at an exercise price
equal to the initial public offering price. Certain holders of such options have
executed Lock-up Agreements. See "Management -- Equity Plans."
The Company intends to file one or more registration statements on Form S-8
under the Securities Act promptly after the date of this prospectus to register
all shares of Common Stock subject to outstanding stock options and Common Stock
issuable pursuant to the Company's stock option plans. Such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to the Lock-up Agreements, to the extent applicable.
LOCK-UP AGREEMENTS
Certain security holders and all officers and directors of the Company have
agreed, pursuant to the Lock-up Agreements, that they will not, without the
prior written consent of BancAmerica Robertson Stephens, offer, sell, contract
to sell or otherwise dispose of, directly or indirectly, any shares of Common
Stock beneficially owned by them for a period of 180 days after the date of this
Prospectus.
REGISTRATION RIGHTS
Upon the expiration of the contractual lock-up period, certain security
holders of the Company (the "Rights Holders") will be entitled to require the
Company to register under the Securities Act up to a total of 9,452,040 shares
of outstanding Common Stock (the "Registrable Shares") under the terms of an
agreement between the Company and the Rights Holders (the "Registration Rights
Agreement"). The Registration Rights Agreement provides that if the Company
proposes to register in a firm commitment underwritten offering any of its
securities under the Securities Act at any time or times, the Rights Holders,
subject to certain exceptions, shall be entitled to include Registrable Shares
in such registration. However, the managing underwriter of any such offering may
exclude for marketing reasons some or all of such Registrable Shares from such
registration. The Rights Holders also have, subject to certain conditions and
limitations, the right to require the Company, on no more than three occasions,
to prepare and file a registration statement under the Securities Act with
respect to their Registrable Shares. The Company is generally required to bear
the expenses of all such registrations, except underwriting discounts and
commissions. The Registration Rights Agreement terminates in March 2001.
Prior to this offering, there has not been any public market for the
securities of the Company. No predictions can be made as to the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could materially
adversely affect the prevailing market price. See "Risk Factors -- Shares
Eligible for Future Sale."
50
<PAGE> 52
UNDERWRITING
The Underwriters named below acting through their representatives,
BancAmerica Robertson Stephens, BT Alex. Brown and Adams, Harkness & Hill, Inc.
(the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock set forth opposite
their respective names below. The Underwriters are committed to purchase and pay
for all of such shares if any are purchased:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
BancAmerica Robertson Stephens..............................
BT Alex. Brown..............................................
Adams, Harkness & Hill, Inc. ...............................
---------
Total............................................. 2,500,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price, less a concession of not more than $ per share,
of which $ per share may be reallowed to other dealers. After the
initial public offering, the public offering price, concession and reallowances
to dealers may be reduced by the Representatives.
Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus,
to purchase an aggregate of up to an additional 375,000 shares of Common Stock
at the same price per share as the Company and the Selling Stockholders received
for the 2,500,000 shares that the Underwriters have agreed to purchase. To the
extent that the Underwriters exercise such option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage of such
additional shares that the number of shares of Common Stock to be purchased by
it shown in the above table represents as a percentage of the 2,500,000 shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the 2,500,000 shares are being
sold. The Selling Stockholders subject to such over-allotment option will be
obligated, pursuant to the option, to sell shares to the Underwriters to the
extent the option is exercised. The Underwriters may exercise such option only
to cover over-allotments made in connection with the sale of Common Stock
offered hereby.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liability
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
Certain securityholders of the Company have agreed with the Representatives
that, until 180 days after the date of this Prospectus, subject to certain
limited exceptions, they will not, directly or indirectly, sell, offer, contract
to sell, pledge, grant any option to purchase or otherwise dispose of any shares
of Common Stock or any securities convertible into, or exchangeable for, or any
rights to purchase or acquire, shares of Common Stock, owned directly by such
holders or with respect to which they have the power of disposition, without the
prior written consent of BancAmerica Robertson Stephens. BancAmerica Robertson
Stephens may, in its sole discretion and without notice, release all or any
portion of the securities subject to the lock-up agreements. See "Shares
Eligible for
51
<PAGE> 53
Future Sale -- Lock-up Agreements." Approximately 10,169,030 of such shares will
be eligible for immediate public sale following expiration of the lock-up
period, subject to Rule 144. In addition, the Company has agreed that, until 180
days from the date of this Prospectus, the Company will not, without the prior
written consent of BancAmerica Robertson Stephens, subject to certain limited
exceptions, sell or otherwise dispose of any shares of Common Stock, any options
or warrants to purchase any shares of Common Stock or any securities convertible
into, exercisable for or exchangeable for shares of Common Stock other than the
Company's sale of shares in this offering, the issuance of Common Stock upon the
exercise of outstanding options, or the Company's grant of options and issuance
of stock under existing employee stock option or stock purchase plans.
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
over-allot or effect transactions which stabilize, maintain or otherwise affect
the market price of the Common Stock at levels above those which might otherwise
prevail in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the Common Stock. A syndicate
covering transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the Underwriters to reclaim a selling concession from a syndicate member in
connection with the offering when shares of Common Stock sold by the syndicate
member are purchased in syndicate covering transactions. Such transaction may be
effected, where permitted, on the Nasdaq National Market, in the
over-the-counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the shares of Common Stock offered hereby for employees of
the Company and certain individuals who have expressed an interest in purchasing
shares of Common Stock in this offering. The number of shares available for sale
to the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock was determined through negotiations between the Company,
representatives of the Selling Stockholders and the Representatives. The
material factors considered in such negotiations were prevailing market and
economic conditions, revenues and earnings and other financial information of
the Company, the market valuations of other companies engaged in activities
similar to those of the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. There
can be no assurance that an active or orderly trading market will develop for
the Common Stock or that the Common Stock will trade in the public market
subsequent to this offering at or above the initial trading price. See "Risk
Factors -- No Prior Public Market; Possible Volatility of Stock Price" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
52
<PAGE> 54
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Hale and Dorr LLP, Boston, Massachusetts. Mr. Hurwitz, a
partner of Testa, Hurwitz & Thibeault, LLP, serves as Trustee of each of the
Robert W. Howe Grantor Retained Annuity Trust and the William H. Gallagher
Grantor Retained Annuity Trust (collectively, the "Trusts"), which Trusts each
beneficially own 258,860 shares of the Company's Common Stock.
EXPERTS
The audited consolidated financial statements and schedule of the Company
as of March 31, 1996 and 1997 and for each of the three years in the period
ended March 31, 1997 included in this Prospectus and elsewhere in the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included herein in reliance upon such reports given upon the authority of
said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (including all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement.
For further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
regarding the contents of any agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, DC
20549, and at its regional offices in New York (Seven World Trade Center, New
York, New York 10007) and in Chicago (Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60611) and copies of all or any part thereof
may be obtained from such offices upon payment of the prescribed fees. In
addition, the Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants (including
the Company) that file electronically with the Commission which can be accessed
at http://www.sec.gov.
The Company intends to furnish holders of its Common Stock offered hereby
with annual reports containing consolidated financial statements audited by an
independent accounting firm and with quarterly reports containing unaudited
summary consolidated financial statements for each of the first three quarters
of each fiscal year.
53
<PAGE> 55
ATLANTIC DATA SERVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of March 31, 1996 and March
31, 1997 and December 31, 1997............................ F-3
Consolidated Statements of Income for the Years Ended March
31, 1995, 1996 and 1997 and the nine months ended December
31, 1996 and December 31, 1997............................ F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1995, 1996 and 1997 and the nine
months ended December 31, 1997............................ F-5
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1995, 1996 and 1997 and the nine month periods
ended December 31, 1996 and December 31, 1997............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 56
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Atlantic Data Services, Inc.
We have audited the accompanying consolidated balance sheets of Atlantic
Data Services, Inc. as of March 31, 1996 and 1997, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlantic Data Services, Inc. at March 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1997 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 2, 1997, except for Note 10 and Note 13,
as to which the date is March 23, 1998
F-2
<PAGE> 57
ATLANTIC DATA SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUE AND SHARES)
<TABLE>
<CAPTION>
MARCH 31,
---------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $2,231 $2,653 $ 5,355
Accounts receivable, net of allowance for doubtful
accounts of $113 in 1996, $231 in 1997, and $339 at
December 31, 1997...................................... 4,164 4,229 6,613
Costs and estimated earnings on contracts in excess of
billings............................................... 45 185 --
Prepaid expenses.......................................... 159 124 240
Prepaid federal and state income taxes.................... -- -- 438
Deferred taxes............................................ 162 207 207
------ ------ -------
Total current assets................................... 6,761 7,398 12,853
Property and equipment, net................................. 563 649 881
Other assets................................................ 146 154 166
------ ------ -------
$7,470 $8,201 $13,900
====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $1,582 $1,994 $ 2,783
Accounts payable and accrued expenses related to the
disposal
and liquidation of the on-line processing division..... 120 -- --
Deferred revenue.......................................... 13 1 615
Billings in excess of costs and estimated earnings on
contracts.............................................. 30 168 466
Federal and state income taxes............................ 229 49 --
Deferred compensation..................................... 146 117 121
Dividend payable.......................................... -- -- 3,000
------ ------ -------
Total current liabilities.............................. 2,120 2,329 6,985
Capital lease obligation.................................... 75 56 41
Commitments and contingencies............................... -- -- --
Stockholders' equity:
Common stock, $.01 par value, 11,746,840 shares
authorized, 6,847,960 shares issued and outstanding.... 68 68 68
Class A common stock, $.01 par value, 1,694,800 shares
authorized, 394,800 shares issued and outstanding at
March 31, 1997 and 1996, and 830,800 shares outstanding
at
December 31, 1997...................................... 4 4 8
Special common stock, $.01 par value, 3,104,080 shares
authorized, 3,104,080 shares issued and outstanding
(liquidating value of $2,827).......................... 31 31 31
Additional paid-in capital................................ 1,281 1,281 2,058
Retained earnings......................................... 3,916 4,457 4,734
Less 112,000 shares of treasury Class A common stock at
cost................................................... (25) (25) (25)
------ ------ -------
Total stockholders' equity............................. 5,275 5,816 6,874
------ ------ -------
$7,470 $8,201 $13,900
====== ====== =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 58
ATLANTIC DATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------
MARCH 31, MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1996 1997
--------- --------- --------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................ $14,624 $20,052 $23,843 $17,158 $28,219
Cost of revenues........................ 9,570 12,377 15,218 11,258 16,252
------- ------- ------- ------- -------
Gross profit............................ 5,054 7,675 8,625 5,900 11,967
Operating expenses:
Sales and marketing................... 683 1,173 1,493 1,050 2,147
General and administrative............ 2,835 3,875 3,947 2,740 4,274
------- ------- ------- ------- -------
Total operating expenses...... 3,518 5,048 5,440 3,790 6,421
Income from operations.................. 1,536 2,627 3,185 2,110 5,546
Interest income......................... 129 199 120 78 109
Interest expense........................ (4) (2) (5) (4) (4)
------- ------- ------- ------- -------
Income from continuing operations before
provision for income taxes
and minority interest................. 1,661 2,824 3,300 2,184 5,651
Provision for income taxes.............. 691 1,261 1,359 900 2,374
------- ------- ------- ------- -------
Income from continuing operations....... 970 1,563 1,941 1,284 3,277
Discontinued operations, net of tax..... 1,245 780 100 100 --
Minority interest....................... (84) -- -- -- --
------- ------- ------- ------- -------
Net Income.................... $ 2,131 $ 2,343 $ 2,041 $ 1,384 $ 3,277
======= ======= ======= ======= =======
Pro forma earnings per common share
(unaudited):
Income from continuing operations..... $ 0.19 $ 0.32
Discontinued operations, net of tax... 0.01 --
------- -------
Net income.............................. $ 0.20 $ 0.32
======= =======
Pro forma earnings per common share
-- assuming dilution (unaudited):
Income from continuing operations..... $ 0.19 $ 0.31
Discontinued operations, net of tax... 0.01 --
------- -------
Net income.............................. $ 0.20 $ 0.31
======= =======
Shares used in computing pro forma
earnings per common share
(unaudited)........................... 10,234,840 10,325,336
========== ==========
Shares used in computing pro forma
earnings per common share -- assuming
dilution (unaudited).................. 10,234,840 10,429,285
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 59
ATLANTIC DATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
CLASS A SPECIAL
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL
----------------- --------------- ----------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ------ ------- ------ --------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994........ 6,847,960 $68 394,800 $4 3,104,080 $31 $1,281 $ 3,442
Net income..................... -- -- -- -- -- -- -- 2,131
--------- --- ------- -- --------- --- ------ -------
Balance at March 31, 1995........ 6,847,960 68 394,800 4 3,104,080 31 1,281 5,573
Dividend....................... -- -- -- -- -- -- -- (4,000)
Net income..................... -- -- -- -- -- -- -- 2,343
--------- --- ------- -- --------- --- ------ -------
Balance at March 31, 1996........ 6,847,960 68 394,800 4 3,104,080 31 1,281 3,916
Dividend....................... -- -- -- -- -- -- -- (1,500)
Net income..................... -- -- -- -- -- -- -- 2,041
--------- --- ------- -- --------- --- ------ -------
Balance at March 31, 1997........ 6,847,960 68 394,800 4 3,104,080 31 1,281 4,457
Dividend (Unaudited)........... -- -- -- -- -- -- -- (3,000)
Exercise of stock options
(Unaudited).................. -- -- 436,000 4 -- -- 392 --
Tax benefit from exercise of
stock options (Unaudited).... -- -- -- -- -- -- -- 385
Net income (Unaudited)......... -- -- -- -- -- -- -- 3,277
--------- --- ------- -- --------- --- ------ -------
Balance at December 31, 1997
(Unaudited).................... 6,847,960 $68 830,800 $8 3,104,080 $31 $2,058 $ 4,734
========= === ======= == ========= === ====== =======
<CAPTION>
TREASURY STOCK TOTAL
--------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY
------- ------ -------------
<S> <C> <C> <C>
Balance at March 31, 1994........ 112,000 $(25) $ 4,801
Net income..................... -- -- 2,131
------- ---- -------
Balance at March 31, 1995........ 112,000 (25) 6,932
Dividend....................... -- -- (4,000)
Net income..................... -- -- 2,343
------- ---- -------
Balance at March 31, 1996........ 112,000 (25) 5,275
Dividend....................... -- -- (1,500)
Net income..................... -- -- 2,041
------- ---- -------
Balance at March 31, 1997........ 112,000 (25) 5,816
Dividend (Unaudited)........... -- -- (3,000)
Exercise of stock options
(Unaudited).................. -- -- 396
Tax benefit from exercise of
stock options (Unaudited).... -- -- --
Net income (Unaudited)......... -- -- 3,277
------- ---- -------
Balance at December 31, 1997
(Unaudited).................... 112,000 $(25) $ 6,874
======= ==== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 60
ATLANTIC DATA SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------- ----------------
1995 1996 1997 1996 1997
------ ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $2,131 $ 2,343 $ 2,041 $1,384 $ 3,277
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 561 154 150 97 160
(Benefit) provision for deferred taxes.................... (473) 130 (61) -- --
Provision for bad debts................................... 18 376 120 89 108
Write-down of assets used in discontinued operations...... 241 -- -- -- --
Other..................................................... 7 39 -- 6 12
Minority interest in net income of subsidiary............. 84 -- -- -- --
Change in assets and liabilities:
Accounts receivable..................................... (743) (728) (185) 232 (2,492)
Costs and estimated earnings on contracts in excess of
billings.............................................. -- (45) (140) 45 185
Prepaid expenses and other assets....................... 4 (84) 28 13 (126)
Accounts payable and accrued expenses................... 733 (264) 250 249 1,393
Billings in excess of costs and estimated earnings on
contracts............................................. -- 30 138 (120) 298
Federal and state income taxes.......................... 39 110 (180) (524) (487)
------ ------- ------- ------ -------
Net cash provided by operating activities.......... 2,602 2,061 2,161 1,471 2,328
INVESTING ACTIVITIES
Purchase of minority interest of subsidiary................. (578) -- -- -- --
Purchases of property and equipment......................... (138) (226) (221) (77) (392)
------ ------- ------- ------ -------
Net cash used in investing activities.............. (716) (226) (221) (77) (392)
FINANCING ACTIVITIES
Principal payments under capital lease obligation........... (80) (40) (18) (14) (15)
Exercise of stock options................................... -- -- -- -- 396
Tax benefit from exercise of stock options.................. -- -- -- -- 385
Dividends paid.............................................. -- (4,000) (1,500) -- --
Repayments of long-term debt................................ (88) -- -- -- --
------ ------- ------- ------ -------
Net cash (used in) provided by financing
activities....................................... (168) (4,040) (1,518) (14) 766
------ ------- ------- ------ -------
Net increase (decrease) in cash............................. 1,718 (2,205) 422 1,380 2,702
Cash and cash equivalents at beginning of year.............. 2,718 4,436 2,231 2,231 2,653
------ ------- ------- ------ -------
Cash and cash equivalents at end of year.................... $4,436 $ 2,231 $ 2,653 $3,611 $ 5,355
====== ======= ======= ====== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 13 $ 2 $ 6 $ 4 $ 4
====== ======= ======= ====== =======
Taxes..................................................... $1,837 $ 816 $ 1,697 $ 990 $ 2,266
====== ======= ======= ====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligation incurred for equipment........... $ 38 $ 100
====== =======
Dividends declared........................................ $ 3,000
=======
</TABLE>
See accompanying notes.
F-6
<PAGE> 61
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. DESCRIPTION OF BUSINESS
Atlantic Data Services, Inc. ("ADS") was organized in 1980. ADS provides
information technology ("IT") strategy consulting and systems integration
services to customers exclusively in the financial services industry, primarily
banks. ADS's services allow customers to rapidly deploy proven technologies and
mission-critical business processes and more effectively manage change within
their organizations. ADS provides its services, primarily on a time and
materials basis, through offerings organized around five practice areas: IT
Strategy Consulting, Consolidations and Conversions, Year 2000 Resolution,
Application Outsourcing, and Electronic Commerce and Home Banking.
Description of On-Line Processing Division
In April 1990, ADS acquired a 55% interest in Data Management Systems, Inc.
("DMS") for $1.1 million. Effective September 1, 1994, ADS acquired the
remaining 45% from the minority stockholder for cash of $577,800, which was
accounted for using the purchase method. DMS provided data processing services
to financial institutions. Refer to Note 6 for information regarding
discontinued operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Atlantic Data
Services, Inc. and DMS, its wholly owned subsidiary (collectively "the
Company"). DMS discontinued its operations effective June 30, 1995. All
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents are defined as short-term, highly liquid investments with
an original maturity of three months or less. Cash equivalents primarily consist
of money market accounts and repurchase agreements whose fair value approximates
cost and are classified as available for sale.
The Company periodically enters into repurchase agreements with a financial
institution. At March 31, 1996 and 1997, the carrying value of the agreement,
stated at cost which approximates market, amounted to $1,157,000 and $2,608,000,
respectively. The agreements are collateralized by U.S. Treasury Securities
which are physically controlled by the financial institution, in an amount equal
to 102% of the agreement value.
F-7
<PAGE> 62
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are stated at cost. Depreciation, which includes
amortization of assets under capital leases, has been provided using the
straight-line method for all assets over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Computer equipment and software... 2 to 5 years
Office furniture and equipment.... 7 years
Leasehold improvements............ Lesser of remaining lease-term or useful life
Building.......................... 31.5 years
Equipment under capital lease..... 5 years
</TABLE>
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk
consist primarily of cash equivalents and accounts receivable. The risk with
respect to cash equivalents is minimized by the Company's policies in which
investments have relatively short maturities and are only placed with highly
rated issuers. A significant portion of the Company's revenues and accounts
receivable are derived from services provided to banks and other financial
institutions. The risk with respect to accounts receivable is minimized by the
creditworthiness of the Company's customers and the Company's credit and
collection policies. The Company performs ongoing credit evaluations of its
customers, generally does not require collateral, and maintains allowances for
potential credit losses which, when realized, have been within the range of
management's expectations.
Revenue Recognition
The Company primarily derives its revenue from consulting services under
time and material billing arrangements. Under these arrangements, revenue is
recognized as the services are provided. Deferred revenue pertains to time and
material billing arrangements and represents cash collected in advance of the
performance of services.
Revenue on fixed price contracts is recognized using the percentage of
completion method of accounting and is adjusted monthly for the cumulative
impact of any revision in estimates. The Company determines the percentage of
completion of its contracts by comparing costs incurred to date to total
estimated costs. Contract costs include all direct labor and expenses related to
the contract performance. The asset, "Costs and estimated earnings on contracts
in excess of billings," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
contracts," represents billings in excess of revenues recognized.
Included in revenues are reimburseable contract-related travel and
entertainment expenses which are separately billable to clients.
Stock Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" ("FAS 123") and accounts for stock options granted to employees in
accordance with the provisions of APB 25 "Accounting for Stock Issued to
Employees."
F-8
<PAGE> 63
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Deferred income taxes are provided for differences between the financial
reporting and tax bases of assets and liabilities at income tax rates expected
to be in effect when the taxes are actually paid or recovered.
Earnings Per Share (Unaudited)
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standard No. 128, "Earnings Per Share" ("FAS 128"). FAS 128 requires the
presentation of two amounts, earnings per share and earnings per share assuming
dilution. Pro forma net income per common share is computed using the weighted
average number of common shares, and Special Common Stock and Class A Common
Stock assuming conversion into Common Stock at April 1, 1996 or at the date of
issuance if later, and dilutive equivalent shares from stock options using the
treasury stock method. Historical net income per share has been presented only
in a footnote as such amounts are not deemed meaningful.
New Accounting Pronouncements (Unaudited)
The Company intends to adopt Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131") in fiscal 1998. Both Standards will require
additional disclosure, but will not have a material effect on the Company's
financial position or results of operations. SFAS No. 130 establishes standards
for the reporting and display of comprehensive income. Components of
comprehensive income include items such as net income and changes in value of
available-for-sale securities. SFAS No. 131 changes the way companies report
segment information and requires segments to be determined based on how
management measures performance and makes decisions about allocating resources.
Interim Financial Statements (Unaudited)
The consolidated balance sheet at December 31, 1997 and the consolidated
statements of income, changes in stockholders' equity and cash flows for the
nine months ended December 31, 1996 and 1997 are unaudited, but, in the opinion
of management, include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of results for these interim
periods. The results of operations for the nine months ended December 31, 1997
are not necessarily indicative of results to be expected for the entire year.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment and software............................. $ 519 $ 671
Office furniture and equipment.............................. 355 425
Leasehold improvements...................................... 269 335
Building.................................................... 183 183
------ ------
1,326 1,614
Less accumulated depreciation and amortization.............. (763) (965)
------ ------
$ 563 $ 649
====== ======
</TABLE>
F-9
<PAGE> 64
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assets recorded under capital leases and included in office furniture and
equipment amounted to approximately $100,000 at March 31, 1996 and 1997. Related
accumulated amortization amounted to approximately $10,000 and $30,000 at March
31, 1996 and 1997, respectively.
4. RELATED PARTY TRANSACTIONS
The Company has a program under which it may loan employees up to $3,000 to
purchase personal computers. Loans are repayable through payroll deductions over
a three year period and bear a preferred rate of interest (0% for all periods
presented). Such loans outstanding at March 31, 1996 and 1997 amounted to
approximately $56,000 and $64,000, respectively, and are included in other
assets.
Construction services are provided by a firm whose owner is a director of
the Company. Amounts paid to such firm in fiscal years ended March 31, 1995,
1996 and 1997 are $11,211, $66,555, and $59,958, respectively. All amounts have
been capitalized and are included in leasehold improvements in the financial
statements.
Revenue recorded by DMS for the five month period ended August 31, 1994
includes approximately $909,000, derived from on-line services provided to the
minority stockholder. DMS also rented office space from this stockholder. Total
rent paid to the minority stockholder during fiscal 1995 was approximately
$32,000. These amounts are included in discontinued operations.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Trade accounts payable...................................... $ 218 $ 401
Accrued payroll............................................. 785 900
Accrued medical............................................. 185 242
Compensated absences........................................ 124 150
Other....................................................... 270 301
------ ------
$1,582 $1,994
====== ======
</TABLE>
6. DISCONTINUED OPERATIONS
During September 1994, the Company approved a plan and entered into an
agreement with a third party that called for the Company to discontinue its
on-line processing division (the "Agreement"). As consideration for entering
into the Agreement, the Company was entitled to receive future payments
contingent upon the acquirer generating specified revenues from the transferred
customer base. The Company is not entitled to any further payments.
F-10
<PAGE> 65
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The on-line processing division represented a separate line of business
and, accordingly, the results of its operations have been reported as
discontinued operations for all periods presented. The results from discontinued
operations can be summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996 1997
------ ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Income from operations of the discontinued on-line
processing division, less applicable income taxes of
$1,095 and $113 in 1995 and 1996, respectively............ $1,574 $186 --
(Loss) gain on disposal of the on-line processing division,
net of income tax benefit of $229 in 1995 and $312 in
1996, less applicable income taxes of $70 in 1997......... (329) 594 $100
------ ---- ----
$1,245 $780 $100
====== ==== ====
</TABLE>
In fiscal 1995, the loss on disposal of the on-line processing division
represents expenses incurred of approximately $174,000 for severance costs,
$241,000 for the write-down of property and equipment to net realizable value
and $143,000 for other exit costs, net of the income tax benefit from the above
mentioned expenses of approximately $229,000. The gain on disposal of the
on-line processing division in fiscal 1996 primarily represents the contingent
payments provided for in the Agreement plus a tax benefit of approximately
$418,000 from the deduction of goodwill. The gain on disposal of the on-line
processing division in fiscal 1997 primarily represents the contingent payments
provided for in the Agreement.
The following table sets forth summary financial information of the on-line
processing division's results of operations.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $6,738 $1,248
Operating earnings.......................................... 2,944 329
Depreciation and amortization............................... 396 37
Other income................................................ 121 7
Provision for taxes......................................... 1,095 113
Net income.................................................. 1,574 186
</TABLE>
7. DEFERRED COMPENSATION
Deferred compensation represents compensation deferred by a former employee
of the Company through the year ended March 31, 1995.
F-11
<PAGE> 66
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
Significant components of the provision for income taxes follow:
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED CONSOLIDATED
OPERATIONS OPERATIONS TAX PROVISION
---------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
FISCAL YEAR 1995:
Current:
Federal..................................... $ 554 $1,036 $1,590
State....................................... 165 275 440
Deferred:
Federal..................................... (24) (340) (364)
State....................................... (4) (105) (109)
------ ------ ------
$ 691 $ 866 $1,557
====== ====== ======
FISCAL YEAR 1996:
Current:
Federal..................................... $1,040 $ (318) $ 722
State....................................... 302 (92) 210
Deferred:
Federal..................................... (64) 161 97
State....................................... (17) 50 33
------ ------ ------
$1,261 $ (199) $1,062
====== ====== ======
FISCAL YEAR 1997:
Current:
Federal..................................... $1,201 $ 53 $1,254
State....................................... 217 19 236
Deferred:
Federal..................................... (50) (1) (51)
State....................................... (9) (1) (10)
------ ------ ------
$1,359 $ 70 $1,429
====== ====== ======
</TABLE>
The reconciliation of the consolidated effective tax rate of the Company
for the years ended March 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Pretax income........................... $3,772 100% $3,405 100% $3,470 100%
====== === ====== ==== ====== ====
Tax at 34%.............................. $1,282 34% $1,158 34% $1,180 34%
State taxes, net of federal benefit..... 218 6 160 5 149 4
Tax deductible goodwill related to the
on-line processing division........... (356) (11) -- --
Permanent differences................... 38 1 98 3 96 3
Other................................... 19 -- 2 -- 4 --
------ --- ------ ---- ------ ----
Total provision............... $1,557 41% $1,062 31% $1,429 41%
====== === ====== ==== ====== ====
</TABLE>
F-12
<PAGE> 67
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of temporary differences and carryforwards that give rise to
deferred tax assets are as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------
1996 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Bad debt allowance.......................................... $ 49 $ 93
Compensated absence accrual................................. 53 60
Interest on deferred compensation........................... 20 22
Deferred rent............................................... 39 27
Depreciation................................................ 4 25
Other costs................................................. 6 5
---- ----
Total deferred tax assets.............................. $171 $232
==== ====
</TABLE>
9. LEASES
The Company leases office space, automobiles and other equipment under
various noncancelable operating leases. Rent expense recognized under these
leases during the fiscal years ended March 31, 1995, 1996 and 1997 amounted to
approximately $436,000, $406,000 and $438,000, respectively.
The Company is also party to a lease agreement for telephone equipment that
has been recorded as a capital lease.
Future minimum annual lease payments due under noncancelable leases as of
March 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Year ending March 31:
1998...................................................... $ 494 $24
1999...................................................... 487 24
2000...................................................... 482 24
2001 and thereafter....................................... 17 13
------ ---
Total minimum lease payments................................ $1,480 85
======
Less amount representing interest......................... 10
---
75
Less current portion of capital lease (included in
accounts payable and accrued expenses)................. 19
---
Long-term portion of capital lease........................ $56
===
</TABLE>
10. STOCKHOLDERS' EQUITY
The authorized capital of the Company consists of Common Stock, Class A
Common Stock, and Special Common Stock. On October 31, 1997, the Company
completed a recapitalization whereby the number of shares of Common Stock, Class
A Common Stock, and Special Common Stock authorized was increased from 410,860,
150,000 and 110,860, respectively, to 11,746,840, 1,694,800 and 3,104,080,
respectively. In addition, the Company's Board of Directors approved a 28-for-1
stock split in the form of a stock dividend on October 31, 1997. The
accompanying consolidated financial statements give effect to the stock split
for all periods presented.
F-13
<PAGE> 68
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Common Stock and Special Common Stock are entitled to one vote per
share and are entitled to dividends at the same rate, when a dividend is
declared. The Special Common Stock has a preference in the event of liquidation
amounting to $0.91 per share and is convertible at any time into Common Stock on
a share-for-share basis.
The Class A Common Stock is nonvoting and is not entitled to receive
dividends. Coincident with the recapitalization on October 31, 1997, the Class A
Common Stock is now required to convert to Common Stock on a share-for-share
basis upon the closing of a public offering of the Company's Common Stock or
earlier at the Company's option.
For the years ended March 31, 1996 and 1997, the Company paid dividends of
$0.40 per share and $0.15 per share, respectively, on its Special Common Stock
and Common Stock. No dividends were paid in the year ended March 31, 1995.
11. STOCK PLANS
Key Person Stock Plan
In March 1985, the Board of Directors approved the Company's Key Person
Stock Plan (the "Key Person Plan") and authorized that 560,000 shares of Class A
Common Stock be reserved for issuance under such plan. Under the terms of the
Key Person Plan, the Company is authorized to sell shares at the then fair
market value of Class A Common Stock to officers and other key employees of and
consultants to the Company. To date, 394,800 shares have been issued under the
Key Person Plan, of which an aggregate 112,000 shares were repurchased by the
Company. No Class A Common Stock was issued pursuant to this plan during the
years ended March 31, 1995, 1996 and 1997. At March 31, 1996 and 1997, 165,200
shares of Class A Common Stock were available for future issuance, although the
Company intends not to issue additional shares under the Key Person Plan.
Incentive Stock Option Plan
On January 26, 1993, the Board of Directors approved the Company's 1992
Incentive Stock Option Plan (the "Plan"). Under the terms of the Plan, the
Company is authorized to grant incentive stock options to purchase shares of
Class A Common Stock to officers and other employees of and consultants to the
Company. The aggregate number of shares of Class A Common Stock which may be
issued pursuant to the Plan is 812,000. Vesting is determined by the Board of
Directors. All options issued in 1997 were to employees and vested immediately
upon issuance. The Company intends not to issue additional options under the
Plan.
F-14
<PAGE> 69
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the activity of the Plan for the years ended
March 31, 1996 and 1997 and for the nine months ended December 31, 1997:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, 1997
1996 1997 (UNAUDITED)
------------------ ------------------ -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at
beginning of period......... 140,000 $0.91 140,000 $0.91 812,000 $0.91
Granted..................... -- -- 672,000 0.91 -- --
Exercised................... -- -- -- -- (436,000) 0.91
------- ----- ------- ----- -------- -----
Outstanding options at end of
period...................... 140,000 $0.91 812,000 $0.91 376,000 $0.91
======= ===== ======= ===== ======== =====
Exercisable at end of
period...................... 105,000 $0.91 812,000 $0.91 376,000 $0.91
======= ===== ======= ===== ======== =====
Available for grant at end of
period...................... -- -- -- -- -- --
======= ===== ======= ===== ======== =====
Weighted average fair value
per share of options granted
during the period........... -- -- $ 0.06 -- -- --
======= ===== ======= ===== ======== =====
</TABLE>
The following table represents weighted average price and life information
about significant option groups outstanding at March 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
OPTION GRANT DATE OUTSTANDING LIFE (YRS.) PRICE EXERCISABLE PRICE
----------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
1997...................... 672,000 9.6 $0.91 672,000 $0.91
1993...................... 140,000 5.8 0.91 140,000 0.91
------- -------
812,000 812,000
======= =======
</TABLE>
As required under FAS 123, the following pro forma net income and earnings
per share presentations reflect the amortization of the option grant fair value
as expense. For purposes of this disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
FISCAL 1997
-----------
<S> <C>
Pro forma net income........................................ $2,011,000
Pro forma earnings per share................................ $ 0.20
</TABLE>
The weighted average grant date value was $0.06 for stock options issued in
fiscal 1997. Significant assumptions used in determining this value include:
risk free interest rates ranging from 6.3-6.6%; expected life of the options is
one year; dividend rate is zero as Class A Common Stock was not entitled to
dividends.
The effects on pro forma disclosures of applying FAS 123 are not likely to
be representative of the effects on pro forma disclosures of future years.
F-15
<PAGE> 70
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED)
On October 31, 1997, the Board of Directors adopted the 1997 Stock Plan
(the "Stock Plan"). The Stock Plan provides for the grant of options for the
purchase of up to 500,000 shares of Class A Common Stock of the Company.
The Stock Plan is administered by the Compensation Committee of the Board
of Directors, and provides incentives to employees, directors and consultants
through opportunities to purchase stock through incentive stock options, options
that do not qualify as incentive stock options, awards of stock in the Company,
and through opportunities to make direct purchases of stock in the Company
(herein collectively referred to as "Awards"). The exercise price per share
specified in the agreement relating to each Award may not be less than the fair
market value of the Class A Common Stock on the date of the grant.
In December 1997, the Board of Directors declared a dividend of $0.30 per
share payable to holders of Common Stock and Special Common Stock.
13. EARNINGS PER SHARE
The following table sets forth the reconciliation of the numerators and
denominators of the basic and diluted pro forma per share computations for
income from continuing operations for the year ended March 31, 1997, and for the
nine month period ended December 31, 1997:
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED
YEAR ENDED DECEMBER 31,
MARCH 31, 1997 1997
(UNAUDITED) (UNAUDITED)
-------------- ------------
<S> <C> <C>
Numerator:
Income from continuing operations (numerator for
earnings per share and earnings per share assuming
dilution)........................................... $ 1,941,000 $ 3,277,000
Denominator:
Denominator for earnings per share -- weighted average
shares.............................................. 10,234,840 10,325,336
Effect of dilutive securities:
Employee stock options.............................. -- 103,949
----------- -----------
Dilutive potential common shares....................... -- 103,949
----------- -----------
Denominator for earnings per share assuming dilution --
adjusted weighted average shares and assumed
conversions......................................... 10,234,840 10,429,285
=========== ===========
Pro forma earnings per share............................. $ 0.19 $ 0.32
=========== ===========
Pro forma earnings per share -- assuming dilution........ $ 0.19 $ 0.31
=========== ===========
</TABLE>
Basic earnings per share has been calculated by dividing net income by
weighted average common shares outstanding (common shares and assuming the
conversion into Common Stock of Special Common Stock and Class A Common Stock at
January 1, 1997 or the date of issuance if later). Diluted earnings per share
reflects the potential dilution arising from the exercise of stock options using
the treasury stock method.
F-16
<PAGE> 71
ATLANTIC DATA SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the computation of earnings per share from
continuing operations for the years ended March 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Income from continuing operations (numerator
for earnings per share)..................... $ 970,000 $ 1,563,000 $ 1,941,000
Dividends declared
Common Stock................................... -- (1,032,144) (2,752,384)
Special Common Stock........................... -- (467,856) (1,247,616)
---------- ----------- -----------
(1,500,000) (4,000,000)
Undistributed earnings........................... $ 970,000 $ 63,000 $(2,059,000)
Denominator for earnings per share -- weighted
average shares.............................. 9,952,040 9,952,040 9,952,040
Undistributed earnings per share
Common Stock and Special Common Stock.......... $ 0.10 $ 0.01 $ (0.21)
Assumed distribution of earnings
Common Stock and Special Common Stock.......... -- $ 0.15 $ 0.40
Earnings per share -- Common Stock and Special
Common Stock................................... $ 0.10 $ 0.16 $ 0.19
========== =========== ===========
</TABLE>
Earnings per share from continuing operations has been calculated under the
two class method for Common Stock and Special Common Stock. Class A Common Stock
does not share in dividends with Common Stock and Special Common Stock, and
therefore does not share in earnings. There were no common stock equivalents
considered to be dilutive securities under FAS 128 at March 31, 1995, 1996 or
1997.
14. EMPLOYEE RETIREMENT PLAN
The Company maintains a defined contribution retirement plan for eligible
employees which is funded by employee contributions and by discretionary Company
contributions. Under the plan, employees may make tax deferred contributions and
the Company, at its discretion, may match 50% of employee contributions up to 5%
of payroll. The Company may also opt to make additional contributions to the
plan. Company contributions vest ratably over five years of employment. Company
contributions amounted to $130,042, $91,771, and $83,062 for the years ended
March 31, 1995, 1996 and 1997, respectively.
15. MAJOR CUSTOMERS
The nature of the Company's services results in the Company deriving
significant amounts of revenue from certain customers in a particular year. Two
customers accounted for 29.4% and 17.5% of the Company's consolidated revenues
in 1995, 22.0% and 18.1% in 1996 and 12.4% and 7.8% in 1997. In addition, in
each year the Company had a different customer which accounted for 18.8% in
1995, 10.7% in 1996 and 18.8% in 1997 of the Company's consolidated revenues.
F-17
<PAGE> 72
[A color graphic depicting the Company's logo superimposed over
certain images associated with the financial services industry
and its information technology needs, with the caption
"Partnering With Financial Services Companies to Manage Change."]
<PAGE> 73
ATLANTIC DATA SERVICES, INC.
[LOGO]
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 12,722
NASD filing fee............................................. 4,813
Nasdaq National Market listing fee.......................... 48,750
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 150,000
Blue Sky fees and expenses (including legal fees)........... 15,000
Transfer agent and registrar fees and expenses.............. 15,000
Miscellaneous............................................... 103,715
Total............................................. $ 750,000
</TABLE>
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Massachusetts Business Corporation Law and the Company's By-laws
provide for indemnification of the Company's directors and officers for
liabilities and expenses that they may incur in such capacities, except with
respect to any matter as to which the indemnified person shall have been
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Company. Reference
is made to the Company's Amended and Restated By-laws and Second Amended and
Restated By-laws filed as Exhibits 3.03 and 3.04 hereto, respectively.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the Company against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). Reference is made
to the form of Underwriting Agreement filed as Exhibit 1.01 hereto.
The Company intends to obtain directors' and officers' liability insurance
for the benefit of its directors and certain of its officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, the
Company has issued the following securities that were not registered under the
Securities Act:
On October 31, 1997, the Board of Directors of the Company declared a
28-for-1 stock split in the form of a stock dividend of 27 shares for each share
of the Company's capital stock outstanding as of the effective filing of the
Company's Amended and Restated Articles of Organization with the Secretary of
the Commonwealth of the Commonwealth of Massachusetts (the "Split"). In
connection with the Split, the Company issued an aggregate 10,274,310 shares of
its capital stock to its stockholders of record on November 6, 1997. During the
past three years, the Company has not issued any shares of its capital stock
other than in connection with the Split and in connection with stock awards and
stock option exercises as described below.
II-1
<PAGE> 75
On November 4, 1997 and November 6, 1997, the Company issued an aggregate
of 420,000 shares of its Class A Common Stock (including 405,000 shares issued
on November 6 in connection with the Split) upon the exercise of employee stock
options under the Company's 1992 Incentive Stock Option Plan (the "1992 Plan")
by Mr. Olsson, the Company's Executive Vice President and Director of Business
Development, at a price of $0.91 per share, for an aggregate consideration of
$382,200.
On December 30, 1997, the Company issued 16,000 shares of its Class A
Common Stock upon the exercise of employee stock options under the 1992 Plan by
Mr. Cahill, the Company's Executive Vice President and Director of Operations,
at a price of $0.91 per share, for an aggregate consideration of $14,560.
On January 5, 1998, the Company issued 10,990 shares of its Class A Common
Stock upon the exercise of employee stock options under the 1992 Plan by an
employee of the Company, at a price of $0.91 per share, for an aggregate
consideration of $10,000.
On January 22, 1998, the Company issued 57,000 shares of its Class A Common
Stock upon the exercise of employee stock options under the 1992 Plan by Mr.
Cahill, at a price of $0.91 per share, for an aggregate consideration of
$51,870.
On February 6, 1998, the Company issued 30,000 shares of its Class A Common
Stock upon the exercise of employee stock options under the Company's 1997 Stock
Plan (the "1997 Plan") by Mr. McGrath, the Company's Senior Vice President,
Finance and Administration, and Chief Financial Officer, at a price of $4.25 per
share, for an aggregate consideration of $127,500.
On February 10, 1998, the Company made a stock award under the 1997 Plan of
15,000 shares of its Class A Common Stock to Mr. Driscoll, a director of the
Company, at a price of $9.00, for an aggregate consideration of $135,000.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase Common Stock, Rule 701 under
the Securities Act. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
II-2
<PAGE> 76
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
1.01* Form of Underwriting Agreement.
3.01 Amended and Restated Articles of Organization of the
Company.
3.02 Form of Second Amended and Restated Articles of Organization
of the Company.
3.03 Amended and Restated By-laws of the Company.
3.04 Form of Second Amended and Restated By-laws of the Company.
4.01 Specimen Certificate for shares of the Company's Common
Stock.
4.02 Description of Capital Stock (contained in the Amended and
Restated Articles of Organization and the Second Amended and
Restated Articles of Organization of the Company, filed as
Exhibits 3.01 and 3.02, respectively).
4.03 Shareholders' Agreement among the Company and Certain
Shareholders dated July 15, 1988, as amended November 24,
1997.
5.01* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.01** Key Person Stock Plan.
10.02** Form of Key Person Stockholders Agreement as amended.
10.03** Amended and Restated 1992 Incentive Stock Option Plan.
10.04** Form of Incentive Stock Option Agreement for Shares Issued
Under the Amended and Restated 1992 Incentive Stock Option
Plan.
10.05** Form of Amended and Restated Stockholders Agreement for
Shares Issued Under the Amended and Restated 1992 Incentive
Stock Option Plan.
10.06** 1997 Stock Plan.
10.07** Amended and Restated 1997 Stock Plan.
10.08** Form of Incentive Stock Option Agreement under the Amended
and Restated 1997 Stock Plan.
10.09** Form of Non-Qualified Stock Option Agreement under the
Amended and Restated 1997 Stock Plan.
10.10** Form of Stock Purchase and Restriction Agreement under the
Amended and Restated 1997 Stock Plan.
10.11** 1998 Employee Stock Purchase Plan.
10.12** Employment Agreement between the Company and Robert W. Howe
dated March 25, 1998.
10.13** Employment Agreement between the Company and William H.
Gallagher dated March 25, 1998.
10.14** Employment Agreement between the Company and Paul K. McGrath
dated March 25, 1998.
10.15** Employment Agreement between the Company and Peter A. Cahill
dated March 25, 1998.
10.16 Employment Agreement between the Company and David E. Olsson
dated March 25, 1998.
10.17 Registration Rights Agreement dated March 25, 1998 by and
among the Company and Certain Stockholders.
10.18 Lease Agreement between the Company and National Fire
Protection Association dated April 1, 1995, as amended July
31, 1995 and January 15, 1997.
23.01* Consent of Testa, Hurwitz & Thibeault, LLP (contained in
Exhibit 5.01).
23.02 Consent of Ernst & Young LLP.
24.01 Power of Attorney (contained on page II-5).
27.01 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
** Indicates a management contract or any compensatory plan, contract or
arrangement.
II-3
<PAGE> 77
(b) Financial Statement Schedule.
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser; (2) that for purposes
of determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Quincy, Massachusetts
on March 26, 1998.
ATLANTIC DATA SERVICES, INC.
By: /s/ ROBERT W. HOWE
------------------------------------
Robert W. Howe
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Atlantic Data Services, Inc.,
hereby severally constitute and appoint Robert W. Howe, William H. Gallagher and
Paul K. McGrath, and each of them singly, our true and lawful attorneys, with
full power to them and each of them singly, to sign for us in our names in the
capacities indicated below, any registration statement related to the offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933 (a "462(b) Registration Statement"), any and all amendments and
exhibits to this registration statement or any 462(b) Registration Statement,
and any and all applications and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of the securities covered
hereby or thereby, and generally to do all things in our names and on our behalf
in such capacities to enable Atlantic Data Services, Inc. to comply with the
provisions of the Securities Act of 1933 and all requirements of the Securities
and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ ROBERT W. HOWE Chief Executive Officer and Chairman March 26, 1998
- ------------------------------------------ of the Board (Principal Executive
Robert W. Howe Officer)
/s/ WILLIAM H. GALLAGHER President, Chief Operating Officer March 26, 1998
- ------------------------------------------ and Director
William H. Gallagher
/s/ PAUL K. MCGRATH Senior Vice President, Finance and March 26, 1998
- ------------------------------------------ Administration, and Chief
Paul K. McGrath Financial Officer (Principal
Financial and Accounting Officer)
/s/ DAVID C. HODGSON Director March 26, 1998
- ------------------------------------------
David C. Hodgson
/s/ LEE M. KENNEDY Director March 26, 1998
- ------------------------------------------
Lee M. Kennedy
/s/ GEORGE F. RAYMOND Director March 26, 1998
- ------------------------------------------
George F. Raymond
/s/ RICHARD D. DRISCOLL Director March 26, 1998
- ------------------------------------------
Richard D. Driscoll
</TABLE>
II-5
<PAGE> 79
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ATLANTIC DATA SERVICES, INC.
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION PERIOD OPERATIONS DEDUCTIONS END OF PERIOD
----------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended March 31, 1995
Reserves and allowances deducted from
asset accounts
Allowance for uncollectible
accounts........................... $ 85,954 18,000 2,418(1) $101,536
Year ended March 31, 1996
Reserves and allowances deducted from
asset accounts
Allowance for uncollectible
accounts........................... $101,536 375,694 363,875(1) $113,355
Year ended March 31, 1997
Reserves and allowances deducted from
asset accounts
Allowance for uncollectible
accounts........................... $113,355 120,000 1,989(1) $231,366
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries
S-1
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
1.01* Form of Underwriting Agreement.
3.01 Amended and Restated Articles of Organization of the
Company.
3.02 Form of Second Amended and Restated Articles of Organization
of the Company.
3.03 Amended and Restated By-laws of the Company.
3.04 Form of Second Amended and Restated By-laws of the Company.
4.01 Specimen Certificate for shares of the Company's Common
Stock.
4.02 Description of Capital Stock (contained in the Amended and
Restated Articles of Organization and the Second Amended and
Restated Articles of Organization of the Company, filed as
Exhibits 3.01 and 3.02, respectively).
4.03 Shareholders' Agreement among the Company and Certain
Shareholders dated July 15, 1988, as amended November 24,
1997.
5.01* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.
10.01** Key Person Stock Plan.
10.02** Form of Key Person Stockholders Agreement as amended.
10.03** Amended and Restated 1992 Incentive Stock Option Plan.
10.04** Form of Incentive Stock Option Agreement for Shares Issued
Under the Amended and Restated 1992 Incentive Stock Option
Plan.
10.05** Form of Amended and Restated Stockholders Agreement for
Shares Issued Under the Amended and Restated 1992 Incentive
Stock Option Plan.
10.06** 1997 Stock Plan.
10.07** Amended and Restated 1997 Stock Plan.
10.08** Form of Incentive Stock Option Agreement under the Amended
and Restated 1997 Stock Plan.
10.09** Form of Non-Qualified Stock Option Agreement under the
Amended and Restated 1997 Stock Plan.
10.10** Form of Stock Purchase and Restriction Agreement under the
Amended and Restated 1997 Stock Plan.
10.11** 1998 Employee Stock Purchase Plan.
10.12** Employment Agreement between the Company and Robert W. Howe
dated March 25, 1998.
10.13** Employment Agreement between the Company and William H.
Gallagher dated March 25, 1998.
10.14** Employment Agreement between the Company and Paul K. McGrath
dated March 25, 1998.
10.15** Employment Agreement between the Company and Peter A. Cahill
dated March 25, 1998.
10.16 Employment Agreement between the Company and David E. Olsson
dated March 25, 1998.
10.17 Registration Rights Agreement dated March 25, 1998 by and
among the Company and Certain Stockholders.
10.18 Lease Agreement between the Company and National Fire
Protection Association dated April 1, 1995, as amended July
31, 1995 and January 15, 1997.
23.01* Consent of Testa, Hurwitz & Thibeault, LLP (contained in
Exhibit 5.01).
23.02 Consent of Ernst & Young LLP.
24.01 Power of Attorney (contained on page II-5).
27.01 Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
** Indicates a management contract or any compensatory plan, contract or
arrangement.
<PAGE> 1
Exhibit 3.01
FEDERAL IDENTIFICATION
NO. 04-2696393
- -------- THE COMMONWEALTH OF MASSACHUSETTS
Examiner WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
- --------
Name We, William H. Gallagher , *President,
Approved
and Susan L. Gorman , *Clerk,
of Atlantic Data Services, Inc., Inc. ,
(Exact name of corporation)
located at One Batterymarch Park, Quincy, MA 02169 ,
-------------------------------------------------
(Street address of corporation in Massachusetts)
do hereby certify that the following Restatement of the Articles of
Organization was duly adopted by unanimous written consent dated
October 31, 1997 by a vote of the directors and by:
<TABLE>
<S> <C> <C> <C> <C> <C>
110,860 shares of Special Common Stock, $.01 par value of 110,860 shares outstanding,
- ------- --------------------------------------- ------------
(type, class & series, if any)
244,570 shares of Common Stock, $.01 par value of 244,570 shares outstanding, and
- ------- --------------------------------------- ------------
(type, class & series, if any)
10,100 shares of Class A Common Stock, $.01 par value of 10,100 shares outstanding
- ------- --------------------------------------- ------------
(type, class & series, if any)
</TABLE>
C [ ] **xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx:
/ **being at least two-thirds of each type, class or series
outstanding and entitled to vote thereon and of each type, class or
P [ ] series of stock whose rights are adversely affected thereby:
ARTICLE I
M [ ] The name of the corporation is:
R.A. [ ] Atlantic Data Services, Inc.
ARTICLE II
The purpose of the corporation is to engage in the following
business activities:
See Continuation Sheets at Attachment II and
incorporated herein by reference.
- --------
P.C.
*Delete the inapplicable words. **Delete the inapplicable clause.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON OF SEPARATE 8 1/2 X 11 SHEETS OF
PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE
MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS
CLEARLY INDICATED.
<PAGE> 2
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
----------------------------------- ---------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
---- ---------------- ---- ---------------- ---------
<S> <C> <C> <C> <C>
Common: Common: 11,746,840 $.01
Class A Common: 1,694,800 $.01
Preferred: Special Common 3,104,080 $.01
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheets at Attachment IV and incorporated herein by reference.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
See Continuation Sheets at Attachment V and incorporated herein by reference.
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheets at Attachment VI and incorporated herein by reference.
**If there are no provisions state "None".
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT.
<PAGE> 3
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the
principal office of the corporation in Massachusetts is: One
Batterymarch Park, Quincy, MA 02169
b. The name, residential address and post office address of each director
and officer of the corporation is as follows:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
---- ------------------- -------------------
<S> <C> <C> <C>
President: William H. Gallagher 72 Katy-Did Lane Same
Hanson, MA 02341
Treasurer: Susan L. Gorman 529 Crafts Street Same
Newton, MA 02165
Clerk: Susan L. Gorman 529 Crafts Street Same
Newton, MA 02165
Directors: Robert W. Howe 3 Jason's Lane Same
Scituate, MA 02060
William H. Gallagher 72 Katy-Did Lane Same
Hanson, MA 02341
David Hodgson 3 Pickwick Plaza Same
Greenwich, CT 06830
Lee M. Kennedy 98 King Caesar Road Same
Duxbury, MA 02332
George Raymond 210 East Oak Avenue Same
Morrestown, NJ 08057
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of: March
d. The name and business address of the resident agent, if any, of the
corporation is:
William H. Gallagher
One Batterymarch Park
Quincy, MA 02169
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
See Continuation Sheets at Attachment VIII and incorporated herein by reference.
SIGNED UNDER THE PENALTIES OF PERJURY, this 31st day of October, 1997,
/s/ William H. Gallagher , *President,
- -------------------------
William H. Gallagher
/s/ Susan L. Gorman , *Clerk.
- -------------------------
Susan L. Gorman
*Delete the inapplicable words. **If there are no amendments, state 'None'.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within Restated Articles of
Organization and, the filing fee in the amount of
$16,274 - having been paid, said articles are deemed
to have been filed with me this 6th day of November,
1997.
Effective date:
/s/ William Francis Galvin
---------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, MA 02110
Attn: Christina R. Schaper, Esq.
Telephone: (617) 248-7775
<PAGE> 5
Atlantic Data Services, Inc.
Restated Articles of Organization
Continuation Sheet II.1
Attachment II
"Article II. The purpose of the corporation is to engage in the
following business activities:
(a) To conduct a business of performing computer services for the
scientific, technical and engineering professions;
(b) To devise formulae and programs for the development, accumulation,
processing, analysis, presentation, distribution and recording of data
required for clients engaged in professional services, research or
publication in the fields of medicine (including paramedical areas of
practice, research and study), physics, chemistry, biology, astronomy,
engineering and other scientific and technical fields;
(c) To render professional data processing services and computer services
and consulting and planning services in connection therewith;
(d) To develop, devise, design and manufacture computers and computer
programming equipment and systems, and to prepare or manufacture and
distribute the resulting products at wholesale, at retail, or on
commission consignment, including research, development, or production
contracts for public agencies, research or educational institutions,
professional groups and business units;
(e) To maintain one or more data banks or any other type of library or
storage facilities for scientific and technical data or for the results
of research, development and design work of the Corporation or of any
other agency, and to buy, sell, lease, license and exchange data, data
systems or data collections or storage modules or units;
(f) To acquire patents, copyrights and other interests or forms of
protection of interests or rights, including the power to purchase,
lease, license or receive grants or gifts of interests from the owners
of an existing patent or other rights, and to sell, assign, lease or
license such rights or interests thereunder to others;
(g) To acquire by purchase, lease or license space and facilities for
research, development, design, production, analysis and storage
activities for scientific or technical data or for other operations of
the Corporation or for administrative purposes, including the power to
construct new facilities or to expand or improve existing facilities
and the power to enter into condominium, compound lease,
cross-licensing or other joint or cooperative programs for the
acquisition or
<PAGE> 6
Atlantic Data Services, Inc.
Restated Articles of Organization
- Continuation Sheet II.2
development of operational or administrative space; and
to acquire, maintain and operate wholesale or resale distribution
outlets for its products;
(h) To enter into any type of syndicate, joint enterprise or other
combination of corporate or non-corporate business organizations or
entities for the furtherance of its operational activities, including
its wholesale and retail trading business;
(i) To do all things necessary, appropriate or ancillary to the conduct of
a general computer services business;
(j) To buy, own, sell, develop, maintain, lease and/or operate and
otherwise deal with, either for itself or for others, real and personal
property of any kind whatsoever and to do all things and carry on all
activities necessary or incidental thereto;
(k) To carry on any manufacturing, mercantile, selling, management, service
or other business, transaction or activity which may be lawfully
carried on by a corporation organized under General Laws of the
Commonwealth of Massachusetts, Chapter 156B, as amended (or the
provisions of any substituted chapter of the General Laws of the
Commonwealth of Massachusetts, dealing with the same general subject
matter or such Chapter as now in effect, which may hereafter be
enacted);
(l) To transfer to other persons or corporations, by grant, license,
franchise, or other method, the right or privilege to carry on any kind
of business on such terms as the Corporation shall deem expedient or
proper;
(m) To acquire the good will, business, property or assets (including a
trademark, trade name or trade style), and to assume or undertake the
whole or any part of the liabilities of any person, firm, association
or corporation and to pay for the same in cash, stock, bonds,
debentures or other securities of the Corporation, or otherwise, as the
Board of Directors may determine;
(n) To carry on any business, transaction or activity through a wholly or
partly-owned subsidiary;
(o) To carry on any business, transaction or activity referred to in the
foregoing paragraphs to the same extent as might an individual, whether
as principal, agent, contractor or otherwise, and either alone or in
conjunction with any corporation, association, trust, firm, individual
or government agency, and to be a general partner, managing general
partner, partner and/or limited partner in a partnership
<PAGE> 7
Atlantic Data Services, Inc.
Restated Articles of Organization
-Continuation Sheet II.3
or limited partnership engaged in any business enterprise which it
would have power to conduct by itself; and
(p) To have as additional purposes all powers granted and conferred by the
laws of the Commonwealth of Massachusetts upon business corporations
organized under Chapter 156B (or any such substituted chapter) of the
General Laws of Massachusetts; provided, however, that no such purpose
shall include any activity inconsistent with such Chapter 156B (or any
such substituted chapter), or any other applicable provisions of the
General Laws of Massachusetts."
<PAGE> 8
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.1
Attachment IV
"Article IV. The total number of shares of stock which the Corporation
shall have authority to issue is 16,545,720 shares of which 11,746,840 shares,
with a par value of $.01 per share, are designated Common Stock ("Common
Stock"), 1,694,800 shares, with a par value of $.01 per share are designated the
Common Stock Class A (the "Class A Common Stock") and 3,104,080 shares, with a
par value of $.01 per share are designated Special Common Stock (the "Special
Common Stock").
The powers, designations, preferences and privileges and relative participation,
optional or other special rights and the qualifications, limitations or
restrictions of the Corporation's Common Stock, Class A Common Stock and Special
Common Stock are as follows:
A. COMMON STOCK:
1. Dividends. Dividends may be paid upon the Common Stock as
and when declared by the Board of Directors out of any funds legally available
therefore.
2. Liquidation. That upon any liquidation, dissolution or
winding up of the Corporation, after payment shall have been made in full to all
holders of the Special Common Stock as provided in this Article IV, the holders
of the Common Stock shall be entitled to receive any and all assets remaining to
be paid or distributed pro rata with the holders of the Class A Common Stock and
without preference or priority between the Common Stock and the Class A Common
Stock.
3. Voting. Except as herein or by law expressly provided, each
share of Common Stock shall be entitled to one vote for the election of
directors and upon all other matters.
B. CLASS A COMMON STOCK:
1. Dividends. The Class A Common Stock shall not be entitled
to receive or share in dividends.
2. Voting. The Class A Common Stock shall not have any voting
rights of any kind whatsoever.
3. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, after payment shall have been made in full to all holders
of the Special Common Stock as provided in this Article IV, the holders of the
Class A Common Stock shall be entitled to receive any and all assets remaining
to be paid or distributed pro rata
<PAGE> 9
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.2
with the holders of all Common Stock and without preference or priority between
the Common Stock and the Class A Common Stock.
4. Conversion.
(a) Optional Conversion. Each share of Class A Common Stock shall be
convertible at any time at the sole option of the Corporation into
one share of fully paid and non-assessable Common Stock (the
"Conversion Rate"). The Conversion Rate shall be subject to
adjustment from time to time in certain instances as hereinafter
provided, except that no adjustment shall be made unless, by reason
of the happening of any one or more of the events hereinafter
specified, the Conversion Rate then in effect would be changed by 1%
or more. Any adjustment of less than 1% that would otherwise be
required to be made shall be carried forward and shall be made at
the time of and together with any subsequent adjustment which,
together with any adjustment or adjustments so carried forward,
amounts of 1% or more.
(b) At the request of the Corporation, any holder of shares of Class A
Common Stock shall surrender the certificate or certificates for
such shares of Class A Common Stock at the head office of the
Corporation, which certificate or certificates, if the Corporation
shall so request, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the
Corporation or in blank.
(c) The Corporation will, as soon as practicable, after such surrender
of certificates for shares of Class A Common Stock, issue and
deliver to the person for whose account such Class A Common Stock
was so surrendered certificates for the number of full shares of
Common Stock to which he, she or it shall be entitled as aforesaid,
together with a cash adjustment computed in accordance with Section
5 of this Article IV.B for any fraction of his, her or its shares as
hereinafter stated, if not evenly convertible. Subject to the
following provisions of this paragraph, such conversion shall be
deemed to have been made as of the date such surrender of Class A
Common Stock to be converted was duly completed in accordance with
this Section 4(c) and each person named to receive the Common Stock
issuable upon the conversion of such Class A Common Stock shall be
deemed to be for all purposes the record holder of the surrendered
shares of Common Stock as of such date.
(d) The Conversion Rate shall be subject to adjustment from time to time
as follows:
(i) Stock Dividends, Subdivisions, Combinations. If the
Corporation shall at any time (x) subdivide its outstanding
shares of Common Stock into a larger number of shares of
<PAGE> 10
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.3
Common Stock; or (y) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect immediately prior thereto shall be
adjusted ratably. An adjustment made pursuant to this
Subsection 4(d)(i) shall become effective retroactively to the
record date of the stock dividend, subdivision or combination,
as the case may be.
(ii) Reorganization, Reclassification, Merger,
Consolidation or Conveyance of Assets. In case of any capital
reorganization or any reclassification of the capital stock of
the Corporation or in case of the consolidation or merger of
the Corporation with or into another corporation or in the
case of any sale or conveyance of all or substantially all of
the property, assets or business of the Corporation, each
share of Class A Common Stock shall thereafter be convertible
into the number of shares of stock or the securities or
property receivable upon such capital reorganization,
reclassification of capital stock, consolidation, merger, sale
or conveyance, as the case may be, by holder of the number of
shares of Common Stock into which such share of Class A Common
Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock,
consolidation, merger, sale or conveyance.
(iii) Whenever the Conversion Rate is adjusted as herein
provided, the Secretary of the Corporation shall forthwith
adjust the corporate records and cause a notice stating the
adjustment and the Conversion Rate as adjusted to be mailed to
the holders of record of the Class A Common Stock as of the
effective date of the such adjustment.
(e) Mandatory Conversion. If at any time the Corporation shall effect a
firm commitment underwritten public offering of shares of Common
Stock, then effective upon the closing of the sale of such shares by
the Corporation pursuant to such public offering, all outstanding
shares of Class A Common Stock shall automatically convert to shares
of Common Stock on the basis set forth in this Subsection 4. Holders
of shares of Class A Common Stock shall surrender the certificate or
certificates for such shares of Class A Common Stock at the head
office of the Corporation, which certificate or certificates, if the
Corporation shall so request, shall be duly endorsed to the
Corporation or in blank, or accompanied by proper instruments of
transfer to the Corporation. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate
or certificates for the number of whole shares of Common Stock to
which such holder is entitled. Until such time as a holder of shares
of Class A Common Stock shall surrender his, her or its certificates
therefor as provided
<PAGE> 11
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.4
above, such certificates shall be deemed to represent the shares of
Common Stock to which such holder shall be entitled upon the
surrender thereof.
5. Fractional Shares. The Corporation shall not issue
fractional shares of Common Stock under this Article IV.B, but in lieu thereof,
the Corporation shall pay in cash the fair market value of fractions of a share
of Common Stock as of the time when those entitled to receive such fractions are
determined.
C. SPECIAL COMMON STOCK:
1. Dividends. No dividends shall be declared or paid or
distribution made for any shares of the Special Common Stock; provided, however,
that notwithstanding the foregoing, if the Board of Directors shall declare a
dividend or other distribution payable upon any other class of the outstanding
shares of Common Stock, there shall be declared a dividend of equal amount per
share payable on the shares of Special Common Stock outstanding on such date.
2. Voting.
(a) Each share of Special Common Stock of the Corporation shall be
entitled to one vote for the election of directors and upon all other
matters.
(b) Except as provided in Subsection 2(c) of this Section 2, Special
Common Stock and Common Stock shall be voted together as a single
class on all matters.
(c) Notwithstanding Subsection 2(a) and (b) of this Section 2, the
affirmative vote of the holders of a majority of the outstanding
shares of Special Common Stock shall be required to authorize any
action which alters or changes the rights, preferences or privileges
of the Special Common Stock, increases the authorized number of
shares of Special Common Stock, Common Stock or Class A Common Stock
or creates any new class of shares having preference over or being on
a parity with the Special Common Stock in any respect.
3. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
holders of shares of Special Common Stock then outstanding shall be entitled to
receive and be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to $25.50 per share of
Special Common Stock before any payment shall be made or any assets distributed
to the holders of shares of Common Stock or Class A Common Stock or any other
class of capital stock of the Corporation. If the assets of the Corporation are
not sufficient to pay in full the liquidation payments payable to holders of
outstanding shares of Special Common Stock, the holders of all such shares
<PAGE> 12
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.5
shall share ratably in the distribution of such assets. Any assets remaining
after all required payments have been made to the holders of Special Common
Stock shall be distributed to the holders of Common Stock and Class A Common
Stock and any other class of capital stock in accordance with their respective
interests, and no further distributions shall be made to the holders of shares
of Special Common Stock.
4. Conversion.
(a) Each share of Special Common Stock shall be convertible at any time
at the option of the holder thereof into one share of fully paid and
non-assessable Common Stock (the "Conversion Rate"). The Conversion
Rate shall be subject to adjustment from time to time in certain
instances as hereinafter provided, except that no adjustment shall
be made unless, by reason of the happening of any one or more of the
events hereinafter specified, the Conversion Rate then in effect
would be changed by 1% or more. Any adjustment of less than 1% that
would otherwise be required to be made shall be carried forward and
shall be made at the time of and together with any subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, amounts of 1% or more.
(b) Before any holder of shares of Special Common Stock shall be
entitled to convert the same into Common Stock, such holder shall
surrender the certificate or certificates for such shares of Special
Common Stock at the head office of the Corporation, which
certificate or certificates, if the Corporation shall so request,
shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation or
in blank, and shall give written notice to the Corporation that he
elects so to convert said shares of Special Common Stock, and shall
state in writing therein the name or names in which he wishes the
certificate or certificates for the conversion shares of Common
Stock to be issued.
(c) The Corporation will, as soon as practicable, after such surrender
of certificates for shares of Special Common Stock accompanied by
the written notice and statement above prescribed, issue and deliver
to the person for whose account such Special Common Stock was so
surrendered, or to his, her or its nominee or nominees, certificates
for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with a cash adjustment computed in
accordance with Section 5 of this Article IV.C for any fraction of
his, her or its share as hereinafter stated, if not evenly
convertible. Subject to the following provisions of this paragraph,
such conversion shall be deemed to have been made as of the date
such surrender of Special Common Stock to be converted was duly
completed in accordance with this Section 4(c) and each
<PAGE> 13
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.6
person named to receive the Common Stock issuable upon the
conversion of such Special Common Stock shall be deemed to be for
all purposes the record holder of the surrendered shares of Common
Stock as of such date.
(d) The Corporation shall not be required to effect any conversion of
shares of Special Common Stock while the stock transfer books of the
Corporation are closed for any purpose; but any shares of Special
Common Stock surrendered for conversion during any period while such
books are so closed shall be converted, effective retroactively to
the date on which such Special Common Stock was surrendered, and at
the Conversion Rate in effect at such date.
(e) The Conversion Rate shall be subject to adjustment from time to time
as follows:
(i) Stock Dividends, Subdivisions, Combinations. If the
Corporation shall at any time (x) subdivide its outstanding
shares of Common Stock into a larger number of shares of
Common Stock; or (y) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect immediately prior thereto shall be
adjusted ratably. An adjustment made pursuant to this
Subsection 4(e)(i) shall become effective retroactively to the
record date of the stock dividend, subdivision or combination,
as the case may be.
(ii) Reorganization, Reclassification, Merger,
Consolidation or Conveyance of Assets. In case of any capital
reorganization or any reclassification of the capital stock of
the Corporation or in case of the consolidation or merger of
the Corporation with or into another corporation or in the
case of any sale or conveyance of all or substantially all of
the property, assets or business of the Corporation, each
share of Special Common Stock shall thereafter be convertible
into the number of shares of stock or the securities or
property receivable upon such capital reorganization,
reclassification of capital stock, consolidation, merger, sale
or conveyance, as the case may be, by holder of the number of
shares of Common Stock into which such share of Special Common
Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock,
consolidation, merger, sale or conveyance; provided, however,
that if the value of the exchange is less that $25.50 per
share, the holders of Special Common Stock shall receive at
least the equivalent of $25.50 per share before the holders of
Common Stock or Class A Common Stock receive any payment or
exchange for their shares; and in any case, appropriate
adjustment (as reasonably determined in good faith 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
<PAGE> 14
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet IV.7
interest thereafter of the holders of the Special Common Stock
to the end that the provision set forth herein (including the
specified changes in, and other adjustments of, the Conversion
Rate) shall there after be applicable, as nearly as reasonably
may be in relation to any shares of stock or other securities
or other property thereafter deliverable on the conversion of
the Special Common Stock.
(iii) Whenever the Conversion Rate is adjusted as herein
provided, the Secretary of the Corporation shall forthwith
adjust the corporate records and cause a notice stating the
adjustment and the Conversion Rate as adjusted to be mailed to
the holders of record of the Special Common Stock as of the
effective date of the such adjustment.
5. Fractional Shares. The Corporation shall not issue fractional
shares of Common Stock under this Article IV.C, but in lieu thereof, the
Corporation shall pay in cash the fair market value of fractions of a
share of Common Stock as of the time when those entitled to receive such
fractions are determined.
6. Reacquired Shares of Special Common Stock. Shares of Special
Common Stock which are converted into Common Stock shall be cancelled and
shall not be available for reissuance.
<PAGE> 15
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet V.1
Attachment V
"Article V. The restrictions, if any, imposed by the Articles of
Organization upon the transfer of shares of stock of any class are as
follows:
A. Common Stock and Special Common Stock:
Shares of Common Stock and Special Common Stock are
transferable only after compliance with the provisions of any
agreement between the Corporation and the shareholders who own
all of the Common Stock and Special Common Stock, a copy of
which is on file in the office of the Corporation, available
for inspection by any holder of Common Stock or Special Common
Stock who may obtain a copy, without charge, upon application.
B. Class A Common Stock:
Shares of Class A Common Stock are transferable only after
compliance with the provisions of an agreement between the
Corporation and each shareholder of the Class A Common Stock
of the Corporation, a copy of which is one file in the office
of the Corporation, available for inspection by any holder of
Class A Common Stock who may obtain a copy, without charge,
upon application.
<PAGE> 16
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet VI.1
Attachment VI
"Article VI. Other lawful provisions, if any, for the conduct and
regulation of business and affairs of the corporation, for its voluntary
dissolution, or for limiting, defining or regulating the powers of the
corporation, or of its directors or stockholders or of any class of
stockholders, are as follows:
(a) Meetings of the stockholders may be held anywhere in the United
States;
(b) Each Director and each officer elected by the stockholders
(including persons elected by the Board of Directors to fill
vacancies in the Board of Directors or in any such offices), and
each former Director and officer, and the heirs, executors,
administrators, successors and assigns of each of them, shall be
indemnified by the Corporation against all costs and expenses,
including fees and disbursements of counsel and the cost of
settlements (other than amounts paid to the Corporation itself)
reasonably incurred by, or imposed upon, him or her in connection
with or arising out of any action, suit or proceeding, civil or
criminal, in which he may be involved, or incurred in anticipation
of any action, suit or proceeding, by reason of his or her being or
having been an officer or Director of the Corporation; or by reason
of any action alleged to have been taken or omitted by him or her as
a Director of the Corporation.
Officers elected by the Board of Directors and employees and other
agents of the Corporation (including persons who serve at its
request as directors or officers of other organizations in which it
owns shares or of which it is a creditor), and each such former
officer, employee and agent, and the heirs, executors,
administrators, successors and assigns of each of them, may be
indemnified by the Corporation to the extent, if any, authorized by
the Board of Directors.
No indemnification shall be provided to any person, or to his or her
heirs, executors, administrators, successors or assigns, with
respect to any matter as to which he shall have been finally
adjudicated in any action, suit or proceeding not to have acted in
good faith in the reasonable belief that his or her action was in
the best interests of the Corporation.
The foregoing indemnification shall not be exclusive of any other
rights of indemnification to which any such Director, officer,
employee or agent may be entitled.
<PAGE> 17
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet VI.2
(c) No contract or other transaction between the Corporation and any
other person, firm or corporation, shall, in the absence of fraud,
in any way be affected or invalidated nor shall any Director be
subject to surcharge with respect to any such contact or transaction
by the fact that such Director, or any firm of which such Director
is a member, or any corporation of which such Director is a
shareholder, officer or director, is a party to, or may be
pecuniarily or otherwise interested in, such contract or
transaction; provided, that the fact that he individually, or such
firm or corporation, is so interested shall be disclosed to the
Board of Directors at the meeting at which (or prior to the
Directors' executing their written consents by which) action to
authorize, ratify or approve such contract or transaction is to be
taken. Any Director of the Corporation may vote upon or give his or
her written consent to any contract or other transaction between the
Corporation and any other person, firm, corporation or other entity
without regard to the fact that he is also a director or officer of
such other firm, or corporation or entity, a subsidiary or
affiliated corporation thereof, or is such other person;
(d) Each Director and officer of the Corporation shall, in the
performance of his or her duties, be fully protected in relying in
good faith upon the books of account of the Corporation, reports
made to the Corporation by any of its officers or employees or by
counsel, accountants, appraisers or other experts or consultants
selected with reasonable care by the Directors, or upon the other
records of the Corporation;
(e) In furtherance and not in limitation of the powers enumerated in
this Article 6, the Corporation shall have as additional powers all
purposes granted and allowed by the laws of the Commonwealth of
Massachusetts to business corporations organized under Chapter 156B
(or any such substituted chapter) of the General Laws of
Massachusetts; provided, that no such power shall be exercised in a
manner inconsistent with such Chapter 156B (or any such substituted
chapter) or any other applicable provision of the General Laws of
Massachusetts;
(f) The Corporation eliminates the personal liability of each Director
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director notwithstanding any provision
of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not
eliminate or limit the liability of a Director (i) for any breach of
the Director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 61 or 62 or successor provisions of the Massachusetts
Business Corporation Law, or (iv) for any transaction from
<PAGE> 18
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet VI.3
which the Director derived an improper personal benefit. This
provision shall not eliminate or limit the liability of a Director
of the Corporation for any act or omission occurring prior to the
date on which this provision becomes effective. No amendment to or
repeal of this provision shall apply to or have any effect on the
liability or alleged liability of any Director for or with respect
to any acts or omissions of such Director occurring prior to such
amendment or repeal;
(g) The Directors of the Corporation may make, amend or repeal the
By-Laws in whole or in part, except with respect to any provision
thereof which by law or the By-Laws requires action by the
stockholders; and
(h) The Corporation may become a partner in any business."
<PAGE> 19
Atlantic Data Services, Inc.
Amended and Restated Articles of Organization
Continuation Sheet VIII.1
Attachment VIII
"We further certify that the foregoing Restated Articles of
Organization affect no amendments to the Articles of Organization of the
corporation as heretofore amended, except amendments to the following articles.
Briefly describe amendments below:
Articles III, IV and VI have been amended.
Article III is amended to increase the number of authorized shares of
Common Stock, $.01 par value per share, from 410,860 shares to 11,746,800
shares, the number of authorized shares of Class A Common Stock, $.01 par value
per share, from 150,000 shares to 1,694,800 shares, and the number of authorized
shares of Special Common Stock, $.01 par value per share, from 110,860 shares to
3,104,080 shares.
Article IV is amended to provide for the conversion of the Class A
Common Stock into Common Stock upon notice by the Corporation or upon the
closing of a public offering of shares of the Company's Common Stock.
Article VI is amended to add other lawful provisions for the conduct
and regulation of the business and affairs of the Corporation which additions
include the (i) elimination of the personal liability of Directors and
Stockholders of the Corporation for money damages for breach of fiduciary duty
by the Directors, subject to certain exceptions; (ii) authority of the Directors
of the Corporation to make, amend or repeal the By-Laws of the corporation,
unless such action is required by the stockholders of the Corporation; and (iii)
authorization for the Corporation to become a partner in any business."
<PAGE> 1
Exhibit 3.02
FEDERAL IDENTIFICATION
NO. 04-2696393
- -------- THE COMMONWEALTH OF MASSACHUSETTS
Examiner WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
AMENDED AND RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
- --------
Name We, William H. Gallagher , *President,
Approved ----------------------------------------------------------------------
and Susan L. Gorman , *Clerk,
----------------------------------------------------------------------
of Atlantic Data Services, Inc.,
----------------------------------------------------------------------
(Exact name of corporation)
located at One Batterymarch Park, Quincy, MA 02169 ,
-----------------------------------------------------------
(Street address of corporation in Massachusetts)
do hereby certify that the following Amendment and Restatement of the
Articles of Organization was duly adopted by unanimous written consent
dated , 1998 by a vote of the directors and by:
-------------
<TABLE>
<S> <C> <C> <C> <C> <C>
3,104,080 shares of Special Common Stock, $.01 par value of 3,104,080 shares outstanding,
- ---------- -------------------------------------- ------------
(type, class & series, if any)
6,847,960 shares of Common Stock, $.01 par value of 6,847,960 shares outstanding, and
- ---------- -------------------------------------- ------------
(type, class & series, if any)
816,790 shares of Class A Common Stock, $.01 par value of 816,790 shares outstanding
- ---------- -------------------------------------- ------------
(type, class & series, if any)
</TABLE>
C [ ] **being at least a majority of each type, class or series outstanding
and entitled to vote thereon: / **being at least two-thirds of each
P [ ] type, class or series outstanding and entitled to vote thereon and of
each type, class or series of stock whose rights are adversely
M [ ] affected thereby:
R.A. [ ] ARTICLE I
The name of the corporation is:
Atlantic Data Services, Inc.
ARTICLE II
The purpose of the corporation is to engage in the
following business activities:
See Continuation Sheets at Attachment II and incorporated herein by
reference.
- --------
P.C. *Delete the inapplicable words. **Delete the inapplicable clause.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON OF SEPARATE 8 1/2 X 11 SHEETS OF
PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE
MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS
CLEARLY INDICATED.
<PAGE> 2
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- ------------------------------------- ---------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------ ----------------------- ------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Common: Common: 60,000,000 $.01
Preferred: Preferred: 1,000,000 $.01
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See Continuation Sheets at Attachment IV and incorporated herein by reference.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None.
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Continuation Sheets at Attachment VI and incorporated herein by reference.
**If there are no provisions state "None".
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT.
<PAGE> 3
ARTICLE VII
The effective date of the amended and restated Articles of Organization of the
corporation shall be the date approved and filed by the Secretary of the
Commonwealth. If a later effective date is desired, specify such date which
shall not be more than thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is: One Batterymarch Park,
Quincy, MA 02169
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
<TABLE>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: William H. Gallagher 72 Katy-Did Lane Same
Hanson, MA 02341
Treasurer: Susan L. Gorman 529 Crafts Street Same
Newton, MA 02165
Clerk: Susan L. Gorman 529 Crafts Street Same
Newton, MA 02165
Directors: Robert W. Howe 3 Jason's Lane Same
Scituate, MA 02060
William H. Gallagher 72 Katy-Did Lane Same
Hanson, MA 02341
David C. Hodgson 3 Pickwick Plaza Same
Greenwich, CT 06830
Lee M. Kennedy 98 King Caesar Road Same
Duxbury, MA 02332
George F. Raymond 210 East Oak Avenue Same
Morrestown, NJ 08057
Richard D. Driscoll 116 Laurel Road Same
Chestnut Hill, MA 02167
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: March
d. The name and business address of the resident agent, if any, of the
corporation is:
William H. Gallagher
One Batterymarch Park
Quincy, MA 02169
**We further certify that the foregoing Amended and Restated Articles of
Organization affect no amendments to the Articles of Organization of the
corporation as heretofore amended, except amendments to the following articles.
Briefly describe amendments below:
See Continuation Sheet at Attachment VIII and incorporated herein by reference.
SIGNED UNDER THE PENALTIES OF PERJURY, this day of , 1998,
----- --------
- ---------------------------------------------, *President,
William H. Gallagher
- ---------------------------------------------, *Clerk.
Susan L. Gorman
*Delete the inapplicable words. **If there are no amendments, state 'None'.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
AMENDED AND RESTATED ARTICLES
OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within Amended and Restated
Articles of Organization and, the filing fee in the
amount of $ __________ having been paid, said
articles are deemed to have been filed with me this
____day of _____________, 1998.
Effective date:_____________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, MA 02110
Attn: Joseph L. Farmer, Esq.
Telephone: (617) 248-7140
<PAGE> 5
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet II.1
Attachment II
"Article II. The purpose of the corporation is to engage in the following
business activities:
(a) To conduct a business of performing computer services for the
scientific, technical and engineering professions;
(b) To devise formulae and programs for the development, accumulation,
processing, analysis, presentation, distribution and recording of
data required for clients engaged in professional services, research
or publication in the fields of medicine (including paramedical
areas of practice, research and study), physics, chemistry, biology,
astronomy, engineering and other scientific and technical fields;
(c) To render professional data processing services and computer
services and consulting and planning services in connection
therewith;
(d) To develop, devise, design and manufacture computers and computer
programming equipment and systems, and to prepare or manufacture and
distribute the resulting products at wholesale, at retail, or on
commission consignment, including research, development, or
production contracts for public agencies, research or educational
institutions, professional groups and business units;
(e) To maintain one or more data banks or any other type of library or
storage facilities for scientific and technical data or for the
results of research, development and design work of the Corporation
or of any other agency, and to buy, sell, lease, license and
exchange data, data systems or data collections or storage modules
or units;
(f) To acquire patents, copyrights and other interests or forms of
protection of interests or rights, including the power to purchase,
lease, license or receive grants or gifts of interests from the
owners of an existing patent or other rights, and to sell, assign,
lease or license such rights or interests thereunder to others;
(g) To acquire by purchase, lease or license space and facilities for
research, development, design, production, analysis and storage
activities for scientific or technical data or for other operations
of the Corporation or for administrative purposes, including the
power to construct new facilities or to expand or improve existing
facilities and the power to enter into condominium, compound lease,
cross-licensing or other joint or cooperative programs for the
acquisition or
<PAGE> 6
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet II.2
development of operational or administrative space; and to
acquire, maintain and operate wholesale or resale distribution
outlets for its products;
(h) To enter into any type of syndicate, joint enterprise or other
combination of corporate or non-corporate business organizations or
entities for the furtherance of its operational activities,
including its wholesale and retail trading business;
(i) To do all things necessary, appropriate or ancillary to the conduct
of a general computer services business;
(j) To buy, own, sell, develop, maintain, lease and/or operate and
otherwise deal with, either for itself or for others, real and
personal property of any kind whatsoever and to do all things and
carry on all activities necessary or incidental thereto;
(k) To carry on any manufacturing, mercantile, selling, management,
service or other business, transaction or activity which may be
lawfully carried on by a corporation organized under General Laws of
the Commonwealth of Massachusetts, Chapter 156B, as amended (or the
provisions of any substituted chapter of the General Laws of the
Commonwealth of Massachusetts, dealing with the same general subject
matter or such Chapter as now in effect, which may hereafter be
enacted);
(l) To transfer to other persons or corporations, by grant, license,
franchise, or other method, the right or privilege to carry on any
kind of business on such terms as the Corporation shall deem
expedient or proper;
(m) To acquire the good will, business, property or assets (including a
trademark, trade name or trade style), and to assume or undertake
the whole or any part of the liabilities of any person, firm,
association or corporation and to pay for the same in cash, stock,
bonds, debentures or other securities of the Corporation, or
otherwise, as the Board of Directors may determine;
(n) To carry on any business, transaction or activity through a wholly
or partly-owned subsidiary;
(o) To carry on any business, transaction or activity referred to in the
foregoing paragraphs to the same extent as might an individual,
whether as principal, agent, contractor or otherwise, and either
alone or in conjunction with any corporation, association, trust,
firm, individual or government agency, and to be a general partner,
managing general partner, partner and/or limited partner in a
partnership
<PAGE> 7
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet II.3
or limited partnership engaged in any business enterprise which it
would have power to conduct by itself; and
(p) To have as additional purposes all powers granted and conferred by
the laws of the Commonwealth of Massachusetts upon business
corporations organized under Chapter 156B (or any such substituted
chapter) of the General Laws of Massachusetts; provided, however,
that no such purpose shall include any activity inconsistent with
such Chapter 156B (or any such substituted chapter), or any other
applicable provisions of the General Laws of Massachusetts."
<PAGE> 8
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet IV.1
Attachment IV
The following is a statement of the designations, preferences, voting powers,
qualifications, and special or relative rights and privileges in respect of the
authorized capital stock of the Corporation.
The shares of Common Stock, par value $.01 per share, authorized under
these Second Amended and Restated Articles of Organization shall be designated
the "Common Stock." The shares of Preferred Stock authorized under these Second
Amended and Restated Articles of Organization shall be designated the "Preferred
Stock."
A. Issuance of Preferred Stock in Series.
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors may
determine. Each series shall be so designated as to distinguish the shares
thereof from the shares of all other series and classes. Except as to the
relative preferences, powers, qualifications, rights and privileges referred to
in paragraph B below, in respect of any or all of which there may be variations
between different series, all shares of Preferred Stock shall be identical.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purpose of voting by classes.
B. Authority to Establish Variations Between Series of Preferred Stock.
The Board of Directors is expressly authorized, subject to the limitations
prescribed by law and the provisions of these Second Amended and Restated
Articles of Organization, to provide by adopting a vote or votes, a certificate
of which shall be filed in accordance with the Business Corporation Law of the
Commonwealth of Massachusetts, for the issue of the Preferred Stock in one or
more series, each with such designations, preferences, voting powers,
qualifications, special or relative rights and privileges as shall be stated in
the vote or votes creating such series. The authority of the Board of Directors
with respect to each such series shall include without limitation of the
foregoing the right to determine and fix:
(1) the distinctive designation of such series and the number of shares
to constitute such series;
(2) the rate at which dividends on the shares of such series shall be
declared and paid, or set aside for payment, whether dividends at the rate so
determined shall be cumulative, and whether the shares of such series shall be
entitled to any participating or
<PAGE> 9
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet IV.2
other dividends in addition to dividends at the rate so determined, and if so on
what terms;
(3) the right, if any, of the corporation to redeem shares of the
particular series and, if redeemable, the price, terms and manner of such
redemption;
(4) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such series shall be entitled
to receive upon any voluntary or involuntary liquidation, dissolution or winding
up of the corporation;
(5) the terms and conditions, if any, upon which shares of such series
shall be convertible into, or exchangeable for, shares of stock of any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any;
(6) the obligation, if any, of the corporation to retire or purchase
shares of such series pursuant to a sinking fund or fund of a similar nature or
otherwise, and the terms and conditions of such obligation;
(7) voting rights, if any;
(8) limitations, if any, on the issuance of additional shares of such
series or any shares of any other series of Preferred Stock; and
(9) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the Board of Directors may deem
advisable and are not inconsistent with law and the provisions of these Second
Amended and Restated Articles of Organization.
C. Statement of Voting Powers, Qualifications, Special or Relative
Rights and Privileges in Respect of Shares of Common Stock.
After the requirements with respect to preferential dividends on the
Preferred Stock (fixed in accordance with the provisions of paragraph B above)
shall have been met and after the corporation shall have complied with all the
requirements, if any, with respect to the setting aside of sums as sinking funds
or redemption or purchase accounts (fixed in accordance with the provisions of
said paragraph B), then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by the
Board of Directors.
After distribution in full of the preferential amount (fixed in accordance
with the provisions of said paragraph B) to be distributed to the holders of
Preferred Stock in the
<PAGE> 10
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet IV.3
event of voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the corporation,
tangible and intangible, of whatever kind available for distribution to the
stockholders ratably in proportion to the number of shares of Common Stock held
by them respectively.
Except as may otherwise be required by law or the provision of these
Second Amended and Restated Articles of Organization, or by the Board of
Directors pursuant to authority granted in these Second Amended and Restated
Articles of Organization, each holder of Common Stock shall have one vote in
respect of each share of stock held by him in all matters voted upon by the
stockholders.
<PAGE> 11
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet VI.1
Attachment VI
Other provisions for the conduct and regulation of the business and affairs of
the corporation, for its voluntary dissolution, or for limiting, defining, or
regulating the powers of the corporation, or of its directors or stockholders,
or of any class of stockholders, are as follows:
A. Board of Directors.
1. Number, Election and Qualification. The number of directors
shall be fixed only by vote of the Board of Directors.
The directors of the corporation shall be classified with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as possible; the term of office of those of the first class ("Class I
Directors") to continue until the first annual meeting following the date the
corporation first had a class of equity securities registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and until their successors
are duly elected and qualified; the term of office of those of the second class
("Class II Directors") to continue until the second annual meeting following the
date the corporation first had a class of equity securities registered under the
Exchange Act and until their successors are duly elected and qualified; and the
term of office of those of the third class ("Class III Directors") to continue
until the third annual meeting following the date the corporation first had a
class of equity securities registered under the Exchange Act and until their
successors are duly elected and qualified. At each annual meeting of the
corporation, the successors to the class of directors whose term expires at that
meeting shall be elected to hold office for a term continuing until the annual
meeting held in the third year following the year of their election and until
their successors are duly elected and qualified. If the authorized number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of an incumbent director.
2. Vacancies. Vacancies and newly-created directorships,
whether resulting from an increase in the size of the Board of Directors, from
the death resignation, disqualification or removal of a director or otherwise,
shall be filled solely by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the immediately preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the vacancy occurred or the new directorship was created and
until such director's successor shall have been elected and qualified.
<PAGE> 12
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet VI.2
3. Enlargement of the Board. The Board of Directors may only be
enlarged by the vote of a majority of the directors then in office.
4. Tenure. Except as otherwise provided by law, these Second Amended
and Restated Articles of Organization or the By-laws of the corporation,
directors shall hold office until the third year following the year of their
election and until their successors are duly elected and qualified. Any director
may resign by delivering his written resignation to the corporation at its
principal office or to the President, Clerk or Secretary. Such resignation shall
be effective upon receipt unless it is specified to be effective at some other
time or upon the happening of some other event.
5. Removal. Any director elected by the stockholders, or by the Board
of Directors to fill a vacancy, may be removed only for cause by a vote of a
majority of directors then in office or by the stockholders, after reasonable
notice and opportunity to be heard before the annual meeting of stockholders at
which his or her removal is considered and by the affirmative vote of the
holders of at least eighty percent (80%) of the combined voting power of the
shares of capital stock of the corporation outstanding and entitled to vote for
the election of directors.
For purposes of the foregoing paragraph, "cause", with respect to the
removal of any director, shall mean only (1) conviction of a felony, (2)
declaration of unsound mind by order of court, (3) gross dereliction of duty,
(4) commission of an action involving moral turpitude, or (5) commission of an
action which constitutes intentional misconduct or a knowing violation of law if
such action in either event results in improper substantial personal benefit and
a material injury to the Corporation.
6. Amendment. Notwithstanding any other provision of these Second
Amended and Restated Articles of Organization, or any provision of law which
might otherwise permit a lesser vote or no vote, the affirmative vote of the
holders of at least eighty percent (80%) of the combined voting power of the
shares of capital stock of the corporation outstanding and entitled to vote for
the election of directors shall be required to alter, amend or repeal this
Article VI, Part A.
B. Liability of Directors.
The corporation eliminates the personal liability of each director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such liability;
provided, however, that, to the extent provided by applicable law, this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 61 or 62
<PAGE> 13
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet VI.3
or successor provisions of the Massachusetts Business Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. This provision shall not eliminate or limit the liability of a director
of the corporation for any act or omission occurring prior to the date on which
this provision becomes effective. No amendment to or repeal of this provision
shall apply to or have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
C. Location of Stockholders' Meetings.
Meetings of the stockholders of the corporation may be held anywhere in
the United States.
D. Amendment of By-laws.
The directors of the corporation may make, amend or repeal the By-laws
in whole or in part, except with respect to any provision thereof which by law
or the By-laws requires action by the stockholders.
E. Issuance of Shares.
The whole or any part of the authorized but unissued shares of capital
stock of the corporation may be issued at any time or from time to time by the
Board of Directors without further action by the stockholders.
F. Corporation As Partner.
The corporation may become a partner in any business.
G. Certain Actions by Majority Vote.
The corporation, by vote of a majority of the stock outstanding and
entitled to vote thereon (or if there are two or more classes of stock entitled
to vote as separate classes, then by vote of a majority of each such class of
stock outstanding) may (i) authorize any amendment to these Second Amended and
Restated Articles of Organization, (ii) authorize the sale, lease or exchange of
all or substantially all of the corporation's property and assets, including its
goodwill and (iii) approve a merger or consolidation of the corporation with or
into any other corporation, provided that such amendment, sale, lease, exchange,
merger or consolidation shall have been approved by the Board of Directors.
<PAGE> 14
Atlantic Data Services, Inc.
Second Amended and Restated Articles of Organization
Continuation Sheet VIII.1
Attachment VIII
I. Article III is amended to eliminate the Class A Common Stock, $.01 par value
per share, to eliminate the Special Common Stock, $.01 par value per share, to
leave one class of Common Stock, $.01 par value per share (the "Common Stock"),
and to increase the number of authorized shares of Common Stock from 15,000,000
to 60,000,000. Article III is also amended to authorize the corporation to issue
1,000,000 shares of undesignated Preferred Stock, $.01 par value per share.
II. Article IV is amended to set forth the designations, preferences, voting
powers, qualifications, and special or relative rights and privileges of the
capital stock of the corporation and to authorize the Board of Directors to
establish the designations, preferences, voting powers, qualifications, special
or relative rights and privileges of any series of Preferred Stock in accordance
with Section 26 of Chapter 156B of the Massachusetts General Laws.
III. Article VI is amended to add certain other provisions for the conduct and
regulation of the business and affairs of the corporation, including, among
others, classification of the Board of Directors, vacancies, enlargement, tenure
and removal of Board members, amendment of the Second Amended and Restated
Articles of Organization and personal liability of directors.
<PAGE> 1
EXHIBIT 3.03
AMENDED AND RESTATED BY-LAWS
OF
ATLANTIC DATA SERVICES, INC.
Dated: July 15, 1997
<PAGE> 2
AMENDED AND RESTATED BY-LAWS
of
ATLANTIC DATA SERVICES, INC.
ARTICLE I
Articles of Organization
The name and purposes of the corporation shall be as set forth in the
Articles of Organization. These By-Laws, the powers of the Corporation and of
its Directors and stockholders, and all matters concerning the conduct and
regulation of the business of the Corporation shall be subject to such
provisions in regard thereto, if any, as are set forth in the Articles of
Organization; and the Articles of Organization, as from time to time amended,
are hereby made a part of these By-Laws. All references in these By-Laws to the
Articles of Organization shall be construed to mean the Articles of Organization
of the Corporation as from time to time amended.
ARTICLE II
Annual Meeting of Stockholders
The annual meeting of stockholders shall be held at 10:00 A.M. on the
third Wednesday of May in each year or at such other hour as may be fixed by
vote of the Board of Directors or, if the Board shall not fix such hour, as may
be determined by the President and set forth in the notice thereof, unless that
day be a legal holiday at the site of the meeting, in which case the meeting
shall be held at the same hour on the next succeeding business day at the site
of the meeting. Purposes for which an annual meeting is to be held, in addition
to those prescribed by law, by the Articles of Organization and by these
By-Laws, may be specified by the President, or by a vote of a majority of the
Directors then in office, or by one or more stockholders who are entitled to
vote and who hold in-the aggregate at least ten per cent (10%) of the capital
stock entitled to vote at the meeting.
If such annual meeting is omitted on the day herein provided therefor,
a special meeting of stockholders may be held in place thereof and any business
transacted or elections held at such special meeting shall have the same effect
as if transacted or held at the annual meeting, and, in such case, all
references in these By-Laws, except in this Article II and in Article IV, to the
annual meeting of stockholders shall be deemed to refer to such special meeting.
Any such special meeting shall be called, and the purposes thereof shall be
specified in the notice thereof, as provided in Article III.
<PAGE> 3
-3-
ARTICLE III
Special Meetings of Stockholders
A special meeting of stockholders may be called at any time by the
President or by a majority of the Directors then in office. A special meeting of
stockholders shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold in the aggregate at least ten
percent (10%) of the capital stock entitled to vote at the meeting. Such call
shall state the time, place and purpose of the meeting.
ARTICLE IV
Place of Stockholders' Meetings
The annual meeting of stockholders and any special meeting of
stockholders, by whomever called, shall be held at the principal office of the
Corporation in Massachusetts, or at such other place in Massachusetts or within
the continental limits of the United States of America as may be determined by
the Board of Directors (or, in the event such meeting shall have been called
upon the application of stockholders, by such stockholders) and stated in the
notice thereof. Any adjourned session of any annual or special meeting of
stockholders shall be held within the continental limits of the United States at
such place as is designated in the vote of adjournment.
ARTICLE V
Notice of Stockholders' Meetings
A written notice of each annual or special meeting of stockholders,
stating the place, date and hour thereof, and the purpose or purposes for which
the meeting is to be held, shall be given at least thirty (30) days before the
meeting to each stockholder entitled to vote thereat, and to each stockholder
who, under the Articles of Organization or these By-Laws, is entitled to such
notice, by leaving such notice with him or at his residence, or usual place of
business or by mailing it, postage prepaid, addressed to such stockholder at his
address as it appears in the records of the Corporation. Such notice shall be
given by the Clerk, by any other officer, or by a person designated either by
the Clerk or by the person or persons calling the meeting, or by the Board of
Directors. No notice of the time, place or purposes of any annual or special
meeting of stockholders shall be required to be given to a stockholder if a
written waiver of such notice is executed before or after the meeting by such
stockholder, or by his attorney thereunto authorized, and filed with the records
of the meeting.
<PAGE> 4
-4-
ARTICLE VI
Quorum of Stockholders
At any meeting of stockholders, a quorum for the election of any
Director or officer, or for the consideration of any question, shall consist of
a majority in interest of all stock issued, outstanding and entitled to vote at
such election, or upon such question, respectively; except that if two or more
classes of stock are entitled to vote as separate classes upon any question,
then, in the case of each such class, a quorum for the consideration of such
question shall consist of a majority in interest of all stock of that class
issued, outstanding and entitled to vote; and except in any case where a larger
quorum is required by law, by the Articles of Organization or by these By-Laws.
Stock owned by the Corporation, if any, shall not be deemed outstanding for this
purpose. In any case, any meeting may be adjourned from time to time by a
majority of the votes properly cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
When a quorum is present at any meeting, a plurality of the votes
properly cast for any office shall elect to such office, except where a larger
vote is required by law, by the Articles of Organization or by these By-Laws,
and a majority of the votes properly cast upon any other question (or if two or
more classes of stock are entitled to vote as separate classes upon such
question, then, in the case of each such class, a majority of the votes of such
class properly cast upon the question), except in any case where a larger vote
is required by law, by the Articles of organization or by these By-laws, shall
decide the matter.
ARTICLE VII
Proxies and Voting
Except as may be provided in the Articles of Organization, with respect
to two or more classes or series of stock, stockholders entitled to vote shall
have one vote for each share of stock entitled to vote owned by them and a
proportionate vote for each fractional share. No ballot shall be required for
such election unless requested by a stockholder present or represented at the
meeting and entitled to vote in the election. The Corporation shall not,
directly or indirectly, vote upon any share of its own stock.
Stockholders entitled to vote may vote either in person or by proxy in
writing dated not more than six (6) months before the meeting named therein,
which proxies shall be filed with the Clerk of the meeting, or any adjournment
thereof, before being voted. Such proxies shall entitle the holders thereof to
vote at any adjournment of such meeting, but shall not be valid after the final
adjournment of such meeting.
Any action to be taken by stockholders may be taken without a meeting
if all stockholders entitled to vote on the matter consent to the action by a
writing or writings filed with the records of the meetings of stockholders. Such
consent shall be treated for all purposes as a vote at a meeting.
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The Chairman of the Board, if there be one, or in his absence the
President, or in absence of both the Chairman of the Board and the President, a
vice-president shall call meetings of the stockholders to order and shall act as
chairman thereof. The Clerk of the corporation, if present, shall record the
proceedings of all meetings of stockholders and, in his absence, the presiding
officer may appoint a clerk pro tempore of the meeting.
ARTICLE VIII
Board of Directors
The number of Directors of the Corporation shall consist of not fewer
than, the lesser of three or the number of shareholders of the Corporation.
Directors shall be elected annually (by ballot if so requested by any
stockholder entitled to vote) at the annual meeting of stockholders by such
stockholders as have the right to vote at such election. The number of Directors
for each corporate year shall initially be fixed by vote at the meeting at which
they are elected, and if not so fixed shall be the number of Directors
immediately prior to such meeting.
Any action which may by law, the Articles of Organization or these
By-Laws be taken by a majority of the Board of Directors then in office may be
taken by the sole Director when the Corporation has only one Director.
At any time during any year the number of the Board of Directors may be
increased within the aforesaid limits by vote of a majority of the Directors
then in office. At any time during any year, the whole number of Directors may
be increased or reduced within the aforesaid limits by the stockholders at a
meeting called for the purpose and, in the case of a reduction, the particular
directorships which shall terminate shall be determined by the stockholders, in
each case by vote of a majority of the stock outstanding and entitled to vote
for the election of Directors, or, in the case of a reduction which involves the
termination of the directorship of an incumbent Director, by such larger vote of
the stock outstanding and entitled to vote thereon, if any, as would be required
to remove such incumbent from office.
Each newly-created directorship resulting from any increase in the
number of Directors may be filled in the manner provided in Article XIX.
No Director need be a stockholder except as may be otherwise provided
by law, by the Articles of Organization or these By-Laws. Each Director shall
hold office until the next annual meeting of stockholders and until his
successor is elected and qualified, or until he sooner dies, resigns or is
removed.
Notwithstanding anything contained in this Article VIII to the
contrary, all of the terms and provisions of this Article VIII shall be subject
to Section 4.1 (insofar as in force from time to time) of the Shareholders'
Agreement (as said term is defined in Article IX of these By-Laws). Wherever in
these By-Laws any matter is made "subject to" a particular Section or provision
of
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the Shareholders' Agreement, the applicable provision of the By-Law shall be
construed so as to give effect to the applicable Section or provision of the
Shareholders' Agreement.
ARTICLE IX
Powers of Directors
The business, property and affairs of the Corporation shall be managed
by, and be under the control and direction of, the Board of Directors which
shall have and may exercise all the powers of the Corporation except such as are
conferred upon the stockholders or other officers by law, by the Articles of
Organization or by these By-Laws.
Except as may be otherwise specifically provided by law or by vote of
the stockholders and subject to-the provisions of Section 4.2 (insofar as in
force from time to time) of that certain Shareholders' Agreement dated as of
July 15, 1988 by and among the Corporation, Robert W. Howe, William H.
Gallagher, Lee M. Kennedy, Edward B. Gardner, Jr., and General Atlantic Partners
II, L.P. (said agreement, together with all amendments, modifications and
changes thereto and all replacements thereof is hereinafter called the
"Shareholder's Agreement"), the Board of Directors is expressly authorized to
issue, from time to time, all or any portion or portions of the capital stock of
the Corporation of any class, which may have been authorized but not issued or
otherwise reserved for issue, to such person or persons and for such
consideration (but not less than the par value thereof in case of stock having
par value), whether cash, tangible or intangible property, good will, services
or expenses, as they may deem best, without first offering (for subscription or
sale) such authorized but unissued stock to any present or future stockholders
of the Corporation, and generally in their absolute discretion to determine the
terms and manner of any disposition of such authorized but unissued stock.
The Board of Directors may delegate from time to time to any committee,
officer or agent such powers and authority as the law, the Articles of
Organization and these By-Laws may permit. Subject to Section 4.2 (insofar as in
force from time to time) of the Shareholder's Agreement, the Board of Directors
in its discretion may appoint and remove and determine the compensation and
duties in addition to those fixed by law, the Articles of Organization and these
By-Laws, of all the officers, representatives, agents, employees and servants of
the Corporation. Subject to Section 4.2 (insofar as in force from time to time)
of the Shareholder's Agreement, the Board of Directors shall have power to fix a
reasonable compensation or fee for the attendance of their members at meetings
of the Board. Subject to Section 4.2 (insofar as in force from time to time) of
the Shareholder's Agreement, the Board of Directors shall have the power, from
time to time, to fix and determine and to vary the amount of working capital of
the Corporation and to direct and determine the use and disposition of any
surplus or net profits of the Corporation over and above the amount contributed
as, or constituting, capital paid in. Subject to Section 4.2 (insofar as in
force from time to time) of the Shareholder's Agreement, the Board of Directors,
in its discretion, shall, from time to time, declare what, if any, dividends
shall be paid on the stock of the Corporation out of the remaining surplus or
net profits, and any dividend so declared shall be payable at such time or times
as the Board shall determine.
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ARTICLE X
Committees of Directors
The Board of Directors, by vote of a majority of the Directors then in
office, may at any time elect from its own number an executive committee and/or
one or more other committees, and may from time to time designate or alter,
within the limits permitted by this Article X, if applicable, the duties, powers
and number of members of such committees or change their membership, and may at
any time abolish such committees or any of them.
Any committee shall be vested with such powers of the Board of
Directors as the Board may determine in the vote establishing such committee or
in a subsequent vote of a majority of directors then in office, provided,
however, that no such committee shall have any power prohibited by law, or the
Articles of Organization or the power
(a) to change the principal office of the Corporation;
(b) to amend or authorize the amendment of the Articles
of Organization or these By-Laws;
(c) to issue stock;
(d) to establish and designate series of stock, and fix
and determine the relative rights and preferences of
any series of stock;
(e) to elect officers required by law, the Articles of
Incorporation or these By-Laws to be elected by
stockholders or Directors, and to fill vacancies in
any such office;
(f) to change the number of the Board of Directors and to
fill vacancies in the Board of Directors;
(g) to remove officers or Directors from office;
(h) to authorize the payment of any dividend or
distribution to stockholders;
(i) to authorize the reacquisition for value of stock of
the Corporation;
(j) to authorize a merger or consolidation of the
Corporation or a sale or other disposition of all or
substantially all the property and business of
the Corporation;
(k) to authorize the liquidation or dissolution of the
Corporation; or
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(l) to authorize any other action which constitutes a
Major Action (as defined in Section 4.2 of the
Shareholder's Agreement);
and provided further, that the fact that a particular power appears in the
foregoing enumeration of power denied to committees of the Board of Directors
shall not be construed to over-ride by implication any other provision of the
Articles of Organization or these By-Laws limiting or denying to the Board of
Directors the right to exercise such power.
Each member of a committee shall hold office until the first meeting of
the Board of Directors following the next annual meeting of stockholders (or
until such other time as the Board of Directors may determine, either in the
vote establishing the committee or at the election of such member) and until his
successor is elected and qualified, or until he sooner dies, resigns, is
removed, is replaced by change of membership or becomes disqualified by ceasing
to be a Director, or until the committee is sooner abolished by the Board of
Directors.
A majority of the members of any committee then in office shall
constitute a quorum for the transaction of business, but any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice. Each committee may make rules not inconsistent herewith
for the holding and conduct of its meetings, but unless otherwise provided in
such rules its meetings shall be held and conducted in the same manner as nearly
as may be as is provided in these By-Laws for meetings of the Board of
Directors. The Board of Directors shall have power to rescind any vote or
resolution of any committee; provided, however, that no rights of third parties
shall be impaired by such rescission.
ARTICLE XI
Meetings of the Board of Directors;
Action without a Meeting
Regular meetings of the Board of Directors may be held without call or
notice at such places and at such times as the Board may from time to time
determine; provided, however, that reasonable notice of such determination and
of any changes therein is given to each member of the Board then in office. A
regular meeting of the Board of Directors for the purpose of electing officers
and agents may be held without call or notice immediately after and at the same
place as the annual meeting of stockholders, and, if held upon due call or
notice, for such other and further purposes as may be specified in such call or
notice.
Special meetings of the Board of Directors may be held at any time and
at any place when called by the President, the Treasurer, the Chairman of the
Board, if there be one, or two or more Directors, reasonable notice thereof
being given to each Director by the Secretary, or, if there be no Secretary, by
the Clerk, or, in the case of death, absence, incapacity or refusal of the
Secretary (or the Clerk, as the case may be), by the officer or Directors
calling the meeting. In any case, it shall be deemed sufficient notice to a
Director to send notice by mail at least ninety-six (96) hours, or by telegram,
telecopy or fax (or other similar means of facsimile transmittal) at
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least twenty-four (24) hours, before the meeting, addressed to him at his usual
or last known business or residence address; or to give notice to him in person,
either by telephone or by handing him a written notice, at least twenty-four
(24) hours before the meeting.
Notwithstanding the foregoing, notice of a meeting need not be given to
any Director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Director who
attends the meeting without protesting prior thereto, or at its commencement,
the lack of notice to him.
Any action required or permitted to be taken at any meeting of the
Directors may be taken without a meeting if a written consent thereto is signed
by all the Directors and such written consent is filed with the records of the
meetings of the Directors. Such consent shall be treated as a vote at a meeting
for all purposes. Such consents may be executed in one or more counterparts and
not every Director need sign the same counterpart.
ARTICLE XII
Quorum of Directors
At any meeting of the Board of Directors, a quorum for any election, or
for the consideration of any question, shall consist of a majority of the
Directors then in office, but any meeting may be adjourned from time to time by
a majority of the votes cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice. When a
quorum is present at any meeting, the votes of a majority of the Directors
present shall be requisite and sufficient for election to any office, and a
majority of the Directors present shall decide any question brought before such
meeting except in any case where a larger vote is required by law, by the
Articles of Organization, by Section 4.2 (insofar as in force and effect from
time to time) of the Shareholder's Agreement, or the vote of certain specific
directors) or by these By-Laws.
ARTICLE XIII
Officers and Agents
The officers of the Corporation shall be a President, a Treasurer, a
Clerk, and such other officers, which may include a Chief Executive Officer, a
Chief Operating Officer, Chairman of the Board, a Secretary, a Controller, one
or more Vice Presidents, Assistant Treasurers, Assistant Clerks, or Assistant
Controllers, as the Board of Directors may, in its discretion, appoint. The
President need not be Director. The Clerk shall be a resident of Massachusetts
unless the Corporation has a resident agent appointed for the purpose of
receiving service of process. So far as is permitted by law, any two or more
offices may be held by the same person.
Subject to law, to the Articles of Organization and the other
provisions of these By-Laws, each officer shall have, in addition to the duties
and powers herein set forth, such duties and
<PAGE> 10
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powers as are commonly incident to his office and as the Board of Directors may
from time to time designate.
The President, Treasurer, and Clerk (and the Chief Executive Officer,
the Chief Operating Officer and Secretary, if, as the case may be, there be one)
shall be elected annually by the Board of Directors at its first meeting
following the annual meeting of stockholders, by, subject to Section 4.2
(insofar as in force and effect from time to time) of the Shareholder's
Agreement, vote of a majority of the full Board of Directors. Such other
officers of the Corporation as may be created in accordance with these By-Laws
may be filled at such meeting by vote of a majority of the full Board of
Directors or any other time by vote of a majority of the Directors then in
office.
Each officer shall (subject to Article XVIII of these By-Laws) hold
office until the first meeting of the Board of Directors following the next
annual meeting of stockholders and until his successor is elected or appointed
and qualified, or until he sooner dies, resigns, is removed, or becomes
disqualified. Each agent shall retain his authority at the pleasure of the Board
of Directors.
Any officer, employee, or agent of the Corporation may be required as
and if determined by the Board of Directors, to give bond for the faithful
performance of his duties.
ARTICLE XIV
Chief Executive Officer; President and Vice Presidents; Chairman of the Board
The Chief Executive Officer of the Corporation, if there shall be one, shall
have general charge and supervision of the business, property and affairs of the
Corporation and such other powers and duties as the Board of Directors may
prescribe, subject to the control of the Board of Directors, unless otherwise
provided by law, the Articles of Organization, these By-Laws or by specific vote
of the Board of Directors.
The President shall be the Chief Operating Officer and shall be junior
in responsibility only to the Chief Executive Officer, if there shall be one,
shall report only to the Chief Executive Officer, if there shall be one, and
shall have such duties and responsibilities as are fixed by the Board of
Directors, unless otherwise provided by law, the Articles of Organization, these
By-Laws or by specific vote of the Board of Directors. In the absence or
disability of the Chief Executive Officer, the President shall have the powers
and duties of the Chief Executive Officer.
Any Vice President shall have such duties and powers as shall be
designated from time to time by the Board of Directors and shall be responsible
to and shall report to the President. In the absence or disability of the
President, the Vice President or, if there be more than one, the Vice Presidents
in the order of their seniority or as otherwise designated by the Board of
Directors, shall have the powers and duties of the President.
<PAGE> 11
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The Chairman of the Board, if there be one, shall be a member of the
Board of Directors and shall preside at its meetings and at the meetings of the
stockholders. He shall keep himself informed of the administration of the
affairs of the Corporation, shall advise and counsel with the President, and, in
the President's absence, with other officers of the Corporation, and shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors.
ARTICLE XV
Treasurer and Assistant Treasurer
The Treasurer shall be the chief financial officer of the Corporation
and shall be in charge of its funds and the disbursements thereof, subject to
the Board of Directors, and shall have such duties and powers as are commonly
incident to the office of a corporate treasurer and such other duties and powers
as may be prescribed from time to time by the Board of Directors. If no
Controller is elected, the Treasurer shall also have the duties and powers of
the Controller as provided by these By-Laws. The Treasurer shall be responsible
to and shall report to the Board of Directors, but in the ordinary conduct of
the Corporation's business, shall be under supervision of the President.
Any Assistant Treasurer shall have such duties and powers as shall be
prescribed from time to time by the Board of Directors or by the Treasurer, and
shall be responsible to and shall report to the Treasurer. In the absence or
disability of the Treasurer, the Assistant Treasurer or, if there be more than
one, the Assistant Treasurers in their order of seniority or as otherwise
designated by the Board of Directors, shall have the powers and duties of the
Treasurer.
ARTICLE XVI
Controller
If a Controller is elected, he shall be the chief accounting officer of
the Corporation and shall be in charge of its books of account and accounting
records and of its accounting procedures, and shall have such duties and powers
as are commonly incident to the office of a corporate controller and such other
duties and powers as may be prescribed from time to time by the Board of
Directors. The Controller shall be responsible to and shall report to the Board
of Directors but in the ordinary conduct of the Corporation's business, shall be
under the supervision of the Treasurer or a Vice President.
Any Assistant Controller shall have duties and powers as shall be
prescribed from time to time by the Board of Directors or by the Controller, and
shall be responsible to and shall report to the Controller.
<PAGE> 12
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ARTICLE XVII
Clerk; Secretary; Assistant Clerk and Assistant Secretary
The Clerk shall record all proceedings of the stockholders in books to
be kept therefor, and shall have custody of the Corporation's records, documents
and valuable papers. In the absence of the Clerk from any such meeting, the
Secretary, if any, may act as temporary clerk, and shall record the proceedings
thereof in the aforesaid books, or a temporary clerk may be chosen by vote of
the meeting.
The Clerk shall also keep, or cause to be kept, the stock transfer
records of the Corporation which shall contain a complete list of the names and
addresses of all stockholders and the amount of stock held by each.
Unless the Board of Directors shall otherwise designate, the Clerk or,
in his absence, the Assistant Clerk, if any, shall have custody of the corporate
seal and be responsible for affixing it to such documents as may be required to
be sealed.
The Clerk shall have such other duties and powers as are commonly
incident to the office of a corporate clerk, and such other duties and powers as
may be prescribed from time to time by the Board of Directors.
If no Secretary is elected, the Clerk shall also record all proceedings
of the Board of Directors and of any meetings of any committees of the Board,
and, in his absence from any such meeting, a temporary clerk shall be chosen who
shall record the proceedings thereof.
The Secretary shall attend all meetings of the Board of Directors and
shall record the proceedings thereat in books provided for that purpose which
shall be open during business hours to the inspection of any Director. He shall
notify the Directors of the meetings in accordance with these By-Laws and shall
have and may exercise such other powers and duties as the Board of Directors may
prescribe. In the absence of the Secretary at a meeting of the Board of
Directors, a temporary secretary shall be chosen.
Any Assistant Clerk and any Assistant Secretary shall have such duties
and powers as shall from time to time be designated by the Board of Directors or
the Clerk or the Secretary, respectively, and shall be responsible to and shall
report to the Clerk and the Secretary respectively.
ARTICLE XVIII
Resignations and Removals
Any Director or officer may resign at any time by delivering his
resignation in writing to the President, the Clerk or the Secretary, or to a
meeting. of the Board of Directors. Subject to Section 4.1 of the Shareholders'
Agreement, the stockholders may, by vote of a majority in
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interest of the stock issued and outstanding and entitled to vote at an election
of Directors, remove any Director or Directors from office with or without
cause; provided, however, that the Directors of a class elected by a particular
class of stockholders may be removed only by the vote of the holders of a
majority of the shares of such class. Subject to Section 4.1 of the
Shareholders' Agreement, the Board of Directors may, by vote of the majority of
the Directors in office, remove any Director from office with cause, or remove
any officer from office with or without cause; provided, however, that the
Directors of a class elected by a particular class of stockholders may be
removed only by the vote of the holders of a majority of the shares of such
class. The Board of Directors may, at any time, by vote of a majority of the
Directors present and voting, terminate or modify the authority of any agent. No
Director or officer resigning and (except where a right to receive compensation
for a definite future period shall be expressly provided in a written agreement
with the Corporation, duly approved by the Board of Directors) no Director or
officer removed shall have any right to any compensation as such Director or
officer for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month, by
the year or otherwise. Any Director or officer may be removed for cause only
after reasonable notice and opportunity to be heard before the body proposing to
remove him.
ARTICLE XIX
Vacancies
Subject to Section 4.1 (insofar as in force) of the Shareholders'
Agreement, any vacancy in the Board of Directors, however occurring, including a
vacancy resulting from the enlargement of the Board, and any vacancy in any
other office, may be filled by the stockholders or, in the absence of
stockholder action, by a majority of the Directors then in office.
Subject to Section 4.1 (insofar as in force) of the Shareholders'
Agreement, if the office of any member of any committee or of any other office
becomes vacant, the Board of Directors may elect or appoint a successor or
successors by vote of a majority of the Directors then in office.
Each successor as a Director or officer shall hold office for the
unexpired term and until his successor shall be elected or appointed and
qualified, or until he sooner dies, resigns, is removed or becomes disqualified.
Subject to Section 4.1 (insofar as in force) of the Shareholders'
Agreement, the Board of Directors shall have and may exercise all its powers,
notwithstanding the existence of one or more vacancies in its number as fixed by
either the stockholders or the Directors.
ARTICLE XX
Capital Stock
The authorized amount of the capital stock and the par value, if any,
of the shares shall be as fixed in the Articles of Organization. At all times
when there are two or more classes of stock,
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the several classes of stock shall conform to the description and terms, and
have the respective preferences, voting powers, restrictions and qualifications
set forth in the Articles of Organization.
ARTICLE XXI
Certificate of Stock
Each stockholder shall be entitled to a certificate of the capital
stock of the Corporation owned by him, in such form as shall, in conformity to
law, be prescribed from time to time by the Board of Directors. Such certificate
shall be signed by the Managing Director or the President or a Vice President,
and by either the Treasurer or an Assistant Treasurer, and may, but need not be,
sealed with the corporate seal; but when any such certificate is signed by a
transfer agent or by a registrar other than a Director, officer, or employee of
the Corporation, the signature of the President or a Vice President and of the
Treasurer or an Assistant Treasurer of the Corporation, or either or both such
signatures and such seal upon such certificate, may be facsimile. If any officer
who has signed, or whose facsimile signature has been placed on, any such
certificate shall have ceased to be such officer before such certificate is
issued, the certificate may be issued by the Corporation with the same effect as
if he were such officer at the time of issue.
Every certificate for share of stock which are subject to any
restriction on transfer pursuant to law, the Articles of Organization, these
By-laws, or any agreement to which the Corporation is a party, shall have the
restriction noted conspicuously on the certificate, and shall also set forth, on
the face or back, either the full text of the restriction or a statement of the
existence of such restriction and (except if such restriction is imposed by law)
a statement that the Corporation will furnish a copy thereof to the holder of
such certificate upon written request and without charge. Every certificate
issued when the Corporation is authorized to issue more than one class or series
of stock shall set forth on its face or back either the full text of the
preferences, voting powers, qualifications, and special and relative rights of
the shares of each class and series authorized to be issued, or a statement of
the existence of such preferences, powers, qualifications and rights, and a
statement that the Corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge.
ARTICLE XXII
Transfer of Shares of Stock
Subject to the restrictions, if any, stated or noted on the stock
certificates, shares of stock may be transferred on the books of the Corporation
only by surrender to the Corporation, or its transfer agent, of the certificate
therefor, properly endorsed or accompanied by a written assignment or power of
attorney properly executed, with all requisite stock transfer stamps affixed,
and with such proof of the authenticity and effectiveness of the signature as
the Corporation or its transfer agent shall reasonably require. Except as may be
otherwise required by law, the Articles of Organization or these By-Laws, the
Corporation shall have the right to
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treat the person registered on the stock transfer books as the owner of any
shares of the Corporation's stock as the owner-in-fact thereof for all purposes,
including the payment of dividends, liability for assessments, the right to vote
with respect thereto and otherwise, and accordingly shall not be bound to
recognize any attempted transfer, pledge or other disposition thereof, or any
equitable or other claim with respect thereto, whether or not it shall have
actual or other notice thereof, until such shares shall have been transferred on
the Corporation's books in accordance with these By-Laws. It shall be the duty
of each stockholder to notify the Corporation of his post office address.
ARTICLE XXIII
Transfer Agents and Registrars, Further Regulations
The Board of Directors may appoint one or more banks, trust companies
or corporations doing a corporate trust business, in good standing under the
laws of the United States or any state therein, to act as the Corporation's
transfer agent and/or registrar for shares of capital stock, and the Board may
make such other and further regulations, not inconsistent with applicable law,
as it may deem expedient concerning the issue, transfer and registration of
capital stock and stock certificates of the Corporation.
ARTICLE XXIV
Loss of Certificates
In the case of the alleged loss, destruction, or wrongful taking of a
certificate of stock, a duplicate certificate may be issued in place thereof
upon receipt by the Corporation of such evidence of loss and such indemnity
bond, with or without surety, as shall be satisfactory to the President and the
Treasurer, or otherwise upon such terms, consistent with law, as the Board of
Directors may prescribe.
ARTICLE XXV
Record Date
The Directors may fix in advance a time, which shall not be more than
sixty days before the date of any meeting of stockholders or the date for the
payment of any dividend or the making of any distribution to stockholders, or
the last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date of, and to vote at, such meeting
and any adjournment thereof, or the right to receive such dividend or
distribution, or the right to give such consent or dissent, and in such case,
only stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the Corporation after the
record date; or, without fixing such record date, the Directors may, for any
such purposes, close the transfer books for all or any part of such period.
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ARTICLE XXVI
Seal
The seal of the Corporation shall, subject to alteration by the Board
of Directors, consist of a flat-faced circular die with the word
"Massachusetts", together with the name of the Corporation and the year of
incorporation, cut or engraved thereon. An impression of the seal impressed upon
the original copy of these By-Laws shall be deemed conclusively to be the seal
adopted by the Board of Directors.
ARTICLE XXVII
Execution of Papers
Except as the Board of Directors may generally or in particular cases
otherwise authorize or direct, all deeds, leases, transfers, contracts,
proposals, bonds, notes, checks, drafts and other obligations made, accepted or
endorsed by the Corporation shall be signed or endorsed on behalf of the
Corporation by its President or by one of its Vice Presidents or by its
Treasurer.
ARTICLE XXVIII
Fiscal Year
Except as from time to time provided by the Board of Directors, the
fiscal year of the Corporation shall end on the 31st day of March of each year.
ARTICLE XXIX
Indemnification of Directors, Officers and
Persons Administering Employee Benefit Plans
Each officer or Director or former officer or Director of the
Corporation, and each person who shall, at the Corporation's request, have
served as an officer or director of another corporation or as a trustee or
officer of an association or trust, in which the Corporation from time to time
owns stock or shares, or of which the Corporation is a creditor, and each person
who shall, at the Corporation's request, have served in any capacity with
respect to any employee benefit plan, whether or not then in office or then
serving with respect to such employee benefit plan, and the heirs, executors,
administrators, successors and assigns of each of them shall be indemnified by
the Corporation against all liabilities, costs and expenses, including amounts
paid in satisfaction of judgments, in compromise and/or as fines or penalties
and fees and disbursements of counsel, imposed upon or reasonably incurred by
him or them in connection with or arising out of any action, suit, or
proceeding, civil or criminal, in which he or they may be involved, or incurred
in anticipation of any action, suit or proceeding, by reason of his being or
having been an officer, trustee or Director or by reason of any alleged act or
omission by him in such capacity or in serving with respect to an employee
benefit plan, including the cost of
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reasonable settlements (other than amounts paid to the Corporation itself) made
with a view to curtailment of costs of litigation. Without limiting the
generality of the foregoing, no Director or officer of the Corporation shall be
liable to any person on account of any action undertaken by him as such Director
or officer in reliance in good faith upon the information, opinions, reports or
records, including financial statements, books of account and other financial
records, in each case presented by or prepared by or under the supervision of
(1) one or more officers or employees of the Corporation whom the Director or
officer reasonably believes to be reliable and competent in the matters
presented, or (2) counsel, public accountants or other persons as to matters
which the Director or officer reasonably believes to be within such person's
professional or expert competence, or (3) in the case of a Director, a duly
constituted committee of the Board of Directors upon which he does not serve, as
to matters within its delegated authority, which committee the Director
reasonably believes to merit confidence. The Corporation shall not, however,
indemnify any such person, or his heirs, executors, administrators, successors,
or assigns, with respect to any matter as to which he shall be finally adjudged
in any such action, suit, or proceeding not to have acted in good faith in the
reasonable belief that his action was in the best interests of the Corporation,
or to the extent that such matter relates to service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries of such
employee benefit plan. Such indemnification may include payment by the
Corporation of expenses incurred in defending any such action, suit or
proceeding in advance of the final disposition thereof, upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification under this Article, which
undertaking may be accepted by the Corporation without reference to the
financial ability of such person to make repayment. The foregoing rights of
indemnification shall not be exclusive of other rights to which any such
Director, officer or person serving with respect to an employee benefit plan may
be entitled as a matter of law. These indemnity provisions shall be separable,
and if any portion thereof shall be finally adjudged to be invalid, such
invalidity shall not affect any other portion which can be given effect.
The Board of Directors may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, trustee, employee or other agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, trustee, employee or other agent of another corporation of
which the Corporation is or was a stockholder or creditor, against any liability
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 him against
such liability.
ARTICLE XXX
Voting Stock in Other Corporations
Unless otherwise ordered by the Board of Directors, the President or,
in the case of his absence or failure to act, the Treasurer, shall have full
power and authority on behalf of the Corporation to attend and to act and to
vote at any meetings of stockholders of any corporation in which this
Corporation may hold stock, and at any such meeting shall possess and may
exercise any and all rights and powers incident to the ownership of such stock
and which, as the owner
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thereof, the Corporation might have possessed and exercised if present. The
Board of Directors, by resolution from time to time, or, in the absence thereof,
the President, may confer like powers upon any other person or persons as
attorneys and proxies of the Corporation.
ARTICLE XXXI
Corporate Records
The original or attested copies of the Articles of Organization,
By-Laws, and records of all meetings of the incorporators and stockholders, and
the stock and transfer records which shall contain the names of all stockholders
and the record address and the amount of stock held by each, shall be kept in
Massachusetts, either at the principal office of the Corporation or at an office
of its transfer agent or of the Clerk. Said copies and records need not all be
kept in the same office. They shall be available at all reasonable times for
inspection by any stockholder for any proper purpose, but not to secure a list
of the stockholders for the purpose of selling said list, or copies thereof, or
of using the same for a purpose other than in the present interest of the
applicant, as a stockholder, relative to the affairs of the Corporation.
ARTICLE XXXII
Amendments
Subject to Section 4.2 (insofar as in force) of the Shareholders'
Agreement, these By-Laws may be altered, amended or repealed, in whole or in
part at any time by vote of the stockholders. Subject to Section 4.2 (insofar as
in force) of the Shareholders' Agreement, the Board of Directors, by a majority
vote of Directors at the time-in office, may alter, amend or repeal these
By-Laws in whole or in part, except with respect to any provision hereof which
by law, the Articles of Organization or these By-laws requires action by the
stockholders; provided that not later than the time of giving notice of the
meeting of stockholders next following the alteration, amendment or repeal of
these By-Laws, in whole or in part, notice thereof, stating the substance of
such action shall be given to all stockholders entitled to vote on amending
these By-Laws. Subject to Section 4.2 (insofar as in force) of the Shareholders'
Agreement, By-Laws adopted by the Directors may be amended by the stockholders.
<PAGE> 1
EXHIBIT 3.04
ATLANTIC DATA SERVICES, INC.
SECOND AMENDED AND RESTATED BY-LAWS
ARTICLE I
Stockholders
1. Annual Meeting. The annual meeting of stockholders shall be held on
the date and at the time fixed, from time to time, by the directors, provided
that the date so fixed is within six months of the end of the fiscal year of the
corporation. The purposes for which the annual meeting is to be held, in
addition to those prescribed by law, by the Articles of Organization or by these
By-Laws, may be specified by the Directors or the President. In the event an
annual meeting has not been held on the date fixed in these By-Laws, a special
meeting in lieu of the annual meeting may be held with all the force and effect
of an annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by
the President or by the Directors. Upon written application of one or more
stockholders who hold at least 10% of the capital stock entitled to vote at a
meeting, a special meeting shall be called by the Clerk, or in case of the
death, absence, incapacity or refusal of the Clerk, by any other officer.
Notwithstanding the immediately preceding sentence, if the corporation has a
class of voting stock registered under the Securities Exchange Act of 1934, as
amended, upon written application of one or more stockholders who hold at least
40% in interest of the capital stock entitled to vote at a meeting, a special
meeting shall be called by the Clerk, or in case of the death, absence,
incapacity or refusal of the Clerk, by any other officer.
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3. Place of Meetings. All meetings of stockholders shall be held at the
principal office of the corporation unless a different place (within or without
Massachusetts, but within the United States) is fixed by the Directors or the
President and stated in the notice of the meeting.
4. Notice of Meetings. A written notice of the place, date and hour of all
meetings of stockholders stating the purpose of the meeting shall be given by
the Clerk or an Assistant Clerk or by the person calling the meeting at least
seven days before the meeting unless such longer period is required by law to
each stockholder entitled to vote thereat and to each stockholder who under the
law, under the Articles of Organization or under these By-Laws, is entitled to
such notice, by leaving such notice with him or at his residence or usual place
of business, or by mailing it, postage prepaid, and addressed to such
stockholder at his address as it appears in the records of the corporation.
Whenever notice of a meeting is required to be given a stockholder under any
provision of the Massachusetts Business Corporation Law or of the Articles of
Organization or these By-Laws, a written waiver thereof, executed before or
after the meeting by such stockholder or his attorney thereunto authorized and
filed with the records of the meeting, shall be deemed equivalent to such
notice.
5. Notice of Stockholder Business. The following provisions of this
Section 5 shall apply to the conduct of business at any meeting of the
stockholders (as used in this Section 5, the term annual meeting shall include a
special meeting in lieu of annual meeting).
(a) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the corporation who is a stockholder of
record at the time of giving of the notice provided for in paragraph (b) of this
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Section 5, who shall be entitled to vote at such meeting and who complies with
the notice procedures set forth in paragraph (b) of this Section 5.
(b) For business to be properly brought before any meeting of the
stockholders by a stockholder pursuant to clause (iii) of paragraph (a) of this
By-law, the stockholder must have given timely notice thereof in writing to the
Clerk of the corporation. To be timely, a stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the corporation:
(i) in the case of any annual meeting, not less than 60 days nor more than 90
days prior to the date specified in Section 1 above for such annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that if a special meeting in lieu of annual
meeting of stockholders is to be held on a date prior to the date specified in
Section 1 above, and if less than seventy days' notice or prior public
disclosure of the date of such special meeting in lieu of annual meeting is
given or made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the tenth day following the
earlier of the date on which notice of the date of such special meeting in lieu
of annual meeting was mailed or the day on which public disclosure was made of
the date of such special meeting in lieu of annual meeting; and (ii) in the case
of a special meeting (other than a special meeting in lieu of an annual
meeting), not later than the tenth day following the earlier of the day on which
notice of the date of the scheduled meeting was mailed or the day on which
public disclosure was made of the date of the scheduled meeting. A stockholder's
notice to the Clerk shall set forth as to each matter the stockholder proposes
to bring before the meeting, (i) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting, (ii) the name and address, as they appear on the
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corporation's books, of the stockholder proposing such business, the name and
address of the beneficial owner, if any, on whose behalf the proposal is made,
and the name and address of any other stockholders or beneficial owners known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the corporation which are owned beneficially and of record by such
stockholder of record, by the beneficial owner, if any, on whose behalf the
proposal is made and by any other stockholders or beneficial owners known by
such stockholder of record and/or of the beneficial owner, if any, on whose
behalf the proposal is made, in such proposed business and any material interest
of any other stockholders or beneficial owners known by such stockholder to be
supporting such proposal in such proposed business, to the extent known by such
stockholder.
(c) Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at a meeting except in accordance with the
procedures set forth in these By-Laws. The person presiding at the meeting
shall, if the facts warrant, determine that business was not properly brought
before the meeting and in accordance with the procedures prescribed by these
By-laws, and if he should so determine, he shall so declare at the meeting and
any such business not properly brought before the meeting shall not be
transacted.
(d) This provision shall not prevent the consideration and approval or
disapproval at the meeting of reports of officers, Directors and committees of
the Board of Directors, but, in connection with such reports, no new business
shall be acted upon at such meeting unless properly brought before the meeting
as herein provided.
(e) Notwithstanding the foregoing provisions of this Section 5 to the
contrary, a stockholder shall comply with all applicable requirements of the
Securities Exchange Act of
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1934, as amended (or any successor provision), and the rules and regulations
thereunder with respect to the matters set forth in this Section 5.
6. Quorum. The holders of a majority in interest of all stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum, but a
lesser number may adjourn any meeting from time to time without further notice;
except that, if two or more classes of stock are outstanding and entitled to
vote as separate classes, then in the case of each such class, a quorum shall
consist of the holders of a majority in interest of the stock of that class
issued, outstanding and entitled to vote.
7. Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote owned by him and a proportionate vote for a
fractional share, unless otherwise provided by the Articles of Organization in
the case that the corporation has two or more classes or series of stock.
Capital stock shall not be voted if any installment of the subscription therefor
has been duly demanded in accordance with the law of the Commonwealth of
Massachusetts and is overdue and unpaid. Stockholders may vote either in person
or by written proxy dated not more than six months before the meeting named
therein. Proxies shall be filed with the clerk of the meeting, or of any
adjournment thereof, before being voted. Except as otherwise limited therein,
proxies shall entitle the persons named therein to vote at any adjournment of
such meeting but shall not be valid after final adjournment of such meeting. A
proxy with respect to stock held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a
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stockholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
8. Action at Meeting. When a quorum is present, the holders of a
majority of the stock present or represented and voting on a matter (or if there
are two or more classes of stock entitled to vote as separate classes, then in
the case of each such class, the holders of a majority of the stock of that
class present or represented and voting on a matter), except where a larger vote
is required by law, the Articles of Organization or these By-Laws, shall decide
any matter to be voted on by the stockholders. Any election of directors or
officers by the stockholders shall be determined by a plurality of the votes
cast by stockholders entitled to vote at the election. Any such elections shall
be by ballot if so requested by any stockholder entitled to vote thereon. The
corporation shall not directly or indirectly vote any share of its own stock.
9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
ARTICLE II
Directors
1. Powers. The business of the corporation shall be managed by a Board
of Directors who may exercise all the powers of the corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
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2. Number, Election and Qualification; Vacancies, Enlargement of the
Board; Tenure; Removal. The number of Directors, and the provisions governing
their election and qualification, vacancies, enlargement of the Board of
Directors and their tenure and removal shall be as provided by law and as set
forth in the Articles of Organization.
3. Meetings. Regular meetings of the Directors may be held without call
or notice at such places and at such times as the Directors may from time to
time determine, provided that any Director who is absent when such determination
is made shall be given notice of the determination. A regular meeting of the
Directors may be held without a call or notice at the same place as the annual
meeting of stockholders.
Special meetings of the Directors may be held at any time and place
designated in a call by the President or two or more Directors.
4. Telephone Conference Meetings. Members of the Board of Directors may
participate in a meeting of the board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
5. Notice of Meetings. Notice of all special meetings of the Directors
shall be given to each Director by the Secretary, or Assistant Secretary, or if
there be no Secretary or Assistant Secretary, by the Clerk, or Assistant Clerk,
or in case of the death, absence, incapacity or refusal of such persons, by the
officer or one of the Directors calling the meeting. Notice shall be given to
each Director in person or by telephone or by telegram sent to his business or
home address at least twenty-four hours in advance of the meeting, or by written
notice mailed to his business or
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home address at least forty-eight hours in advance of the meeting. Notice of a
meeting need not be given to any Director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors' meeting need not specify the purposes of the meeting.
6. Quorum. At any meeting of the Directors, a majority of the
Directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time without further notice.
7. Action at Meeting. At any meeting of the Directors at which a
quorum is present, a majority of the Directors present may take any action on
behalf of the Board except to the extent that a larger number is required by law
or the Articles of Organization or these By-Laws.
8. Action by Consent. Any action required or permitted to be taken at
any meeting of the Directors may be taken without a meeting, if all the
Directors consent to the action in writing and the written consents are filed
with the records of the meetings of Directors. Such consents shall be treated
for all purposes as a vote at a meeting.
9. Committees. The Directors may, by vote of a majority of the
Directors then in office, elect from their number an executive or other
committees and may by like vote delegate thereto some or all of their powers
except those which by law, the Articles of Organization or these By-Laws they
are prohibited from delegating to such committee. Except as the Directors may
otherwise determine, any such committee may make rules for the conduct of its
business, but unless otherwise provided by the Directors or in such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these By-Laws for the Directors.
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ARTICLE III
Officers
1. Enumeration. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers, including a Chairman
of the Board of Directors, one or more Vice Presidents, Assistant Treasurers,
Assistant Clerks, Secretary and Assistant Secretaries as the Directors may
determine.
2. Election. The President, Treasurer and Clerk shall be elected annually
by the Directors at their first meeting following the annual meeting of
stockholders. Other officers may be chosen by the Directors at such meeting or
at any other meeting.
3. Qualification. The President may, but need not be, a Director. No
officer need be a stockholder. Any two or more offices may be held by the same
person, provided that the President and Clerk shall not be the same person. The
Clerk shall be a resident of Massachusetts unless the corporation has a resident
agent appointed for the purpose of service of process. Any officer may be
required by the Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with such sureties as the Directors
may determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their successors are chosen and qualified; and
all other officers shall hold office until the first meeting of the Directors
following the next annual meeting of stockholders and until their successors are
chosen and qualified, unless a shorter term is specified in the vote choosing or
appointing them. Any officer may resign by delivering his written resignation to
the corporation at its principal office
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or to the President, Clerk or Secretary, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
5. Removal. The Directors may remove any officer with or without cause
by vote of a majority of the Directors then in office; provided, that an officer
may be removed for cause only after a reasonable notice and opportunity to be
heard before the Board of Directors.
6. President, Chairman of the Board, and Vice-President. The President
shall, unless otherwise provided by the Directors, be the chief executive
officer of the corporation and shall, subject to the direction of the Directors,
have general supervision and control of its business. Unless otherwise provided
by the Directors he shall preside, when present, at all meetings of stockholders
and, unless a Chairman of the Board has been elected and is present, of the
Directors.
If a Chairman of the Board of Directors is elected he shall preside at
all meetings of the Board of Directors at which he is present. The Chairman
shall have such other powers as the Directors may from time to time designate.
Any Vice-President shall have such powers as the Directors may from
time to time designate.
7. Treasurer and Assistant Treasurer. The Treasurer shall, subject to
the direction of the Directors, have general charge of the financial affairs of
the corporation and shall cause accurate books of account to be kept. He shall
have custody of all funds, securities, and valuable documents of the
corporation, except as the Directors may otherwise provide.
Any Assistant Treasurer shall have such powers as the Directors may
from time to time designate.
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8. Clerk and Assistant Clerks. The Clerk shall record all proceedings
of the stockholders in a book to be kept therefor. Unless a transfer agent is
appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the
principal office of the corporation or at his office, the stock and transfer
records of the corporation, in which are contained the names of all stockholders
and the record address and the amount of stock held by each.
In case a Secretary is not elected, the Clerk shall record all
proceedings of the Directors in a book to be kept therefor.
In the absence of the Clerk from any meeting of the stockholders, an
Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the duties of the Clerk. Any
Assistant Clerk shall have such additional powers as the Directors may from time
to time designate.
9. Secretary and Assistant Secretaries. If a Secretary is elected, he
shall keep a record of the meetings of the Directors and in his absence, an
Assistant Secretary, if one be elected, otherwise a Temporary Secretary
designated by the person presiding at the meeting, shall keep a record of the
meetings of the Directors.
Any Assistant Secretary shall have such additional powers as the
Directors may from time to time designate.
10. Other Powers and Duties. Each officer shall, subject to these
By-Laws, have in addition to the duties and powers specifically set forth in
these By-Laws, such duties and powers as are customarily incident to his office,
and such duties and powers as the Directors may from time to time designate.
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ARTICLE IV
Capital Stock
1. Certificates of Stock. Subject to the provisions of Section 2 below,
each stockholder shall be entitled to a certificate of the capital stock of the
corporation in such form as may be prescribed from time to time by the
Directors. The certificate shall be signed by the President or a Vice-President,
and by the Treasurer or an Assistant Treasurer; provided, however, such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer at the time of its issue.
Every certificate issued for shares of stock at a time when such shares
are subject to any restriction on transfer pursuant to the Articles of
Organization, these By-Laws or any agreement to which the corporation is a party
shall have the restriction noted conspicuously on the certificate and shall also
set forth on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction and a statement
that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge. Every stock certificate
issued by the corporation at a time when it is authorized to issue more than one
class or series of stock shall set forth upon the face or back of the
certificate either the full text of the preferences, voting powers,
qualifications and special and relative rights of the shares of each class and
series, if any, authorized to be issued, as set forth in the Articles of
Organization, or a statement of the existence of such preferences, powers,
qualifications, and
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rights, and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
2. Stockholder Open Accounts. The corporation may maintain or cause to
be maintained stockholder open accounts in which may be recorded all
stockholders' ownership of stock and all changes therein. Certificates need not
be issued for shares so recorded in a stockholder open account unless requested
by the stockholder.
3. Transfers. Subject to the restrictions, if any, stated or noted on
the stock certificates, shares of stock may be transferred in the records of the
corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the corporation or its
transfer agent may reasonably require. When such stock certificates are thus
properly surrendered to the corporation or its transfer agent, the corporation
or transfer agent shall cause the records of the corporation to reflect the
transfer of the shares of stock. Except as may be otherwise required by law, by
the Articles of Organization or by these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown in its records as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect thereof, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
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4. Record Date. The Directors may fix in advance a time which shall be
not more than sixty (60) days before the date of any meeting of stockholders or
the date for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or distribution or the
right to give such consent or dissent. In such case only stockholders of record
on such record date shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. Without fixing such
record date the Directors may for any of such purposes close the transfer books
for all or any part of such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors acts with respect thereto.
5. Replacement of Certificates. In case of the alleged loss,
mutilation or destruction of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms and conditions as the Directors may
prescribe.
6. Issue of Capital Stock. The whole or any part of the then
authorized but unissued shares of each class of stock may be issued at any time
or from time to time by the Board of Directors without action by the
stockholders.
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7. Reacquisition of Stock. Shares of stock previously issued which
have been reacquired by the corporation, may be restored to the status of
authorized but unissued shares by vote of the Board of Directors, without
amendment of the Articles of Organization.
ARTICLE V
Provisions Relative to Directors,
Officers, Stockholders and Employees
1. Certain Contracts and Transactions. In the absence of fraud or bad
faith, no contract or transaction by this corporation shall be void, voidable or
in any way affected by reason of the fact that the contract or transaction is
(a) with one or more of its officers, Directors, stockholders or employees, (b)
with a person who is in any way interested in this corporation, or (c) with a
corporation, organization or other concern in which an officer, Director,
stockholder or employee of this corporation is an officer, director,
stockholder, employee or in any way interested. The provisions of this section
shall apply notwithstanding the fact that the presence of a Director or
stockholder, with whom a contract or transaction is made or entered into or who
is an officer, director, stockholder or employee of a corporation, organization
or other concern with which a contract or transaction is made or entered into or
who is in any way interested in such contract or transaction, was necessary to
constitute a quorum at the meeting of the Directors (or any authorized committee
thereof) or stockholders at which such contract or transaction was authorized
and/or that the vote of such Director or stockholder was necessary for the
adoption of such contract or transaction, provided that if said interest was
material, it shall have been known or disclosed to the Directors or stockholders
voting at said meeting on said contract or transaction. A general notice to any
person voting on said contract or transaction that an officer, Director,
stockholder or employee has a material interest in any corporation, organization
or
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other concern shall be sufficient disclosure as to such officer, Director,
stockholder or employee with respect to all contracts and transactions with such
corporation, organization or other concern. This section shall be subject to
amendment or repeal only by action of the stockholders.
2. Indemnification.
(a) Actions, Suits and Proceedings. 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, 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 or officer of, or in a similar capacity with, another organization or
in any capacity with respect to any employee benefit plan of the corporation
(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 and fines incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, unless such indemnification is prohibited by the Business Corporation
Law of the Commonwealth of Massachusetts. Notwithstanding anything to the
contrary in this By-law, except as set forth in paragraph 2(e) of this By-law,
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.
(b) Settlements. The right to indemnification conferred in
this By-law shall include the right to be paid by the corporation for amounts
paid in settlement of any such action,
<PAGE> 17
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suit or proceeding and any appeal therefrom, and all expenses (including
attorneys' fees) incurred in connection with such settlement, pursuant to a
consent decree or otherwise, unless and to the extent it is determined pursuant
to paragraph 2(e) of this By-law that the Indemnitee did not act in good faith
in the reasonable belief that his action was in the best interests of the
corporation or, to the extent such matter relates to service with respect to an
employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
(c) 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 the
such claim, other than as provided below in paragraph 2(c) of this By-law. 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
<PAGE> 18
-18-
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
By-law. 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.
(d) Advance of Expenses. Subject to the provisions of
paragraph 2(e) of this By-law, in the event that the corporation does not assume
the defense pursuant to paragraph 2(c) of this By-law of any action, suit,
proceeding or investigation of which the corporation receives notice under this
By-law, 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 By-law. Such undertaking may be
accepted without reference to the financial ability of the Indemnitee to make
such repayment.
(e) Procedure for Indemnification. In order to obtain
indemnification or advancement of expenses pursuant to paragraphs (a), (b) or
(d) of this By-law, the Indemnitee shall submit to the corporation a written
request, including in such request such documentation and information as is
reasonably available to the Indemnitee and is reasonably necessary to
<PAGE> 19
-19-
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 sixty
days after receipt by the corporation of the written request of the Indemnitee,
unless the corporation determines, by clear and convincing evidence, within such
sixty-day period that the Indemnitee did not meet the applicable standard of
conduct set forth in paragraph (a) or (b) of this By-law, as the case may be.
Such determination shall be made in each instance by (a) a majority vote of a
quorum of the directors of the corporation, (b) 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, (c)
independent legal counsel (who may be regular legal counsel to the corporation),
or (d) a court of competent jurisdiction.
(f) Remedies. The right to indemnification or advances as
granted by this By-law 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 sixty-day period referred
to above in paragraph 2(e) of this By-law. Unless otherwise provided by law, the
burden of proving that the Indemnitee is not entitled to indemnification or
advancement of expenses under this By-law 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 paragraph 2(e) of this By-law 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
such applicable
<PAGE> 20
-20-
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.
(g) Subsequent Amendment. No amendment, termination or repeal
of this By-law or of the relevant provisions of Chapter 156B of the
Massachusetts General Laws 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.
(h) Other Rights. The indemnification and advancement of
expenses provided by this By-law shall not be deemed exclusive of any other
rights to which an Indemnitee seeking indemnification or advancement of expenses
may be entitled under any law (common or statutory), agreement or vote of
stockholders or 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 By-law
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 By-law. 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 By-law.
<PAGE> 21
-21-
(i) Partial Indemnification. If an Indemnitee is entitled
under any provision of this By-law 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.
(j) 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 organization or 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
Chapter 156B of the Massachusetts General Laws.
(k) 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 By-law 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.
(l) Savings Clause. If this By-law 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,
<PAGE> 22
-22-
whether civil, criminal or administrative, including an action by or in the
right of the corporation, to the fullest extent permitted by any applicable
portion of this By-law that shall not have been invalidated and to the fullest
extent permitted by applicable law.
(m) Subsequent Legislation. If the Massachusetts General Laws
are amended after adoption of these By-Laws to expand further the
indemnification permitted to Indemnitees, then the corporation shall indemnify
such persons to the fullest extent permitted by the Massachusetts General Laws,
as so amended.
ARTICLE VI
Miscellaneous Provisions
1. Fiscal Year. Except as from time to time otherwise determined by the
Directors, the fiscal year of the corporation shall end on March 31 in each
year. Following any change in the fiscal year previously adopted, a certificate
of such change, signed under the penalties of perjury by the Clerk or an
Assistant Clerk, shall be filed forthwith with the state secretary.
2. Seal. The seal of this corporation shall, subject to alteration by
the Directors, bear its name, the word "Massachusetts," and the year of its
incorporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or the Treasurer
except as the Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Except as the Directors may otherwise
designate, the President or Treasurer may waive notice of, and appoint any
person or persons to act as proxy or attorney-in-fact for this corporation (with
or without power of substitution) at any meeting of
<PAGE> 23
-23-
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5. Corporate Records. The original, or attested copies, of the Articles
of Organization, By-Laws and records of all meetings of incorporators and
stockholders, and the stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts at the principal office of the corporation or at
an office of its transfer agent or of the Clerk or of its resident agent. Said
copies and records need not all be kept in the same office. They shall be
available at all reasonable times to the inspection of any stockholder for any
proper purpose but not to secure a list of stockholders or other information for
the purpose of selling said list or information or copies thereof or of using
the same for a purpose other than in the interest of the applicant, as a
stockholder, relative to the affairs of the corporation.
6. Articles of Organization. All references in these By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
7. Amendments. These By-Laws, to the extent provided in these By-Laws,
may be amended or repealed, in whole or in part, and new By-Laws adopted either
(a) by the stockholders at any meeting of the stockholders by the affirmative
vote of the holders of at least a majority in interest of the capital stock
present and entitled to vote, provided that notice of the proposed amendment or
repeal or of the proposed making of new By-Laws shall have been given in the
notice of such meeting, or (b) if so authorized by the Articles of Organization,
by the Board of Directors at any meeting of the Board by the affirmative vote of
a majority of the
<PAGE> 24
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Directors then in office, but no amendment or repeal of a By-law shall be voted
by the Board of Directors and no new By-law shall be made by the Board of
Directors which alters the provisions of these By-Laws with respect to removal
of Directors, or the election of committees by Directors and the delegation of
powers thereto, nor shall the Board of Directors make, amend or repeal any
provision of the By-Laws which by law, the Articles of Organization or the
By-Laws requires action by the stockholders. Not later than the time of giving
notice of the meeting of stockholders next following the making, amending, or
repealing by the Directors of any By-law, notice thereof stating the substance
of such change shall be given to all stockholders entitled to vote on amending
the By-Laws. Any By-law or amendment of a By-law made by the Board of Directors
may be amended or repealed by the stockholders by affirmative vote as above
provided in this Section 7.
8. 1987 Massachusetts Control Share Acquisition Act. The 1987
Massachusetts Control Share Acquisition Act, Chapter 110D of the Massachusetts
General Laws, as it may be amended from time to time, shall not apply to the
corporation.
<PAGE> 1
EXHIBIT 4.01
ADS
[LOGO]
NUMBER SHARES
ATLANTIC DATA SERVICES, INC.
ADS
<TABLE>
<S> <C> <C>
THIS CERTIFICATE IS TRANSFERABLE INCORPORATED UNDER THE LAWS OF THE COMMON STOCK
IN BOSTON, MA OR NEW YORK, NY COMMONWEALTH OF MASSACHUSETTS $.01 PAR VALUE
</TABLE>
THIS CERTIFIES THAT CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
ATLANTIC DATA SERVICES, INC. transferable on the books of the Corporation in
person or by attorney upon surrender of this certificate properly endorsed. This
Certificate and the shares represented hereby are subject to the laws of the
Commonwealth of Massachusetts and to the Second Amended and Restated Articles of
Organization and the Second Amended and Restated By-laws of the Corporation as
from time to time amended.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF ATLANTIC DATA SERVICES, INC. has caused its
facsimile corporate seal and the facsimile signatures of its duly authorized
officers to be hereunto affixed.
Dated:
<TABLE>
<S> <C> <C>
Atlantic Data Services, Inc.
Incorporated
/s/ Susan L. Gorman 1980 /s/ Robert W. Howe
VICE PRESIDENT AND TREASURER Massachusetts CHAIRMAN AND
[Seal] CHIEF EXECUTIVE OFFICER
</TABLE>
----------------------------------------
COUNTERSIGNED AND REGISTERED:
BANKBOSTON, N.A.
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
ATLANTIC DATA SERVICES, INC.
The Corporation is authorized to issue more than one class of stock. A
copy of the full text of the preferences, voting powers, qualifications and
special or relative rights of the shares of each class of stock will be provided
to the holder hereof upon written request and without charge.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ........Custodian........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act...........................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ___________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
__________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_______________________________
__________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
______________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.03
SHAREHOLDERS' AGREEMENT
among
ATLANTIC DATA SERVICES, INC.
and
CERTAIN SHAREHOLDERS
As of July 15, 1988
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
ARTICLE I -- PRELIMINARIES.............................................. 1
1.1 Definitions...................................................... 1
1.2 Current Ownership of Capital Stock............................... 6
1.3 Transfers Void................................................... 7
ARTICLE II -- TRANSFERS OF CAPITAL STOCK................................ 7
2.1 Proposed Voluntary Transfer of Capital Stock by Shareholders..... 7
2.2 Issuances of Capital Stock by Corporation........................ 15
2.3 Involuntary Transfers............................................ 16
ARTICLE III -- REGISTRATION RIGHTS...................................... 21
3.1 Demand Registrations............................................. 21
3.2 Incidental or "Piggyback" Registration........................... 22
3.3 Registration Procedures.......................................... 24
3.4 Indemnity........................................................ 26
ARTICLE IV -- OTHER RIGHTS.............................................. 27
4.1 Election of Directors............................................ 27
4.2 Majority Vote of Directors....................................... 29
4.3 Death or Incapacity of Management Shareholders................... 31
4.4 Insurance........................................................ 32
ARTICLE V -- MISCELLANEOUS.............................................. 32
5.1 Term............................................................. 32
5.2 Governing Law; Consent to Jurisdiction........................... 33
5.3 Legend........................................................... 33
5.4 Corporate Obligations............................................ 33
5.5 Binding on Transferees........................................... 34
5.6 Notices.......................................................... 34
5.7 References to Closing Dates...................................... 35
5.8 Severability..................................................... 35
5.9 Counterparts..................................................... 35
5.10 Entire Agreement................................................ 35
5.11 Waiver.......................................................... 36
5.12 Consent to Specific Performance................................. 36
5.13 Multiple Classes of Capital Stock............................... 36
5.14 Variations in Pronouns.......................................... 36
5.15 By-laws......................................................... 37
</TABLE>
- i -
<PAGE> 3
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of July 15, 1988, by and among
ATLANTIC DATA SERVICES, INC. (the "Corporation"), a Massachusetts corporation
having its principal office at One Batterymarch Park, Quincy, Massachusetts
02169, and the Major Shareholders (as defined in Section 1.1.10) whose names and
addresses appear on Schedule I attached hereto.
The Major Shareholders own the shares of the issued and outstanding
capital stock of the Corporation set forth on Schedule I attached hereto. The
Major Shareholders and the Corporation desire to enter into an agreement that,
among other things, imposes restrictions on the transfer of the shares of the
Corporation's capital stock owned by the Major Shareholders. Accordingly, in
consideration of the premises and the mutual covenants and agreements herein
provided, the parties hereto agree as follows:
ARTICLE I
PRELIMINARIES
1.1 Definitions. As used herein, the following terms shall be defined
as set forth below:
1.1.1 "Act" means the Securities Act of 1933, as amended.
1.1.2 An "Affiliate" of any entity or person is any individual
or any partnership, corporation, group or trust that directly or indirectly, by
way of majority ownership, (i) controls, (ii) is controlled by or (iii) is under
common control with, such entity or person.
The Affiliates of GAIL shall also include any bona
fide director, officer or employee of or consultant to any partnership,
corporation, group, or trust that directly or indirectly, by way of majority
ownership, (i) controls, (ii) is controlled by or (iii) is under common
<PAGE> 4
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control with, General Atlantic, or members of the immediate family of any such
person (or trust for his or their benefit).
1.1.3 The "Applicable Percentage" of any Major Shareholder
means the percentage arrived at by dividing (i) the aggregate number of Common
Shares then owned by (a) that Major Shareholder, (b) the members of the
immediate family of that Major Shareholder and (c) any trust, the only
beneficiaries of which are members of the immediate family of that Major
Shareholder by (ii) the aggregate number of shares of Capital Stock then issued
and outstanding. For purposes of this computation, each reference to Common
Shares shall be deemed to reflect the conversion into Common Shares of all
Common Stock Equivalents, if any, then issued and outstanding.
1.1.4 "Capital Stock" means (i) the Voting Common Stock, (ii)
the Non-Voting Common Stock, (iii) the Special Common Stock, (iv) any other
class of capital stock of the Corporation, and (v) any security or obligation
which is by its terms convertible into capital stock and any warrant, option or
other subscription or purchase right with respect to capital stock.
1.1.5 "Common Shares" means the Voting Common Stock, and the
Special Common Stock.
1.1.6 "Common Stock Equivalents" means any security or
obligation which is by its terms convertible into Common Shares and any warrant,
option or other subscription or purchase right with respect to Common Shares.
1.1.7 "Family Percentage" means the percentage arrived at by
dividing (i) the number of Common Shares then owned by a member of the immediate
family of a Major Shareholder, the estate of a deceased Major Shareholder, or a
trust for the benefit of members of the immediate family of a Major Shareholder
by (ii) the aggregate number of Common Shares then owned
<PAGE> 5
- 3 -
by all Major Shareholders. For purposes of this computation, (a) each reference
to Common Shares shall be deemed to reflect the conversion of all Common Stock
Equivalents, if any, then owned by Major Shareholders, by members of the
immediate families of Major Shareholders, or by trusts for benefit of the
members of the immediate families of Major Shareholders, into Common Shares and
(b) (with respect to the number referred to in clause (ii) above only) all
Common Shares held by Affiliates of GAIL or by members of the immediate family
of any of the other Major Shareholders, or by trusts for the benefit of members
of the immediate families of the other Major Shareholders shall be deemed to be
held by GAIL or by such other Major Shareholders, respectively.
1.1.8 "GAIL" means General Atlantic Investments Limited, a
Bermuda corporation, and any Affiliate to which such corporation transfers
substantially all of the Capital Stock owned by it.
1.1.9 "General Atlantic" means General Atlantic Investments
Limited, a Bermuda corporation, and any Affiliate to which General Atlantic
transfers any or all of the Capital Stock owned by it.
1.1.10 "immediate family" means mother, father, mother-in-law,
father-in-law, spouse, children (including adopted children), brothers, sisters
and grandchildren.
1.1.11 "Involuntary Transfer" means any transfer, proceeding
or action (other than a transfer pursuant to Articles II and III hereof or a
transfer, whether inter vivos, by will or through intestacy, to a Permitted
Transferee or, by operation of law upon death, to the estate of a Shareholder
the only beneficiaries of which, with respect to the Capital Stock owned by such
Shareholder, are members of the immediate family of such Shareholder) by or in
which a Shareholder shall be deprived or divested of any right, title or
<PAGE> 6
- 4 -
interest in or to any of the Capital Stock, involuntarily or by operation of
law, including, without limitation, any seizure under levy of attachment or
execution, any transfer in connection with bankruptcy (whether pursuant to the
filing of a voluntary or an involuntary petition under the Federal Bankruptcy
Code of 1978, or any modifications or revisions thereto) or other court
proceeding to a debtor in possession, trustee in bankruptcy or receiver or other
officer or agency, any transfer to a state or to a public officer or agency
pursuant to any statute pertaining to escheat or abandoned property, any
transfer pursuant to a separation agreement or the entry of a final court order
in a divorce proceeding from which there is no further right of appeal, any
transfer upon or occasioned by the death of any Shareholder, or any transfer to
a legal representative of any Shareholder.
1.1.12 "Major Shareholder" means each of GAIL, Robert W. Howe,
William H. Gallagher, Lee M. Kennedy and Edward B. Gardner (all of Schedule I).
1.1.13 "Major Shareholder Percentage" means the percentage
arrived at by dividing (i) the number of Common Shares then owned by a Major
Shareholder by (ii) the aggregate number of Common Shares then owned by all
Major Shareholders. For purposes of this computation (a) each reference to
Common Shares shall be deemed to reflect the conversion of all Common Stock
Equivalents, if any, then owned by all Major Shareholders, by members of the
immediate families of Major Shareholders, or by trusts for the benefit of
members of the immediate families of Major Shareholders, into Common Shares and
(b) all Common Shares held by Affiliates of General Atlantic or by members of
the immediate family of any of the other Major Shareholders, or by trusts for
the benefit of members of the immediate families of any of the other Major
<PAGE> 7
- 5 -
Shareholders, shall be deemed to be held by General Atlantic or by such other
Major Shareholder(s), respectively.
1.1.14 "Management Shareholders" means Robert W. Howe ("Howe")
and William H. Gallagher ("Gallagher").
1.1.15 "Management Shareholder Percentage" means the
percentage arrived at by dividing (i) the number of Common Shares then owned by
a Management Shareholder by (ii) the aggregate number of Common Shares then
owned by both Management Shareholders. For purposes of this computation, (a)
each reference to Common Shares shall be deemed to reflect the conversion of all
Common Stock Equivalents, if any, then owned by both Management Shareholders, by
members of the immediate families of Management Shareholders, or by trusts for
the benefit of members of the immediate families of Management Shareholders,
into Common Shares and (b) all Common Shares held by members of the immediate
family of either of the Management Shareholders, or by trusts for the benefit of
members of the immediate families of Management Shareholders shall be deemed to
be held by such Major Shareholders, respectively.
1.1.16 "Non-Voting Common Stock" means the Class A Non-Voting
Stock of the corporation, par value $.01 per share.
1.1.17 "Permitted Transferee" means a person or an entity who
agrees in writing to be bound by the terms and conditions of this Agreement and
who is (i) a member of the transferor's immediate family, (ii) an Affiliate of a
Major Shareholder, (iii) a transferee to whom the Corporation and each Major
Shareholder have expressly consented in writing, (iv) a trust for the benefit of
a member of the transferor's immediate family or (v) upon the death of the
transferor, the estate, or the executor thereof, of such transferor, pending
distribution to the beneficiaries of the estate, provided
<PAGE> 8
- 6 -
that the only beneficiaries of the estate with respect to the Capital Stock are
members of such transferor's immediate family.
1.1.18 "Public Sale Date" means the date on which a public
offering of securities of the Corporation under the Act is effective.
1.1.19 "Qualified Investment Banker" means a nationally
recognized investment banking firm that is (i) knowledgeable and experienced
concerning the business of the Corporation, (ii) willing and able to serve in
such capacity and to render the services required of it under this Agreement and
(iii) selected by the corporation's regular independent accountants from a list
of investment banking firms submitted by each Major Shareholder.
1.1.20 "Shareholder" means the Major Shareholders listed on
Schedule I hereto, any other holder of Common Shares, and any Transferee.
1.1.21 "Special Common Stock" means convertible special common
stock of the Corporation, par value $.01 per share.
1.1.22 "Stock Purchase Agreement" means the Stock Purchase
Agreement dated the date hereof among the Major Shareholders and the
Corporation.
1.1.23 "Transferee" means any direct or indirect transferee of
Common Shares that is transferred by the Corporation or a Shareholder, including
any transferee who takes from the Corporation by original issue or reissue from
or after the date hereof, but does not include any direct or indirect transferee
of Common Shares issued or transferred in a public offering under the Act.
1.1.24 "Voting Common Stock" means the common stock of the
Corporation with voting rights, par value $.01 per share.
1.2 Current Ownership of Capital Stock. Each Major Shareholder
represents and warrants that as of the date hereof, except as shown on
<PAGE> 9
- 7 -
Schedule I, (i) he owns of record and beneficially the number of shares of
Capital Stock listed on Schedule I hereto opposite his name, and that other than
as contemplated by or disclosed in this Agreement or the Stock Purchase
Agreement, he has not pledged, hypothecated or granted any security interest in
such shares of Capital Stock to any person, (ii) other than as contemplated by
or disclosed in this Agreement or the Stock Purchase Agreement, he has not
granted any person any right to purchase or otherwise acquire any interest in
such shares of Capital Stock and (iii) other than as contemplated by or
disclosed in this Agreement or the Stock Purchase Agreement, he owns such shares
of Capital Stock free and clear of any liens, claims, options, charges,
encumbrances, or rights of others; provided, however, that such Shareholder
makes no representations with respect to the ownership of any Common Shares
other than those purported to be owned by him as set forth on Schedule I.
1.3 Transfers Void. Each Shareholder agrees that he will not sell,
give, transfer, assign, pledge, grant a security interest in, or otherwise
dispose of any capital Stock that such Shareholder now owns or hereafter
acquires in violation of the terms and conditions of this Agreement. Any sale,
gift, transfer, assignment, pledge, grant of a security interest in or other
disposition of Capital Stock in violation of this Section shall be void ab
initio.
ARTICLE II
TRANSFERS OF CAPITAL STOCK
2.1 Proposed Voluntary Transfer of Capital Stock by Shareholders.
2.1.1 Rights of First Refusal. Any Shareholder (each of whom
is referred to in this Section 2.1 as an "Offering Shareholder") who desires to
sell, give, transfer, assign, pledge, grant a security interest in or otherwise
dispose of all or any portion of his Capital Stock (other than (i)
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to a Permitted Transferee, (ii) pursuant to Article III hereof, (iii) pursuant
to the Stock Purchase Agreement or (iv) pursuant to an Involuntary Transfer),
shall first make an offer (the "Offer") to sell, transfer, or assign the Capital
Stock which is the subject of such desire (the "Offered Shares") to the
Management Shareholders, the Corporation and the other Major Shareholders as
provided herein. The Offering Shareholder shall send written notice of the Offer
(the "Offering Shareholder's Notice") to the Corporation and to each of the
Major Shareholders (and if a Major Shareholder has deceased, to trusts for the
benefit of members of the immediate family of such Major Shareholder, the estate
of such Major Shareholder and members of the immediate family of such Major
Shareholder, in each case who are shareholders), stating the amount, identified
by class, of the Offered Shares, the proposed purchase price therefor and the
terms and conditions of the offer.
2.1.1(a) The Management Shareholders shall be entitled to
purchase, upon the terms and conditions of the Offer, some or all of the offered
Shares, upon written notice given to the Offering Shareholder, the Corporation
and the Major Shareholders within 20 business days of the Offering Shareholder's
Notice (the "First Offering Period"). Each Management Shareholder has the right,
and may indicate in such notice his election, to purchase the balance of the
Offered Shares if the other Management Shareholder does not exercise his right
to purchase up to the full amount of his Management Shareholder Percentage of
the Offered Shares. The failure of either or both Management Shareholders to
exercise his or their rights to purchase the Offered Shares within the First
Offering Period shall be regarded as a waiver of his or their rights to
participate in the purchase of the offered Shares under this Subsection
2.1.1(a).
<PAGE> 11
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2.1.1(b) If the Management Shareholders do not elect to
purchase all the Offered Shares as provided above, then the Corporation shall be
entitled to purchase, upon the terms and conditions of the offer, some or all of
the offered Shares, upon written notice given to the Offering Shareholder and
the Major Shareholders within 20 business days after the end of the First
Offering Period of the Offering Shareholder's Notice. The failure of the
Corporation to exercise its right to purchase the Offered Shares within such 20
business-day notice period (the "Second Offering Period") shall be regarded as a
waiver of its right to participate in the purchase of the Offered Shares.
2.1.1(c) If the Management Shareholders and the Corporation do
not elect to purchase all of the Offered Shares as provided above, each Major
Shareholder (including the Management Shareholders) shall then have the right to
purchase, upon the terms and conditions of the offer, up to his Major
Shareholder Percentage of the Offered Shares for which no such election has
previously been made by the Management Shareholders or by the Corporation (the
"Excess Offered Shares"). Each such Major Shareholder's right to purchase Excess
Offered Shares shall be exercisable by written notice to the Offering
Shareholder, the Corporation and the other Major Shareholders given within 5
business days after the end of the Second Offering Period (the "Third Offering
Period"). Each such Major Shareholder has the right, and may indicate in such
notice his election to purchase the balance of such Excess Offered Shares (the
"Unpurchased Shares") if other Major Shareholders do not exercise their rights
to purchase up to the full amount of their Major Shareholder Percentage of the
Excess Offered Shares. The failure of any Major Shareholder to exercise his or
its right to purchase the Excess Offered Shares within the Third Offering Period
shall be regarded as a waiver of his or its right to participate in the purchase
of the Excess Offered Shares under this Subsection 2.1.1(c).
<PAGE> 12
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2.1.1(d) If, after the Third Offering Period has ended, there
are still Unpurchased Shares available, each Management Shareholder will again
be entitled to purchase, upon the terms and conditions of the Offer, some or all
of these Unpurchased Shares, up to his Management Shareholder Percentage, upon
written notice given to the Offering Shareholder, the Corporation and the other
Major Shareholders within 5 days after the end of the Third Offering Period (the
"Fourth Offering Period"). Each Management Shareholder may indicate in such
notice his election to purchase the balance of such Unpurchased Shares if the
other Management Shareholder does not exercise his right to purchase up to the
full amount of his Management Shareholder Percentage. The failure of either or
both Management Shareholders to exercise his or their rights to purchase the
Unpurchased Shares within the Third Offering Period shall be regarded as a
waiver of his or their rights to participate in the purchase of the Unpurchased
Shares.
2.1.1(e) Any Major Shareholder who has not elected to exercise
his right to purchase Offered Shares or Excess Offered Shares under Subsections
2.1.1(a) or 2.1.1(c) and (a) any Affiliate of any Major Shareholder and (b) any
member of the immediate family of any such Major Shareholder and any trust for
the benefit of members of the immediate family of such Major Shareholder and any
estate of such Major Shareholder, if such Major Shareholder has deceased (such
member, trust or estate referred to herein as "Family Members"), who wishes to
be a "Co-selling Shareholder" under this Subsection 2.1.1(e) (as that term is
defined in Section 2.1.2) shall give written notice to the Offering Shareholder
and the Corporation within 5 business days after the end of the Third Offering
Period. In such event, the Co-Selling Shareholder shall be entitled to
participate, upon the same terms and conditions, in an amount up to his Major
Shareholder Percentage of the Offered
<PAGE> 13
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Shares in the sale of the Offered Shares to the Corporation and other Major
Shareholders ("Inside Buyers"), which participation shall not be subject to the
other requirements of Section 2.1.1; provided, however, that (x) if any of the
Co-Selling Shareholders are GAIL and any Affiliates thereof, then all such
entities shall act in concert with respect to any such participation and (y) if
any of the Selling Shareholders are Family Members, then each such Family Member
shall be entitled to participate in an amount up to his or its Family
Percentage. Notwithstanding the above, if a Family Member of a Major Shareholder
elects to exercise his co-sale rights under this Section 2.1.1(e), then, for
purposes of this Section 2.1.1(e), the Major Shareholder Percentage with respect
to such Major Shareholder shall be adjusted so that the amount of Common Shares
owned by such Family Member shall be deducted from the amount of Common Shares
referred to in clause (i) of Section 1.1.13. If the Co-Selling Shareholder sells
shares of Capital Stock to an Inside Buyer pursuant to the co-sale rights herein
described, the number of shares that the Offering Shareholder may then sell to
the Inside Buyers pursuant to Section 2.1.1 shall be reduced by the number of
shares (or amount) of Capital Stock sold by the Co-Selling Shareholder.
Irrespective of whether any co-sale rights are exercised
pursuant to Subsection 2.1.1(e), unless the Corporation and/or any one or more
of the Major Shareholders elect to purchase all of the Offered Shares as set
forth above, neither the Corporation nor any Major Shareholder may purchase any
of the Offered Shares unless the Offering Shareholder desires to sell less than
all of the Offered Shares to the Inside Buyer, in which case the Offering
Shareholder may sell less than all of the Offered Shares to the Inside Buyer
and, if he elects, attempt to sell the balance of the Offered Shares to a third
party as provided herein (provided, however, that if the Offering
<PAGE> 14
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Shareholder is selling less than all of the Offered Shares only because a
Co-Selling Shareholder is participating in the sale pursuant to Subsection
2.1.1(e), then the Offering Shareholder may not sell the balance of the Offered
Shares to a third party without first offering such to the other Major
Shareholders pursuant to Section 2.1.1). Irrespective of whether any co-sale
rights are exercised pursuant to Subsection 2.1.1(e), if the Major Shareholders
and the Corporation together elect to purchase less than all of the Offered
Shares, the Offering Shareholder may elect to sell all of the Offered Shares to
a third party. The Offering Shareholder may sell, give, transfer, assign,
pledge, grant a security interest in or otherwise dispose of, within six months
of the Offering Shareholder's Notice, and subject to the provisions of Section
5.5 hereof, all, but not less than all, of the Offered Shares which the Offering
Shareholder elects (in accordance with the provisions set forth above) to sell
to a bona fide third-party purchaser for a purchase price that is no lower than
that stated in the Offer and upon terms that, in the aggregate, are not
materially less favorable than those stated in the Offer. If such sale to a
third party is not consummated within such six-month period, the restrictions,
terms and provisions provided for in Section 2.1.1 shall again become effective
with respect to such Offered Shares, and no sale, gift, transfer, assignment,
pledge, grant of a security interest in or other disposition of such Capital
Stock may be made thereafter (other than to a Permitted Transferee or pursuant
to Article III) by the Offering Shareholder without again offering the same to
the Management Shareholders, the Corporation and the Major Shareholders in
accordance with this Agreement.
2.1.2 Participation in Sales to Third Parties. If a Major
Shareholder who is the recipient of an Offering Shareholder's Notice under
Section 2.1.1 hereof (and/or an Affiliate or Family Member of such Major
<PAGE> 15
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Shareholder) wishes to sell any or all of his or its Capital Stock on terms
equivalent to those set forth in the Offering Shareholder's Notice, then such
Major Shareholder (and/or an Affiliate or Family Member of such Major
Shareholder) (for purposes of this Section 2.1.2, the "Co-Selling Shareholder")
shall give written notice to the Offering Shareholder and the Corporation within
5 business days after the end of the Fourth Offering Period; provided, however,
that if the Offering Shareholder has agreed to sell the Offered Shares at a
price higher than the price described in the Offering Shareholder's Notice, then
the Offering Shareholder shall again send written notice to the Major
Shareholders (and if a Major Shareholder has deceased, to trusts for the benefit
of members of the immediate family of such Major Shareholder, the estate of such
Major Shareholder and members of the immediate family of such Major Shareholder,
in each case who are Shareholders), stating the amount, identified by class, of
the Offered Shares, the agreed purchase price therefor and the terms and
conditions of such sale to the third party, and the other Major Shareholders
(and/or Affiliates or Family Members of such other Major Shareholders) shall, if
any of them wishes to sell any or all of his or its Capital Stock on terms
equivalent to those set forth in the revised written notice, give written notice
to the Offering Shareholder and the Corporation of his or its desire to
participate in such sale within 10 business days from the date of such second
notice. In such event, the Co-Selling Shareholder shall, except in a public
offering of such Capital Stock, be entitled to participate, upon the same terms
and conditions, in an amount up to his Major Shareholder Percentage of the
Offered Shares, in the sale to any person (the "Prospective Buyer") of the
Offered Shares (such participation not subject to Section 2.1.1); provided,
however, that (x) if any of the Co-Selling Shareholders are GAIL and any
Affiliates thereof, then all such
<PAGE> 16
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entities shall act in concert with respect to any such participation and (y) if
any of the Co-Selling Shareholders are Family Members, then each such Family
Member shall be entitled to participate in an amount up to his or its Family
Percentage. Notwithstanding the above, if a Family Member of a Major Shareholder
elects to exercise his co-sale rights under this Section 2.1.2, then, for
purposes of this Section 2.1.2, the Major Shareholder Percentage with respect to
such Major Shareholder shall be adjusted so that the amount of Common Shares
owned by such Family Member shall be deducted from the amount of Common Shares
referred to in clause (i) of Section 1.1.13. If the Co-Selling Shareholder sells
shares of Capital Stock to the Prospective Buyer pursuant to this Section 2.1.2,
the number of Offered Shares that the Offering Shareholder may then sell to the
Prospective Buyer pursuant to Section 2.1.1 shall be reduced by the number of
shares (or amount) of Capital Stock sold by the Co-Selling Shareholder.(1)
2.1.3 Closing of Purchases of the Offered Shares. The closing
of any purchase by the Corporation or any Major Shareholder pursuant to this
Section 2.1 of the Offered Shares shall be held at the principal office of the
Corporation at 11:00 A.M. local time on or before the twentieth business day
after the end of the Fourth Offering Period or at such other time and place as
the parties to the transaction may agree upon. At the closing, the Offering
Shareholder and any Co-Selling Shareholder shall deliver certificates
representing the Offered Shares, duly endorsed for transfer and accompanied by
all requisite stock transfer taxes, and the Offered Shares shall be free and
clear of any liens, claims, options, charges, encumbrances, or rights of
- --------
(1) Co-sale rights under this Section 2.1.2 shall apply only to the balance of
Capital Stock available to be sold to third parties after compliance with
Section 2.1.1 and shall not apply to the sale of any Capital Stock to a Major
Shareholder by virtue of the exercise of any right of first refusal under
Section 2.1.1 nor to any sale by virtue of any co-sale right under Section
2.1.1(e).
<PAGE> 17
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others and each Offering Shareholder and Co-Selling Shareholder shall so
represent and warrant, and further represent and warrant that he is the record
and beneficial owner of the Offered Shares. Each party participating in the
purchase shall deliver at the closing, by certified or official bank check, so
much of the purchase price as is payable in cash. All parties to the transaction
shall execute such documents as are otherwise customary and appropriate.
2.2 Issuances of Capital Stock by Corporation.
2.2.1 Anti-Dilution Right. The Corporation shall give each
Major Shareholder 15 business days' prior written notice of the proposed
issuance of any Capital Stock ("Offered Securities") (other than in connection
with an acquisition, combination, reorganization, reclassification, split-up,
employee stock option plan (including the employee stock purchase plan of the
Company in effect at the date hereof) or public offering of Capital Stock
registered under the Act which, in each case, is approved by the Corporation's
Board of Directors). By written notice to the Corporation (a "Purchaser Notice")
given within 10 business days of being notified of such proposed issuance, a
Major Shareholder shall be entitled to purchase all or part of his Applicable
Percentage of such Offered Securities at the proposed issuance price. The
failure of a Major Shareholder to deliver a Purchaser Notice within the 10
business-day notice period shall constitute a waiver of his right to participate
in the purchase of the Offered Securities. Each Major Shareholder may also
indicate in his Purchaser Notice, if he so elects, his desire to participate
also in the purchase of any Excess Offered Securities (as defined below). If a
Major Shareholder declines to purchase all or part of his Applicable Percentage
of the Offered Securities, then the unaccepted participations of such declining
Major Shareholder ("Excess Offered
<PAGE> 18
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Securities") shall automatically be accepted by any other Major Shareholder, if
and to the extent that such other Major Shareholder indicated in his Purchaser
Notice a desire to participate in the purchase of Excess Offered Securities. If
more than one Major Shareholder elects to purchase such Excess Offered
Securities, then all such Excess Offered Securities shall be allocated among
such Major Shareholders pro rata relative to their Major Shareholder
Percentages.
2.2.2 Closing. The closing of any purchase by the Major
Shareholders of the Offered Securities under this Section 2.2 shall be held at
the principal office of the Corporation at 11:00 A.M. local time on or before
the 60th business day after the date on which the Major Shareholders receive
notice of the proposed issuance or at such other time and place as the
Corporation and those Major Shareholders purchasing the Offered Securities may
agree upon. At such closing, the Major Shareholders participating in the
purchase shall deliver, by certified or official bank check, so much of the
purchase price for the Offered Securities as is payable in cash, and all parties
to the transaction shall execute such documents as are otherwise customary and
appropriate.
2.3 Involuntary Transfers.
2.3.1 Rights of First Refusal. The Corporation shall give
written notice (the "Involuntary Transfer Notice") to each Major Shareholder
upon the occurrence, or prospective occurrence, of an Involuntary Transfer
within 10 business days of the date on which the Corporation is notified of the
occurrence or prospective occurrence of such Involuntary Transfer.
2.3.1(a) The Management Shareholders shall be entitled to
purchase some or all of the Capital Stock that is the subject of the Involuntary
Transfer (the "Transferred Shares") by notifying the involuntary transferee
<PAGE> 19
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thereof, the Shareholder who held (or previously held) the Transferred Shares
(or his estate in case of such Shareholder's death), the Corporation and the
other Major Shareholders within 20 business days of the Involuntary Transfer
Notice (the "First Transfer Period"). Each Management Shareholder has the right,
and may indicate in such notice his election, to purchase the balance of the
Transferred Shares if the other Management Shareholder does not exercise his
right to purchase up to the full amount of his Management Shareholder Percentage
of the Transferred Shares. The failure of either or both Management Shareholders
to exercise his or their rights to purchase the Transferred Shares within the
First Transfer Period shall be regarded as a waiver of their rights to
participate in the purchase of the Transferred Shares under this Subsection
2.3.1(a).
2.3.1(b) If the Management Shareholders do not elect to
purchase all the Transferred Shares as provided above, then the Corporation
shall be entitled to purchase some or all of the Transferred Shares, upon
written notice to the involuntary transferee, the shareholder who held (or
previously held) the Transferred Shares (or his estate in the case of such
Shareholder's death) and the Major Shareholders within 10 business days after
the end of the First Transfer Period of the Offering Shareholder's Notice (the
"Second Transfer Period"). The failure of the Corporation to exercise its right
to purchase the Transferred Shares within such 10 business day notice period
shall be regarded as a waiver of its right to participate in the purchase of the
Transferred Shares.
2.3.1(c) If the Management Shareholders and the Corporation do
not elect to purchase all of the Transferred Shares as provided above, each
Major Shareholder shall be entitled to purchase up to his Major Shareholder
Percentage of the Transferred Shares for which no such election has previously
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been made (the "Excess Transferred Shares"), upon written notice given to the
involuntary transferee, the Shareholder who suffered the Involuntary Transfer
(or his estate in the case of such Shareholder's death), the Corporation and the
other Major Shareholders within 5 business days after the end of the Second
Transfer Period (the "Third Transfer Period"). Each such Major Shareholder may
also indicate in such notice, if he so elects, his desire to purchase the
balance of such Excess Transferred Shares in excess of his Major Shareholder
Percentage. The failure of any Major Shareholder to exercise his or its rights
to purchase the Excess Transferred Shares within the Third Transfer Period shall
be regarded as a waiver of his or its right to participate in the purchase of
the Excess Transferred Shares under this Subsection 2.3.1(c). If any such Major
Shareholder declines to purchase his Major Shareholder Percentage of the Excess
Transferred Shares, then the unaccepted participations of such Major Shareholder
(the "Unpurchased Transferred Shares") shall automatically be accepted by the
other Major Shareholders if and to the extent that such other Major Shareholders
indicated in their notice a desire to participate in the purchase of Unpurchased
Transferred Shares. If more than such one Major Shareholder elects to purchase
such Unpurchased Transferred Shares, then all such Unpurchased Transferred
Shares shall be allocated among such Major Shareholders pro rata according to
their Major Shareholder Percentages.
2.3.1(d) If, after the Third Transfer Period has ended, there
are still Excess Transferred Shares available, each Management Shareholder will
again be entitled to purchase, some or all of these Excess Transferred Shares,
up to his Management Shareholder Percentage, upon written notice given to the
involuntary transferee, the Shareholder who held (or previously held) the
Transferred Shares (or his estate in the case of such Shareholder's death),
<PAGE> 21
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the Corporation and the other Major Shareholders within 5 days after the end of
the Third Transfer Period (the "Fourth Transfer Period"). Each Management
Shareholder may indicate in such notice his election to purchase the balance of
such Excess Transferred Shares to the extent any are available. The failure of
either or both Management Shareholders to exercise his or their rights to
purchase the Excess Transferred Shares within the Fourth Transfer Period shall
be regarded as a waiver of his or their rights to participate in the purchase of
the Excess Transferred Shares under this Subsection 2.3.1(d). It is understood
that co-sale rights do not apply to transactions contemplated in this Subsection
2.3.1.
2.3.2 Purchase Price. The purchase price per share of any
Transferred Shares shall be the "fair market value" thereof as determined by
mutual agreement of the involuntary transferee and each party participating in
such purchase, or if no such agreement can be reached, by an investment banking
firm that is: (i) knowledgeable and experienced concerning the business of the
Corporation, (ii) willing and able to complete such valuation within 60 days
after being retained to make such valuation (or such other period as the
involuntary transferee and the parties participating in such purchase shall
mutually agree upon) and (iii) otherwise reasonably satisfactory to both the
involuntary transferee and each party participating in such purchase. If the
involuntary transferee and each such party shall not agree upon the selection of
an investment banking firm within 45 days of the Involuntary Transfer Notice, a
Qualified Investment Banker shall be selected for such purpose. The
determination of the purchase price per share by an investment banking firm
hereunder shall be final and binding upon all parties participating in such
purchase and the involuntary transferee. The fees of
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any investment banking firm retained to determine the purchase price for the
Transferred Shares shall be paid by the Corporation.
2.3.3 Closing. The closing of any purchase under this Section
2.3 shall be held at the principal office of the Corporation at 11:00 A.M. local
time on or before the 20th business day after the date on which the involuntary
transferee and each party participating in the purchase of Transferred Shares,
or the investment banking firm selected pursuant to Section 2.3.2, reach a
determination as to the purchase price for the Transferred Shares, or at such
other time and place as the parties to the transaction may agree upon. At such
closing, the involuntary transferee shall deliver certificates representing the
Transferred Shares being purchased by each Major Shareholder and/or the
Corporation, duly endorsed for transfer and accompanied by all requisite stock
transfer taxes, and the Transferred Shares shall be free and clear of any liens,
claims, options, charges, encumbrances or rights of others arising through the
action or inaction of the involuntary transferee and the involuntary transferee
shall so represent and warrant, and further represent and warrant that he is the
beneficial owner of the Transferred Shares. Each party participating in the
purchase shall deliver at such closing, by certified or official bank check,
payment in full for the Transferred Shares. At such closing, all parties to the
transaction shall execute such documents as are otherwise customary and
appropriate.
2.3.4 Additional Rights Upon Involuntary Transfer. In the
event the provisions of this Section 2.3 shall be held to be unenforceable with
respect to any particular involuntary transfer of Capital Stock, or if all of
the Transferred Shares are not purchased pursuant to the provisions of Section
2.3.1, the Major Shareholders (other than Major Shareholders who may be the
subject of such Involuntary Transfer) and the Corporation shall have
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rights of first refusal if the involuntary transferee subsequently desires to
transfer such Capital Stock, in which event the involuntary transferee shall be
deemed to be an "Offering Shareholder" under Section 2.1 and shall be bound by
the other provisions of that Section and by all other provisions of this
Agreement.
ARTICLE III
REGISTRATION RIGHTS
3.1 Demand Registrations.
3.1.1 Registration Rights. If either (i) a Major Shareholder
(either alone or together with his Family Members and Affiliates or (ii) the
Family Members of a deceased Major Shareholder, acting together (such Major
Shareholder, the Family Members and Affiliates referred to in this Section 3.1
as a "Selling Shareholder") wishes to sell, transfer or otherwise dispose of
Common Shares owned by him (including all Common Shares held by Family Members
or Affiliates of such Major Shareholder, as the case may be) having an expected
market value of at least $2,000,000 (such Common Shares are hereinafter referred
to as the "Registration Shares"), and in the opinion of counsel for such Selling
Shareholder (which opinion shall be reasonably acceptable to counsel for the
Corporation) such proposed sale, transfer or other disposition may not be
effected without registration under the Act, each such Selling Shareholder shall
be entitled to make one written demand upon the Corporation to require the
Corporation to file a registration statement under the Act with respect to such
Registration Shares, which demand must be made prior to the fifth anniversary of
the Public Sale Date. Upon receipt of each such demand (and delivery of the copy
of such opinion of counsel, if requested by the Corporation), the Corporation
shall expeditiously effect the registration under the Act of the Registration
Shares. The notice for the
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first such registration statement for the Registration Shares may be delivered
to the Corporation at any time no sooner than twelve months after the effective
date of the first registration statement relating to the Common Shares filed by
the Corporation under the Act. The notice for any subsequent registration
statement by any other Selling Shareholder may be delivered to the Corporation
at any time later than twelve months after the effective date of the most recent
previous registration statement requested by a Selling Shareholder under this
Section 3.1.
The obligations of the Corporation under this Section 3.1.1
shall be subject to suspension in the reasonable discretion of the Corporation,
by notice given to the Selling Shareholder, if prior to the consummation of the
sale of the Registration Shares the managing underwriter of the proposed sale of
the Registration Shares shall have limited in whole or in part the total number
of Registration Shares to be sold; provided, however, that if the Corporation
has included Common Shares to be sold by the Corporation in the registration
statement for the Registration Shares, such Common Shares shall be removed from
inclusion in the registration statement prior to the Corporation being able to
suspend its obligations under this Section 3.1.1 and then the Corporation may
suspend its obligations hereunder only if the managing underwriter again limits
in whole or in part the total number of Registration Shares to be sold. The
obligations of the Corporation to effect the sale of the Registration Shares
shall resume once such limitation has been rescinded in full.
3.2 Incidental or "Piggyback" Registration. If at any time the
Corporation proposes to register any Common Shares or any other shares of the
Corporation convertible to Common Shares under the Act for public sale for its
own account or for the account of any holder of Capital Stock (for purposes of
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this Section 3.2, the "Initial Offering Shareholder"), the Corporation shall
give each Major Shareholder (and, if a Major Shareholder is deceased, each
member of the immediate family of such Major Shareholder) notice of such
proposed registration at least 60 days prior to the filing of a registration
statement. Upon the written request of any Major Shareholder (acting with
respect to Common Shares owned by him and the members of his immediate family)
or, if such Major Shareholder is deceased, the members of his immediate family,
acting together (such Major Shareholder or his family, as the case may be,
referred to in this Section 3.2 as an "Incidental Shareholder") delivered to the
Corporation within 30 days after the receipt of the notice from the Corporation,
which request shall state the number of Common Shares (the "Incidental Shares")
that such Incidental Shareholder wishes to sell or distribute publicly under the
registration statement proposed to be filed by the Corporation, the Corporation
shall use its best efforts to register under the Act such Incidental Shares, and
to cause such registration to become and remain effective so long as the
Corporation keeps such registration effective as to such other Common Shares.
The Corporation shall not be required to include as Incidental Shares any Common
Shares of any Incidental Shareholder in any registration of Common Shares other
than on Forms S-1 and S-2 or S-3 (if available), or such other forms as shall
then be prescribed by the Securities and Exchange Commission under the Act as
forms comparable to such forms. The Incidental Shares registered pursuant to
this Section 3.2 must be purchased and offered for sale by a bona fide
underwriter or underwriters in a public offering, and in the event that the
underwriter or underwriters for the other Common Shares being sold do not or
will not agree to purchase the Incidental Shares, then the Incidental
Shareholder may, at the Corporation's expense, procure an additional underwriter
or underwriters acceptable to the
<PAGE> 26
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Board of Directors of the Corporation to purchase the Incidental Shares. The
Corporation may withdraw the registration statement at any time before it
becomes effective or postpone the offering without obligation to any Incidental
Shareholder. The Corporation's managing underwriter shall have the right to
limit in whole or in part the total number of Incidental Shares to be sold
hereunder, so long as such limitation is applied on a pro rata basis with
respect to all Common Shares owned by the Corporation and the Incidental
Shareholders (but not with respect to the Common Shares owned by the Initial
Offering Shareholder) proposed or requested to be registered by the Corporation.
3.3 Registration Procedures. With respect to any registration statement
filed on behalf of a Selling Shareholder pursuant to Section 3.1 or an
Incidental Shareholder pursuant to Section 3.2:
(a) The Selling Shareholders and Incidental Shareholders shall
retain counsel and shall cause such counsel to deliver to the managing
underwriter such opinions as the managing underwriter may reasonably require.
(b) If necessary, the Selling Shareholders and the Incidental
Shareholders shall, upon request of the Corporation, execute powers of attorney,
and deposit and custodian agreements in form and substance satisfactory to the
managing underwriter.
(c) The Selling Shareholders and the Incidental Shareholders
shall execute an underwriting agreement in form and substance satisfactory to
the managing underwriter, which underwriting agreement may contain provisions
whereby each Selling Shareholder or each Incidental Shareholder, as the case may
be, indemnifies the underwriters with respect to all information contained in
the registration statement and not covered by the certification of independent
accountants. In the case of an offering contemplated under
<PAGE> 27
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Section 3.1.1, the Selling Shareholder shall have the right to designate the
managing underwriter, which shall be a nationally recognized investment bank
reasonably satisfactory to the Corporation.
(d) Other Registrations. If any of the Registration Shares or
Incidental Shares require registration or qualification under the securities or
"blue sky" laws of any state, or the approval of any state governmental official
or authority, the Corporation will take all requisite action and use its best
efforts to cause such Registration Shares or Incidental Shares to be duly
registered, qualified or approved as may be required. If the Registration Shares
or Incidental Shares meet the criteria for listing on any exchange on which the
Common Shares of the Corporation are then listed, the Corporation shall apply
for and use its best efforts to obtain a listing of all such Registration Shares
or Incidental Shares on such exchange.
(e) Registration Obligations. The Corporation will deliver to
a Selling Shareholder or an Incidental Shareholder after the effectiveness of
any registration statement such reasonable number of copies of a definitive
prospectus included in such registration statement and of any revised or
supplemental prospectus as a Selling Shareholder or Incidental Shareholder may
from time to time request. Upon the request of a Selling Shareholder or
Incidental Shareholder, the Corporation shall file post-effective amendments or
supplements to such registration statement for a period of three months in order
that the registration statement may be effective at all times during such period
and at all times comply with applicable federal and state securities laws (after
which period the Corporation may withdraw such securities from registration),
and deliver copies of the prospectus contained therein as provided above.
<PAGE> 28
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(f) Expenses. The Corporation shall pay all of the expenses in
connection with the registration of Registration Shares or Incidental Shares,
including, without limitation, the costs of preparing, printing and filing the
registration statement in compliance with the Act, fees and expenses of counsel
and accountants for the Corporation and the costs of preparing ancillary
agreements, qualifying the offering under the securities or "blue sky" laws and
regulations of the states in which the offering is qualified and complying with
federal and state filing fees; provided, however, that each Selling shareholder
and Incidental Shareholder shall pay any and all such expenses as are directly
attributable to the registration and sale of Common Shares owned by such Selling
Shareholder and Incidental Shareholder, including, but not limited to,
underwriters' discounts or commissions, fees and expenses of counsel and
accountants for the Selling Shareholders and any taxes payable with respect to
the sale of such Common Shares.
3.4 Indemnity. The Corporation will indemnify and hold harmless each
Selling Shareholder under Section 3.1 hereof and each Incidental Shareholder
under Section 3.2 hereof (referred to individually as an "Indemnitee"), the
officers and directors of each such Indemnitee and each underwriter of Common
Shares sold by such Indemnitee pursuant to such Section (and any person who
controls such Indemnitee or underwriter within the meaning of Section 15 of the
Act) against all claims, losses, damages, liabilities and expenses resulting
from any untrue statement or allegedly untrue statement of a material fact
contained in a prospectus or in any related registration statement, notification
or the like or from any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in light of the circumstances under which they were made) not misleading,
except insofar as the same may have been based on
<PAGE> 29
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information furnished in writing to the Corporation by such Indemnitee or such
underwriter expressly for use therein and used in accordance with such writing.
Such Indemnitee, by acceptance of the provisions herein, agrees to furnish to
the Corporation such information concerning such Indemnitee and the proposed
sale or distribution as shall, in the opinion of counsel for the Corporation, be
necessary in connection with any such registration or qualification of any
Registration Shares or Incidental Shares, and to indemnify and hold harmless the
Corporation, its officers and directors and each of its underwriters (and any
person who controls the Corporation or such underwriters within the meaning of
Section 15 of the Act) against all claims, losses, damages, liabilities and
expenses resulting from any untrue statement or allegedly untrue statement of a
material fact furnished in writing by such Indemnitee to the Corporation or to
any underwriter of Common Shares sold by such Indemnitee, expressly for use in
connection with such registration or qualification and used in accordance with
such writing and from any omission therefrom or alleged omission therefrom of a
material fact needed to be furnished or necessary to make the statements therein
(in light of the circumstances under which they were made) not misleading.
ARTICLE IV
OTHER RIGHTS
4.1 Election of Directors. From the date hereof until the earlier of
(i) the date on which General Atlantic or either of the Management Shareholders
(each together with their Family Members) holds a majority of the Common Shares,
(ii) the date on which the Management Shareholders (together with the members of
their respective immediate families and trusts for the benefit of the members of
their respective immediate families) each holds less than 10% of the outstanding
Common Shares or Common Shares and Common Share
<PAGE> 30
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Equivalents Convertible into less than of the Common Shares (such amount
referred to in this Section 4.1 as the "Minimum Amount"), (iii) the date on
which one Management Shareholder has deceased or become mentally incapacitated
and the other Management Shareholder (together with the members of his immediate
family and trusts for the benefit of the members of his immediate family) holds
less than the Minimum Amount or (iv) the date on which both Management
Shareholders have deceased or become mentally incapacitated, unless all of the
Major Shareholders (who are neither deceased nor mentally incapacitated)
otherwise agree in writing, each Shareholder shall take, at any time and from
time to time, all action (including voting the Common Shares owned by it,
calling special meetings of shareholders and executing and delivering written
consents) necessary to elect at least five and up to six members to the
Corporation's Board of Directors, including (i) two persons designated by GAIL,
one of whom shall be so designated at GAIL's sole discretion and the second of
whom shall be so designated subject to the consent of the Management
Shareholders, which consent shall not be unreasonably withheld, (ii) both of the
Management Shareholders, (iii) a person designated at the sole discretion of the
Management Shareholders or the surviving Management Shareholder and (iv) if
desired by the Management Shareholders or the surviving Management Shareholder,
a person designated by the Management Shareholders or the surviving Management
Shareholder, subject to the consent of GAIL, which consent shall not be
unreasonably withheld; provided, however, that if at any time GAIL or either
Management Shareholder (together with trusts for the benefit of members of the
immediate family of each such Management Shareholder or members of the immediate
family of each such Management Shareholder) holds less than the Minimum Amount,
then GAIL or such Management Shareholder, as the case may be, shall forfeit its
or his
<PAGE> 31
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rights and privileges under this Section 4.1, and the obligations of the other
Shareholders to such Shareholder under this Section 4.1 shall terminate. For the
second director appointed by GAIL, GAIL will use its best efforts to designate
an independent individual knowledgeable in the computer services and/or banking
industry. GAIL shall have the right to remove its own directors at its sole
discretion, and shall have the right to replace one of its own such directors at
its sole discretion and the second of its own such directors with the consent of
the Management Shareholders, which consent shall not be unreasonably withheld.
The Management Shareholders shall have the right to remove their own director or
directors (not including the Management Shareholders themselves) at their sole
discretion, and shall have the right to replace one of their own such directors
at their sole discretion and the second of their own such directors with the
consent of GAIL, which consent shall not be unreasonably withheld. Each
Shareholder shall cooperate fully to fill any vacancies in the Board of
Directors as promptly as possible, which vacancies shall be filled in accordance
with the by-laws of the Corporation. Upon the death or mental incapacitation of
a Management Shareholder, such Management Shareholder shall forfeit his rights
and privileges under this Section 4.1, including his right to a seat on the
Board of Directors of the Corporation, and the vacancy created by such
forfeiture shall be filled in accordance with the by-laws of the Corporation. If
a Major Shareholder forfeits his right and privileges under this Section 4.1
because of a decline in his or its ownership or control of Common Shares,
nothing herein shall be construed to limit the number of directors to which
other Major Shareholders shall otherwise be entitled to elect.
4.2 Majority Vote of Directors. The Corporation shall not take any
Major Action (as defined in this Section 4.2) without the approval of a
<PAGE> 32
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majority of the Board of Directors, including at least one director designated
by GAIL and both Howe and Gallagher; provided, however, that (i) the approval of
a director designated by GAIL shall not be required if General Atlantic then
holds less than 20% of the outstanding Common Shares or Common Shares and Common
Share Equivalents convertible into at least 20% of the Common Shares, (ii) the
approval of Howe shall not be required if (a) Howe, together with his Family
Members, then holds less than 20% of the outstanding Common Shares or Common
Shares and Common Share Equivalents convertible into at least 20% of the Common
Shares or (b) Howe is then deceased or mentally incapacitated or (iii) the
approval of Gallagher shall not be required if (x) Gallagher, together with his
Family Members, then holds less than 20% of the outstanding Common Shares or
Common Shares and Common Share Equivalents convertible into at least 20% of the
Common Shares or (b) Gallagher is then deceased or mentally incapacitated.
"Major Actions" are:
(a) the issuance of any form of long-term debt in excess of
$500,000 in the aggregate, which amount shall be increased from time to
time as aggregate operating income increases;
(b) the issuance of any form of equity of the Corporation;
(c) the declaration of any dividend;
(d) other than with respect to Howe and Gallagher as President
and Executive Vice President, respectively, decisions with respect to
the selection and compensation of the chief executive officer of the
Corporation and all executives who report directly to the chief
executive officer of the Corporation including all equity/option
grants;
(e) approval of annual operating and capital budgets;
<PAGE> 33
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(f) decisions with respect to new businesses and acquisitions
of new businesses, the latter not in excess of $500,000, which amount
shall be increased from time to time as operating income increases;
(g) decisions concerning capital expenditures in the aggregate
in excess of $500,000 per annum and other expenditures in the aggregate
in excess of $250,000 per annum not included in the annual operating
budget (which amounts shall be increased from time to time as operating
income increases);
(h) the sale, lease or other disposition of assets outside the
ordinary course of business;
(i) the sale, merger or liquidation of the Corporation;
(j) changes in the accounting methods or policies of the
Corporation and any change in the
auditors of the Corporation;
(k) changes in the Certificate of Incorporation or by-laws of
the Corporation; and
(l) the purchase of Common Shares by the Corporation pursuant
to section 2 of this Agreement.
Notwithstanding the foregoing, with respect to Board approval
of decisions described in (l) Above (i) if the Selling Shareholder in question
is General Atlantic, the Required Consent of General Atlantic shall not be
required, (ii) if the Selling Shareholder is Howe, the Required Consent of Howe
shall not be required and (iii) if the Selling Shareholder is Gallagher, the
Required Consent of Gallagher shall not be required.
4.3 Death or Incapacity of Management Shareholders. In the event of the
death or incapacity of a Major Shareholder, all shares of Capital Stock then
held or controlled by that Major Shareholder or his legal representatives shall,
to the extent permitted by law, be voted by the Management Shareholders
<PAGE> 34
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(or other Management Shareholder, if the deceased or incapacitated Major
Shareholder is a Management Shareholder). The Corporation agrees to recognize
the authority of such person or persons, as the case may be, to vote such shares
of Capital Stock. Each Major Shareholder agrees, upon the request of either
Management Shareholder, to grant to such Management Shareholder such proxies,
each coupled with an interest, and/or voting trust agreements as may be required
by such Management Shareholder in order to give effect to the terms and
provisions of this Section 4.3.
4.4 Insurance. The Corporation agrees to apply, and the other parties
hereto agree that they will use their best efforts to have the Corporation
apply, the proceeds of any life insurance policies purchased by the Corporation
with respect to the lives each of Howe, Gallagher, Lee E. Kennedy ("Kennedy")
and Edward B. Gardner ("Gardner"), towards the purchase of Common Shares held by
the respective estates of each of the above, if desired by the administrators of
such estate, in the maximum aggregate amounts (in terms of value of Common
shares at the then appraised value) of $1,000,000 for each of Howe and
Gallagher, $300,000 for Kennedy and $100,000 for Gardner. If the administrators
of such estates for any reason waive their right to sell such Common Shares as
provided in this Subsection 4.4, the Company shall have the right to apply the
proceeds of such life insurance policies at its sole discretion.
ARTICLE V
MISCELLANEOUS
5.1 Term. This Agreement shall terminate on the earliest of:
(a) ten years from the date hereof;
(b) the Public Sale Date; or
<PAGE> 35
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(c) termination by mutual agreement between the Corporation
and the Major Shareholders;
provided, however, that the provisions of Sections 2.1.3, 2.2, Article III and
Article V shall survive any termination of this Agreement under Subsection (b)
hereof, and shall terminate only upon the earlier of Subsection (a) or (c)
above.
5.2 Governing Law; Consent to Jurisdiction. This Agreement shall be
subject to and governed by the laws of the Commonwealth of Massachusetts
applicable to agreements to be entered into and performed entirely within such
state.
5.3 Legend. Each certificate evidencing Capital Stock now held or
hereafter acquired by any Shareholder shall, for as long as this Agreement is
effective, bear a legend as follows:
"The transfer of any part of the Capital Stock
represented by this certificate is restricted by the
terms of a certain Shareholders' Agreement dated as
of July 15, 1988, which provides, among other things,
for certain rights of first refusal."
5.4 Corporate Obligations. The Corporation agrees for itself and for
its successors and assigns for the term of this Agreement:
(a) Insofar as is required, it consents to this Agreement;
(b) It will not transfer or reissue Capital Stock in violation
of this Agreement or without requiring proof of compliance with this
Agreement;
(c) It will not issue any Capital Stock from and after the
effective date hereof without making the provisions hereof known to the
person to whom such shares are to be issued;
<PAGE> 36
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(d) All certificates for Capital Stock issued by the
Corporation and which are subject to this Agreement shall bear the
legend as above stated; and
(e) It will cooperate in the enforcement of this Agreement and
pay all fees and expenses required to be paid by it hereunder.
5.5 Binding on Transferees. The provisions of this Agreement shall be
binding upon any Transferees of Common Stock, including those taking from the
Corporation by original issue or reissue from and after the date hereof. Other
than in connection with a public offering of the Common Stock, the Corporation
shall not issue, or record a transfer of, Common Stock to any person not a party
hereto unless said person shall execute an acknowledgment of the terms hereof
and agrees to be bound hereby, substantially in the form of Exhibits A-1 or A-2
attached hereto. Upon execution of any such form, said new Shareholder shall be
deemed for all purposes to be a party hereto, shall be included as a Shareholder
as defined herein, and shall enjoy all the rights and be subject to all the
obligations created hereby with respect to Shareholders. Notwithstanding the
foregoing, the rights provided herein to the Major Shareholders (and, where
applicable, members of the immediate families of the Major Shareholders and
trusts for the benefit of the members of the immediate families of the Major
Shareholders) shall not be assignable and shall be exercisable only by the Major
Shareholders (and, where applicable, members of the immediate families of the
Major Shareholders and trusts for the benefit of the members of the immediate
families of the Major Shareholders) and shall not survive in the event of a
transfer of Common Shares except as specifically provided herein.
5.6 Notices. All notices or other communications hereunder shall be in
writing and shall be effective (i) when personally delivered by Federal
<PAGE> 37
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Express or other comparable courier to the party to be given such notice or
other communication, or (ii) on the business day following the day such notice
or other communication is sent by telex, facsimile or similar electronic device,
fully prepaid, or (iii) on the fifth day following the date of deposit in the
United States mails if such notice or other communication is sent by certified
or registered air mail (or its equivalent) with return receipt requested and
postage thereon fully prepaid. The addresses for such notices shall be as
follows: (i) in the case of the Corporation, to its principal office as
indicated above and (ii) in the case of a Shareholder, as set forth on the books
and records of the Corporation, or, in each case, as that party may instruct by
notice hereunder.
5.7 References to Closing Dates. If any date specified hereunder as a
closing date shall fall on other than a business day, such closing date shall
occur on the next succeeding business day, subject to the right of the parties
to such closing to specify a different closing date as provided herein.
5.8 Severability. In the event any provision hereof is held void or
unenforceable by any court, then such provision shall be severable and shall not
affect the remaining provisions hereof.
5.9 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
5.10 Entire Agreement. This Agreement and, with respect to parties also
party to the Stock Purchase Agreement, the Stock Purchase Agreement constitute
the entire agreement among the parties hereto, and, when executed by the parties
hereto and, to the extent applicable, thereto, supersede all prior agreements
(including both Shareholders' Agreements among Howe, Gallagher, Kennedy and
Gardner dated March 25, 1980), understandings and
<PAGE> 38
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communications, either verbal or in writing, among the parties hereto with
respect to the subject matter contained herein. Any amendment or variation of
this Agreement must be in writing and duly signed by the parties hereto.
5.11 Waiver. Any failure by a party hereto to comply with any
obligation, agreement or condition herein may be expressly waived in writing by
each of the other parties hereto, but such waiver or failure to insist upon
strict compliance with such obligation, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any such subsequent or other
failure.
5.12 Consent to Specific Performance. The parties hereto agree that it
is impossible to measure the monetary damages that would accrue to a party by
reason of a failure by any other party to perform any of the obligations
hereunder. Therefore, if any party shall institute any action or proceeding to
enforce the provisions hereof, any party against whom such action or proceeding
is brought hereby waives any claim or defense therein that the party seeking
such relief has an adequate remedy at law.
5.13 Multiple Classes of Capital Stock. In the event that a Major
Shareholder is entitled to and elects to purchase pursuant to the terms and
conditions of this Agreement his Major Shareholder Percentage, Management
Shareholder Percentage or Applicable Percentage of Capital Stock constituting
more than one class of securities, then such Major Shareholder shall purchase
his Major Shareholder Percentage, Management Shareholder Percentage or
Applicable Percentage, as the case may be, of each such class of Capital Stock.
5.14 Variations in Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
<PAGE> 39
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plural, as the identity of the antecedent person or persons or entity or
entities may require.
5.15 By-laws. In the event that any provision of this Agreement shall
conflict with any provision of the Corporation's by-laws, the Shareholders agree
that they will use their best efforts to amend such provision of the
Corporation's by-laws to conform to such provision of this Agreement.
5.16 Notwithstanding any term or provision of Article II of this
Agreement to the contrary, any transfer or sale of Capital Stock to any person,
partnership, corporation, group, trust or other entity (except a Permitted
Transferee) shall be deemed a transfer or sale which is subject to all the terms
and provisions of Article 2.
<PAGE> 40
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IN WITNESS WHEREOF, the undersigned have hereunto duly set their hands.
SHAREHOLDERS:
/s/ Robert W. Howe
---------------------------------------------
Robert W. Howe
/s/ William H. Gallagher
---------------------------------------------
William H. Gallagher
/s/ Lee M. Kennedy
---------------------------------------------
Lee M. Kennedy
/s/ Edward B. Gardner
---------------------------------------------
Edward B. Gardner
GENERAL ATLANTIC INVESTMENTS
LIMITED
By: /s/ Craig P. Mayor
------------------------------------------
Name: Craig P. Mayor
Title: Treasurer
THE CORPORATION:
ATLANTIC DATA SERVICES, INC.
By: /s/ Robert W. Howe
------------------------------------------
Name: Robert W. Howe
Title: President
<PAGE> 41
EXHIBIT A-l*
ACKNOWLEDGMENT AND AGREEMENT
The undersigned wishes to receive from ___________________
("Transferor") certain shares (the "Shares") of the ___________ Stock, par value
$________ per share, of ATLANTIC DATA SERVICES, INC., a Massachusetts
corporation (the "Corporation");
The Shares are subject to that certain Shareholders' Agreement, dated
as of July 15, 1988 (the "Agreement");
The undersigned has been given a copy of the Agreement and afforded
ample opportunity in which to read it, and the undersigned is thoroughly
familiar with its terms;
Pursuant to Section 5.5 of the Agreement, the Corporation is prohibited
from issuing certificates evidencing ownership of the Shares to certain persons
unless and until such persons first acknowledge the terms thereof and agree to
be bound thereby; and
The undersigned wishes to receive such a certificate;
NOW, THEREFORE, in consideration of the premises and to induce the
Corporation to issue such a certificate to the undersigned, the undersigned does
hereby acknowledge complete familiarity with the terms of the Agreement and does
hereby agree fully to be bound thereby.
This _____ day of ______________, 19___.
___________________________________
______________
* For transfers of previously issued stock.
<PAGE> 42
EXHIBIT A-2*
ACKNOWLEDGMENT AND AGREEMENT
The undersigned wishes to receive from ATLANTIC DATA SERVICES, INC., a
Massachusetts corporation (the "Corporation"), certain newly issued shares (the
"Shares") of the ___________ Stock, par value $_________ per share of the
Corporation;
Pursuant to Section 5.5 of that certain Shareholders' Agreement, dated
as of July 15, 1988 (the "Agreement"), the Corporation is prohibited from
issuing certificates evidencing ownership of the Shares to certain persons
unless and until such persons first acknowledge the terms thereof and agree to
be bound thereby; and
The undersigned wishes to receive such a certificate;
NOW, THEREFORE, in consideration of the premises and to induce the
Corporation to issue such a certificate to the undersigned, the undersigned does
hereby acknowledge and agree that (i) he has been given a copy of the Agreement
and ample opportunity in which to read it, and the undersigned is thoroughly
familiar with its terms, and (ii) the Shares are subject to the Agreement and
the undersigned does hereby agree fully to be bound thereby.
This ___ day of ____________, 19___.
___________________________________
_________________
* For transfers of newly issued stock.
<PAGE> 43
SCHEDULE I
(SHAREHOLDERS' AGREEMENT)
Atlantic Data Services, Inc.
SHAREHOLDERS
** Common Stock
** Shareholders Current Shares Shares to be Sold Shares Remaining
R. W. Howe 105,000 12,550 92,450
W. H. Gallagher 105,000 12,550 92,450
L. M. Kennedy 60,000 19,700 40,300
E. B. Gardner 30,000 10,630 19,370
------ ------ ------
300,000 55,430 244,570
Robert W. Howe
3 Jason's Lane
Scituate, MA 02060
William E. Gallagher
72 Katy-Did Lane
Hanson, MA 02341
Lee M. Kennedy
98 King Caesar Road
Duxbury, MA 02332
Edward B. Gardner, Jr.
107 Louise Road
Braintree, MA 02184
<PAGE> 1
EXHIBIT 10.01
ATLANTIC DATA SERVICES, INC.
KEY PERSON STOCK PLAN
1. Atlantic Data Services, Inc. (the "Corporation"), hereby sets
aside 20,000 shares of Common Stock Class A, one cent par value for issuance to
such persons as the Board of Directors of the Corporation determine are "Key
Persons" in the development and maintenance of the Corporation as a first class
software development company.
2. The Board of Directors shall, in connection with any such
designation of a Key Person, also designate the number of shares made available
for acquisition by such Key Person, the purchase price therefor and the date or
dates over which such shares may be acquired entirely or in increments. Upon the
grant of any such rights hereunder to a Key Person and as a condition to receipt
of any such grant, each Key Person shall enter into a Key Person Stockholder's
Agreement with the Corporation in the form attached hereto.
3. If a designated Key Person ceases to be employed by the
Corporation within five years of the date of the Key Person Stockholders
Agreement with such person, then the Corporation shall have the right to
repurchase all shares acquired by said person pursuant to this Plan for the same
price as said shares were originally purchased from the Corporation by such
person, all as more particularly set forth in the Key Person Stockholder's
Agreement.
<PAGE> 1
EXHIBIT 10.02
KEY PERSON STOCKHOLDER'S AGREEMENT
AGREEMENT, dated the ____ of __________, 19___ between ATLANTIC DATA
SERVICES, INC., a Massachusetts corporation (herein called the "Corporation")
and _________ (herein called the "Shareholder"),
WITNESSETH:
WHEREAS, the Corporation has designated Shareholder as a Key Person
under the terms of the Corporation's "Key Person" Stock Plan (the "Plan") and
has granted Shareholder the right and option to purchase ________ shares of
Common Stock Class A, one cent par value of the Corporation (the "Shares") for
$5.00 per share; and
WHEREAS, Shareholder desires to exercise such option for said Shares
of the Corporation; and
WHEREAS, the parties hereto desire to set forth the terms and
conditions of the Share subscriptions by the Shareholder and the respective
rights and obligations of the Corporation and Shareholder with respect to the
Shares.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
provisions herein contained, each of the parties hereto, for himself or itself,
and for his or its heirs, representatives, successors and assigns agrees with
every other party hereto as follows:
ARTICLE 1
EXERCISE OF OPTION BY SHAREHOLDER
1.01 Shareholder hereby exercises its option to purchase the Shares of
the Corporation as granted pursuant to the Plan and delivers
herewith his check payable to the order of the Corporation in the
amount of $________ (the "Purchase Price") representing payment in
full for said Shares so subscribed for. The Corporation hereby
acknowledges receipt of such payment by Shareholder, delivers to
Shareholder a certificate registered in his name for the Shares of
the Corporation and represents and warrants that such Shares have
been duly issued and are fully paid and non-assessable. Shareholder
hereby acknowledges receipt of such Shares.
<PAGE> 2
ARTICLE 2
RESTRICTIONS DURING LIFE
2.01 Shareholder's Obligations to Offer Shares to Other Shareholders and
to Corporation. Shareholder shall not, during his lifetime, sell,
assign, transfer, pledge or otherwise, directly or indirectly,
dispose of, or encumber (all such dispositions shall hereafter be
referred to by use of the very "dispose") any of his Shares of the
Corporation to, or with, any other person, firm or corporation
(including, without limitation, dispositions to any other
Shareholder and dispositions by gift) unless (a) the Shareholder
shall have first made the offer to sell hereinafter described in
this Article 2 (the "Offer") and such Offer shall not have been
accepted by the Corporation; and (b) thereafter, the Shareholder
shall have compiled with the Right of First Refusal set forth in
Article 3 hereof and the Corporation shall have elected not to
exercise its rights thereunder.
2.02 Offer by Transferor. The Offer shall be given (the date on which
such Offer is given is hereinafter called the "Offer Date") to the
Corporation and shall consist of a written offer to sell all the
Shares of the Corporation which the Shareholder then intends to
dispose of (said shares are hereinafter called the "Offer Shares")
to which written Offer shall be attached a statement of intention to
dispose of the Offered Shares, the number of shares involved and the
price at which it would be willing to sell such shares.
2.03 Rights of Corporation. The Corporation may elect to purchase all,
but not less than, all of the Offered Shares by giving written
notice to the Shareholder within thirty (30) days of the Offer Date
which (a) shall state whether or not the Corporation elects to
exercise its option and (b) shall fix a date and time (herein called
"Closing Date") for the closing of the purchase of such stock which
shall be not less than twenty (20), nor more than sixty (60), days
after giving of such notice by the Corporation.
2.04 Effect of Failure to Give Notice. Failure by the Corporation to give
notice required of it pursuant to the foregoing Sections within the
time limits therein provided shall be deemed an election by said
Corporation not to exercise the subject rights.
2.05 Failure to Subscribe All Offered Shares. If the Corporation shall
fail to exercise the respective right and option provided in this
Article 2 to acquire all of the Offered Shares owned by the
Shareholder, the Shareholder shall (subject to the Corporation's
further Right of First Refusal set forth in Article 3 hereof) be
free to sell all the Offered Shares, only if such sale is bona fide
and is consummated in strict accordance with the terms of the Offer
within ninety (90) days after the expiration of the Corporation's
Right of First Refusal, and if no such third party transfer or
encumbrance is consummated within such period, such Offered Shares
shall, again, become subject to all the restrictions of this
Agreement and the rights of Corporation hereunder and under Article
3 in the same manner as if no notice of Offer had been given; and,
in any event, such Offered Shares shall, again, be subject to these
restrictions and to the terms of this Article 2 and Article 3 in the
hands of the third-party purchaser or lienor if such disposition is
effected.
<PAGE> 3
2.06 Payment of Purchase Price. If the Corporation shall exercise any
right described in this Article 2, then the Corporation shall pay to
the Shareholder on the Closing Date, an amount equal to the Purchase
Price (as hereinafter defined) for the Shares purchased, either in
cash or by certified or official bank check.
2.07 Purchase Price. The Purchase Price for the Offered Shares shall be
at the option of the Corporation: (a) the price set forth in the
Offer; or, (b) the price determined in accordance with the
provisions of Article 5 of this Agreement; or, (c) if an Offer is
"deemed given" pursuant to Section 2.10 hereof prior to Vesting (as
said term is defined in Section 2.11 hereof) the Purchase Price set
forth in Article 1 hereof (i.e.
the original price for the shares).
2.08 Assumption on Sale. Shareholder shall not sell or otherwise transfer
any of the Shares of the Corporation held by him unless the
transferee thereof shall agree to be bound by the terms of this
Agreement by an instrument in writing directly with the Corporation,
an executed copy of which shall have been furnished to the
Corporation; such transferee, however, by the acceptance of such
Shares shall thereupon become a party to this Agreement, bound by
all the terms hereof, without further action and, specifically,
whether or not such transferee shall have executed such an
instrument. Shareholder is not presently, and shall not at any time,
except as expressly permitted hereby, become a party in any voting
trust or other agreement with respect to Shares owned by him which
would, in any way, impair the rights of the Corporation.
2.09 Assignment of Corporation's Purchase Rights. If, at any time, the
Corporation shall have the right to purchase any Offered Shares
pursuant to the provisions of this Article 2 or Article 3, the
Corporation may, by a two-thirds vote of the Board of Directors,
assign any such right to any officer, director, or employee of the
Corporation, in such proportions as the Board may determine. All
provisions of this Agreement shall remain applicable to any shares
purchased by any such officer, director, or employee pursuant to
such assignments.
2.10 Circumstances Under Which an Offer is Deemed Made. If a Shareholder
shall attempt to assign, transfer, pledge, hypothecate, or otherwise
encumber or dispose any of his Shares without complying with the
terms of this Agreement, or if the Shares, or any part thereof,
shall be executed against, or voluntarily subjected to encumbrance,
or if he shall attempt to sell any of his Shares other than in
compliance with the terms of this Agreement, or if a Shareholder
shall initiate or have initiated against him, a bankruptcy or
insolvency proceeding which is not discharged within ninety (90)
days of the commencement thereof or if Shareholder ceases to be
employed by the Corporation (whether voluntarily or involuntarily)
or if Shareholder dies, such Shareholder shall be deemed to have
given an Offer to the Corporation under Section 2.02 of this
Agreement with respect to all Shares owned by him, with the Offer
Date being the date upon which each member of the Board of Directors
has actual notice thereof.
2.11 Vesting. Vesting shall be deemed to have occurred upon the first to
occur of: (a) completion of five (5) consecutive years of employment
by Shareholder with the Corporation measured from _____________; or
(b) the sale of all of the stock or assets of
<PAGE> 4
the Corporation to an unrelated unaffiliated third party; or, (c)
sale of at least 66 2/3 percent of the issued and outstanding shares
of Common Stock of the Corporation to an unaffiliated unrelated
third party.
ARTICLE 3
RIGHTS OF FIRST REFUSAL
3.01 Corporation and Shareholder agree that if the Corporation shall not
elect to purchase the Offered Shares pursuant to the Corporation's
rights under Article 2 of this Agreement and if Shareholder,
nevertheless, desires to sell the Offered Shares and shall have
received a bona fide offer from a third party to purchase the same,
Shareholder shall first offer the Offered shares for sale to the
Corporation. Such offer shall be at the price and upon the other
terms and conditions embodied in the Shareholder's offer from the
third party and as provided in this Article 3. Such offer by
Shareholder to the Corporation shall also give the name and address
of each prospective purchaser of the Shares. Corporation shall have
the longer of (i) thirty (30) days, if the value of such offer is
readily ascertainable or (ii) the time required for an accurate
determination of the value of such offer (if such offer shall not be
a cash or equivalent transaction) plus fifteen days, in which to
elect to purchase the offered interest from the Shareholder, upon
the price, terms and conditions set forth in said notice.
3.02 If the Corporation elects to purchase, the Shareholder shall sell
the Offered Shares and the Corporation shall purchase the Offered
Shares (subject to and with the benefit of (i) the continued
application of Article 2 and 3 of this Agreement to any subsequent
sale of Shares if the Shares being sold do not include all of the
Shares included in the original Offer under Article 2. The closing
of the purchase shall occur at the offices of the Corporation upon
the later to occur of: (a) thirty (30) days after the date of
acceptance of such offer by the Corporation; or, (b) the date set
for closing in the Offer, and each party shall deliver such
documents and take such action in connection with the closing as is
required by the Offer.
3.03 If the Corporation shall fail to give notice of election to purchase
the Offered Shares, or after giving notice of election to purchase
the Offered Shares, shall fail to perform its obligation pursuant
thereto, the Shareholder shall be free to sell the Offered Shares
but only for the price and upon the terms and conditions set forth
in the Offer, only to the purchaser named therein and only if such
sale is bona fide and is consummated in strict accordance with the
terms of the Offer within ninety (90) days after expiration of the
Corporation's rights under this Article 3 and if no such third party
transfer is consummated within such period, such Offered Shares
shall, again, become subject to all the restrictions of this
Agreement and all of the rights of the Corporation under Articles 2
and 3, in the same manner as if no notice of Offer had first been
given under Article 2 of this Agreement; and, in any event, such
Offered Shares shall, again, be subject to the terms and provisions
of this Agreement in the hands of the third party purchaser if such
disposition is effected.
<PAGE> 5
ARTICLE 4
PURCHASE BY CORPORATION HEREUNDER
4.01 Whenever Corporation, pursuant to this Agreement, shall purchase any
Shares, each selling Shareholder shall do all things and execute and
deliver all papers as the Corporation may deem reasonably necessary
to consummate such purchase.
ARTICLE 5
PURCHASE PRICE
5.01 The purchase price for Shares as set forth in Section 2.07(b) in
this Agreement (the "Price") shall be determined by multiplying the
price per share (the "Share Price") by the number of shares of Stock
being acquired. The Share Price shall be the net book value of the
Shares as of the date of the Offer as determined by the
Corporation's accountants.
5.02 The determination by the Corporation's accountants of the Share
Price shall be final, binding and conclusive upon all parties hereto
and their legal representatives.
ARTICLE 6
BAR AGAINST ENCUMBRANCING
6.01 Notwithstanding anything contained in this Agreement to the
contrary, Shares may not be voluntarily mortgaged, pledged,
hypothecated, collaterally assigned or otherwise encumbered as
security for any loan or other obligation without first obtaining
the written consent of all parties bound by the terms of this
Agreement.
ARTICLE 7
ENDORSEMENT ON SHARE CERTIFICATES
7.01 Each certificate representing Shares of the Corporation now or
hereafter held by the Shareholder shall be stamped with a legend in
substantially the following form:
"The transfer of the shares represented by the within
certificate is restricted under the terms of an agreement
between the holder and the Corporation dated __________,
19___, a copy of which is on file at the office of the
Corporation."
<PAGE> 6
ARTICLE 8
SPECIFIC PERFORMANCE
8.01 Shareholder acknowledges that it will be impossible to measure in
money the damage to the Corporation if there is a failure to comply
with any of the restrictions or obligations herein imposed upon the
disposition of his Shares, or a failure to comply with the
provisions of Article 2, 3 and 6 hereof, and agrees that in the
event of any such failure, the Corporation will not have an adequate
remedy at law.
8.02 It is therefore agreed that the Corporation, in addition to any
other rights or remedies which it has, shall be entitled to
immediate injunctive relief to enforce such restrictions,
obligations or provisions, or any of them, and that in the event any
action or proceeding is brought in equity to enforce the same, no
Shareholder will urge, as a defense, that there is an adequate
remedy at law.
ARTICLE 9
NOTICES
9.01 Any and all notices, designations, consents, offers, acceptances, or
any other communication provided for herein shall be given in
writing by hand delivery or by registered or certified mail which
shall be addressed, in the case of the Corporation, to its principal
office, and in the case of the Shareholder, to his address appearing
on the books of the Corporation or his residence or to such other
address as may be designated by him. Each such notice shall be dated
as of the date of its mailing and shall be deemed given, delivered
and completed on the date of mailing thereof provided it is received
in due course or, in the case of hand delivery, on the date of
delivery.
ARTICLE 10
INVALID PROVISIONS
10.01 The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and the
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
ARTICLE 11
MODIFICATION
11.01 No change or modification of this Agreement shall be valid unless
the same be in writing and signed by all the parties hereto.
<PAGE> 7
ARTICLE 12
NO SEPARATE ASSIGNMENT
12.01 Except as otherwise expressly permitted by the terms of this
Agreement, the rights granted under this Agreement may not be
severed from the Shares or separately assigned, sold or otherwise
transferred.
ARTICLE 13
MISCELLANEOUS
13.01 No waiver by a party hereto of a breach of any condition, term or
provision of this Agreement shall be deemed a waiver of any
preceding or subsequent breach of the same or any other condition,
term or provision hereto.
13.02 This Agreement is made pursuant to, and shall be governed by and
construed in accordance with the internal laws of the Commonwealth
of Massachusetts, as of the date hereof. It sets forth the entire
agreement among the parties concerning the subject matter thereof,
and any amendment or modification will be effective only if in
writing and signed by the parties affected thereby. Time is of the
essence of this Agreement for all purposes. Any provisions in the
Articles of Incorporation or the Bylaws of the Corporation
purporting to effect restrictions on the transfer of Stock are in
addition to the restrictions contained herein.
13.03 This Agreement shall supersede and replace all prior agreements
between the Corporation and any other party hereto relating to the
same subject matter. It shall continue in full force and effect so
long as the Shares shall remain issued and outstanding. This
Agreement shall bind and benefit the parties hereto and their
respective successors and legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATLANTIC DATA SERVICES, INC.
By:_____________________________________
Its:____________________________________
SHAREHOLDER:
________________________________________
<PAGE> 8
AMENDMENT AGREEMENT TO
KEY PERSON STOCKHOLDER'S AGREEMENT
This Amendment Agreement is an amendment to a certain Key Person
Stockholder's Agreement (the "Key Person Stockholders Agreement") by and between
Atlantic Data Services, Inc., a Massachusetts corporation (the "Corporation")
and **NAME** (the "Key Person Stockholder").
WHEREAS the Company and the Key Person Stockholder desire to amend the
Key Person Stockholder's Agreement to the extent set forth herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties, in accordance with Article 11 of the Key Person
Stockholder's Agreement, hereby agree as follows:
1. Definitions. The capitalized terms used herein and not otherwise
defined shall have the meaning set forth in the Key Person Stockholder's
Agreement.
2. Amendment. That the Key Person Stockholder's Agreement is hereby
amended by deleting Article 13.03 thereof and replacing, in lieu thereof, the
following:
"This Agreement shall supersede and replace all prior agreements
between the Corporation any other party hereto relating to the same
subject matter. The restrictions on transfer of the Shares contained in
Articles 2, 3 and 6 shall terminate upon a distribution to the public
of shares of common stock of the Corporation for an aggregate public
offering price of at least $10 million pursuant to an effective
registration statement filed under the Act of any successor statute.
This Agreement shall bind and benefit the parties hereto and their
respective successors and legal representatives."
<PAGE> 9
IN WITNESS WHEREOF, this Amendment Agreement has been executed this __
day of October, 1997.
ATLANTIC DATA SERVICES, INC.
By:
-------------------------
President
KEY PERSON STOCKHOLDER:
**NAME**
----------------------------
Signature
<PAGE> 1
EXHIBIT 10.03
ATLANTIC DATA SERVICES, INC.
AMENDED AND RESTATED 1992 INCENTIVE STOCK OPTION PLAN
1. Purpose - The purpose of this 1992 Incentive Stock Option Plan (the
"Plan") is to provide a means by which certain employees and directors
of Atlantic Data Services, Inc. (the "Company") and its Affiliates (as
defined below) may be given an opportunity to purchase shares of
non-voting, non-dividend bearing Common Class A Stock, one cent par
value of the Company ("Common Class A Stock") and to qualify such
options as incentive stock options as such term is defined in Section
422A of the Internal Revenue Code of 1986 (the "Code"). The Plan is
intended to advance the interests of the Company by encouraging stock
ownership on the part of certain employees and directors, by enabling
the Company (and its Affiliates) to secure and retain the services of
highly qualified persons, and by providing employees and directors with
an additional incentive to advance the success of the Company (and its
Affiliates). For purposes of this Plan, Affiliate shall mean any parent
or subsidiary corporation of the Company as defined in Section 425 (e)
and (f) respectively of the Code. Affiliation shall refer to a group of
Affiliates.
2. Stock Subject to Option - Subject to adjustment as provided in Sections
4(G) and (H) hereof, options may be granted by the Company from time to
time to purchase up to an aggregate of 29,000 shares of the Company's
authorized but unissued Common Class A Stock, provided that the number
of shares that may be granted to any employee under the Plan shall be
reasonable in relation to the purpose of the Plan. Shares that by
reason of the expiration of an option or otherwise are no longer
subject to purchase pursuant to an option granted under the Plan may be
reoptioned under the Plan. The Company shall not be required upon the
exercise of any option, to issue or deliver any shares of stock prior
to the completion of such registration or other qualification of such
shares under any state or Federal law, rule, or regulation as the
Company shall determine to be necessary or desirable.
3. Participants - All employees of the Company (or its Affiliates) may be
granted options under the Plan. A director of the Company who is not
otherwise employed by the Company (or an Affiliate) may-also be granted
an option. A person who holds an option granted hereunder that has not
expired is referred to as an optionee.
4. Terms and Conditions of Options. The committee (as that term is defined
in Section 5) may grant options from time to time pursuant to the Plan.
Such options shall be evidenced by written agreements substantially in
the form of the Stock Option Agreement, which is attached hereto as
"Exhibit A" including the Stockholders Agreement attached thereto.
Shares of stock that may be purchased under an option granted pursuant
of this Plan shall sometimes hereinafter be referred to as "Option
Shares". Nothing in this Plan or an option granted hereunder shall
govern the employment rights and duties between the optionee and the
Company or Affiliate.
<PAGE> 2
- 2 -
Neither this Plan, nor any grant or exercise pursuant thereto, shall
constitute an employment agreement among such parties.
(A) Option Price - The Option Price for each option shall be equal
to the price per share of Common Class A Stock last
established by the Board of Directors of the Corporation and
in effect on the date that the option is granted.
(B) Term of Option - Notwithstanding any other provision of this
Plan, each option granted under this Plan shall expire not
more than ten years from the date the option is granted,
except that under the circumstances described in Sections
4(G), 4(H), and 4(I), options may expire and terminate at an
earlier date. However, with respect to an option granted to a
10% Shareholder, the word "five" shall be substituted for the
word "ten" in the immediately preceding sentence.
(C) Exercise of Option - No option granted under the Plan shall be
exercisable in any part until the first anniversary of the
date of grant. Each option shall be exercisable as to 25% of
the total shares covered by such option as of the first
anniversary date of grant. The right to exercise with respect
to an additional 25% of the total shares shall accrue on each
of the second, third, and fourth anniversaries of the date of
grant and shall be cumulative. The date of grant shall be the
date set forth in any option as the Date of Grant. Further,
where an optionee's employment by the Company and its
Affiliates is terminated for any reason, no option shall give
an optionee (or his successor) a right to acquire any greater
number of shares than he had rights to acquire on the date of
his termination. Where an optionee is a director but not an
employee of the Company and such directorship is terminated
for any reason, no option shall give such optionee (or his
successor) a right to acquire any greater number of shares
than he had rights to acquire on the date of his termination.
The committee may accelerate the time at which an option may
be exercised. Notwithstanding any other provision in this
Section 4(C), the aggregate fair market value (determined at
the time such option is granted) of the shares of Common Class
A Stock with respect to which options are exercisable for the
first time by such optionee during any calendar year (under
all incentive stock option plans of the Company and its
Affiliates) shall not exceed $100,000.
(D) Manner of Exercise - Shares of Common Class A Stock purchased
upon exercise of options shall at the time of purchase be paid
for in full. To the extent that the right to purchase shares
has accrued hereunder, options may be exercised from time to
time by written notice to the Company stating the full number
of shares with respect to which the option is being exercised
and the time of delivery thereof, which shall be at least
fifteen days after the giving of such notice unless an earlier
date shall have been mutually agreed upon, accompanied by full
payment for the shares by certified or official bank check or
the equivalent thereof acceptable to the Company. At the time
of delivery, the Company shall, without stock transfer or
issue tax to the optionee (or other person entitled to
exercise the option), deliver to the optionee (or to such
other person) at the principal
<PAGE> 3
- 3 -
office of the Company, or such other place as shall be
mutually agreed upon, a certificate or certificates for such
shares, provided, however, that the time of delivery may be
postponed by the Company for such period as may be required
for it with reasonable diligence to comply, upon exercise of
any option, with applicable state and federal laws including,
without limitation, the Securities Act of 1933 (the "Act") and
Massachusetts General Laws Chapter 110A (the "State Act"). The
Company shall also have the right to postpone the exercise of
any option for such period as may be required for it with
reasonable diligence to comply with applicable state and
federal laws (including, without limitation, the Act and the
State Act) upon exercise of an option. The Company, at the
time of exercise, will require in addition that the registered
owner deliver an investment representation in form acceptable
to the Company and its counsel. At the time of exercise, the
Company will also require that the registered owner execute
and deliver the Shareholders Agreement referred to in Section
4(M). The Company will place a legend on the certificate for
such Common Class A Stock restricting the transfer of same. At
no time shall the Company have any obligation or duty to
register under the Act the Common Class A Stock issuable upon
exercise of the options.
(E) Non-Assignability of Option Rights - No option shall be
assignable or transferable otherwise than by will or by the
laws of descent and distribution. During the lifetime of an
optionee, the option is exercisable only by the optionee
except otherwise provided in Section 4(F) (2).
(F) Termination of Employment or Directorship
(1) In the event that optionee's employment by the
Company and its Affiliates shall terminate (or in the
event optionee is a non-employee director of the
Company and such directorship is terminated), and the
provisions of Sections 4(F) (2), 4(F) (3) and 4(I) do
not apply, the options granted to optionee pursuant
to this Plan shall terminate immediately.
(2) In the event that optionee shall die (a) while in the
employment of the Company (or an Affiliate) or (b)
while he is director of the Company or if the
optionee's employment by the Company (or an
Affiliate) or his directorship on the Board of
Directors is terminated because optionee has become
disabled within the meaning of Section 105(d) (4) of
the Code, optionee, his estate, or beneficiary shall
have the right to exercise his options at any time
within twelve months from the date of (i) the death
of such optionee or (ii) termination of his
employment due to disability, as the case may be, to
the same extent optionee was entitled to exercise
such option as of the date of such death or
termination due to disability. Notwithstanding the
foregoing, the provisions of this Section 4(F) (2)
shall be subject to Sections 4(B), 4(H), and 4(I) as
may earlier terminate the option.
(3) In the event that termination of employment is due to
retirement with the consent of the Company, the
optionee shall have the right to exercise his option
at any time within three months after such retirement
to the extent he was entitled to
<PAGE> 4
- 4 -
exercise the same immediately prior to retirement.
Notwithstanding the foregoing, the provisions of this
Section 4(F) (3) shall be subject to Sections 4(B),
4(H), and 4(I) as may earlier terminate the option.
(G) Adjustment of Options on Recapitalization - The aggregate
number of Shares of Common Class A Stock for which options may
be granted to persons participating under the Plan, the number
of shares covered by each outstanding option, and the exercise
price per share, of each such option shall be proportionately
adjusted for any increase or decrease in the number of issued
shares of common stock of the Company resulting from the
subdivision or consolidation of common stock shares, or the
payment of a stock dividend after the date of grant of the
option, or other increase in such common shares effected
without receipt of consideration by the Company (but there
shall be no such proportional adjustment by virtue of, or in
connection with, the conversion of shares of Special Common
Stock or Common Class A Stock into shares of common stock of
the Company), provided, however, that any options to purchase
fractional shares resulting from any such adjustment shall be
eliminated, and provided further that any such adjustment
shall be made in a manner so as not to constitute a
modification as defined in Section 425(h) (3) of the Code. In
the event of a recapitalization of the Company pursuant to
which securities of the Company or of another corporation are
issued with respect to the outstanding shares of Class A
Common Stock, an optionee upon exercising an option shall be
entitled to receive for the purchase price paid upon such
exercise the securities he or she would hold if he or she had
exercised such option prior to such recapitalization.
(H) Adjustment of Options Upon Reorganization
(1) With respect to options to acquire stock of an
Affiliate of optionee's then present employer, if
optionee's then present employer ceases to be
affiliated with the other member(s) of the
Affiliation, then the option shall expire and
terminate (30) days after the date on which
optionee's employer ceases to be an Affiliate.
Notwithstanding the foregoing, the provisions of this
Section 4(H) (1) shall be subject to Section 4(I) at
a time earlier than the notice provided herein.
(2) If the Company shall at any time participate in a
reorganization to which 425(a) of the Code applies
and (a) the Company is not the surviving entity, or
(b) the Company is the surviving entity and the
shareholders of the Company's Common Stock or Common
Class A Stock are required to exchange their shares
for property and/or securities, the Company shall
give each optionee written notice of such fact on or
before fifteen (15) days before such merger or
consolidation, and each option shall be exercisable
in full after receipt of such notice and prior to
such merger
<PAGE> 5
- 5 -
or consolidation; however, options not exercised
prior to such merger or consolidation shall expire on
the occurrence of such merger or consolidation. A
sale of all or substantially all the assets of the
Company for a consideration (apart from assumption of
obligations) consisting primarily of securities shall
be deemed a merger or consolidation for the foregoing
purposes. Notwithstanding the foregoing, the
provisions of this Section 4(H) (2) shall be subject
to Section 4(B).
(I) Dissolution of Issuer of Option Stock - In the event of the
proposed dissolution or liquidation of the Company, the
options granted hereunder shall terminate as of a date to be
fixed by the Committee, provided that not less than thirty
(30) days prior written notice of the date so fixed shall be
given to the optionee, and the optionee shall have the right,
during the period of thirty (30) days preceding such
termination, to exercise his option. Notwithstanding the
foregoing, the provisions of this Section 4(I) shall be
subject to Section 4(H) if the optionee receives notice under
Section 4(H) at a time earlier than the notice provided for
herein.
(J) Rights as a Shareholder - The options shall have no rights as
a shareholder with respect to any shares of Common Class A
Stock of the Company held under option until the date of
issuance of the stock certificate to him for such shares.
Except as provided in Section 4(G), no adjustment shall be
made for dividends (if any are applicable) or other applicable
rights for which the record date is prior to the date of such
issuance.
(K) Time of Granting Options - The grant of an option shall occur
only when a written option agreement substantially in the form
of the Incentive Stock Option Agreement, which is attached
hereto marked "Exhibit A" together with the Shareholders
Agreement appended thereto as Exhibit I shall have been duly
executed and delivered by or on behalf of the Company and the
employee to whom such option shall be granted.
(L) Stock Legend - Certificates evidencing shares of the Company's
Common Class A Stock purchased upon the exercise of options
issued under the Plan shall be endorsed with a legend in
substantially the following form:
The shares evidenced by this certificate may not be sold or
transferred prior to _______________ 19__, in the absence of a
written statement from the Company to the effect that the
Company is aware of the fact that of such sale or transfer and
has consented thereto.
The blank contained in such legend shall be filled in with the
date which is the later of (a) two years and one day after
granting the option in question or (b) one year and one day
after the date of transfer of such stock to the optionee
following the exercise of such stock option. The foregoing
restriction option shall have no effect on other restrictions
on transfer to which the stock may be subject but, rather,
shall be in addition to such other restrictions.
<PAGE> 6
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(M) Shareholders Agreement - Upon exercise of any option granted
pursuant to this Agreement and prior to the issuance of any
Common Class A stock pursuant to such exercise, the Optionee
shall first enter into a Shareholders Agreement with the
Corporation in the form attached to the Stock Option
Agreement.
5. Administration
(A) The plan shall he administered by a Compensation Committee
(the "Committee") consisting of not fewer than two (2)
directors to be appointed by the Board of Directors of the
Company. The Board of Directors may, from time to time, remove
members from or add members to the Committee. Vacancies in the
Committee caused, shall be filled by the Board of Directors.
The Committee shall select one of its members chairman and
shall hold meetings at such times and places as it may
determine. The Committee may appoint a secretary and, subject
to the provisions of the Plan and to policies determined by
the Board of Directors, may make such rules and regulations
for the conduct of its business as it shall deem advisable. A
majority of the Committee shall constitute a quorum. All
action of the Committee shall be taken by a majority of its
members. Any action may be taken by a written instrument
signed by a majority of the members, and action so taken shall
be fully as effective as if it had been taken by a vote of the
majority of the members at a meeting duly called and held. The
Board of Directors may act in lieu of the Committee and shall
act in lieu of a Committee at any time such a Committee is not
instituted.
(B) Subject to the express terms and conditions of the Plan, the
Committee shall have full power to grant options under the
Plan, to construe or interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it and to make
all other determinations necessary or advisable for its
administration.
(C) Subject to the provisions of Section 3 and 4 hereof, the
Committee may, from time to time, determine which employees of
the Company or its Affiliates shall be granted options under
the Plan, the number of Option Shares subject to each option,
and the time or times at which options shall be granted, and
the Company may grant such options under the Plan.
(D) The Committee shall report to the Board of Directors the names
of employees and non-employee Directors granted options, the
number of Option Shares granted to each employee and each
non-employee Director, and the terms and conditions of each
option.
(E) No member of the Board of Directors or the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any option.
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6. Effective Date and Termination
(A) The effective date of the Plan is July 1, 1992.
(B) The Plan shall terminate on June 30, 2002; but the Board of
Directors may terminate the Plan at any time prior to ten
years from the effective date of the Plan Termination of the
Plan shall not alter or impair, without the consent of the
optionee, any of the rights or obligations and any option
therefore granted under the Plan.
7. Amendments - The Board of Directors of the Company may, from time to
time, alter, amend, suspend, or discontinue the Plan, or alter or amend
any and all option agreements granted thereunder, provided however,
that no such action of the Board of Directors, without the approval of
the shareholders of the Company, may alter the provisions of the Plan
so as to:
(A) Decrease the minimum option price;
(B) Extend the term of the Plan beyond ten years or the maximum
term of the options granted beyond ten years;
(C) Alter any outstanding option agreement to the detriment of the
optionee without his consent; or
(D) Decrease, directly or indirectly (by cancellation and
substitution of options or otherwise), the option price
applicable to any option granted under this Plan.
Notwithstanding the foregoing, (i) the Board of Directors may amend the
Plan in any respect in order to qualify the options granted pursuant
hereto as Incentive Stock Options as defined in Section 422A of the
Code, and (ii) no amendment may be made to this Plan (or any option
granted hereunder without the consent of the optionee) which could
constitute a modification of any option outstanding under Section 425
(h) of the code or which could adversely affect an outstanding option's
status as an incentive stock option under Section 422A of the Code.
8. Status of Options - Options granted pursuant to this Plan are intended
to qualify as Incentive Stock Options within the meaning of Section
422A of the Code, and the terms of this Plan and options granted
hereunder shall be so construed, provided, however, that nothing in
this Plan shall be interpreted as a representation, guarantee or other
undertaking on the part of the Company that the options granted
pursuant to the Plan are, or will be, determined to be Incentive Stock
Options, within the meaning of Section 422A of the Code.
9. Use of Proceeds - The proceeds from the sale of Common Class A Stock
pursuant to options will be used for the Company's general corporate
purposes.
<PAGE> 1
EXHIBIT 10.04
ATLANTIC DATA SERVICES, INC.
INCENTIVE STOCK OPTION AGREEMENT
ATLANTIC DATA SERVICES, INC. (the "Company), in consideration of the
value of the continuing services of ____________________ (hereafter called
"optionee") which continuing services the grant of this option is designed to
secure, and in consideration of the undertakings made herein by Optionee, and
pursuant to its 1992 Incentive Stock Option Plan (hereinafter called the
"Plan"), hereby grants to Optionee an option, evidenced by this option
agreement, exercisable for the period and upon the terms hereinafter set out, to
purchase _____ shares of Common Class A Stock ("Common Class A Stock") of the
Company at a price of $__________.
1. Term of Option - This option is granted and dated on the date set
forth next above the signature shown (sometimes hereinafter called the "Date of
Grant"), and will terminate and expire, to the extent not previously exercised,
for ______(_____) years after the Date of Grant, or at such earlier time as may
be specified in Section 4 hereof.
Except as otherwise provided in this Option Agreement or
the Plan, Optionee shall have the right to acquire shares under this Option
Agreement as follows:
(a) As of the first anniversary of the Date
of Grant and thereafter, Optionee may exercise rights to acquire 25%
of the Option Shares;
(b) As of the second anniversary of the Date
of Grant and thereafter, Optionee may exercise rights to acquire an
additional 25% of the Option Shares;
(c) As of the third anniversary of the Date
of Grant and thereafter, Optionee may exercise rights to acquire an
additional 25% of the Option Shares; and
(d) As of the fourth anniversary of the Date
of Grant and thereafter, Optionee may exercise rights to acquire an
additional 25% of the Option Shares.
2. Non-Transferability - This option shall not be assignable or
transferable otherwise than by will or by the laws of descent and distribution.
During the lifetime of an optionee, the option is exercisable only by the
optionee except otherwise provided in Section 4(F) (2) of the Plan.
Any transfer in violation hereof shall be void and of no effect and shall
terminate this Option.
3. Manner of Exercise - Shares of Common Class A Stock purchased
upon exercise of the option shall at the time of purchase be paid for in full.
To the extent that the right to purchase shares has accrued hereunder, this
option may be exercised from time to time by written notice to the Company
stating the full number of shares with respect to which the option is being
exercised and the time of delivery thereof, which shall be at least fifteen days
after the giving of such notice unless an earlier date shall have been mutually
agreed upon, accompanied by full payment for the shares by certified or official
bank check or the equivalent thereof acceptable to the Company. At the time of
delivery, the Company shall, without stock transfer or issue tax to the optionee
(or other person entitled to exercise the option), deliver to the optionee (or
to such other person) at the
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principal office of the Company, or such other place as shall be mutually agreed
upon, a certificate or certificates for such shares, provided, however, that the
time of delivery may be postponed by the Company for such period as may be
required for it with reasonable diligence to comply, upon exercise of this
option, with applicable state and federal laws including, without limitation,
the Securities Act of 1933 (the "Act")and Massachusetts General Laws Chapter
110A (the "State Act"). The Company shall also have the right to postpone the
exercise of any option for such period as may be required for it with reasonable
diligence to comply with applicable state and federal laws (including, without
limitation, the Act and the State Act) upon exercise of an option. The Company,
at the time of exercise, will require in addition that the registered owner
deliver an investment representation in form acceptable to the Company and its
counsel. At the time of exercise, the Company will also require that the
registered owner execute and deliver the Shareholders Agreement attached hereto
as Exhibit 1. The Company will place a legend on the certificate for such Common
Class A Stock restricting the transfer of same per the Plan and the Shareholders
Agreement. At no time shall the Company have any obligation or duty to register
under the Act or the State Act or any other laws the Common Class A Stock
issuable upon exercise of the options. As set forth in the Plan, the Company
shall not be required, upon the exercise of any option, to issue or deliver
shares hereunder prior to completion of registration or other qualification of
such shares under any state or Federal law, rule or regulation as the Company
shall determine to be necessary or desirable.
4. Termination of Employment or Directorship.
(a) In the event that Optionee's employment by the
Company and its Affiliates shall terminate (or if optionee is non-employee
director and his directorship with the Company or an Affiliate shall terminate),
and the provisions of Sections 4(F) (2), 4(F) (3) and 4(I) of the Plan do not
apply, the options granted to optionee pursuant to this Plan shall terminate
immediately.
(b) In the event that Optionee shall die (a) while in
the employment of the Company (or an Affiliate) or (b) while he is a director of
the Company or if the Optionee's employment by the Company (or an Affiliate) or
his directorship on the Board of Directors is terminated because Optionee has
become disabled within the meaning of Section 105(d) (4) of the Code, optionee,
his estate, or beneficiary shall have the right to exercise his options at any
time within twelve months from the date of (i) the death of such optionee or
(ii) termination of his employment due to disability, as the case may be, to the
same extent Optionee was entitled to exercise such option as of the date of such
death or termination due to disability. Notwithstanding the foregoing, the
provisions of this Paragraph (b) shall be subject to Sections 4(B), 4(H), and
4(I) of the Plan as may earlier terminate the option.
(c) In the event that termination of employment or
directorship is due to retirement with the consent of the Company, the optionee
shall have the right to exercise his option at any time within three months
after such retirement to the extent he was entitled to exercise the same
immediately prior to retirement. Notwithstanding the foregoing, the provisions
of this Paragraph (c) shall be subject to Sections 4(B), 4(H), and 4(I) of the
Plan as may earlier terminate the option.
<PAGE> 3
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(d) In no event shall this option give optionee (or his
successor) a right to acquire any greater number of shares than he had the right
to acquire on the date of his termination.
5. Adjustments on Recapitalization - The aggregate number of shares
of Common Class A Stock covered by this option, and the exercise price per
share, of set forth in this option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of common stock of the
Company resulting from the subdivision or consolidation of common stock shares,
or the payment of a stock dividend after the date of grant of this Option, or
other increase in such common shares effected without receipt of consideration
by the Company (but there shall be no such proportional adjustment by virtue of,
or in connection with, the conversion of shares of Special Common Stock which
are presently issued and outstanding into shares of common stock of the
Company), provided, however, that any options to purchase fractional shares
resulting from any such adjustment shall be eliminated, and provided further
that any such adjustment shall be made in a manner so as not to constitute a
modification as defined in Section 425(h) (3) of the Code.
6. Adjustments on Reorganization - If the Company shall at any time
participate in a reorganization to which 425(a) of the Code applies and (a) the
Company is not the surviving entity, or (b) the Company is the surviving entity
and the shareholders of the Company's Common Stock or Common Class A Stock are
required to exchange their shares for property and/or securities, the Company
shall give each optionee written notice of such fact on or before fifteen (15)
days before such merger or consolidation, and each option shall be exercisable
in full after receipt of such notice and prior to such merger or consolidation;
however, options not exercised prior to such merger or consolidation shall
expire on the occurrence of such merger or consolidation. A sale of all or
substantially all the assets of the Company for a consideration (apart from
assumption of obligations) consisting primarily of securities shall be deemed a
merger or consolidation for the foregoing purposes. Notwithstanding the
foregoing, the provisions of this Paragraph 6 shall be subject to Section 4(B)
of the Plan.
7. Dissolution of Issuer of Option Stock - In the event of the
proposed dissolution or liquidation of the Company, the options granted
hereunder shall terminate as of a date to be fixed by the Committee, provided
that not less than thirty (30) days prior written notice of the date so fixed
shall be given to the optionee, and the optionee shall have the right, during
the period of thirty (30) days preceding such termination, to exercise his
option. Notwithstanding the foregoing, the provisions of this Paragraph 7 shall
be subject to Section 4(H) of the Plan if the optionee receives notice under
Section 4(H) at a time earlier than the notice provided herein.
8. Rights as a Shareholder - The optionee shall have no rights as a
shareholder with respect to any shares of Common Class A Stock of the Company
held under option until the date of issuance of the stock certificate to him for
such shares. Except as provided in Section 4(G) of the Plan, no adjustment shall
be made for dividends (if any are applicable to the Common Class A Stock) or
other applicable rights for which the record date is prior to the date of such
issuance. The Common Class A Stock is non-voting, non-dividend bearing stock.
Shares of Special Common Stock have priority over the Common Class A Stock upon
liquidation of the Company.
9. Status of Options - Options granted pursuant to the Plan are
intended to qualify as Incentive Stock Options within the meaning of Section
422A of the Code, and the terms of the Plan
<PAGE> 4
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and this option shall be so construed, provided, however that nothing in the
Plan or this Option shall be interpreted as a representation, guarantee or other
undertaking on the part of the Company that the options granted pursuant hereto
are, or will be, determined to be Incentive Stock Options, within the meaning of
Section 422A of the Code.
10. Shareholders Agreement - Upon exercise of any option granted
pursuant to this Agreement and prior to the issuance of any Common Class A Stock
pursuant to such exercise, the Optionee shall first enter into a Shareholders
Agreement with the Corporation in the form attached hereto as Exhibit 1.
11. Stock Legend - Certificate evidencing shares of the Company's
Common Class A Stock purchased upon the exercise of this Option shall be
endorsed with the legend as required under the Plan and the Shareholders
Agreement.
12. Subject to Plan - This option is subject to all the terms and
conditions of the Plan, and specifically to the power of the Compensation
Committee of the Board of Directors of the Company to make interpretations of
the Plan and of options granted thereunder, and of the Board of Directors of the
Company to alter, amend, suspend, or discontinue the Plan subject to the
limitation expressed in the Plan. In the event of any conflict between the
provisions of Paragraphs 2 through 12 hereof and the Plan, the Plan shall
govern. By acceptance hereof Optionee acknowledges receipt of a copy of the Plan
and recognizes and agrees that all determinations, interpretations, or other
actions respecting the Plan may be made by a majority of the Board of Directors
of the Company or of the Compensation Committee, and that determinations,
interpretations or other actions are final, conclusive, and binding upon all
parties, including Optionee. Such Board of Directors or Committee may accelerate
the time at which this Option may be exercised.
IN WITNESS WHEREOF, this Option Agreement is executed as of the
_____ day of _____________________, 19__.
ATLANTIC DATA SERVICES, INC.
By:__________________________________
The undersigned Optionee hereby accepts the benefits of the
foregoing Incentive Stock Option Agreement and agrees to comply with the terms
thereof.
_____________________________________
<PAGE> 1
EXHIBIT 10.05
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT FOR SHARES
ISSUED UNDER 1992 INCENTIVE STOCK OPTION PLAN
AGREEMENT, dated the ____ day of __________, 199__ between ATLANTIC
DATA SERVICES, INC., a Massachusetts corporation (herein called the
"Corporation") and _________ (herein called the "Shareholder"),
WITNESSETH:
WHEREAS, the Corporation has granted Shareholder under the terms of
the Corporation's 1992 Incentive Stock Plan (the "Plan") the right and option
(the "Option") to purchase ________ shares of Common Stock Class A, one cent par
value of the Corporation (the "Shares") for $0.91 per share; and
WHEREAS, Shareholder desires to exercise such Option for said Shares
of the Corporation; and
WHEREAS, in furtherance of the Plan, the parties hereto desire to
set forth certain terms and conditions with respect to the use, ownership and
transfer of the Shares by the Shareholders.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
provisions herein contained, each of the parties hereto, for himself or itself,
and for his or its heirs, representatives, successors and assigns agrees with
every other party hereto as follows:
ARTICLE 1
INVESTMENT REPRESENTATION
1.01 Shareholder has exercised its option to purchase the Shares of the
Corporation as granted pursuant to the Plan and Option and delivers
herewith his check payable to the order of the Corporation in the
amount of $________ (the "Purchase Price") representing payment in
full for said Shares so subscribed for. The Corporation hereby
acknowledges receipt of such payment by Shareholder and has
delivered to Shareholder a certificate registered in his name for
the Shares of the Corporation. Shareholder hereby acknowledges
receipt of such Shares.
1.02 Shareholder represents and warrants to the Corporation that the
Shares have been purchased for investment within the meaning of the
Securities Act of 1933 (the "Act") and agrees that notwithstanding
any other term or provision of the Plan, the Option or this
Agreement, they may not, and will not, be offered or sold without an
effective Registration Statement under the Act and the Massachusetts
Uniform Securities Act (namely, Massachusetts General Laws Chapter
110A) (the "State Act") or an opinion of counsel satisfactory to the
Corporation to the effect that the proposed transaction will be
exempt from registration under the Act and the State Act. Nothing
contained in the Plan,
<PAGE> 2
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the Option or Articles 2 or 3 hereof shall constitute a waiver of
the requirements of this Section 1.02.
ARTICLE 2
RESTRICTIONS DURING LIFE
2.01 Shareholder's Obligations to Offer Shares to Corporation -
Shareholder shall not, during his lifetime, sell, assign, transfer,
pledge or otherwise, directly or indirectly, dispose of, or encumber
(all such dispositions shall hereafter be referred to by use of the
verb "dispose") any of his Shares of the Corporation to, or with,
any other person, firm or corporation (including, without
limitation, dispositions to any other shareholder and dispositioning
by gift) unless (a) the Shareholder shall have first made the offer
to sell hereinafter described in this Article 2 (the "Offer") and
such Offer shall not have been accepted by the Corporation and (b)
thereafter, the Shareholder shall have compiled with the Right of
First Refusal set forth in Article 3 hereof and the Corporation
shall have elected not to exercise its rights thereunder. In any
event, no Shares shall be sold or offered for sale by Shareholder in
violation of the Plan, the Option or Section 1.02 hereof.
2.02 Offer by Transferor - The Offer shall be given (the date on which
such Offer is given is hereinafter called the "Offer Date") to the
Corporation and shall consist of a written offer to sell all the
Shares of the Corporation which the Shareholder then intends to
dispose of (said shares are hereinafter called the "Offer Shares")
to which written Offer shall be attached a statement of intention to
dispose of the Offered Shares, the number of shares involved and the
price at which it would be willing to sell such shares.
2.03 Rights of Corporation - The Corporation may elect to purchase all,
but not less than, all of the Offered Shares by giving written
notice to the Shareholder within thirty (30) days of the Offer Date
which (a) shall state whether or not the Corporation elects to
exercise its option and (b) shall fix a date and time (herein called
"Closing Date") for the closing of the purchase of such stock which
shall be not less than twenty (20), nor more than sixty (60), days
after giving of such notice by the Corporation.
2.04 Effect of Failure to Give Notice - Failure by the Corporation to
give notice required of it pursuant to the foregoing Sections within
the time limits therein provided shall be deemed an election by said
Corporation not to exercise the subject rights.
2.05 Failure to Subscribe All Offered Shares - If the Corporation shall
fail to exercise the respective right and option provided in this
Article 2 to acquire all of the Offered Shares owned by the
Shareholder, the Shareholder shall (subject to the Corporation's
further Right of First Refusal set forth in Article 3 hereof and
subject to the other restrictions set forth in the Plan and/or on
the stock certificate for such Shares) be free to sell all the
Offered Shares, only if such sale is bona fide and is consummated in
strict accordance with the terms of the Offer within ninety (90)
days after the expiration of the Corporation's Right of First
Refusal, and if no such third party transfer or encumbrance is
consummated within such period, such Offered Shares shall, again,
become subject to all the restrictions of this Agreement and the
rights of Corporation hereunder and under
<PAGE> 3
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Article 3 in the same manner as if no notice of Offer had been
given; and, in any event, such Offered Shares shall, again, be
subject to these restrictions and to the terms of this Article 2,
Article 3, 8 (and to all other restrictions and terms set forth in
this Agreement, the Option and the Plan) in the hands of the
third-party purchaser or lienor if such disposition is effected.
2.06 Payment of Purchase Price - If the Corporation shall exercise any
right described in this Article 2, then the Corporation shall pay to
the Shareholder on the Closing Date, an amount equal to the Purchase
Price (as hereinafter defined) for the Shares purchased, either in
cash or by certified or official bank check.
2.07 Purchase Price - The Purchase Price for the Offered Shares shall be
the price set forth in the Offer.
2.08 Assumption on Sale - Shareholder shall not sell or otherwise
transfer any of the Shares of the Corporation held by him unless the
transferee thereof shall agree to be bound by the terms of this
Agreement by an instrument in writing directly with the Corporation,
an executed copy of which shall have been furnished to the
Corporation; such transferee, however, by the acceptance of such
Shares shall thereupon become a party to this Agreement, bound by
all the terms hereof, without further action and, specifically,
whether or not such transferee shall have executed such an
instrument. Shareholder is not presently, and shall not at any time,
except as expressly permitted hereby, become a party to any voting
trust or other agreement with respect to Shares owned by him which
would, in any way, impair the rights of the Corporation.
2.09 Assignment of Corporation's Purchase Rights - If, at any time, the
Corporation shall have the right to purchase any Offered Shares
pursuant to the provisions of this Article 2 or Article 3, the
Corporation may, by a two-thirds vote of the Board of Directors,
assign any such right to any officer, director, or employee of the
Corporation, in such proportions as the Board may determine. All
provisions of this Agreement shall remain applicable to any shares
purchased by any such officer, director, or employee pursuant to
such assignments.
2.10 Circumstances Under Which an Offer is Deemed Made - If a Shareholder
shall attempt to assign, transfer, pledge, hypothecate, or otherwise
encumber or dispose any of his Shares without complying with the
terms of this Agreement, the Option and the Plan, or if the Shares,
or any part thereof, shall be executed against, or voluntarily
subjected to encumbrance, or if he shall attempt to sell any of his
Shares other than in compliance with the terms of this Agreement,
the Option and the Plan, or if a Shareholder shall initiate or have
initiated against him, a bankruptcy or insolvency proceeding which
is not discharged within ninety (90) days of the commencement
thereof or if Shareholder ceases to be employed by the Corporation
(or in the case of a non-employee, director, ceases to be a director
of the Corporation) (whether voluntarily or involuntarily) or if
Shareholder dies, such Shareholder shall be deemed to have given an
Offer to the Corporation under Section 2.02 of this Agreement with
respect to all Shares owned by him, with the Offer Date being the
date upon which each member of the Board of Directors has actual
notice thereof.
<PAGE> 4
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ARTICLE 3
RIGHTS OF FIRST REFUSAL
3.01 Corporation and Shareholder agree that if the Corporation shall not
elect to purchase the Offered Shares pursuant to the Corporation's
rights under Article 2 of this Agreement and if Shareholder,
nevertheless, desires to sell the Offered Shares and shall have
received a bona fide offer from a third party to purchase the same,
Shareholder shall first offer the Offered shares for sale to the
Corporation. Such offer shall be at the price and upon the other
terms and conditions embodied in the Shareholder's offer from the
third party and as provided in this Article 3. Such offer by
Shareholder to the Corporation shall also give the name and address
of each prospective purchaser of the Shares. Corporation shall have
the longer of (i) thirty (30) days, if the value of such offer is
readily ascertainable or (ii) the time required for an accurate
determination of the value of such offer (if such offer shall not be
a cash or equivalent transaction) plus fifteen days, in which to
elect to purchase the offered interest from the Shareholder, upon
the price, terms and conditions set forth in said notice.
3.02 If the Corporation elects to purchase, the Shareholder shall sell
the Offered Shares and the Corporation shall purchase the Offered
Shares (subject to and with the benefit of (i) the continued
application of Articles 2 and 3 of this Agreement to any subsequent
sale of Shares if the Shares being sold do not include all of the
Shares included in the original Offer under Article 2. The closing
of the purchase shall occur at the offices of the Corporation upon
the later to occur of (a) thirty (30) days after the date of
acceptance of such offer by the Corporation or (b) the date set for
closing in the Offer, and each party shall deliver such documents
and take such action in connection with the closing as is required
by the Offer.
3.03 If the Corporation shall fail to give notice of election to purchase
the Offered Shares, or after giving notice of election to purchase
the Offered Shares, shall fail to perform its obligation pursuant
thereto, the Shareholder shall (subject to other restrictions set
forth in the Plan the other restrictions appearing in the Stock
Certificates) be free to sell the Offered Shares but only for the
price and upon the terms and conditions set forth in the Offer, only
to the purchase named therein and only if such sale is bona fide and
is consummated in strict accordance with the terms of the Offer
within ninety (90) days after expiration of the Corporation's rights
under this Article 3 and if no such third party transfer is
consummated within such period, such Offered Shares shall, again,
become subject to all the restrictions of this Agreement (and other
applicable provisions of the Plan) and all of the rights of the
Corporation under Articles 2 and 3, in the same manner as if no
notice of Offer had first been given under Article 2 of this
Agreement, and, in any event, such Offered Shares shall, again, be
subject to the terms and provisions of this Agreement in the hands
of the third party purchaser if such disposition is effected. No
offer or sale shall be made to any third party purchaser without
compliance with Section 1.02 hereof.
<PAGE> 5
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ARTICLE 4
PURCHASE BY CORPORATION HEREUNDER
4.01 Whenever Corporation, pursuant to this Agreement, shall purchase any
Shares, each selling Shareholder shall do all things and execute and
deliver all papers as the Corporation may deem reasonably necessary
to consummate such purchase.
ARTICLE 5
PURCHASE PRICE
5.01 The purchase price for Shares as set forth in Section 2.07(b) in
this Agreement (the "Price") shall be determined by multiplying the
price per share (the "Share Price") by the number of shares of Stock
being acquired. The Share Price shall be equal to the price per
share of Common Stock Class A last established by the Board of
Directors of the Corporation and in effect on the date the offer is
made.
5.02 The determination by the Corporation's Board of Directors of the
Share Price shall be final, binding, and conclusive upon all parties
hereto and their legal representatives.
ARTICLE 6
BAR AGAINST ENCUMBRANCING
6.01 Notwithstanding anything contained in this Agreement to the
contrary, Shares may not be voluntarily mortgaged, pledged,
hypothecated, collaterally assigned or otherwise encumbered as
security for any loan or other obligation without first obtaining
the written consent of all parties bound by the terms of this
Agreement.
ARTICLE 7
ENDORSEMENT ON SHARE CERTIFICATES
7.01 Each certificate representing Shares of the Corporation now or
hereafter held by the Shareholder shall be stamped with a legend in
substantially the following form-(in addition to the legend required
under Section 4(L) or the Plan):
"The transfer of the shares represented by the within certificate is
restricted under the terms of an agreement between the holder and
the Corporation dated __________, 199__, a copy of which is on file
at the office of the Corporation. These shares have been purchased
for investment within the meaning of the Securities Act of 1933 and
they may not be offered or sold without an effective Registration
Statement under that Act or an opinion of counsel satisfactory to
the Company to the effect that the proposed transaction
<PAGE> 6
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will be exempt from registration. The shares represented by this
Certificate have been issued pursuant to the Limited Offering
Exemption under Section 402(b) (9) of the Massachusetts Uniform
Securities Act and may not be offered or sold to a person without an
effective Registration Statement under that Act or an opinion of
counsel satisfactory to the Corporation to the effect that the
proposed transaction will be exempt from registration. Preferences,
voting powers, qualifications and rights (including, without
limitation, exchange and conversion rights) attributable to various
classes of stock of the Company exist and vary among the different
classes of stock of the Company. The Company will furnish a copy
thereof to the holder hereto without charge."
ARTICLE 8
MANDATORY TRANSFER OR EXCHANGE OF SHARES
8.01 Upon the occurrence of a Triggering Event (as said term is
hereinafter defined), the Corporation shall have the right (the
"Mandatory Sale Right") to require, at its option, that Shareholder
sell and transfer all of the Shares to, at the option of the
Corporation, either the Corporation or the purchaser of the Control
Shares (as said term is hereinafter defined) in connection with such
Triggering Event. In such case, the purchase price shall be an
amount equal to the Mandatory Sale Price, (as said term is
hereinafter defined). If the Triggering Event involves an exchange
of all, but not less than all, of the Control Shares for shares of
another corporation, partnership, limited partnership, trust or
other entity (an "Exchange Entity") or a combination of the sale
some of the Control Shares and an exchange for the balance of the
Control Shares, then, upon the occurrence of such Triggering Event,
the Corporation shall also have the right (the "Mandatory Exchange
Right") to require, at its option, that Shareholder exchange all of
the Shares for shares or other securities in the Exchange Entity at
the same per share exchange ratio applicable to the Control Shares
of the Major Shareholders which are exchanged in such transaction
or, at the option of the Corporation, the Corporation may require
that the Shareholder sell and transfer all of the shares to, at the
option of the Corporation, either the Corporation or the Exchange
Entity, in which case, the purchase price shall be an amount equal
to the per share price payable to the Major Shareholder for the
Control Stock in connection with such Triggering Event. It is
expressly understood and agreed that for purposes hereof the term
"Triggering Event" shall include the exchange by the Major
Shareholders (or the combined sale and exchange by the Major
Shareholders) of all the Control Shares then owned by such Major
Shareholders for stock or other securities of an Exchange Entity or
for stock and cash. For purposes hereof, an Exchange Entity will
only include Persons who are Qualified Purchasers (as said term is
hereinafter defined). The Corporation may exercise such Mandatory
Sale or Exchange Right at any time after the occurrence of a
Triggering Event through and including the date of closing of the
transaction contemplated by the Triggering Event. The closing of any
such purchase, sale or exchange of the Shares in connection with the
exercise of such Mandatory Sale or Exchange Right shall occur
simultaneously with the closing of the transfer or exchange (as the
case may be) of the Control Shares (as said term is hereinafter
defined) in connection with the applicable Triggering Event.
<PAGE> 7
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8.02 Tenders - All shares which the Corporation or the purchaser in
connection with a Triggering Event purchases or is to receive in an
exchange under this Article 8 shall be tendered to the Corporation
or to such designated purchaser at the principal office of the
Corporation, or at such other reasonable place as the Corporation
may require, at a reasonable date and time specified by the
Corporation (but, in any event, if the Corporation so elects within
seven (7) days after the Corporation's notice to the Shareholder of
the exercise of such Mandatory Sale or Exchange Right) by delivery
of certificates representing such Shares, endorsed in blank and in
proper form for transfer against payment of the purchase price in
cash or by certified or bank check (or for exchange, as the case may
be, for stock of an Exchange Entity). If the transaction
contemplated by the Triggering Event giving rise to the exercise of
the Mandatory Sale or Exchange Right shall not close, then the
Corporation shall be under no obligation to purchase or exchange, or
cause the purchase, of such Shares pursuant to this Article 8 and
shall have no liability or obligation to the Shareholder in
connection therewith. The Corporation shall have the right to extend
the Closing Date of the sale or exchange contemplated by the
exercise of the Mandatory Sale or Exchange Right from time to time
by written notice to the Shareholder but in no event shall the
Corporation have the right to extend such sale beyond the date for
closing the sale or exchange by the Major Shareholders in connection
with the Triggering Event as such date may be extended from time to
time. If a sale or exchange hereunder does not close because the
transaction giving rise to the applicable Triggering Event does not
close, the Shares shall, nevertheless, remain subject to all the
terms and provisions of this Agreement and all of the rights of the
Corporation under this Article 8 in the same manner as if no
Triggering Event had occurred.
8.03 As used herein, the term "Triggering Event" shall mean the sale and
transfer by Robert Howe, William Gallagher, Lee Kennedy, and General
Atlantic Partners II, L.P. ("GAP"), a Bermuda corporation
(collectively, the "Major Shareholders" which term shall also
include the successors and assigns of the named Major Shareholders
with respect to their Control Shares) to a person(s), corporation,
partnership, limited partnership, trust or other entity
(collectively, a "Person") of all (but not less than all) of the
Common Stock, Par Value $.01 per share and Special Common Stock, Par
Value $.01 per share of the Corporation then owned, in the
aggregate, by the Major Shareholders (such Common Stock and Special
Common Stock being hereinafter collectively referred to as the
"Control Shares") to a Person (a "Qualified Purchaser") who is not
(i) a Major Shareholder, (ii) a trustee of a trust established by a
Major Shareholder, (iii) a family member of a Major Shareholder,
(iv) a Person or Persons 51% or more of the capital stock of which
is owned or controlled, directly or indirectly, or through one or
more intermediaries, by one or more Major Shareholders (except where
GAP is the only Major Shareholder which owns or controls such
interest) or (v) a Person (except GAP and the persons who own or
control GAP) (collectively, "Affiliates"). The term "Triggering
Event" shall also include certain exchanges of Control Shares for
shares in Exchange Entities as more particularly set forth in
Section 8.01. It is expressly agreed that sales and/or transfers of
the Control Shares to any Affiliate (except GAP and affiliates of
GAP) shall not constitute a Triggering Event and that sales and/or
transfers of less than all of the Control Shares of all Major
Shareholders shall not constitute a Triggering Event. As used
herein, the term "Mandatory Sale Price" shall mean an amount equal
to (a) the
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product of (i) the number of Shares being transferred by the
Shareholder hereunder and (ii) the per share price payable to the
Major Shareholders for the Control Stock in connection with the
applicable Triggering Event.
ARTICLE 9
SPECIFIC PERFORMANCE
9.01 Shareholder acknowledges that it will be impossible to measure in
money the damage to the Corporation if there is a failure to comply
with any of the restrictions or obligations herein imposed upon the
disposition of his Shares, or a failure to comply with the
provisions of Articles 1, 2, 3, 6, and 8 hereof or any provision of
the Plan or Option, and agrees that in the event of any such
failure, the Corporation will not have an adequate remedy at law.
9.02 It is therefore agreed that the Corporation, in addition to any
other rights or remedies which it has, shall be entitled to
immediate injunctive relief to enforce such restrictions,
obligations or provisions, or any of them, and that in the event any
action or proceeding is brought in equity to enforce the same, no
Shareholder will urge, as a defense, that there is an adequate
remedy at law.
ARTICLE 10
NOTICES
10.01 Any and all notices, designations, consents, offers, acceptances, or
any other communication provided for herein shall be given in
writing by hand delivery or by registered or certified mail which
shall be addressed, in the case of the Corporation, to its principal
office, and in the case of the Shareholder, to his address appearing
on the books of the Corporation or his residence or to such other
address as may be designated by him. Each such notice shall be dated
as of the date of its mailing and shall be deemed given, delivered,
and completed on the date of mailing thereof provided it is received
in due course or, in the case of hand delivery, on the date of
delivery.
ARTICLE 11
INVALID PROVISIONS
11.01 The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and the
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
<PAGE> 9
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ARTICLE 12
MODIFICATION
12.01 No change or modification of this Agreement shall be valid unless
the same be in writing and signed by all the parties hereto.
ARTICLE 13
NO SEPARATE ASSIGNMENT
13.01 Except as otherwise expressly permitted by the terms of this
Agreement, the right granted under this Agreement may not be severed
from the Shares or separately assigned, sold or otherwise
transferred.
ARTICLE 14
MISCELLANEOUS
14.01 No waiver by a party hereto of a breach of any condition, term or
provision of this Agreement shall be deemed a waiver of any
preceding or subsequent breach of the same or any other condition,
term or provision hereto.
14.02 This Agreement is made pursuant to, and shall be governed by and
construed in accordance with the internal laws of the Commonwealth
of Massachusetts, as of the date hereof. It sets forth the entire
agreement among the parties concerning the subject matter thereof,
and any amendment or modification will be effective only if in
writing and signed by the parties affected thereby. Time is of the
essence of this Agreement for all purposes. Any provisions in the
Articles of Incorporation of the Bylaws of the Corporation
purporting to effect restrictions on the transfer of Stock are in
addition to the restrictions contained herein.
14.03 This Agreement shall supersede and replace all prior agreements
between the Corporation and any other party hereto relating to the
same subject matter. Except as set forth in Section 14.04 below,
this Agreement shall continue in full force and effect so long as
the Shares shall remain issued and outstanding. This Agreement shall
bind and benefit the parties hereto and their respective successors
and legal representatives.
14.04 The restrictions on transfer of the Shares contained in Articles 2,
3,6 and 8 shall terminate on the earliest to occur of: (i) ten years
from the date hereof or (ii) a distribution to the public of shares
of common stock of the Company for an aggregate public offering
price of at least $10 million pursuant to an effective registration
statement filed under the Act or any successor statute.
<PAGE> 10
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATLANTIC DATA SERVICES, INC.
By:_____________________________________
Its:____________________________________
SHAREHOLDER:
________________________________________
<PAGE> 1
EXHIBIT 10.06
ATLANTIC DATA SERVICES, INC.
1997 STOCK PLAN
1. PURPOSE. The purpose of the Atlantic Data Services, Inc. 1997 Stock
Plan (the "Plan") is to encourage key employees of Atlantic Data Services, Inc.
(the "Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall
(be administered by the Board of Directors of the Company (the
"Board") or, subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so
required by applicable state law), and subject to the terms of
the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of employees eligible
under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options
and Awards and to make Purchases) Non-Qualified Options,
Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards
shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which
outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature
of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to
it. If the Committee
<PAGE> 2
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determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. The interpretation
and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final
unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of
the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority of
the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state
law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock
Rights may be granted to members of the Board. All grants of
Stock Rights to members of the Board shall in all respects be
made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Stock Rights pursuant to the
Plan or (ii) have been granted Stock Rights may vote on any
matters affecting the administration of the Plan or the grant
of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of
Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the
granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure
that Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section
162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the
following (i) if the Board determines that Stock Rights
granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee
consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any
<PAGE> 3
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Non-Qualified Options with an exercise price less than the
fair market value per share of Class A Common Stock are
granted under the Plan and the Board determines that such
Options should constitute Performance-Based Compensation, such
options shall be made exercisable only upon the attainment of
a pre-established, objective performance goal established by
the Committee, and such grant shall be submitted for, and
shall be contingent upon shareholder approval and (iii) Stock
Rights granted under the Plan may be subject to such other
terms and conditions as are necessary for compensation
recognized in connection with the exercise or disposition of
such Stock Right or the disposition of Class A Common Stock
acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Class A Common Stock of the Company, par value $.01 per share
(the "Class A Common Stock"), or shares of Class A Common Stock reacquired by
the Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 500,000, subject to adjustment as provided in paragraph
13. If any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part or shall be repurchased by the Company, the
unpurchased shares of Class A Common Stock subject to such Option shall again be
available for grants of Stock Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 350,000 shares of Class A Common
Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Class A Common Stock deemed to have been granted to such employee under the
Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after October 31, 1997 and prior to October 31, 2007. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
<PAGE> 4
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6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
PURCHASES. Subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the
Plan may be less than the fair market value of the Class A
Common Stock of the Company on the date of grant; provided
that, in no event shall such exercise price or such purchase
price be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
B. PRICE FOR ISOs. The exercise price per share
specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per
share of Class A Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one
hundred ten percent (110%) of the fair market value per share
of Class A Common Stock on the date of grant. For purposes of
determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
eligible employee may be granted Options treated as ISOs only
to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to
stock having a fair market value (determined at the time the
ISOs were granted) in excess of $100,000. The Company intends
to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the
time an Option is granted under the Plan, the Company's Class
A Common Stock is publicly traded, "fair market value" shall
be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such
date, the last business day for which such prices or quotes
are available prior to the date of grant and shall mean (i)
the average (on that date) of the high and low prices of the
Class A Common Stock on the principal national securities
exchange on which the Class A Common Stock is traded, if the
Class A Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date)
of the Class A Common Stock on the Nasdaq National Market, if
the Class A Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid
<PAGE> 5
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price (or average of bid prices) last quoted (on that date) by
an established quotation service for over-the-counter
securities, if the Class A Common Stock is not reported on the
Nasdaq National Market. If the Class A Common Stock is not
publicly traded at the time an Option is granted under the
Plan, "fair market value" shall mean the fair value of the
Class A Common Stock as determined by the Committee after
taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and
offer prices of the Class A Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable
on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment
becomes exercisable, it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to
which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the
right to accelerate the date that any installment of any
Option becomes exercisable; provided that the Committee shall
not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
<PAGE> 6
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9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
thirty (30) days after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or
her death, any ISO owned by such optionee may be exercised, to
the extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) 12 months from the date of
the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by reason
of his or her disability, such optionee shall have the right
to exercise any ISO held by him or her on the date of
termination of employment, for the number of shares for which
he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or
(ii) 12 months from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor
statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
<PAGE> 7
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12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Class A Common
Stock issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Class A Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall
issue any shares of Class A Common Stock as a stock dividend
on its outstanding Class A Common Stock, the number of shares
of Class A Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's
assets or otherwise (each, an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations
of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options
either (a) the consideration payable with respect to the
outstanding shares of Class A Common Stock in connection with
the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the
Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the
shares of Class A Common Stock subject to such Options
immediately preceding the Acquisition; or (ii) upon written
notice to
<PAGE> 8
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the optionees, provide that all Options must be exercised, to
the extent then exercisable or to be exercisable as a result
of the Acquisition, within a specified number of days of the
date of such notice, at the end of which period the Options
shall terminate; or (iii) terminate all Options in exchange
for a cash payment equal to the excess of the fair market
value of the shares subject to such Options (to the extent
then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event
of a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph B above) pursuant
to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Class A
Common Stock, an optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such
exercise the securities he or she would hold if he or she had
exercised such Option prior to such recapitalization or
reorganization.
D. MODIFICATION OF ISOs. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A, B
or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly
provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of
the Company.
G. FRACTIONAL SHARES. No fractional shares shall be
issued under the Plan and the optionee shall receive from the
Company cash in lieu of such fractional shares.
<PAGE> 9
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H. ADJUSTMENTS. Upon the happening of any of the
events described in subparagraphs A, B or C above, the class
and aggregate number of shares set forth in paragraph 4 hereof
that are subject to Stock Rights which previously have been or
subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall
determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Class A Common Stock having a fair market value equal as of the date
of the exercise to the cash exercise price of the Option, (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Class A Common Stock acquired upon exercise of the Option
and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
October 31, 1997, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to October 31, 1998, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on October 31, 2007 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding
<PAGE> 10
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eligibility for grants of ISOs may not be modified; (c) the provisions of
paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without such grantee's
consent, under any Stock Right previously granted to such grantee.
16. MODIFICATIONS OF ISOs; CONVERSION OF ISOs INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Class A Common Stock for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 18), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to such
stock
<PAGE> 11
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or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Class A Common Stock for less than its fair market value, or (v) the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the grantee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Class A Common
Stock or the withholding from the shares of Class A Common Stock otherwise
deliverable upon exercise of a Option shares having an aggregate fair market
value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Class A Common Stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
<PAGE> 1
EXHIBIT 10.07
ATLANTIC DATA SERVICES, INC.
AMENDED AND RESTATED 1997 STOCK PLAN
WHEREAS, on October 31, 1997, the Board of Directors of Atlantic Data
Services, Inc. (the "Company") adopted this 1997 stock plan (the "Plan"), which
was approved by the stockholders of the Company on October 31, 1997;
WHEREAS, the Board of Directors initially reserved 500,000 shares of
Class A Common Stock of the Company, $.01 par value per share (the "Class A
Common Stock") under the Plan;
WHEREAS, on March 25, 1998 the Board of Directors of the Company and on
March __, 1998, the stockholders of the Company voted to amend and restate the
Plan to provide that the number of shares of Class A Common Stock reserved for
issuance under the Plan be increased from 500,000 to 1,500,000 shares;
WHEREAS, pursuant to the Company's Amended and Restated Articles of
Organization, upon the closing of the Company's initial public offering, all
shares of Class A Common Stock will be automatically converted into shares of
Common Stock, $.01 par value per share, (the "Common Stock"); and
WHEREAS, in such event, pursuant to Section 13.C of the Plan, any and
all references herein to Class A Common Stock, including any shares of Class A
Common Stock reserved for issuance under this Plan (and any options granted
prior to the date hereof) shall be deemed to mean and refer to Common Stock;
NOW THEREFOR, this Plan is hereby amended and restated to read in its
entirety as follows:
1. PURPOSE. The purpose of the Atlantic Data Services, Inc. 1997 Stock
Plan (the "Plan") is to encourage key employees of Atlantic Data Services, Inc.
(the "Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and
<PAGE> 2
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"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall
(be administered by the Board of Directors of the Company (the
"Board") or, subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), by a committee appointed by
the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the
grant or authorization of each Stock Right by the Board (if so
required by applicable state law), and subject to the terms of
the Plan, the Committee shall have the authority to (i)
determine to whom (from among the class of employees eligible
under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options
and Awards and to make Purchases) Non-Qualified Options,
Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards
shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase,
which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which
outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature
of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an
ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted under
it shall be final unless otherwise determined by the Board.
The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such
time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority of
the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state
law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee
<PAGE> 3
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and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock
Rights may be granted to members of the Board. All grants of
Stock Rights to members of the Board shall in all respects be
made in accordance with the provisions of this Plan applicable
to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Stock Rights pursuant to the
Plan or (ii) have been granted Stock Rights may vote on any
matters affecting the administration of the Plan or the grant
of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of
Stock Rights, but any such member may be counted in
determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the
granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its
discretion, may take such action as may be necessary to ensure
that Stock Rights granted under the Plan qualify as "qualified
performance-based compensation" within the meaning of Section
162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the
following (i) if the Board determines that Stock Rights
granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee
consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of
Class A Common Stock are granted under the Plan and the Board
determines that such Options should constitute
Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established,
objective performance goal established by the Committee, and
such grant shall be submitted for, and shall be contingent
upon shareholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as
are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the
disposition of Class A Common Stock acquired pursuant to such
Stock Right, to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock
<PAGE> 4
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Right. The granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify such individual or entity
from, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Class A Common Stock of the Company, par value $.01 per share
(the "Class A Common Stock"), or shares of Class A Common Stock reacquired by
the Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 1,500,000, subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or terminate for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part or shall be repurchased by the Company,
the unpurchased shares of Class A Common Stock subject to such Option shall
again be available for grants of Stock Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,000,000 shares of Class A
Common Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Class A Common Stock deemed to have been granted to such employee under the
Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after October 31, 1997 and prior to October 31, 2007. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
PURCHASES. Subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the
Plan may be less than the fair market value of the Class A
Common Stock of the Company on the date of grant; provided
that, in no event shall such exercise price or such purchase
price be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
B. PRICE FOR ISOs. The exercise price per share
specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per
share of Class A Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock
<PAGE> 5
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of the Company or any Related Corporation, the price per share
specified in the agreement relating to such ISO shall not be
less than one hundred ten percent (110%) of the fair market
value per share of Class A Common Stock on the date of grant.
For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall
apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
eligible employee may be granted Options treated as ISOs only
to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to
stock having a fair market value (determined at the time the
ISOs were granted) in excess of $100,000. The Company intends
to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are
Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the
time an Option is granted under the Plan, the Company's Class
A Common Stock is publicly traded, "fair market value" shall
be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such
date, the last business day for which such prices or quotes
are available prior to the date of grant and shall mean (i)
the average (on that date) of the high and low prices of the
Class A Common Stock on the principal national securities
exchange on which the Class A Common Stock is traded, if the
Class A Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date)
of the Class A Common Stock on the Nasdaq National Market, if
the Class A Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities,
if the Class A Common Stock is not reported on the Nasdaq
National Market. If the Class A Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair
market value" shall mean the fair value of the Class A Common
Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of
the Class A Common Stock in private transactions negotiated at
arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with
<PAGE> 6
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respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment
becomes exercisable, it shall remain exercisable until
expiration or termination of the Option, unless otherwise
specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may
be exercised at any time or from time to time, in whole or in
part, for up to the total number of shares with respect to
which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have
the right to accelerate the date that any installment of any
Option becomes exercisable; provided that the Committee shall
not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
thirty (30) days after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock
<PAGE> 7
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Right the right to be retained in employment or other service by the Company or
any Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or
her death, any ISO owned by such optionee may be exercised, to
the extent otherwise exercisable on the date of death, by the
estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) 12 months from the date of
the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by reason
of his or her disability, such optionee shall have the right
to exercise any ISO held by him or her on the date of
termination of employment, for the number of shares for which
he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or
(ii) 12 months from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor
statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Class A Common
Stock issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
<PAGE> 8
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A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Class A Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall
issue any shares of Class A Common Stock as a stock dividend
on its outstanding Class A Common Stock, the number of shares
of Class A Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's
assets or otherwise (each, an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations
of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options
either (a) the consideration payable with respect to the
outstanding shares of Class A Common Stock in connection with
the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the
Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the
shares of Class A Common Stock subject to such Options
immediately preceding the Acquisition; or (ii) upon written
notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable or to be exercisable
as a result of the Acquisition, within a specified number of
days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair
market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of
the Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event
of a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph B above) pursuant
to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Class A
Common Stock, an optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such
exercise the securities he or she would hold if he or she had
exercised such Option prior to such recapitalization or
reorganization.
<PAGE> 9
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D. MODIFICATION OF ISOs. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A, B
or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly
provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of
the Company.
G. FRACTIONAL SHARES. No fractional shares shall be
issued under the Plan and the optionee shall receive from the
Company cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the
events described in subparagraphs A, B or C above, the class
and aggregate number of shares set forth in paragraph 4 hereof
that are subject to Stock Rights which previously have been or
subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall
determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Class A Common Stock having a fair market value equal as of the date
of the exercise to the cash exercise price of the Option, (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the
<PAGE> 10
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lowest applicable Federal rate, as defined in Section 1274(d) of the Code, (d)
at the discretion of the Committee and consistent with applicable law, through
the delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Class A Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
October 31, 1997, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to October 31, 1998, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on October 31, 2007 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
16. MODIFICATIONS OF ISOs; CONVERSION OF ISOs INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At
<PAGE> 11
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the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. Upon the taking of such action, the
Company shall issue separate certificates to the optionee with respect to
Options that are Non-Qualified Options and Options that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Class A Common Stock for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 18), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to such
stock or securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Class A Common Stock for less than its fair market value, or (v) the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the grantee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Class A Common
Stock or the withholding from the shares of Class A Common Stock otherwise
deliverable upon exercise of a Option shares having an aggregate fair market
value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Class A Common Stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information
<PAGE> 12
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statements to employees and former employees that exercise ISOs under the Plan,
and the Company may be required to file tax information returns reporting the
income received by grantees of Options in connection with the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
<PAGE> 1
EXHIBIT 10.08
ATLANTIC DATA SERVICES, INC.
INCENTIVE STOCK OPTION AGREEMENT
Atlantic Data Services, Inc., a Massachusetts corporation (the
"Company"), hereby grants as of [DATE] to [NAME OF EMPLOYEE] (the "Employee"),
an option to purchase a maximum of [NUMBER NOT EXCEEDING AVAILABLE SHARE LIMIT]
shares (the "Option Shares") of its Class A Common Stock, $.01 par value
("Common Stock"), at the price of $[PRICE] per share, on the following terms and
conditions:
1. GRANT UNDER 1997 STOCK PLAN. This option is granted pursuant
to and is governed by the Company's 1997 Stock Plan, as it may be amended from
time to time in the future (the "Plan") and, unless the context otherwise
requires, terms used herein shall have the same meaning as in the Plan.
Determinations made in connection with this option pursuant to the Plan shall be
governed by the Plan as it exists on this date. Any inconsistency between this
Agreement and the Plan shall be governed by the Plan.
2. GRANT AS INCENTIVE STOCK OPTION; OTHER OPTIONS. This option is
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding the
above, this option shall be treated as a Non-Qualified Option if the Plan is not
approved by the Company's stockholders on or before October 31, 1998. This
option is in addition to any other options heretofore or hereafter granted to
the Employee by the Company or any Related Corporation (as defined in the Plan),
but a duplicate original of this instrument shall not effect the grant of
another option.
3. VESTING OF OPTION IF EMPLOYMENT CONTINUES. If the Employee has
continued to be employed by the Company or any Related Corporation on the
following dates, the Employee may exercise this option for the number of shares
of Common Stock set opposite the applicable date:
Less than one year from the date - [NUMBER] shares
hereof
One year but less than two years - an additional [NUMBER] shares
from the date hereof
Two years but less than three years - an additional [NUMBER] shares
from the date hereof
Three years but less than four years - an additional [NUMBER] shares
from the date hereof
Four years or more from the date - an additional [NUMBER] shares
hereof
<PAGE> 2
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Notwithstanding the foregoing, in accordance with and subject to the provisions
of the Plan, the Committee may, in its discretion, accelerate the date that any
installment of this Option becomes exercisable. The foregoing rights are
cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be
employed by the Company and all Related Corporations) may be exercised on or
before the date which is ten years from the date this option is granted.
4. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OTHER THAN FOR CAUSE. If the Employee
ceases to be employed by the Company and all Related Corporations,
other than by reason of death or disability as defined in Section 5 or
termination for Cause as defined in Section 4(c), no further
installments of this option shall become exercisable, and this option
shall terminate (and may no longer be exercised) after the passage of
thirty days from the Employee's last day of employment, but in no event
later than the scheduled expiration date. In such a case, the
Employee's only rights hereunder shall be those which are properly
exercised before the termination of this option.
(b) TERMINATION FOR CAUSE. If the employment of the
Employee is terminated for Cause (as defined in Section 4(c)), this
option shall terminate upon the Employee's receipt of written notice of
such termination and shall thereafter not be exercisable to any extent
whatsoever.
(c) DEFINITION OF CAUSE. "Cause" shall mean conduct
involving one or more of the following: (i) the substantial and
continuing failure of the Employee, after notice thereof, to render
services to the Company or Related Corporation in accordance with the
terms or requirements of his or her employment; (ii) disloyalty, gross
negligence, willful misconduct, dishonesty or breach of fiduciary duty
to the Company or Related Corporation; (iii) the commission of an act
of embezzlement or fraud; (iv) deliberate disregard of the rules or
policies of the Company or Related Corporation which results in direct
or indirect loss, damage or injury to the Company or Related
Corporation; (v) the unauthorized disclosure of any trade secret or
confidential information of the Company or Related Corporation; or (vi)
the commission of an act which constitutes unfair competition with the
Company or Related Corporation or which induces any customer or
supplier to breach a contract with the Company or Related Corporation.
5. DEATH; DISABILITY.
(a) DEATH. If the Employee dies while in the employ of
the Company or any Related Corporation, this option may be exercised,
to the extent otherwise exercisable on the date of his or her death, by
the Employee's estate, personal representative or beneficiary to whom
this option has been assigned pursuant to Section 10, at any time
within one year after the date of death, but not later than the
scheduled expiration date.
<PAGE> 3
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(b) DISABILITY. If the Employee ceases to be employed by
the Company and all Related Corporations by reason of his or her
disability (as defined in the Plan), this option may be exercised, to
the extent otherwise exercisable on the date of the termination of his
or her employment, at any time within one year after such termination,
but not later than the scheduled expiration date.
(c) EFFECT OF TERMINATION. At the expiration of the one
year period provided in paragraphs (a) or (b) of this Section 5 or the
scheduled expiration date, whichever is the earlier, this option shall
terminate (and shall no longer be exercisable) and the only rights
hereunder shall be those as to which the option was properly exercised
before such termination.
6. PARTIAL EXERCISE. This option may be exercised in part at any
time and from time to time within the above limits, except that this option may
not be exercised for a fraction of a share unless such exercise is with respect
to the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Employee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Employee in accordance with the terms hereof.
7. PAYMENT OF PRICE. The option price shall be paid in the
following manner:
(a) in cash or by check;
(b) by delivery of an assignment satisfactory in form and
substance to the Company of a sufficient amount of the proceeds from
the sale of the Option Shares and an instruction to the broker or
selling agent to pay that amount to the Company; or
(c) by any combination of the foregoing.
8. RESTRICTIONS ON RESALE; LEGEND.
(a) Option Shares may not be transferred without the
Company's written consent except by will, by the laws of descent and
distribution and in accordance with the provisions of Sections 17 and
18, if applicable. Option Shares will be of an illiquid nature and will
be deemed to be "restricted securities" for purposes of the Securities
Act of 1933, as amended (the "Securities Act"). Accordingly, such
shares must be sold in compliance with the registration requirements of
the Securities Act or an exemption therefrom. If upon exercise of this
Option the Option Shares are not subject to an effective registration
statement under the Securities Act, the Employee will deliver to the
Company an investment representation letter in form and substance
satisfactory to the Company. Each certificate evidencing any of the
Option Shares shall bear a legend substantially as follows:
<PAGE> 4
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"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of
except in accordance with and subject to all the terms and
conditions of a certain Incentive Stock Option Agreement dated
as of [DATE], a copy of which the Company will furnish to the
holder of this certificate upon request and without charge."
(b) TERMINATION OF RESTRICTIONS. The restrictions on
transfer contained in the first sentence of Section 8(a) and in
Sections 17 and 18 shall expire as to Option Shares on the earliest to
occur of (i) the tenth anniversary of the date of this Agreement, (ii)
a distribution to the public of shares of common stock of the Company
for an aggregate public offering price of at least $10 million pursuant
to an effective registration statement filed under the Securities Act
or any successor statute, or (iii) the occurrence of an Acquisition (as
defined in the Plan).
9. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Agreement, this option may be exercised by written notice to
the Company at its principal executive office, or to such transfer agent as the
Company shall designate. Such notice shall state the election to exercise this
option and the number of Option Shares for which it is being exercised and shall
be signed by the person or persons so exercising this option. Such notice shall
be accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Employee
and if the Employee shall so request in the notice exercising this option, shall
be registered in the name of the Employee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Employee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.
10. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Employee's lifetime only the Employee can exercise this option.
11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of
this option imposes no obligation on the Employee to exercise it.
12. NO OBLIGATION TO CONTINUE EMPLOYMENT. Neither the Plan, this
Agreement, nor the grant of this option imposes any obligation on the Company or
any Related Corporation to continue the Employee in employment.
13. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Employee shall
have no rights as a stockholder with respect to the Option Shares until such
time as the Employee has exercised this option by delivering a notice of
exercise and has paid in full the purchase price for the shares so exercised in
accordance with Section 9. Except as is expressly provided in the Plan with
<PAGE> 5
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respect to certain changes in the capitalization of the Company, no adjustment
shall be made for dividends or similar rights for which the record date is prior
to such date of exercise.
14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
15. EARLY DISPOSITION. The Employee agrees to notify the Company
in writing immediately after the Employee transfers any Option Shares, if such
transfer occurs on or before the later of (a) the date two years after the date
of this Agreement or (b) the date one year after the date the Employee acquired
such Option Shares. The Employee also agrees to provide the Company with any
information concerning any such transfer required by the Company for tax
purposes.
16. WITHHOLDING TAXES. If the Company or any Related Corporation
in its discretion determines that it is obligated to withhold any tax in
connection with the exercise of this option, or in connection with the transfer
of, or the lapse of restrictions on, any Common Stock or other property acquired
pursuant to this option, the Employee hereby agrees that the Company or any
Related Corporation may withhold from the Employee's wages or other remuneration
the appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Employee on exercise of this option. The
Employee further agrees that, if the Company or any Related Corporation does not
withhold an amount from the Employee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Employee will make reimbursement on demand, in cash, for the amount
underwithheld.
17. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Employee desires to
transfer all or any part of the Option Shares to any person other than
the Company (an "Offeror"), the Employee shall: (i) obtain in writing
an irrevocable and unconditional bona fide offer (the "Offer") for the
purchase thereof from the Offeror; and (ii) give written notice (the
"Option Notice") to the Company setting forth the Employee's desire to
transfer such shares, which Option Notice shall be accompanied by a
photocopy of the Offer and shall set forth at least the name and
address of the Offeror and the price and terms of the Offer. Upon
receipt of the Option Notice, the Company shall have an assignable
option to purchase any or all of such Option Shares (the "Company
Option Shares") specified in the Option Notice, such option to be
exercisable by giving, within 30 days after receipt of the Option
Notice, a written counter-notice to the Employee. If the Company elects
to purchase any or all of such Company Option Shares, it shall be
obligated to purchase, and the Employee shall be obligated to sell to
the Company, such Company Option Shares at the
<PAGE> 6
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price and terms indicated in the Offer within 30 days from the date of
delivery by the Company of such counter-notice.
(b) SALE OF OPTION SHARES TO OFFEROR. The Employee may,
for 60 days after the expiration of the 30-day option period as set
forth in Section 17(a), sell to the Offeror, pursuant to the terms of
the Offer, any or all of such Company Option Shares not purchased or
agreed to be purchased by the Company or its assignee; provided,
however, that the Employee shall not sell such Company Option Shares to
such Offeror if such Offeror is a competitor of the Company and the
Company gives written notice to the Employee, within 30 days of its
receipt of the Option Notice, stating that the Employee shall not sell
his or her Company Option Shares to such Offeror; and provided,
further, that prior to the sale of such Option Shares to an Offeror,
such Offeror shall execute an agreement with the Company pursuant to
which such Offeror agrees to be subject to the restrictions set forth
in this Section 17. If any or all of such Company Option Shares are not
sold pursuant to an Offer within the time permitted above, the unsold
Company Option Shares shall remain subject to the terms of this Section
17.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If
there shall be any change in the Common Stock of the Company through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like,
the restrictions contained in Section 8 and this Section 17 shall apply
with equal force to additional and/or substitute securities, if any,
received by the Employee in exchange for, or by virtue of his or her
ownership of, Option Shares, except as otherwise determined by the
Board of Directors of the Company.
(d) FAILURE TO DELIVER OPTION SHARES. If the Employee
fails or refuses to deliver on a timely basis duly endorsed
certificates representing Company Option Shares to be sold to the
Company or its assignee pursuant to this Section 17, the Company shall
have the right to deposit the purchase price for such Company Option
Shares in a special account with any bank or trust company in the
Commonwealth of Massachusetts, giving notice of such deposit to the
Employee, whereupon such Company Option Shares shall be deemed to have
been purchased by the Company. All such monies shall be held by the
bank or trust company for the benefit of the Employee. All monies
deposited with the bank or trust company but remaining unclaimed for
two years after the date of deposit shall be repaid by the bank or
trust company to the Company on demand, and the Employee shall
thereafter look only to the Company for payment.
18. COMPANY'S RIGHT OF REPURCHASE.
(a) RIGHT OF REPURCHASE. The Company shall have the right
but not the obligation (the "Repurchase Right") to repurchase all, but
no less than all, of the Option Shares from the holder of this option,
upon the occurrence of any of the events specified in Section 18(b)
below (the "Repurchase Event"). The Repurchase Right may be exercised
by the Company within 60 days following the later of the date of the
exercise of this option or the date the Company receives actual
knowledge of such event (the
<PAGE> 7
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"Repurchase Period"). The Repurchase Right shall be exercised by the
Company by giving the holder written notice on or before the last day
of the Repurchase Period of its intention to exercise the Repurchase
Right, and, together with such notice, tendering to the holder an
amount equal to (i) in the case of an event specified in Section
18(b)(i), (ii) or (iii) below, the greater of the option price or the
fair market value of the shares, and (ii) in the case of an event
specified in Section 18(b)(iv) below, the option price. The Company may
assign the Repurchase Right to one or more persons. Upon timely
exercise of the Repurchase Right in the manner provided in this Section
18(a), the holder shall deliver to the Company the stock certificate or
certificates representing the shares being repurchased, duly endorsed
and free and clear of any and all liens, charges and encumbrances.
If shares are not purchased under the Repurchase Right, the
Employee and his or her successor in interest, if any, will hold any
such shares in his or her possession subject to Section 17 and all of
the provisions of this Agreement.
(b) COMPANY'S RIGHT TO EXERCISE REPURCHASE RIGHT. The
Company shall have the Repurchase Right in the event that any of the
following events shall occur:
(i) The termination of the Employee's employment with the
Company and all Related Corporations, voluntarily or
involuntarily, for any reason whatsoever other than
for Cause (as defined in Section 4(c) hereof),
including death or permanent disability, prior to the
time this option shall be fully vested as provided in
Section 3 hereof;
(ii) The receivership, bankruptcy or other creditor's
proceeding regarding the Employee or the taking of
any of Employee's shares acquired upon exercise of
this option by legal process, such as a levy of
execution;
(iii) Distribution of shares held by the Employee to his or
her spouse as such spouse's joint or community
interest pursuant to a decree of dissolution,
operation of law, divorce, property settlement
agreement or for any other reason, except as may be
otherwise permitted by the Company; or
(iv) The termination of the Employee's employment for
Cause (as defined in Section 4(c) hereof).
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market
value of the Option Shares shall be, for purposes of this Section 18,
determined in accordance with paragraph 6D of the Plan as of the date
of the Repurchase Event. The determination by the Board of Directors of
the fair market value shall be conclusive and binding.
(d) EXPIRATION OF COMPANY'S REPURCHASE RIGHT: The
Repurchase Right shall remain in effect until such time as (i) the
Option Shares are transferred in accordance with Section 17 hereof or
(ii) the provisions of Section 8(b) are satisfied.
<PAGE> 8
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19. LOCK-UP AGREEMENT. The Employee agrees that in connection with
an underwritten public offering of Common Stock, upon the request of the Company
or the principal underwriter managing such public offering, the Option Shares
may not be sold, offered for sale or otherwise disposed of without the prior
written consent of the Company or such underwriter, as the case may be, for at
least 270 days after the effectiveness of the registration statement filed in
connection with such offering, or such longer period of time as the Board of
Directors may determine if all of the Company's directors and officers agree to
be similarly bound. The obligations under this Section 19 shall remain effective
for all underwritten public offerings with respect to which the Company has
filed a registration statement on or before the date five (5) years after the
closing of the Company's initial public offering, provided, however, that this
Section 19 shall cease to apply to any Option Share sold to the public pursuant
to an effective registration statement or an exemption from the registration
requirements of the Securities Act in a transaction that complied with the terms
of this Agreement.
20. ARBITRATION. Any dispute, controversy, or claim arising out
of, in connection with, or relating to the performance of this Agreement or its
termination shall be settled by arbitration in the Commonwealth of
Massachusetts, pursuant to the rules then obtaining of the American Arbitration
Association. Any award shall be final, binding and conclusive upon the parties
and a judgment rendered thereon may be entered in any court having jurisdiction
thereof.
21. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this
Agreement the Employee acknowledges receipt of a copy of this Agreement and a
copy of the Plan.
22. MISCELLANEOUS.
(a) NOTICES. All notices hereunder shall be in writing
and shall be deemed given when sent by certified or registered mail,
postage prepaid, return receipt requested, to the address set forth
below. The addresses for such notices may be changed from time to time
by written notice given in the manner provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION. This Agreement
constitutes the entire agreement between the parties relative to the
subject matter hereof, and supersedes all proposals, written or oral,
and all other communications between the parties relating to the
subject matter of this Agreement. This Agreement may be modified,
amended or rescinded only by a written agreement executed by both
parties.
(c) SEVERABILITY. The invalidity, illegality or
unenforceability of any provision of this Agreement shall in no way
affect the validity, legality or enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to the limitations set forth
in Section 10 hereof.
<PAGE> 9
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(e) GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of the conflicts
of laws thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 10
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IN WITNESS WHEREOF, the Company and the Employee have caused this
instrument to be executed as of the date first above written.
ATLANTIC DATA SERVICES, INC.
ONE BATTERYMARCH PARK
QUINCY, MA 02169
____________________________________
EMPLOYEE
By:_________________________________
____________________________________
Street Address ____________________________________
Title
____________________________________
City State Zip Code
<PAGE> 1
EXHIBIT 10.09
ATLANTIC DATA SERVICES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
ATLANTIC DATA SERVICES, INC., a Massachusetts corporation (the
"Company"), hereby grants as of [DATE] to [NAME OF OPTIONEE] (the "Optionee"),
an option to purchase a maximum of [NUMBER NOT EXCEEDING AVAILABLE SHARE LIMIT]
shares (the "Option Shares") of its Class A Common Stock, $.01 par value ("Class
A Common Stock"), at the price of $[PRICE] per share, on the following terms and
conditions:
1. GRANT UNDER 1997 STOCK PLAN. This option is granted pursuant
to and is governed by the Company's 1997 Stock Plan, as it may be amended from
time to time in the future (the "Plan") and, unless the context otherwise
requires, terms used herein shall have the same meaning as in the Plan.
Determinations made in connection with this option pursuant to the Plan shall be
governed by the Plan as it exists on this date. Any inconsistency between this
Agreement and the Plan shall be governed by the Plan.
2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option
shall be treated for federal income tax purposes as a Non-Qualified Option
(rather than an incentive stock option). This option is in addition to any other
options heretofore or hereafter granted to the Optionee by the Company or any
Related Corporation (as defined in the Plan), but a duplicate original of this
instrument shall not effect the grant of another option.
3. VESTING OF OPTION IF BUSINESS RELATIONSHIP CONTINUES. If the
Optionee has continued to serve the Company or any Related Corporation in the
capacity of an employee, officer, director or consultant (such service is
described herein as maintaining or being involved in a "Business Relationship
with the Company") on the following dates, the Optionee may exercise this option
for the number of shares of Common Stock set opposite the applicable date:
Less than one year from the date - [NUMBER] shares
hereof
One year but less than two years from - an additional [NUMBER] shares
the date hereof
Two years but less than three years - an additional [NUMBER] shares
from the date hereof
Three years but less than four years - an additional [NUMBER] shares
from the date hereof
Four years or more from the date - an additional [NUMBER] shares
hereof
<PAGE> 2
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Notwithstanding the foregoing, in accordance with and subject to the provisions
of the Plan, the Committee may, in its discretion, accelerate the date that any
installment of this Option becomes exercisable. The foregoing rights are
cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be
employed by the Company and all Related Corporations) may be exercised up to and
including the date which is ten years from the date this option is granted.
4. TERMINATION OF BUSINESS RELATIONSHIP.
(a) TERMINATION OTHER THAN FOR CAUSE. If the Optionee's
Business Relationship with the Company and all Related Corporations is
terminated, other than by reason of death, disability or dissolution as
defined in Section 5 or termination for Cause as defined in Section
4(c), no further installments of this option shall become exercisable,
and this option shall terminate (and may no longer be exercised) after
the passage of thirty days from the date the Business Relationship
ceases, but in no event later than the scheduled expiration date. In
such a case, the Optionee's only rights hereunder shall be those which
are properly exercised before the termination of this option.
(b) TERMINATION FOR CAUSE. If the Optionee's Business
Relationship with the Company is terminated for Cause (as defined in
Section 4(c)), this option shall terminate upon the Optionee's receipt
of written notice of such termination and shall thereafter not be
exercisable to any extent whatsoever.
(c) DEFINITION OF CAUSE. "Cause" shall mean conduct
involving one or more of the following: (i) the substantial and
continuing failure of the Optionee, after notice thereof, to render
services to the Company or Related Corporation in accordance with the
terms or requirements of the Optionee's Business Relationship with the
Company; (ii) disloyalty, gross negligence, willful misconduct,
dishonesty or breach of fiduciary duty to the Company or Related
Corporation; (iii) the commission of an act of embezzlement or fraud;
(iv) deliberate disregard of the rules or policies of the Company or
Related Corporation which results in direct or indirect loss, damage or
injury to the Company or Related Corporation; (v) the unauthorized
disclosure of any trade secret or confidential information of the
Company or Related Corporation; or (vi) the commission of an act which
constitutes unfair competition with the Company or Related Corporation
or which induces any customer or supplier to break a contract with the
Company or Related Corporation.
5. DEATH; DISABILITY; DISSOLUTION.
(a) DEATH. If the Optionee is a natural person who dies
while involved in a Business Relationship with the Company, this option
may be exercised, to the extent otherwise exercisable on the date of
his or her death, by the Optionee's estate, personal representative or
beneficiary to whom this option has been assigned pursuant to Section
10, at any time within one year after the date of death, but not later
than the scheduled expiration date.
<PAGE> 3
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(b) DISABILITY. If the Optionee is a natural person whose
Business Relationship with the Company is terminated by reason of his
or her disability (as defined in the Plan), this option may be
exercised, to the extent otherwise exercisable on the date the Business
Relationship was terminated, at any time within one year after such
termination, but not later than the scheduled expiration date.
(c) EFFECT OF TERMINATION. At the expiration of such one
year period provided in paragraphs (a) or (b) of this Section 5 or the
scheduled expiration date, whichever is the earlier, this option shall
terminate (and shall no longer be exercisable) and the only rights
hereunder shall be those as to which the option was properly exercised
before such termination.
(d) DISSOLUTION. If the Optionee is a corporation,
partnership, trust or other entity that is dissolved, is liquidated,
becomes insolvent or enters into a merger or acquisition with respect
to which the Optionee is not the surviving entity, at a time when the
Optionee is involved in a Business Relationship with the Company, this
option shall immediately terminate as of the date of such event (and
shall thereafter not be exercisable to any extent whatsoever), and the
only rights hereunder shall be those as to which this option was
properly exercised before such dissolution or other event.
6. PARTIAL EXERCISE. This option may be exercised in part at any
time and from time to time within the above limits, except that this option may
not be exercised for a fraction of a share unless such exercise is with respect
to the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
7. PAYMENT OF PRICE. The option price shall be paid:
(a) in cash or by check;
(b) by delivery of an assignment satisfactory in form and
substance to the Company of a sufficient amount of the proceeds from
the sale of the Option Shares and an instruction to the broker or
selling agent to pay that amount to the Company; or
(c) by any combination of the foregoing.
<PAGE> 4
-4-
8. RESTRICTIONS ON TRANSFER; LEGEND.
(a) Option Shares may not be transferred without the
Company's written consent except by will, by the laws of descent and
distribution, or in accordance with the provisions of Sections 16 and
17, if applicable. Option Shares will be of an illiquid nature and will
be deemed to be "restricted securities" for purposes of the Securities
Act of 1933, as amended (the "Securities Act"). Accordingly, such
shares must be sold in compliance with the registration requirements of
the Securities Act or an exemption therefrom. If upon exercise of this
Option the Option Shares are not subject to an effective registration
statement under the Securities Act, the Optionee will deliver to the
Company an investment representation letter in form and substance
satisfactory to the Company. Each certificate evidencing any of the
Option Shares shall bear a legend substantially as follows:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of
except in accordance with and subject to all the terms and
conditions of a certain Non-Qualified Stock Option Agreement
dated as of [DATE], a copy of which the Company will furnish
to the holder of this certificate upon request and without
charge."
(b) Termination of Restrictions. The restrictions on
transfer contained in the first sentence of Section 8(a) and in
Sections 16 and 17 shall expire as to Option Shares on the earliest to
occur of (i) the tenth anniversary of the date of this Agreement, (ii)
a distribution to the public of shares of common stock of the Company
for an aggregate public offering price of at least $10 million pursuant
to an effective registration statement filed under the Securities Act
or any successor statute, or (iii) the occurrence of an Acquisition (as
defined in the Plan).
9. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Agreement, this option may be exercised by written notice to
the Company, at the principal executive office of the Company, or to such
transfer agent as the Company shall designate. Such notice shall state the
election to exercise this option and the number of Option Shares for which it is
being exercised and shall be signed by the person or persons so exercising this
option. Such notice shall be accompanied by payment of the full purchase price
of such shares, and the Company shall deliver a certificate or certificates
representing such shares as soon as practicable after the notice shall be
received. Such certificate or certificates shall be registered in the name of
the person or persons so exercising this option (or, if this option shall be
exercised by the Optionee and if the Optionee shall so request in the notice
exercising this option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship). In the event this option
shall be exercised, pursuant to Section 5 hereof, by any person or persons other
than the Optionee, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise this option.
<PAGE> 5
-5-
10. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution or pursuant
to a valid domestic relations order. Except as set forth in the preceding
sentence, during the Optionee's lifetime, only the Optionee can exercise this
option.
11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of
this option imposes no obligation on the Optionee to exercise it.
12. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the
Plan, this Agreement, nor the grant of this option imposes any obligation on the
Company or any Related Corporation to continue to maintain a Business
Relationship with the Optionee.
13. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall
have no rights as a stockholder with respect to the Option Shares until such
time as the Optionee has exercised this option by delivering a notice of
exercise and has paid in full the purchase price for the number of shares for
which this option is to be so exercised in accordance with Section 9. Except as
is expressly provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date is prior to such date of exercise.
14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
15. WITHHOLDING TAXES. If the Company or any Related Corporation
in its discretion determines that it is obligated to withhold any tax in
connection with the exercise of this option, or in connection with the transfer
of, or the lapse of restrictions on, any Common Stock or other property acquired
pursuant to this option, the Optionee hereby agrees that the Company or any
Related Corporation may withhold from the Optionee's wages or other remuneration
the appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Optionee on exercise of this option. The
Optionee further agrees that, if the Company or Related Corporation does not
withhold an amount from the Optionee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount
underwithheld.
<PAGE> 6
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16. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Optionee or his or her
legal representative (the "Transferor") desires to transfer all or any
part of the Option Shares to any person other than the Company (an
"Offeror"), the Transferor shall: (i) obtain in writing an irrevocable
and unconditional bona fide offer (the "Offer") for the purchase
thereof from the Offeror; and (ii) give written notice (the "Option
Notice") to the Company setting forth the Optionee's desire to transfer
such shares, which Option Notice shall be accompanied by a photocopy of
the Offer and shall set forth at least the name and address of the
Offeror and the price and terms of the bona fide offer. Upon receipt of
the Option Notice, the Company shall have an assignable option to
purchase any or all of such shares (the "Company Option Shares")
specified in the Option Notice, such option to be exercisable by
giving, within 30 days after receipt of the Option Notice, a written
counter-notice to the Transferor. If the Company elects to purchase any
or all of such Company Option Shares, it shall be obligated to
purchase, and the Transferor shall be obligated to sell to the Company,
such Company Option Shares at the price and terms indicated in the
Offer within 30 days from the date of delivery by the Company of such
counter-notice.
(b) SALE OF OPTION SHARES TO OFFEROR. The Transferor may,
for 60 days after the expiration of the 30-day period during which the
Company may give the counter-notice, sell, pursuant to the terms of the
Offer, any or all of such Company Option Shares not purchased or agreed
to be purchased by the Company or its assignee; provided, however, that
the Transferor shall not sell such Company Option Shares to the Offeror
if the Offeror is a competitor of the Company and the Company gives
written notice to the Transferor, within 30 days of its receipt of the
Option Notice, stating that the Transferor shall not sell such Company
Option Shares to such Offeror; and provided, further, that prior to the
sale of such Company Option Shares to the Offeror, the Offeror shall
execute an agreement with the Company pursuant to which the Offeror
agrees to be subject to the restrictions set forth in this Agreement.
If any or all of such Company Option Shares are not sold pursuant to an
Offer within the time permitted above, the unsold Company Option Shares
shall remain subject to the terms of this Section 16.
(c) ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If
there shall be any change in the Common Stock of the Company through
merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like,
the restrictions contained in Section 8 or this Section 16 shall apply
with equal force to additional and/or substitute securities, if any,
received by the Optionee in exchange for, or by virtue of his or her
ownership of, Company Option Shares, except as otherwise determined by
the Board of Directors of the Company.
(d) FAILURE TO DELIVER COMPANY OPTION SHARES. If the
Transferor fails or refuses to deliver on a timely basis duly endorsed
certificates representing Company Option Shares to be sold to the
Company or its assignee pursuant to this Section 16, the Company shall
have the right to deposit the purchase price for such Company Option
<PAGE> 7
-7-
Shares in a special account with any bank or trust company in the
Commonwealth of Massachusetts, giving notice of such deposit to the
Transferor, whereupon such Company Option Shares shall be deemed to
have been purchased by the Company. All such monies shall be held by
the bank or trust company for the benefit of the Transferor. All monies
deposited with the bank or trust company remaining unclaimed for two
years after the date of deposit shall be repaid by the bank or trust
company to the Company on demand, and the Transferor shall thereafter
look only to the Company for payment.
17. COMPANY'S RIGHT OF REPURCHASE.
(a) RIGHT OF REPURCHASE. The Company shall have the right
(the "Repurchase Right") to repurchase from the holder of this option,
all, but not less than all, of the Option Shares then owned by such
holder, upon the occurrence of any of the events specified in Section
17(b) below (a "Repurchase Event"). The Repurchase Right may be
exercised by the Company within 60 days following the later of the date
of the exercise of this option or the date the Company receives actual
knowledge of such event (the "Repurchase Period"). The Repurchase Right
shall be exercised by the Company by giving the holder written notice
on or before the last day of the Repurchase Period of its intention to
exercise the Repurchase Right, and, together with such notice,
tendering to the holder an amount equal to (i) in the case of an event
specified in Section 17(b)(i), (ii) or (iii) below, the greater of the
option price or the fair market value of the shares, and (ii) in the
case of an event specified in Section 17(b)(iv) below, the option
price. The Company may assign the Repurchase Right to one or more
persons. Upon timely exercise of the Repurchase Right in the manner
provided in this Section 17(a), the holder shall deliver to the Company
the stock certificate or certificates representing the shares being
repurchased, duly endorsed and free and clear of any and all liens,
charges and encumbrances.
If shares are not purchased under the Repurchase Right, the
Optionee and his or her successor in interest, if any, will hold any
such shares in his or her possession subject to Section 16 and all of
the provisions of this Agreement.
(b) COMPANY'S RIGHT TO EXERCISE REPURCHASE RIGHT. The
Company shall have the Repurchase Right in the event that any of the
following events shall occur:
(i) The termination of the Optionee's Business
Relationship with the Company, voluntarily or
involuntarily, for any reason whatsoever other than
for Cause (as defined in Section 4(c) hereof),
including death or permanent disability, prior to the
time this option shall be fully vested as provided in
Section 3 hereof;
(ii) The receivership, bankruptcy or other creditor's
proceeding regarding the Optionee or the taking of
any of the Optionee's shares acquired upon exercise
of this option by legal process, such as a levy of
execution;
<PAGE> 8
-8-
(iii) Distribution of shares held by the Optionee to his or
her spouse as such spouse's joint or community
interest pursuant to a decree of dissolution,
operation of law, divorce, property settlement
agreement or for any other reason, except as may be
otherwise permitted by the Company; or
(iv) The termination of the Optionee's Business
Relationship with the Company for Cause (as defined
in Section 4(c) hereof).
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market
value of the Option Shares shall be, for purposes of this Section 17,
determined in accordance with Section 6D of the Plan as of the date of
the Repurchase Event. The determination by the Board of Directors of
the fair market value shall be conclusive and binding.
(d) EXPIRATION OF COMPANY'S REPURCHASE RIGHT. The
Repurchase Right shall remain in effect until such time as (i) such
shares are transferred in accordance with Section 16 hereof or the
Company's written consent or (ii) the provisions of Section 8(b) are
satisfied.
18. LOCK-UP AGREEMENT. The Employee agrees that in connection with
an underwritten public offering of Common Stock, upon the request of the Company
or the principal underwriter managing such public offering, the Option Shares
may not be sold, offered for sale or otherwise disposed of without the prior
written consent of the Company or such underwriter, as the case may be, for at
least 270 days after the effectiveness of the registration statement filed in
connection with such offering, or such longer period of time as the Board of
Directors may determine if all of the Company's directors and officers agree to
be similarly bound. The obligations under this Section 18 shall remain effective
for all underwritten public offerings with respect to which the Company has
filed a registration statement on or before the date five (5) years after the
closing of the Company's initial public offering, provided, however, that this
Section 18 shall cease to apply to any Option Share sold to the public pursuant
to an effective registration statement or an exemption from the registration
requirements of the Securities Act in a transaction that complied with the terms
of this Agreement.
19. ARBITRATION. Any dispute, controversy, or claim arising out
of, in connection with, or relating to the performance of this Agreement or its
termination shall be settled by arbitration in the Commonwealth of
Massachusetts, pursuant to the rules then obtaining of the American Arbitration
Association. Any award shall be final, binding and conclusive upon the parties
and a judgment rendered thereon may be entered in any court having jurisdiction
thereof.
20. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this
Agreement the Optionee acknowledges receipt of a copy of this Agreement and a
copy of the Plan.
<PAGE> 9
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21. MISCELLANEOUS.
(a) NOTICES. All notices hereunder shall be in writing
and shall be deemed given when sent by certified or registered mail,
postage prepaid, return receipt requested, to the address set forth
below. The addresses for such notices may be changed from time to time
by written notice given in the manner provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION. This Agreement
constitutes the entire agreement between the parties relative to the
subject matter hereof, and supersedes all proposals, written or oral,
and all other communications between the parties relating to the
subject matter of this Agreement. This Agreement may be modified,
amended or rescinded only by a written agreement executed by both
parties.
(c) SEVERABILITY. The invalidity, illegality or
unenforceability of any provision of this Agreement shall in no way
affect the validity, legality or enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to the limitations set forth
in Section 10 hereof.
(e) GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of the conflicts
of laws thereof. The preceding choice of law provision shall apply to
all claims, under any theory whatsoever, arising out of the
relationship of the parties contemplated herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 10
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IN WITNESS WHEREOF, the Company and the Optionee have caused this
instrument to be executed as of the date first above written.
ATLANTIC DATA SERVICES, INC.
ONE BATTERYMARCH PARK
QUINCY, MA 02169
__________________________________
EMPLOYEE
By:__________________________________
__________________________________
Street Address _____________________________________
Title
__________________________________
City State Zip Code
<PAGE> 1
EXHIBIT 10.10
MASTER
ATLANTIC DATA SERVICES, INC.
STOCK PURCHASE AND RESTRICTION AGREEMENT
ATLANTIC DATA SERVICES, INC., a Massachusetts corporation (the
"Company"), hereby awards as of [DATE] to [NAME] (the "Purchaser"), the right to
purchase a maximum of [NUMBER NOT EXCEEDING AVAILABLE SHARE LIMIT] shares (the
"Shares") of its Class A Common Stock, $.01 par value ("Class A Common Stock"),
at the price of $[PRICE] per share (the "Purchase Price Per Share"). The Shares
shall be governed by the following terms and conditions:
1. AWARD UNDER 1997 STOCK PLAN. The Shares are awarded pursuant
to and are governed by the Company's 1997 Stock Plan (the "Plan") and, unless
the context otherwise requires, terms used herein shall have the same meaning as
in the Plan. Determinations made in connection with this award pursuant to the
Plan shall be governed by the Plan as it exists on this date.
2. PURCHASE AND SALE OF SHARES.
(a) Subject to the terms and conditions of the Plan and
this Stock Purchase and Restriction Agreement, Purchaser hereby
purchases from the Company, and the Company hereby sells to the
Purchaser, the Shares at the Purchase Price Per Share or an aggregate
purchase price of $___________ (the "Aggregate Purchase Price").
(b) The Company hereby acknowledges receipt from the
Purchaser of the Aggregate Purchase Price and the Purchaser hereby
acknowledges receipt of a stock certificate issued in her, his or its
name representing the Shares.
(c) The Purchaser hereby acknowledges receipt from the
Company of a stock certificate issued in her, his or its name
representing the Shares.
3. VESTING OF SHARES IF BUSINESS RELATIONSHIP CONTINUES.
[ONE-THIRD] of the Shares shall vest immediately on the date hereof and, if the
Purchaser has continued to serve the Company or any Related Corporation in the
capacity of an employee, officer, director or consultant (such service is
described herein as maintaining or being involved in a "BUSINESS RELATIONSHIP
WITH THE COMPANY") on the following dates, an additional number of the Shares
shall vest in accordance with the schedule below:
One year but less than two years from - [NUMBER] shares
the date hereof
Two years from the date hereof - an additional [NUMBER] shares
<PAGE> 2
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Any of the Shares that vest in accordance with this schedule shall be
deemed "Vested Shares" and any of the Shares that have not yet vested in
accordance with this schedule shall be deemed "Unvested Shares." Notwithstanding
the foregoing, in accordance with and subject to the provisions of the Plan and
Section 17 herein, the Board of Directors may, in its discretion, accelerate the
date that any installment of the Shares vest, and accordingly, upon such
acceleration, any such shares shall be deemed Vested Shares.
4. TERMINATION OF BUSINESS RELATIONSHIP.
(a) If the Purchaser's Business Relationship with the
Company and all Related Corporations is terminated with or without
Cause (as defined below), including by reason of death or disability if
the Purchaser is a natural person, no further installments of the
Shares shall vest and Vested Shares shall be those Shares that vested
as of the date of termination in accordance with Section 3.
(b) DEFINITION OF CAUSE. "Cause" shall mean conduct
involving one or more of the following: (i) the substantial and
continuing failure of the Purchaser, after notice thereof, to render
services to the Company or Related Corporation in accordance with the
terms or requirements of her, his or its Business Relationship; (ii)
disloyalty, gross negligence, willful misconduct, dishonesty or breach
of fiduciary duty to the Company or Related Corporation; (iii) the
commission of an act of embezzlement or fraud; (iv) deliberate
disregard of the rules or policies of the Company or Related
Corporation which results in direct or indirect loss, damage or injury
to the Company or Related Corporation; (v) the unauthorized disclosure
of any trade secret or confidential information of the Company or
Related Corporation; or (vi) the commission of an act which constitutes
unfair competition with the Company or Related Corporation or which
induces any customer or supplier to breach a contract with the Company
or Related Corporation.
5. RESTRICTIONS ON TRANSFER AND RESALE.
(a) The Shares may not be transferred without the
Company's written consent except by will, by the laws of descent and
distribution and in accordance with the provisions of Section 5(b)
herein and Sections 7 and 8, if applicable.
(b) Notwithstanding the foregoing, upon written notice
from the Purchaser to the Company, the Shares may be transferred by the
Purchaser to a trust, corporation, partnership or other estate planning
vehicle for the benefit of such Purchaser (each an "Estate Planning
Entity"); provided, however, that prior to the transfer of any of the
Shares to an Estate Planning Entity such Estate Planning Entity shall
execute an agreement with the Company pursuant o which such Estate
Planning Entity agrees to be subject to the restrictions set forth in
this Agreement.
(c) The Shares will be of an illiquid nature and will be
deemed to be "restricted securities" for purposes of the Securities Act
of 1933, as amended (the
<PAGE> 3
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"Securities Act"). Accordingly, such Shares must be sold in compliance
with the registration requirements of the Securities Act or an
exemption therefrom. Each certificate evidencing any of the Shares
shall bear a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND MAY NOT BE SOLD, EXCHANGED,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO ALL THE TERMS AND
CONDITIONS OF A CERTAIN STOCK PURCHASE AND RESTRICTION
AGREEMENT DATED AS OF __________, 199_, A COPY OF WHICH THE
COMPANY WILL FURNISH TO THE HOLDER OF THIS CERTIFICATE UPON
REQUEST AND WITHOUT CHARGE."
6. INVESTMENT INTENT.
(a) Purchaser represents and warrants that she, he or it
has acquired the Shares for her, his or its own account for the purpose
of investment and not with a view to resale or distribution.
(b) The certificates evidencing the Shares shall be
endorsed with a legend, in addition to any other legends required by
this Agreement, substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS."
(c) Purchaser understands and agrees that neither the
Company nor any agent of the Company shall be under any obligation to
recognize any transfer of any of the Shares if, in the opinion of
counsel for the Company, such transfer would result in violation by the
Company of any federal or state law with respect to the offering,
issuance or sale of securities.
7. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) EXERCISE OF RIGHT. If the Purchaser desires to
transfer all or any part of the Vested Shares to any person other than
the Company (an "Offeror"), the Purchaser
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shall: (i) obtain in writing an irrevocable and unconditional bona fide
offer (the "Offer") for the purchase thereof from the Offeror; and (ii)
give written notice (the "Notice") to the Company setting forth the
Purchaser's desire to transfer such shares, which Notice shall be
accompanied by a photocopy of the Offer and shall set forth at least
the name and address of the Offeror and the price and terms of the
Offer. Upon receipt of the Notice, the Company shall have an assignable
option to purchase any or all of such Vested Shares (the "Company
Shares") specified in the Notice, such option to be exercisable by
giving, within 30 days after receipt of the Notice, a written
counter-notice to the Purchaser. If the Company elects to purchase any
or all of such Company Shares, it shall be obligated to purchase, and
the Purchaser shall be obligated to sell to the Company, such Company
Shares at the price and terms indicated in the Offer within 30 days
from the date of delivery by the Company of such counter-notice.
(b) SALE OF SHARES TO OFFEROR. The Purchaser may, for 60
days after the expiration of the 30-day option period as set forth in
Section 7(a), sell to the Offeror, pursuant to the terms of the Offer,
any or all of such Company Shares not purchased or agreed to be
purchased by the Company or its assignee; provided, however, that the
Purchaser shall not sell such Company Shares to such Offeror if such
Offeror is a competitor of the Company and the Company gives written
notice to the Purchaser, within 30 days of its receipt of the Notice,
stating that the Purchaser shall not sell her, his or its Company
Shares to such Offeror; and provided, further, that prior to the sale
of such Shares to an Offeror, such Offeror shall execute an agreement
with the Company pursuant to which such Offeror agrees to be subject to
the restrictions set forth in this Section 7. If any or all of such
Company Shares are not sold pursuant to an Offer within the time
permitted above, the unsold Company Shares shall remain subject to the
terms of this Section 7.
8. COMPANY'S RIGHT OF REPURCHASE.
(a) RIGHT OF REPURCHASE. The Company shall have the right
(the "Repurchase Right") to repurchase any or all of the Shares from
the Purchaser, upon the occurrence of any of the events specified in
Section 8(b) below (the "Repurchase Event"). The Repurchase Right may
be exercised by the Company within 60 days following the date the
Company receives actual knowledge of such event (the "Repurchase
Period"). The Repurchase Right shall be exercised by the Company by
giving the Purchaser written notice on or before the last day of the
Repurchase Period of its intention to exercise the Repurchase Right,
and, together with such notice, tendering to the holder an amount equal
to the following: (i) for Vested Shares, the fair market value, in the
case of an event specified in Section 8(b)(i), (ii) or (iii) below, and
the Purchase Price Per Share in the case of an event specified in
Section 8(b)(iv) below, and (ii) for Unvested Shares, the Purchase
Price Per Share in the in the case of any event specified in Section
8(b) below. The Company may assign the Repurchase Right to one or more
persons. Upon timely exercise of the Repurchase Right in the manner
provided in this Section 8(a), the holder shall deliver to the Company
the stock certificate or certificates representing the shares
<PAGE> 5
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being repurchased, duly endorsed and free and clear of any and all
liens, charges and encumbrances.
If any of the Shares are not purchased under the Repurchase
Right, the Purchaser and her, his or its successor in interest, if any,
will hold any such Shares in her, his or its possession subject to all
of the provisions of this Agreement.
(b) COMPANY'S RIGHT TO EXERCISE REPURCHASE RIGHT. The
Company shall have the Repurchase Right in the event that any of the
following events shall occur:
(i) The termination of the Purchaser's Business
Relationship with the Company and all Related
Corporations, voluntarily or involuntarily, for any
reason whatsoever other than for Cause (as defined in
Section 4(b) hereof), including death or permanent
disability, if the Purchaser is a natural person;
(ii) The receivership, bankruptcy or other creditor's
proceeding regarding the Purchaser or the taking of
any of the Shares by legal process, such as a levy of
execution;
(iii) If the Purchaser is a natural person, the
distribution of shares held by the Purchaser to her
or his spouse as such spouse's joint or community
interest pursuant to a decree of dissolution,
operation of law, divorce, property settlement
agreement or for any other reason, except as may be
otherwise permitted by the Company; or
(iv) The termination of the Purchaser's Business
Relationship for Cause (as defined in Section 4(b)
hereof).
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market
value of the Shares shall be, for purposes of this Section 8,
determined in accordance with paragraph 6D of the Plan as of the date
of the Repurchase Event. The determination by the Board of Directors of
the fair market value shall be conclusive and binding.
9. FAILURE TO TRANSFER SHARES TO THE COMPANY.
(a) If the Purchaser becomes obligated to sell any Shares to
the Company under this Agreement and fails or refuses to deliver on a
timely basis duly endorsed certificates representing any of the Shares
to be sold to the Company, the Company may elect (a) to establish a
segregated account to receive the payments, such account to be turned
over to the Purchaser upon delivery of the certificates representing
such Shares, and (b) immediately to take such action as is appropriate
to transfer record title of such Shares from the Purchaser to the
Company and treat the Purchaser and such Shares in all respects as if
delivery of the certificates representing such Shares had been made as
required by this Agreement and to treat such Shares on the books of the
Company as if
<PAGE> 6
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surrendered and any obligation represented by such shares null and void
and no longer binding. The Purchaser hereby irrevocably grants the
Company a power of attorney for the purpose of effecting the foregoing.
(b) Notwithstanding the foregoing, for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, upon the triggering of the Company's right to purchase
any or all of the Shares under this Agreement, the Purchaser hereby
makes, constitutes and appoints the Company, or such other designee of
the Company, to act as their proxy and attorney-in-fact for the purpose
of effectuating the transactions contemplated by this Agreement. This
irrevocable proxy and power of attorney are given to the Company in
consideration of, and in order to carry out the terms of this
Agreement. This proxy and power of attorney are coupled with an
interest and shall not be revocable or revoked by the Purchaser for any
reason.
(c) The Purchaser expressly agrees with the Company that
the Company will be irreparably damaged if this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by the Purchaser, the
Company, in addition to all other remedies, shall be entitled to a
temporary or permanent injunction, without showing any actual damage,
and/or a decree for specific performance, in accordance with the
provisions hereof.
(d) Subject to the terms hereof, Purchaser shall have all
the rights of a shareholder with respect to the Unvested Shares while
they are subject to this Agreement, including without limitation, the
right to vote the Unvested Shares and receive any cash dividends
declared thereon. If, from time to time while the Purchaser is holding
Unvested Shares, there is any stock dividend, stock split or other
change in the Shares, any and all new, substituted or additional
securities to which Purchaser is entitled by reason of her, his or its
ownership of the Unvested Shares shall be immediately subject to this
Agreement and included thereafter as "Shares," or "Unvested Shares," as
the case may be, for purposes of this Agreement and the Company's
purchase rights.
10. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. If there shall
be any change in the Class A Common Stock of the Company through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination or exchange of shares, or the like, the number of Shares shall be
appropriately increased or decreased proportionately to reflect such change and
the restrictions contained in Sections 5, 7 and 8 shall apply with equal force
to additional and/or substitute securities, if any, received by the Purchaser in
exchange for, or by virtue of her, his or its ownership of, the Shares, except
as otherwise determined by the Board of Directors of the Company.
11. TERMINATION OF RESTRICTIONS. The restrictions on transfer
contained in Section 5(a) shall expire as to Shares, and the Company's Right of
First Refusal set forth in Section 7 and the Company's Repurchase Right set
forth in Section 8 shall expire as to the Vested Shares, on the earliest to
occur of (i) the tenth anniversary of the date of this Agreement, (ii) a
distribution to the public of shares of common stock of the Company for an
aggregate
<PAGE> 7
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public offering price of at least $10 million pursuant to an effective
registration statement filed under the Securities Act or any successor statute,
or (iii) the occurrence of an Acquisition (as defined in the Plan).
12. LOCK-UP AGREEMENT. The Purchaser agrees that in connection
with an underwritten public offering of Class A Common Stock, upon the request
of the Company or the principal underwriter managing such public offering, the
Shares may not be sold, offered for sale or otherwise disposed of without the
prior written consent of the Company or such underwriter, as the case may be,
for at least 270 days after the effectiveness of the registration statement
filed in connection with such offering, or such longer period of time as the
Board of Directors may determine if all of the Company's directors and officers
agree to be similarly bound. The obligations under this Section 12 shall remain
effective for all underwritten public offerings with respect to which the
Company has filed a registration statement on or before the date five (5) years
after the closing of the Company's initial public offering, provided, however,
that this Section 12 shall cease to apply to any Share sold to the public
pursuant to an effective registration statement or an exemption from the
registration requirements of the Securities Act in a transaction that complied
with the terms of this Agreement.
13. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the
Plan, this Agreement, nor the award of the Shares imposes any obligation on the
Company or any Related Corporation to continue the Business Relationship with
the Purchaser.
14. ARBITRATION. Any dispute, controversy, or claim arising out
of, in connection with, or relating to the performance of this Agreement or its
termination shall be settled by arbitration in the Commonwealth of
Massachusetts, pursuant to the rules then obtaining of the American Arbitration
Association. Any award shall be final, binding and conclusive upon the parties
and a judgment rendered thereon may be entered in any court having jurisdiction
thereof.
15. PROVISION OF DOCUMENTATION TO PURCHASER. By signing this
Agreement the Purchaser acknowledges receipt of a copy of this Agreement and a
copy of the Plan.
16. MISCELLANEOUS.
(a) NOTICES. All notices hereunder shall be in writing
and shall be deemed given when sent by certified or registered mail,
postage prepaid, return receipt requested, to the address set forth
below. The addresses for such notices may be changed from time to time
by written notice given in the manner provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION. This Agreement
constitutes the entire agreement between the parties relative to the
subject matter hereof, and supersedes all proposals, written or oral,
and all other communications between the parties relating to the
subject matter of this Agreement. This Agreement may be modified,
amended or rescinded only by a written agreement executed by both
parties.
<PAGE> 8
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(c) SEVERABILITY. The invalidity, illegality or
unenforceability of any provision of this Agreement shall in no way
affect the validity, legality or enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
(e) GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of the conflicts
of laws thereof.
[17. ACCELERATION OF VESTING OF SHARES FOR BUSINESS COMBINATIONS.
Upon an Acquisition (as defined in the Plan), all of the Shares shall,
immediately prior to the consummation of such Acquisition, become Vested Shares;
provided, however, that the Board of Directors, in its sole discretion, may
require that the Purchaser's rights under this section shall be conditioned on
approval by shareholders of the Company in accordance with Section 280G(b)(5)(B)
of the Code and regulations thereunder.]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 9
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IN WITNESS WHEREOF, the Company and the Purchaser have caused this
instrument to be executed as of the date first above written.
PURCHASER ATLANTIC DATA SERVICES, INC.
One Batterymarch Park
Quincy, MA 02169
____________________________________
PURCHASER
____________________________________ By:________________________________
Street Address
___________________________________
____________________________________ Title
City State Zip Code
<PAGE> 1
EXHIBIT 10.11
ATLANTIC DATA SERVICES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 1998 Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by all eligible employees of ATLANTIC DATA SERVICES,
INC. (the "Company"), a Massachusetts corporation, and its participating
subsidiaries (as defined in Article 17) so that they may share in the growth of
the Company by acquiring or increasing their proprietary interest in the
Company. The Plan is designed to encourage eligible employees to remain in the
employ of the Company and its participating subsidiaries. The Plan is intended
to constitute an "employee stock purchase plan" within the meaning of Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
This Plan shall be administered by the Board of Directors (the "Board")
or by a committee appointed by the Board (the "Committee"). In the event the
Board fails to appoint or refrains from appointing a Committee, the Board shall
have all power and authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
option granted under it.
ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries
whose customary employment is more than 20 hours per week and for more than 3
months in any calendar year and who have completed more than 180 days of
employment with the Company on or before the first day of any Payment Period (as
defined in Article 5) shall be eligible to receive options under the Plan to
purchase stock of the Company, and all eligible employees shall have the same
rights and privileges hereunder. Persons who are eligible employees on the first
business day of any Payment Period shall receive their options as of such day.
Persons who become eligible employees after any date on which options are
granted under the Plan shall be granted options on the first day of the next
succeeding Payment Period on which options are granted to eligible employees
under the Plan. In no event, however, may an employee be granted an option if
such employee, immediately after the option was granted, would be treated as
owning stock possessing five (5%) percent or more of the total combined voting
power or value of all classes of stock of the Company or of any parent
corporation or subsidiary corporation, as the terms "parent corporation" and
"subsidiary corporation" are defined in Section 424(e) and (f) of the Code. For
purposes of determining stock ownership under this paragraph, the rules of
<PAGE> 2
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Section 424(d) of the Code shall apply, and stock which the employee may
purchase under outstanding options shall be treated as stock owned by the
employee.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 500,000, subject to adjustment as provided in
Article 12. If any option granted under the Plan shall expire or terminate for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available under the Plan.
ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.
The first Payment Period during which payroll deductions will be
accumulated under the Plan shall commence on the date the Company's Common Stock
is first registered under the Securities Exchange Act of 1934, as amended, and
shall end on the earlier of the following March 31 or September 30. For the
remainder of the duration of the Plan, Payment Periods shall consist of the
six-month periods commencing on April 1 and October 1, respectively, and ending
on the following September 30 and March 31, respectively.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of 500 shares, on condition that such
employee remains eligible to participate in the Plan throughout the remainder of
such Payment Period. The participant shall be entitled to exercise the option so
granted only to the extent of the participant's accumulated payroll deductions
on the last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than 500 shares except for the 500 share limitation, the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the 500 shares shall be promptly refunded to the participant by the
Company, without interest. The Option Price per share for each Payment Period
shall be the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of the Payment Period and (ii) 85% of the average
market price of the Common Stock on the last business day of the Payment Period,
in either event rounded up to avoid fractions of a dollar other than 1/4, 1/2
and 3/4 to the nearest cent (the "Option Price"). The foregoing limitation on
the number of shares subject to option and the Option Price shall be subject to
adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common
<PAGE> 3
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Stock on the NASDAQ National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market; or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of the Plan, the term "business day" means a day on which
there is trading on the NASDAQ National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in the Commonwealth of Massachusetts.
No employee shall be granted an option which permits the employee's
right to purchase stock under the Plan, and under all other Section 423(b)
employee stock purchase plans of the Company and any parent or subsidiary
corporations, to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined on the date or dates that options on such stock were
granted) for each calendar year in which such option is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code. If the participant's accumulated payroll
deductions on the last day of the Payment Period would otherwise enable the
participant to purchase Common Stock in excess of the Section 423(b)(8)
limitation described in this paragraph, the excess of the amount of the
accumulated payroll deductions over the aggregate purchase price of the shares
actually purchased shall be promptly refunded to the participant by the Company,
without interest.
ARTICLE 6 - EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on
the last day of a Payment Period shall be deemed to have exercised his or her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
the participant's accumulated payroll deductions on such date will pay for at
the Option Price, subject to the 500 share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, then he or she shall not be
entitled to exercise his or her option and the amount of his or her payroll
deduction shall be refundable, without interest. Only full shares of Common
Stock may be purchased under the Plan. Unused payroll deductions remaining in a
participant's account at the end of a Payment Period by reason of the inability
to purchase a fractional share shall be carried forward to the next Payment
Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the employee's
pay;
<PAGE> 4
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B. Authorizing the purchase of stock for the employee in each Payment
Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for the
employee is to be issued as provided under Article 11 hereof.
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the
Plan, the deductions and purchases under the authorization the participant has
on file under the Plan will continue from one Payment Period to succeeding
Payment Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in an amount (expressed as
a whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan, in which event the
Company will promptly refund (without interest) the entire balance of the
employee's deductions not previously used to purchase stock under the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at
any time prior to the last day of a Payment Period by delivering a withdrawal
notice to the Company.
To re-enter the Plan, an employee who has previously withdrawn must
file a new authorization at least ten days before the first day of the next
Payment Period in which he or she wishes to participate. The employee's re-entry
into the Plan becomes effective at the beginning of such Payment Period,
provided that he or she is an eligible employee on the first business day of the
Payment Period.
<PAGE> 5
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ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as
soon as practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a
participant's rights to options granted under the Plan shall be adjusted as
hereinafter provided:
A. In the event that the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if,
upon a reorganization, split-up, liquidation, recapitalization or the like
of the Company, the shares of Common Stock shall be exchanged for other
securities of the Company, each participant shall be entitled, subject to
the conditions herein stated, to purchase such number of shares of Common
Stock or amount of other securities of the Company as were exchangeable
for the number of shares of Common Stock that such participant would have
been entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares as a
stock dividend upon or with respect to the shares of stock of the class
which shall at the time be subject to options hereunder, each participant
upon exercising such an option shall be entitled to receive (for the
purchase price paid upon such exercise) the shares as to which the
participant is exercising his or her option and, in addition thereto (at
no additional cost), such number of shares of the class or classes in
which such stock dividend or dividends were declared or paid, and such
amount of cash in lieu of fractional shares, as is equal to the number of
shares thereof and the amount of cash in lieu of fractional shares,
respectively, which the participant would have received if the participant
had been the holder of the shares as to which the participant is
exercising his or her option at all times between the date of the granting
of such option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and
aggregate number of shares set forth in Article 4 hereof which are subject to
options which have been or may be granted under the Plan and the limitations set
forth in the second paragraph of Article 5 shall also be appropriately adjusted
to reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
<PAGE> 6
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If the Company is to be consolidated with or acquired by another entity
in a merger, a sale of all or substantially all of the Company's assets or
otherwise (an "Acquisition"), the Committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the "Successor Board")
shall, with respect to options then outstanding under the Plan, either (i) make
appropriate provision for the continuation of such options by arranging for the
substitution on an equitable basis for the shares then subject to such options
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant's options in exchange for a cash payment
equal to the excess of (a) the fair market value on the date of the Acquisition,
of the number of shares of Common Stock that the participant's accumulated
payroll deductions as of the date of the Acquisition could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period and subject to the 500 share limit, Code Section
423(b)(8) and fractional-share limitations on the amount of stock a participant
would be entitled to purchase, over (b) the result of multiplying such number of
shares by such option price.
The Committee or Successor Board shall determine the adjustments to be
made under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An option granted under the Plan may not be transferred or assigned to,
or availed by, any other person other than by will or the laws of descent and
distribution and may be exercised only by the employee during the employee's
lifetime.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days.
If a participant's payroll deductions are interrupted by any legal
process, a withdrawal notice will be considered as having been received from the
participant on the day the interruption occurs.
<PAGE> 7
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ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
The Plan may be terminated at any time by the Company's Board of
Directors but such termination shall not affect options then outstanding under
the Plan. It will terminate in any case when all or substantially all of the
unissued shares of stock reserved for the purposes of the Plan have been
purchased. If at any time shares of stock reserved for the purpose of the Plan
remain available for purchase but not in sufficient number to satisfy all then
unfilled purchase requirements, the available shares shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase stock, and
the Plan shall terminate. Upon such termination or any other termination of the
Plan, all payroll deductions not used to purchase stock will be refunded,
without interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
options under the Plan, if such action would be treated as the adoption of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment
and not for resale. The Company does not, however, intend to restrict or
influence any employee in the conduct of his or her own affairs. An employee
may, therefore, sell stock purchased under the Plan at any time the employee
chooses, subject to compliance with any applicable federal or state securities
laws and subject to any restrictions imposed under Article 21 to ensure that tax
withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions
from his or her pay shall constitute such employee a stockholder of the shares
covered by an option until such shares have been actually purchased by the
employee.
<PAGE> 8
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ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
pursuant to options granted under the Plan will be used for general corporate
purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to
notify the Company in writing immediately after the participant transfers Common
Stock acquired under the Plan, if such transfer occurs within two years after
the first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges
that the Company and its participating subsidiaries are required to withhold
taxes with respect to the amounts deducted from the participant's compensation
and accumulated for the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the participant's compensation, when amounts are
added to the participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan, the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each participant agrees that such
taxes may be withheld from compensation otherwise payable to such participant.
It is intended that tax withholding will be accomplished in such a manner that
the full amount of payroll deductions elected by the participant under Article 7
will be used to purchase Common Stock. However, if amounts sufficient to satisfy
applicable tax withholding obligations have not been withheld from compensation
otherwise payable to any participant, then, notwithstanding any other provision
of the Plan, the Company may withhold such taxes from the participant's
accumulated payroll deductions and apply the net amount to the purchase of
Common Stock, unless the participant pays to the Company, prior to the exercise
date, an amount sufficient to satisfy such withholding obligations. Each
participant further acknowledges that the Company and its participating
subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the Company or any
participating subsidiary may take whatever action it considers appropriate to
satisfy such withholding requirements, including deducting from compensation
otherwise payable to such participant an amount sufficient to satisfy such
withholding requirements or conditioning any disposition of Common Stock by the
participant upon the payment to the Company or such subsidiary of an amount
sufficient to satisfy such withholding requirements.
<PAGE> 9
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ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock
under the Plan is subject to the approval of any governmental authority required
in connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws
of the Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of law thereof.
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on [_________] and was
approved by the stockholders of the Company on [_________].
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 25th day of March, 1998, by and between
Robert W. Howe (the "Employee") and Atlantic Data Services, Inc., a
Massachusetts corporation with a principal place of business at One Batterymarch
Park, Quincy, MA 02169 (the "Company").
WHEREAS, Employee has entered into an Employment Agreement by and
between the Company and the Employee dated July 15, 1988 (the "Employment
Agreement"), which Employment Agreement shall be terminated and superseded by
this Agreement;
WHEREAS, the Company believes it to be to its advantage that the
Employee renders services to the Company as hereinafter provided; and
WHEREAS, the Employee's senior managerial position requires that he or
she be trusted with confidential information and trade secrets of the Company
and that he or she develop a thorough and comprehensive knowledge of various
aspects of the Company's business;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities. The Employee agrees to serve
initially as Chief Executive Officer, Chairman and Director of the Company. The
parties agree that such employment shall be full-time and on an "at-will" basis,
and that either the Employee or the Company may terminate the employment
relationship at any time, with or without cause, upon written notice to the
other party. The Employee shall initially report to, and his or her activities
shall at all times be subject to the direction and control of, the Board of
Directors of the Company, and the Employee shall exercise such powers and comply
with and perform, faithfully and to the best of his or her ability, such
directions and duties in relation to the business and affairs of the Company as
may from time to time be vested in or requested of him or her by the Board of
Directors and shall use his or her best efforts to improve and extend the
business of the Company.
2. Compensation. The Company shall pay the Employee the following
compensation, including the following:
(A) Salary. In consideration of the services to be rendered by
the Employee to the Company, the Company will pay to the Employee a
monthly salary of $29,167 (the Employee's "base rate"). Such salary
shall be payable in conformity with the Company's customary practices
for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all
applicable federal and state withholding, payroll and other taxes.
<PAGE> 2
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(B) Fringe Benefits. The Employee will also be entitled to
participate on the same basis in the Company's standard benefits
package generally available for all other officers of the Company
similarly situated. In addition, the Employee shall be eligible to
participate in the Company's annual incentive bonus plan for officers,
as approved by and subject to the discretion of the Company's Board of
Directors.
(C) Change of Control. If, upon a Change of Control (as
hereinafter defined), the Employee is (i) not offered employment by the
acquiring corporation in a comparable position, at a comparable salary
or (ii) the Company or the acquiring corporation terminates the
employment of the Employee, without Cause, within twelve months of the
consummation of a Change in Control, then the Company or the acquiring
corporation, as the case may be, shall be obligated to pay the Employee
a severance payment of twelve months' salary at the Employee's then
current base rate, payable in the same manner as such salary was
payable during the period of the Employee's employment. In the event
that the Employee elects to continue health insurance coverage in
accordance with the provisions of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the Company shall continue to pay
for Employee's health insurance premium on the same terms and
conditions, and subject to the same rules and regulations applicable
thereto, as active Company employees for a period of twelve months from
the date of termination of Employee's employment with the Company.
Thereafter, the Employee shall be solely liable for the cost of such
premium. "For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during Employee's employment with the
Company any of the following events shall occur:
(i) The Company is merged or consolidated into or
with another corporation or other legal person, and as a result of such
merger or consolidation less than a majority of the combined voting
power of the then-outstanding securities of such surviving or resulting
corporation or person immediately after such transaction is held in the
aggregate by the holders of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock") immediately prior to such transaction;
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person, and after
such sale less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale is held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale; or
(iii) There is a tender offer in which any "person"
(as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) acquires the beneficial ownership of securities
representing a majority or more of the Voting Stock of the Company;
provided, however, that a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any
Company-sponsored employee stock ownership plan or any other employee
<PAGE> 3
-3-
benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or because the Company reports that a
change in control of the Company has occurred by reason of such
beneficial ownership.
(D) Termination for Cause. The Company may terminate the
employment of the Employee at any time for "Cause". For purposes of
this Agreement, "Cause" means: (a) the Employee's conviction of any
crime (whether or not involving the Company) other than unintentional
motor vehicle felonies; (b) any intentional act of theft, fraud or
embezzlement by the Employee in connection with his work with the
Company; (c) Employee's continuing, repeated or willful failure or
refusal to perform his duties and services under this Agreement (other
than due to his incapacity due to illness or injury), or (d) the
Employee's violation of Section 3 of this Agreement.
If the Company terminates the Employee's employment for Cause
at any time (regardless of whether or not the Company experiences a
Change of Control), the Employee shall not be entitled to any
compensation or benefits following the date of such termination, other
than compensation and benefits required to be paid or provided by law
and payment of the Employee's normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
(E) Termination Without Cause. The Company may terminate the
employment of the Employee at any time without Cause. If the Company
terminates the Employee's employment without Cause at any time, then
the Company shall be obligated to pay the Employee a severance payment
of twelve month's salary at the Employee's then current base rate,
payable in the same manner as such salary was payable, during the
period of the Employee's employment. In the event that the Employee
elects to continue health insurance coverage in accordance with the
provisions COBRA, the Company shall continue to pay for Employee's
health insurance premium on the same terms and conditions, and subject
to the same rules and regulations applicable thereto, as active Company
employees for a period of twelve months from the date of termination of
Employee's employment with the Company. Thereafter, the Employee shall
be solely liable for the cost of such premium.
3. Nondisclosure and Developments; Non-Solicitation.
(A) Nondisclosure. Employee will not at any time, whether
during or after his or her period of employment by the Company
("Employment Period") reveal to any person or entity any of the trade
secrets or confidential information concerning the organization,
business or finances of the Company or of any third party which the
Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship,
<PAGE> 4
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customer lists, software, supplier lists, pricing, projects, plans and
proposals), except as may be required in the ordinary course of
performing duties as an employee of the Company, and Employee shall
keep secret all matters entrusted to him or her and shall not use or
attempt to use any such information in any manner which may injure or
cause loss or may be calculated to injure or cause loss, whether
directly or indirectly, to the Company. Further, Employee agrees that
during and after the Employment Period he or she shall not make, use or
permit to be used any notes, memoranda, reports, lists, records,
drawings, sketches, specifications, software programs, data,
documentation or other materials of any nature relating to any matter
within the scope of the business of the Company or concerning any of
its dealings or affairs otherwise than for the benefit of the Company,
it being agreed that all of the foregoing shall be and remain the sole
and exclusive property of the Company, and that immediately upon the
termination of Employee's employment he or she shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
(B) Developments. If at any time or times during the
Employment Period, Employee shall (either alone or with others) make,
conceive, create, discover, invent or reduce to practice any invention,
modification, discovery, design, development, improvement, process,
software program, work of authorship, documentation, formula, data,
technique, know-how, trade secret or intellectual property right
whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes, including
but not limited to the Semiconductor Chip Protection Act, or subject to
analogous protection) (herein called "Developments") that (i) relates
to the business of the Company or any customer of or supplier to the
Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (ii) results from tasks assigned the Employee by the Company
or (iii) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
then:
(i) such Developments and the benefits thereof are
deemed works-made-for hire (if applicable) and shall immediately become
the sole and absolute property of the Company and its assigns, as works
made for hire or otherwise;
(ii) Employee shall promptly disclose to the Company
(or any persons designated by it) each such Development;
(iii) as may be necessary to ensure the Company's
ownership of such Developments, Employee hereby assigns any rights
(including, but not limited to, any patents, copyrights and trademarks)
he or she may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without
further compensation; and
(iv) Employee shall communicate, without cost or
delay, and without disclosing to others the same, all available
information relating thereto (with all necessary plans and models) to
the Company.
<PAGE> 5
-5-
(C) Further Assurances. Employee will, during and after the
Employment Period, at the request and cost of the Company, promptly
sign, execute, make and do all such deeds, documents, acts and things
as the Company and its duly authorized agents may reasonably require:
(i) to apply for, obtain, register and vest in the
name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in
any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any judicial,
opposition or other proceedings or petitions or applications for
revocation of such letters patent, copyright, trademark or other
analogous protection.
In the event the Company is unable, after reasonable effort,
to secure Employee's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of
Employee's physical or mental incapacity or for any other reason
whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his or her agent
and attorney-in-fact, to act for and in Employee's behalf and stead to
execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal
force and effect as if executed by Employee.
(D) Non-Solicitation. For a period of two (2) years after any
termination of employment with the Company, whether voluntary or
involuntary, Employee will not, directly or indirectly,
(i) solicit for employment or employ, or permit any
other company or business organization which is directly or indirectly
controlled by Employee to solicit for employment or employ, any person
who is employed by the Company, or in any manner assist any person or
entity in soliciting for employment or hiring any employee of the
Company, or otherwise seek to induce any such employee to leave his or
her employment with the Company; or
(ii) solicit any of the Company's then current
customers, or permit any other company or business organization which
is directly or indirectly controlled by Employee to solicit any such
customers, or in any manner assist any person or entity in soliciting
such customers of the Company, or otherwise seek to induce any such
customer to terminate its business relationship with the Company.
<PAGE> 6
-6-
(E) Specific Performance. Employee agrees that any breach of
this Section 3 by Employee will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an injunction,
specific performance or other equitable relief to prevent the violation
of Employee's obligations hereunder.
4. Termination of Employment Agreement. Each of the Company and the
Employee, being a party to the Employment Agreement, acknowledge and agree that
the Employment Agreement shall be terminated and of no further force and effect
and all rights and obligations of the parties thereunder shall be null and void
and superseded by this Agreement.
5. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he or she has obtained all waivers and/or consents from third
parties which are necessary to enable him or her to enjoy employment with the
Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Employee represents that he or she
is not bound by any agreement or any other existing or previous business
relationship which conflicts with, or may conflict with, the performance of his
or her obligations hereunder or prevent the full performance of his or her
duties and obligations hereunder.
6. Governing Law; Jurisdiction and Venue. This Agreement, the
employment relationship contemplated herein and any claim arising from such
relationship, whether or not arising under this Agreement, shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without reference to its conflicts of law principles, and this
Agreement shall be deemed to be performable in Massachusetts. Any legal action
or proceeding arising out of or relating to this Agreement may be instituted in
either the courts of the Commonwealth of Massachusetts or the United States
District Court for the District of Massachusetts, and Employee hereby
irrevocably submits to the jurisdiction of any such court in any such action or
proceeding, and Employee expressly consents to personal jurisdiction and venue
in any such action.
7. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed and reformed to the maximum extent permitted by law.
8. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 7. No waiver by either party of any
breach by the other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but
<PAGE> 7
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only by an instrument in writing signed by the party against whom any waiver,
change, discharge or termination is sought.
9. Assignment. The Employee acknowledges that the services to be
rendered by him or her hereunder are unique and personal in nature. Accordingly,
the Employee may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement. The rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
10. Acknowledgments. The Employee hereby acknowledges and recognizes
that the enforcement of any of the provisions in this Agreement may potentially
interfere with the Employee's ability to pursue a proper livelihood. The
Employee represents that he or she is knowledgeable about the business of the
Company and further represents that he or she is capable of pursuing a career in
other industries to earn a proper livelihood. The Employee recognizes and agrees
that the enforcement of the provisions of Section 3 of this Agreement are
necessary to ensure the preservation, protection and continuity of the business,
trade secrets and goodwill of the Company.
11. Entire Agreement. This Agreement constitutes the entire
understanding of the parties relating to the subject matter set forth herein and
supersedes and cancels all agreements, written or oral, made prior to the date
hereof between the Employee and the Company relating to employment, salary,
bonus, or other compensation of any description, equity participation, pension,
post-retirement benefits, severance or other remuneration, including the
Employment Agreement.
12. Notices. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Atlantic Data Services, Inc.
One Batterymarch Park
Quincy, MA 02169
Attention: Chief Executive Officer
If to the Employee, at the Employee's address set forth on the
signature page hereto.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14. Section Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
ATLANTIC DATA SERVICES, INC. EMPLOYEE:
By: /s/ William H. Gallagher /s/ Robert W. Howe
----------------------------- ---------------------------------
Robert W. Howe
Title: President
3 Jason's Lane
N. Scituate, MA 02060
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 25th day of March, 1998, by and between
William H. Gallagher (the "Employee") and Atlantic Data Services, Inc., a
Massachusetts corporation with a principal place of business at One Batterymarch
Park, Quincy, MA 02169 (the "Company").
WHEREAS, Employee has entered into an Employment Agreement by and
between the Company and the Employee dated July 15, 1988 (the "Employment
Agreement"), which Employment Agreement shall be terminated and superseded by
this Agreement;
WHEREAS, the Company believes it to be to its advantage that the
Employee renders services to the Company as hereinafter provided; and
WHEREAS, the Employee's senior managerial position requires that he or
she be trusted with confidential information and trade secrets of the Company
and that he or she develop a thorough and comprehensive knowledge of various
aspects of the Company's business;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities. The Employee agrees to serve
initially as President, Chief Operating Officer, Assistant Clerk and Director of
the Company. The parties agree that such employment shall be full-time and on an
"at-will" basis, and that either the Employee or the Company may terminate the
employment relationship at any time, with or without cause, upon written notice
to the other party. The Employee shall initially report to, and his or her
activities shall at all times be subject to the direction and control of, the
Board of Directors of the Company, and the Employee shall exercise such powers
and comply with and perform, faithfully and to the best of his or her ability,
such directions and duties in relation to the business and affairs of the
Company as may from time to time be vested in or requested of him or her by the
Board of Directors and shall use his or her best efforts to improve and extend
the business of the Company.
2. Compensation. The Company shall pay the Employee the following
compensation, including the following:
(A) Salary. In consideration of the services to be rendered by
the Employee to the Company, the Company will pay to the Employee a
monthly salary of $29,167 (the Employee's "base rate"). Such salary
shall be payable in conformity with the Company's customary practices
for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all
applicable federal and state withholding, payroll and other taxes.
<PAGE> 2
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(B) Fringe Benefits. The Employee will also be entitled to
participate on the same basis in the Company's standard benefits
package generally available for all other officers of the Company
similarly situated. In addition, the Employee shall be eligible to
participate in the Company's annual incentive bonus plan for officers,
as approved by and subject to the discretion of the Company's Board of
Directors.
(C) Change of Control. If, upon a Change of Control (as
hereinafter defined), the Employee is (i) not offered employment by the
acquiring corporation in a comparable position, at a comparable salary
or (ii) the Company or the acquiring corporation terminates the
employment of the Employee, without Cause, within twelve months of the
consummation of a Change in Control, then the Company or the acquiring
corporation, as the case may be, shall be obligated to pay the Employee
a severance payment of twelve months' salary at the Employee's then
current base rate, payable in the same manner as such salary was
payable during the period of the Employee's employment. In the event
that the Employee elects to continue health insurance coverage in
accordance with the provisions of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the Company shall continue to pay
for Employee's health insurance premium on the same terms and
conditions, and subject to the same rules and regulations applicable
thereto, as active Company employees for a period of twelve months from
the date of termination of Employee's employment with the Company.
Thereafter, the Employee shall be solely liable for the cost of such
premium. "For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during Employee's employment with the
Company any of the following events shall occur:
(i) The Company is merged or consolidated into or
with another corporation or other legal person, and as a result of such
merger or consolidation less than a majority of the combined voting
power of the then-outstanding securities of such surviving or resulting
corporation or person immediately after such transaction is held in the
aggregate by the holders of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock") immediately prior to such transaction;
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person, and after
such sale less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale is held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale; or
(iii) There is a tender offer in which any "person"
(as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) acquires the beneficial ownership of securities
representing a majority or more of the Voting Stock of the Company;
provided, however, that a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any
Company-sponsored employee stock ownership plan or any other employee
<PAGE> 3
-3-
benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or because the Company reports that a
change in control of the Company has occurred by reason of such
beneficial ownership.
(D) Termination for Cause. The Company may terminate the
employment of the Employee at any time for "Cause". For purposes of
this Agreement, "Cause" means: (a) the Employee's conviction of any
crime (whether or not involving the Company) other than unintentional
motor vehicle felonies; (b) any intentional act of theft, fraud or
embezzlement by the Employee in connection with his work with the
Company; (c) Employee's continuing, repeated or willful failure or
refusal to perform his duties and services under this Agreement (other
than due to his incapacity due to illness or injury), or (d) the
Employee's violation of Section 3 of this Agreement.
If the Company terminates the Employee's employment for Cause
at any time (regardless of whether or not the Company experiences a
Change of Control), the Employee shall not be entitled to any
compensation or benefits following the date of such termination, other
than compensation and benefits required to be paid or provided by law
and payment of the Employee's normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
(E) Termination Without Cause. The Company may terminate the
employment of the Employee at any time without Cause. If the Company
terminates the Employee's employment without Cause at any time, then
the Company shall be obligated to pay the Employee a severance payment
of twelve month's salary at the Employee's then current base rate,
payable in the same manner as such salary was payable, during the
period of the Employee's employment. In the event that the Employee
elects to continue health insurance coverage in accordance with the
provisions COBRA, the Company shall continue to pay for Employee's
health insurance premium on the same terms and conditions, and subject
to the same rules and regulations applicable thereto, as active Company
employees for a period of twelve months from the date of termination of
Employee's employment with the Company. Thereafter, the Employee shall
be solely liable for the cost of such premium.
3. Nondisclosure and Developments; Non-Solicitation.
(A) Nondisclosure. Employee will not at any time, whether
during or after his or her period of employment by the Company
("Employment Period") reveal to any person or entity any of the trade
secrets or confidential information concerning the organization,
business or finances of the Company or of any third party which the
Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship,
<PAGE> 4
-4-
customer lists, software, supplier lists, pricing, projects, plans and
proposals), except as may be required in the ordinary course of
performing duties as an employee of the Company, and Employee shall
keep secret all matters entrusted to him or her and shall not use or
attempt to use any such information in any manner which may injure or
cause loss or may be calculated to injure or cause loss, whether
directly or indirectly, to the Company. Further, Employee agrees that
during and after the Employment Period he or she shall not make, use or
permit to be used any notes, memoranda, reports, lists, records,
drawings, sketches, specifications, software programs, data,
documentation or other materials of any nature relating to any matter
within the scope of the business of the Company or concerning any of
its dealings or affairs otherwise than for the benefit of the Company,
it being agreed that all of the foregoing shall be and remain the sole
and exclusive property of the Company, and that immediately upon the
termination of Employee's employment he or she shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
(B) Developments. If at any time or times during the
Employment Period, Employee shall (either alone or with others) make,
conceive, create, discover, invent or reduce to practice any invention,
modification, discovery, design, development, improvement, process,
software program, work of authorship, documentation, formula, data,
technique, know-how, trade secret or intellectual property right
whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes, including
but not limited to the Semiconductor Chip Protection Act, or subject to
analogous protection) (herein called "Developments") that (i) relates
to the business of the Company or any customer of or supplier to the
Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (ii) results from tasks assigned the Employee by the Company
or (iii) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
then:
(i) such Developments and the benefits thereof are
deemed works-made-for hire (if applicable) and shall immediately become
the sole and absolute property of the Company and its assigns, as works
made for hire or otherwise;
(ii) Employee shall promptly disclose to the Company
(or any persons designated by it) each such Development;
(iii) as may be necessary to ensure the Company's
ownership of such Developments, Employee hereby assigns any rights
(including, but not limited to, any patents, copyrights and trademarks)
he or she may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without
further compensation; and
(iv) Employee shall communicate, without cost or
delay, and without disclosing to others the same, all available
information relating thereto (with all necessary plans and models) to
the Company.
<PAGE> 5
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(C) Further Assurances. Employee will, during and after the
Employment Period, at the request and cost of the Company, promptly
sign, execute, make and do all such deeds, documents, acts and things
as the Company and its duly authorized agents may reasonably require:
(i) to apply for, obtain, register and vest in the
name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in
any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any judicial,
opposition or other proceedings or petitions or applications for
revocation of such letters patent, copyright, trademark or other
analogous protection.
In the event the Company is unable, after reasonable effort,
to secure Employee's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of
Employee's physical or mental incapacity or for any other reason
whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his or her agent
and attorney-in-fact, to act for and in Employee's behalf and stead to
execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal
force and effect as if executed by Employee.
(D) Non-Solicitation. For a period of two (2) years after any
termination of employment with the Company, whether voluntary or
involuntary, Employee will not, directly or indirectly,
(i) solicit for employment or employ, or permit any
other company or business organization which is directly or indirectly
controlled by Employee to solicit for employment or employ, any person
who is employed by the Company, or in any manner assist any person or
entity in soliciting for employment or hiring any employee of the
Company, or otherwise seek to induce any such employee to leave his or
her employment with the Company; or
(ii) solicit any of the Company's then current
customers, or permit any other company or business organization which
is directly or indirectly controlled by Employee to solicit any such
customers, or in any manner assist any person or entity in soliciting
such customers of the Company, or otherwise seek to induce any such
customer to terminate its business relationship with the Company.
<PAGE> 6
-6-
(E) Specific Performance. Employee agrees that any breach of
this Section 3 by Employee will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an injunction,
specific performance or other equitable relief to prevent the violation
of Employee's obligations hereunder.
4. Termination of Employment Agreement. Each of the Company and the
Employee, being a party to the Employment Agreement, acknowledge and agree that
the Employment Agreement shall be terminated and of no further force and effect
and all rights and obligations of the parties thereunder shall be null and void
and superseded by this Agreement.
5. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he or she has obtained all waivers and/or consents from third
parties which are necessary to enable him or her to enjoy employment with the
Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Employee represents that he or she
is not bound by any agreement or any other existing or previous business
relationship which conflicts with, or may conflict with, the performance of his
or her obligations hereunder or prevent the full performance of his or her
duties and obligations hereunder.
6. Governing Law; Jurisdiction and Venue. This Agreement, the
employment relationship contemplated herein and any claim arising from such
relationship, whether or not arising under this Agreement, shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without reference to its conflicts of law principles, and this
Agreement shall be deemed to be performable in Massachusetts. Any legal action
or proceeding arising out of or relating to this Agreement may be instituted in
either the courts of the Commonwealth of Massachusetts or the United States
District Court for the District of Massachusetts, and Employee hereby
irrevocably submits to the jurisdiction of any such court in any such action or
proceeding, and Employee expressly consents to personal jurisdiction and venue
in any such action.
7. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed and reformed to the maximum extent permitted by law.
8. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 7. No waiver by either party of any
breach by the other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but
<PAGE> 7
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only by an instrument in writing signed by the party against whom any waiver,
change, discharge or termination is sought.
9. Assignment. The Employee acknowledges that the services to be
rendered by him or her hereunder are unique and personal in nature. Accordingly,
the Employee may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement. The rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
10. Acknowledgments. The Employee hereby acknowledges and recognizes
that the enforcement of any of the provisions in this Agreement may potentially
interfere with the Employee's ability to pursue a proper livelihood. The
Employee represents that he or she is knowledgeable about the business of the
Company and further represents that he or she is capable of pursuing a career in
other industries to earn a proper livelihood. The Employee recognizes and agrees
that the enforcement of the provisions of Section 3 of this Agreement are
necessary to ensure the preservation, protection and continuity of the business,
trade secrets and goodwill of the Company.
11. Entire Agreement. This Agreement constitutes the entire
understanding of the parties relating to the subject matter set forth herein and
supersedes and cancels all agreements, written or oral, made prior to the date
hereof between the Employee and the Company relating to employment, salary,
bonus, or other compensation of any description, equity participation, pension,
post-retirement benefits, severance or other remuneration, including the
Employment Agreement.
12. Notices. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Atlantic Data Services, Inc.
One Batterymarch Park
Quincy, MA 02169
Attention: Chief Executive Officer
If to the Employee, at the Employee's address set forth on the
signature page hereto.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14. Section Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
ATLANTIC DATA SERVICES, INC. EMPLOYEE:
By: /s/ Robert W. Howe /s/ William H. Gallagher
------------------------------ ------------------------------------
William H. Gallagher
Title: Chief Executive Officer
72 Katy-Did Lane
Hanson, MA 02341
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 25th day of March, 1998, by and between Paul
K. McGrath (the "Employee") and Atlantic Data Services, Inc., a Massachusetts
corporation with a principal place of business at One Batterymarch Park, Quincy,
MA 02169 (the "Company").
WHEREAS, the Company believes it to be to its advantage that the
Employee renders services to the Company as hereinafter provided; and
WHEREAS, the Employee's senior managerial position requires that he or
she be trusted with confidential information and trade secrets of the Company
and that he or she develop a thorough and comprehensive knowledge of various
aspects of the Company's business;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities. The Employee agrees to serve
initially as Senior Vice President, Finance and Administration, Chief Financial
Officer of the Company. The parties agree that such employment shall be
full-time and on an "at-will" basis, and that either the Employee or the Company
may terminate the employment relationship at any time, with or without cause,
upon written notice to the other party. The Employee shall initially report to,
and his or her activities shall at all times be subject to the direction and
control of, the Chairman and Chief Executive Officer of the Company, and the
Employee shall exercise such powers and comply with and perform, faithfully and
to the best of his or her ability, such directions and duties in relation to the
business and affairs of the Company as may from time to time be vested in or
requested of him or her by the Chairman and Chief Executive Officer and shall
use his or her best efforts to improve and extend the business of the Company.
2. Compensation. The Company shall pay the Employee the following
compensation, including the following:
(A) Salary. In consideration of the services to be rendered by
the Employee to the Company, the Company will pay to the Employee a
monthly salary of $13,333 (the Employee's "base rate"). Such salary
shall be payable in conformity with the Company's customary practices
for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all
applicable federal and state withholding, payroll and other taxes.
(B) Fringe Benefits. The Employee will also be entitled to
participate on the same basis in the Company's standard benefits
package generally available for all other officers of the Company
similarly situated. In addition, the Employee shall be eligible to
participate in the Company's annual incentive bonus plan for
officers, as approved by and subject to the discretion of the
Company's Board of Directors.
<PAGE> 2
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(C) Change of Control. If, upon a Change of Control (as
hereinafter defined), the Employee is (i) not offered employment by the
acquiring corporation in a comparable position, at a comparable salary
or (ii) the Company or the acquiring corporation terminates the
employment of the Employee, without Cause, within twelve months of the
consummation of a Change in Control, then the Company or the acquiring
corporation, as the case may be, shall be obligated to pay the Employee
a severance payment of twelve months' salary at the Employee's then
current base rate, payable in the same manner as such salary was
payable during the period of the Employee's employment. In the event
that the Employee elects to continue health insurance coverage in
accordance with the provisions of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the Company shall continue to pay
for Employee's health insurance premium on the same terms and
conditions, and subject to the same rules and regulations applicable
thereto, as active Company employees for a period of twelve months from
the date of termination of Employee's employment with the Company.
Thereafter, the Employee shall be solely liable for the cost of such
premium. "For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during Employee's employment with the
Company any of the following events shall occur:
(i) The Company is merged or consolidated into or
with another corporation or other legal person, and as a result of such
merger or consolidation less than a majority of the combined voting
power of the then-outstanding securities of such surviving or resulting
corporation or person immediately after such transaction is held in the
aggregate by the holders of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock") immediately prior to such transaction;
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person, and after
such sale less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale is held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale; or
(iii) There is a tender offer in which any "person"
(as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) acquires the beneficial ownership of securities
representing a majority or more of the Voting Stock of the Company;
provided, however, that a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any
Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or because the Company
<PAGE> 3
-3-
reports that a change in control of the Company has occurred by reason
of such beneficial ownership.
(D) Termination for Cause. The Company may terminate the
employment of the Employee at any time for "Cause". For purposes of
this Agreement, "Cause" means: (a) the Employee's conviction of any
crime (whether or not involving the Company) other than unintentional
motor vehicle felonies; (b) any intentional act of theft, fraud or
embezzlement by the Employee in connection with his work with the
Company; (c) Employee's continuing, repeated or willful failure or
refusal to perform his duties and services under this Agreement (other
than due to his incapacity due to illness or injury), or (d) the
Employee's violation of Section 3 of this Agreement.
If the Company terminates the Employee's employment for Cause
at any time (regardless of whether or not the Company experiences a
Change of Control), the Employee shall not be entitled to any
compensation or benefits following the date of such termination, other
than compensation and benefits required to be paid or provided by law
and payment of the Employee's normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
(E) Termination Without Cause. The Company may terminate the
employment of the Employee at any time without Cause. If the Company
terminates the Employee's employment without Cause at any time, then
the Company shall be obligated to pay the Employee a severance payment
of twelve month's salary at the Employee's then current base rate,
payable in the same manner as such salary was payable, during the
period of the Employee's employment. In the event that the Employee
elects to continue health insurance coverage in accordance with the
provisions COBRA, the Company shall continue to pay for Employee's
health insurance premium on the same terms and conditions, and subject
to the same rules and regulations applicable thereto, as active Company
employees for a period of twelve months from the date of termination of
Employee's employment with the Company. Thereafter, the Employee shall
be solely liable for the cost of such premium.
3. Nondisclosure and Developments; Non-Solicitation.
(A) Nondisclosure. Employee will not at any time, whether
during or after his or her period of employment by the Company
("Employment Period") reveal to any person or entity any of the trade
secrets or confidential information concerning the organization,
business or finances of the Company or of any third party which the
Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship, customer lists,
software, supplier lists, pricing, projects, plans and proposals),
except as may be required in the ordinary course of performing duties
as an employee of the Company, and Employee shall keep secret all
matters entrusted to him or her and shall not use or attempt to use any
such information in any manner which may injure or cause
<PAGE> 4
-4-
loss or may be calculated to injure or cause loss, whether directly or
indirectly, to the Company. Further, Employee agrees that during and
after the Employment Period he or she shall not make, use or permit to
be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or
other materials of any nature relating to any matter within the scope
of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company, it being agreed
that all of the foregoing shall be and remain the sole and exclusive
property of the Company, and that immediately upon the termination of
Employee's employment he or she shall deliver all of the foregoing, and
all copies thereof, to the Company, at its main office.
(B) Developments. If at any time or times during the
Employment Period, Employee shall (either alone or with others) make,
conceive, create, discover, invent or reduce to practice any invention,
modification, discovery, design, development, improvement, process,
software program, work of authorship, documentation, formula, data,
technique, know-how, trade secret or intellectual property right
whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes, including
but not limited to the Semiconductor Chip Protection Act, or subject to
analogous protection) (herein called "Developments") that (i) relates
to the business of the Company or any customer of or supplier to the
Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (ii) results from tasks assigned the Employee by the Company
or (iii) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
then:
(i) such Developments and the benefits thereof are
deemed works-made-for hire (if applicable) and shall immediately become
the sole and absolute property of the Company and its assigns, as works
made for hire or otherwise;
(ii) Employee shall promptly disclose to the Company
(or any persons designated by it) each such Development;
(iii) as may be necessary to ensure the Company's
ownership of such Developments, Employee hereby assigns any rights
(including, but not limited to, any patents, copyrights and trademarks)
he or she may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without
further compensation; and
(iv) Employee shall communicate, without cost or
delay, and without disclosing to others the same, all available
information relating thereto (with all necessary plans and models) to
the Company.
(C) Further Assurances. Employee will, during and after the
Employment Period, at the request and cost of the Company, promptly
sign, execute, make and do all
<PAGE> 5
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such deeds, documents, acts and things as the Company and its duly
authorized agents may reasonably require:
(i) to apply for, obtain, register and vest in the
name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in
any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any judicial,
opposition or other proceedings or petitions or applications for
revocation of such letters patent, copyright, trademark or other
analogous protection.
In the event the Company is unable, after reasonable effort,
to secure Employee's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of
Employee's physical or mental incapacity or for any other reason
whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his or her agent
and attorney-in-fact, to act for and in Employee's behalf and stead to
execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal
force and effect as if executed by Employee.
(D) Non-Solicitation. For a period of two (2) years after any
termination of employment with the Company, whether voluntary or
involuntary, Employee will not, directly or indirectly,
(i) solicit for employment or employ, or permit any
other company or business organization which is directly or indirectly
controlled by Employee to solicit for employment or employ, any person
who is employed by the Company, or in any manner assist any person or
entity in soliciting for employment or hiring any employee of the
Company, or otherwise seek to induce any such employee to leave his or
her employment with the Company; or
(ii) solicit any of the Company's then current
customers, or permit any other company or business organization which
is directly or indirectly controlled by Employee to solicit any such
customers, or in any manner assist any person or entity in soliciting
such customers of the Company, or otherwise seek to induce any such
customer to terminate its business relationship with the Company.
(E) Specific Performance. Employee agrees that any breach of
this Section 3 by Employee will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an
<PAGE> 6
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injunction, specific performance or other equitable relief to prevent
the violation of Employee's obligations hereunder.
4. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he or she has obtained all waivers and/or consents from third
parties which are necessary to enable him or her to enjoy employment with the
Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Employee represents that he or she
is not bound by any agreement or any other existing or previous business
relationship which conflicts with, or may conflict with, the performance of his
or her obligations hereunder or prevent the full performance of his or her
duties and obligations hereunder.
5. Governing Law; Jurisdiction and Venue. This Agreement, the
employment relationship contemplated herein and any claim arising from such
relationship, whether or not arising under this Agreement, shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without reference to its conflicts of law principles, and this
Agreement shall be deemed to be performable in Massachusetts. Any legal action
or proceeding arising out of or relating to this Agreement may be instituted in
either the courts of the Commonwealth of Massachusetts or the United States
District Court for the District of Massachusetts, and Employee hereby
irrevocably submits to the jurisdiction of any such court in any such action or
proceeding, and Employee expressly consents to personal jurisdiction and venue
in any such action.
6. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed and reformed to the maximum extent permitted by law.
7. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 7. No waiver by either party of any
breach by the other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but only by an instrument in writing signed by the
party against whom any waiver, change, discharge or termination is sought.
8. Assignment. The Employee acknowledges that the services to be
rendered by him or her hereunder are unique and personal in nature. Accordingly,
the Employee may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement. The rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
<PAGE> 7
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9. Acknowledgments. The Employee hereby acknowledges and recognizes
that the enforcement of any of the provisions in this Agreement may potentially
interfere with the Employee's ability to pursue a proper livelihood. The
Employee represents that he or she is knowledgeable about the business of the
Company and further represents that he or she is capable of pursuing a career in
other industries to earn a proper livelihood. The Employee recognizes and agrees
that the enforcement of the provisions of Section 3 of this Agreement are
necessary to ensure the preservation, protection and continuity of the business,
trade secrets and goodwill of the Company.
10. Entire Agreement. This Agreement constitutes the entire
understanding of the parties relating to the subject matter set forth herein and
supersedes and cancels all agreements, written or oral, made prior to the date
hereof between the Employee and the Company relating to employment, salary,
bonus, or other compensation of any description, equity participation, pension,
post-retirement benefits, severance or other remuneration.
11. Notices. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Atlantic Data Services, Inc.
One Batterymarch Park
Quincy, MA 02169
Attention: Chief Executive Officer
If to the Employee, at the Employee's address set forth on the
signature page hereto.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13. Section Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
ATLANTIC DATA SERVICES, INC. EMPLOYEE:
By: /s/ Robert W. Howe /s/ Paul K. McGrath
------------------------------ --------------------------------
Paul K. McGrath
Title: Chief Executive Officer
68 Sunyside Avenue
Reading, MA 01867
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 25th day of March, 1998, by and between Peter
A. Cahill (the "Employee") and Atlantic Data Services, Inc., a Massachusetts
corporation with a principal place of business at One Batterymarch Park, Quincy,
MA 02169 (the "Company").
WHEREAS, the Company believes it to be to its advantage that the
Employee renders services to the Company as hereinafter provided; and
WHEREAS, the Employee's senior managerial position requires that he or
she be trusted with confidential information and trade secrets of the Company
and that he or she develop a thorough and comprehensive knowledge of various
aspects of the Company's business;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities. The Employee agrees to serve
initially as Executive Vice President and Director of Operations of the Company.
The parties agree that such employment shall be full-time and on an "at-will"
basis, and that either the Employee or the Company may terminate the employment
relationship at any time, with or without cause, upon written notice to the
other party. The Employee shall initially report to, and his or her activities
shall at all times be subject to the direction and control of, the President and
Chief Operating Officer of the Company, and the Employee shall exercise such
powers and comply with and perform, faithfully and to the best of his or her
ability, such directions and duties in relation to the business and affairs of
the Company as may from time to time be vested in or requested of him or her by
the President and Chief Operating Officer and shall use his or her best efforts
to improve and extend the business of the Company.
2. Compensation. The Company shall pay the Employee the following
compensation, including the following:
(A) Salary. In consideration of the services to be rendered by
the Employee to the Company, the Company will pay to the Employee a
monthly salary of $21,667 (the Employee's "base rate"). Such salary
shall be payable in conformity with the Company's customary practices
for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all
applicable federal and state withholding, payroll and other taxes.
(B) Fringe Benefits. The Employee will also be entitled to participate
on the same basis in the Company's standard benefits package generally
available for all other officers of the Company similarly situated. In
addition, the Employee shall be eligible to participate in the
Company's annual incentive bonus plan for officers, as approved by and
subject to the discretion of the Company's Board of Directors.
<PAGE> 2
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(C) Change of Control. If, upon a Change of Control (as
hereinafter defined), the Employee is (i) not offered employment by the
acquiring corporation in a comparable position, at a comparable salary
or (ii) the Company or the acquiring corporation terminates the
employment of the Employee, without Cause, within twelve months of the
consummation of a Change in Control, then the Company or the acquiring
corporation, as the case may be, shall be obligated to pay the Employee
a severance payment of twelve months' salary at the Employee's then
current base rate, payable in the same manner as such salary was
payable during the period of the Employee's employment. In the event
that the Employee elects to continue health insurance coverage in
accordance with the provisions of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the Company shall continue to pay
for Employee's health insurance premium on the same terms and
conditions, and subject to the same rules and regulations applicable
thereto, as active Company employees for a period of twelve months from
the date of termination of Employee's employment with the Company.
Thereafter, the Employee shall be solely liable for the cost of such
premium. "For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during Employee's employment with the
Company any of the following events shall occur:
(i) The Company is merged or consolidated into or
with another corporation or other legal person, and as a result of such
merger or consolidation less than a majority of the combined voting
power of the then-outstanding securities of such surviving or resulting
corporation or person immediately after such transaction is held in the
aggregate by the holders of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock") immediately prior to such transaction;
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person, and after
such sale less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale is held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale; or
(iii) There is a tender offer in which any "person"
(as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) acquires the beneficial ownership of securities
representing a majority or more of the Voting Stock of the Company;
provided, however, that a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any
Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or because the Company
<PAGE> 3
-3-
reports that a change in control of the Company has occurred by reason
of such beneficial ownership.
(D) Termination for Cause. The Company may terminate the
employment of the Employee at any time for "Cause". For purposes of
this Agreement, "Cause" means: (a) the Employee's conviction of any
crime (whether or not involving the Company) other than unintentional
motor vehicle felonies; (b) any intentional act of theft, fraud or
embezzlement by the Employee in connection with his work with the
Company; (c) Employee's continuing, repeated or willful failure or
refusal to perform his duties and services under this Agreement (other
than due to his incapacity due to illness or injury), or (d) the
Employee's violation of Section 3 of this Agreement.
If the Company terminates the Employee's employment for Cause
at any time (regardless of whether or not the Company experiences a
Change of Control), the Employee shall not be entitled to any
compensation or benefits following the date of such termination, other
than compensation and benefits required to be paid or provided by law
and payment of the Employee's normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
(E) Termination Without Cause. The Company may terminate the
employment of the Employee at any time without Cause. If the Company
terminates the Employee's employment without Cause at any time, then
the Company shall be obligated to pay the Employee a severance payment
of twelve month's salary at the Employee's then current base rate,
payable in the same manner as such salary was payable, during the
period of the Employee's employment. In the event that the Employee
elects to continue health insurance coverage in accordance with the
provisions COBRA, the Company shall continue to pay for Employee's
health insurance premium on the same terms and conditions, and subject
to the same rules and regulations applicable thereto, as active Company
employees for a period of twelve months from the date of termination of
Employee's employment with the Company. Thereafter, the Employee shall
be solely liable for the cost of such premium.
3. Nondisclosure and Developments; Non-Solicitation.
(A) Nondisclosure. Employee will not at any time, whether
during or after his or her period of employment by the Company
("Employment Period") reveal to any person or entity any of the trade
secrets or confidential information concerning the organization,
business or finances of the Company or of any third party which the
Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship, customer lists,
software, supplier lists, pricing, projects, plans and proposals),
except as may be required in the ordinary course of performing duties
as an employee of the Company, and Employee shall keep secret all
matters entrusted to him or her and shall not use or attempt to use any
such information in any manner which may injure or cause
<PAGE> 4
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loss or may be calculated to injure or cause loss, whether directly or
indirectly, to the Company. Further, Employee agrees that during and
after the Employment Period he or she shall not make, use or permit to
be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or
other materials of any nature relating to any matter within the scope
of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company, it being agreed
that all of the foregoing shall be and remain the sole and exclusive
property of the Company, and that immediately upon the termination of
Employee's employment he or she shall deliver all of the foregoing, and
all copies thereof, to the Company, at its main office.
(B) Developments. If at any time or times during the
Employment Period, Employee shall (either alone or with others) make,
conceive, create, discover, invent or reduce to practice any invention,
modification, discovery, design, development, improvement, process,
software program, work of authorship, documentation, formula, data,
technique, know-how, trade secret or intellectual property right
whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes, including
but not limited to the Semiconductor Chip Protection Act, or subject to
analogous protection) (herein called "Developments") that (i) relates
to the business of the Company or any customer of or supplier to the
Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (ii) results from tasks assigned the Employee by the Company
or (iii) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
then:
(i) such Developments and the benefits thereof are
deemed works-made-for hire (if applicable) and shall immediately become
the sole and absolute property of the Company and its assigns, as works
made for hire or otherwise;
(ii) Employee shall promptly disclose to the Company
(or any persons designated by it) each such Development;
(iii) as may be necessary to ensure the Company's
ownership of such Developments, Employee hereby assigns any rights
(including, but not limited to, any patents, copyrights and trademarks)
he or she may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without
further compensation; and
(iv) Employee shall communicate, without cost or
delay, and without disclosing to others the same, all available
information relating thereto (with all necessary plans and models) to
the Company.
(C) Further Assurances. Employee will, during and after the
Employment Period, at the request and cost of the Company, promptly
sign, execute, make and do all
<PAGE> 5
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such deeds, documents, acts and things as the Company and its duly
authorized agents may reasonably require:
(i) to apply for, obtain, register and vest in the
name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in
any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any judicial,
opposition or other proceedings or petitions or applications for
revocation of such letters patent, copyright, trademark or other
analogous protection.
In the event the Company is unable, after reasonable effort,
to secure Employee's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of
Employee's physical or mental incapacity or for any other reason
whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his or her agent
and attorney-in-fact, to act for and in Employee's behalf and stead to
execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal
force and effect as if executed by Employee.
(D) Non-Solicitation. For a period of two (2) years after any
termination of employment with the Company, whether voluntary or
involuntary, Employee will not, directly or indirectly,
(i) solicit for employment or employ, or permit any
other company or business organization which is directly or indirectly
controlled by Employee to solicit for employment or employ, any person
who is employed by the Company, or in any manner assist any person or
entity in soliciting for employment or hiring any employee of the
Company, or otherwise seek to induce any such employee to leave his or
her employment with the Company; or
(ii) solicit any of the Company's then current
customers, or permit any other company or business organization which
is directly or indirectly controlled by Employee to solicit any such
customers, or in any manner assist any person or entity in soliciting
such customers of the Company, or otherwise seek to induce any such
customer to terminate its business relationship with the Company.
(E) Specific Performance. Employee agrees that any breach of
this Section 3 by Employee will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an
<PAGE> 6
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injunction, specific performance or other equitable relief to prevent
the violation of Employee's obligations hereunder.
4. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he or she has obtained all waivers and/or consents from third
parties which are necessary to enable him or her to enjoy employment with the
Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Employee represents that he or she
is not bound by any agreement or any other existing or previous business
relationship which conflicts with, or may conflict with, the performance of his
or her obligations hereunder or prevent the full performance of his or her
duties and obligations hereunder.
5. Governing Law; Jurisdiction and Venue. This Agreement, the
employment relationship contemplated herein and any claim arising from such
relationship, whether or not arising under this Agreement, shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without reference to its conflicts of law principles, and this
Agreement shall be deemed to be performable in Massachusetts. Any legal action
or proceeding arising out of or relating to this Agreement may be instituted in
either the courts of the Commonwealth of Massachusetts or the United States
District Court for the District of Massachusetts, and Employee hereby
irrevocably submits to the jurisdiction of any such court in any such action or
proceeding, and Employee expressly consents to personal jurisdiction and venue
in any such action.
6. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed and reformed to the maximum extent permitted by law.
7. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 7. No waiver by either party of any
breach by the other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but only by an instrument in writing signed by the
party against whom any waiver, change, discharge or termination is sought.
8. Assignment. The Employee acknowledges that the services to be
rendered by him or her hereunder are unique and personal in nature. Accordingly,
the Employee may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement. The rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
<PAGE> 7
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9. Acknowledgments. The Employee hereby acknowledges and recognizes
that the enforcement of any of the provisions in this Agreement may potentially
interfere with the Employee's ability to pursue a proper livelihood. The
Employee represents that he or she is knowledgeable about the business of the
Company and further represents that he or she is capable of pursuing a career in
other industries to earn a proper livelihood. The Employee recognizes and agrees
that the enforcement of the provisions of Section 3 of this Agreement are
necessary to ensure the preservation, protection and continuity of the business,
trade secrets and goodwill of the Company.
10. Entire Agreement. This Agreement constitutes the entire
understanding of the parties relating to the subject matter set forth herein and
supersedes and cancels all agreements, written or oral, made prior to the date
hereof between the Employee and the Company relating to employment, salary,
bonus, or other compensation of any description, equity participation, pension,
post-retirement benefits, severance or other remuneration.
11. Notices. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Atlantic Data Services, Inc.
One Batterymarch Park
Quincy, MA 02169
Attention: Chief Executive Officer
If to the Employee, at the Employee's address set forth on the
signature page hereto.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13. Section Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 8
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
ATLANTIC DATA SERVICES, INC. EMPLOYEE:
By: /s/ Robert W. Howe /s/ Peter A Cahill
------------------------------ -------------------------------
Peter A. Cahill
Title: Chief Executive Officer
3 Windjammer Way
Hingham, MA 02043
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 25th day of March, 1998, by and between David
E. Olsson (the "Employee") and Atlantic Data Services, Inc., a Massachusetts
corporation with a principal place of business at One Batterymarch Park, Quincy,
MA 02169 (the "Company").
WHEREAS, Employee has entered into an Employment Agreement by and
between the Company and the Employee dated July 3, 1996, as amended (the
"Employment Agreement"), which Employment Agreement shall be terminated and
superseded by this Agreement;
WHEREAS, the Company believes it to be to its advantage that the
Employee renders services to the Company as hereinafter provided; and
WHEREAS, the Employee's senior managerial position requires that he or
she be trusted with confidential information and trade secrets of the Company
and that he or she develop a thorough and comprehensive knowledge of various
aspects of the Company's business;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Position and Responsibilities. The Employee agrees to serve
initially as Executive Vice President and Director of Business Development of
the Company. The parties agree that such employment shall be full-time and on an
"at-will" basis, and that either the Employee or the Company may terminate the
employment relationship at any time, with or without cause, upon written notice
to the other party. The Employee shall initially report to, and his or her
activities shall at all times be subject to the direction and control of, the
President and Chief Operating Officer of the Company, and the Employee shall
exercise such powers and comply with and perform, faithfully and to the best of
his or her ability, such directions and duties in relation to the business and
affairs of the Company as may from time to time be vested in or requested of him
or her by the President and Chief Operating Officer and shall use his or her
best efforts to improve and extend the business of the Company.
2. Compensation. The Company shall pay the Employee the following
compensation, including the following:
(A) Salary. In consideration of the services to be rendered by
the Employee to the Company, the Company will pay to the Employee a
monthly salary of $21,667 (the Employee's "base rate"). Such salary
shall be payable in conformity with the Company's customary practices
for executive compensation as such practices shall be established or
modified from time to time. Salary payments shall be subject to all
applicable federal and state withholding, payroll and other taxes.
<PAGE> 2
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(B) Fringe Benefits. The Employee will also be entitled to
participate on the same basis in the Company's standard benefits
package generally available for all other officers of the Company
similarly situated. In addition, the Employee shall be eligible to
participate in the Company's annual incentive bonus plan for officers,
as approved by and subject to the discretion of the Company's Board of
Directors.
(C) Change of Control. If, upon a Change of Control (as
hereinafter defined), the Employee is (i) not offered employment by the
acquiring corporation in a comparable position, at a comparable salary
or (ii) the Company or the acquiring corporation terminates the
employment of the Employee, without Cause, within twelve months of the
consummation of a Change in Control, then the Company or the acquiring
corporation, as the case may be, shall be obligated to pay the Employee
a severance payment of twelve months' salary at the Employee's then
current base rate, payable in the same manner as such salary was
payable during the period of the Employee's employment. In the event
that the Employee elects to continue health insurance coverage in
accordance with the provisions of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the Company shall continue to pay
for Employee's health insurance premium on the same terms and
conditions, and subject to the same rules and regulations applicable
thereto, as active Company employees for a period of twelve months from
the date of termination of Employee's employment with the Company.
Thereafter, the Employee shall be solely liable for the cost of such
premium. "For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during Employee's employment with the
Company any of the following events shall occur:
(i) The Company is merged or consolidated into or
with another corporation or other legal person, and as a result of such
merger or consolidation less than a majority of the combined voting
power of the then-outstanding securities of such surviving or resulting
corporation or person immediately after such transaction is held in the
aggregate by the holders of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock") immediately prior to such transaction;
(ii) The Company sells all or substantially all of
its assets to any other corporation or other legal person, and after
such sale less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale is held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale; or
(iii) There is a tender offer in which any "person"
(as such term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) acquires the beneficial ownership of securities
representing a majority or more of the Voting Stock of the Company;
provided, however, that a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any
Company-sponsored employee stock ownership plan or any other employee
<PAGE> 3
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benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock or because the Company reports that a
change in control of the Company has occurred by reason of such
beneficial ownership.
(D) Termination for Cause. The Company may terminate the
employment of the Employee at any time for "Cause". For purposes of
this Agreement, "Cause" means: (a) the Employee's conviction of any
crime (whether or not involving the Company) other than unintentional
motor vehicle felonies; (b) any intentional act of theft, fraud or
embezzlement by the Employee in connection with his work with the
Company; (c) Employee's continuing, repeated or willful failure or
refusal to perform his duties and services under this Agreement (other
than due to his incapacity due to illness or injury), or (d) the
Employee's violation of Section 3 of this Agreement.
If the Company terminates the Employee's employment for Cause
at any time (regardless of whether or not the Company experiences a
Change of Control), the Employee shall not be entitled to any
compensation or benefits following the date of such termination, other
than compensation and benefits required to be paid or provided by law
and payment of the Employee's normal post-termination benefits in
accordance with the Company's retirement, insurance and other benefit
plans and arrangements.
(E) Termination Without Cause. The Company may terminate the
employment of the Employee at any time without Cause. If the Company
terminates the Employee's employment without Cause at any time, then
the Company shall be obligated to pay the Employee a severance payment
of twelve month's salary at the Employee's then current base rate,
payable in the same manner as such salary was payable, during the
period of the Employee's employment. In the event that the Employee
elects to continue health insurance coverage in accordance with the
provisions COBRA, the Company shall continue to pay for Employee's
health insurance premium on the same terms and conditions, and subject
to the same rules and regulations applicable thereto, as active Company
employees for a period of twelve months from the date of termination of
Employee's employment with the Company. Thereafter, the Employee shall
be solely liable for the cost of such premium.
3. Nondisclosure and Developments; Non-Solicitation.
(A) Nondisclosure. Employee will not at any time, whether
during or after his or her period of employment by the Company
("Employment Period") reveal to any person or entity any of the trade
secrets or confidential information concerning the organization,
business or finances of the Company or of any third party which the
Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship,
<PAGE> 4
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customer lists, software, supplier lists, pricing, projects, plans and
proposals), except as may be required in the ordinary course of
performing duties as an employee of the Company, and Employee shall
keep secret all matters entrusted to him or her and shall not use or
attempt to use any such information in any manner which may injure or
cause loss or may be calculated to injure or cause loss, whether
directly or indirectly, to the Company. Further, Employee agrees that
during and after the Employment Period he or she shall not make, use or
permit to be used any notes, memoranda, reports, lists, records,
drawings, sketches, specifications, software programs, data,
documentation or other materials of any nature relating to any matter
within the scope of the business of the Company or concerning any of
its dealings or affairs otherwise than for the benefit of the Company,
it being agreed that all of the foregoing shall be and remain the sole
and exclusive property of the Company, and that immediately upon the
termination of Employee's employment he or she shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
(B) Developments. If at any time or times during the
Employment Period, Employee shall (either alone or with others) make,
conceive, create, discover, invent or reduce to practice any invention,
modification, discovery, design, development, improvement, process,
software program, work of authorship, documentation, formula, data,
technique, know-how, trade secret or intellectual property right
whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes, including
but not limited to the Semiconductor Chip Protection Act, or subject to
analogous protection) (herein called "Developments") that (i) relates
to the business of the Company or any customer of or supplier to the
Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation
therewith, (ii) results from tasks assigned the Employee by the Company
or (iii) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by the Company,
then:
(i) such Developments and the benefits thereof are
deemed works-made-for hire (if applicable) and shall immediately become
the sole and absolute property of the Company and its assigns, as works
made for hire or otherwise;
(ii) Employee shall promptly disclose to the Company
(or any persons designated by it) each such Development;
(iii) as may be necessary to ensure the Company's
ownership of such Developments, Employee hereby assigns any rights
(including, but not limited to, any patents, copyrights and trademarks)
he or she may have or acquire in the Developments and benefits and/or
rights resulting therefrom to the Company and its assigns without
further compensation; and
(iv) Employee shall communicate, without cost or
delay, and without disclosing to others the same, all available
information relating thereto (with all necessary plans and models) to
the Company.
<PAGE> 5
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(C) Further Assurances. Employee will, during and after the
Employment Period, at the request and cost of the Company, promptly
sign, execute, make and do all such deeds, documents, acts and things
as the Company and its duly authorized agents may reasonably require:
(i) to apply for, obtain, register and vest in the
name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in
any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any judicial,
opposition or other proceedings or petitions or applications for
revocation of such letters patent, copyright, trademark or other
analogous protection.
In the event the Company is unable, after reasonable effort,
to secure Employee's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of
Employee's physical or mental incapacity or for any other reason
whatsoever, Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his or her agent
and attorney-in-fact, to act for and in Employee's behalf and stead to
execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal
force and effect as if executed by Employee.
(D) Non-Solicitation. For a period of two (2) years after any
termination of employment with the Company, whether voluntary or
involuntary, Employee will not, directly or indirectly,
(i) solicit for employment or employ, or permit any
other company or business organization which is directly or indirectly
controlled by Employee to solicit for employment or employ, any person
who is employed by the Company, or in any manner assist any person or
entity in soliciting for employment or hiring any employee of the
Company, or otherwise seek to induce any such employee to leave his or
her employment with the Company; or
(ii) solicit any of the Company's then current
customers, or permit any other company or business organization which
is directly or indirectly controlled by Employee to solicit any such
customers, or in any manner assist any person or entity in soliciting
such customers of the Company, or otherwise seek to induce any such
customer to terminate its business relationship with the Company.
<PAGE> 6
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(E) Specific Performance. Employee agrees that any breach of
this Section 3 by Employee will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an injunction,
specific performance or other equitable relief to prevent the violation
of Employee's obligations hereunder.
4. Termination of Employment Agreement. Each of the Company and the
Employee, being a party to the Employment Agreement, acknowledge and agree that
the Employment Agreement shall be terminated and of no further force and effect
and all rights and obligations of the parties thereunder shall be null and void
and superseded by this Agreement.
5. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he or she has obtained all waivers and/or consents from third
parties which are necessary to enable him or her to enjoy employment with the
Company on the terms and conditions set forth herein and to execute and perform
this Agreement without being in conflict with any other agreement, obligation or
understanding with any such third party. The Employee represents that he or she
is not bound by any agreement or any other existing or previous business
relationship which conflicts with, or may conflict with, the performance of his
or her obligations hereunder or prevent the full performance of his or her
duties and obligations hereunder.
6. Governing Law; Jurisdiction and Venue. This Agreement, the
employment relationship contemplated herein and any claim arising from such
relationship, whether or not arising under this Agreement, shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without reference to its conflicts of law principles, and this
Agreement shall be deemed to be performable in Massachusetts. Any legal action
or proceeding arising out of or relating to this Agreement may be instituted in
either the courts of the Commonwealth of Massachusetts or the United States
District Court for the District of Massachusetts, and Employee hereby
irrevocably submits to the jurisdiction of any such court in any such action or
proceeding, and Employee expressly consents to personal jurisdiction and venue
in any such action.
7. Severability. In case any one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed and reformed to the maximum extent permitted by law.
8. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 7. No waiver by either party of any
breach by the other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other provision of this
Agreement. This Agreement sets forth all of the terms of the understandings
between the parties with reference to the subject matter set forth herein and
may not be waived, changed, discharged or terminated orally or by any course of
dealing between the parties, but
<PAGE> 7
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only by an instrument in writing signed by the party against whom any waiver,
change, discharge or termination is sought.
9. Assignment. The Employee acknowledges that the services to be
rendered by him or her hereunder are unique and personal in nature. Accordingly,
the Employee may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement. The rights and obligations of
the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
10. Acknowledgments. The Employee hereby acknowledges and recognizes
that the enforcement of any of the provisions in this Agreement may potentially
interfere with the Employee's ability to pursue a proper livelihood. The
Employee represents that he or she is knowledgeable about the business of the
Company and further represents that he or she is capable of pursuing a career in
other industries to earn a proper livelihood. The Employee recognizes and agrees
that the enforcement of the provisions of Section 3 of this Agreement are
necessary to ensure the preservation, protection and continuity of the business,
trade secrets and goodwill of the Company.
11. Entire Agreement. This Agreement constitutes the entire
understanding of the parties relating to the subject matter set forth herein and
supersedes and cancels all agreements, written or oral, made prior to the date
hereof between the Employee and the Company relating to employment, salary,
bonus, or other compensation of any description, equity participation, pension,
post-retirement benefits, severance or other remuneration, including the
Employment Agreement.
12. Notices. All notices hereunder shall be in writing and shall be
delivered in person or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to the Company, to: Atlantic Data Services, Inc.
One Batterymarch Park
Quincy, MA 02169
Attention: Chief Executive Officer
If to the Employee, at the Employee's address set forth on the
signature page hereto.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14. Section Headings. The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to define, limit, or
otherwise affect the construction of any provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
ATLANTIC DATA SERVICES, INC. EMPLOYEE:
By: /s/ Robert W. Howe /s/ David E. Olsson
------------------------------ ---------------------------------
David E. Olsson
Title: Chief Executive Officer
6 Catha Lane
Hingham, MA 02043
<PAGE> 1
EXHIBIT 10.17
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of March 25,
1998 by and among Atlantic Data Services, Inc., a Massachusetts corporation (the
"COMPANY") and each of the shareholders of the Company listed on Schedule I
hereto (the "SHAREHOLDERS").
W I T N E S S E T H:
WHEREAS, the Shareholders currently own collectively 6,847,960 shares
of the Company's Common Stock, $.01 par value per share (the "COMMON STOCK") and
3,104,800 shares of the Company's Special Common Stock, $.01 par value per share
(the "SPECIAL COMMON");
WHEREAS, each of the Shareholders and the Company are parties to a
Shareholders' Agreement dated as of July 15, 1988, as amended (the
"SHAREHOLDERS' AGREEMENT");
WHEREAS, the Company is presently in the process of preparing an
underwritten initial public offering (the "OFFERING") of shares of its Common
Stock;
WHEREAS, the Company and the Shareholders desire to terminate the
Shareholders' Agreement and replace it in full with the terms and provisions of
this Agreement effective on the first date that the Company's shares of Common
Stock are registered under the Securities Exchange Act of 1934, as amended (the
"EFFECTIVE DATE").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
REGISTRATION RIGHTS
1.1 "PIGGY-BACK" REGISTRATIONS. If at any time the Company
shall determine to register, in a firm commitment underwritten offering, for its
own account or the account of others under the Securities Act of 1933, as
amended (the "SECURITIES ACT") any of its equity securities, it shall send to
each holder of Registrable Shares (as defined below), written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Registrable Shares such holder
requests to be registered. "REGISTRABLE SHARES" shall consist of (i) any and all
shares of Common Stock held by the Shareholders as of the date of this Agreement
which shares are set forth on Schedule I attached hereto; (ii) any and all
shares of Common Stock issued or issuable upon conversion of the Special Common
held by the Shareholders as of the date of this Agreement which shares are set
forth on Schedule I attached hereto; and (iii) any and all of Common Stock and
all other securities of the Company which
<PAGE> 2
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may be issued in exchange for or in respect of shares of the Common Stock
(whether by way of conversion, stock split, stock dividend, reclassification,
reorganization, or any other means).
If, in connection with any offering involving Common Stock to
be issued by the Company, the managing underwriter shall impose a limitation on
the number of shares of such Common Stock which may be included in the
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such registration statement only such limited portion of the
Registrable Shares with respect to which such holder has requested inclusion
hereunder; provided, however, that the Company shall not so exclude any
Registrable Shares unless it has first excluded any securities to be offered and
sold by officers and employees of the Company or by holders who do not have
contractual rights to include such securities in any registration.
Any exclusion of Registrable Shares shall be made pro rata
among the Shareholders and its assigns seeking to include such shares in
proportion to the number of such shares held by the Shareholder or its assigns
bears to total number of shares held by all shareholders. No rights or
restrictions under this Section 1.1 shall be construed to limit, and shall not
apply to, any registration required under Section 1.2. The obligations of the
Company under this Section 1.1 may be waived at any time upon the written
consent of holders of a majority of the Registrable Shares.
This Section 1.1 shall not apply to (i) the Offering or (ii) a
registration of shares of Common Stock on Form S-8 or Form S-4 or their then
equivalents or otherwise relating to an offering of shares of Common Stock to be
issued in connection with any acquisition of any entity or business or otherwise
issuable in connection with any stock option, stock purchase or employee benefit
plan of the Company existing now or in the future.
1.2 DEMAND REGISTRATIONS. Commencing with the Offering (but
not within twelve (12) months of the effective date of the registration
statement filed in connection with the Offering), if on any occasion one or more
holders of at least twenty percent (20%) of the Registrable Shares shall notify
the Company in writing that it or they intend to offer or cause to be offered
for public sale, in a firm commitment underwritten offering (with a managing
underwriter, which shall be a nationally recognized investment bank reasonably
satisfactory to the Company), not less than fifty percent (50%) of the
Registrable Shares held by such holders, (or any lesser percentage if the
anticipated aggregate offering price would exceed $5,000,000), the Company will
so notify all holders of Registrable Shares. Upon written request of any holder
given within twenty (20) days after the receipt by such holder from the Company
of such notification, the Company will use its best efforts to cause such of the
Registrable Shares as may be requested by any holder thereof (including the
holder or holders giving the initial notice of intent to offer) to be registered
under the Securities Act as expeditiously as possible.
The Company shall not be required to effect more than three
(3) registration pursuant to this Section 1.2 and no Shareholder may request a
registration pursuant to this Section 1.2 earlier than twelve (12) months after
the effective date of the most recent registration requested under this Section
1.2. If the Company determines to include shares to be sold by it or
<PAGE> 3
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by other selling shareholders in any registration request pursuant to this
Section 1.2, such registration shall be deemed to have been a "piggy back"
registration under Section 1.1, and not a "demand" registration under this
Section 1.2 if the holders of Registrable Shares are unable to include in any
such registration statement at least two-thirds of the Registrable Shares
initially requested for inclusion in such registration statement.
1.3 EFFECTIVENESS. The Company will use its best efforts to
maintain the effectiveness for at least 90 days (or such shorter period of time
as the underwriters need to complete the distribution of the registered offering
of any registration statement pursuant to which any of the Registrable Shares
are being offered, and from time to time will amend or supplement such
registration statement and the prospectus contained therein to the extent
necessary to comply with the Securities Act and any applicable state securities
statute or regulation. The Company will also provide each holder of Registrable
Shares with as many copies of the prospectus contained in any such registration
statement as it may reasonably request.
1.4 INDEMNIFICATION OF HOLDER OF REGISTRABLE SHARES. In the
event that the Company registers any offering of the Registrable Shares under
the Securities Act, the Company will indemnify and hold harmless each holder and
each underwriter of the Registrable Shares (including their officers, directors,
affiliates and partners) so registered (including any broker or dealer through
whom such shares may be sold) and each person, if any, who controls such holder
or any such underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages, expenses or liabilities,
joint or several, to which they or any of them become subject under the
Securities Act, applicable state securities laws or under any other statute or
at common law or otherwise, as incurred, and, except as hereinafter provided,
will reimburse each such holder, each such underwriter and each such controlling
person, if any, for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement under which such Registrable Shares were registered under
the Securities Act, in any preliminary or amended preliminary prospectus or in
the final prospectus (or the registration statement or prospectus as from time
to time amended or supplemented by the Company), or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction required of the Company in connection with such
registered offering.
Notwithstanding the foregoing, the Company shall have no
obligation to indemnify any such holder, underwriter or controlling person if:
(i) such untrue statement or omission was made in such registration statement,
preliminary or amended preliminary prospectus or final prospectus in reliance
upon and in conformity with information furnished in writing to the Company in
connection therewith by such holder of Registrable Shares (in the case of
indemnification of such holder), such underwriter (in the case of
indemnification of such underwriter) or such controlling person (in the case
<PAGE> 4
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of indemnification of such controlling person) expressly for use therein, or
(ii) in the case of a sale directly by such holder of Registrable Shares
(including a sale of such Registrable Shares through any underwriter retained by
such holder of Registrable Shares to engage in a distribution solely on behalf
of such holder of Registrable Shares), such untrue statement or alleged untrue
statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus copies of which were
delivered to such holder of Registrable Shares or such underwriter on a timely
basis, and such holder of Registrable Shares failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of the sale of the
Registrable Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act.
The indemnity provided in this Section 1.4 shall survive the
transfer of any Registrable Shares by such holder or any termination of this
Agreement.
1.5 INDEMNIFICATION OF COMPANY. In the event that the Company
registers any offering of Registrable Shares under the Securities Act, each
holder of the Registrable Shares so registered will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed or
otherwise participated in the preparation of the registration statement, each
underwriter of the Registrable Shares so registered (including any broker or
dealer through whom such of the shares may be sold) and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, applicable state securities laws or under any other statute or at common
law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer, underwriter or controlling person for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement of a material
fact contained in the registration statement under which such Registrable Shares
were registered under the Securities Act, in any preliminary or amended
preliminary prospectus or in the final prospectus (or in the registration
statement or prospectus as from time to time amended or supplemented), or arise
out of or are based upon the omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading, but only to
the extent that any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such holder of Registrable Shares expressly for use therein;
provided, however, that such holders' obligations hereunder shall be limited to
an amount equal to the proceeds received by such holder of Registrable Shares
sold in any such registered offering.
<PAGE> 5
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1.6 INDEMNIFICATION PROCEDURES AND CONTRIBUTION.
(a) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any person entitled to indemnification under Sections 1.4 or
1.5 above (an "INDEMNIFIED PARTY") in respect of which indemnity may be sought
from any party required by the terms hereof to provide such indemnification (an
"INDEMNIFYING PARTY"), the Indemnifying Party shall assume the defense thereof,
including the employment of counsel selected by the Indemnifying Party and
reasonably satisfactory to such Indemnified Party, and shall assume the payment
of all expenses. Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnifying Party has agreed to pay such fees and expenses
or (ii) the named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that there
may be a conflict of interest on the part of counsel employed by the
Indemnifying Party to represent such Indemnified Party, or that there may be
defenses available to the Indemnified Party that are different from or in
addition to those available to the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party; it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties). The Indemnifying Party shall
not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.
(b) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
the Company or any holder of Registrable Shares exercising its rights under this
Article 1, makes a claim for indemnification pursuant to Section 1.4 or 1.5, but
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding that Section 1.4 or 1.5 provides for
indemnification, then, in such case, the Company and such holder of Registrable
Shares will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and of the holder of Registrable Shares on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations or, if the
allocation provided herein is not permitted by applicable law,
<PAGE> 6
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in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and any holder of Registrable Shares from the offering
of the Securities covered by such registration statement. The relative fault of
the Company on the one hand and of the holder of Registrable Shares on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or by the holder of Registrable Shares on the other, and each party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, however, that, in any such case,
(A) no such holder of Registrable Shares will be required to contribute any
amount in excess of the lesser of (1) the amount for which such holder would
have been liable pursuant to Section 1.5 if the indemnification provided for
therein were enforceable in accordance with the terms thereof and (2) the
proceeds received by such holder of Registrable Shares offered by it pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
1.7 EXCHANGE ACT REGISTRATION. The Company shall timely file
with the Commission such information as the Commission may require under Section
13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"); and in such event, the Company shall use its best efforts to
take all action pursuant to Rule 144(c) as may be required as a condition to the
availability of Rule 144 or Rule 144A under the Securities Act (or any successor
exemptive rule hereinafter in effect) with respect to the Common Stock. The
Company shall furnish to any holder of Registrable Shares forthwith upon request
(i) a written statement by the Company as to its compliance with the reporting
requirements of Rule 144(c), (ii) a copy of the most recent annual or quarterly
report of the Company as filed with the Commission, and (iii) such other
publicly filed reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a holder to
sell any such Registrable Shares without registration. The Company agrees to use
its best efforts to facilitate and expedite transfers of Registrable Shares
pursuant to Rule 144 under the Securities Act, which efforts shall include
timely notice to its transfer agent to expedite such transfers of Registrable
Shares and timely filing of all reports required to be filed with the Commission
within any applicable time period (such as Form 10-K, Form 10-Q and Form 8-K).
1.8 DAMAGES. The Company recognizes and agrees that the holder
of Registrable Shares will not have an adequate remedy if the Company fails to
comply with this Article I and that damages may not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the holder of Registrable Shares or any other
person entitled to the benefits of this Article I requiring specific performance
of any and all provisions hereof or enjoining the Company from continuing to
commit any such breach of this Article I.
1.9 FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the
preceding Sections of this Article I, the Company is required hereunder to
register an offering of Registrable Shares, it agrees that it shall also do the
following:
<PAGE> 7
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(a) Furnish to each selling holder such copies of
each preliminary and final prospectus and such other documents as said
holder may reasonably request to facilitate the public offering of its
Registrable Shares;
(b) Use all reasonable efforts to register or qualify
the Registrable Shares covered by said registration statement under the
applicable securities or Blue Sky laws of such jurisdictions as any
selling holder may reasonably request; provided, however, that the
Company shall not be obligated to qualify to do business in any
jurisdictions where it is not then so qualified or to take any action
which would subject it to local taxation or the service of process in
suits other than those arising out of the offer or sale of the
securities covered by the registration statement in any jurisdiction
where it is not then so subject or to conform the composition of its
assets at the time to the securities or "Blue Sky" laws of any
jurisdiction;
(c) Furnish to each selling holder a signed
counterpart, addressed to the selling holders, of
(i) an opinion of counsel for the Company,
dated the effective date of the registration statement, and
(ii) "comfort" letters signed by the
Company's independent public accountants who have examined and
reported on the Company's financial statements included in the
registration statement, to the extent permitted by the
standards of the American Institute of Certified Public
Accountants,
covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in
the case of the accountants' "comfort" letters) with respect to events
subsequent to the date of the financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' "comfort"
letters delivered to the underwriters in underwritten public offerings
of securities, but the Company shall be obligated hereunder only to the
extent that the Company is required to deliver or cause the delivery of
such opinion or "comfort" letters to the underwriters in an
underwritten public offering of securities;
(d) Permit each selling holder of Registrable Shares
or his counsel or other representatives to inspect and copy such
corporate documents and records as may reasonably be requested by them
after reasonable advance notice and without undue interference with the
operation of the Company's business;
(e) Furnish to each selling holder of Registrable
Shares a copy of all documents filed with and all correspondence from
or to the Commission in connection with any such offering of
securities;
(f) Use its best efforts to ensure the obtaining of
all necessary approvals from the National Association of Securities
Dealers, Inc. (the "NASD"); and
<PAGE> 8
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(g) Otherwise use all reasonable efforts to comply
with all applicable rules and regulations of the Commission.
Whenever under the preceding Sections of this Article I the
holders of Registrable Shares are registering such shares pursuant to any
registration statement, each such holder agrees to timely provide to the
Company, at its request, such written information and materials as it may
reasonably request in order to effect the registration of such Registrable
Shares.
1.10 EXPENSES. In the case of each registration effected under
Section 1.1 or 1.2, the Company shall bear all reasonable costs and expenses of
each such registration on behalf of the selling holders of Registrable Shares
(except as otherwise prohibited by state securities law or regulation),
including, but not limited to, the Company's printing, legal and accounting fees
and expenses, Commission and NASD filing fees and "Blue Sky" fees and expenses
and the reasonable fees and disbursements of one counsel competent in securities
matters for the selling holders of Registrable Shares in connection with the
registration of their Registrable Shares; provided, however, that the Company
shall have no obligation to pay or otherwise bear any portion of the
underwriters' commissions or discounts attributable to the Registrable Shares
being offered and sold by the holders of Registrable Shares, or the fees and
expenses of more than one counsel for the selling holders of Registrable Shares
in connection with the registration of the Registrable Shares. The Company shall
pay all expenses (including reasonable attorneys' fees) of the holders of the
Registrable Shares in connection with any registration initiated pursuant to
this Article I which is withdrawn, delayed or abandoned, except if such
withdrawal, delay or abandoned is requested by the holders of the Registrable
Shares or is caused by the fraud, material misstatement or omission of a
material fact to be included in writing in such registration by a holder of
Registrable Shares, or other act of the holders of Registrable Shares in
violation of the provisions of this Agreement.
1.11 EXPIRATION OF REGISTRATION RIGHTS. With respect to any
Registrable Shares held by any Shareholder, the registration rights set forth in
Section 1.1 or 1.2 of this Agreement shall terminate and expire when any such
Shareholder holds less than one percent (1.0%) of the outstanding Common Stock,
or such Shareholder, is otherwise eligible to sell to the public such
Registrable Shares pursuant to any of the provisions of Rule 144(k) of the
Securities Act or any successor provision. Notwithstanding the foregoing, the
registration rights granted in Sections 1.1 and 1.2 hereof shall expire on the
date which is three (3) years from the date hereof.
1.12 "LOCK-UP" AND MARKET STANDSTILL. Each holder of
Registrable Shares agrees that in the event the Company proposes to offer for
sale to the public any of its equity securities pursuant to a registration
statement under the Securities Act (whether for its own account or the account
of others, including the holders of Registrable Shares), and (1) if requested in
writing by the Company and an underwriter of the proposed offering of Common
Stock or other securities of the Company; and (2) if all other non-institutional
"affiliates" and all directors and executive officers similarly situated are
requested by the Company and such underwriter to sign, and actually do sign, any
"Lock-Up Agreement" (as described herein), then such holder will agree to a
restriction whereby he not sell, grant any option or right to buy or sell, or
otherwise transfer or dispose of in any manner, to the public in open market
transactions, any
<PAGE> 9
-9-
Common Stock or other equity securities of the Company held by it during
whatever time period requested by the Company and the underwriter for
restrictions on trading or transfer (the "LOCK-UP PERIOD") following the
effective date of the registration statement of the Company filed under the
Securities Act. Such agreements shall be in writing and in form and substance
pursuant to customary and prevailing terms and conditions for such Lock-Up
Agreements. The Company may impose stop-transfer instructions with respect to
the securities subject to the foregoing restrictions until the end of the
Lock-Up Period. Such Lock-Up Period shall not exceed 180 days in length.
1.13 DELAY OF REGISTRATION. For a period not to exceed 90 days
(subject to the last paragraph of this Section 1.13), the Company shall not be
obligated to prepare and file, or be prevented from delaying or abandoning, a
registration statement pursuant to this Agreement at any time when the Company,
in its good faith judgment by the Board of Directors with the advice of counsel,
reasonably believes:
(a) that the filing thereof at the time requested, or
the offering of Registrable Shares pursuant thereto, would materially
and adversely affect (i) a pending or scheduled public offering or
private placement of the Company's securities, (ii) an acquisition,
merger, consolidation or similar transaction by or of the Company,
(iii) pre-existing and continuing negotiations, discussions or pending
proposals with respect to any of the foregoing transactions, or (iv)
the financial condition of the Company in view of the disclosure of any
pending or threatened litigation, claim, assessment or governmental
investigation which may be required thereby; and
(b) that the failure to disclose any material
information with respect to the foregoing would cause a violation of
the Securities Act or the Exchange Act.
If the Company defers or delays the filing of a registration statement
or the offering of Registrable Shares or if the Company abandons a registration
statement pursuant to this Section 1.13, then such deferral, delay or
abandonment right shall exist only so long as the condition giving rise to such
right exists. If the Company chooses to abandon a registration statement
pursuant to, and in accordance with, this Section 1.13 then such registration
shall not be deemed to be a "demand" registration under Section 1.2.
ARTICLE II
TERMINATION OF SHAREHOLDERS' AGREEMENT
Each of the undersigned, being a party to the Shareholders' Agreement,
acknowledges and agrees that, as of the Effective Date, the Shareholders'
Agreement shall be terminated and of no further force and effect and all rights
and obligations of the parties thereto shall be null and void.
<PAGE> 10
-10-
ARTICLE III
MISCELLANEOUS
3.1 SEVERABILITY. If any provisions of this Agreement shall be
determined to be illegal or unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
3.2 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of law thereof.
3.3 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
legal representatives and heirs and shall be binding upon the Company and its
successors and assignees. Notwithstanding the foregoing, the rights hereunder
are not assignable without the prior written consent of the Company.
3.4 MODIFICATION OR AMENDMENT. Neither this Agreement nor any
provision hereof may be modified, amended, changed, waived, discharged or
terminated except by an instrument in writing, signed by holders of at least a
majority of the Registrable Shares.
3.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
3.6 NOTICES. All notices to be given or otherwise made to any
party to this Agreement shall be deemed to be sufficient if contained in a
written instrument, delivered in person, or by express overnight courier
service, or by electronic facsimile transmission (with a copy sent by first
class mail, postage prepaid), or by registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
herein or at such other address as may hereafter be designated in writing by the
addressee to the address or listing all parties. All such notices shall, when
mailed or telegraphed, be effective when received or when attempted delivery is
refused.
3.7 MERGER PROVISION. This Agreement, including all exhibits
and schedules thereto, constitute the entire agreement among the parties hereto
pertaining to the subject matter hereof and thereof, and supersede all prior and
contemporaneous agreements and understandings, whether oral or written, of any
of the parties hereto concerning the subject matter hereof and thereof.
3.8 CONTRACT CONSTRUCTION. Whenever the content of this
Agreement permits, the masculine gender shall include the feminine and neuter
genders, and reference to singular or plural shall be interchangeable with the
other. When a reference is made in this Agreement to Articles or Sections, such
references shall be to an Article or Section of this
<PAGE> 11
-11-
Agreement unless otherwise indicated. When used in this Agreement, the words
"hereof," "herein" and "hereunder" refer to this Agreement.
3.9 SECTION HEADINGS. Captions in this Agreement are for
convenience only and shall not be considered a part of or effect the
construction or interpretation of any provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 12
-12-
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Agreement of the date first above written.
THE COMPANY:
ATLANTIC DATA SERVICES, INC.
By: /s/ Robert W. Howe
-----------------------------------------
Print Name: Robert W. Howe
Title: Chief Executive Officer
--------------------------------------
SHAREHOLDERS:
/s/ Robert W. Howe
---------------------------------------------
Robert W. Howe
/s/ William H. Gallagher
---------------------------------------------
William H. Gallagher
/s/ Lee M. Kennedy
---------------------------------------------
Lee M. Kennedy
/s/ Edward B. Gardner, Jr.
---------------------------------------------
Edward B. Gardner, Jr.
GENERAL ATLANTIC PARTNERS II, L.P.
By: /s/ David C. Hodgson
------------------------------------------
Print Name: David C. Hodgson
----------------------------------
Title: Managing Member of General Atlantic
Partners, LLC, its General Partner
--------------------------------------
<PAGE> 13
-13-
LEE M. KENNEDY 1997 IRREVOCABLE TRUST
f/b/o Shaila Kennedy dated November 6, 1997
By: /s/ Mary Elizabeth Kenney
-----------------------------------------
Mary Elizabeth Kennedy
Trustee
By: /s/ Jennifer C. Snyder
-----------------------------------------
Jennifer C. Snyder
Trustee
LEE M. KENNEDY 1997 IRREVOCABLE TRUST
f/b/o Lee Michael Kennedy dated November 6,
1997
By: /s/ Mary Elizabeth Kennedy
-----------------------------------------
Mary Elizabeth Kennedy
Trustee
By: /s/ Jennifer C. Snyder
-----------------------------------------
Jennifer C. Snyder
Trustee
LEE M. KENNEDY 1997 IRREVOCABLE TRUST
f/b/o Eugene Kennedy dated November 6, 1997
By: /s/ Mary Elizabeth Kennedy
-----------------------------------------
Mary Elizabeth Kennedy
Trustee
By: /s/ Jennifer C. Snyder
-----------------------------------------
Jennifer C. Snyder
Trustee
<PAGE> 14
-14-
HOWE FAMILY PARTNERSHIP
By: /s/ Robert W. Howe
-----------------------------------------
Robert W. Howe
General Partner
ROBERT W. HOWE GRANTOR
RETAINED ANNUITY TRUST
By: /s/ Stephen A. Hurwitz
-----------------------------------------
Stephen A. Hurwitz
Trustee
GALLAGHER FAMILY LIMITED PARTNERSHIP
By: /s/ William H. Gallagher
-----------------------------------------
William H. Gallagher
General Partner
WILLIAM H. GALLAGHER GRANTOR
RETAINED ANNUITY TRUST
By: /s/ Stephen A. Hurwitz
-----------------------------------------
Stephen A. Hurwitz
Trustee
GARDNER FAMILY LIMITED PARTNERSHIP
By: /s/ Edward B. Gardner, Jr.
-----------------------------------------
Edward B. Gardner, Jr.
By: /s/ Susan C. Gardner
-----------------------------------------
Susan C. Gardner
<PAGE> 15
SCHEDULE I
<TABLE>
<CAPTION>
No. of Shares of No. of Shares of
Name of Shareholder Common Stock Special Common Stock
------------------- ------------ --------------------
<S> <C> <C>
Robert W. Howe 2,070,880 0
Howe Family Limited Partnership 258,860 0
Robert W. Howe Grantor Retained Annuity Trust 258,860 0
William H. Gallagher 2,070,880 0
Gallagher Family Limited Partnership 258,860 0
William H. Gallagher Grantor Retained 258,860 0
Annuity Trust
Lee M. Kennedy 1,068,400 0
Lee M. Kennedy 1997 Irrevocable Trust f/b/o 20,000 0
Shaila Kennedy dated November 6, 1997
Lee M. Kennedy 1997 Irrevocable Trust f/b/o 20,000 0
Lee Michael Kennedy dated November 6,
1997
Lee M. Kennedy 1997 Irrevocable Trust f/b/o 20,000 0
Eugene Kennedy dated November 6, 1997
Edward B. Gardner, Jr. 414,360
Gardner Family Limited Partnership 128,000
General Atlantic Partners II, L.P. 0 3,104,080
--------- ---------
TOTAL: 6,847,960 3,104,080
========= =========
</TABLE>
<PAGE> 1
EXHIBIT 10.18
LEASE OF
NATIONAL FIRE PROTECTION ASSOCIATION
HEADQUARTERS BUILDING
BATTERYMARCH PARK, QUINCY, MA
TABLE OF CONTENTS
ARTICLE
NUMBER CAPTION PAGE
I. BASIC LEASE PROVISIONS 3
II. PREMISES AND APPURTENANT RIGHTS 5
III. BASIC RENT 7
IV. TERM OF LEASE 8
V. USE OF PREMISES 8
VI. ASSIGNMENT AND SUBLETTING 10
VII. RESPONSIBILITY FOR REPAIRS AND CONDITIONS
OF PREMISES: SERVICES TO BE 11
FURNISHED BY LANDLORD
VIII. REAL ESTATE TAXES 15
IX. OPERATING EXPENSES 16
X. INDEMNITY AND PUBLIC LIABILITY INSURANCE 17
XI. LANDLORD'S ACCESS TO PREMISES 18
XII. FIRE, EMINENT DOMAIN, ETC. 19
XIII. DEFAULT 20
XIV. MISCELLANEOUS PROVISIONS 23
14.1 Extra Hazardous Use 23
14.2 Waiver 23
14.3 Covenant of Quiet Enjoyment 24
1
<PAGE> 2
14.4 Landlord's Liability 24
14.5 Notice to Mortgagee 24
14.6 Assignment of Rents and Transfer of Title 25
14.7 Rules and Regulations 25
14.8 Additional Charges 26
14.9 Invalidity of Particular Provisions 26
14.10 Provisions Binding, Etc. 26
14.11 Recording 26
14.12 Notices 26
14.13 When Lease Becomes Binding 27
14.14 Paragraph Headings 27
14.15 Rights of Mortgagee 27
14.16 Status Report 27
14.17 Security Deposit 27
14.18 Remedying Defaults 27
14.19 Holding Over 28
14.20 Waiver of Subrogation 28
14.21 Surrender of Premises 28
14.22 Brokerage 29
14.23 Substitute Space 29
14.24 First Right of Refusal 29
14.25 Exhibits 29
14.26 Governing Law 29
XV. OPTION TO EXTEND 29
EXHIBIT D RULES AND REGULATIONS
EXHIBIT OC OPERATING COSTS
EXHIBIT CS CLEANING SPECIFICATIONS
EXHIBIT FP FLOOR PLAN
2
<PAGE> 3
Lease Agreement
THIS INSTRUMENT IS A LEASE, dated as of ____________________________,
in which the Landlord and the Tenant are the parties hereinafter named, and
which relates to space in a building (the "Building") known as the National Fire
Protection Association Headquarters Building located in Batterymarch Park,
Quincy, MA. The parties to this instrument hereby agree with each other as
follows:
ARTICLE I
BASIC LEASE PROVISIONS
1.1 INTRODUCTION
The following sets forth basic data and, where appropriate, constitutes
definitions of the terms hereinafter listed. This Lease supersedes and
upon occupancy hereunder, cancels a lease between the parties dated
February 1, 1991.
1.2 BASIC DATA
Landlord: National Fire Protection Association (NFPA)
Landlord's Original Address: One Batterymarch Park, Quincy, MA 02269
Attention: John E. Saxon.
Tenant: Atlantic Data Services, Inc.
Tenant's Original Address: One Batterymarch Park, Quincy, MA
Guarantor: N/A
Basic Rent: $18.50 per square foot of the Premises Rentable Area per
annum as the same may be adjusted and/or abated pursuant to
Sections 2.3, 3.2, 3.3 and 12.1.
Premises Rentable Area: 21,192 rentable square feet (subject to
adjustment pursuant to Section 2.3) located on the Third floor of the
Building as measured in accordance with the Measurement Method.
Permitted Uses: Administrative offices, clerical offices, non-retail
sales and statistical offices.
Escalation Factor: 14.98 as computed in accordance with the
Escalation Factor Computation.
Construction Completion Date: N/A
3
<PAGE> 4
Plan Approval Date:
Initial Term: Five (5) years commencing on April 1, 1995 and expiring
at the close of the day immediately preceding the Fifth anniversary of
the Commencement Date, except that if the Commencement Date shall be
other than the first day of a calendar month, the expiration of the
Initial Term shall be at the close of the day on the last day of the
calendar month on which such anniversary shall fall.
Security Deposit: none
Base Operating Expenses: Actual 1995 Operating Expenses
Base Taxes: Actual Fiscal Year 1995 Real Estate Taxes
Public Liability Insurance: 500,000 per occurrence (combined single
limit) for property damage, personal injury or death.
Usable Floor Area: Premises Rentable Area multiplied by 82%.
1.3 ADDITIONAL DEFINITIONS
Agent:
Building Rentable Area: 152,096 square feet measured in accordance
with the Measurement Method.
Business Days: All days except Sunday, New Year's Day, Martin Luther
King Day, Washington's Birthday, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veteran's Day, Thanksgiving Day, Christmas Day (and
the following day when any such day occurs on Sunday) and such other
days that Landlord presently or in the future recognizes as holidays
for Landlord's general office staff.
Commencement Date: As defined in Section 4.1.
Default of Tenant: As defined in Section 13.1.
Escalation Charges: The amounts prescribed in Sections 8.1 and 9.2.
Escalation Factor: Computation: Premises Rentable Area divided by 93%
of Building Rentable Area.
Landlord's Work: As defined in Section 4.2.
Measurement Method: "Standard Method of Floor Measurement for Office
Buildings," effective April 16, 1968, approved by the Real Estate Board
of New York, Inc. Without
4
<PAGE> 5
limitation, such computation includes common areas of the Building
notwithstanding the fact that such common areas are not contained
within the Premises.
Operating Expenses: As determined in accordance with Section 9.1.
Operating Year: As defined in Section 9.1.
Premises: A portion of the Building as shown on Exhibit FP annexed
hereto.
Property: The Building and the land parcels on which it is located
(including adjacent sidewalks).
Tax Year: As defined in Section 8.1.
Taxes: As determined in accordance with Section 8.1.
Tenant's Delay: As defined in Section 4.2.
Tenant's Plans: As defined in Section 4.2.
Tenant's Removable Property: As defined in Section 5.2.
Term of this Lease: The Initial Term and any extension thereof in
accordance with the provisions hereof.
ARTICLE II
PREMISES AND APPURTENANT RIGHTS
2.1 LEASE OF PREMISES
Landlord hereby demises and leases to Tenant for the Term of this Lease
and upon the terms and conditions hereinafter set forth, and Tenant
hereby accepts from Landlord, the Premises.
2.2 APPURTENANT RIGHTS AND RESERVATIONS
a. Tenant shall have, as appurtenant to the Premises, the
non-exclusive right to use, and permit its invitees to use in
common with others, public or common lobbies, hallways,
stairways, and elevators and common walkways necessary for
access to the Building, and if the portion of the Premises on
any floor includes less than the entire floor, the common
toilets, corridors and elevator lobby of such floor; but such
rights shall always be subject to reasonable rules and
regulations from time to time established by Landlord pursuant
to Section 14.7 and to the right of Landlord to designate and
change from time to time areas and facilities so to be used.
The Premises shall be designated a non-smoking area and Tenant
will comply with Building regulations regarding non-smoking
areas. Tenant will be permitted to rent conference facilities
in the Building so long as such are available
5
<PAGE> 6
and subject to the Landlord's then prevailing rules,
regulations and fees, which the Landlord may change from time
to time without notice.
b. Excepted and excluded from the Premises are the ceiling, floor
and all perimeter walls of the Premises, except the inner
surfaces thereof, but the entry doors to the Premises are a
part thereof; and Tenant agrees that Landlord shall have the
right to place in the Premises (but in such manner as to
reduce to a minimum interference with Tenant's use of the
Premises) utility lines, pipes and the like, in, over and upon
the Premises. Tenant shall install and maintain, as Landlord
may require, proper access panels in any hung ceilings or
walls as may be installed by Tenant in the Premises to afford
access to any facilities above the ceiling or within or behind
the walls.
2.3 ADJUSTMENT TO PREMISES RENTABLE AREA
a. Either party hereto, not later than sixty (60) days after the
Commencement Date, may request that an exact measurement of
the Premises be made in accordance with the Measurement
Method. Such measurement shall be made by Fuller Associates
(or other architect or engineer acceptable to both parties) at
the cost and expense of the requesting party.
b. If the Premises Rentable Area as so measured is more than 102%
or less than 98% of Premises Rentable Area as set forth in
Section 1.2:
i. Basic Rent shall, retroactively to the Commencement
Date, be recomputed by multiplying the Basic Rent set
forth in Section 1.2 by a fraction, the numerator of
which shall be premises Rentable Area as determined
by such measurement and the denominator of which
shall be the Premises Rentable Area set forth in
Section 1.2: and
ii. The Escalation Factor shall be recomputed to be the
percentage determined by dividing the Premises
Rentable Area as determined by such measurement by
93% of Building Rentable Area.
Any payment due either party as a result of such
recomputations shall, if due from Tenant, be paid within
fifteen (15) days of such recomputation, or if due from
Landlord, be credited against the first amounts of Basic Rent
due after such recomputation.
c. If:
i. Neither Landlord nor Tenant requests any adjustment
as herein provided within the time limit prescribed,
or
ii. Such adjustment is requested, but the Premises
Rentable Area as so measured is between 98% and 102%
of the Premises Rentable Area set
6
<PAGE> 7
forth in Section 1.2, then Landlord and Tenant shall
be deemed to have consented to such Premises Rentable
Areas as set forth in Section 1.2 and shall be deemed
to have waived any and all right to any adjustment or
adjustments pursuant to the provisions of this
Section.
d. In the event of any adjustment pursuant to this Section,
Landlord and Tenant shall promptly execute a written statement
setting forth the recomputed Premises Rentable Area, Basic
Rent and Escalation Factor.
ARTICLE III
BASIC RENT
3.1 BASIC RENT
a. Tenant agrees to pay to Landlord, or as directed by Landlord,
commencing on the Commencement Date without offset, abatement
(except as provided in Article 12.1), deduction or demand, the
Basic Rent. Such Basic Rent shall be payable in equal monthly
installments, in advance, on the first day of each and every
calendar month during the Term of this Lease, at Landlord's
Original Address, or at such other place as Landlord shall
from time to time designate by notice. Until notice of some
other designation is given, Basic Rent and all other charges
for which provision is herein made shall be paid by remittance
payable to the Agent, and all remittances so received as
aforesaid, or by any subsequently designated recipient, shall
be treated as a payment to Landlord.
b. Basic Rent for any partial month shall be prorated on a daily
basis, and if the Term of this Lease commences on a day other
than the first day of a calendar month, the first payment
which Tenant shall make to Landlord shall be payable on the
Commencement Date and shall be equal to a proportionate part
of the monthly installment of Basic Rent for the partial month
from the Commencement Date to the last day of the month in
which such Date occurs plus the installment of Basic Rent for
the succeeding calendar month. In addition to any charges
pursuant to Section 14.18, Tenant shall pay a late charge
equal to 5% of the amount of any Basic Rent payment not paid
when due.
3.2 ADJUSTMENT
Effective as of the second and each subsequent anniversary of the
Commencement Date thereafter, the Basic Rent shall be a sum computed by
adding to the Basic Rent less Base Operating Expenses (rentable sq.
ft.) and Base Taxes (rentable sq. ft.) set forth in Section 1.2 an
amount determined by multiplying such Basic Rent by 33 1/3% of the
percentage increase in the United States Department of Labor Consumer
Price Index, Boston, for Urban Consumers (CPI-U), all item (1967 = 100)
between the point at which such Index stood when last published prior
to the Commencement Date and the point at which such Index stood when
last published prior to the second and each subsequent anniversary of
the Commencement Date thereafter. If such Index is discontinued, its
successor shall be used and if there is no successor, an index
designated by Landlord shall be used.
7
<PAGE> 8
ARTICLE IV
TERM OF LEASE
4.1 COMMENCEMENT DATE
The Commencement Date shall be April 1, 1995.
4.2 PREPARATION OF THE PREMISES
Item Deleted
4.3 TENANT ALLOWANCE
Landlord will provide Tenant with a tenant allowance of $105,960 for
interior improvements, which improvements are only to be undertaken in
conformance with the provisions of Section 5.2 and any other applicable
sections hereof.
ARTICLE V
USE OF PREMISES
5.1 PERMITTED USE
a. Tenant agrees that the Premises shall be used and occupied by
Tenant only for Permitted Uses and for no other purpose.
b. Tenant agrees to conform to the following provisions during
the Term of this Lease:
i. Tenant shall cause all freight to be delivered to or
removed from the Building and the Premises in
accordance with reasonable rules and regulations
established by Landlord therefor;
ii. Tenant will not place on the exterior of the Premises
(including both interior and exterior surfaces of
windows and doors) or on any part of the Building
outside the Premises, any sign, symbol, advertisement
or the like visible to public view outside of the
Premises without the prior consent of Landlord.
Landlord will not unreasonably withhold consent for
signs or lettering on the entry doors to the Premises
provided such signs conform to building standards
adopted by Landlord and Tenant has submitted to
Landlord a plan or sketch of the sign to be placed on
such entry doors. Landlord agrees, however, to
maintain a tenant directory in the lobby of the
Building in which will be placed Tenant's name and
the location of the Premises in the Building.
iii. Tenant shall not perform any act or carry on any
practice which may injure the Premises, or any other
part of the Building, or cause any offensive odors or
loud noise or constitute a nuisance or a menace to
any other tenant or tenants or other persons in the
Building;
8
<PAGE> 9
iv. Tenant shall not operate any cooking apparatus
(except for coffee making equipment), or locate any
vending machines, in the Premises; and
v. Tenant shall continuously throughout the Term of this
Lease occupy the Premises for Permitted Uses.
5.2 INSTALLATIONS AND ALTERATIONS BY TENANT
a. Tenant shall make no alterations, additions, (including, for
the purposes hereof, wall-to-wall carpeting), or improvements
in or to the Premises without Landlord's prior written
consent. Any such alterations, additions or improvements
shall:
i. Be performed in a good and workmanlike manner and in
compliance with all applicable laws;
ii. Be made only by contractors or mechanics approved by
Landlord;
iii. Be made at Tenant's sole expense and at such times
and in such manner as Landlord may from time td time
designate; and
iv. Become part of the Premises and the property of
Landlord. Tenant agrees not to employ or permit the
use of any labor or otherwise take any action which
might result in a labor dispute involving personnel
providing services in the Building pursuant to
arrangements made by Landlord.
b. All articles of personal property and all business fixtures,
machinery and equipment and furniture owned or installed by
Tenant solely at its expense in the Premises ("Tenant's
Removable Property") shall remain the Property of Tenant and
may be removed by Tenant at any time prior to the expiration
of this Lease, provided that Tenant, at its expense, shall
repair any damage to the Building caused by such removal.
c. Notice is hereby given that Landlord shall not be liable for
any labor or materials furnished or to be furnished to Tenant
upon credit, and that no mechanic's or other lien for any such
labor or materials shall attach to or affect the reversion or
other estate or interest of Landlord in and to the Premises.
Whenever and as often as any mechanic's lien shall have been
filed against the Property based upon any act or interest of
Tenant or of anyone claiming through Tenant, Tenant shall
forthwith take such action by bonding, deposit or payment as
will remove or satisfy the lien.
9
<PAGE> 10
ARTICLE VI
ASSIGNMENT AND SUBLETTING
6.1 PROHIBITION
a. Tenant covenants and agrees that neither this Lease nor the
term and estate hereby granted, nor any interest herein or
therein, will be assigned, mortgaged, pledged, encumbered or
otherwise transferred and that neither the Premises nor any
part thereof will be encumbered in any manner by reason of any
act or omission on the part of Tenant, or used or occupied or
permitted to be used or occupied, by anyone other than Tenant,
or for any use or purpose other than a Permitted Use, or be
sublet (which term, without limitation, shall include granting
of concessions, licenses and the like) in whole or in part,
without, in each instance, having first received the express
written consent of Landlord which, in the case of any
subletting (except to another tenant in the Building or other
buildings owned by Landlord or its beneficiaries), will not be
unreasonably withheld. The foregoing restrictions shall not be
applicable to an assignment of this Lease or a subletting of
the Premises by Tenant to a subsidiary wholly-owned by Tenant,
a controlling corporation (which owns all of the outstanding
stock of Tenant, or any other corporation, the stock in which
is wholly-owned by the stockholders of Tenant. It shall be a
condition of the validity of any assignment, whether with the
consent of Landlord or to a subsidiary or controlling
corporation, that the assigned agrees directly with Landlord,
by written instrument in form satisfactory to Landlord, to be
bound by all the obligations of Tenant hereunder including,
without limitation, the covenant against further assignment
and subletting. No assignment or subletting shall relieve
Tenant from its obligations hereunder and Tenant shall remain
fully and primarily liable therefor.
b. If this Lease be assigned, or if the Premises or any part
thereof be sublet or occupied by anyone other than Tenant,
Landlord may, at any time and from time to time, collect rent
and other charges from the assignee, subtenant or occupant,
and apply the net amount collected to the rent and other
changes herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of this
covenant, or the acceptance of the assignee, subtenant or
occupant as a tenant or a release of Tenant from the further
performance by Tenant of its obligations hereunder. The
consent by Landlord to an assignment or subletting shall in no
way be construed to relieve Tenant or any successor from
obtaining the express consent in writing of Landlord to any
further assignment or subletting. No assignment or subletting
and no use of the Premises by a subsidiary wholly-owned by
Tenant or controlling corporation of Tenant shall affect
Permitted Uses.
6.2 EXCESS PAYMENTS
If:
i. The rent and other sums received by Tenant on account
of a sublease of all or any portion of the Premises
exceeds the Basic Rent and Escalation Charges
allocable to the space subject to the sublease (in
the proportion of
10
<PAGE> 11
the area of such space to the entire Premises) plus
actual out-of-pocket expenses incurred by Tenant in
connection with Tenant's subleasing of such space,
including brokerage commissions to a licensed broker
and the cost of preparing such space for occupancy by
the subtenant, Tenant shall pay to Landlord, as an
additional charge, 75% of such excess, monthly as
received by Tenant; or
ii. Any payment received by Tenant on account of any
assignment of this Lease exceeds the actual
out-of-pocket expenses incurred by Tenant in
connection with such assignment, including brokerage
commissions to a licensed broker and the cost of
preparing space for the assignee, Tenant shall pay to
Landlord, as an additional charge, 75% of such excess
when received by Tenant.
6.3 TERMINATION
Notwithstanding any other provision of this Article VI, if Tenant shall
intend to assign this Lease or intend (except with respect to
subletting described in the second sentence of Paragraph a. of this
Section 6.1) to enter into a sublease which, together with any other
subleases then in effect, cover more than 50% of Premises Rentable
Area, Landlord may elect to terminate this Lease by giving notice to
Tenant of such election not later than thirty (30) days after receiving
notice of such subletting or assignment whereupon this Lease shall
terminate thirty (30) days after the giving of such notice by Landlord
with the same force and effect as if such date where the date
originally established as the expiration date hereof.
ARTICLE VII
RESPONSIBILITY FOR REPAIRS AND CONDITIONS OF PREMISES;
SERVICES TO BE FURNISHED BY LANDLORD
7.1 LANDLORD REPAIRS
a. Except as otherwise provided in this Lease, Landlord agrees to
keep in good order, condition and repair the roof, public
areas, exterior walls and structure of the Building (including
plumbing, mechanical and electrical systems), all insofar as
they affect the Premises, except that Landlord shall in no
event be responsible to Tenant for the condition of glass in
and about the Premises or for the doors leading to the
Premises, or for any condition in the Premises or the Building
caused by any act or neglect of Tenant, its invitees or
contractors. Landlord shall not be responsible to make any
improvements or repairs to the Building other than as
expressly in this Section 7.1 provided, unless expressly
provided otherwise in this Lease.
b. Landlord shall never be liable for any failure to make repairs
which, under the provisions of this Section 7.1 or elsewhere
in this Lease, Landlord has undertaken to make unless Tenant
has given notice to Landlord of the need to make such repairs,
and Landlord has failed to continence to make such repairs
within a
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reasonable time after receipt of such notice, or fails to
proceed with reasonable diligence to complete such repairs.
7.2 TENANT'S AGREEMENT
a. Tenant will keep neat and clean and maintain in good order,
condition and repair the Premises and every part thereof,
excepting only those repairs for which Landlord is responsible
under the terms of this Lease, reasonable wear and tear of the
Premises, and damage by fire or other casualty and as a
consequence of the exercise of the power of eminent domain;
and shall surrender the Premises, at the end of the term, in
such condition. Without limitation, Tenant shall maintain and
use the Premises in accordance with all directions, rules and
regulations of the proper officers of governmental agencies
having jurisdiction, and shall, at Tenant's own expense,
obtain all permits, licenses and the like required by
applicable law. Tenant shall be responsible for the cost of
repairs which may be made necessary by reason of damage to
common areas in the Building by Tenant, Tenant's independent
contractors, or Tenant's invitees.
b. If repairs are required to be made by Tenant pursuant to the
terms hereof, Landlord may demand that Tenant make the same
forthwith, and if Tenant refuses or neglects to commence such
repairs and complete the same with reasonable dispatch, after
such demand, Landlord may (but shall not be required to do so)
make or cause such repairs to be made and shall not be
responsible to Tenant for any loss or damage that may accrue
to Tenant's stock or business by reason thereof. If Landlord
makes or causes such repairs to be made, Tenant agrees that
Tenant shall forthwith, on demand, pay to Landlord the cost
thereof as an additional charge.
7.3 FLOOR LOAD - HEAVY MACHINERY
a. Tenant shall not place a load upon any floor in the Premises
exceeding 100 lbs. (live load) per square foot of Usable Floor
Area. Landlord reserves the right to prescribe the weight and
position of all business machines and mechanical equipment,
including safes, which shall be placed so as to distribute the
weight. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in
settings sufficient, in Landlord's judgment, to absorb and
prevent vibration, noise and annoyance. Tenant shall not move
any safe, heavy machinery, heavy equipment, freight, bulky
matter or fixtures into or out of the Building without
Landlord's prior consent, which consent may include a
requirement to provide insurance in such amounts as Landlord
may deem reasonable.
b. If any such safe, machinery, equipment, freight, bulky matter
or fixtures requires special handling, Tenant agrees to employ
only persons holding a Master Rigger's License to do such
work, and that all work in connection therewith shall comply
with applicable laws and regulations. Any such moving shall be
at the sole risk and hazard of Tenant, and Tenant will
exonerate, indemnify and save Landlord
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harmless against and from any liability, loss, injury, claim
or suit resulting directly or indirectly from such moving.
7.4 BUILDING SERVICES
a. Landlord shall, on Business Days from 8:00 a.m. to 6:00 p.m.
(except on Saturdays only from 9:00 a.m. to 1:00 p.m.),
furnish heating and cooling as normal seasonal changes may
require to provide reasonably comfortable space temperature
and ventilation for occupants of the Premises under normal
business operation at an occupancy of not more than one person
per 150 square feet of Usable Floor Area and an electrical
load not exceeding 3.0 watts per square foot of Usable Floor
Area. If Tenant shall require air conditioning, heating or
ventilation outside the hours and days above specified,
Landlord shall furnish such service and Tenant shall pay
therefor such charges as may from time to time be in effect.
In the event Tenant introduces into the Premises personnel or
equipment which overloads the capacity of the Building system
or in any other way interferes with the system's ability to
perform adequately its proper functions, supplementary systems
may, if and as needed, at Landlord's option, be provided by
Landlord, at Tenant's expense.
b. Landlord shall also provide:
i. Hot water for lavatory purposes and cold water (at
temperatures supplied by the City of Quincy) for
drinking, lavatory and toilet purposes. If Tenant
uses water for any purpose other than for ordinary
lavatory and drinking purposes, Landlord may asses a
reasonable charge for the additional water so used,
or install a water meter and thereby measure Tenant's
water consumption for all purposes. In the latter
event, Landlord shall pay the cost of the meter and
the cost of installation thereof and shall keep such
meter and installation equipment in good working
order and repair. Tenant agrees to pay for water
consumed, as shown on such meter, together with the
sewer charge based on such meter changes, as and when
bills are rendered, and in default in making such
payment Landlord may pay such charges and collect the
same from Tenant as an additional charge. All piping
and other equipment and facilities required for use
of water outside the Building core will be installed
and maintained by Landlord at Tenant's sole cost and
expense.
ii. Cleaning and janitorial services to the Premises,
provided the same are kept in order by Tenant, in
accordance with the cleaning standards set forth in
Schedule CS attached hereto.
iii. Passenger elevator service from the existing
passenger elevator system in common with Landlord and
other tenants of the Building.
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7.5 ELECTRICITY
a. Landlord shall supply electricity to the Premises to supply a
requirement not to exceed 3.0 watts per square foot of Usable
Floor Area for standard single-phase 120 volt alternating
current and Tenant agrees in its use of the Premises not to
exceed such requirement and that its total connected lighting
load will not exceed the maximum from time to time permitted
under applicable governmental regulations. Landlord shall
purchase and install all lamps, tubes, bulbs, starters and
ballasts. For all original fluorescent tubes within the
Premises all other bulbs, tubes and lighting fixtures for the
Premises shall be provided and installed by Landlord at
Tenant's cost and expense. In order to assure that the
foregoing requirements are not exceeded and to avert possible
adverse affect on the Building's electric system, Tenant shall
not, without Landlord's prior consent, connect any fixtures,
appliances or equipment to the Building's electric
distribution system other than typewriters, pencil sharpeners,
adding machines, hand-held or desk-top calculators and
dictaphones.
b. From time to time during the Term of this Lease, Landlord
shall have the right to have an electrical consultant selected
by Landlord make a survey of Tenant's electric usage, the
result of which survey shall be conclusive and binding upon
Landlord and Tenant. In the event that such survey shows that
Tenant has exceeded the requirements set forth in Paragraph
a., in addition to any other rights Landlord may have
hereunder, Tenant shall, upon demand, reimburse Landlord for
the cost of such survey and the cost, as determined by such
consultant, of electricity usage in excess of such
requirements as additional charges.
c. Landlord shall have the right to discontinue furnishing
electric power to the Premises at any time upon not less than
thirty (30) days' notice to Tenant provided Landlord shall
first have arranged for the supply of power for Tenant's use
to be provided to the Premises by the public utility company
furnishing electric service to the Building and shall, at
Landlord's expense, separately meter the Premises. If Landlord
exercises such right, from and after the effective date of
such termination, Landlord shall not be obligated to furnish
electricity to the Premises, and
i. The Basic Rent shall be reduced by the product of
ninety cents ($.90) multiplied by Premises Rentable
Area;
ii. Base Operating Expenses shall be reduced to $610,000;
and
iii. In the computation of Operating Costs, only the cost
of electricity supplied to those portions of the
Building other than those intended to be leased to
tenants for their exclusive use and occupancy, or
used by the Building for its own offices, i.e., only
those areas which are so-called common areas, shall
be included.
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ARTICLE VIII
REAL ESTATE TAXES
8.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES
a. For the purposes of this Article, the term "Tax Year" shall
mean the twelve (12) month period commencing on the July 1
immediately preceding the Commencement Date and each twelve
(12) month period thereafter during the Term of this Lease;
and the term "Taxes" shall mean real estate taxes assessed
with respect to the Property for any Tax Year.
b. In the event that for any reason, Taxes shall be greater
during any Tax Year than Base Taxes, Tenant shall pay to
Landlord, as an Escalation Charge, and amount equal to:
i. The excess of Taxes over Base Taxes, multiplied by,
ii. The Escalation Factor, such amount to be apportioned
for any fraction of a Tax Year in which the
Commencement Date falls or the Term of this Lease
ends.
c. Estimated payments by Tenant on account of real estate taxes
shall be made monthly and at the time and in the fashion
herein provided for the payment of Basic Rent. The monthly
amount so to be paid to Landlord shall equal to one-twelfth
(1/12) of the amount required to be paid (if any) by Tenant
pursuant to Paragraph b. above for the preceding Tax Year.
Promptly after receipt by Landlord of bills for such taxes,
Landlord shall advise Tenant of the amount thereof and the
computation of Tenant's payment on account thereof. If
estimated payments theretofor made by Tenant for the Tax Year
covered by such bills exceed the required payments on account
thereof for such Year, Landlord shall credit the amount of
overpayment against subsequent obligations of Tenant on
account of real estate taxes (or refund such overpayment if
the Term of this Lease has ended and Tenant has no further
obligation to Landlord); but if the required payments on
account thereof for such Year are greater than estimated
payments theretofor made on account thereof for such Year,
Tenant shall make payment to Landlord within thirty (30) days
after being so advised by Landlord. Landlord shall have the
same rights and remedies for the nonpayment by -Tenant of any
payments due on account of such taxes as Landlord has
hereunder for the failure of Tenant to pay Basic Rent.
8.2 ABATEMENT
If Landlord shall receive any tax refund or reimbursement of taxes or
sum in lieu thereof with respect to any Tax Year, then out of any
balance remaining thereof after deducting Landlord's expenses
reasonably incurred in obtaining such refund, Landlord shall pay to
Tenant, provided there does not then exist a Default of Tenant, an
amount equal to such refund or reimbursement or sum in lieu thereof
(exclusive of interest) multiplied by the
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Escalation Factor; provided, that in no event shall Tenant be entitled
to receive more than the amount of any payments made by Tenant on
account of real estate tax increases for such Year pursuant to
Paragraph b. of Section 8.1 or to receive any payment if Taxes for any
Tax Year are less than Base Taxes. No refund shall be due to the Tenant
if the basis for the refund or reimbursement shall be the tax free
status of the Landlord.
8.3 ALTERNATE TAXES
a. If some method or type of taxation shall replace the current
method of assessment of real estate taxes, or the type
thereof, the Tenant agrees that Tenant shall pay an equitable
share of the same computed in a fashion consistent with the
method of computation herein provided, to the end that
Tenant's share thereof shall be, to the maximum extent
practicable, comparable to that which Tenant would bear under
the foregoing provisions.
b. If a tax (other than a Federal or State net income tax) is
assessed on account of the rents or other charges payable by
Tenant to Landlord under this Lease, Tenant agrees to pay the
same within ten (10) days after billing therefor, unless
applicable law prohibits the payment of such tax by Tenant.
Landlord shall have the same rights and remedies for
nonpayment by Tenant of any such amounts as Landlord has
hereunder for the failure of Tenant to pay Basic Rent.
ARTICLE IX
OPERATING EXPENSES
9.1 DEFINITIONS
For the purposes of this Article, the following terms shall have the
following respective meanings:
Operating Year: Each calendar year in which any part of the Term of
this Lease shall fall.
Operating Expenses: The aggregate costs or expenses reasonably incurred
by Landlord with respect to the operation, administration, cleaning,
repair, maintenance and management of the Property including, without
limitation, those items enumerated in Exhibit OC annexed hereto,
provided that, if during any portion of the Operating Year for which
Operating Expenses are being computed, less than 93% of the building
rentable area was occupied by Tenants, actual operating expenses
incurred shall be reasonably extrapolated by Landlord on an item basis
to the estimated operational expenses that would have incurred if the
building were 93% occupied for such Year, and such extrapolated amount
shall, for the purposes hereof, be deemed to be the Operating Expenses
for such Year.
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9.2 TENANT'S PAYMENT
a. In the event that Operating Expenses for any Operating Year
shall be greater than Base Operating Expenses, Tenant shall
pay to Landlord, as an Escalation Charge, an amount equal to:
i. The excess of the Operating Expenses for such Year
over and above Base Operating Expenses, multiplied
by,
ii. The Escalation Factor, such amount to be apportioned
for any Operating Year in which the Commencement Date
falls or the Term of this Lease ends.
b. Estimated payments by Tenant on account of Operating Expenses
shall be made monthly and at the time and in the fashion
herein provided for the payment of Basic Rent. The monthly
amount so to be paid to Landlord shall be sufficient to
provide Landlord by the end of each Operating Year a sum equal
to Tenant's required payments (if any) on account of Operating
Expenses for the preceding Operating Year. Promptly after the
end of each Operating Year, Landlord shall submit to Tenant a
reasonably detailed accounting of Operating Expenses for such
Year, and Landlord shall certify the accuracy thereof. If
estimated payments theretofor made for such Year by Tenant
exceed Tenant's required payment on account thereof for such
Year, according to such statement, Landlord shall credit the
amount of overpayment against subsequent obligations of Tenant
with respect to Operating Expenses (or refund such overpayment
if the Term of this Lease has ended and Tenant has no further
obligation to Landlord); but, if the required payments on
account thereof for such Year are greater than the estimated
payments (if any) theretofor made on account thereof for such
Year, Tenant shall make payment to Landlord within ten (10)
days after being so advised by Landlord. Landlord shall have
the same rights and remedies for the nonpayment by Tenant of
any payments due on account of Operating Expenses as Landlord
has hereunder for the failure of Tenant to pay Basic Rent.
ARTICLE X
INDEMNITY AND PUBLIC LIABILITY INSURANCE
10.1 TENANT'S INDEMNITY
To the maximum extent this Agreement may be made effective according to
law, Tenant agrees to indemnify and save harmless Landlord from and
against all claims of whatever nature arising from any act, omission or
negligence of Tenant or Tenant's contractors, licensees agents,
servants or employees or arising from any accident, injury or damage
whatsoever caused to any person, or to the property of any person,
occurring after the date of this Lease until the end of the Term of
this Lease and thereafter, so long as Tenant is in occupancy of any
part of the Premises, in or about the Premises, or arising from any
accident, injury or damage occurring outside of the Premises but on the
Property, where such accident, damage or injury results or is claimed
to have resulted from an act or
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omission on the part of Tenant or Tenant's agents or employees or
independent contractors. This indemnity and hold harmless agreement
shall include indemnity against all costs, expenses and liabilities
incurred in or in connection with any such claim or proceeding brought
thereon, and the defense thereof.
10.2 PUBLIC LIABILITY INSURANCE
Tenant agrees to maintain in full force from the date upon which Tenant
first enters the Premises for any reason, throughout the Term of this
Lease, and thereafter so long as Tenant is in occupancy of any part of
the premises, a policy of general liability and property damage
insurance under which Landlord (and such other persons are in privity
of estate with Landlord as may be set out in notice from time to time)
and Tenant are named as insureds, and under which the insurer agrees to
indemnify and hold Landlord, and those in privity of estate with
Landlord, harmless from and against all cost, expense and/or liability
arising out of or based upon any and all claims, accidents, injuries
and damages set forth in Section 10.1. Each such policy shall be
non-cancellable and non-amendable with respect to Landlord and
Landlord's said designees without twenty (20) days prior notice to
Landlord and shall be in at least the amounts of the Public Liability
Insurance specified in Section 1.2, and a duplicate original or
certificate thereof evidencing broad form contractual liability,
independent contractor's hazard and completed operation coverage and
waiver of subrogation shall be delivered to Landlord.
10.3 TENANT'S RISK
To the maximum extent this Agreement may be made effective according to
law, Tenant agrees to use and occupy the Premises and to use such other
portions of the Building as Tenant is herein given the right to use at
Tenant's own risk; and Landlord shall have no responsibility or
liability for any loss of or damage to Tenant's Removable Property. The
provisions of this Section shall be applicable from and after the
execution of this Lease and until the end of the Term of this Lease,
and during such further period as Tenant may use or be in occupancy of
any part of the Premises or of the Building.
10.4 INJURY CAUSED BY THIRD PARTIES
To the maximum extent this Agreement may be made effective according to
law, Tenant agrees that Landlord shall not be responsible or liable to
Tenant, or to those claiming by, through or under Tenant, for any loss
or damage that may be occasioned by or through the acts or omissions of
persons occupying adjoining premises or any part of the premises
adjacent to or connecting with the Premises or any part of the Property
or otherwise.
ARTICLE XI
LANDLORD'S ACCESS TO PREMISES
11.1 LANDLORD'S RIGHTS
Landlord shall have the right to enter the Premises at all reasonable
hours for the purpose of inspecting or making repairs to the same, and
Landlord shall also have the right to make access available at all
reasonable hours to prospective or existing mortgages, purchasers or
tenants of any part of the Property.
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ARTICLE XII
FIRE, EMINENT DOMAIN, ETC.
12.1 ABATEMENT OF RENT
If the Premises shall be damaged by fire, casualty or other material
defect in the Building, Basic Rent and Escalation Charges payable by
Tenant shall abate proportionately for the period in which, by reason
of such damage, there is substantial interference with Tenant's use of
the Premises, having regard to the extent to which Tenant may be
required to discontinue Tenant's use of all or a portion of the
Premises, but such abatement or reduction shall end if and when
Landlord shall have substantially restored the Premises to the
condition in which they were prior to such damage. If the Premises
shall be affected by any exercise of the power of eminent domain, Basic
Rent and Escalation Charges payable by Tenant shall be justly and
equitably abated and reduced according to the nature and extent of the
loss of use thereof suffered by Tenant.
12.2 LANDLORD'S RIGHT OF TERMINATION
If the Premises or the Building are substantially damaged by fire or
casualty (the term "substantially damaged" meaning damage of such a
character that the same cannot, in ordinary course, reasonably be
expected to be repaired within sixty (60) days from the time that
repair work would commence), or if any part of the Building is taken by
any exercise of the right of eminent domain, then Landlord shall have
the right to terminate this Lease (even if Landlord's entire interest
in the Premises may have been divested) by giving notice of Landlord's
election so to do within ninety (90) days after the occurrence of such
casualty or the effective date of such taking, whereupon this Lease
shall terminate thirty (30) days after the date of such notice with the
same force and effect as if such date were the date originally
established as the expiration date hereof.
12.3 RESTORATION
If this Lease shall not be terminated pursuant to Section 12.2,
Landlord shall thereafter use due diligence to restore the Premises to
proper condition for Tenant's use and occupation, provided that
Landlord's obligation shall be limited to the amount of insurance
proceeds available therefor. If, for any reason, such restoration shall
not be substantially completed within six (6) months after the
expiration of the ninety (90) day period referred to in Section 12.2
(which six (6) month period may be extended for such periods of time as
Landlord is prevented from proceeding with or completing such
restoration for any cause beyond Landlord's reasonable control, but in
no event for more than an additional three (3) months), Tenant shall
have the right to terminate this Lease by giving notice to Landlord
thereof within thirty (30) days after the expiration of such period (as
to extended). Upon the giving of such notice, this Lease shall cease
and come to an end without further liability or obligation on the part
of either party unless, within such thirty (30) day period, Landlord
substantially completes such restoration. Such right of termination
shall be Tenant's sole and exclusive remedy at law or in equity for
Landlord's failure so to complete such restoration.
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12.4 AWARD
Landlord shall have and hereby reserves and excepts, and Tenant hereby
warrants and assigns to Landlord, all rights to recover for damages to
the Property and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, and by way of confirming the foregoing, Tenant
hereby grants and assigns, and covenants with Landlord to grant and
assign to Landlord, all rights to such damages or compensation. Nothing
contained herein shall be construed to prevent Tenant from prosecuting
in any condemnation proceedings a claim for the value of any of
Tenant's Removable Property installed in the Premises by Tenant at
Tenant's expense and for relocation expenses, provided that such action
shall not affect the amount of compensation otherwise recoverable by
Landlord from the taking authority.
ARTICLE XIII
DEFAULT
13.1 TENANT'S DEFAULT
a. If at any time subsequent to the date of this Lease any one or
more of the following events (herein referred to as a "Default
of Tenant") shall happen:
i. Tenant shall fail to pay the Basic Rent, Escalation
Charges or other charges hereunder when due and such
failure shall continue for three (3) full Business
Days after notice to Tenant from Landlord; or
ii. Tenant shall neglect or fail to perform or observe
any other covenant herein contained on Tenant's part
to be performed or observed and Tenant shall fail to
remedy the same within thirty (30) days after notice
to Tenant specifying such neglect or failure, or if
such failure is of such a nature that Tenant cannot
reasonably remedy the same within such thirty (30)
day period, Tenant shall fail to commence promptly to
remedy the same and to prosecute such remedy to
completion with diligence and continuity; or
iii. Tenant's leasehold interest in the Premises shall be
taken on execution or by other process of law
directed against Tenant; or
iv. Tenant shall make an assignment for the benefit of
creditors or shall file a voluntary petition in
bankruptcy or shall be adjudicated bankrupt or
insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief for itself under any present or future
Federal, State or other statute, law or regulation
for the relief of debtors, or shall seek or consent
to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any
substantial part of its properties, or shall admit in
writing its inability to pay its debts generally as
they become due; or
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v. A petition shall be filed against Tenant in
bankruptcy or under any other law seeking any
reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar
relief under any present or future Federal, State or
other statute, law or regulation and shall remain
undismissed or unstayed for an aggregate of sixty
(60) days (whether or not consecutive), or if any
debtor in possession (whether or not Tenant) trustee,
receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Premises
shall be appointed without the consent or
acquiescence of Tenant and such appointment shall
remain unvacated or unstayed for an aggregate of
sixty (60) days (whether or not consecutive);
vi. Then in any such case:
(1) If such Default of Tenant shall occur prior
to the Commencement Date, this Lease shall
ipso facto, and without further act on the
part of Landlord, terminate; and
(2) If such Default of Tenant shall occur after
the commencement Date, Landlord may
terminate this Lease by notice to Tenant,
specifying a date not less than ten (10)
days after the giving of such notice on
which this Lease shall terminate and this
Lease shall come to an end on the date
specified therein as fully and completely as
if such date were the date herein originally
fixed for the expiration of the Term of this
Lease (Tenant hereby waiving any rights of
redemption under M.G.L.A. c. 186, K), and
Tenant will then quit and surrender the
Premises to Landlord, but Tenant shall
remain liable as hereinafter provided.
b. If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the
Premises shall be taken or occupied by someone other than
Tenant, then Landlord may, without notice, re-enter the
Premises, either by force, summary proceedings, ejectment or
otherwise, and remove and dispossess Tenant and all other
persons and any and all property from the same, as if this
Lease had not been made, and Tenant hereby waives the service
of Notice if intention to re-enter or to institute legal
proceedings to that end.
c. In the event of any termination, Tenant shall pay the Basic
Rent, Escalation Charges and other sums payable hereunder up
to the time of such termination, and thereafter Tenant, until
the end of what would have been the Term of this Lease in the
absence of such termination, and whether or not the Premises
shall have been relet, shall be liable to Landlord for, and
shall pay to Landlord, as liquidated current damages, the
Basic Rent, Escalation Charges and other sums which would be
payable hereunder if such termination had not occurred, less
the net proceeds, if any, of any reletting of the Premises.
after deducting all expenses in connection
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with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees,
alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord
monthly on the days which the Basic Rent would have been
payable hereunder if this Lease had not been terminated.
d. At any time after such termination, whether or not Landlord
shall have collected any such current damages, as liquidated
final damages and in lieu of all such current damages beyond
the date of such demand, Tenant shall pay to Landlord an
amount equal to the excess, if any, of the Basic Rent,
Escalation Charges and other sums as hereinbefore provided
which would be payable hereunder from the date of such demand
(assuming that, for the purposes of this paragraph, annual
payments by Tenant on account of real estate taxes and
Operating Expenses would be the same as the payments required
for the immediately preceding Operating or Tax Year) for what
remained in effect, over the Term of this Lease if the same
remained in effect, over the then fair net rental value of the
Premises for the same period.
e. In case of any Default by Tenant, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord
may:
i. Re-let the Premises or any part or parts thereof,
either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option be equal
to or less than or exceed the period which would
otherwise have constituted the balance of the Term of
this Lease and may grant concessions or free rent to
the extent that Landlord considers advisable and
necessary to re-let the same; and
ii. May make such reasonable alterations, repairs and
decorations in the Premises as Landlord in its sole
judgment considers advisable and necessary for the
purpose of reletting the Premises; and the making of
such alterations, repairs and decorations shall not
operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in
no event to be liable in any way whatsoever for
failure to relet the Premises, or, in the event that
the Premises are re-let, for failure to collect the
rent under such re-letting. Tenant hereby expressly
waives any and all rights of redemption granted by or
under any present or future laws in the event of
Tenant being evicted or dispossessed, or in the event
of Landlord obtaining possession of the Premises, by
reason of the violation by Tenant of any of the
covenants and conditions of this Lease.
f. If a Guarantor of this Lease is named in Section 1.2, the
happening of any of the events described in Paragraphs a.iv or
a.v of this Section 13.1 with respect to the Guarantor shall
constitute a Default of Tenant hereunder.
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g. The specified remedies to which Landlord may resort hereunder
are not intended to be exclusive of any remedies or means of
redress to which Landlord may at any time be entitled
lawfully, and Landlord may invoke any remedy (including the
remedy of specific performance) allowed at law or in equity as
if specific remedies were not herein provided for.
h. All costs and expenses incurred by or on behalf of Landlord
(including, without limitation, attorneys' fees and expenses)
in enforcing its rights hereunder or occasioned by any Default
of Tenant shall be paid by Tenant.
13.2 LANDLORD'S DEFAULT
Landlord shall in no event be in Default in the performance of any of
Landlord's obligations hereunder unless and until Landlord shall have
failed to perform such obligations within thirty (30) days, or such
additional time as is reasonably required to correct any such default,
after notice by Tenant to Landlord specifying wherein Landlord has
failed to perform any such obligations.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 EXTRA HAZARDOUS USE
Tenant covenants and agrees that Tenant will not do or permit anything
to be done in or upon the Premises, or bring in anything or keep
anything therein, which shall increase the rate of property or
liability insurance on the Premises or of the Building above the
standard rate applicable to premises occupied for Permitted Uses; and
Tenant further agrees that, in the event that Tenant shall do any of
the foregoing, Tenant will promptly pay to Landlord, on demand, any
such increase resulting therefrom, which shall be due and payable as an
additional charge hereunder.
14.2 WAIVER
a. Failure on the part of Landlord or Tenant to complain of any
action or non-action on the part of the other, no matter how
long the same may continue, shall never be a waiver by Tenant
or Landlord, respectively, of any of the other's rights
hereunder. Further, no waiver at any time of any of the
provisions hereof by Landlord or Tenant shall be construed as
a waiver of any of the other provisions hereof, and a waiver
at any time of any of the provisions hereof shall not be
construed as a waiver at any subsequent time of the same
provisions. The consent or approval of Landlord or Tenant to
or of any action by the other requiring such consent or
approval shall not be construed to waive or render unnecessary
Landlord's or Tenant's consent or approval to or of any
subsequent similar act by the other.
b. No payment by Tenant, or acceptance by Landlord, of a lesser
amount than shall be due from Tenant to Landlord shall be
treated otherwise than as a payment on account. The acceptance
by Landlord of a check for a lesser amount with an
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endorsement or statement thereon, or upon any letter
accompanying such a check, that such lesser amount is payment
in full, shall be given no effect, and Landlord may accept
such check without prejudice to any other rights or remedies
which Landlord may have against Tenant.
14.3 COVENANT OF QUIET ENJOYMENT
Tenant, subject to the terms and provisions of this Lease, on payment
of the Basic Rent and Escalation charges and observing, keeping and
performing all of the other terms and provisions of this Lease on
Tenant's part to be observed, kept and performed, shall lawfully,
peaceably and quietly have, hold, occupy and enjoy the Premises during
the term hereof, without hindrance or ejection by any persons lawfully
claiming under Landlord to have title to the Premises superior to
Tenant; the foregoing covenant of quiet enjoyment is in lieu of any
other covenant, express or implied.
14.4 LANDLORD'S LIABILITY
a. Tenant specifically agrees to look solely to Landlord's then
equity interest in the Property at the time owned, for
recovery of any judgment from Landlord; it being specifically
agreed that Landlord (original or successor) shall never be
personally liable for any such judgment, or for the payment of
any monetary obligation to Tenant. The provision contained in
the foregoing sentence is not intended to, and shall not,
limit any right that Tenant might otherwise have to obtain
injunctive relief against Landlord or Landlord's successors in
interest, or to take any action not involving the personal
liability of Landlord (original or successor) to respond in
monetary damages from Landlord's assets other than Landlord's
equity interest in the Property.
b. With respect to any services or utilities to be furnished by
Landlord to Tenant, Landlord shall in no event be liable for
failure to furnish the same when prevented from doing so by
strike, lockout, breakdown, accident, order or regulation of
or by any governmental authority, or failure of supply, or
inability by the exercise of reasonable diligence to obtain
supplies, parts or employees necessary to furnish such
services, or because of war or other emergency, or for any
cause beyond Landlord's reasonable control, or for cause due
to any act or neglect of Tenant or Tenant's servants, agents,
employees, licensees or any person claiming by, through or
under Tenant.
c. In no event shall Landlord ever be liable to Tenant for any
indirect or consequential damages suffered by Tenant from
whatever cause.
14.5 NOTICE TO MORTGAGEE
After receiving notice from any person, firm or other entity that it
holds a mortgage which includes the Premises as part of the mortgaged
premises, no notice from Tenant to Landlord shall be effective unless
and until a copy of the same is given to such holder (provided Tenant
shall have been furnished with the name and address of such holder),
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and the curing of any of Landlord's defaults by such holder shall be
treated as performance by Landlord.
14.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLES
a. With reference to any assignment by Landlord of Landlord's
interest in this Lease, or the rents payable hereunder,
conditional in nature or otherwise, which assignment is made
to the holder of a mortgage on property which includes the
Premises, Tenant agrees that the execution thereof by
Landlord, and the acceptance thereof by the holder of such
mortgage shall never be treated as an assumption by such
holder of any of the obligations of Landlord hereunder unless
such holder shall, by notice sent to Tenant, specifically
otherwise elect and that, except as aforesaid, such holder
shall be treated as having assumed Landlord's obligations
hereunder only upon foreclosure of such holder's mortgage and
the taking of possession of the Premises.
b. In no event shall the acquisition of title to the Property by
a purchaser which, simultaneously therewith, leases the entire
Property back to the seller thereof be treated as an
assumption by operation of law or otherwise, of Landlord's
obligations hereunder, but Tenant shall look solely to such
seller-lessee, and its successors from time to time in title,
for performance of Landlord's obligations hereunder. In any
event, this Lease shall be subject and subordinate to the
lease to such purchaser. For all purposes, such seller-lessee,
and its successors in title, shall be the Landlord hereunder
unless and until Landlord's position shall have been assumed
by such purchaser-lessor.
c. Except as provided in paragraph b. of this Section, in the
event of any transfer of title to the Property by Landlord,
Landlord shall thereafter be entirely freed and relieved form
the performance and observance of all covenants and
obligations hereunder.
d. Tenant hereby agrees not to look to the mortgagee, as
mortgagee, mortgagee in possession, or successor in title to
the property, for accountability for any security deposit
required by the Landlord hereunder, unless said sums have
actually been received by said mortgagee as security for the
tenant's performance of this Lease.
14.7 RULES AND REGULATIONS
Tenant shall abide by rules and regulations established by Landlord
from time to time. It being agreed that such rules and regulations will
be established and applied by Landlord in a non-discriminatory fashion,
such that all rules and regulations shall be generally applicable to
other tenants, of similar nature to the Tenant named herein, of the
Building. Landlord agrees to use reasonable efforts to insure that any
such rules and regulations are uniformly enforced, but Landlord shall
not be liable to Tenant for violation of the same by any other tenant
or occupant of the Building, or persons having business with them.
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14.8 ADDITIONAL CHARGES
If Tenant shall fail to pay when due any sum under this Lease
designated as an additional charge, Landlord shall have the same rights
and remedies as Landlord has hereunder for failure to pay Basic Rent.
14.9 INVALIDITY OF PARTICULAR PROVISIONS
If any term or provision of this Lease, or the application thereof to
any person or circumstance shall, to the extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Lease shall be valid and
be enforced to the fullest extent permitted by law.
14.10 PROVISIONS BINDING, ETC.
Except as herein otherwise provided, the terms hereof shall be binding
upon and shall inure to the benefit of the successors and assigns,
respectively, of Landlord and Tenant and, if Tenant shall be an
individual, upon and to his heirs, executors, administrators,
successors and assigns. Each term and each provision of this Lease to
be performed by Tenant shall be construed to be both a covenant and a
condition. The reference contained to successors and assigns of Tenant
is not intended to constitute a consent to assignment by Tenant, but
has reference only to those instances in which Landlord may later give
consent to a particular assignment as required by those provisions of
Article VI hereof.
14.11 RECORDING
Tenant agrees not to record this Lease, but each party hereto agrees,
on the request of the other, to execute a so-called Notice of Lease in
form recordable and complying with applicable law and reasonably
satisfactory to Landlord's attorneys. In no event shall such document
set forth the rent or other charges payable by Tenant under this Lease;
and any such document shall expressly state that it is executed
pursuant to the provisions contained in this Lease, and is not intended
to vary the terms and conditions of this Lease.
14.12 NOTICES
Whenever, by the terms of this Lease, notices shall or may be given
either to Landlord or to Tenant, such notice shall be in writing and
shall be sent by registered or certified mail, postage prepaid:
If Intended for Landlord:
Address to Landlord at Landlord's Original Address (or to such other
address or addresses as may from time to time hereafter be designated
by Landlord by like notice).
If Intended for Tenant:
Address to Tenant at Tenant's Original Address (or to such other
address or addresses as may from time to time hereafter be designated
by Landlord by like notice).
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All such notices shall be effective when deposited in the United States
Mail within the Continental United States, provided that the same are
received in ordinary course at the address to which the same were sent.
14.13 WHEN LEASE BECOMES BINDING
The submission of this document for examination and negotiation does
not constitute an offer to lease, or a reservation of, or option for,
the Premises, and this document shall become effective and binding only
upon the execution and delivery hereof by both Landlord and Tenant. All
negotiations, considerations, representations and understandings
between Landlord and Tenant are incorporated herein and this Lease
expressly supersedes any proposals or other written documents relating
hereto. This Lease may be modified or altered only by written agreement
between Landlord and Tenant, and no act or omission of any employee or
agent of Landlord shall alter, change or modify any of the provisions
hereof.
14.14 PARAGRAPH HEADINGS
The paragraph headings throughout this instrument are for convenience
and reference only, and the words contained therein shall in no way be
held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this Lease.
14.15 RIGHTS OF MORTGAGEE
This Lease shall be subordinate to any mortgage from time to time
encumbering the Premises, whether executed and delivered prior to or
subsequent to the date of this Lease, if the holder of such mortgage
shall so elect. Tenant agrees to execute such instruments of
Subordination in confirmation of the foregoing agreement as such holder
may request, and Tenant hereby appoints such holder as Tenant's
attorney-in-fact to execute such subordination agreement upon default
of Tenant in complying with such holder's request.
14.16 STATUS REPORT
Recognizing that both parties may find it necessary to establish third
parties, such as accountants, banks, mortgagees or the like, the
then-current status of performance hereunder, either party, on the
request of the other made from time to time, will promptly furnish to
Landlord, or the holder of any mortgage encumbering the Premises, or to
Tenant, as the case may be, a statement of the status of any matter
pertaining to this Lease, including, without limitation,
acknowledgments that (or the extent of which) each party is in
compliance with its obligations under the terms of this Lease.
14.17 SECURITY DEPOSIT
No security deposit is required under this lease.
14.18 REMEDYING DEFAULTS
Landlord shall have the right, but shall not be required, to pay such
sums or do any act which requires the expenditure of monies which may
be necessary or appropriate by reason of the failure or neglect of
Tenant to perform any of the provisions of this Lease, and in the event
of the exercise of such right by Landlord, Tenant agrees to pay to
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<PAGE> 28
Landlord forthwith upon demand all such sums, together with interest
thereon at a rate equal to 3% over the prime rate in effect from time
to time at the Bank of Boston (but in no event less than 18% per
annum), as an additional charge. Any payment as Basic Rent, Escalation
Charges or other sums payable herewith not paid when due shall, at the
option of Landlord, bear interest at a rate equal to 3% over the prime
rate in effect from time to time at the Bank of Boston (but in no event
less than 18% per annum) from the due date thereof, forthwith upon
demand by Landlord.
14.19 HOLDING OVER
Any holding over by Tenant after the expiration of the term of this
Lease shall be treated as a daily tenancy at sufferance at a rate equal
to 1 1/2 times the Basic Rent plus Escalation Charges and other charges
therein provided (prorated on a daily basis) and shall otherwise be on
the terms and conditions set forth in this Lease as far as applicable.
14.20 WAIVER OF SUBROGATION
Insofar as, and to the extent that, the following provision may be
effective without invalidating or making it impossible to secure
insurance coverage obtainable from responsible insurance companies
doing business in the locality in which the Property is located (even
though extra premium may result therefrom) Landlord and Tenant mutually
agree that, with respect to any hazard, the loss from which is covered
by insurance then being carried by them, respectively, the one carrying
such insurance and suffering such loss releases the other of and from
any and all claims with respect to such loss to the extent of the
insurance proceeds paid with respect thereto; and they further mutually
agree that their respective insurance companies shall have no right of
subrogation against the other on account thereof.
14.21 SURRENDER OF PREMISES
Upon the expiration or earlier termination of the Term of this Lease,
Tenant shall peaceably quit and surrender to Landlord the Premises in
neat and clean condition and in good order, condition and repair,
together with all alterations, additions and improvements which may
have been made or installed in, on or to the Premises prior to or
during the Term of this Lease, excepting only ordinary wear and use and
damage by fire or other casualty for which, under other provisions of
this Lease, Tenant has no responsibility of repair or restoration.
Tenant shall remove all of Tenant's Removable Property and, to the
extent specified by Landlord, all alterations and additions made by
Tenant and all partitions wholly within the Premises unless installed
initially by Landlord in preparing the Premises for Tenant's occupancy
pursuant to Article IV; and shall repair any damages to the Premises or
the Building caused by such removal. Any Tenant's Removable Property
which shall remain in the Building or on the Premises after the
expiration or termination of the Term of this Lease shall be deemed
conclusively to have been abandoned, and either may be retained by
Landlord as its property or may be disposed of in such manner as
Landlord may see fit, at Tenant's sole cost and expense.
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14.22 BROKERAGE
Tenant warrants and represents that Tenant has dealt with no broker in
connection with the consummation of this Lease and, in the event of any
brokerage makes claim against Landlord predicated upon dealings with
Tenant in consummation hereof, Tenant agrees to defend the same and
indemnify Landlord against any such claim.
14.23 SUBSTITUTE SPACE
Item deleted.
14.24 RIGHT OF FIRST REFUSAL
Provided that at the time of exercise there exists no Default of Tenant
and that this Lease is still in full force and effect, the Tenant shall
have a first right of refusal to lease under the terms hereof, for a
term coincident with this lease, any tenant space which shall become
available on the third floor of the Building. In order to exercise this
right, Landlord shall notify tenant in writing of the availability or
imminent availability of the space and Tenant shall within thirty days
of such notice agree to add the available space to its leasehold
pursuant to the terms hereof. If the tenant fails to add the space
within the said thirty days, the tenant shall have no further rights in
regards that particular space.
14.25 EXHIBITS
Exhibits OC, CS, and FP attached hereto are hereby incorporated by
reference as fully as if set forth herein in full.
14.26 GOVERNING LAW
This Lease shall be governed exclusively by the provisions hereof and
by the Laws of the Commonwealth of Massachusetts, as the same may from
time to time exist.
ARTICLE XV
OPTION TO EXTEND
15.1 TENANT'S OPTION
Provided that at the time of exercise there exists no Default of Tenant
and that this Lease is still in full force and effect, Tenant shall
have the right and option to extend the Term of this Lease of one
extended term of five years (the Extended Term) commencing on the day
immediately succeeding the expiration date of the Initial Term and
ending at the close of the day on the last day of the sixtieth calendar
month thereafter. Tenant shall exercise such option to extend by giving
written notice to Landlord not later than nine months prior to the
expiration of the Initial Term. The giving of such notice by Tenant
shall automatically extend the Term of this Lease for the Extended Term
and no instrument of renewal need to be executed. In the event that
Tenant fails to give such notice to Landlord, this Lease shall
automatically terminate at the end of the Initial Term and Tenant shall
have no further option to extend the Term of this Lease. The Extended
Term shall be on all the terms and conditions of this Lease except that
the provisions of the Section 15.1 shall not be applicable and Basic
Rent shall be as determined pursuant to paragraph 15.2 hereof.
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15.2 EXTENDED TERM RENT
The Basic Rent for the Extended Term shall be the greater of:
a. The fair market rental value of the Premises as of the
commencement of the Extended Term, determined without regard
to Tenant's right to extend, as agreed by the parties; or
b. A sum computed by adding to the Basic Rent during, the Initial
Term and amount determined by multiplying such Basic Rent by
33 1/3% of the percentage increase in the United States
Department of Labor Consumer Price Index, Boston, for Urban
Consumers (CPI-U), all items (1967=100) between the point at
which such Index stood when last published prior to the
Commencement Date and the point at which such Index stood when
last published prior to the first day of the Extended Term. In
the event that Landlord and Tenant are unable to agree on a
fair-market rental value at least three (3) months prior to
the commencement of the Extended Term, such value shall be
determined by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association,
except that there shall be only one arbitrator and such
arbitrator shall have at least ten (10) years' experience as a
real estate broker or appraiser in the Boston area. If such
Index is discontinued its successor shall be used and if there
is no successor, an index designated by Landlord shall be
used.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed, under seal, by persons hereunto duly authorized, in multiple
copies, each to be considered an original hereof, as of the date first set forth
above.
LANDLORD TENANT
NATIONAL FIRE PROTECTION ASSOCIATION
By: /s/ James M. Shannon By: /s/ William H. Gallagher
------------------------------------ ----------------------------
Title: Vice President and General Counsel Title: President
By: /s/ Susan L. Gorman
----------------------------
Title: Treasurer
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EXHIBIT OC
ITEMS INCLUDED IN OPERATING EXPENSES
Without limitation, Operating Expenses shall include:
1. All expenses incurred by Landlord or Landlord's agents which shall be
directly related to employment of personnel, including amounts incurred
for wages, salaries and other compensation for services, payroll,
social security, unemployment and similar taxes, workmen's compensation
insurance, disability benefits, pensions, hospitalization, retirement
plans and group insurance, uniforms and working clothes and the
cleaning thereof, and expenses imposed on Landlord or Landlord's agents
pursuant to any collective bargaining agreement for the services of
employees of Landlord or Landlord's agents in connection with the
operation, repair, maintenance, cleaning, management and protection of
the Property, and its mechanical systems including, without limitation,
day and night supervisors, property manager, accountants, bookkeepers,
janitors, carpenters, engineers, mechanics, electricians and plumbers
and personnel engaged in supervision of any of the persons mentioned
above; provided that, if any such employee is also employed on other
property of Landlord, such compensation shall be suitably prorated
among the Property and such other properties.
2. The cost of services, materials and supplies furnished to the building
or tenants thereof or used in the operation, repair, maintenance,
cleaning, management and protection of the Property.
3. The cost of replacements for tools and other similar equipment used in
the repair, maintenance, cleaning and protection of the Property,
provided that, in the case of any such equipment used jointly on other
property of Landlord, such costs shall be suitably prorated among the
Property and such other properties and of establishment of reasonable
reserves relating to operation and maintenance of the Property.
4. Where the Property is managed by Landlord or an affiliate of Landlord,
a sum equal to the amounts customarily charged by management firms in
the Boston area for similar properties, but in no event more than five
percent (5%) of gross annual income, whether or not actually paid, or
where otherwise managed, the amounts accrued for management, together
with amounts accrued for legal and other professional fees relating to
the Property, but excluding such fees and commissions paid in
connection with services rendered for securing or renewing leases and
for matters not related to the normal administration and operation of
the Building.
5. Premiums for insurance against damage or loss to the Building from such
hazards as shall from time to time be generally required by
institutional mortgages in the Quincy area for similar properties,
including, but not by way of limitation, insurance covering loss of
rent attributable to any such hazards, and public liability insurance.
<PAGE> 32
6. If, during the Term of this Lease, Landlord shall make a capital
expenditure which is not otherwise properly includable in Operating
Expenses for the Operating Year in which it was made, there shall
nevertheless be included in such Operating Expenses for the Operating
Year in which it was made and in Operating Expenses for each succeeding
Operating Year during the useful life of the capital expenditure the
annual charge-off of such capital expenditure. Annual charge-off shall
be determined by dividing the original capital expenditure plus an
interest factor, reasonably determined by Landlord, as being the
interest rate then being charged for long-term mortgages by
institutional lenders on like properties within the locality in which
the Building is located, by the number of years of useful life of the
capital expenditure; and the useful life shall be determined reasonably
by Landlord in accordance with generally accepted accounting principles
and practices in effect at the time of making such expenditure.
7. Costs for electricity, water and sewer use charges, and other utilities
supplied to the Property and not paid for directly by Tenants.
8. Betterment assessments provided the same are apportioned equally over
the longest period permitted by law.
9. Amounts paid to independent contractors for services, materials and
supplies furnished for the operation, repair, maintenance, cleaning and
protection of the Property.
Initiated for Identification
LANDLORD: /s/ James M. Shannon TENANT: /s/ William H. Gallagher
------------------------------ -------------------------
<PAGE> 33
EXHIBIT CS
(CLEANING SPECIFICATIONS)
A. PREMISES
Daily on Business Days:
1. Empty and clean all waste receptacles and ash trays and remove
waste material from the Premises; wash receptacles as necessary.
2. Sweep and dust mop all uncarpeted areas using a dust-treated mop.
3. Spot vacuum all rugs and carpeted areas.
4. Hand dust and wipe clean with treated cloths all horizontal
surfaces including furniture, office equipment, window sills, door
ledges, chair rails and counter tops, within normal reach.
5. Wash clean all water fountains.
6. Clean glass on building floor directories.
7. Upon completion of cleaning, all lights will be turned off and
doors locked, leaving the Premises in an orderly condition.
Weekly: Vacuum all rugs and carpeted areas.
Quarterly:
Render high dusting not reached in daily cleaning to include:
1. Dusting all pictures, frames, charts, graphs and similar
wall hangings.
2. Dusting all vertical surfaces, such as walls, partitions,
doors and ducts.
3. Dusting all pipes and high moldings.
B. LAVATORIES
Daily on Business Days:
1. Sweep and damp mop floors.
2. Clean all mirrors, powder shelves, dispensers and receptacles,
bright work, flushmeters, pipes and toilet seat hinges.
3. Wash both sides of all toilet seats.
4. Wash all basins, bowls and urinals.
5. Dust and clean all powder room fixtures.
6. Empty and clean paper towel and sanitary disposal receptacles.
7. Remove waste paper and refuse.
8. Refill tissue holders, soap dispensers, towel dispensers, vending
sanitary dispensers; materials to be furnished by Landlord.
9. A sanitizing solution will be used in all lavatory cleaning.
Monthly:
1. Machine scrub lavatory floors.
2. Wash all partitions and tile walls in lavatories.
3. Clean air return grills.
<PAGE> 34
EXHIBIT FP
[Map]
<PAGE> 35
FIRST AMENDMENT OF LEASE
AMENDMENT OF LEASE, dated as of July 31, 1995, by and between the
NATIONAL FIRE PROTECTION ASSOCIATION (hereinafter, "Landlord"), a Massachusetts
not-for-profit corporation, and ATLANTIC DATA SERVICES, a Massachusetts
corporation (hereinafter, "Tenant").
A. Landlord and Tenant are parties to a Lease dated as of April 1, 1995
(hereinafter, the "Lease"), covering certain premises located on the
third floor of the National Fire Protection Headquarters Building
(hereinafter, the "Building") located at Batterymarch Park, Quincy, MA.
B. Landlord and Tenant desire to further amend the Lease to provide for
the addition to the premises demised thereunder of 1,337 rentable
square feet located on the third floor of the Building (hereinafter
called the Additional Space).
NOW THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Landlord and Tenant hereby agree as follows:
1. The following definitions contained in Section 1.2 of the
Lease are hereby amended as follows:
a. BASIC RENT: no changes
b. PREMISES RENTABLE AREA: Delete from the definition of
Premises Rentable Area the number 21,192 and insert
in lieu thereof the number 22,529.
c. ESCALATION FACTOR: Delete from the definition of
Escalation Factor the percentage 14.98 and insert in
lieu thereof the percentage 15.93.
2. Exhibit FP to the Lease is hereby amended by the addition to
the space therein described of the space shown as "Howes
Space" on AMENDMENT EXHIBIT 1, attached hereto.
3. The tenant shall be responsible for all improvements to the
space including obtaining all permits. Such improvements shall
be in accordance with the plan attached hereto as AMENDMENT
EXHIBIT 2. Tenant shall indemnify and hold harmless the
landlord from any loss, cost, injury or damage as a result of
the improvements to the premises. In all additional ways, the
improvements shall comply with the provisions of Section 5.2
of the Lease.
<PAGE> 36
4. The provisions of this First Amendment to Lease unless
otherwise stated shall be effective as of September 15, 1995,
or sooner upon substantial completion of the build-out of the
premises.
5. The Lease, as hereby modified, shall continue in full force
and effect and is hereby confirmed, approved and ratified.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
of Lease to be executed as a sealed instrument as of the date first written
above.
LANDLORD TENANT
NATIONAL FIRE PROTECTION ASSOCIATION
By: /s/ James M. Shannon By: /s/ William H. Gallagher
---------------------------------- -----------------------------
Vice President, General Counsel President
2
<PAGE> 37
AMENDMENT EXHIBIT 1
[Map]
3
<PAGE> 38
SECOND AMENDMENT OF LEASE
AMENDMENT OF LEASE, dated as of January 15, 1997, by and between the
NATIONAL FIRE PROTECTION ASSOCIATION (hereinafter, "Landlord"), a Massachusetts
not-for-profit corporation, and ATLANTIC DATA SERVICES, a Massachusetts
corporation (hereinafter, "Tenant").
A. Landlord and Tenant are parties to a Lease dated as of April 1, 1995
(hereinafter, the "Lease"), and a First Amendment of Lease dated July
31, 1995 covering certain premises located on the third floor of the
National Fire Protection Headquarters Building (hereinafter, the
"Building") located at Batterymarch Park, Quincy, MA.
B. Landlord and Tenant desire to further amend the Lease to provide for
the addition to the premises demised thereunder of one thousand two
hundred thirteen (1,213) rentable square feet located on the third
floor of the Building (hereinafter called the Additional Space).
NOW THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Landlord and Tenant hereby agree as follows:
1. The following definitions contained in Section 1.2 of the
Lease as Amended by the First Amendments, are hereby amended
as follows:
a. BASIC RENT: no changes
b. PREMISES RENTABLE AREA: Delete from the definition of
Premises Rentable Area the number 22,529 and insert
in lieu thereof the number 23,742.
c. ESCALATION FACTOR: Delete from the definition of
Escalation Factor the percentage 15.93 and insert in
lieu thereof the percentage 16.78.
2. Exhibit FP to the Lease is hereby amended by the addition to
the space therein described of the space shown as ADS SECOND
AMENDMENT EXPANSION SPACE, on AMENDMENT EXHIBIT 1, attached
hereto.
3. The tenant shall be responsible for all improvements to the
space including obtaining all permits. Tenant shall indemnify
and hold harmless the landlord from any loss, cost, injury or
damage as a result of the improvements to the premises. In all
additional ways, the improvements shall comply with the
provisions of Section 5.2 of the Lease. Tenant shall, as part
of the approval required under said Section 5.2, submit plans
for all improvements to be undertaken.
<PAGE> 39
4. The provisions of this Second Amendment to Lease unless
otherwise stated shall be effective as of substantial
completion of the improvements referenced above, but under no
circumstances later than March 1, 1997.
5. Landlord shall provide to the Tenant an allowance of $3.00 per
rentable square foot of space for such improvements.
6. The Lease, as hereby modified, shall continue in full force
and effect and is hereby confirmed, approved and ratified.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment of Lease to be executed as a sealed instrument as of the date first
written above.
LANDLORD TENANT
NATIONAL FIRE PROTECTION ASSOCIATION
By: /s/ James M. Shannon By: /s/ William H. Gallagher
--------------------------------- -----------------------------
Vice President, General Counsel President
2
<PAGE> 40
AMENDMENT EXHIBIT 1
[Map]
3
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated May 2,
1997, except for Note 10 and Note 13, as to which the date is March 23, 1998, in
the Registration Statement and related Prospectus of Atlantic Data Services,
Inc. for the registration of 2,500,000 shares of its common stock.
Our audits also included the financial statement schedule of Atlantic Data
Services, Inc. included in the Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the schedule based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements, and notes thereto, included in the
Company's registration statement, to which this schedule is an exhibit, and is
qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1998
<PERIOD-START> APR-01-1996 APR-01-1997
<PERIOD-END> MAR-31-1997 DEC-31-1997
<CASH> 2,653 5,355
<SECURITIES> 0 0
<RECEIVABLES> 4,460 6,952
<ALLOWANCES> 231 339
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,398 12,853
<PP&E> 1,614 1,990
<DEPRECIATION> (965) (1,109)
<TOTAL-ASSETS> 8,201 13,900
<CURRENT-LIABILITIES> 2,329 6,985
<BONDS> 0 0
0 0
0 0
<COMMON> 103 107
<OTHER-SE> 5,713 6,767
<TOTAL-LIABILITY-AND-EQUITY> 8,201 13,900
<SALES> 23,843 28,219
<TOTAL-REVENUES> 23,843 28,219
<CGS> 15,218 16,252
<TOTAL-COSTS> 5,440 6,421
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5 4
<INCOME-PRETAX> 3,300 5,651
<INCOME-TAX> 1,359 2,374
<INCOME-CONTINUING> 1,941 3,277
<DISCONTINUED> 100 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,041 3,277
<EPS-PRIMARY> .20 .32
<EPS-DILUTED> .20 .31
</TABLE>
